CMS-1655-P – Hospital Inpatient PPS Proposed Rule FY 2017

Vol. 81 Wednesday, No. 81 April 27, 2016

Part II

Department of Health and Human Services

Centers for Medicare & Medicaid Services 42 CFR Parts 405, 412, 413, et al. Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; and Technical Changes Relating to Costs to Organizations and Medicare Cost Reports; Proposed Rule

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DEPARTMENT OF HEALTH AND and inpatient psychiatric facilities) that Services, Department of Health and HUMAN SERVICES are participating in Medicare, including Human Services, Room 445–G, Hubert related provisions for eligible hospitals H. Humphrey Building, 200 Centers for Medicare & Medicaid and critical care hospitals (CAHs) Independence Avenue SW., Services participating in the Electronic Health Washington, DC 20201. Record (EHR) Incentive Program. We are (Because access to the interior of the 42 CFR Parts 405, 412, 413, and 485 proposing to update policies relating to Hubert H. Humphrey Building is not [CMS–1655–P] the Hospital Value-Based Purchasing readily available to persons without (VBP) Program, the Hospital Federal Government identification, RIN 0938–AS77 Readmissions Reduction Program, and commenters are encouraged to leave the Hospital-Acquired Condition (HAC) their comments in the CMS drop slots Medicare Program; Hospital Inpatient Reduction Program. We also are located in the main lobby of the Prospective Payment Systems for proposing to: Implement statutory building. A stamp-in clock is available Acute Care Hospitals and the Long- provisions that require hospitals and for persons wishing to retain a proof of Term Care Hospital Prospective CAHs to furnish notification to filing by stamping in and retaining an Payment System and Proposed Policy Medicare beneficiaries, including extra copy of the comments being filed.) Changes and Fiscal Year 2017 Rates; Medicare Advantage enrollees, when b. For delivery in Baltimore, MD— Quality Reporting Requirements for the beneficiaries receive outpatient Centers for Medicare & Medicaid Specific Providers; Graduate Medical observation services for more than 24 Services, Department of Health and Education; Hospital Notification hours; announce the implementation of Human Services, 7500 Security Procedures Applicable to Beneficiaries the Frontier Community Health Boulevard, Baltimore, MD 21244–1850. Receiving Observation Services; and Integration Project Demonstration; and If you intend to deliver your Technical Changes Relating to Costs make technical corrections and changes comments to the Baltimore address, to Organizations and Medicare Cost to regulations relating to costs to please call the telephone number (410) Reports organizations and Medicare cost reports. 786–7195 in advance to schedule your DATES: AGENCY: Centers for Medicare and To be assured consideration, arrival with one of our staff members. Medicaid Services (CMS), HHS. comments must be received at one of Comments mailed to the addresses the addresses provided in the indicated as appropriate for hand or ACTION: Proposed rule. ADDRESSES section, no later than 5 p.m. courier delivery may be delayed and SUMMARY: We are proposing to revise the EDT on June 17, 2016. received after the comment period. Medicare hospital inpatient prospective ADDRESSES: In commenting, please refer For information on viewing public payment systems (IPPS) for operating to file code CMS–1655–P. Because of comments, we refer readers to the and capital-related costs of acute care staff and resource limitations, we cannot beginning of the SUPPLEMENTARY hospitals to implement changes arising accept comments by facsimile (FAX) INFORMATION section. from our continuing experience with transmission. FOR FURTHER INFORMATION CONTACT: Ing these systems for FY 2017. Some of the You may submit comments in one of Jye Cheng, (410) 786–4548, and Donald proposed changes would implement four ways (no duplicates, please): Thompson, (410) 786–4487, Operating 1. Electronically. You may (and we certain statutory provisions contained in Prospective Payment, MS–DRGs, Wage encourage you to) submit electronic the Pathway for Sustainable Growth Index, New Medical Service and comments on this regulation to http:// (SGR) Reform Act of 2013, the Technology Add-On Payments, Hospital www.regulations.gov. Follow the Improving Medicare Post-Acute Care Geographic Reclassifications, Graduate instructions under the ‘‘submit a Transformation Act of 2014, the Notice Medical Education, Capital Prospective comment’’ tab. of Observation Treatment and 2. By regular mail. You may mail Payment, Excluded Hospitals, Medicare Implications for Care Eligibility Act of written comments to the following Disproportionate Share Hospital (DSH) 2015, and other legislation. We also are address ONLY: Centers for Medicare & Issues, Medicare-Dependent Small Rural providing the estimated market basket Medicaid Services, Department of Hospital (MDH) Program, and Low- update to apply to the rate-of-increase Health and Human Services, Attention: Volume Hospital Payment Adjustment limits for certain hospitals excluded CMS–1655–P, P.O. Box 8011, Baltimore, Issues. from the IPPS that are paid on a MD 21244–1850. Michele Hudson, (410) 786–4487, and reasonable cost basis subject to these Please allow sufficient time for mailed Emily Lipkin, (410) 786–3633, Long- limits for FY 2017. comments to be received before the Term Care Hospital Prospective We are proposing to update the close of the comment period. Payment System and MS–LTC–DRG payment policies and the annual 3. By express or overnight mail. You Relative Weights Issues. payment rates for the Medicare may send written comments via express Mollie Knight (410) 786–7948, and prospective payment system (PPS) for or overnight mail to the following Bridget Dickensheets, (410) 786–8670, inpatient hospital services provided by address ONLY: Centers for Medicare & Rebasing and Revising the LTCH Market long-term care hospitals (LTCHs) for FY Medicaid Services, Department of Basket Issues. 2017. Health and Human Services, Attention: Siddhartha Mazumdar, (410) 786– In addition, we are proposing to make CMS–1655–P, Mail Stop C4–26–05, 6673, Rural Community Hospital changes relating to direct graduate 7500 Security Boulevard, Baltimore, MD Demonstration Program Issues. medical education (GME) and indirect 21244–1850. Jason Pteroski, (410) 786–4681, and medical education (IME) payments to 4. By hand or courier. If you prefer, Siddhartha Mazumdar, (410) 786–6673, hospitals with rural track training you may deliver (by hand or courier) Frontier Community Health Integration programs. We are proposing to establish your written comments before the close Project Demonstration Issues. new requirements or revise of the comment period to either of the Kathryn McCann Smith, (410) 786– requirements for quality reporting by following addresses: 7623, Hospital Notification Procedures specific providers (acute care hospitals, a. For delivery in Washington, DC— for Beneficiaries Receiving Outpatient PPS-exempt cancer hospitals, LTCHs, Centers for Medicare & Medicaid Observation Services Issues; or

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Stephanie Simons, (206) 615–2420, only close of the comment period on the ALOS Average length of stay- for Related Medicare Health Plans following Web site as soon as possible ALTHA Acute Long-Term Hospital Issues. after they have been received: http:// Association Lein Han, (617) 879–0129, Hospital AMA American Medical Association www.regulations.gov. Follow the search AMGA American Medical Group Readmissions Reduction Program— instructions on that Web site to view Association Readmission Measures for Hospitals public comments. AMI Acute myocardial infarction Issues. Electronic Access AOA American Osteopathic Association Delia Houseal, (410) 786–2724, APR DRG All Patient Refined Diagnosis Hospital-Acquired Condition Reduction This Federal Register document is Related Group System Program and Hospital Readmissions also available from the Federal Register APRN Advanced practice registered nurse Reduction Program—Program online database through Federal Digital ARRA American Recovery and Administration Issues. System (FDsys), a service of the U.S. Reinvestment Act of 2009, Public Law 111–5 Joseph Clift, (410) 786–4165, Government Printing Office. This ASCA Administrative Simplification Hospital-Acquired Condition Reduction database can be accessed via the Compliance Act of 2002, Public Law 107– Program—Measures Issues. Internet at: http://www.gpo.gov/fdsys. 105 James Poyer, (410) 786–2261, Hospital Tables Available Only Through the ASITN American Society of Interventional Inpatient Quality Reporting and and Therapeutic Neuroradiology Hospital Value-Based Purchasing— Internet on the CMS Web Site ASPE Assistant Secretary for Planning and Program Administration, Validation, In the past, a majority of the tables Evaluation (DHHS) and Reconsideration Issues. referred to throughout this preamble ATRA American Taxpayer Relief Act of Cindy Tourison, (410) 786–1093, and in the Addendum to the proposed 2012, Public Law 112–240 BBA Balanced Budget Act of 1997, Public Hospital Inpatient Quality Reporting— rule and the final rule were published Law 105–33 Measures Issues Except Hospital in the Federal Register as part of the BBRA Medicare, Medicaid, and SCHIP Consumer Assessment of Healthcare annual proposed and final rules. [State Children’s Health Insurance Providers and Systems Issues; and However, beginning in FY 2012, some of Program] Balanced Budget Refinement Act Readmission Measures for Hospitals the IPPS tables and LTCH PPS tables are of 1999, Public Law 106–113 Issues. no longer published in the Federal BIPA Medicare, Medicaid, and SCHIP [State Kim Spaulding Bush, (410) 786–3232, Register. Instead, these tables generally Children’s Health Insurance Program] Benefits Improvement and Protection Act Hospital Value-Based Purchasing will be available only through the of 2000, Public Law 106–554 Efficiency Measures Issues. Internet. The IPPS tables for this BLS Bureau of Labor Statistics Elizabeth Goldstein, (410) 786–6665, proposed rule are available through the CABG Coronary artery bypass graft Hospital Inpatient Quality Reporting— Internet on the CMS Web site at: http:// [surgery] Hospital Consumer Assessment of www.cms.hhs.gov/Medicare/Medicare- CAH Critical access hospital Healthcare Providers and Systems Fee-for-Service-Payment/AcuteInpatient CARE [Medicare] Continuity Assessment Measures Issues. PPS/index.html. Click on the link on the Record & Evaluation [Instrument] James Poyer, (410) 786–2261, PPS- left side of the screen titled, ‘‘FY 2017 CART CMS Abstraction & Reporting Tool Exempt Cancer Hospital Quality CAUTI Catheter-associated urinary tract IPPS Proposed Rule Home Page’’ or infection Reporting Issues. ‘‘Acute Inpatient—Files for Download’’. CBSAs Core-based statistical areas Mary Pratt, (410) 786–6867, Long- The LTCHy PPS tables for this FY 2017 CC Complication or comorbidity Term Care Hospital Quality Data proposed rule are available through the CCN CMS Certification Number Reporting Issues. Internyet on the CMS Web site at: http:// CCR Cost-to-charge ratio Jeffrey Buck, (410) 786–0407 and www.cms.gov/Medicare/Medicare-Fee- CDAC [Medicare] Clinical Data Abstraction Cindy Tourison (410) 786–1093, for-Service-Payment/LongTermCare Center Inpatient Psychiatric Facilities Quality HospitalPPS/index.html under the list CDAD Clostridium difficile-associated Data Reporting Issues. disease item for Regulation Number CMS–1655– CDC Centers for Disease Control and Deborah Krauss, (410) 786–5264, and P. For further details on the contents of Lisa Marie Gomez, (410) 786–1175, EHR Prevention the tables referenced in this proposed CERT Comprehensive error rate testing Incentive Program Clinical Quality rule, we refer readers to section VI. of CDI Clostridium difficile [C. difficile] Measure Related Issues. the Addendum to this proposed rule. infection Elizabeth Myers, (410) 786–4751, EHR Readers who experience any problems CFR Code of Federal Regulations Incentive Program Nonclinical Quality accessing any of the tables that are CLABSI Central line-associated Measure Related Issues. posted on the CMS Web sites identified bloodstream infection Lauren Wu, (202) 690–7151, Certified above should contact Michael Treitel at CIPI Capital input price index CMI Case-mix index EHR Technology Related Issues. (410) 786–4552. Kellie Shannon, (410) 786–0416, CMS Centers for Medicare & Medicaid Technical Changes Relating to Costs to Acronyms Services CMSA Consolidated Metropolitan Organizations and Medicare Cost 3M 3M Health Information System Statistical Area Reports Issues. AAMC Association of American Medical COBRA Consolidated Omnibus SUPPLEMENTARY INFORMATION: Colleges Reconciliation Act of 1985, Public Law 99– ACGME Accreditation Council for Graduate 272 Electronic Access Medical Education COLA Cost-of-living adjustment Inspection of Public Comments: All ACoS American College of Surgeons CoP [Hospital] condition of participation public comments received before the AHA American Hospital Association COPD Chronic obstructive pulmonary close of the comment period are AHIC American Health Information disease Community CPI Consumer price index available for viewing by the public, AHIMA American Health Information CQL Clinical quality language including any personally identifiable or Management Association CQM Clinical quality measure confidential business information that is AHRQ Agency for Healthcare Research and CY Calendar year included in a comment. We post all Quality DACA Data Accuracy and Completeness public comments received before the AJCC American Joint Committee on Cancer Acknowledgement

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DPP Disproportionate patient percentage I–O Input-Output NHSN National Healthcare Safety Network DRA Deficit Reduction Act of 2005, Public IOM Institute of Medicine NOP Notice of Participation Law 109–171 IPF Inpatient psychiatric facility NOTICE Act Notice of Observation DRG Diagnosis-related group IPFQR Inpatient Psychiatric Facility Treatment and Implication for Care DSH Disproportionate share hospital Quality Reporting [Program] Eligibility Act, Public Law 114–42 EBRT External beam radiotherapy IPPS [Acute care hospital] inpatient NQF National Quality Forum ECE Extraordinary circumstances prospective payment system NQS National Quality Strategy exemption IRF Inpatient rehabilitation facility NTIS National Technical Information ECI Employment cost index IQR [Hospital] Inpatient Quality Reporting Service eCQM Electronic clinical quality measure LAMCs Large area metropolitan counties NTTAA National Technology Transfer and EDB [Medicare] Enrollment Database LEP Limited English proficiency Advancement Act of 1991, Public Law EHR Electronic health record LOC Limitation on charges 104–113 EMR Electronic medical record LOS Length of stay NUBC National Uniform Billing Code EMTALA Emergency Medical Treatment LTC–DRG Long-term care diagnosis-related NVHRI National Voluntary Hospital and Labor Act of 1986, Public Law 99–272 group Reporting Initiative EP Eligible professional LTCH Long-term care hospital OACT [CMS’] Office of the Actuary FAH Federation of American Hospitals LTCH QRP Long-Term Care Hospital OBRA 86 Omnibus Budget Reconciliation FDA Food and Drug Administration Quality Reporting Program Act of 1986, Public Law 99–509 FFY Federal fiscal year MA Medicare Advantage OES Occupational employment statistics FPL Federal poverty line MAC Medicare Administrative Contractor OIG Office of the Inspector General FQHC Federally qualified health center MACRA Medicare Access and CHIP OMB [Executive] Office of Management and FR Federal Register Reauthorization Act of 2015, Public Law Budget FTE Full-time equivalent 114–10 ONC Office of the National Coordinator for FY Fiscal year MAP Measure Application Partnership Health Information Technology GAF Geographic Adjustment Factor MCC Major complication or comorbidity OPM [U.S.] Office of Personnel GME Graduate medical education MCE Medicare Code Editor Management HAC Hospital-acquired condition MCO Managed care organization OQR [Hospital] Outpatient Quality HAI Healthcare-associated infection MDC Major diagnostic category Reporting HCAHPS Hospital Consumer Assessment of MDH Medicare-dependent, small rural O.R. Operating room Healthcare Providers and Systems hospital OSCAR Online Survey Certification and MedPAC Medicare Payment Advisory HCFA Health Care Financing Reporting [System] Administration Commission PAC Post-acute care HCO High-cost outlier MedPAR Medicare Provider Analysis and PAMA Protecting Access to Medicare Act of HCP Healthcare personnel Review File 2014, Public Law 113–93 HCRIS Hospital Cost Report Information MEI Medicare Economic Index PCH PPS-exempt cancer hospital System MGCRB Medicare Geographic Classification HF Heart failure Review Board PCHQR PPS-exempt cancer hospital quality HHA Home health agency MIEA–TRHCA Medicare Improvements and reporting HHS Department of Health and Human Extension Act, Division B of the Tax Relief PMSAs Primary metropolitan statistical Services and Health Care Act of 2006, Public Law areas HICAN Health Insurance Claims Account 109–432 POA Present on admission Number MIPPA Medicare Improvements for Patients PPI Producer price index HIPAA Health Insurance Portability and and Providers Act of 2008, Public Law PPR Potentially Preventable Readmissions Accountability Act of 1996, Public Law 110–275 PPS Prospective payment system 104–191 MMA Medicare Prescription Drug, PRM Provider Reimbursement Manual HIPC Health Information Policy Council Improvement, and Modernization Act of ProPAC Prospective Payment Assessment HIS Health information system 2003, Public Law 108–173 Commission HIT Health information technology MMEA Medicare and Medicaid Extenders PRRB Provider Reimbursement Review HMO Health maintenance organization Act of 2010, Public Law 111–309 Board HPMP Hospital Payment Monitoring MMSEA Medicare, Medicaid, and SCHIP PRTFs Psychiatric residential treatment Program Extension Act of 2007, Public Law 110–173 facilities HSA Health savings account MOON Medicare Outpatient Observation PSF Provider-Specific File HSCRC [Maryland] Health Services Cost Notice PSI Patient safety indicator Review Commission MRHFP Medicare Rural Hospital Flexibility PS&R Provider Statistical and HSRV Hospital-specific relative value Program Reimbursement [System] HSRVcc Hospital-specific relative value MRSA Methicillin-resistant Staphylococcus PQRS Physician Quality Reporting System cost center aureus PUF Public use file HQA Hospital Quality Alliance MSA Metropolitan Statistical Area QDM Quality data model HQI Hospital Quality Initiative MS–DRG Medicare severity diagnosis- QIES ASAP Quality Improvement HwH Hospital-within-hospital related group Evaluation System Assessment Submission ICD–9–CM International Classification of MS–LTC–DRG Medicare severity long-term and Processing Diseases, Ninth Revision, Clinical care diagnosis-related group QIG Quality Improvement Group [CMS] Modification MU Meaningful Use [EHR Incentive QIO Quality Improvement Organization ICD–10–CM International Classification of Program] QM Quality measure Diseases, Tenth Revision, Clinical MUC Measure under consideration QRDA Quality Reporting Document Modification NAICS North American Industrial Architecture ICD–10–PCS International Classification of Classification System RFA Regulatory Flexibility Act, Public Law Diseases, Tenth Revision, Procedure NALTH National Association of Long Term 96–354 Coding System Hospitals RHC Rural health clinic ICR Information collection requirement NCD National coverage determination RHQDAPU Reporting hospital quality data ICU Intensive care unit NCHS National Center for Health Statistics for annual payment update IGI IHS Global Insight, Inc. NCQA National Committee for Quality RIM Reference information model IHS Indian Health Service Assurance RNHCI Religious nonmedical health care IME Indirect medical education NCVHS National Committee on Vital and institution IMPACT Act Improving Medicare Post- Health Statistics RPL Rehabilitation psychiatric long-term Acute Care Transformation Act of 2014, NECMA New England County Metropolitan care (hospital) Public Law 113–185 Areas RRC Rural referral center

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RSMR Risk-standard mortality rate 6. The Notice of Observation Treatment 6. MDC 6 (Diseases and Disorders of the RSP Risk-standardized payment and Implication for Care Eligibility Act Digestive System): Excision of Ileum RSSR Risk-standard readmission rate (the NOTICE Act) of 2015 (Pub. L. 114– 7. MDC 7 (Diseases and Disorders of the RTI Research Triangle Institute, 42) Hepatobiliary System and Pancreas): International D. Summary of the Provisions of this Bypass Procedures of the Veins RUCAs Rural-urban commuting area codes Proposed Rule 8. MDC 8 (Diseases and Disorders of the RY Rate year II. Proposed Changes to Medicare Severity Musculoskeletal System and Connective SAF Standard Analytic File Diagnosis-Related Group (MS–DRG) Tissue) SCH Sole community hospital Classifications and Relative Weights a. Proposed Updates to MS–DRGs 469 and SCHIP State Child Health Insurance A. Background 470 (Major Joint Replacement or Program B. MS–DRG Reclassifications Reattachment of Lower Extremity with SCIP Surgical Care Improvement Project C. Adoption of the MS–DRGs in FY 2008 and without MCC, respectively) SFY State fiscal year D. Proposed FY 2017 MS–DRG (1) Total Ankle Replacement (TAR) SGR Sustainable Growth Rate Documentation and Coding Adjustment Procedures SIC Standard Industrial Classification 1. Background on the Prospective MS–DRG (2) Hip Replacements Procedures with SIR Standardized infection ratio Documentation and Coding Adjustments Principal Diagnosis of Hip Fracture SNF Skilled nursing facility for FY 2008 and FY 2009 Authorized by b. Revision of Total Ankle Replacement SNF QRP Skilled Nursing Facility Quality Public Law 110–90 Procedures Reporting Program 2. Adjustment to the Average Standardized (1) Revision of Total Ankle Replacement SNF VBP Skilled Nursing Facility Value- Amounts Required by Public Law 110– Procedures Based Purchasing 90 (2) Combination Codes for Removal and SOCs Standard occupational classifications a. Prospective Adjustment Required by Replacement of Knee Joints SOM State Operations Manual Section 7(b)(1)(A) of Public Law 110–90 c. Decompression Laminectomy SRR Standardized risk ratio b. Recoupment or Repayment Adjustments d. Lordosis SSI Surgical site infection in FYs 2010 through 2012 Required by 9. MDC 13 (Diseases and Disorders of the SSI Supplemental Security Income Section 7(b)(1)(B) of Public Law 110–90 Female Reproductive System): Pelvic SSO Short-stay outlier 3. Retrospective Evaluation of FY 2008 and Evisceration SUD Substance use disorder FY 2009 Claims Data 10. MDC 19 (Mental Diseases and TEFRA Tax Equity and Fiscal 4. Prospective Adjustments for FY 2008 Disorders): Proposed Modification of Responsibility Act of 1982, Public Law 97– and FY 2009 Authorized by Section Title of MS–DRG 884 (Organic 248 7(b)(1)(A) of Public Law 110–90 Disturbances and Mental Retardation) TEP Technical expert panel 5. Recoupment or Repayment Adjustment 11. MDC 23 (Factors Influencing Health THA/TKA Total hip arthroplasty/total knee Authorized by Section 7(b)(1)(B) of Status and Other Contacts with Health arthroplasty Public Law 110–90 Services): Logic of MS–DRGs 945 and TMA TMA [Transitional Medical 6. Proposed Recoupment or Repayment 946 (Rehabilitation with and without Assistance], Abstinence Education, and QI Adjustment Authorized by Section 631 CC/MCC, Respectively) [Qualifying Individuals] Programs of the American Taxpayer Relief Act of 12. Proposed Medicare Code Editor (MCE) Extension Act of 2007, Public Law 110–90 2012 (ATRA) Changes TPS Total Performance Score E. Refinement of the MS–DRG Relative a. Age Conflict Edit UHDDS Uniform hospital discharge data set Weight Calculation (1) Newborn Diagnosis Category UR Utilization review 1. Background (2) Pediatric Diagnosis Category VBP [Hospital] Value Based Purchasing 2. Discussion of Policy for FY 2017 b. Sex Conflict Edit [Program] F. Proposed Changes to Specific MS–DRG c. Non-Covered Procedure Edit VTE Venous thromboembolism Classifications (1) Endovascular Mechanical 1. Discussion of Changes to Coding System Thrombectomy Table of Contents and Basis for MS–DRG Updates (2) Radical Prostatectomy a. Conversion of MS–DRGs to the d. Unacceptable Principal Diagnosis Edit I. Executive Summary and Background International Classification of Diseases, (1) Liveborn Infant A. Executive Summary 10th Revision (ICD–10) (2) Multiple Gestation 1. Purpose and Legal Authority b. Basis for Proposed FY 2017 MS–DRG (3) Supervision of High Risk Pregnancy 2. Summary of the Major Provisions Updates e. Other MCE Issues 3. Summary of Costs and Benefits 2. Pre-Major Diagnostic Category (Pre- (1) Procedure Inconsistent with Length of B. Summary MDC): Total Artificial Heart Stay Edit 1. Acute Care Hospital Inpatient Replacement (2) Maternity Diagnoses Prospective Payment System (IPPS) 3. MDC 1 (Diseases and Disorders of the (3) Manifestation Codes Not Allowed as 2. Hospitals and Hospital Units Excluded Nervous System) Principal Diagnosis Edit from the IPPS a. Endovascular Embolization (Coiling) or (4) Questionable Admission Edit 3. Long-Term Care Hospital Prospective Occlusion of Head and Neck Procedures (5) Removal of Edits and Future Payment System (LTCH PPS) b. Mechanical Complication Codes Enhancement 4. Critical Access Hospitals (CAHs) 4. MDC 4 (Diseases and Disorders of the 13. Proposed Changes to Surgical 5. Payments for Graduate Medical Ear, Nose, Mouth and Throat) Hierarchies Education (GME) a. Proposed Reassignment of Diagnosis 14. Proposed Changes to the MS–DRG C. Summary of Provisions of Recent Code R22.2 (Localized Swelling, Mass Diagnosis Codes for FY 2017 Legislation Proposed to be Implemented and Lump, Trunk) 15. Proposed Complications or in this Proposed Rule b. Pulmonary Embolism with tPA or Other Comorbidity (CC) Exclusions List 1. American Taxpayer Relief Act of 2012 Thrombolytic Therapy a. Background of the CC List and the CC (ATRA) (Pub. L. 112–240) 5. MDC 5 (Diseases and Disorders of the Exclusions List 2. Pathway for SGR Reform Act of 2013 Circulatory System) b. Proposed CC Exclusions List for FY 2017 (Pub. L. 113–67) a. Implant of Loop Recorder 16. Review of Procedure Codes in MS 3. Improving Medicare Post-Acute Care b. Endovascular Thrombectomy of the DRGs 981 through 983; 984 through 986; Transformation Act of 2014 (IMPACT Lower Limbs and 987 through 989 Act) (Pub. L. 113–185) c. Pacemaker Procedures Code a. Moving Procedure Codes from MS–DRGs 4. The Medicare Access and CHIP Combinations 981 through 983 or MS–DRGs 987 Reauthorization Act (MACRA) of 2015 d. Transcatheter Mitral Valve Repair with through 989 into MDCs (Pub. L. 114–10) Implant b. Reassignment of Procedures among MS– 5. The Consolidated Appropriations Act, e. MS–DRG 245 (AICD Generator DRGs 981 through 983, 984 through 986, 2016 (Pub. L. 114–113) Procedures) and 987 through 989

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c. Adding Diagnosis or Procedure Codes to c. CardioMEMSTM HF (Heart Failure) J. Proposed Revisions to the Wage Index MDCs Monitoring System Based on Hospital Redesignations and (1) Angioplasty of Extracranial Vessel d. MitraClip® System Reclassifications (2) Excision of Abdominal Arteries e. Responsive Neurostimulator (RNS®) 1. General Policies and Effects of (3) Excision of Retroperitoneal Tissue System Reclassification and Redesignation (4) Occlusion of Vessels: Esophageal f. Blinatumomab (BLINCYTOTM Trade 2. MGCRB Reclassification and Varices Brand) Redesignation Issues for FY 2017 (5) Excision of Vulva g. Lutonix® Drug Coated Balloon PTA a. FY 2017 Reclassification Requirements (6) Lymph Node Biopsy Catheter and In.PACTTM AdmiralTM and Approvals (7) Obstetrical Laceration Repair Pacliaxel Coated Percutaneous b. Requirements for FY 2018 Applications 17. Proposed Changes to the ICD–10–CM Transluminal Angioplasty (PTA) Balloon and Proposed Revisions Regarding Paper and ICD–10–PCS Coding Systems Catheter Application Requirements a. ICD–10 Coordination and Maintenance 5. Proposed FY 2017 Applications for New c. Other Policy Regarding Reclassifications Committee Technology Add-On Payments for Terminated Hospitals b. Code Freeze a. MAGEC® Spinal Bracing and Distraction 3. Redesignation of Hospitals Under 18. Replaced Devices Offered without Cost System (MAGEC® Spine) Section 1886(d)(8)(B) of the Act or With a Credit b. MIRODERM Biologic Wound Matrix 4. Waiving Lugar Redesignation for the a. Background (MIRODERM) Out-Migration Adjustment b. Proposed Changes for FY 2017 c. Idarucizumab K. Proposed Out-Migration Adjustment 19. Other Proposed Policy Changes d. Titan Spine (Titan Spine Endoskeleton® Based on Commuting Patterns of a. MS–DRG GROUPER Logic nanoLOCKTM Interbody Device) Hospital Employees for FY 2017 (1) Operations on Products of Conception e. Andexanet Alfa L. Notification Regarding Proposed CMS (2) Other Heart Revascularization f. Defitelio® (Defibrotide) ‘‘Lock-In’’ Date for Urban to Rural (3) Procedures on Vascular Bodies: g. EDWARDS INTUITY EliteTM Valve Reclassifications Under § 412.103 Chemoreceptors System M. Process for Requests for Wage Index (4) Repair of the Intestine h. GORE® EXCLUDER® Iliac Branch Data Corrections (5) Insertion of Infusion Pump Endoprosthesis (IBE) N. Proposed Labor Market Share for the (6) Procedures on the Bursa i. VistogardTM (Uridine Triacetate) Proposed FY 2017 Wage Index (7) Procedures on the Breast III. Proposed Changes to the Hospital Wage O. Solicitation of Comments on Treatment (8) Excision of Subcutaneous Tissue and Index for Acute Care Hospitals of Overhead and Home Office Costs in Fascia A. Background the Wage Index Calculation IV. Other Decisions and Proposed Changes to (9) Shoulder Replacement 1. Legislative Authority the IPPS for Operating Costs and (10) Reposition 2. Core-Based Statistical Areas (CBSAs) Graduate Medical Education (GME) (11) Insertion of Infusion Device Revisions for the Proposed FY 2017 Costs (12) Bladder Neck Repair Hospital Wage Index A. Changes to Operating Payments for (13) Future Consideration B. Worksheet S–3 Wage Data for the Subsection (d) Puerto Rico Hospitals as b. Issues Relating to MS–DRG 999 Proposed FY 2017 Wage Index a Result of Section 601 of Public Law (Ungroupable) 1. Included Categories of Costs 114–113 c. Other Operating Room (O.R.) and Non- 2. Excluded Categories of Costs B. Proposed Changes in the Inpatient O.R. Issues 3. Use of Wage Index Data by Providers Hospital Updates for FY 2017 (1) O.R. Procedures to Non-O.R. Procedures Other Than Acute Care Hospitals under (§§ 412.64(d) and 412.211(c)) (a) Endoscopic/Transorifice Insertion the IPPS 1. Proposed FY 2017 Inpatient Hospital (b) Endoscopic/Transorifice Removal C. Verification of Worksheet S–3 Wage Update (c) Tracheostomy Device Removal Data 2. Proposed FY 2017 Puerto Rico Hospital (d) Endoscopic/Percutaneous Insertion D. Method for Computing the Proposed FY Update (e) Percutaneous Removal 2017 Unadjusted Wage Index 3. Electronic Health Records (EHR) (f) Percutaneous Drainage E. Proposed Occupational Mix Adjustment Adjustment to IPPS Market Basket (g) Percutaneous Inspection to the FY 2017 Wage Index C. Rural Referral Centers (RRCs): Proposed (h) Inspection without Incision 1. Use of 2013 Occupational Mix Survey Annual Updates to Case-Mix Index (CMI) (i) Dilation of Stomach for the Proposed FY 2017 Wage Index and Discharge Criteria (§ 412.96) (j) Endoscopic/Percutaneous Occlusion 2. Development of the 2016 Medicare Wage 1. Case-Mix Index (CMI) (k) Infusion Device Index Occupational Mix Survey for the 2. Discharges (2) Non-O.R. Procedures to O.R. Procedures FY 2019 Wage Index D. Proposed Payment Adjustment for Low- (a) Drainage of Pleural Cavity 3. Calculation of the Proposed Volume Hospitals (§ 412.101) (b) Drainage of Cerebral Ventricle Occupational Mix Adjustment for FY E. Indirect Medical Education (IME) G. Recalibration of the Proposed FY 2017 2017 Payment Adjustment (§ 412.105) MS–DRG Relative Weights F. Analysis and Implementation of the 1. IME Adjustment Factor for FY 2017 1. Data Sources for Developing the Proposed Occupational Mix Adjustment 2. Other Proposed Policy Changes Proposed Relative Weights and the Proposed FY 2017 Occupational Affecting IME 2. Methodology for Calculation of the Mix Adjusted Wage Index F. Proposed Payment Adjustment for Proposed Relative Weights G. Transitional Wage Indexes Medicare Disproportionate Share 3. Development of National Average CCRs 1. Background Hospitals (DSHs) for FY 2017 and H. Proposed Add-On Payments for New 2. Transition for Hospitals in Urban Areas Subsequent Years (§ 412.106) Services and Technologies That Became Rural 1. General Discussion 1. Background 3. Transition for Hospitals Deemed Urban 2. Eligibility for Empirically Justified 2. Public Input Before Publication of a under Section 1886(d)(8)(B) of the Act Medicare DSH Payments and Notice of Proposed Rulemaking on Add- Where the Urban Area Became Rural Uncompensated Care Payments On Payments under the New OMB Delineations 3. Empirically Justified Medicare DSH 3. ICD–10–PCS Section ‘‘X’’ Codes for 4. Budget Neutrality Payments Certain New Medical Services and H. Proposed Application of the Proposed 4. Uncompensated Care Payments Technologies Rural, Imputed, and Frontier Floors a. Calculation of Proposed Factor 1 for FY 4. Proposed FY 2017 Status of 1. Proposed Rural Floor 2017 Technologies Approved for FY 2016 2. Proposed Imputed Floor for FY 2017 b. Calculation of Proposed Factor 2 for FY Add-On Payments 3. Proposed State Frontier Floor for FY 2017 a. KcentraTM 2017 c. Calculation of Proposed Factor 3 for FY b. Argus® II Retinal Prosthesis System I. Proposed FY 2017 Wage Index Tables 2017

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d. Proposed Calculation of Factor 3 for FY (RSMR) Following Coronary Artery 6. Request for Comments on Additional 2018 and Subsequent Fiscal Years Bypass Graft (CABG) Surgery (NQF Measures for Potential Future Adoption (1) Background #2558) 7. Maintenance of Technical Specifications (2) Proposed Data Source and Time Period 6. Previously Adopted and Newly for Quality Measures for FY 2018 and Subsequent Years, Proposed Baseline and Performance 8. Extraordinary Circumstance Exception Including Methodology for Incorporating Periods Policy for the HAC Reduction Program Worksheet S–10 Data a. Background Beginning in FY 2016 and for (3) Proposed Definition of Uncompensated b. Patient- and Caregiver-Centered Subsequent Years Care for FY 2018 and Subsequent Fiscal Experience of Care/Care Coordination J. Payment for Graduate Medical Education Years Domain (Proposed Person and (GME) and Indirect Medical Education (4) Other Methodological Considerations Community Engagement Domain) (IME) Costs (§§ 412.105, 413.75 through for FY 2018 and Subsequent Fiscal Years c. Efficiency and Cost Reduction Domain 413.83) G. Hospital Readmissions Reduction d. Safety Domain 1. Background Program: Proposed Updates and Changes e. Clinical Care Domain 2. Change in New Program Growth From 3 (§§ 412.150 through 412.154) f. Summary of Previously Adopted and Years to 5 Years 1. Statutory Basis for the Hospital Newly Proposed Baseline and a. Urban and Rural Hospitals Readmissions Reduction Program Performance Periods for the FY 2018, FY b. Proposed Policy Changes Relating to 2. Regulatory Background 2019, FY 2020, FY 2021, and FY 2022 Rural Training Tracks at Urban Hospitals 3. Proposed Policies for the FY 2017 Program Years c. Proposed Effective Date Hospital Readmissions Reduction 7. Proposed Immediate Jeopardy Policy K. Rural Community Hospital Program Changes Demonstration Program 4. Maintenance of Technical Specifications a. Background 1. Background for Quality Measures b. Proposed Increase of Immediate 2. Budget Neutrality Offset Adjustments: 5. Proposed Applicable Period for FY 2017 Jeopardy Citations From Two to Three Fiscal Years 2005 Through 2016 6. Proposed Calculation of Aggregate Surveys a. Fiscal Years 2005 Through 2013 Payments for Excess Readmissions for c. EMTALA-Related Immediate Jeopardy b. Fiscal Years 2014 and 2015 FY 2017 Citations c. Fiscal Year 2016 7. Extraordinary Circumstance Exception 8. Proposed Performance Standards for the 3. Proposed Budget Neutrality Policy Hospital VBP Program Methodology for FY 2017 8. Timeline for Public Reporting of Excess a. Background L. Proposed Hospital and CAH Notification Readmission Ratios on Hospital b. Previously Adopted and Proposed Procedures for Outpatients Receiving Observation Services Compare for the FY 2017 Payment Performance Standards for the FY 2019 1. Background Determination Program Year a. Statutory Authority H. Hospital Value-Based Purchasing (VBP) c. Previously Adopted Performance b. Proposed Effective Date Program: Proposed Policy Changes for Standards for Certain Measures for the 2. Proposed Implementation of the NOTICE the FY 2018 Program Year and FY 2020 Program Year Act Provisions d. Previously Adopted and Newly Subsequent Years a. Proposed Notice Process 1. Background Proposed Performance Standards for b. Proposed Notification Recipients a. Statutory Background and Overview of Certain Measures for the FY 2021 c. Proposed Timing of Notice Delivery Past Program Years Program Year d. Proposed Requirements for Written b. FY 2017 Program Year Payment Details e. Proposed Performance Standards for Notice 2. PSI 90 Measure in the FY 2018 and Certain Measures for the FY 2022 e. Outpatient Observation Services and Future Program Years Program Year Beneficiary Financial Liability a. Proposed PSI 90 Measure Performance 9. FY 2019 Program Year Scoring f. Delivering the Medicare Outpatient Period Change for the FY 2018 Program Methodology Observation Notice Year a. Domain Weighting for the FY 2019 g. Proposed Oral Notice b. Intent To Propose in Future Rulemaking Program Year for Hospitals That Receive h. Proposed Signature Requirements To Adopt the Modified PSI 90 Measure a Score on All Domains i. No Appeal Rights Under the NOTICE Act 3. Retention Policy, Domain Name b. Domain Weighting for the FY 2019 M. Proposed Technical Changes and Proposal, and Updating of Quality Program Year for Hospitals Receiving Correction of Typographical Errors in Measures for the FY 2019 Program Year Scores on Fewer Than Four Domains Certain Regulations Under 42 CFR part a. Retention of Previously Adopted I. Proposed Changes to the Hospital- 413 Relating to Costs to Related Hospital VBP Program Measures Acquired Condition (HAC) Reduction Organizations and Medicare Cost Reports b. Proposed Domain Name Change Program 1. General Background c. Proposed Inclusion of Selected Ward 1. Background 2. Proposed Technical Change to Non-Intensive Care Unit (ICU) Locations 2. Statutory Basis for the HAC Reduction Regulations at 42 CFR 413.17(d)(1) on in Certain NHSN Measures Beginning Program Cost to Related Organizations With the FY 2019 Program Year 3. Overview of Previous HAC Reduction 3. Proposed Changes to 42 CFR d. Summary of Previously Adopted Program Rulemaking 413.24(f)(4)(i) Relating to Electronic Measures and Newly Proposed Measure 4. Implementation of the HAC Reduction Submission of Cost Reports Refinements for the FY 2019 Program Program for FY 2017 4. Proposed Technical Changes to 42 CFR Year a. Clarification of Complete Data 413.24(f)(4)(ii) Relating to Electronic 4. Newly Proposed Measures and Measure Requirements for Domain 1 Submission of Cost Reports and Due Refinements for the FY 2021 Program b. Clarification of NHSN CDC HAI Data Dates Year and Subsequent Years Submission Requirements for Newly 5. Proposed Technical Changes to 42 CFR a. Condition-Specific Hospital Level, Risk- Opened Hospitals 413.24(f)(4)(iv) Relating to Reporting Standardized Payment Measures 5. Implementation of the HAC Reduction Entities, Cost Report Certification b. Proposed Update to an Existing Measure Program for FY 2018 Statement, Electronic Submission and for the FY 2021 Program Year: Hospital a. Proposed Adoption of PSI 90: Patient Cost Reports Due Dates 30-Day, All-Cause, Risk-Standardized Safety and Adverse Events Composite 6. Proposed Technical Correction to 42 Mortality Rate (RSMR) Following (NQF # 0531) CFR 413.200(c)(1)(i) Relating to Medicare Pneumonia (PN) Hospitalization (NQF b. Applicable Time Periods for the FY 2018 Cost Report Due Dates for Organ #0468) (Updated Cohort) HAC Reduction Program and the FY Procurement Organizations and 5. Proposed New Measure for the FY 2022 2019 HAC Reduction Program Histocompatibility Laboratories Program Year: Hospital 30-Day, All- c. Proposed Changes to the HAC Reduction N. Clarification Regarding the Medicare Cause, Risk-Standardized Mortality Rate Program Scoring Methodology Utilization Requirement for Medicare-

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Dependent, Small Rural Hospitals a. Use of Medicare Cost Report Data F. Proposed Modifications to the ‘‘25- (MDHs) (§ 412.108) (1) Wages and Salaries Costs Percent Threshold Policy’’ Payment 1. Background (2) Employee Benefit Costs Adjustments (§§ 412.534 and 412.536) 2. Clarification of Medicare Utilization (3) Contract Labor Costs G. Proposed Refinement to the Payment Criterion for MDH Classification (4) Pharmaceutical Costs Adjustment for ‘‘Subclause II’’ LTCHs O. Adjustment to IPPS Rates Resulting (5) Professional Liability Insurance Costs VIII. Quality Data Reporting Requirements for From 2-Midnight Policy (6) Capital Costs Specific Providers and Suppliers V. Proposed Changes to the IPPS for Capital- b. Final Major Cost Category Computation A. Hospital Inpatient Quality Reporting Related Costs c. Derivation of the Detailed Operating Cost (IQR) Program A. Overview Weights 1. Background B. Additional Provisions d. Derivation of the Detailed Capital Cost a. History of the Hospital IQR Program 1. Exception Payments Weights b. Maintenance of Technical Specifications 2. New Hospitals e. Proposed 2013-Based LTCH Market for Quality Measures 3. Proposed Changes in Payments for Basket Cost Categories and Weights c. Public Display of Quality Measures Hospitals Located in Puerto Rico 4. Selection of Proposed Price Proxies 2. Process for Retaining Previously C. Proposed Annual Update for FY 2017 a. Price Proxies for the Operating Portion Adopted Hospital IQR Program Measures VI. Proposed Changes for Hospitals Excluded of the Proposed 2013–Based LTCH for Subsequent Payment Determinations From the IPPS Market Basket 3. Removal and Suspension of Hospital A. Proposed Rate-of-Increase in Payments (1) Wages and Salaries IQR Program Measures to Excluded Hospitals for FY 2017 (2) Employee Benefits a. Considerations in Removing Quality B. Critical Care Hospitals (CAHs) (3) Electricity Measures From the Hospital IQR 1. Background (4) Fuel, Oil, and Gasoline Program 2. Frontier Community Health Integration (5) Water and Sewage b. Proposed Removal of Hospital IQR Project (FCHIP) Demonstration (6) Professional Liability Insurance Program Measures for the FY 2019 VII. Proposed Changes to the Long-Term Care (7) Pharmaceuticals Payment Determination and Subsequent Hospital Prospective Payment System (8) Food: Direct Purchases Years (LTCH PPS) for FY 2015 (9) Food: Contract Services 4. Previously Adopted Hospital IQR A. Background of the LTCH PPS (10) Chemicals Program Measures for the FY 2018 and 1. Legislative and Regulatory Authority (11) Medical Instruments FY 2019 Payment Determination and 2. Criteria for Classification as a LTCH (12) Rubber and Plastics Subsequent Years a. Classification as a LTCH (13) Paper and Printing Products 5. Expansion and Updating of Quality b. Hospitals Excluded From the LTCH PPS (14) Miscellaneous Products Measures 3. Limitation on Charges to Beneficiaries (15) Professional Fees: Labor-Related 6. Proposed Refinements to Existing 4. Administrative Simplification (16) Administrative and Facilities Support Measures in the Hospital IQR Program Compliance Act (ASCA) and Health Services a. Proposed Expansion of the Cohort for the Insurance Portability and Accountability (17) Installation, Maintenance, and Repair PN Payment Measure: Hospital-Level, Act (HIPAA) Compliance Services Risk-Standardized Payment Associated B. Proposed Modifications to the (18) All Other: Labor-Related Services With a 30-Day Episode-of-Care for Application of the Site Neutral Payment Pneumonia (NQF # 2579) Rate (§ 412.522) (19) Professional Fees: Nonlabor-Related 1. Background (20) Financial Services b. Proposed Adoption of Modified PSI 90: 2. Technical Correction of Definition of (21) Telephone Services Patient Safety and Adverse Events ‘‘Subsection (d) Hospital’’ for the Site (22) All Other: Nonlabor-Related Services Composite Measure (NQF #0531) Neutral Payment Rate (§ 412.503) b. Price Proxies for the Capital Portion of 7. Proposed Additional Hospital IQR C. Proposed Medicare Severity Long-Term the Proposed 2013-Based LTCH Market Program Measures for the FY 2019 Care Diagnosis-Related Group (MS–LTC– Basket Payment Determinations and Subsequent DRG) Classifications and Relative (1) Capital Price Proxies Prior to Vintage Years Weights for FY 2017 Weighting a. Proposed Adoption of Three Clinical 1. Background (2) Vintage Weights for Price Proxies Episode-Based Payment Measures 2. Patient Classifications Into MS–LTC– c. Summary of Price Proxies of the b. Proposed Adoption of Excess Days in DRGs Proposed 2013-Based LTCH Market Acute Care After Hospitalization for a. Background Basket Pneumonia (PN Excess Days) Measure b. Proposed Changes to the MS–LTC–DRGs d. Proposed FY 2017 Market Basket Update c. Summary of Previously Adopted and for FY 2017 for LTCHs Newly Proposed Hospital IQR Program 3. Development of the Proposed FY 2017 e. Proposed FY 2017 Labor-Related Share Measures for the FY 2019 Payment MS–LTC–DRG Relative Weights E. Proposed Changes to the LTCH PPS Determination and Subsequent Years a. General Overview of the Development of Payment Rates and Other Proposed 8. Proposed Changes to Policies on the MS–LTC–DRG Relative Weights Changes to the LTCH PPS for FY 2017 Reporting of eCQMs b. Development of the Proposed MS–LTC– 1. Overview of Development of the LTCH a. Proposed Requirement That Hospitals DRG Relative Weights for FY 2017 PPS Standard Federal Payment Rates Report on All eCQMs in the Hospital IQR c. Data 2. Proposed FY 2017 LTCH PPS Standard Program Measure Set for the CY 2017 d. Hospital-Specific Relative Value (HSRV) Federal Payment Rate Annual Market Reporting Period/FY 2019 Payment Methodology Basket Update Determination and Subsequent Years e. Treatment of Severity Levels in a. Overview b. Proposed Requirement That Hospitals Developing the MS–LTC–DRG Relative b. Proposed Market Basket Under the Report a Full Year of eCQM Data Weights LTCH PPS for FY 2017 c. Clarification Regarding Data Submission f. Proposed Low-Volume MS–LTC–DRGs c. Revision of Certain Market Basket for ED–1, ED–2, PC–01, STK–4, VTE–5, g. Steps for Determining the Proposed FY Updates as Required by the Affordable and VTE–6 2017 MS–LTC–DRG Relative Weights Care Act 9. Possible New Quality Measures and D. Proposed Rebasing of the LTCH Market d. Proposed Adjustment to the LTCH PPS Measure Topics for Future Years Basket Standard Federal Payment Rate Under a. Potential Inclusion of the National 1. Background the Long-Term Care Hospital Quality Institutes of Health (NIH) Stroke Scale 2. Overview of the Proposed 2013-Based Reporting Program (LTCH QRP) for the Hospital 30-Day Mortality LTCH Market Basket e. Proposed Annual Market Basket Update Following Acute Ischemic Stroke 3. Development of the Proposed 2013- Under the LTCH PPS for FY 2017 Hospitalization Measure Beginning as Based LTCH Market Basket Cost 3. Proposed Update Under the Payment Early as the FY 2022 Payment Categories and Weights Adjustment for ‘‘Subclause (II)’’ LTCHs Determination

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b. Potential Inclusion of National 4. Proposed New Quality Measure b. Timeline for Data Submission Under the Healthcare Safety Network (NHSN) Beginning With the FY 2019 Program LTCH QRP for the FY 2018 and Antimicrobial Use Measure (NQF #2720) Year Subsequent Years Payment c. Potential Measures for Behavioral Health a. Considerations in the Selection of Determinations in the Hospital IQR Program Quality Measures c. Proposed Timeline and Data Submission d. Potential Public Reporting of Quality b. Admissions and Emergency Department Mechanisms for the FY 2018 Payment Measures Data Stratified by Race, (ED) Visits for Patients Receiving Determination and Subsequent Years for Ethnicity, Sex, and Disability and Future Outpatient Chemotherapy New LTCH QRP Resource Use and Other Hospital Quality Measures That 5. Possible New Quality Measure Topics Measures—Claims-Based Measures Incorporate Health Equity for Future Years d. Proposal To Revise the Previously 10. Form, Manner, and Timing of Quality 6. Maintenance of Technical Specifications Adopted Data Collection Period and Data Submission for Quality Measures Submission Deadlines for Percent of a. Background 7. Public Display Requirements Residents or Patients Who Were b. Procedural Requirements for the FY a. Background Assessed and Appropriately Given the 2019 Payment Determination and b. Proposed Additional Public Display Seasonal Influenza Vaccine (Short Stay) Subsequent Years Requirements (NQF #0680) for the FY 2019 Payment c. Data Submission Requirements for c. Proposed Public Display of Additional Determination and Subsequent Years Chart-Abstracted Measures PCHQR Measure e. Proposed Timeline and Data Submission d. Proposed Alignment of the Hospital IQR d. Proposed Public Display of Updated Mechanisms for the Proposed LTCH QRP Measure Quality Measure for the FY 2020 Program With the Medicare and e. Proposed Postponement of Public Payment Determination and Subsequent Medicaid EHR Incentive Programs for Display of Two Measures Years Eligible Hospitals and CAHs 8. Form, Manner, and Timing of Data 10. LTCH QRP Data Completion e. Sampling and Case Thresholds for the Submission Thresholds for the FY 2016 Payment FY 2019 Payment Determination and 9. Exceptions From PCHQR Program Determination and Subsequent Years Subsequent Years Requirements 11. LTCH QRP Data Validation Process for f. HCAHPS Requirements for the FY 2019 C. Long-Term Care Hospital Quality the FY 2016 Payment Determination and Payment Determination and Subsequent Reporting Program (LTCH QRP) Subsequent Years Years 1. Background and Statutory Authority 12. Proposed Change to Previously g. Data Submission Requirements for 2. General Considerations Used for Codified LTCH QRP Submission Structural Measures for the FY 2019 Selection of Quality, Resource Use, and Exception and Extension Policies Payment Determination and Subsequent Other Measures for the LTCH QRP 13. Previously Finalized LTCH QRP Years 3. Policy for Retention of LTCH QRP Reconsideration and Appeals Procedures h. Data Submission and Reporting Measures Adopted for Previous Payment 14. Proposals and Policies Regarding Requirements for HAI Measures Determinations Public Display of Measure Data for the Reported via NHSN 4. Policy for Adopting Changes to LTCH LTCH QRP and Procedures for the 11. Proposed Modifications to the Existing QRP Measures Opportunity To Review and Correct Data Processes for Validation of Hospital IQR 5. Quality Measures Previously Finalized and Information Program Data for and Currently Used in the LTCH QRP a. Public Display of Measures a. Background 6. LTCH QRP Quality, Resource Use and b. Procedures for the Opportunity To b. Proposed Modifications to the Existing Other Measures Proposed for the FY Review and Correct Data and Processes for Validation of Hospital IQR 2018 Payment Determination and Information Program Data Subsequent Years 15. Proposed Mechanism for Providing 12. Data Accuracy and Completeness a. Proposal To Address the IMPACT Act Feedback Reports to LTCHs Acknowledgement (DACA) Domain of Resource Use and Other D. Inpatient Psychiatric Facility Quality Requirements for the FY 2019 Payment Measures: Total Estimated MSPB—PAC Reporting (IPFQR) Program Determination and Subsequent Years LTCH QRP 1. Background 13. Public Display Requirements for the FY b. Proposal To Address the IMPACT Act a. Statutory Authority 2019 Payment Determination and Domain of Resource Use and Other b. Covered Entities Subsequent Years Measures: Discharge to Community-Post- c. Considerations in Selecting Quality 14. Reconsideration and Appeal Acute Care (PAC) Long-Term Care Measures Procedures for the FY 2019 Payment Hospital Quality Reporting Program 2. Retention of IPFQR Program Measures Determination and Subsequent Years c. Proposal To Address the IMPACT Act Adopted in Previous Payment 15. Proposed Changes to the Hospital IQR Domain of Resource Use and Other Determinations Program Extraordinary Circumstances Measures: Potentially Preventable 30- 3. Proposed Update to Previously Finalized Extensions or Exemptions (ECE) Policy Day Post-Discharge Readmission Measure: Screening for Metabolic a. Proposal To Extend the General ECE Measure for the Long-Term Care Hospital Disorders Request Deadline for Non-eCQM Quality Reporting Program 4. Proposed New Quality Measures for the Circumstances 7. LTCH QRP Quality Measure Proposed FY 2019 Payment Determination and b. Proposal To Establish a Separate for the FY 2020 Payment Determination Subsequent Years Submission Deadline for ECE Requests and Subsequent Years a. SUB–3—Alcohol and Other Drug Use Related to eCQMs a. Background Disorder Treatment Provided or Offered B. PPS-Exempt Cancer Hospital Quality b. Quality Measure Addressing the at Discharge and the Subset Measure Reporting (PCHQR) Program IMPACT Act Domain of Medication SUB–3a—Alcohol and Other Drug Use 1. Background Reconciliation: Drug Regimen Review Disorder Treatment at Discharge (NQF 2. Proposed Criteria for Removal and Conducted With Follow-Up for #1664) Retention of PCHQR Program Measures Identified Issues-Post-Acute Care LTCH b. Thirty-Day All-Cause Unplanned 3. Retention and Proposed Update to QRP Readmission Following Psychiatric Previously Finalized Quality Measures 8. LTCH QRP Quality Measures and Hospitalization in an IPF for PCHs Beginning With the FY 2019 Measure Concepts Under Consideration 5. Summary of Proposed Measures for the Program Year for Future Years FY 2019 Payment Determination and a. Background 9. Proposed Form, Manner, and Timing of Subsequent Years b. Proposed Update of Oncology: Radiation Quality Data Submission for the FY 2018 6. Possible IPFQR Program Measures and Dose Limits to Normal Tissues (NQF Payment Determination and Subsequent Topics for Future Consideration #0382) Measure for FY 2019 Program Years 7. Public Display and Review Year and Subsequent Years a. Background Requirements

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8. Form, Manner, and Timing of Quality C. Calculation of the Prospective Payment 4. Effects of Proposed Changes Under the Data Submission Rates FY 2017 Hospital Value-Based a. Procedural and Submission III. Proposed Changes to Payment Rates for Purchasing (VBP) Program Requirements Acute Care Hospital Inpatient Capital- 5. Effects of the Proposed Changes to the b. Proposed Change to the Reporting Related Costs for FY 2017 HAC Reduction Program for FY 2017 Periods and Submission Timeframes A. Determination of Federal Hospital 6. Effects of Proposed Policy Changes c. Population and Sampling Inpatient Capital-Related Prospective Relating to Direct GME and IME d. Data Accuracy and Completeness Payment Rate Update Payments for Rural Training Tracks at Acknowledgement (DACA) B. Calculation of the Proposed Inpatient Urban Hospitals Requirements Capital-Related Prospective Payments for 7. Effects of Implementation of Rural 9. Reconsideration and Appeals Procedures FY 2017 Community Hospital Demonstration 10. Exceptions to Quality Reporting C. Capital Input Price Index Program Requirements IV. Proposed Changes to Payment Rates for 8. Effects of Proposed Implementation of E. Clinical Quality Measurement for Excluded Hospitals: Rate-of-Increase the Notice of Observation Treatment and Eligible Hospitals and Critical Access Percentages for FY 2017 Implications for Care Eligibility Act Hospitals (CAHs) Participating in the V. Proposed Updates to the Payment Rates (NOTICE Act) EHR Incentive Programs in 2017 for the LTCH PPS for FY 2017 9. Effects of Proposed Technical Changes 1. Background A. Proposed LTCH PPS Standard Federal and Correction of Typographical Errors 2. CQM Reporting for the Medicare and Payment Rate for FY 2017 in Certain Regulations Under 42 CFR Medicaid EHR Incentive Programs in B. Proposed Adjustment for Area Wage part 413 Relating to Costs to Related 2017 Levels Under the LTCH PPS for FY 2017 Organizations and Medicare Cost Reports a. Background 1. Background 10. Effects of Proposed Implementation of b. CQM Reporting Period for the Medicare 2. Proposed Geographic Classifications the Frontier Community Health and Medicaid EHR Incentive Programs in (Labor Market Areas) for the LTCH PPS Integration Project (FCHIP) CY 2017 Standard Federal Payment Rate Demonstration c. CQM Reporting Form and Method for 3. Proposed Labor-Related Share for the I. Effects of Proposed Changes in the the Medicare EHR Incentive Program in LTCH PPS Standard Federal Payment Capital IPPS 2017 Rate 1. General Considerations IX. MedPAC Recommendations 4. Proposed Wage Index for FY 2017 for the 2. Results X. Other Required Information LTCH PPS Standard Federal Payment J. Effects of Proposed Payment Rate A. Requests for Data From the Public Rate Changes and Policy Changes Under the B. Collection of Information Requirements 5. Proposed Budget Neutrality Adjustment LTCH PPS 1. Statutory Requirement for Solicitation of for Changes to the LTCH PPS Standard 1. Introduction and General Considerations Comments Federal Payment Rate Area Wage Level 2. Impact on Rural Hospitals 2. ICRs for Add-On Payments for New Adjustment 3. Anticipated Effects of Proposed LTCH Services and Technologies C. Proposed LTCH PPS Cost-of-Living PPS Payment Rate Changes and Policy 3. ICRs for the Occupational Mix Adjustment (COLA) for LTCHs Located Changes Adjustment to the Proposed FY 2017 in Alaska and Hawaii 4. Effect on the Medicare Program Wage Index (Hospital Wage Index D. Proposed Adjustment for LTCH PPS 5. Effect on Medicare Beneficiaries Occupational Mix Survey) High-Cost Outlier (HCO) Cases K. Effects of Proposed Requirements for 4. Hospital Applications for Geographic E. Proposed Update to the IPPS Hospital Inpatient Quality Reporting Reclassifications by the MGCRB Comparable/Equivalent Amounts to (IQR) Program 5. ICRs for the Notice of Observation Reflect the Statutory Changes to the IPPS L. Effects of Proposed Requirements for the Treatment by Hospitals and CAHs DSH Payment Adjustment Methodology PPS-Exempt Cancer Hospital Quality 6. ICRs for the Hospital Inpatient Quality F. Computing the Proposed Adjusted LTCH Reporting (PCHQR) Program Reporting (IQR) Program PPS Federal Prospective Payments for M. Effects of Proposed Requirements for 7. ICRs for PPS-Exempt Cancer Hospital FY 2017 the Long-Term Care Hospital Quality Quality Reporting (PCHQR) Program VI. Tables Referenced in This Proposed Reporting Program (LTCH QRP) for the 8. ICRs for Hospital Value-Based Rulemaking and Available Through the FY 2018 Payment Determination and Purchasing (VBP) Program Internet on the CMS Web site Subsequent Years 9. ICRs for the Long-Term Care Hospital Appendix A—Economic Analyses N. Effects of Proposed Updates to the Quality Reporting Program (LTCH QRP) I. Regulatory Impact Analysis Inpatient Psychiatric Facility Quality 10. ICRs for the Inpatient Psychiatric A. Introduction Reporting (IPFQR) Program Facility Quality Reporting (IPFQR) B. Need O. Effects of Proposed Requirements Program C. Objectives of the IPPS Regarding Electronic Health Record 11. ICRs for the Electronic Health Record D. Limitations of Our Analysis (EHR) Meaningful Use Program (EHR) Incentive Program and Meaningful E. Hospitals Included in and Excluded P. Alternatives Considered Use From the IPPS Q. Overall Conclusion C. Response to Public Comments F. Effects on Hospitals and Hospital Units 1. Acute Care Hospitals Regulation Text Excluded From the IPPS 2. LTCHs Addendum—Proposed Schedule of G. Quantitative Effects of the Proposed II. Accounting Statements and Tables Standardized Amounts, Update Factors, Policy Changes Under the IPPS for A. Acute Care Hospitals and Rate-of-Increase Percentages Operating Costs B. LTCHs Effective With Cost Reporting Periods 1. Basis and Methodology of Estimates III. Regulatory Flexibility Act (RFA) Analysis Beginning on or After October 1, 2016 2. Analysis of Table I IV. Impact on Small Rural Hospitals and Payment Rates for LTCHs Effective 3. Impact Analysis of Table II V. Unfunded Mandate Reform Act (UMRA) With Discharges Occurring on or After H. Effects of Other Proposed Policy Analysis October 1, 2016 Changes VI. Executive Order 12866 I. Summary and Background 1. Effects of Proposed Policy Relating to Appendix B: Recommendation of Update II. Proposed Changes to the Prospective New Medical Service and Technology Factors for Operating Cost Rates of Payment Rates for Hospital Inpatient Add-On Payments Payment for Inpatient Hospital Services Operating Costs for Acute Care Hospitals 2. Effect of Proposed Changes Relating to I. Background for FY 2017 Payment Adjustment for Medicare II. Inpatient Hospital Update for FY 2017 A. Calculation of the Adjusted Disproportionate Share Hospitals A. Proposed FY 2017 Inpatient Hospital Standardized Amount 3. Effects of Proposed Reduction Under the Update B. Proposed Adjustments for Area Wage Hospital Readmissions Reduction B. Proposed Update for SCHs and MDHs Levels and Cost-of-Living Program for FY 2017

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C. Proposed FY 2017 Puerto Rico Hospital a system of payment for the operating standards established for a performance Update costs of acute care hospital inpatient period for such fiscal year. D. Proposed Update for Hospitals Excluded stays under Medicare Part A (Hospital • Section 1886(p) of the Act, as added From the IPPS by section 3008 of the Affordable Care E. Proposed Update for LTCHs for FY 2017 Insurance) based on prospectively set III. Secretary’s Recommendation rates. Section 1886(g) of the Act requires Act, which establishes a Hospital- IV. MedPAC Recommendation for Assessing that, instead of paying for capital-related Acquired Condition (HAC) Reduction Payment Adequacy and Updating costs of inpatient hospital services on a Program, under which payments to Payments in Traditional Medicare reasonable cost basis, the Secretary use applicable hospitals are adjusted to provide an incentive to reduce hospital- I. Executive Summary and Background a prospective payment system (PPS). • Section 1886(d)(1)(B) of the Act, acquired conditions. • A. Executive Summary which specifies that certain hospitals Section 1886(q) of the Act, as added by section 3025 of the Affordable Care 1. Purpose and Legal Authority and hospital units are excluded from the IPPS. These hospitals and units are: Act and amended by section 10309 of This proposed rule would make Rehabilitation hospitals and units; the Affordable Care Act, which payment and policy changes under the LTCHs; psychiatric hospitals and units; establishes the ‘‘Hospital Readmissions Medicare inpatient prospective payment children’s hospitals; and cancer Reduction Program’’ effective for systems (IPPS) for operating and capital- hospitals. Religious nonmedical health discharges from an ‘‘applicable related costs of acute care hospitals as care institutions (RNHCIs) are also hospital’’ beginning on or after October well as for certain hospitals and hospital excluded from the IPPS. 1, 2012, under which payments to those units excluded from the IPPS. In • Sections 123(a) and (c) of Public hospitals under section 1886(d) of the addition, it would make payment and Law 106–113 and section 307(b)(1) of Act will be reduced to account for policy changes for inpatient hospital Public Law 106–554 (as codified under certain excess readmissions. • Section 1886(r) of the Act, as added services provided by long-term care section 1886(m)(1) of the Act), which hospitals (LTCHs) under the long-term by section 3133 of the Affordable Care provide for the development and care hospital prospective payment Act, which provides for a reduction to implementation of a prospective system (LTCH PPS). It also would make disproportionate share hospital (DSH) payment system for payment for policy changes to programs associated payments under section 1886(d)(5)(F) of inpatient hospital services of long-term with Medicare IPPS hospitals, IPPS- the Act and for a new uncompensated care hospitals (LTCHs) described in excluded hospitals, and LTCHs. care payment to eligible hospitals. section 1886(d)(1)(B)(iv) of the Act. We are proposing to establish new • Specifically, section 1886(r) of the Act requirements or revise requirements for Sections 1814(l), 1820, and 1834(g) requires that, for fiscal year 2014 and quality reporting by specific providers of the Act, which specify that payments each subsequent fiscal year, subsection (acute care hospitals, PPS-exempt are made to critical access hospitals (d) hospitals that would otherwise cancer hospitals, LTCHs, and inpatient (CAHs) (that is, rural hospitals or receive a DSH payment made under psychiatric facilities) that are facilities that meet certain statutory section 1886(d)(5)(F) of the Act will participating in Medicare, including requirements) for inpatient and receive two separate payments: (1) 25 related provisions for eligible hospitals outpatient services and that these percent of the amount they previously and critical assess hospitals (CAHs) payments are generally based on 101 would have received under section participating in the Electronic Health percent of reasonable cost. 1886(d)(5)(F) of the Act for DSH (‘‘the • Record (EHR) Incentive Program. We are Section 1866(k) of the Act, as added empirically justified amount’’), and (2) proposing to update policies relating to by section 3005 of the Affordable Care an additional payment for the DSH the Hospital Value-Based Purchasing Act, which establishes a quality hospital’s proportion of uncompensated (VBP) Program, the Hospital reporting program for hospitals care, determined as the product of three Readmissions Reduction Program, and described in section 1886(d)(1)(B)(v) of factors. These three factors are: (1) 75 the Hospital-Acquired Condition (HAC) the Act, referred to as ‘‘PPS-exempt percent of the payments that would Reduction Program. We also are cancer hospitals.’’ otherwise be made under section proposing to: Implement statutory • Section 1886(a)(4) of the Act, which 1886(d)(5)(F) of the Act; (2) 1 minus the provisions that require hospitals and specifies that costs of approved percent change in the percent of CAHs to furnish notification to educational activities are excluded from individuals under the age of 65 who are Medicare beneficiaries, including the operating costs of inpatient hospital uninsured (minus 0.1 percentage points Medicare Advantage enrollees, when services. Hospitals with approved for FY 2014, and minus 0.2 percentage the beneficiaries receive outpatient graduate medical education (GME) points for FY 2015 through FY 2017); observation services for more than 24 programs are paid for the direct costs of and (3) a hospital’s uncompensated care hours; announce the implementation of GME in accordance with section 1886(h) amount relative to the uncompensated the Frontier Community Health of the Act. care amount of all DSH hospitals Integration Project Demonstration; make • Section 1886(b)(3)(B)(viii) of the expressed as a percentage. technical corrections and changes to Act, which requires the Secretary to • Section 1886(m)(6) of the Act, as regulations relating to costs to reduce the applicable percentage added by section 1206(a)(1) of the organizations and Medicare cost reports. increase in payments to a subsection (d) Pathway for SGR Reform Act of 2013 Under various statutory authorities, hospital for a fiscal year if the hospital (Pub. L. 113–67), which provided for the we are proposing to make changes to the does not submit data on measures in a establishment of site neutral payment Medicare IPPS, to the LTCH PPS, and to form and manner, and at a time, rate criteria under the LTCH PPS with other related payment methodologies specified by the Secretary. implementation beginning in FY 2016. and programs for FY 2017 and • Section 1886(o) of the Act, which • Section 1886(m)(5)(D)(iv) of the subsequent fiscal years. These statutory requires the Secretary to establish a Act, as added by section 1206 (c) of the authorities include, but are not limited Hospital Value-Based Purchasing (VBP) Pathway for SGR Reform Act of 2013, to, the following: Program under which value-based which provides for the establishment of • Section 1886(d) of the Social incentive payments are made in a fiscal a functional status quality measure Security Act (the Act), which sets forth year to hospitals meeting performance under the LTCH QRP for change in

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mobility among inpatients requiring (1/0.998) to the standardized amount, year to hospitals based on their ventilator support. the hospital-specific payment rates, and performance on measures established • Section 1899B of the Act, as added the national capital Federal rate using for a performance period for such fiscal by the Improving Medicare Post-Acute our authority under sections year. Care Transformation Act of 2014 (the 1886(d)(5)(I)(i) and 1886(g) of the Act to In this proposed rule, we are IMPACT Act), which imposes data prospectively remove the 0.2 percent proposing to refine two previously reporting requirements for certain post- reduction to the rate put in place in FY adopted measures beginning with the acute care providers, including LTCHs. 2014 to offset the estimated increase in FY 2019 program year, to update one • Section 1886(d)(12) of the Act, as IPPS expenditures as a result of the 2- previously adopted measure beginning amended by section 204 of the Medicare midnight policy. In addition, we are with the FY 2021 program year, to adopt Access and CHIP Reauthorization Act of proposing a temporary one-time two new measures beginning with the 2015, which extended, through FY prospective increase to the FY 2017 FY 2021 program year, and to adopt one 2017, changes to the inpatient hospital standardized amount, the hospital- new measure beginning with the FY payment adjustment for certain low- specific payment rates, and the national 2022 program year. We also are volume hospitals; and section capital Federal rate of 0.6 percent by proposing to change the performance 1886(d)(5)(G) of the Act, as amended by including a temporary one-time factor of period for one previously adopted section 205 of the Medicare Access and 1.006 in the calculation of the measure for the FY 2018 program year CHIP Reauthorization Act of 2015, standardized amount, the hospital- and to change the name of the Patient- which extended, through FY 2017, the specific payment rates, and the national and Caregiver-Centered Experience of Medicare-dependent, small rural capital Federal rate using our authority Care/Care Coordination domain to the hospital (MDH) program. under sections 1886(d)(5)(I)(i) and Person and Community Engagement 1886(g) of the Act, to address the effects domain beginning with the FY 2019 2. Summary of the Major Provisions of the 0.2 percent reduction to the rate program year. In addition, we are a. MS–DRG Documentation and Coding for the 2-midnight policy in effect for proposing changes to the immediate Adjustment FYs 2014, 2015, and 2016. jeopardy citation policy. Section 631 of the American Taxpayer c. Reduction of Hospital Payments for e. Hospital-Acquired Condition (HAC) Relief Act (ATRA, Pub. L. 112–240) Excess Readmissions Reduction Program amended section 7(b)(1)(B) of Public We are proposing to make changes to Section 1886(p) of the Act, as added Law 110–90 to require the Secretary to policies for the Hospital Readmissions under section 3008(a) of the Affordable make a recoupment adjustment to the Reduction Program, which is Care Act, establishes an incentive to standardized amount of Medicare established under section 1886(q) of the hospitals to reduce the incidence of payments to acute care hospitals to Act, as added by section 3025 of the hospital-acquired conditions by account for changes in MS–DRG Affordable Care Act, as amended by requiring the Secretary to make an documentation and coding that do not section 10309 of the Affordable Care adjustment to payments to applicable reflect real changes in case-mix, totaling Act. The Hospital Readmissions hospitals effective for discharges $11 billion over a 4-year period of FYs Reduction Program requires a reduction beginning on October 1, 2014. This 1- 2014, 2015, 2016, and 2017. This to a hospital’s base operating DRG percent payment reduction applies to a adjustment represents the amount of the payment to account for excess hospital whose ranking is in the top increase in aggregate payments as a readmissions of selected applicable quartile (25 percent) of all applicable result of not completing the prospective conditions. For FY 2017 and subsequent hospitals, relative to the national adjustment authorized under section years, the reduction is based on a average, of conditions acquired during 7(b)(1)(A) of Public Law 110–90 until hospital’s risk-adjusted readmission rate the applicable period and on all of the FY 2013. Prior to the ATRA, this during a 3-year period for acute hospital’s discharges for the specified amount could not have been recovered myocardial infarction (AMI), heart fiscal year. In this proposed rule, we are under Public Law 110–90. failure (HF), pneumonia, chronic proposing the following HAC Reduction While our actuaries estimated that a obstructive pulmonary disease (COPD), Program policies: (1) Establishing NHSN ¥9.3 percent adjustment to the total hip arthroplasty/total knee CDC HAI data submission requirements standardized amount would be arthroplasty (THA/TKA), and coronary for newly opened hospitals; (2) a necessary if CMS were to fully recover artery bypass graft (CABG). In this clarification of data requirements for the $11 billion recoupment required by proposed rule, to align with other Domain 1 scoring; (3) establishing section 631 of the ATRA in one year, it quality reporting programs and allow us performance periods for the FY 2018 is often our practice to delay or phase to post data as soon as possible, we are and FY 2019 HAC Reduction Programs, in rate adjustments over more than one clarifying our public reporting policy so including revising our regulations to year, in order to moderate the effects on that excess readmission rates will be accommodate variable timeframes; (4) rates in any one year. Therefore, posted to the Hospital Compare Web adopting the refined PSI 90: Patient consistent with the policies that we site as soon as feasible following the Safety and Adverse Events Composite have adopted in many similar cases, we preview period, and we are proposing (NQF #0531); and (5) changing the made a ¥0.8 percent recoupment the methodology to include the addition program scoring methodology from the adjustment to the standardized amount of the CABG applicable condition in the current decile-based scoring to a in FY 2014, FY 2015, and FY 2016. For calculation of the readmissions payment continuous scoring methodology. FY 2017, we are proposing to make an adjustment for FY 2017. additional ¥1.5 percent recoupment f. DSH Payment Adjustment and adjustment to the standardized amount. d. Hospital Value-Based Purchasing Additional Payment for Uncompensated (VBP) Program Care b. Adjustment to IPPS Rates Resulting Section 1886(o) of the Act requires the Section 3133 of the Affordable Care From 2-Midnight Policy Secretary to establish a Hospital VBP Act modified the Medicare In this proposed rule, we are Program under which value-based disproportionate share hospital (DSH) proposing a permanent adjustment of incentive payments are made in a fiscal payment methodology beginning in FY

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2014. Under section 1886(r) of the Act, located in Puerto Rico from 75 percent Cholecystectomy and Common Duct which was added by section 3133 of the to 100 percent and decreased the Exploration Clinical Episode-Based Affordable Care Act, starting in FY applicable Puerto Rico percentage of the Payment Measure; (3) Spinal Fusion 2014, DSHs will receive 25 percent of operating IPPS payments for hospitals Clinical Episode-Based Payment the amount they previously would have located in Puerto Rico from 25 percent Measure; and (4) Excess Days in Acute received under the statutory formula for to zero percent, applicable to discharges Care after Hospitalization for Medicare DSH payments in section occurring on or after January 1, 2016. In Pneumonia for the FY 2019 payment 1886(d)(5)(F) of the Act. The remaining this proposed rule, we are proposing to determination and subsequent years. amount, equal to 75 percent of what revise the calculation of capital IPPS Fourth, we are inviting public otherwise would have been paid as payments to hospitals located in Puerto Medicare DSH payments, will be paid as Rico to parallel the change in the comment on potential new quality additional payments after the amount is statutory calculation of operating IPPS measures under consideration for future reduced for changes in the percentage of payments to hospitals located in Puerto inclusion in the Hospital IQR Program: individuals that are uninsured. Each Rico, beginning in FY 2017. (1) A refined version of the NIH Stroke Medicare DSH will receive an Scale for the Hospital 30-Day Mortality h. Proposed Changes to the LTCH PPS additional payment based on its share of Following Acute Ischemic Stroke the total amount of uncompensated care In this proposed rule, we are Hospitalization Measure beginning as for all Medicare DSHs for a given time proposing to revise and rebase the early as the FY 2022 payment period. market basket used under the LTCH PPS determination; (2) the National In this proposed rule, we are (currently the 2009-based LTCH-specific Healthcare Safety Network (NHSN) proposing to update our estimates of the market basket) to reflect a 2013 base Antimicrobial Use Measure (NQF three factors used to determine year. In addition, in this proposed rule, #2720); and (3) one or more measures of uncompensated care payments for FY we are proposing to change our 25- behavioral health for the inpatient 2017 and proposing to continue our percent threshold policy by proposing hospital setting, including measures methodology of using a hospital’s share to sunset our existing regulations at 42 previously adopted for the IPFQR of insured low-income days for CFR 412.534 and 412.536 and replace Program (80 FR 46417). Also, we are purposes of determining Factor 3. For them with a single consolidated 25- seeking public comment on the Puerto Rico hospitals, we are proposing percent threshold policy at proposed possibility of future stratification of to use 14 percent of Medicaid days as § 412.538. We also are proposing to Hospital IQR Program data by race, a proxy for SSI days in the calculation change our existing regulations limiting ethnicity, sex, and disability on Hospital of Factor 3. We are proposing to allowable charges to beneficiaries for Compare, as well as on potential future continue to use the methodology we Subclause (II) LTCHs and proposing to hospital quality measures that established in FY 2015 to calculate the make technical corrections to § 412.503. incorporate health equity. uncompensated care payment amounts i. Hospital Inpatient Quality Reporting for merged hospitals such that we Fifth, we are proposing to require (IQR) Program combine uncompensated care data for hospitals to submit all available eCQMs the hospitals that have undergone a Under section 1886(b)(3)(B)(viii) of included in the Hospital IQR Program merger in order to calculate their the Act, hospitals are required to report measure set for four quarters of data, on relative share of uncompensated care. data on measures selected by the an annual basis, beginning with the CY We are proposing to expand the time Secretary for the Hospital IQR Program 2017 reporting period/FY 2019 payment period of the data used to calculate the in order to receive the full annual determination, in order to align the uncompensated care payment amounts percentage increase in payments. In past Hospital IQR Program with the to be distributed, from one cost years, we have established measures for Medicare and Medicaid EHR Incentive reporting period to three cost reporting reporting data and the process for Programs. Also, we are proposing periods. We also are proposing a future submittal and validation of the data. related eCQM submission requirements transition to using Worksheet S–10 data In this proposed rule, we are making beginning with the FY 2019 payment to determine the amounts and several proposals. First, we are determination. distribution of uncompensated care proposing to remove 15 measures for the Sixth, we are proposing to modify the payments. Specifically, we are FY 2019 payment determination and existing validation process for Hospital proposing a 3-year transition beginning subsequent years. Thirteen of these IQR Program data to include validation in FY 2018 where we use a combination measures are electronic clinical quality of eCQMs beginning with the FY 2020 of Worksheet S–10 and proxy data until measures (eCQMs), two of which we are payment determination. FY 2020 when all data used in proposing also to remove in their chart- computing the uncompensated care abstracted form, because they are Seventh, we are proposing to update payment amounts to be distributed ‘‘topped-out,’’ and two others are our Extraordinary Circumstances would come from Worksheet S–10. structural measures. Extensions or Exemptions (ECE) policy Second, we are proposing to refine by: (1) Extending the ECE request g. Payments for Capital-Related Costs for two previously adopted measures deadline for non-eCQM circumstances Hospitals Located in Puerto Rico beginning with the FY 2018 payment from 30 to 90 calendar days following Capital IPPS payments to hospitals determination: (1) The Hospital-level, an extraordinary circumstance, located in Puerto Rico are currently Risk-standardized Payment Associated beginning in FY 2017 as related to computed based on a blend of 25 with a 30-day Episode-of-Care for extraordinary circumstance events that percent of the capital IPPS Puerto Rico Pneumonia (NQF #2579); and (2) the occur on or after October 1, 2016; and rate and 75 percent of the capital IPPS Patient Safety and Adverse Events (2) establishing a separate submission Federal rate. Section 601 of the Composite (NQF #0531). deadline of April 1 following the end of Consolidated Appropriations Act, 2016 Third, we are proposing to add four the reporting calendar year for ECEs (Pub. L. 114–113) increased the new claims-based measures: (1) Aortic related to eCQMs beginning with an applicable Federal percentage of the Aneurysm Procedure Clinical Episode- April 1, 2017 deadline and applying for operating IPPS payment for hospitals Based Payment Measure; (2) subsequent eCQM reporting years.

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j. Long-Term Care Hospital Quality Identified Issues-PAC LTCH QRP, period will be approximately 12 weeks Reporting Program (LTCH QRP) addresses the IMPACT Act domain of before the public display date. Medication Reconciliation. Section 3004(a) of the Affordable Care 3. Summary of Costs and Benefits In addition, we will publicly report Act amended section 1886(m)(5) of the • Adjustment for MS–DRG Act to require the Secretary to establish LTCH quality data beginning in fall 2016, on a CMS Web site, such as Documentation and Coding Changes. the Long-Term Care Hospital Quality We are proposing to make a ¥1.5 Reporting Program (LTCH QRP). This Hospital Compare. We will initially publicly report quality data on four percent recoupment adjustment to the program applies to all hospitals certified standardized amount for FY 2017 to by Medicare as LTCHs. Beginning with quality measures. In this proposed rule, we are proposing to publicly report data implement, in part, the requirement of the FY 2014 payment determination and section 631 of the ATRA that the subsequent years, the Secretary is in 2017 on four additional measures. We are proposing additional details Secretary make an adjustment totaling required to reduce any annual update to $11 billion over a 4-year period of FYs the LTCH PPS standard Federal rate for regarding procedures that would allow individual LTCHs to review and correct 2014, 2015, 2016, and 2017. This discharges occurring during such fiscal recoupment adjustment represents the year by 2 percentage points for any their data and information on measures that are to be made public before those amount of the increase in aggregate LTCH that does not comply with the payments as a result of not completing requirements established by the measure data are made public. We also are proposing to provide confidential the prospective adjustment authorized Secretary. under section 7(b)(1)(A) of Public Law The Improving Medicare Post-Acute feedback reports to LTCHs on their performance on the specified measures, 110–90 until FY 2013. Prior to the Care Transformation Act of 2014 ATRA, this amount could not have been (IMPACT Act) amended the Act in ways beginning 1 year after the specified application date that applies to such recovered under Public Law 110–90. that affect the LTCH QRP. Specifically, While our actuaries estimated that a measures and LTCHs. section 2(a) of the IMPACT Act ¥9.3 percent recoupment adjustment to amended title XVIII of the Act by adding Finally, we are proposing to change the standardized amount would be section 1899B, titled Standardized Post- the timing for submission of exception necessary if CMS were to fully recover Acute Care (PAC) Assessment Data for and extension requests from 30 days to the $11 billion recoupment required by Quality, Payment, and Discharge 90 days from the date of the qualifying section 631 of the ATRA in FY 2014, it Planning. The Act requires that each event which is preventing an LTCH is often our practice to delay or phase LTCH submit, for FYs beginning on or from submitting their quality data for in rate adjustments over more than one after the specified application date (as the LTCH QRP. year, in order to moderate the effects on defined in section 1899B(a)(2)(E) of the k. Inpatient Psychiatric Facility Quality rates in any one year. Taking into Act), data on quality measures specified Reporting (IPFQR) Program account the cumulative effects of this under section 1899B(c)(1) of the Act and proposed adjustment and the data on resource use and other measures Section 1886(s)(4) of the Act, as added adjustments made in FYs 2014, 2015, specified under section 1899B(d)(1) of and amended by sections 3401(f) and and 2016, we estimate that we would the Act in a manner and within the 10322(a) of the Affordable Care Act, recover the full $11 billion required timeframes specified by the Secretary. requires the Secretary to implement a under section 631 of the ATRA by the In addition, each LTCH is required to quality reporting program for inpatient end of FY 2017. We note that section submit standardized patient assessment psychiatric hospitals and psychiatric 414 of the MACRA (Pub. L. 114–10), data required under section 1899B(b)(1) units. Section 1886(s)(4)(C) of the Act enacted on April 16, 2015, requires us of the Act in a manner and within the requires that, for FY 2014 (October 1, to not make the single positive timeframes specified by the Secretary. 2013 through September 30, 2014) and adjustment we intended to make in FY Sections 1899B(c)(1) and 1899B(d)(1) of each subsequent year, each psychiatric 2018, but instead make a 0.5 percent the Act require the Secretary to specify hospital and psychiatric unit must positive adjustment for each of FYs quality measures and resource use and submit to the Secretary data on quality 2018 through 2023. The provision under other measures with respect to certain measures as specified by the Secretary. section 414 of the MACRA does not domains no later than the specified The data must be submitted in a form impact our proposed FY 2017 application date in section and manner and at a time specified by recoupment adjustment, and we will 1899B(a)(2)(E) of the Act that applies to the Secretary. In this proposed rule, for address this MACRA provision in future each measure domain and PAC provider the IPFQR Program, we are making rulemaking. setting. several proposals. We are proposing two • Proposed Adjustment to IPPS In this proposed rule, we are new measures beginning with the FY Payment Rates as a Result of the 2- proposing three new measures for the 2019 payment determination: Midnight Policy. The proposed FY 2018 payment determination and • SUB–3 Alcohol & Other Drug Use adjustment to IPPS rates resulting from subsequent years to meet the Disorder Treatment Provided or Offered the 2-midnight policy would increase requirements as set forth by the at Discharge and SUB–3a Alcohol and IPPS payment rates by (1/0.998) * 1.006 IMPACT Act. These proposed measures Other Drug Use Disorder Treatment at for FY 2017. The 1.006 is a one-time are: (1) MSPB–PAC LTCH QRP; (2) Discharge (NQF #1664); and factor that would be applied to the Discharge to Community-PAC LTCH • Thirty-day all-cause unplanned standardized amount, the hospital- QRP; and (3) Potentially Preventable 30- readmission following psychiatric specific rates, and the national capital Day Post-Discharge Readmission hospitalization in an IPF. Federal rate for FY 2017 only. Measure for the PAC LTCH QRP. We We also are proposing a technical Therefore, for FY 2018, we would apply also are proposing one new quality update to the previously finalized a one-time factor of (1/1.006) in the measure to meet the requirements of the measure, ‘‘Screening for Metabolic calculation of the rates to remove this IMPACT Act for the FY 2020 Disorder.’’ In addition, we are proposing one-time prospective increase. determination and subsequent years. to no longer specify in rulemaking the • Proposed Changes to the Hospital The proposed measure, Drug Regimen date of the public display of the Readmissions Reduction Program. For Review Conducted with Follow-Up for program’s data or that the preview FY 2017 and subsequent years, the

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reduction is based on a hospital’s risk- uncompensated care is made to eligible required by section 1886(m)(6)(A) of the adjusted readmission rate during a 3- hospitals beginning in FY 2014. Act, the proposed update to the LTCH year period for acute myocardial Hospitals that receive Medicare DSH PPS standard Federal payment rate for infarction (AMI), heart failure (HF), payments will receive 25 percent of the FY 2017, the proposed update to the pneumonia, chronic obstructive amount they previously would have LTCH PPS adjustment for differences in pulmonary disease (COPD), total hip received under the current statutory area wage levels (which includes the arthroplasty/total knee arthroplasty formula for Medicare DSH payments in proposed update to the labor-related (THA/TKA), and coronary artery bypass section 1886(d)(5)(F) of the Act. The share based on the proposed revised and graft (CABG). Overall, in this proposed remainder, equal to an estimate of 75 rebased LTCH PPS market basket) and rule, we estimate that 2,603 hospitals percent of what otherwise would have estimated changes to the site neutral will have their base operating DRG been paid as Medicare DSH payments, payment rate and short-stay outlier payments reduced by their proposed will be the basis for determining the (SSO) and high-cost outlier (HCO) proxy FY 2017 hospital-specific additional payments for uncompensated payments would result in an estimated readmission adjustment. As a result, we care after the amount is reduced for decrease in payments from FY 2016 of estimate that the Hospital Readmissions changes in the percentage of individuals approximately $355 million. Reduction Program will save that are uninsured and additional • Hospital Inpatient Quality approximately $532 million in FY 2017, statutory adjustments. Each hospital Reporting (IQR) Program. In this an increase of approximately $100 that receives Medicare DSH payments proposed rule, we are proposing to million over the estimated FY 2016 will receive an additional payment for remove 15 measures for the FY 2019 savings. This increase in the estimated uncompensated care based on its share payment determination and subsequent savings for the Hospital Readmissions of the total uncompensated care amount years. We are proposing to add four new Reduction Program in FY 2017 as reported by Medicare DSHs. The claims-based measures to the Hospital compared to FY 2016 is primarily due reduction to Medicare DSH payments is IQR Program for the FY 2019 payment to the inclusion of the refinement of the not budget neutral. determination and subsequent years. We pneumonia readmissions measure, For FY 2017, we are providing that also are proposing to require hospitals which expanded the measure cohort, the 75 percent of what otherwise would to report on all Hospital IQR Program along with the addition of the CABG have been paid for Medicare DSH is electronic clinical quality measures that readmission measure, in the calculation adjusted to approximately 56.74 percent align with the Medicare EHR Incentive of the payment adjustment. of the amount to reflect changes in the Program for four quarters of data on an • Value-Based Incentive Payments percentage of individuals that are annual basis for the FY 2019 payment under the Hospital VBP Program. We uninsured and additional statutory determination and subsequent years. In estimate that there will be no net adjustments. In other words, addition, we are proposing to modify financial impact to the Hospital VBP approximately 42.56 percent (the the existing validation process for the Program for the FY 2017 program year product of 75 percent and 56.74 Hospital IQR Program data to include a in the aggregate because, by law, the percent) of our estimate of Medicare random sample of up to 200 hospitals amount available for value-based DSH payments, prior to the application for validation of eCQMs. We estimate incentive payments under the program of section 3133 of the Affordable Care that our policies for the adoption and in a given year must be equal to the total Act, is available to make additional removal of measures will result in total amount of base operating MS–DRG payments to hospitals for their relative hospital costs of $30 million across payment amount reductions for that share of the total amount of 3,300 IPPS hospitals. year, as estimated by the Secretary. The uncompensated care. We project that • Proposed Changes Related to the estimated amount of base operating MS– estimated Medicare DSH payments, and LTCH QRP. In this proposed rule, we DRG payment amount reductions for the additional payments for uncompensated are proposing four quality measures for FY 2017 program year and, therefore, care made for FY 2017, would reduce the LTCH QRP. We estimate that the the estimated amount available for payments overall by approximately 0.3 total cost related to one of these value-based incentive payments for FY percent as compared to the estimate of proposed measures, the Drug Regimen 2017 discharges is approximately $1.7 Medicare DSH payments and Review Conducted with Follow-up for billion. uncompensated care payments that will Identified Issues-PAC measure, would • Proposed Changes to the HAC be distributed in FY 2016. The be $3,080 per LTCH annually, or Reduction Program. In regard to the five additional payments have redistributive $1,330,721 for all LTCHs annually. We proposed changes to existing HAC effects based on a hospital’s also estimate that while there will be Reduction Program policies described uncompensated care amount relative to some additional burden associated with earlier, because a hospital’s Total HAC the uncompensated care amount for all our proposal to expand data collection score and its ranking in comparison to hospitals that are estimated to receive for the measure NQF #0680 Percent of other hospitals in any given year Medicare DSH payments, and the Residents or Patients Who Were depends on several different factors, any proposed payment amount is not Assessed and Appropriately Given the significant impact due to the HAC directly tied to a hospital’s number of Seasonal Influenza Vaccine (77 FR Reduction Program proposed changes discharges. 53624 through 53627), this burden has for FY 2017, including which hospitals • Proposed Update to the LTCH PPS been previously accounted for in PRA receive the adjustment, would depend Payment Rates and Other Payment submissions approved under OMB on actual experience. Factors. Based on the best available data control number 0938–1163. For a • Medicare DSH Payment Adjustment for the 419 LTCHs in our data base, we detailed explanation, we refer readers to and Additional Payment for estimate that the proposed changes to section I.M. of Appendix A (Economic Uncompensated Care. Under section the payment rates and factors that we Analyses) of this proposed rule. There is 1886(r) of the Act (as added by section are presenting in the preamble and no additional burden for the three other 3133 of the Affordable Care Act), DSH Addendum of this proposed rule, which claims-based measures proposed for payments to hospitals under section includes the second year under the adoption. Overall, we estimate the total 1886(d)(5)(F) of the Act are reduced and transition of the statutory application of cost for the 13 previously adopted an additional payment for the new site neutral payment rate measures and the four proposed new

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measures would be $27,905 per LTCH a percentage increase in Medicare addition, certain rural hospitals annually or $12,054,724 for all LTCHs payments to hospitals that qualify under previously designated by the Secretary annually. These estimates were based either of two statutory formulas as essential access community hospitals on 432 LTCHs that are currently designed to identify hospitals that serve are considered SCHs. certified by Medicare. This is an average a disproportionate share of low-income Under current law, the Medicare- increase of 14 percent over the burden patients. For qualifying hospitals, the dependent, small rural hospital (MDH) for FY 2016. This increase includes all amount of this adjustment varies based program is effective through FY 2017. quality measures that LTCHs are on the outcome of the statutory Through and including FY 2006, an required to report, with the exception of calculations. The Affordable Care Act MDH received the higher of the Federal the four proposed measures for FY 2017. revised the Medicare DSH payment rate or the Federal rate plus 50 percent Section VIII.C. of this proposed rule methodology and provides for a new of the amount by which the Federal rate includes a detailed discussion of the additional Medicare payment that was exceeded by the higher of its FY policies. considers the amount of uncompensated 1982 or FY 1987 hospital-specific rate. • Proposed Changes to the IPFQR care beginning on October 1, 2013. For discharges occurring on or after Program. In this proposed rule, we are If the hospital is training residents in October 1, 2007, but before October 1, proposing to add two new measures an approved residency program(s), it 2017, an MDH receives the higher of the beginning with the FY 2019 payment receives a percentage add-on payment Federal rate or the Federal rate plus 75 determination and for subsequent years. for each case paid under the IPPS, percent of the amount by which the One of these measures, the 30-Day All- known as the indirect medical Federal rate is exceeded by the highest Cause Unplanned Readmissions education (IME) adjustment. This of its FY 1982, FY 1987, or FY 2002 following Psychiatric Hospitalization in percentage varies, depending on the hospital-specific rate. MDHs are a major an Inpatient Psychiatric Facility ratio of residents to beds. source of care for Medicare beneficiaries measure, is calculated from Additional payments may be made for in their areas. Section 1886(d)(5)(G)(iv) administrative claims data. For the cases that involve new technologies or of the Act defines an MDH as a hospital second measure, we estimate that our medical services that have been that is located in a rural area, has not proposed policies would result in total approved for special add-on payments. more than 100 beds, is not an SCH, and costs of $11,834,748 for 1,684 IPFs To qualify, a new technology or medical has a high percentage of Medicare nationwide. service must demonstrate that it is a discharges (not less than 60 percent of substantial clinical improvement over its inpatient days or discharges in its B. Summary technologies or services otherwise cost reporting year beginning in FY 1. Acute Care Hospital Inpatient available, and that, absent an add-on 1987 or in two of its three most recently Prospective Payment System (IPPS) payment, it would be inadequately paid settled Medicare cost reporting years). under the regular DRG payment. Section 1886(g) of the Act requires the Section 1886(d) of the Social Security The costs incurred by the hospital for Secretary to pay for the capital-related Act (the Act) sets forth a system of a case are evaluated to determine costs of inpatient hospital services ‘‘in payment for the operating costs of acute whether the hospital is eligible for an accordance with a prospective payment care hospital inpatient stays under additional payment as an outlier case. system established by the Secretary.’’ Medicare Part A (Hospital Insurance) This additional payment is designed to The basic methodology for determining based on prospectively set rates. Section protect the hospital from large financial capital prospective payments is set forth 1886(g) of the Act requires the Secretary losses due to unusually expensive cases. in our regulations at 42 CFR 412.308 to use a prospective payment system Any eligible outlier payment is added to and 412.312. Under the capital IPPS, (PPS) to pay for the capital-related costs the DRG-adjusted base payment rate, payments are adjusted by the same DRG of inpatient hospital services for these plus any DSH, IME, and new technology for the case as they are under the ‘‘subsection (d) hospitals.’’ Under these or medical service add-on adjustments. operating IPPS. Capital IPPS payments PPSs, Medicare payment for hospital Although payments to most hospitals are also adjusted for IME and DSH, inpatient operating and capital-related under the IPPS are made on the basis of similar to the adjustments made under costs is made at predetermined, specific the standardized amounts, some the operating IPPS. In addition, rates for each hospital discharge. categories of hospitals are paid in whole hospitals may receive outlier payments Discharges are classified according to a or in part based on their hospital- for those cases that have unusually high list of diagnosis-related groups (DRGs). specific rate, which is determined from costs. The base payment rate is comprised of their costs in a base year. For example, The existing regulations governing a standardized amount that is divided sole community hospitals (SCHs) payments to hospitals under the IPPS into a labor-related share and a receive the higher of a hospital-specific are located in 42 CFR part 412, subparts nonlabor-related share. The labor- rate based on their costs in a base year A through M. related share is adjusted by the wage (the highest of FY 1982, FY 1987, FY index applicable to the area where the 1996, or FY 2006) or the IPPS Federal 2. Hospitals and Hospital Units hospital is located. If the hospital is rate based on the standardized amount. Excluded From the IPPS located in Alaska or Hawaii, the SCHs are the sole source of care in their Under section 1886(d)(1)(B) of the nonlabor-related share is adjusted by a areas. Specifically, section Act, as amended, certain hospitals and cost-of-living adjustment factor. This 1886(d)(5)(D)(iii) of the Act defines an hospital units are excluded from the base payment rate is multiplied by the SCH as a hospital that is located more IPPS. These hospitals and units are: DRG relative weight. than 35 road miles from another Inpatient rehabilitation facility (IRF) If the hospital treats a high percentage hospital or that, by reason of factors hospitals and units; long-term care of certain low-income patients, it such as isolated location, weather hospitals (LTCHs); psychiatric hospitals receives a percentage add-on payment conditions, travel conditions, or absence and units; children’s hospitals; and applied to the DRG-adjusted base of other like hospitals (as determined by cancer hospitals. Religious nonmedical payment rate. This add-on payment, the Secretary), is the sole source of health care institutions (RNHCIs) are known as the disproportionate share hospital inpatient services reasonably also excluded from the IPPS. Various hospital (DSH) adjustment, provides for available to Medicare beneficiaries. In sections of the Balanced Budget Act of

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1997 (BBA, Pub. L. 105–33), the 4. Critical Access Hospitals (CAHs) certain patient-specific criteria. In this Medicare, Medicaid and SCHIP [State Under sections 1814(l), 1820, and proposed rule, we are providing Children’s Health Insurance Program] 1834(g) of the Act, payments made to clarifications to prior policy changes Balanced Budget Refinement Act of critical access hospitals (CAHs) (that is, that implemented provisions under 1999 (BBRA, Pub. L. 106–113), and the rural hospitals or facilities that meet section 1206 of the Pathway for SGR Medicare, Medicaid, and SCHIP certain statutory requirements) for Reform Act. Benefits Improvement and Protection inpatient and outpatient services are 3. Improving Medicare Post-Acute Care Act of 2000 (BIPA, Pub. L. 106–554) generally based on 101 percent of Transformation Act of 2014 (IMPACT provide for the implementation of PPSs reasonable cost. Reasonable cost is Act) (Pub. L. 113–185) for IRF hospitals and units, LTCHs, and determined under the provisions of The Improving Medicare Post-Acute psychiatric hospitals and units (referred section 1861(v)(1)(A) of the Act and to as inpatient psychiatric facilities Care Transformation Act of 2014 existing regulations under 42 CFR parts (IMPACT Act (Pub. L. 113–185), enacted (IPFs)). (We note that the annual 413 and 415. updates to the LTCH PPS are now on October 6, 2014, made a number of included as part of the IPPS annual 5. Payments for Graduate Medical changes that affect the Long-Term Care update document. Updates to the IRF Education (GME) Quality Reporting Program (LTCH QRP). In this proposed rule, we are continuing PPS and IPF PPS are issued as separate Under section 1886(a)(4) of the Act, to implement portions of section 1899B documents.) Children’s hospitals, costs of approved educational activities of the Act, as added by section 2 of the cancer hospitals, and RNHCIs continue are excluded from the operating costs of IMPACT Act, which, in part, requires to be paid solely under a reasonable inpatient hospital services. Hospitals LTCHs, among other postacute care cost-based system subject to a rate-of- with approved graduate medical providers, to report standardized patient increase ceiling on inpatient operating education (GME) programs are paid for assessment data, data on quality costs. the direct costs of GME in accordance measures, and data on resource use and The existing regulations governing with section 1886(h) of the Act. The other measures. payments to excluded hospitals and amount of payment for direct GME costs hospital units are located in 42 CFR for a cost reporting period is based on 4. The Medicare Access and CHIP parts 412 and 413. the hospital’s number of residents in Reauthorization Act of 2015 (Pub. L. 3. Long-Term Care Hospital Prospective that period and the hospital’s costs per 114–10) Payment System (LTCH PPS) resident in a base year. The existing The Medicare Access and CHIP The Medicare prospective payment regulations governing payments to the Reauthorization Act of 2015 (Pub. L. system (PPS) for LTCHs applies to various types of hospitals are located in 114–10) extended the MDH program hospitals described in section 42 CFR part 413. and changes to the payment adjustment 1886(d)(1)(B)(iv) of the Act effective for C. Summary of Provisions of Recent for low-volume hospitals through FY cost reporting periods beginning on or Legislation Proposed To Be 2017. In this proposed rule, we are after October 1, 2002. The LTCH PPS Implemented in This Proposed Rule proposing to update the low-volume was established under the authority of hospital payment adjustment for FY sections 123 of the BBRA and section 1. American Taxpayer Relief Act of 2012 2017 under the extension of the 307(b) of the BIPA (as codified under (ATRA) (Pub. L. 112–240) temporary changes to the low-volume section 1886(m)(1) of the Act). During The American Taxpayer Relief Act of hospital payment adjustment provided the 5-year (optional) transition period, a 2012 (ATRA) (Pub. L. 112–240), enacted for by section 204 of Public Law 114– LTCH’s payment under the PPS was on January 2, 2013, made a number of 10. We also state our intention to based on an increasing proportion of the changes that affect the IPPS. In this finalize in the FY 2017 IPPS/LTCH PPS LTCH Federal rate with a corresponding proposed rule, we are proposing to final rule the provisions of the FY 2016 decreasing proportion based on make policy changes to implement IPPS/LTCH PPS interim final rule with reasonable cost principles. Effective for section 631 of the American Taxpayer comment period (80 FR 49594 through cost reporting periods beginning on or Relief Act of 2012, which amended 49597) that implemented sections 204 after October 1, 2006, all LTCHs are section 7(b)(1)(B) of Public Law 110–90 and 205 of Public Law 114–10. paid 100 percent of the Federal rate. and requires a recoupment adjustment 5. The Consolidated Appropriations Section 1206(a) of Public Law 113–67 to the standardized amounts under Act, 2016 (Pub. L. 114–113) established the site neutral payment rate section 1886(d) of the Act based upon under the LTCH PPS, which made the the Secretary’s estimates for discharges The Consolidated Appropriations Act, LTCH PPS a dual rate payment system occurring in FY 2014 through FY 2017 2016 (Pub. L. 114–113), enacted on beginning in FY 2016. Under this to fully offset $11 billion (which December 18, 2015, made changes that statute, based on a rolling effective date represents the amount of the increase in affect the IPPS and the LTCH PPS. that is linked to the date on which a aggregate payments from FYs 2008 Section 231 of Public Law 114–113 given LTCH’s Federal FY 2016 cost through 2013 for which an adjustment provides for a temporary exception for reporting period begins, LTCHs are paid was not previously applied). certain wound care discharges from the for LTCH discharges at the site neutral application of the site neutral payment payment rate unless the discharge meets 2. Pathway for SGR Reform Act of 2013 rate under the LTCH PPS for certain the patient criteria for payment at the (Pub. L. 113–67) LTCHs, which is being implemented in LTCH PPS standard Federal payment The Pathway for SGR Reform Act of an interim final rule with comment rate. The existing regulations governing 2013 (Pub. L. 113–67) introduced new period. Section 601 of Public Law 114– payment under the LTCH PPS are payment rules in the LTCH PPS. Under 113 made changes to the payment located in 42 CFR part 412, subpart O. section 1206 of this law, discharges in calculation for operating IPPS payments Beginning October 1, 2009, we issue the cost reporting periods beginning on or for hospitals located in Puerto Rico. annual updates to the LTCH PPS in the after October 1, 2015 under the LTCH Section 602 of Public Law 114–113 same documents that update the IPPS PPS will receive payment under a site specifies that Puerto Rico hospitals are (73 FR 26797 through 26798). neutral rate unless the discharge meets eligible for incentive payments for the

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meaningful use of certified EHR • Proposed changes to MS–DRG 3. Other Decisions and Proposed technology, effective beginning FY classifications based on our yearly Changes to the IPPS for Operating Costs 2016, and also applies the adjustments review for FY 2017. and GME Costs • to the applicable percentage increase Proposed application of the In section IV. of the preamble of this under the statute for Puerto Rico documentation and coding adjustment proposed rule, we discuss proposed hospitals that are not meaningful EHR for FY 2017 resulting from changes or clarifications of a number of users, effective FY 2022. In this implementation of the MS–DRG system. the provisions of the regulations in 42 • proposed rule, we are proposing Proposed recalibrations of the MS– CFR parts 412 and 413, including the conforming changes to our regulations DRG relative weights. following: • to reflect the provisions of section 601 A discussion of the FY 2017 status • Proposed conforming changes to of Public Law 114–113, which increased of new technologies approved for add- our regulations to reflect the changes to the applicable Federal percentage of the on payments for FY 2016 and a operating payments for subsection (d) operating IPPS payment for hospitals presentation of our evaluation and Puerto Rico hospitals in accordance located in Puerto Rico from 75 percent analysis of the FY 2017 applicants for with the provisions of section 601 of to 100 percent and decreased the add-on payments for high-cost new Public Law 114–113. applicable Puerto Rico percentage of the medical services and technologies • Proposed changes to the inpatient operating IPPS payments for hospitals (including public input, as directed by hospital update for FY 2017. located in Puerto Rico from 25 percent Public Law 108–173, obtained in a town • Proposed updated national and to zero percent, applicable to discharges hall meeting). regional case-mix values and discharges occurring on or after January 1, 2016. 2. Proposed Changes to the Hospital for purposes of determining RRC status. • 6. The Notice of Observation Treatment Wage Index for Acute Care Hospitals Proposed payment adjustment for and Implication for Care Eligibility Act low-volume hospitals for FY 2017. In section III. of the preamble to this • (the NOTICE Act) (Pub. L. 114–42) The statutorily required IME proposed rule, we are proposing adjustment factor for FY 2017. The Notice of Observation Treatment revisions to the wage index for acute • Proposed changes to the and Implication for Care Eligibility Act care hospitals and the annual update of methodologies for determining (the NOTICE Act) (Pub. L. 114–42) the wage data. Specific issues addressed Medicare DSH payments and the enacted on August 6, 2015, amended include, but not limited to, the additional payments for uncompensated section 1866(a)(1) of the Act by adding following: care. • new subparagraph (Y) that requires The proposed FY 2017 wage index • Proposed changes to the rules for hospitals and CAHs to provide written update using wage data from cost payment adjustments under the notification and an oral explanation of reporting periods beginning in FY 2013. Hospital Readmissions Reduction • such notification to individuals Calculation of the proposed Program based on hospital readmission receiving observation services as occupational mix adjustment for FY measures and the process for hospital outpatients for more than 24 hours at 2017 based on the 2013 Occupational review and correction of those rates for the hospitals or CAHs. In this proposed Mix Survey. FY 2017. • rule, we are proposing to implement the Analysis and implementation of the • Proposed changes to the provisions of Public Law 114–42. proposed FY 2017 occupational mix requirements and provision of value- adjustment to the wage index for acute based incentive payments under the D. Summary of the Provisions of This care hospitals. Hospital Value-Based Purchasing Proposed Rule • Proposed application of the rural Program for FY 2017. floor, the proposed imputed floor, and • In this proposed rule, we are setting Proposed requirements for payment the proposed frontier State floor. forth proposed payment and policy adjustments to hospitals under the HAC • Transitional wage indexes relating changes to the Medicare IPPS for FY Reduction Program for FY 2017. to the continued use of the revised OMB • 2017 operating costs and for capital- Proposed changes relating to direct labor market area delineations based on related costs of acute care hospitals and GME and IME payments to urban 2010 Decennial Census data. certain hospitals and hospital units that hospitals with rural track training • Proposed revisions to the wage are excluded from IPPS, including programs. index for acute care hospitals based on • proposed changes relating to payments Discussion of the Rural Community hospital redesignations and for IME and direct GME to certain Hospital Demonstration Program and a reclassifications under sections hospitals that continue to be excluded proposal for making a budget neutrality 1886(d)(8)(B), (d)(8)(E), and (d)(10) of from the IPPS and paid on a reasonable adjustment for the demonstration the Act. cost basis. In addition, in this proposed program. • Notification regarding proposed • rule, we are setting forth proposed Proposed implementation of the CMS ‘‘lock-in’’ date for urban to rural changes to the payment rates, factors, Notice of Observation Treatment and reclassifications under § 412.103. Implications for Care Eligibility Act (the and other payment and policy-related • changes to programs associated with The proposed adjustment to the NOTICE Act) for hospitals and CAHs. • payment rate policies under the LTCH wage index for acute care hospitals for Proposed technical changes and PPS for FY 2017. FY 2017 based on commuting patterns corrections to regulations relating to of hospital employees who reside in a cost to related organizations and Below is a summary of the major county and work in a different area with Medicare cost reports. changes that we are proposing to make: a higher wage index. • Determination of the labor-related 4. Proposed FY 2017 Policy Governing 1. Proposed Changes to MS–DRG the IPPS for Capital-Related Costs Classifications and Recalibrations of share for the proposed FY 2017 wage Relative Weights index. In section V. of the preamble to this • Solicitation of Comments on proposed rule, we discuss the proposed In section II. of the preamble of the Treatment of Overhead and Home Office payment policy requirements for proposed rule, we include— Costs in the Wage Index Calculation capital-related costs and capital

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payments to hospitals for FY 2017. In Psychiatric Facility Quality Reporting for operating costs of acute care addition, we discuss proposed changes (IPFQR) Program. hospitals (and hospital-specific rates to the calculation of capital IPPS • Proposed changes relating to applicable to SCHs and MDHs). payments to hospitals located in Puerto clinical quality measures for the • Target rate-of-increase limits to the Rico to parallel the change in the Medicare Electronic Health Record allowable operating costs of hospital statutory calculation of operating IPPS (EHR) Incentive Program and eligible inpatient services furnished by certain payments to hospitals located in Puerto hospitals and CAHs. hospitals excluded from the IPPS. • The LTCH PPS standard Federal Rico, beginning in FY 2017. 8. Determining Prospective Payment payment rate and the site neutral 5. Proposed Changes to the Payment Operating and Capital Rates and Rate-of- payment rate for hospital inpatient Rates for Certain Excluded Hospitals: Increase Limits for Acute Care Hospitals services provided for LTCH PPS Rate-of-Increase Percentages In the Addendum to this proposed discharges. In section VI. of the preamble of this rule, we set forth proposed changes to proposed rule, we discuss— the amounts and factors for determining 12. Discussion of Medicare Payment • Proposed changes to payments to the proposed FY 2017 prospective Advisory Commission certain excluded hospitals for FY 2017. payment rates for operating costs and Recommendations • Proposed implementation of the capital-related costs for acute care Under section 1805(b) of the Act, Frontier Community Health Integration hospitals. We are proposing to establish MedPAC is required to submit a report Project (FCHIP) Demonstration. the threshold amounts for outlier cases. to Congress, no later than March 15 of In addition, we address the update 6. Proposed Changes to the LTCH PPS each year, in which MedPAC reviews factors for determining the rate-of- and makes recommendations on In section VII. of the preamble of this increase limits for cost reporting periods Medicare payment policies. MedPAC’s proposed rule, we set forth— beginning in FY 2017 for certain March 2016 recommendations • Proposed changes to the LTCH PPS hospitals excluded from the IPPS. concerning hospital inpatient payment Federal payment rates, factors, and policies address the update factor for other payment rate policies under the 9. Determining Prospective Payment Rates for LTCHs hospital inpatient operating costs and LTCH PPS for FY 2017. capital-related costs for hospitals under • Proposals to sunset our existing 25- In the Addendum to this proposed the IPPS. We addressed these percent threshold policy regulations, rule, we set forth proposed changes to recommendations in Appendix B of this and replace them with single the amounts and factors for determining proposed rule. For further information consolidated 25 percent threshold the proposed FY 2017 LTCH PPS relating specifically to the MedPAC policy regulation. standard Federal payment rate and other March 2016 report or to obtain a copy • Proposed changes to the limitation factors used to determine LTCH PPS of the report, contact MedPAC at (202) on charges (LOC) to beneficiaries and payments under both the LTCH PPS 220–3700 or visit MedPAC’s Web site at: related billing requirements for standard Federal payment rate and the http://www.medpac.gov. ‘‘subclause (II)’’ LTCHs to align those site neutral payment rate in FY 2017. LTCH PPS payment adjustment policies We are proposing to establish the II. Proposed Changes to Medicare with the LOC policies applied in the adjustments for wage levels, the labor- Severity Diagnosis-Related Group (MS– TEFRA payment context. related share, the cost-of-living DRG) Classifications and Relative • Proposed technical corrections to adjustment, and high-cost outliers, Weights certain definitions to correct and clarify including the applicable fixed-loss A. Background their use under the application of the amounts and the LTCH cost-to-charge site neutral payment rate and proposed ratios (CCRs) for both payment rates. We Section 1886(d) of the Act specifies additional definitions in accordance also are providing the estimated market that the Secretary shall establish a with our proposed modifications to the basket update to apply to the ceiling classification system (referred to as 25-percent policy. used to determine payments under the diagnosis-related groups (DRGs)) for • Proposed rebasing and revising of existing payment adjustment for inpatient discharges and adjust the LTCH market basket to update the ‘‘subclause (II)’’ LTCHs for cost payments under the IPPS based on LTCH PPS, effective for FY 2017. reporting periods beginning in FY 2017. appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, 7. Proposed Changes Relating to Quality 10. Impact Analysis Medicare pays for inpatient hospital Data Reporting for Specific Providers In Appendix A of this proposed rule, services on a rate per discharge basis and Suppliers we set forth an analysis of the impact that varies according to the DRG to In section VIII. of the preamble of the that the proposed changes would have which a beneficiary’s stay is assigned. proposed rule, we address— on affected acute care hospitals, CAHs, The formula used to calculate payment • Proposed requirements for the LTCHs, PCHs, and IPFs. for a specific case multiplies an Hospital Inpatient Quality Reporting individual hospital’s payment rate per (IQR) Program as a condition for 11. Recommendation of Update Factors case by the weight of the DRG to which receiving the full applicable percentage for Operating Cost Rates of Payment for the case is assigned. Each DRG weight increase. Hospital Inpatient Services represents the average resources • Proposed changes to the In Appendix B of this proposed rule, required to care for cases in that requirements for the quality reporting as required by sections 1886(e)(4) and particular DRG, relative to the average program for PPS-exempt cancer (e)(5) of the Act, we provided our resources used to treat cases in all hospitals (PCHQR Program). recommendations of the appropriate DRGs. • Proposed changes to the percentage changes for FY 2017 for the Congress recognized that it would be requirements under the LTCH Quality following: necessary to recalculate the DRG Reporting Program (LTCH QRP). • A single average standardized relative weights periodically to account • Proposed changes to the amount for all areas for hospital for changes in resource consumption. requirements under the Inpatient inpatient services paid under the IPPS Accordingly, section 1886(d)(4)(C) of

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the Act requires that the Secretary our authority under section under section 1886(d)(3)(A)(vi) of the adjust the DRG classifications and 1886(d)(3)(A)(vi) of the Act, which Act. relative weights at least annually. These authorizes us to maintain budget Section 1886(d)(3)(A)(vi) of the Act adjustments are made to reflect changes neutrality by adjusting the national authorizes adjustments to the average in treatment patterns, technology, and standardized amount, to eliminate the standardized amounts for subsequent any other factors that may change the estimated effect of changes in coding or fiscal years in order to eliminate the relative use of hospital resources. classification that do not reflect real effect of such coding or classification changes in case-mix. Our actuaries changes. These adjustments are B. MS–DRG Reclassifications estimated that maintaining budget intended to ensure that future annual For general information about the neutrality required an adjustment of aggregate IPPS payments are the same as MS–DRG system, including yearly ¥4.8 percent to the national the payments that otherwise would have reviews and changes to the MS–DRGs, standardized amount. We provided for been made had the prospective we refer readers to the previous phasing in this ¥4.8 percent adjustment adjustments for documentation and discussions in the FY 2010 IPPS/RY over 3 years. Specifically, we coding applied in FY 2008 and FY 2009 2010 LTCH PPS final rule (74 FR 43764 established prospective documentation reflected the change that occurred in through 43766), the FY 2011 IPPS/LTCH and coding adjustments of ¥1.2 percent those years. ¥ PPS final rule (75 FR 50053 through for FY 2008, 1.8 percent for FY 2009, b. Recoupment or Repayment ¥ 50055), the FY 2012 IPPS/LTCH PPS and 1.8 percent for FY 2010. Adjustments in FYs 2010 Through 2012 final rule (76 FR 51485 through 51487), On September 29, 2007, Congress Required by Section 7(b)(1)(B) Public the FY 2013 IPPS/LTCH PPS final rule enacted the TMA [Transitional Medical Law 110–90 (77 FR 53273), the FY 2014 IPPS/LTCH Assistance], Abstinence Education, and PPS final rule (78 FR 50512), the FY QI [Qualifying Individuals] Programs If, based on a retroactive evaluation of 2015 IPPS/LTCH PPS final rule (79 FR Extension Act of 2007 (Pub. L. 110–90). claims data, the Secretary determines 49871), and the FY 2016 IPPS/LTCH Section 7(a) of Public Law 110–90 that implementation of the MS–DRG PPS final rule (80 FR 49342). reduced the documentation and coding system resulted in changes in documentation and coding that did not adjustment made as a result of the MS– C. Adoption of the MS–DRGs in FY 2008 reflect real changes in case-mix for DRG system that we adopted in the FY discharges occurring during FY 2008 or For information on the adoption of 2008 IPPS final rule with comment FY 2009 that are different from the the MS–DRGs in FY 2008, we refer period to ¥0.6 percent for FY 2008 and prospective documentation and coding readers to the FY 2008 IPPS final rule ¥0.9 percent for FY 2009, and we adjustments applied under section 7(a) with comment period (72 FR 47140 finalized the FY 2008 adjustment of Public Law 110–90, section 7(b)(1)(B) through 47189). through rulemaking, effective October 1, of Public Law 110–90 requires the 2007 (72 FR 66886). D. Proposed FY 2017 MS–DRG Secretary to make an additional For FY 2009, section 7(a) of Public Documentation and Coding Adjustment adjustment to the standardized amounts Law 110–90 required a documentation under section 1886(d) of the Act. This 1. Background on the Prospective MS– and coding adjustment of ¥0.9 percent, adjustment must offset the estimated DRG Documentation and Coding and we finalized that adjustment increase or decrease in aggregate Adjustments for FY 2008 and FY 2009 through rulemaking effective October 1, payments for FYs 2008 and 2009 Authorized by Public Law 110–90 2008 (73 FR 48447). The documentation (including interest) resulting from the and coding adjustments established in In the FY 2008 IPPS final rule with difference between the estimated actual the FY 2008 IPPS final rule with comment period (72 FR 47140 through documentation and coding effect and comment period, which reflected the 47189), we adopted the MS–DRG the documentation and coding amendments made by section 7(a) of patient classification system for the adjustment applied under section 7(a) of Public Law 110–90, are cumulative. As IPPS, effective October 1, 2007, to better Public Law 110–90. This adjustment is a result, the ¥0.9 percent recognize severity of illness in Medicare in addition to making an appropriate documentation and coding adjustment payment rates for acute care hospitals. adjustment to the standardized amounts for FY 2009 was in addition to the ¥0.6 The adoption of the MS–DRG system under section 1886(d)(3)(A)(vi) of the percent adjustment for FY 2008, resulted in the expansion of the number Act as required by section 7(b)(1)(A) of yielding a combined effect of ¥1.5 of DRGs from 538 in FY 2007 to 745 in Public Law 110–90. That is, these percent. FY 2008. (Currently, for FY 2016, there adjustments are intended to recoup (or are 756 MS–DRGs.) By increasing the 2. Adjustment to the Average repay, in the case of underpayments) number of MS–DRGs and more fully Standardized Amounts Required by spending in excess of (or less than) taking into account patient severity of Public Law 110–90 spending that would have occurred had illness in Medicare payment rates for the prospective adjustments for changes acute care hospitals, MS–DRGs a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 110–90 in documentation and coding applied in encourage hospitals to improve their FY 2008 and FY 2009 matched the documentation and coding of patient Section 7(b)(1)(A) of Public Law 110– changes that occurred in those years. diagnoses. 90 requires that, if the Secretary Public Law 110–90 requires that the In the FY 2008 IPPS final rule with determines that implementation of the Secretary only make these recoupment comment period (72 FR 47175 through MS–DRG system resulted in changes in or repayment adjustments for discharges 47186), we indicated that the adoption documentation and coding that did not occurring during FYs 2010, 2011, and of the MS–DRGs had the potential to reflect real changes in case-mix for 2012. lead to increases in aggregate payments discharges occurring during FY 2008 or without a corresponding increase in FY 2009 that are different than the 3. Retrospective Evaluation of FY 2008 actual patient severity of illness due to prospective documentation and coding and FY 2009 Claims Data the incentives for additional adjustments applied under section 7(a) In order to implement the documentation and coding. In that final of Public Law 110–90, the Secretary requirements of section 7 of Public Law rule with comment period, we exercised shall make an appropriate adjustment 110–90, we performed a retrospective

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evaluation of the FY 2008 data for implementation of any documentation result in a continued accrual of claims paid through December 2008 and coding adjustment until a full unrecoverable overpayments, it was using the methodology first described in analysis of case-mix changes based on imperative that we implement a the FY 2009 IPPS/LTCH PPS final rule FY 2009 claims data could be prospective adjustment for FY 2012, (73 FR 43768 and 43775) and later completed. We refer readers to the FY while recognizing CMS’ continued discussed in the FY 2010 IPPS/RY 2010 2010 IPPS/RY LTCH PPS final rule for desire to mitigate the effects of any LTCH PPS final rule (74 FR 43768 a detailed description of our proposal, significant downward adjustments to through 43772). We performed the same responses to comments, and finalized hospitals. Therefore, we implemented a analysis for FY 2009 claims data using policy. After analysis of the FY 2009 ¥2.0 percent prospective adjustment to the same methodology as we did for FY claims data for the FY 2011 IPPS/LTCH the standardized amount instead of the 2008 claims (75 FR 50057 through PPS final rule (75 FR 50057 through full ¥3.9 percent. 50068). The results of the analysis for 50073), we found a total prospective In the FY 2013 IPPS/LTCH PPS final the FY 2011 IPPS/LTCH PPS proposed documentation and coding effect of 5.4 rule (77 FR 53274 through 53276), we and final rules, and subsequent percent. After accounting for the ¥0.6 completed the prospective portion of evaluations in FY 2012, supported that percent and the ¥0.9 percent the adjustment required under section the 5.4 percent estimate accurately documentation and coding adjustments 7(b)(1)(A) of Public Law 110–90 by ¥ reflected the FY 2009 increases in in FYs 2008 and 2009, we found a finalizing a 1.9 percent adjustment to documentation and coding under the remaining documentation and coding the standardized amount for FY 2013. MS–DRG system. We were persuaded by effect of 3.9 percent. As we have We stated that this adjustment would both MedPAC’s analysis (as discussed discussed, an additional cumulative remove the remaining effect of the in the FY 2011 IPPS/LTCH PPS final adjustment of ¥3.9 percent would be documentation and coding changes that rule (75 FR 50064 through 50065)) and necessary to meet the requirements of do not reflect real changes in case-mix our own review of the methodologies section 7(b)(1)(A) of Public Law 110–90 that occurred in FY 2008 and FY 2009. proposed by various commenters that to make an adjustment to the average We believed that it was imperative to the methodology we employed to standardized amounts in order to implement the full remaining determine the required documentation eliminate the full effect of the adjustment, as any further delay would and coding adjustments was sound. documentation and coding changes that result in an overstated standardized As in prior years, the FY 2008, FY do not reflect real changes in case-mix amount in FY 2013 and any future fiscal 2009, and FY 2010 MedPAR files are on future payments. Unlike section years until a full adjustment was made. available to the public to allow 7(b)(1)(B) of Public Law 110–90, section We noted again that delaying full independent analysis of the FY 2008 7(b)(1)(A) does not specify when we implementation of the prospective portion of the adjustment required and FY 2009 documentation and coding must apply the prospective adjustment, under section 7(b)(1)(A) of Public Law effects. Interested individuals may still but merely requires us to make an 110–90 until FY 2013 resulted in order these files through the CMS Web ‘‘appropriate’’ adjustment. Therefore, as payments in FY 2010 through FY 2012 site at: http://www.cms.gov/Research- we stated in the FY 2011 IPPS/LTCH being overstated. These overpayments Statistics-Data-and-Systems/Files-for- PPS final rule (75 FR 50061), we could not be recovered by CMS, as Order/LimitedDataSets/ by clicking on believed the law provided some section 7(b)(1)(B) of Public Law 110–90 MedPAR Limited Data Set (LDS)— discretion as to the manner in which we limited recoupments to overpayments Hospital (National). This CMS Web page applied the prospective adjustment of made in FY 2008 and FY 2009. describes the file and provides ¥3.9 percent. As we discussed directions and further detailed extensively in the FY 2011 IPPS/LTCH 5. Recoupment or Repayment instructions for how to order. PPS final rule, it has been our practice Adjustment Authorized by Section Persons placing an order must send to moderate payment adjustments when 7(b)(1)(B) of Public Law 110–90 the following: A Letter of Request, the necessary to mitigate the effects of Section 7(b)(1)(B) of Public Law 110– LDS Data Use Agreement and Research significant downward adjustments on 90 requires the Secretary to make an Protocol (refer to the Web site for further hospitals, to avoid what could be adjustment to the standardized amounts instructions), the LDS Form, and a widespread, disruptive effects of such under section 1886(d) of the Act to check (refer to the Web site for the adjustments on hospitals. Therefore, we offset the estimated increase or decrease required payment amount) to: stated that we believed it was in aggregate payments for FY 2008 and Mailing address if using the U.S. appropriate to not implement the ¥3.9 FY 2009 (including interest) resulting Postal Service: percent prospective adjustment in FY from the difference between the Centers for Medicare & Medicaid 2011 because we finalized a ¥2.9 estimated actual documentation and Services, RDDC Account, Accounting percent recoupment adjustment for that coding effect and the documentation Division, P.O. Box 7520, Baltimore, fiscal year. Accordingly, we did not and coding adjustments applied under MD 21207–0520. propose a prospective adjustment under section 7(a) of Public Law 110–90. This Mailing address if using express mail: section 7(b)(1)(A) of Public Law 110–90 determination must be based on a Centers for Medicare & Medicaid for FY 2011 (75 FR 23868 through retrospective evaluation of claims data. Services, OFM/Division of 23870). We noted that, as a result, Our actuaries estimated that there was Accounting—RDDC, 7500 Security payments in FY 2011 (and in each a 5.8 percentage point difference Boulevard, C3–07–11, Baltimore, MD future fiscal year until we implemented resulting in an increase in aggregate 21244–1850. the requisite adjustment) would be payments of approximately $6.9 billion. higher than they would have been if we Therefore, as discussed in the FY 2011 4. Prospective Adjustments for FY 2008 had implemented an adjustment under IPPS/LTCH PPS final rule (75 FR 50062 and FY 2009 Authorized by Section section 7(b)(1)(A) of Public Law 110–90. through 50067), we determined that an 7(b)(1)(A) of Public Law 110–90 In the FY 2012 IPPS/LTCH PPS final aggregate adjustment of ¥5.8 percent in In the FY 2010 IPPS/RY 2010 LTCH rule (76 FR 51489 and 51497), we FYs 2011 and 2012 would be necessary PPS final rule (74 FR 43767 through indicated that, because further delay of in order to meet the requirements of 43777), we opted to delay the this prospective adjustment would section 7(b)(1)(B) of Public Law 110–90

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to adjust the standardized amounts for to require the Secretary to make a factors, we estimate that the entire $11 discharges occurring in FYs 2010, 2011, recoupment adjustment or adjustments billion will be accounted for by the end and/or 2012 to offset the estimated totaling $11 billion by FY 2017. This of the statutory 4-year timeline. As amount of the increase in aggregate adjustment represents the amount of the estimates of any future adjustments are payments (including interest) in FYs increase in aggregate payments as a subject to slight variations in total 2008 and 2009. result of not completing the prospective savings, we did not provide for specific It is often our practice to phase in adjustment authorized under section adjustments for FYs 2015, 2016, or 2017 payment rate adjustments over more 7(b)(1)(A) of Public Law 110–90 until at that time. We stated that we believed than one year in order to moderate the FY 2013. As discussed earlier, this delay that this level of adjustment for FY 2014 effect on payment rates in any one year. in implementation resulted in was a reasonable and fair approach that Therefore, consistent with the policies overstated payment rates in FYs 2010, satisfies the requirements of the statute that we have adopted in many similar 2011, and 2012. The resulting while mitigating extreme annual cases, in the FY 2011 IPPS/LTCH PPS overpayments could not have been fluctuations in payment rates. final rule, we made an adjustment to the recovered under Public Law 110–90. Consistent with the approach standardized amount of ¥2.9 percent, Similar to the adjustments authorized discussed in the FY 2014 rulemaking for representing approximately half of the under section 7(b)(1)(B) of Public Law recouping the $11 billion required by aggregate adjustment required under 110–90, the adjustment required under section 631 of the ATRA, in the FY 2015 section 7(b)(1)(B) of Public Law 110–90, section 631 of the ATRA is a one-time IPPS/LTCH PPS final rule (79 FR 49874) for FY 2011. An adjustment of this recoupment of a prior overpayment, not and the FY 2016 IPPS/LTCH PPS final magnitude allowed us to moderate the a permanent reduction to payment rates. rule (80 FR 49345), we implemented effects on hospitals in one year while Therefore, we anticipated that any additional ¥0.8 percent recoupment simultaneously making it possible to adjustment made to reduce payment adjustments to the standardized amount implement the entire adjustment within rates in one year would eventually be in FY 2015 and FY 2016, respectively. the timeframe required under section offset by a positive adjustment in 2018, We estimated that these adjustments, 7(b)(1)(B) of Public Law 110–90 (that is, once the necessary amount of combined with leaving the prior ¥0.8 no later than FY 2012). For FY 2012, in overpayment was recovered. However, percent adjustments in place, would accordance with the timeframes set section 414 of the Medicare Access and recover up to $2 billion in FY 2015 and forth by section 7(b)(1)(B) of Public Law CHIP Reauthorization Act (MACRA) of another $3 billion in FY 2016. When 110–90, and consistent with the 2015, Public Law 114–10, enacted on combined with the approximately $1 discussion in the FY 2011 IPPS/LTCH April 16, 2015, replaced the single billion adjustment made in FY 2014, we PPS final rule, we completed the positive adjustment we intended to estimated that approximately $5 to $6 recoupment adjustment by make in FY 2018 with a 0.5 percent billion would be left to recover under implementing the remaining ¥2.9 positive adjustment for each of FYs section 631 of the ATRA by the end of percent adjustment, in addition to 2018 through 2023. We stated in the FY FY 2016. removing the effect of the ¥2.9 percent 2016 IPPS/LTCH PPS final rule (80 FR However, due to lower than adjustment to the standardized amount 49345) that we will address this previously estimated inpatient finalized for FY 2011 (76 FR 51489 and MACRA provision in future rulemaking. spending, an adjustment of ¥0.8 51498). Because these adjustments, in As we stated in the FY 2014 IPPS/ percent in FY 2017 would not recoup effect, balanced out, there was no year- LTCH PPS final rule (78 FR 50515 the $11 billion under section 631 of the to-year change in the standardized through 50517), our actuaries estimate ATRA. Based on the FY 2017 amount due to this recoupment that a ¥9.3 percent adjustment to the President’s Budget, our actuaries adjustment for FY 2012. In the FY 2013 standardized amount would be currently estimate that FY 2014 through IPPS/LTCH PPS final rule (77 FR necessary if CMS were to fully recover FY 2016 spending subject to the 53276), we made a final +2.9 percent the $11 billion recoupment required by documentation and coding recoupment adjustment to the standardized amount, section 631 of the ATRA in FY 2014. It adjustment in the absence of the ¥0.8 completing the recoupment portion of is often our practice to phase in percent adjustments made in FYs 2014 section 7(b)(1)(B) of Public Law 110–90. payment rate adjustments over more through 2016 would have been $123.783 We note that with this positive than one year, in order to moderate the billion in FY 2014, $124.361 billion in adjustment, according to our estimates, effect on payment rates in any one year. FY 2015, and $127.060 billion in FY all overpayments made in FY 2008 and Therefore, consistent with the policies 2016. As shown in the following table, FY 2009 have been fully recaptured that we have adopted in many similar the amount recouped in each of those with appropriate interest, and the cases, and after consideration of the fiscal years is therefore calculated as the standardized amount has been returned public comments we received, in the FY difference between those amounts and to the appropriate baseline. 2014 IPPS/LTCH PPS final rule (78 FR the amounts determined to have been 50515 through 50517), we implemented spent in those years with the ¥0.8 6. Proposed Recoupment or Repayment a ¥0.8 percent recoupment adjustment percent adjustment applied, namely Adjustment Authorized by Section 631 to the standardized amount in FY 2014. $122.801 billion in FY 2014, $122.395 of the American Taxpayer Relief Act of We stated that if adjustments of billion in FY 2015, and $124.059 billion 2012 (ATRA) approximately ¥0.8 percent are in FY 2016. This yields an estimated Section 631 of the ATRA amended implemented in FYs 2014, 2015, 2016, total recoupment through the end of FY section 7(b)(1)(B) of Public Law 110–90 and 2017, using standard inflation 2016 of $5.950 billion.

RECOUPMENT MADE UNDER SECTION 631 OF THE AMERICAN TAXPAYER RELIEF ACT OF 2012 (ATRA)

IPPS Cumulative Adjusted IPPS Recoupment Spending * adjustment spending amount (billions) factor (billions) (billions)

FY 2014 ...... $122.801 1.00800 $123.783 $0.98

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RECOUPMENT MADE UNDER SECTION 631 OF THE AMERICAN TAXPAYER RELIEF ACT OF 2012 (ATRA)—Continued

IPPS Cumulative Adjusted IPPS Recoupment Spending * adjustment spending amount (billions) factor (billions) (billions)

FY 2015 ...... 122.395 1.01606 124.361 1.97 FY 2016 ...... 124.059 1.02419 127.060 3.00

Total ...... 5.95 * Based on FY 2017 President’s Budget, including capital, IME, and DSH payments.

These estimates and the estimate of instead make a 0.5 percent positive www.rti.org/reports/cms/HHSM-500- FY 2017 spending subject to the adjustment for each of FYs 2018 through 2005-0029I/PDF/Refining_Cost_to_ documentation and coding recoupment 2023. The provision under section 414 Charge_Ratios_200807_Final.pdf). adjustment also will be contained in a of the MACRA does not impact our In the FY 2009 IPPS final rule (73 FR memorandum from the Office of the proposed FY 2017 adjustment, and we 48458 through 48467), in response to Actuary that we will make publicly will address this MACRA provision in the RTI’s recommendations concerning available on the CMS Web site. A future rulemaking. cost report refinements, we discussed description of the President’s Budget for E. Refinement of the MS–DRG Relative our decision to pursue changes to the FY 2017 is currently available on the Weight Calculation cost report to split the cost center for OMB Web site at: https://www. Medical Supplies Charged to Patients whitehouse.gov/omb/budget. 1. Background into one line for ‘‘Medical Supplies Our actuaries currently estimate that Beginning in FY 2007, we Charged to Patients’’ and another line the FY 2017 spending subject to the implemented relative weights for DRGs for ‘‘Implantable Devices Charged to documentation and coding recoupment based on cost report data instead of Patients.’’ We acknowledged, as RTI had adjustment (including capital, IME, and charge information. We refer readers to found, that charge compression occurs DSH payment) would be $129.625 the FY 2007 IPPS final rule (71 FR in several cost centers that exist on the billion in the absence of any 47882) for a detailed discussion of our Medicare cost report. However, as we documentation and recoupment final policy for calculating the cost- stated in the FY 2009 IPPS final rule, we adjustments from FY 2014 through FY based DRG relative weights and to the focused on the CCR for Medical 2017. Therefore, our actuaries currently FY 2008 IPPS final rule with comment Supplies and Equipment because RTI estimate that, to the nearest tenth of a period (72 FR 47199) for information on found that the largest impact on the percent, the FY 2017 documentation how we blended relative weights based MS–DRG relative weights could result and coding adjustment factor that will on the CMS DRGs and MS–DRGs. from correcting charge compression for recoup as closely as possible $11 billion As we implemented cost-based devices and implants. In determining from FY 2014 through FY 2017 without relative weights, some public the items that should be reported in exceeding this amount is ¥1.5 percent. commenters raised concerns about these respective cost centers, we This adjustment factor yields an potential bias in the weights due to adopted the commenters’ estimated spending amount in FY 2017 ‘‘charge compression,’’ which is the recommendations that hospitals use of $124.693 billion, calculated as practice of applying a higher percentage revenue codes established by the AHA’s $129.625/(1.008*1.008*1.008*1.015). charge markup over costs to lower cost National Uniform Billing Committee to This estimated ¥1.5 percent adjustment items and services, and a lower determine the items that should be factor will be updated for the final rule percentage charge markup over costs to reported in the ‘‘Medical Supplies based on the FY 2017 President’s higher cost items and services. As a Charged to Patients’’ and the Budget Midsession Review. It is result, the cost-based weights would ‘‘Implantable Devices Charged to possible that, based on updated undervalue high-cost items and Patients’’ cost centers. Accordingly, a estimates, the necessary adjustment overvalue low-cost items if a single cost- new subscripted line for ‘‘Implantable factor to the nearest tenth of a percent to-charge ratio (CCR) is applied to items Devices Charged to Patients’’ was could be different than our actuaries’ of widely varying costs in the same cost created in July 2009. This new current estimate of ¥1.5 percent. The center. To address this concern, in subscripted cost center has been proposed ¥1.5 percent adjustment August 2006, we awarded a contract to available for use for cost reporting would be the final adjustment required the Research Triangle Institute, periods beginning on or after May 1, under section 631 of the ATRA, and International (RTI) to study the effects of 2009. when combined with the effects of charge compression in calculating the As we discussed in the FY 2009 IPPS previous adjustments made in FY 2014, relative weights and to consider final rule (73 FR 48458) and in the CY FY 2015, and FY 2016, we estimate will methods to reduce the variation in the 2009 OPPS/ASC final rule with satisfy the section 631 of the ATRA CCRs across services within cost comment period (73 FR 68519 through recoupment. As stated earlier, once the centers. For a detailed summary of RTI’s 68527), in addition to the findings recoupment was complete, we had findings, recommendations, and public regarding implantable devices, RTI anticipated making a single positive comments that we received on the found that the costs and charges of adjustment in FY 2018 to offset the report, we refer readers to the FY 2009 computed tomography (CT) scans, reductions required to recoup the $11 IPPS/LTCH PPS final rule (73 FR 48452 magnetic resonance imaging (MRI), and billion under section 631 of the ATRA. through 48453). In addition, we refer cardiac catheterization differ However, as stated earlier, section 414 readers to RTI’s July 2008 final report significantly from the costs and charges of the MACRA requires that we not titled ‘‘Refining Cost to Charge Ratios of other services included in the make the single positive adjustment we for Calculating APC and MS–DRG standard associated cost center. RTI also intended to make in FY 2018, but Relative Payment Weights’’ (http:// concluded that both the IPPS and the

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OPPS relative weights would better Devices Charged to Patients’’ for use in cost reports, compared to prior years. estimate the costs of those services if calculating the MS–DRG relative We stated that we believed that the CMS were to add standard cost centers weights for FY 2012. We indicated that analytic findings described using the FY for CT scans, MRIs, and cardiac we would reassess the availability of 2011 cost report data and FY 2012 catheterization in order for hospitals to data for the ‘‘Implantable Devices claims data supported our original report separately the costs and charges Charged to Patients’’ cost center for the decision to break out and create new for those services and in order for CMS FY 2013 IPPS/LTCH PPS rulemaking cost centers for implantable devices, to calculate unique CCRs to estimate the cycle and, if appropriate, we would MRIs, CT scans, and cardiac costs from charges on claims data. In the propose to create a distinct CCR at that catheterization, and we saw no reason to FY 2011 IPPS/LTCH PPS final rule (75 time. further delay proposing to implement FR 50075 through 50080), we finalized During the development of the FY the CCRs of each of these cost centers. our proposal to create standard cost 2013 IPPS/LTCH PPS proposed and Therefore, beginning in FY 2014, we centers for CT scans, MRIs, and cardiac final rules, hospitals were still in the proposed a policy to calculate the MS– catheterization, and to require that process of transitioning from the DRG relative weights using 19 CCRs, hospitals report the costs and charges previous cost report Form CMS–2552– creating distinct CCRs from cost report for these services under new cost 96 to the new cost report Form CMS– data for implantable devices, MRIs, CT centers on the revised Medicare cost 2552–10. Therefore, we were able to scans, and cardiac catheterization. report Form CMS–2552–10. (We refer access only those cost reports in the FY We refer readers to the FY 2014 IPPS/ readers to the FY 2011 IPPS/LTCH PPS 2010 HCRIS with fiscal year begin dates LTCH PPS proposed rule (78 FR 27507 final rule (75 FR 50075 through 50080) on or after October 1, 2009, and before through 27509) and final rule (78 FR for a detailed discussion of the reasons May 1, 2010; that is, those cost reports 50518 through 50523) in which we for the creation of standard cost centers on Form CMS–2552–96. Data from the presented data analyses using distinct for CT scans, MRIs, and cardiac Form CMS–2552–10 cost reports were CCRs for implantable devices, MRIs, CT catheterization.) The new standard cost not available because cost reports filed scans, and cardiac catheterization. The on the Form CMS–2552–10 were not centers for CT scans, MRIs, and cardiac FY 2014 IPPS/LTCH PPS final rule also accessible in the HCRIS. Further catheterization are effective for cost set forth our responses to public complicating matters was that, due to reporting periods beginning on or after comments we received on our proposal additional unforeseen technical May 1, 2010, on the revised cost report to implement these CCRs. As explained difficulties, the corresponding Form CMS–2552–10. in more detail in the FY 2014 IPPS/ information regarding charges for LTCH PPS final rule, we finalized our In the FY 2009 IPPS final rule (73 FR implantable devices on hospital claims proposal to use 19 CCRs to calculate 48468), we stated that, due to what is was not yet available to us in the MS–DRG relative weights beginning in typically a 3-year lag between the MedPAR file. Without the breakout in FY 2014—the then existing 15 cost reporting of cost report data and the the MedPAR file of charges associated availability for use in ratesetting, we with implantable devices to correspond centers and the 4 new CCRs for anticipated that we might be able to use to the costs of implantable devices on implantable devices, MRIs, CT scans, data from the new ‘‘Implantable Devices the cost report, we believed that we had and cardiac catheterization. Therefore, Charged to Patients’’ cost center to no choice but to continue computing the beginning in FY 2014, we calculate the develop a CCR for ‘‘Implantable Devices relative weights with the current CCR IPPS MS–DRG relative weights using 19 Charged to Patients’’ in the FY 2012 or that combines the costs and charges for CCRs, creating distinct CCRs for FY 2013 IPPS rulemaking cycle. supplies and implantable devices. We implantable devices, MRIs, CT scans, However, as noted in the FY 2010 IPPS/ stated in the FY 2013 IPPS/LTCH PPS and cardiac catheterization. RY 2010 LTCH PPS final rule (74 FR final rule (77 FR 53281 through 53283) 2. Discussion of Policy for FY 2017 43782), due to delays in the issuance of that when we do have the necessary the revised cost report Form CMS 2552– data for supplies and implantable Consistent with our established 10, we determined that a new CCR for devices on the claims in the MedPAR policy, we calculated the proposed MS– ‘‘Implantable Devices Charged to file to create distinct CCRs for the DRG relative weights for FY 2017 using Patients’’ might not be available before respective cost centers for supplies and two data sources: The MedPAR file as FY 2013. Similarly, when we finalized implantable devices, we hoped that we the claims data source and the HCRIS as the decision in the FY 2011 IPPS/LTCH would also have data for an analysis of the cost report data source. We adjusted PPS final rule to add new cost centers creating distinct CCRs for CT scans, the charges from the claims to costs by for CT scans, MRIs, and cardiac MRIs, and cardiac catheterization, applying the 19 national average CCRs catheterization, we explained that data which could then be finalized through developed from the cost reports. The from any new cost centers that may be rulemaking. In the FY 2013 IPPS/LTCH description of the calculation of the created will not be available until at PPS final rule (77 FR 53281), we stated proposed 19 CCRs and the proposed least 3 years after they are first used (75 that, prior to proposing to create these MS–DRG relative weights for FY 2017 is FR 50077). In preparation for the FY CCRs, we would first thoroughly included in section II.G. of the preamble 2012 IPPS/LTCH PPS rulemaking, we analyze and determine the impacts of of this proposed rule. As we did with checked the availability of data in the the data, and that distinct CCRs for the FY 2016 IPPS/LTCH PPS final rule, ‘‘Implantable Devices Charged to these new cost centers would be used in we are providing the version of the Patients’’ cost center on the FY 2009 the calculation of the relative weights HCRIS from which we calculated these cost reports, but we did not believe that only if they were first finalized through proposed 19 CCRs on the CMS Web site there was a sufficient amount of data rulemaking. at: http://www.cms.gov/Medicare/ from which to generate a meaningful At the time of the development of the Medicare-Fee-for-Service-Payment/ analysis in this particular situation. FY 2014 IPPS/LTCH PPS proposed rule AcuteInpatientPPS/index.html. Click on Therefore, we did not propose to use (78 FR 27506 through 27507), we had a the link on the left side of the screen data from the ‘‘Implantable Devices substantial number of hospitals titled, ‘‘FY 2017 IPPS Proposed Rule Charged to Patients’’ cost center to completing all, or some, of these new Home Page’’ or ‘‘Acute Inpatient Files create a distinct CCR for ‘‘Implantable cost centers on the FY 2011 Medicare for Download.’’

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F. Proposed Changes to Specific MS– a new compliance date that required the CMS Web site at: http://www.cms. DRG Classifications use of ICD–10 beginning October 1, hhs.gov/Medicare/Coding/ICD9Provider 2015. The rule also required HIPAA- DiagnosticCodes/index.html. 1. Discussion of Changes to Coding covered entities to continue to use ICD– We reviewed comments on the ICD– System and Basis for MS–DRG Updates 9–CM through September 30, 2015. 10 MS–DRGs Version 28 and made a. Conversion of MS–DRGs to the The anticipated move to ICD–10 updates as a result of these comments. International Classification of Diseases, necessitated the development of an We called the updated version the ICD– 10th Revision (ICD–10) ICD–10–CM/ICD–10–PCS version of the 10 MS–DRGs Version 28–R1. We posted As of October 1, 2015, providers use MS–DRGs. CMS began a project to a Definitions Manual of ICD–10 MS– the International Classification of convert the ICD–9–CM-based MS–DRGs DRGs Version 28–R1 on our ICD–10 Diseases, 10th Revision (ICD–10) coding to ICD–10 MS–DRGs. In response to the MS–DRG Conversion Project Web site. system to report diagnoses and FY 2011 IPPS/LTCH PPS proposed rule, To make the review of Version 28–R1 procedures for Medicare hospital we received public comments on the updates easier for the public, we also inpatient services under the MS–DRG creation of the ICD–10 version of the made available pilot software on a CD system instead of the ICD–9–CM coding MS–DRGs to be implemented at the ROM that could be ordered through the system, which was used through same time as ICD–10 (75 FR 50127 and National Technical Information Service September 30, 2015. The ICD–10 coding 50128). While we did not propose an (NTIS). A link to the NTIS ordering page system includes the International ICD–10 version of the MS–DRGs in the was provided on the CMS ICD–10 MS– FY 2011 IPPS/LTCH PPS proposed rule, DRGs Web site. We stated that we Classification of Diseases, 10th we noted that we have been actively believed that, by providing the ICD–10 Revision, Clinical Modification (ICD– involved in converting current MS– MS–DRGs Version 28–R1 Pilot Software 10–CM) for diagnosis coding and the DRGs from ICD–9–CM codes to ICD–10 (distributed on CD ROM), the public International Classification of Diseases, codes and sharing this information would be able to more easily review and 10th Revision, Procedure Coding through the ICD–10 (previously ICD–9– provide feedback on updates to the ICD– System (ICD–10–PCS) for inpatient CM) Coordination and Maintenance 10 MS–DRGs. We discussed the updated hospital procedure coding, as well as Committee. We undertook this early ICD–10 MS–DRGs Version 28–R1 at the the Official ICD–10–CM and ICD–10– conversion project to assist other payers September 14, 2011 ICD–9–CM PCS Guidelines for Coding and and providers in understanding how to Coordination and Maintenance Reporting. The ICD–10 coding system implement their own conversion Committee meeting. We encouraged the was initially adopted for transactions projects. We posted ICD–10 MS–DRGs public to continue to review and conducted on or after October 1, 2013, based on Version 26.0 (FY 2009) of the provide comments on the ICD–10 MS– as described in the Health Insurance MS–DRGs. We also posted a paper that DRGs so that CMS could continue to Portability and Accountability Act of describes how CMS went about update the system. 1996 (HIPAA) Administrative completing this project and suggestions In FY 2012, we prepared the ICD–10 Simplification: Modifications to for other payers and providers to follow. MS–DRGs Version 29, based on the FY Medical Data Code Set Standards to Information on the ICD–10 MS–DRG 2012 MS–DRGs (Version 29.0) that we Adopt ICD–10–CM and ICD–10–PCS conversion project can be found on the finalized in the FY 2012 IPPS/LTCH Final Rule published in the Federal ICD–10 MS–DRG Conversion Project PPS final rule. We posted a Definitions Register on January 16, 2009 (74 FR Web site at: http://cms.hhs.gov/ Manual of ICD–10 MS–DRGs Version 29 3328 through 3362) (hereinafter referred Medicare/Coding/ICD10/ICD-10-MS- on our ICD–10 MS–DRG Conversion to as the ‘‘ICD–10–CM and ICD–10–PCS DRG-Conversion-Project.html. We have Project Web site. We also prepared a final rule’’). However, the Secretary of continued to keep the public updated document that describes changes made Health and Human Services (the on our maintenance efforts for ICD–10– from Version 28 to Version 29 to Secretary) issued a final rule that CM and ICD–10–PCS coding systems, as facilitate a review. The ICD–10 MS– delayed the compliance date for ICD–10 well as the General Equivalence DRGs Version 29 was discussed at the from October 1, 2013, to October 1, Mappings that assist in conversion ICD–9–CM Coordination and 2014. That final rule, entitled through the ICD–10 (previously ICD–9– Maintenance Committee meeting on ‘‘Administrative Simplification: CM) Coordination and Maintenance March 5, 2012. Information was Adoption of a Standard for a Unique Committee. Information on these provided on the types of updates made. Health Plan Identifier; Addition to the committee meetings can be found on the Once again the public was encouraged National Provider Identifier CMS Web site at: http://www.cms. to review and comment on the most Requirements; and a Change to the hhs.gov/Medicare/Coding/ICD9Provider recent update to the ICD–10 MS–DRGs. Compliance Date for ICD–10–CM and DiagnosticCodes/index.html. CMS prepared the ICD–10 MS–DRGs ICD–10–PCS Medical Data Code Sets,’’ During FY 2011, we developed and Version 30 based on the FY 2013 MS– CMS–0040–F, was published in the posted Version 28.0 of the ICD–10 MS– DRGs (Version 30) that we finalized in Federal Register on September 5, 2012 DRGs based on the FY 2011 MS–DRGs the FY 2013 IPPS/LTCH PPS final rule. (77 FR 54664) and is available for (Version 28.0) that we finalized in the We posted a Definitions Manual of the viewing on the Internet at: http:// FY 2011 IPPS/LTCH PPS final rule on ICD–10 MS–DRGs Version 30 on our www.gpo.gov/fdsys/pkg/FR-2012-09-05/ the CMS Web site. This ICD–10 MS– ICD–10 MS–DRG Conversion Project pdf/2012-21238.pdf. On April 1, 2014, DRGs Version 28.0 also included the CC Web site. We also prepared a document the Protecting Access to Medicare Act of Exclusion List and the ICD–10 version that describes changes made from 2014 (PAMA) (Pub. L. 113–93) was of the hospital-acquired conditions Version 29 to Version 30 to facilitate a enacted, which specified that the (HACs), which was not posted with review. We produced mainframe and Secretary may not adopt ICD–10 prior to Version 26. We also discussed this computer software for Version 30, October 1, 2015. Accordingly, the U.S. update at the September 15–16, 2010 which was made available to the public Department of Health and Human and the March 9–10, 2011 meetings of in February 2013. Information on Services released a final rule in the the ICD–9–CM Coordination and ordering the mainframe and computer Federal Register on August 4, 2014 (79 Maintenance Committee. The minutes software through NTIS was posted on FR 45128 through 45134) that included of these two meetings are posted on the the ICD–10 MS–DRG Conversion Project

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Web site. The ICD–10 MS–DRGs cms.hhs.gov/Medicare/Coding/ICD10/ Definitions Manual of the ICD–10 MS Version 30.0 computer software ICD-10-MS-DRG-Conversion- DRGs Version 32 on the ICD–10 MS– facilitated additional review of the ICD– Project.html under the ‘‘Downloads’’ DRG Conversion Project Web site at: 10 MS–DRGs conversion. section. Information on the March 5, http://www.cms.gov/Medicare/Coding/ We provided information on a study 2013 ICD–9–CM Coordination and ICD10/ICD-10-MS-DRG-Conversion- conducted on the impact of converting Maintenance Committee meeting can be Project.html. We also prepared a the MS–DRGs to ICD–10. Information on found on the CMS Web site at: http:// document that described changes made this study is summarized in a paper cms.hhs.gov/Medicare/Coding/ICD9 from Version 31–R to Version 32 to entitled ‘‘Impact of the Transition to ProviderDiagnosticCodes/ICD-9-CM-C- facilitate a review. We produced ICD–10 on Medicare Inpatient Hospital and-M-Meeting-Materials.html. This mainframe and computer software for Payments.’’ This paper was posted on update of the impact paper and the ICD– Version 32, which was made available the CMS ICD–10 MS–DRGs Conversion 10 MS–DRG Version 30 software to the public in January 2015. Project Web site and was distributed provided additional information to the Information on ordering the mainframe and discussed at the September 15, 2010 public who were evaluating the and computer software through NTIS ICD–9–CM Coordination and conversion of the MS–DRGs to ICD–10 was made available on the CMS Web Maintenance Committee meeting. The MS–DRGs. site at: http://www.cms.gov/Medicare/ paper described CMS’ approach to the CMS prepared the ICD–10 MS–DRGs Coding/ICD10/ICD-10-MS-DRG- conversion of the MS–DRGs from ICD– Version 31 based on the FY 2014 MS– Conversion-Project.html under the 9–CM codes to ICD–10 codes. The study DRGs (Version 31) that we finalized in ‘‘Related Links’’ section. This ICD–10 was undertaken using the ICD–9–CM the FY 2014 IPPS/LTCH PPS final rule. MS–DRGs Version 32 computer MS–DRGs Version 27.0 (FY 2010), In November 2013, we posted a software facilitated additional review of which was converted to the ICD–10 Definitions Manual of the ICD–10 MS– the ICD–10 MS–DRGs conversion. We MS–DRGs Version 27.0. The study DRGs Version 31 on the ICD–10 MS– encouraged the public to submit to CMS estimated the impact on aggregate DRG Conversion Project Web site at: any comments on areas where they payment to hospitals and the http://www.cms.hhs.gov/Medicare/ believed the ICD–10 MS–DRGs did not distribution of payments across Coding/ICD10/ICD-10-MS-DRG- accurately reflect grouping logic found hospitals. The impact of the conversion Conversion-Project.html. We also in the ICD–9–CM MS–DRGs Version 32. from ICD–9–CM to ICD–10 on Medicare prepared a document that described We discussed five requests from the MS–DRG hospital payments was changes made from Version 30 to public to update the ICD–10 MS–DRGs estimated using FY 2009 Medicare Version 31 to facilitate a review. We Version 32 to better replicate the ICD– claims data. The study found a hospital produced mainframe and computer 9–CM MS–DRGs in section II.G.3., 4., payment increase of 0.05 percent using software for Version 31, which was and 5. of the preamble of the FY 2016 the ICD–10 MS–DRGs Version 27. made available to the public in IPPS/LTCH PPS final rule. In the FY CMS provided an overview of this December 2013. Information on ordering 2016 IPPS/LTCH PPS proposed rule (80 hospital payment impact study at the the mainframe and computer software FR 24351), we proposed to implement March 5, 2012 ICD–9–CM Coordination through NTIS was posted on the CMS the MS–DRG code logic in the ICD–10 and Maintenance Committee meeting. Web site at: http://cms.hhs.gov/ MS–DRGs Version 32 along with any This presentation followed Medicare/Coding/ICD10/ICD-10-MS- finalized updates to the ICD–10 MS– presentations on the creation of ICD–10 DRG-Conversion-Project.html under the DRGs Version 32 for the final ICD–10 MS–DRGs Version 29.0. A summary ‘‘Related Links’’ section. This ICD–10 MS–DRGs Version 33. In the proposed report of this meeting can be found on MS–DRGs Version 31.0 computer rule, we proposed the ICD–10 MS–DRGs the CMS Web site at: http://www.cms. software facilitated additional review of Version 33 as the replacement logic for hhs.gov/Medicare/Coding/ICD9Provider the ICD–10 MS–DRGs conversion. We the ICD–9–CM based MS–DRGs Version DiagnosticCodes/index.html. At this encouraged the public to submit to CMS 32 as part of the proposed MS–DRG March 2012 meeting, CMS announced any comments on areas where they updates for FY 2016. We invited public that it would produce an update on this believed the ICD–10 MS–DRGs did not comments on how well the ICD–10 MS– impact study based on an updated accurately reflect grouping logic found DRGs Version 32 replicated the logic of version of the ICD–10 MS–DRGs. This in the ICD–9–CM MS–DRGs Version 31. the MS–DRGs Version 32 based on ICD– update of the impact study was We reviewed public comments 9–CM codes. presented at the March 5, 2013 ICD–9– received and developed an update of In the FY 2016 IPPS/LTCH PPS final CM Coordination and Maintenance ICD–10 MS–DRGs Version 31, which we rule (80 FR 49356 through 49357 and Committee meeting. The study found called ICD–10 MS–DRGs Version 31–R. 49363 through 49407), we addressed the that moving from an ICD–9–CM-based We posted a Definitions Manual of the public comments we received on the system to an ICD–10 MS–DRG ICD–10 MS–DRGs Version 31–R on the replication in the ICD–10 MS–DRGs replicated system would lead to DRG ICD–10 MS–DRG Conversion Project Version 32 of the logic of the MS–DRGs reassignments on only 1 percent of the Web site at: http://www.cms.hhs.gov/ Version 32 based on ICD–9–CM codes. 10 million MedPAR sample records Medicare/Coding/ICD10/ICD-10-MS- We refer readers to that final rule for a used in the study. Ninety-nine percent DRG-Conversion-Project.html. We also discussion of the changes we made in of the records did not shift to another prepared a document that describes response to public comments. MS–DRG when using an ICD–10 MS– changes made from Version 31 to DRG system. For the 1 percent of the Version 31–R to facilitate a review. We b. Basis for Proposed FY 2017 MS–DRG records that shifted, 45 percent of the continued to share ICD–10 MS–DRG Updates shifts were to a higher-weighted MS– conversion activities with the public CMS encourages input from our DRG, while 55 percent of the shifts were through this Web site. stakeholders concerning the annual to lower-weighted MS–DRGs. The net CMS prepared the ICD–10 MS–DRGs IPPS updates when that input is made impact across all MS–DRGs was a Version 32 based on the FY 2015 MS– available to us by December 7 of the reduction by 4/10000 or minus 4 DRGs (Version 32) that we finalized in year prior to the next annual proposed pennies per $100. The updated paper is the FY 2015 IPPS/LTCH PPS final rule. rule update. For example, to be posted on the CMS Web site at: http:// In November 2014, we made available a considered for any updates or changes

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in FY 2017, comments and suggestions prefer not to create a new MS–DRG of the preamble of this proposed rule, should have been submitted by unless it would include a substantial ICD–9–CM data were used for December 7, 2015. The comments that number of cases. computing the proposed FY 2017 MS– were submitted in a timely manner for In our examination of the claims data, DRG relative payment weights. If the FY 2017 are discussed in this section of we apply the following criteria ICD–9 and ICD–10 versions of MS– the proposed rule. Interested parties established in FY 2008 (72 FR 47169) to DRGs cease to be replications of each should submit any comments and determine if the creation of a new other, the relative payment weights suggestions for FY 2018 by December 7, complication or comorbidity (CC) or computed using the ICD–9 claims data 2016, via the new CMS MS–DRG major complication or comorbidity and MS–DRGs would be inconsistent Classification Change Requests Mailbox (MCC) subgroup within a base MS–DRG with the relative payment weights located at: is warranted: assigned for the ICD–10 MS–DRGs, MSDRGClassificationChange@ • A reduction in variance of costs of causing unintended payment cms.hhs.gov. at least 3 percent. redistributions. Thus, if the findings of Following are the changes we are • At least 5 percent of the patients in our data analyses and the proposing to the MS–DRGs for FY 2017. the MS–DRG fall within the CC or MCC recommendations of our clinical We are inviting public comment on each subgroup. advisors supported modifications to the • of the MS–DRG classification proposed At least 500 cases are in the CC or current ICD–10 MS–DRG structure, changes described in this rule, as well MCC subgroup. • prior to proposing any changes, we first as our proposals to maintain certain There is at least a 20-percent evaluated whether the requested change existing MS–DRG classifications, which difference in average costs between could be replicated in the ICD–9–CM subgroups. are also discussed later in this section • MS–DRGs. If the answer was ‘‘yes,’’ of the proposed rule. In some cases, we There is a $2,000 difference in from a replication perspective, the are proposing changes to the MS–DRG average costs between subgroups. change was considered feasible. If the In order to warrant creation of a CC classifications based on our analysis of answer was ‘‘no,’’ we examined whether or MCC subgroup within a base MS– claims data. In other cases, we are the change in the ICD–10 MS–DRGs was DRG, the subgroup must meet all five of proposing to maintain the existing MS– likely to cause a significant number of the criteria. DRG classification based on our analysis patient cases to change or ‘‘shift’’ ICD– We note that some of the issues being of claims data. For this FY 2017 10 MS–DRGs. If relatively few patient evaluated for the FY 2017 MS–DRGs proposed rule, our MS–DRG analysis is cases would be impacted, we evaluated update continue to relate to the need for based on claims data from the December if it would be feasible to propose the the ICD–10 MS–DRGs to accurately 2015 update of the FY 2015 MedPAR change even though it could not be replicate the logic of the ICD–9–CM file, which contains hospital bills replicated by the ICD–9 MS–DRGs based version of the MS–DRGs. received through September 30, 2015, because it would not cause a material Replication is important because both for discharges occurring through payment redistribution. For the ICD–10 the logic for the proposed MS–DRGs September 30, 2015. In our discussion MS–DRG classification change requests of the proposed MS–DRG and the data source used to calculate that could not be replicated in ICD–9– reclassification changes that follows, we and develop proposed relative payment CM and that would cause a significant refer to our analysis of claims data from weights are based on the same MedPAR number of patient cases to shift MS– the ‘‘December 2015 update of the FY claims data. In other words, as the logic DRG assignment, we considered other 2015 MedPAR file.’’ for the proposed FY 2017 ICD–10 MS– alternatives. As explained in previous rulemaking DRGs is based upon the FY 2015 ICD– (76 FR 51487), in deciding whether to 9–CM MedPAR claims data, the data 2. Pre-Major Diagnostic Category (Pre- propose to make further modification to source used to calculate and develop the MDC): Total Artificial Heart the MS–DRGs for particular proposed FY 2017 relative payment Replacement circumstances brought to our attention, weights is also based on the FY 2015 An ICD–10 MS–DRG replication issue we consider whether the resource ICD–9–CM MedPAR claims data, regarding the assignment of two ICD– consumption and clinical characteristics including any proposed MS–DRG 10–PCS procedure codes was identified of the patients with a given set of classification changes discussed in this after the October 1, 2015 conditions are significantly different proposed rule. This is consistent with implementation of the Version 33 ICD– than the remaining patients in the MS– how the current FY 2016 relative 10 MS–DRGs. ICD–10–PCS procedure DRG. We evaluate patient care costs payment weights are based on the ICD– codes 02RK0JZ (Replacement of right using average costs and lengths of stay 9–CM diagnosis and procedure codes ventricle with synthetic substitute, open and rely on the judgment of our clinical from the FY 2014 MedPAR claims data approach) and 02RL0JZ (Replacement of advisors to decide whether patients are that were grouped through the ICD–9– left ventricle with synthetic substitute, clinically distinct or similar to other CM version of the FY 2016 GROUPER open approach), when reported patients in the MS–DRG. In evaluating Version 33. We note that we made the together, describe a biventricular heart resource costs, we consider both the MS–DRG GROUPER and Medicare Code replacement (artificial heart). Under the absolute and percentage differences in Editor (MCE) ICD–9–CM Software Version 32 ICD–9–CM based MS–DRGs, average costs between the cases we Version 33 available to the public for this procedure was described by ICD–9– select for review and the remainder of use in analyzing ICD–9–CM data to CM procedure code 37.52 (Implantation cases in the MS–DRG. We also consider create relative payment weights using of total internal biventricular heart variation in costs within these groups; ICD–9–CM data on our CMS Web site at: replacement system) and grouped to that is, whether observed average https://www.cms.gov/Medicare/ MS–DRGs 001 and 002 (Heart differences are consistent across Medicare-Fee-for-Service-Payment/ Transplant or Implant of Heart Assist patients or attributable to cases that are AcuteInpatientPPS/FY2016-IPPS-Final- System with and without MCC, extreme in terms of costs or length of Rule-Home-Page.html?DLSort respectively). stay, or both. Further, we consider the =0&DLEntries=10& As discussed in section II.F.1.a. of the number of patients who will have a DLPage=1&DLSortDir=ascending. preamble of this proposed rule, to assist given set of characteristics and generally Therefore, as discussed in section II.G. in the conversion from the ICD–9–CM

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based MS–DRGs to ICD–10, beginning respectively) to accurately replicate the describing endovascular embolization or in FY 2011, draft versions of the ICD– Version 32 ICD–9–CM based MS–DRG occlusion of the head and neck as well 10 based MS–DRGs were developed and logic of procedure code 37.52. We are as several other codes describing made available for public comment. The inviting public comments on our endovascular procedures of the head two ICD–10–PCS procedure codes proposal. and neck. (02RK0JZ and 02RL0JZ) were assigned 3. MDC 1 (Diseases and Disorders of the The ICD–10–PCS procedure codes as a ‘‘cluster’’ to the draft ICD–10 based Nervous System) listed in the following table capture MS–DRGs 001 and 002 in prior draft endovascular embolization or occlusion versions of the ICD–10 MS–DRGs. In a. Endovascular Embolization (Coiling) of the head and neck procedures that are ICD–10–PCS, a cluster is the term used or Occlusion of Head and Neck assigned to the following MS–DRGs in to describe when a combination of ICD– Procedures ICD–10 Version 33 MS–DRGs: MS–DRG 10–PCS procedure codes are needed to We received a repeat request to 020 (Intracranial Vascular Procedures fully satisfy the equivalent meaning of change the MS–DRG assignment for with Principal Diagnosis of Hemorrhage an ICD–9–CM procedure code for it to procedure codes describing with MCC); MS–DRG 021 (Intracranial be considered a plausible translation. endovascular embolization (coiling) or Vascular Procedures with Principal Upon review of prior draft versions of occlusion of the head and neck. This Diagnosis of Hemorrhage with CC); MS– the ICD–10 MS–DRGs, it was topic was discussed in the FY 2015 determined that Version 30 was the last IPPS/LTCH PPS proposed rule (79 FR DRG 022 (Intracranial Vascular version to include ICD–10–PCS 28005 through 28007); the FY 2015 Procedures with Principal Diagnosis of procedure codes 02RK0JZ and 02RL0JZ IPPS/LTCH PPS final rule (79 FR 49883 Hemorrhage without CC/MCC); MS– as a code cluster (from ICD–9–CM through 49886); the FY 2016 IPPS/LTCH DRG 023 (Craniotomy with Major procedure code 37.52) that grouped to PPS proposed rule (80 FR 24351 Device Implant/Acute Complex CNS the draft ICD–10 based MS–DRGs 001 through 24356); and the FY 2016 IPPS/ Principal Diagnosis with MCC or Chemo and 002. Subsequent draft versions of LTCH PPS final rule (80 FR 49358 Implant); MS–DRG 024 (Craniotomy the ICD–10 MS–DRGs inadvertently through 49363). For these 2 fiscal years, with Major Device Implant/Acute omitted this code cluster from those we did not change the MS–DRG Complex CNS Principal Diagnosis MS–DRGs. assignment for procedure codes without MCC); MS–DRG 025 Therefore, for FY 2017, we are describing endovascular embolization (Craniotomy and Endovascular proposing to assign ICD–10–PCS (coiling) or occlusion of the head and Intracranial Procedures with MCC); MS– procedure codes 02RK0JZ and 02RL0JZ neck for the reasons discussed in these DRG 026 (Craniotomy and Endovascular as a code cluster to ICD–10 Version 34 proposed and final rules. Intracranial Procedures with CC); and MS–DRGs 001 and 002 (Heart For FY 2017, the requestor again MS–DRG 027 (Craniotomy and Transplant or Implant of Heart Assist asked that CMS change the MS–DRG Endovascular Intracranial Procedures System with and without MCC, assignment for procedure codes without CC/MCC):

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF THE HEAD AND NECK PROCEDURES ASSIGNED TO MS–DRGS 020 THROUGH 027 IN ICD–10 MS–DRGS VERSION 33

ICD–10–PCS code Code description

03LG3BZ ...... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous approach. 03LG3DZ ...... Occlusion of intracranial artery with intraluminal device, percutaneous approach. 03LG4BZ ...... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LG4DZ ...... Occlusion of intracranial artery with intraluminal device, percutaneous endoscopic approach. 03LH3BZ ...... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous approach. 03LH3DZ ...... Occlusion of right common carotid artery with intraluminal device, percutaneous approach. 03LH4BZ ...... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LH4DZ ...... Occlusion of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 03LJ3BZ ...... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous approach. 03LJ3DZ ...... Occlusion of left common carotid artery with intraluminal device, percutaneous approach. 03LJ4BZ ...... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LJ4DZ ...... Occlusion of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 03LK3BZ ...... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 03LK3DZ ...... Occlusion of right internal carotid artery with intraluminal device, percutaneous approach. 03LK4BZ ...... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LK4DZ ...... Occlusion of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 03LL3BZ ...... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 03LL3DZ ...... Occlusion of left internal carotid artery with intraluminal device, percutaneous approach. 03LL4BZ ...... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LL4DZ ...... Occlusion of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 03LM3BZ ...... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous approach. 03LM3DZ ...... Occlusion of right external carotid artery with intraluminal device, percutaneous approach. 03LM4BZ ...... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LM4DZ ...... Occlusion of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 03LN3BZ ...... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous approach. 03LN3DZ ...... Occlusion of left external carotid artery with intraluminal device, percutaneous approach. 03LN4BZ ...... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LN4DZ ...... Occlusion of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 03LP3BZ ...... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous approach. 03LP3DZ ...... Occlusion of right vertebral artery with intraluminal device, percutaneous approach. 03LP4BZ ...... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach.

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ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF THE HEAD AND NECK PROCEDURES ASSIGNED TO MS–DRGS 020 THROUGH 027 IN ICD–10 MS–DRGS VERSION 33—Continued

ICD–10–PCS code Code description

03LP4DZ ...... Occlusion of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 03LQ3BZ ...... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous approach. 03LQ3DZ ...... Occlusion of left vertebral artery with intraluminal device, percutaneous approach. 03LQ4BZ ...... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 03LQ4DZ ...... Occlusion of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 03LR3DZ ...... Occlusion of face artery with intraluminal device, percutaneous approach. 03LR4DZ ...... Occlusion of face artery with intraluminal device, percutaneous endoscopic approach. 03LS3DZ ...... Occlusion of right temporal artery with intraluminal device, percutaneous approach. 03LS4DZ ...... Occlusion of right temporal artery with intraluminal device, percutaneous endoscopic approach. 03LT3DZ ...... Occlusion of left temporal artery with intraluminal device, percutaneous approach. 03LT4DZ ...... Occlusion of left temporal artery with intraluminal device, percutaneous endoscopic approach. 03VG3BZ ...... Restriction of intracranial artery with bioactive intraluminal device, percutaneous approach. 03VG3DZ ...... Restriction of intracranial artery with intraluminal device, percutaneous approach. 03VG4BZ ...... Restriction of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VG4DZ ...... Restriction of intracranial artery with intraluminal device, percutaneous endoscopic approach. 03VH3BZ ...... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous approach. 03VH3DZ ...... Restriction of right common carotid artery with intraluminal device, percutaneous approach. 03VH4BZ ...... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VH4DZ ...... Restriction of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 03VJ3BZ ...... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous approach. 03VJ3DZ ...... Restriction of left common carotid artery with intraluminal device, percutaneous approach. 03VJ4BZ ...... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VJ4DZ ...... Restriction of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 03VK3BZ ...... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 03VK3DZ ...... Restriction of right internal carotid artery with intraluminal device, percutaneous approach. 03VK4BZ ...... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VK4DZ ...... Restriction of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 03VL3BZ ...... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 03VL3DZ ...... Restriction of left internal carotid artery with intraluminal device, percutaneous approach. 03VL4BZ ...... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VL4DZ ...... Restriction of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 03VM3BZ ...... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous approach. 03VM3DZ ...... Restriction of right external carotid artery with intraluminal device, percutaneous approach. 03VM4BZ ...... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VM4DZ ...... Restriction of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 03VN3BZ ...... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous approach. 03VN3DZ ...... Restriction of left external carotid artery with intraluminal device, percutaneous approach. 03VN4BZ ...... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VN4DZ ...... Restriction of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 03VP3BZ ...... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous approach. 03VP3DZ ...... Restriction of right vertebral artery with intraluminal device, percutaneous approach. 03VP4BZ ...... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VP4DZ ...... Restriction of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 03VQ3BZ ...... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous approach. 03VQ3DZ ...... Restriction of left vertebral artery with intraluminal device, percutaneous approach. 03VQ4BZ ...... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 03VQ4DZ ...... Restriction of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 03VR3DZ ...... Restriction of face artery with intraluminal device, percutaneous approach. 03VR4DZ ...... Restriction of face artery with intraluminal device, percutaneous endoscopic approach. 03VS3DZ ...... Restriction of right temporal artery with intraluminal device, percutaneous approach. 03VS4DZ ...... Restriction of right temporal artery with intraluminal device, percutaneous endoscopic approach. 03VT3DZ ...... Restriction of left temporal artery with intraluminal device, percutaneous approach. 03VT4DZ ...... Restriction of left temporal artery with intraluminal device, percutaneous endoscopic approach. 03VU3DZ ...... Restriction of right thyroid artery with intraluminal device, percutaneous approach. 03VU4DZ ...... Restriction of right thyroid artery with intraluminal device, percutaneous endoscopic approach. 03VV3DZ ...... Restriction of left thyroid artery with intraluminal device, percutaneous approach. 03VV4DZ ...... Restriction of left thyroid artery with intraluminal device, percutaneous endoscopic approach.

Cases reporting any of the ICD–10– and 024 require the insertion of a major acute complex CNS principal diagnosis, PCS procedures codes listed in the table implant or an acute complex central or a major device implant. above that are assigned to MS–DRGs nervous system (CNS) principal The requestor expressed concerns 020, 021, and 022 under MDC 1 require diagnosis. Cases reporting any of the about the appropriateness of the MS– a principal diagnosis of hemorrhage. ICD–10–PCS procedure codes listed in DRG assignment for the endovascular Cases reporting any of the ICD–10–PCS the table above that are assigned to MS– embolization or occlusion of head and procedure codes listed in the table DRGs 025, 026, and 027 do not have a neck procedures. The requestor stated above that are assigned to MS–DRGs 023 principal diagnosis of hemorrhage, an that past data demonstrated that the cost of cases involving endovascular coils

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exceeds the average cost of all cases The commenter also expressed • 39.79 (Other endovascular within each of the MS–DRGs to which concern about the appropriateness of procedures on other vessels). these procedures are assigned. The the current ICD–10 MS–DRG assignment We examined claims data from the requestor pointed out that these of the following ICD–9–CM codes that December 2015 update of the FY 2015 procedures were formerly captured by describe other endovascular procedures MedPAR file for the endovascular the following ICD–9–CM codes that of head and neck that were previously embolization or occlusion of the head were assigned to MS–DRGs 020 through assigned to MS–DRGs 023 through 027 027: in the ICD–9–CM MS–DRGs Version 32. and neck procedures or other • 39.72 (Endovascular (total) The commenter stated that these endovascular procedures reported under embolization or occlusion of head and procedures are more clinically complex ICD–9–CM procedure codes 00.62, neck vessels); than other procedures assigned to these 39.72, 39.74, 39.75, 39.76, and 39.79 in • 39.75 (Endovascular embolization MS–DRGs. MS–DRGs 020 through 027. The table or occlusion of vessel(s) of head or neck • 00.62 (Percutaneous angioplasty of below shows our findings. using bare coils); and intracranial vessels(s)); • 39.76 (Endovascular embolization • 39.74 (Endovascular removal of or occlusion of vessel(s) of head or neck obstruction from head and neck using bioactive coils). vessel(s)); and

ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF THE HEAD AND NECK PROCEDURES AND OTHER ENDOVASCULAR PROCEDURES

Average MS–DRG Number of length of Average costs cases stay

MS–DRG 020—All cases ...... 1,213 16.44 $70,716 MS–DRG 020—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 895 16.15 72,357 MS–DRG 021—All cases ...... 350 13.74 53,289 MS–DRG 021—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 272 13.21 53,478 MS–DRG 022—All cases ...... 84 7.83 33,598 MS–DRG 022—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 63 7.27 33,606 MS–DRG 023—All cases ...... 6,360 10.63 38,204 MS–DRG 023—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 2,183 8.57 38,935 MS–DRG 024—All cases ...... 2,376 5.52 28,270 MS–DRG 024—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 1,402 5.46 28,543 MS–DRG 025—All cases ...... 17,756 9.19 29,657 MS–DRG 025—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76 or 39.79 ...... 671 9.20 47,579 MS–DRG 026—All cases ...... 7,630 5.80 21,441 MS–DRG 026—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76, or 39.79 ...... 825 3.11 27,429 MS–DRG 027—All cases ...... 9,628 2.99 17,158 MS–DRG 027—Cases with procedure code 00.62, 39.72, 39.74, 39.75, 39.76 or 39.79 ...... 1,847 1.62 22,845

As can be seen from the table, most 9,628 cases reported in MS–DRG 027. 021 ($53,478) compared to the average of the cases of endovascular The average costs for endovascular costs for all cases ($53,289) reported in embolization or occlusion of the head embolization or occlusion of the head MS–DRG 021; and for the endovascular and neck procedures and other and neck procedures and other embolization or occlusion of the head endovascular procedures reported with endovascular procedures cases reported and neck procedures and other procedure codes 00.62, 39.72, 39.74, in MS–DRGs 023 and 024 are not endovascular procedures cases reported 39.75, 39.76, and 39.79 occur in MS– significantly different from the average in MS–DRG 022 ($33,606) compared to DRGs 023, 024, and 027. There were costs for all cases reported in MS–DRGs the average costs for all cases ($33,598) 2,183 of these procedure cases reported 023 and 024. The average costs for reported in MS–DRG 022. in MS–DRG 023 with an average length endovascular embolization or occlusion Average costs were higher for the 671 of stay of 8.57 days and average costs of of the head and neck procedures and endovascular embolization or occlusion $38,935, compared to an average length other endovascular procedures cases of the head and neck procedures and of stay of 10.63 days and average costs reported in MS–DRG 027 are higher other endovascular procedures cases of $38, 204 for all 6,360 cases reported ($22,845) than the average costs of all reported in MS–DRG 025 ($47,579) in MS–DRG 023. There were 1,402 of cases reported in MS–DRG 027 compared to the average costs for all these cases reported in MS–DRG 024 ($17,158). However, average costs are 17,756 cases ($29,657) reported in MS– with an average length of stay of 5.46 not significantly different for the DRG 025. The average costs also were days and average costs of $28,543, endovascular embolization or occlusion higher for the 825 endovascular compared to an average length of stay of of the head and neck procedures and embolization or occlusion of the head 5.52 days and average costs of $28,270 other endovascular procedures cases and neck procedures and other for all 2,376 cases reported in MS–DRG reported in MS–DRG 020 ($72,357) endovascular procedures cases reported 024. There were 1,847 of these cases compared to the average costs for all in MS–DRG 26 ($27,429) compared to reported in MS–DRG 027 with an cases ($70,716) reported in MS–DRS the average costs for all 7,630 cases average length of stay of 1.62 days and 020; for the endovascular embolization ($21,441) reported in MS–DRG 26. average costs of $22,845, compared to or occlusion of the head and neck Given that average costs are similar for an average length of stay of 2.99 days procedures and other endovascular most endovascular embolization or and average costs of $17,158 for all procedures cases reported in MS–DRG occlusion of the head and neck

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procedures and other endovascular other endovascular procedures should cases within each of the eight MS– procedures cases reported in MS–DRGs be reassigned from these eight MS– DRGs. The following table shows our 020, 021, 022, 023, 024, 025, 026, and DRGs. findings. 027, we do not believe that all We also examined the average costs endovascular embolization or occlusion for each specific ICD–9–CM code of the head and neck procedures and compared to the average costs of all

Average MS–DRG Number of length of Average cases stay costs

MS–DRG 020—All cases ...... 1,213 16.44 $70,716 MS–DRG 020—Cases with code 00.62 ...... 11 16.09 95,422 MS–DRG 020—Cases with code 39.72 ...... 422 16.31 74,951 MS–DRG 020—Cases with code 39.74 ...... 9 16.78 71,478 MS–DRG 020—Cases with code 39.75 ...... 424 15.79 69,081 MS–DRG 020—Cases with code 39.76 ...... 39 18.26 71,630 MS–DRG 020—Cases with code 39.79 ...... 25 16.64 73,043 MS–DRG 021—All cases ...... 350 13.74 53,289 MS–DRG 021—Cases with code 00.62 ...... 1 11.00 75,492 MS–DRG 021—Cases with code 39.72 ...... 130 13.12 54,715 MS–DRG 021—Cases with code 39.74 ...... 1 11.00 75,492 MS–DRG 021—Cases with code 39.75 ...... 133 13.46 52,819 MS–DRG 021—Cases with code 39.76 ...... 7 10.57 48,749 MS–DRG 021—Cases with code 39.79 ...... 3 12.00 40,458 MS–DRG 022—All cases ...... 84 7.83 33,598 MS–DRG 022—Cases with code 00.62 ...... 0 0 0 MS–DRG 022—Cases with code 39.72 ...... 40 6.43 32,598 MS–DRG 022—Cases with code 39.74 ...... 0 0 0 MS–DRG 022—Cases with code 39.75 ...... 21 8.81 32,690 MS–DRG 022—Cases with code 39.76 ...... 3 10.00 62,417 MS–DRG 022—Cases with code 39.79 ...... 0 0 0 MS–DRG 023—All cases ...... 6,360 10.63 38,204 MS–DRG 023—Cases with code 00.62 ...... 67 9.30 43,741 MS–DRG 023—Cases with code 39.72 ...... 56 11.14 52,589 MS–DRG 023—Cases with code 39.74 ...... 2,016 8.30 38,047 MS–DRG 023—Cases with code 39.75 ...... 20 12.65 53,837 MS–DRG 023—Cases with code 39.76 ...... 3 23.00 84,947 MS–DRG 023—Cases with code 39.79 ...... 71 13.08 50,720 MS–DRG 024—All cases ...... 2,376 5.52 28,270 MS–DRG 024—Cases with code 00.62 ...... 76 6.74 32,415 MS–DRG 024—Cases with code 39.72 ...... 31 6.35 29,977 MS–DRG 024—Cases with code 39.74 ...... 1,284 5.35 28,268 MS–DRG 024—Cases with code 39.75 ...... 8 6.50 50,333 MS–DRG 024—Cases with code 39.76 ...... 2 1.50 19,567 MS–DRG 024—Cases with code 39.79 ...... 27 6.74 28,019 MS–DRG 025—All cases ...... 17,756 9.19 29,657 MS–DRG 025—Cases with code 00.62 ...... 17 5.88 29,036 MS–DRG 025—Cases with code 39.72 ...... 380 9.46 51,082 MS–DRG 025—Cases with code 39.74 ...... 55 9.87 45,895 MS–DRG 025—Cases with code 39.75 ...... 139 8.94 52,188 MS–DRG 025—Cases with code 39.76 ...... 25 5.84 38,654 MS–DRG 025—Cases with code 39.79 ...... 82 11.04 39,839 MS–DRG 026—All cases ...... 7,630 5.80 21,441 MS–DRG 026—Cases with code 00.62 ...... 31 3.48 25,611 MS–DRG 026—Cases with code 39.72 ...... 481 3.00 27,180 MS–DRG 026—Cases with code 39.74 ...... 16 4.69 27,519 MS–DRG 026—Cases with code 39.75 ...... 253 2.77 26,863 MS–DRG 026—Cases with code 39.76 ...... 31 3.32 27,891 MS–DRG 026—Cases with code 39.79 ...... 45 5.42 37,410 MS–DRG 027—All cases ...... 9,628 2.99 17,158 MS–DRG 027—Cases with code 00.62 ...... 61 2.23 21,337 MS–DRG 027—Cases with code 39.72 ...... 1,159 1.58 22,893 MS–DRG 027—Cases with code 39.74 ...... 13 1.62 69,081 MS–DRG 027—Cases with code 39.75 ...... 580 1.63 23,296 MS–DRG 027—Cases with code 39.76 ...... 61 1.74 27,403 MS–DRG 027—Cases with code 39.79 ...... 30 1.53 17,740

As can be seen from the table above, 39.74 in MS–DRG 023 compared to average costs of $38,047, compared to there are a large number of cases 6,360 total cases reported in the MS– an average length of stay of 10.63 days reporting procedure code 39.74 in MS– DRG. The cases that reported procedure and average costs of $38,204 for all DRGs 023 and 024. There were 2,016 code 39.74 in MS–DRG 023 had an cases reported in MS–DRG 023. There cases that reported procedure code average length of stay of 8.30 days and were 1,284 cases that reported

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procedure code 39.74 in MS–DRG 024 reassigning the procedures from MS– provide additional detail that describes compared to 2,376 total cases reported DRGs 020 through 027. the location of the mechanical in MS–DRG 024. The cases that reported Based on the findings from our data complication as being within the procedure code 39.74 in MS–DRG 024 analyses and the recommendations from nervous system. had an average length of stay of 5.35 our clinical advisors, we are not Based on the results of our days and average costs of $28,268, proposing to reassign the cited examination, we agree with the compared to an average length of stay of endovascular embolization or occlusion requestor that ICD–10–CM diagnosis 5.52 days and average costs of $28,270 of head and neck procedures and other codes T85.610A, T85.620A, T85.630A, for all cases reported in MS–DRG 024. endovascular procedures from MS– and T85.690A describe conditions The average length of stay and average DRGs 020 through 027 to another MS– occurring within the nervous system. costs for cases that reported procedure DRG or to create a new MS–DRG for Within the ICD–9–CM MS–DRGs, codes code 39.74 are very similar to the these procedures for FY 2017. We are describing nervous system disorders average length of stay and average costs inviting public comments on our were assigned to MDC 1. The prior ICD– for all cases reported in MS–DRGs 023 proposal to maintain the current MS– 9–CM codes for mechanical and 024. The only other group of DRG assignments of these procedures in complications did not indicate the type endovascular embolization or occlusion MS–DRGs 020 through 027. of complication and therefore could not of the head and neck procedures and b. Mechanical Complication Codes be assigned to a specific MDC. Therefore, the nonspecific complication other endovascular procedures cases We received a request to reassign the that exceeded 1,000 in number was codes were assigned to MDC 21. These following four ICD–10–CM diagnosis new ICD–10–CM diagnosis codes reported in MS–DRG 027. There were codes from MDC 21 (Injuries, 1,159 cases that reported procedure describe concepts not previously Poisonings and Toxic Effects of Drugs) captured by the ICD–9–CM codes and code 39.72 in MS–DRG 027, compared under MS–DRGs 919, 920, and 921 capture nervous system conditions. to 9,628 total cases reported in MS–DRG (Complications of Treatment with MCC, Therefore, ICD–10–CM diagnosis codes 027. The cases that reported procedure with CC, and without CC/MCC, T85.610A, T85.620A, T85.630A, and code 39.72 in MS–DRG 027 had an respectively) to MDC 1 (Diseases and T85.690A should be reassigned from average length of stay of 1.58 days and Disorders of the Nervous System) under MDC 21 under MS–DRGs 919, 920, and average costs of $22,893, compared to MS–DRGs 091, 092, and 093 (Other 921 to MDC 1 under MS–DRGs 091, 092, an average length of stay of 2.99 days Disorders of the Nervous System with and 093. Our clinical advisors reviewed and average costs of $17,158 for all MCC, with CC, and without CC/MCC, this issue and also agree that the four cases reported in MS–DRG 027. In other respectively): • ICD–10–CM diagnosis codes describe words, the cases that reported procedure T85.610A (Breakdown (mechanical) conditions occurring within the nervous code 39.72 in MS–DRG 027 had a of epidural and subdural infusion system and therefore should be shorter average length of stay and catheter, initial encounter); • reassigned from MDC 21 to MDC 1. average costs that were $5,735 higher T85.620A (Displacement of Based on the results of our analysis and than the average costs for all cases epidural and subdural infusion catheter, the recommendations of our clinical reported in MS–DRG 027. The cases that initial encounter); advisors, we are proposing to reassign • T85.630A (Leakage of epidural and reported procedure code 39.72 in MS– ICD–10–CM diagnosis codes T85.610A, subdural infusion catheter, initial DRG 020 had a shorter average length of T85.620A, T85.630A, and T85.690A stay and average costs that were $4,235 encounter); and • from MDC 21 under MS–DRGs 919, 920, higher than the average costs for all T85.690A (Other mechanical complication of epidural and subdural and 921 to MDC 1 under MS–DRGs 091, cases reported in MS–DRG 020. 092, and 093. However, the average costs for the cases infusion catheter, initial encounter). The requestor stated that these ICD– We are inviting public comments on that reported procedure code 39.72 in our proposal. MS–DRGs 021, 022, and 024 were close 10–CM diagnosis code titles clearly to the average costs for all cases describe mechanical complications of 4. MDC 4 (Diseases and Disorders of the reported in the three MS–DRGs ($54,715 nervous system devices, implants, or Ear, Nose, Mouth and Throat) grafts and are unquestionably nervous compared to $53,289 in MS–DRG 021; a. Proposed Reassignment of Diagnosis $32,598 compared to $33,598 in MS– system codes. Therefore, the requestor recommended that these diagnosis Code R22.2 (Localized Swelling, Mass DRG 022; and $29,997 compared to and Lump, Trunk) $28,270 in MS–DRG 024). codes be reassigned to MDC 1 under MS–DRGs 091, 092, and 093. We received a request to reassign Our clinical advisors reviewed this We examined ICD–10–CM diagnosis ICD–10–CM diagnosis code R22.2 issue and advised us that the codes T85.610A, T85.620A, T85.630A, (Localized swelling, mass and lump, endovascular embolization or occlusion and T85.690A that are currently trunk) from MDC 4 (Diseases and of head and neck procedures and other assigned to MDC 21 under MS–DRGs Disorders of the Respiratory System) to endovascular procedures currently are 919, 920, and 921. We note that the MDC 9 (Diseases and Disorders of the appropriately assigned to MS–DRGs 020 predecessor ICD–9–CM diagnosis code Skin, Subcutaneous Tissue and Breast). through 027. They did not support for these four ICD–10–CM diagnosis The requestor stated that this code is reassigning these procedures from MS– codes was diagnosis code 996.59 used to capture a buttock mass. The DRGs 020 through 027 to another MS– (Mechanical complication due to other requestor pointed out that the ICD–10– DRG or creating a new MS–DRG for implant and internal device, not CM index for localized swelling and these procedures. Our clinical advisors elsewhere classified), which also was localized mass directs the coder to stated that these procedures are all assigned to MDC 21 under MS–DRGs diagnosis code R22.2 for both the chest clinically similar to other procedures in 919, 920, and 921. ICD–9–CM diagnosis and the trunk as sites. these MS–DRGs. In addition, they stated code 996.59 did not describe the We reviewed this issue and note that that the surgical techniques are all location of the device. However, ICD– diagnosis code R22.2 is included in a designed to correct the same clinical 10–CM diagnosis codes T85.610A, category of ICD–10–CM codes problem and advised us against T85.620A, T85.630A, and T85.690A describing symptoms and signs

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involving the skin and subcutaneous FY 2017, we are proposing to reassign DRG. The requestor suggested that CMS tissue (categories R20 through R23). ICD–10–CM diagnosis code R22.2 from review cases reporting the following Diagnosis code R22.2 is clearly MDC 4 to MDC 9 under MS–DRGs 606 ICD–9–CM diagnosis codes describing designated within the ICD–10 coding and 607 (Minor Skin Disorders with and pulmonary embolism: 415.11 (Iatrogenic system as a code that describes a without MCC, respectively). pulmonary embolism and infarction), condition of the skin and subcutaneous We are inviting public comments on 415.12 (Septic pulmonary embolism), tissue. Therefore, we agree with the our proposal to reassign ICD–10–CM 415.13 (Saddle embolus of pulmonary requester that ICD–10–CM diagnosis diagnosis code R22.2 from MDC 4 to artery), and 415.19 (Other pulmonary code R22.2 should be reassigned from MDC 9 under MS–DRGs 606 and 607. embolism and infarction), when MDC 4 to MDC 9. One of the reported in combination with ICD–9– predecessor ICD–9–CM codes for ICD– b. Pulmonary Embolism With tPA or CM procedure code 99.10 (Injection or 10–CM diagnosis code R22.2 was Other Thrombolytic Therapy infusion of thrombolytic agent), to diagnosis code 782.2 (Localized We received a request to create a new identify that thrombolytic therapy was superficial swelling, mass, or lump), MS–DRG or to reassign cases with a which is assigned to MS–DRG 606 and principal diagnosis of pulmonary administered. 607 (Minor Skin Disorders with and embolism where tPA or other The comparable ICD–10–CM without MCC, respectively). Our clinical thrombolytic therapy was administered diagnosis code translations for the ICD– advisors reviewed this issue and agree from MS–DRGs 175 and 176 (Pulmonary 9–CM pulmonary embolism diagnosis that ICD–10–CM diagnosis code R22.2 Embolism with and without MCC, codes to which the requestor cited captures a skin diagnosis. Therefore, for respectively) to a higher paying MS– consist of the following:

ICD–10–CM diagnosis code Description

I26.01 ...... Septic pulmonary embolism with acute cor pulmonale. I26.02 ...... Saddle embolus of pulmonary artery with acute cor pulmonale. I26.09 ...... Other pulmonary embolism with acute cor pulmonale. I26.90 ...... Septic pulmonary embolism without acute cor pulmonale. I26.92 ...... Saddle embolus of pulmonary artery without acute cor pulmonale. I26.99 ...... Other pulmonary embolism without acute cor pulmonale.

Thrombolytic therapy is identified with the following ICD–10–PCS procedure codes:

ICD–10–PCS procedure code Description

3E03017 ...... Introduction of other thrombolytic into peripheral vein, open approach. 3E03317 ...... Introduction of other thrombolytic into peripheral vein, percutaneous approach. 3E04017 ...... Introduction of other thrombolytic into central vein, open approach. 3E04317 ...... Introduction of other thrombolytic into central vein, percutaneous approach. 3E05017 ...... Introduction of other thrombolytic into peripheral artery, open approach. 3E05317 ...... Introduction of other thrombolytic into peripheral artery, percutaneous approach. 3E06017 ...... Introduction of other thrombolytic into central artery, open approach. 3E06317 ...... Introduction of other thrombolytic into central artery, percutaneous approach.

A pulmonary embolism is an congenital heart defects. Common We examined the claims data from the obstruction of pulmonary vasculature symptoms of pulmonary embolism December 2015 update of the FY 2015 most commonly caused by a venous include shortness of breath with or MedPAR file for ICD–9–CM MS–DRGs thrombus, and less commonly by fat or without chest pain, tachycardia, 175 and 176 for cases with a principal tumor tissue or air bubbles or both. Risk hemoptysis, low grade fever, pleural diagnosis of pulmonary embolism factors for a pulmonary embolism effusion, and depending on the etiology where tPA or other thrombolytic include prolonged immobilization from of the embolus, might include lower therapy (procedure code 99.10) was any cause, obesity, cancer, fractured hip extremity pain or swelling, syncope, administered and cases of a principal or leg, use of certain medications such jugular venous distention, and finally a diagnosis of pulmonary embolism as oral contraceptives, presence of pulmonary embolus could be where no tPA or other thrombolytic certain medical conditions such as heart asymptomatic. therapy was administered. Our findings failure, sickle cell anemia, or certain are shown in the table below.

PRINCIPAL DIAGNOSIS OF PULMONARY EMBOLISM WITH AND WITHOUT TPA OR OTHER THROMBOLYTIC THERAPY ADMINISTERED

Average MS–DRG Number of length of Average cases stay costs

MS–DRG 175—All MCC cases ...... 19,274 5.76 $10,479

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PRINCIPAL DIAGNOSIS OF PULMONARY EMBOLISM WITH AND WITHOUT TPA OR OTHER THROMBOLYTIC THERAPY ADMINISTERED—Continued

Average MS–DRG Number of length of Average cases stay costs

MS–DRG 175—MCC cases with principal diagnosis of pulmonary embolism with tPA or other thrombolytic therapy administered ...... 630 6.31 19,419 MS–DRG 175—MCC cases with principal diagnosis of pulmonary embolism without tPA or other thrombolytic therapy administered ...... 18,529 5.74 10,181 MS–DRG 176—All Without MCC cases ...... 33,565 3.81 6,645 MS–DRG 176—Without MCC cases with principal diagnosis of pulmonary embolism with tPA or other thrombolytic therapy administered ...... 544 5.07 16,345 MS–DRG 176—Without MCC cases with principal diagnosis of pulmonary embolism without tPA or other thrombolytic therapy administered ...... 32,789 3.79 6,483

As shown in the table above, for MS– thrombolytic therapy in MS–DRGs 175 We then conducted additional data DRG 175, there were a total of 19,274 and 176. As shown in the table above, analyses to determine if reassignment of cases with an average length of stay of our data analysis demonstrates the cases with a principal diagnosis of 5.76 days and average costs of $10,479. average costs for these cases are higher pulmonary embolism where tPA or Of the 19,274 cases in MS–DRG 175, ($19,419 compared to $10,479 for MS– other thrombolytic therapy was there were 630 cases that reported a DRG 175, and $16,345 compared to administered to a higher paying MS– principal diagnosis of pulmonary $6,645 for MS–DRG 176) and the length DRG was supported. As displayed in the embolism where tPA or other of stay is slightly longer (6.31 days data findings in the tables below, we thrombolytic therapy was also reported compared to 5.76 days for MS–DRG 175, explored reassigning cases with a with an average length of stay of 6.31 and 5.07 days compared to 3.81 days for principal diagnosis of pulmonary days and average costs of $19,419. For MS–DRG 176) compared to all cases embolism that received tPA or other MS–DRG 176, there were a total of reported in MS–DRGs 175 and 176. Out thrombolytic therapy from MS–DRG 176 33,565 cases with an average length of to the higher severity level MS–DRG of a total of 52,492 cases (630 + 18,529 stay of 3.81 days and average costs of 175. The data do not adequately support + 544 + 32,789) in MS–DRGs 175 and $6,645. Of the 33,565 cases reported in this reassignment, as the cases with a MS–DRG 176, there were 544 cases that 176 reporting a principal diagnosis of principal diagnosis of pulmonary reported a principal diagnosis of pulmonary embolism, 1,174 (2.24 embolism where tPA or other pulmonary embolism where tPA or percent) of these cases also received tPA thrombolytic therapy is administered other thrombolytic therapy also was or other thrombolytic therapy. While we would continue to be underpaid. reported with an average length of stay recognize the differences in average As shown in the data findings in the of 5.07 days and average costs of costs and length of stay for these cases, table below, the initial data analysis for $16,345. the volume of these cases as well as the MS–DRG 175 found the average costs To address the request we received to potential creation of a new MS–DRG for for cases that reported a principal create a new MS–DRG, we reviewed the this subset of patients raised some diagnosis of pulmonary embolism that data for the 1,174 total cases (630 and concerns with our clinical advisors. We received tPA or other thrombolytic 544, respectively) that reported a present our clinical advisors’ concerns therapy were $19,419, and for MS–DRG principal diagnosis of pulmonary following the additional data analysis 176, the average costs for these cases embolism that received tPA or other discussions below. were $16,345.

PRINCIPAL DIAGNOSIS OF PULMONARY EMBOLISM WITH TPA OR OTHER THROMBOLYTIC THERAPY ADMINISTERED

Average MS–DRG Number length of Average of cases stay costs

MS–DRG 175—All MCC cases ...... 19,274 5.76 $10,479 MS–DRG 175—MCC cases with principal diagnosis of pulmonary embolism with tPA or other thrombolytic therapy administered ...... 630 6.31 19,419 MS–DRG 176—All without MCC cases ...... 33,565 3.81 6,645 MS–DRG 176—Without MCC cases with principal diagnosis of pulmonary embolism with tPA or other thrombolytic therapy administered ...... 544 5.07 16,345

As displayed in the table below, if we for all cases in MS–DRG 175 would be = $8,779 and $16,345¥$10,640 = reassigned the 544 cases with a approximately $10,640. This figure $5,705, respectively). In addition, our principal diagnosis of pulmonary continues to result in a difference of clinical advisors had concerns about the embolism where tPA or other approximately $9,000 for the MCC cases prospect of moving the subset of 544 thrombolytic therapy is administered and $6,000 for the without MCC cases patients from the ‘‘without MCC’’ level from the ‘‘without MCC’’ level, MS– when compared to findings for the to the ‘‘with MCC’’ level. We present DRG 176, to the ‘‘with MCC’’ severity average costs of these cases from the these concerns following the additional level, MS–DRG 175, the average costs initial data analysis ($19,419¥$10,640 data analysis discussion below.

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OPTION OF REASSIGNMENT OF CASES OF PRINCIPAL DIAGNOSIS OF PULMONARY EMBOLISM WITH AND WITHOUT TPA

MS–DRG 175—Cases with pulmonary embolism with MCC or tPA or other thrombolytic therapy ...... 19,818 5.74 $10,640 MS–DRG 176—Cases with pulmonary embolism without MCC ...... 33,021 3.79 6,486

We also reviewed claims data in level split of ‘‘with MCC or tPA, with cases, the data failed to meet the considering the option of adding CC, and without CC/MCC.’’ Therefore, it criterion that there be at least a $2,000 another severity level to the current would include proposing new MS– difference between the ‘‘with CC’’ and structure of MS–DRGs 175 and 176 and DRGs if the data and our clinical ‘‘without CC/MCC’’ subgroups. Our data assigning the cases with a principal advisors supported creation of new MS– analysis shows the average costs in the diagnosis of pulmonary embolism that DRGs. However, as displayed in the data hypothetical ‘‘with CC’’ subgroup of receive tPA or other thrombolytic findings in the table below, the data did $6,932 and the average costs in the therapy to the highest level. This option not support this option. In addition to hypothetical ‘‘without CC/MCC’’ would involve modifying the current 2- similar results from the previous subgroup of $5,309. The difference only way severity level split of ‘‘with MCC’’ option’s discussion regarding continued amounts to $1,623 ($6,932 minus $5,309 and ‘‘without MCC’’ to a 3-way severity differences in average costs for these = $1,623).

PRINCIPAL DIAGNOSIS OF PULMONARY EMBOLISM WITH AND WITHOUT TPA OR OTHER THROMBOLYTIC THERAPY

Average Optional new MS–DRG Number length of Average of cases stay costs

MS–DRG XXX—Pulmonary embolism with MCC or tPA or other thrombolytic therapy ...... 19,819 5.74 $10,641 MS–DRG XXX—Pulmonary embolism with CC ...... 23,929 4.04 6,932 MS–DRG XXX—Pulmonary embolism without CC/MCC ...... 9,091 3.13 5,309

Lastly, we explored reassigning cases thrombolytic therapy is a combination requestor also noted that the with a principal diagnosis of pulmonary of numbers (1) through (3). They implantation procedures are often embolism that receive tPA or other recommended maintaining the current performed in the inpatient setting and thrombolytic therapy to other MS–DRGs structure of MS–DRGs 175 and 176 at suggested that they be recognized under within MDC 4. However, our review did this time. the ICD–10 MS–DRGs as they had been not support reassignment of these cases As a result of the data analysis and under the ICD–9–CM based MS–DRG to any other medical MS–DRGs as these the concerns expressed by our clinical logic. cases would not be clinically coherent advisors, we are not proposing to create The requestor stated that, under the with the cases assigned to those other a new MS–DRG or to reassign cases with ICD–9–CM based MS–DRGs, procedure MS–DRGs. a principal diagnosis of pulmonary code 37.79 was designated as an In addition to the results of the embolism with tPA or other operating room (O.R.) procedure in the various data analyses we performed for thrombolytic therapy for FY 2017. We Definitions Manual under Appendix E— creating a new MS–DRG or for are inviting public comment on our Operating Room Procedures and reassignment of cases of pulmonary proposal. Procedure Code/MS–DRG Index and embolism with tPA or other 5. MDC 5 (Diseases and Disorders of the grouped to MS–DRGs 040, 041, and 042 thrombolytic therapy to another higher Circulatory System) (Peripheral, Cranial Nerve and Other paying MS–DRG, our clinical advisors Nervous System Procedures with MCC, also expressed a number of concerns. a. Implant of Loop Recorder with CC or peripheral neurostimulator, They pointed out that all patients with We received a request to examine a and without CC/MCC, respectively); a diagnosis of pulmonary embolism are potential ICD–9 to ICD–10 replication MS–DRGs 260, 261, and 262 (Cardiac considered high risk and the small issue for procedures describing Pacemaker Revision Except Device subset of patients receiving implantation or revision of loop Replacement with MCC, with CC, and thrombolytic therapy does not recorder that were reported using ICD– without CC/MCC, respectively); MS– necessarily warrant a separate MS–DRG 9–CM procedure code 37.79 (Revision DRGs 579, 580, and 581 (Other Skin, or reassignment at this time. Our or relocation of cardiac device pocket). Subcutaneous Tissue and Breast clinical advisors noted that it is unclear A loop recorder is also known as an Procedures with MCC, with CC and if: (1) The higher costs associated with implantable cardiac monitor. It is without CC/MCC, respectively); MS– receiving tPA or other thrombolytic indicated for patients who experience DRGs 907, 908, and 909 (Other O.R. therapy are due to a different subset of episodes of unexplained syncope Procedures for Injuries with MCC, with patients or complications; (2) if those (fainting), heart palpitations, or patients CC, and without CC/MCC, respectively); patients treated with tPA or other at risk for various types of cardiac and MS–DRGs 957, 958, and 959 (Other thrombolytic therapy for pulmonary arrhythmias, such as atrial fibrillation or O.R. Procedures for Multiple Significant embolism are indeed sicker patients; (3) ventricular tachyarrhythmia. Loop Trauma with MCC, with CC, and if the cost of tPA or other thrombolytic recorders function by detecting and without CC/MCC, respectively). therapy for patients with pulmonary monitoring potential episodes of these Under the current Version 33 ICD–10 embolism is the reason for the higher kinds of conditions. The requestor MS–DRGs, there are two comparable costs seen with these cases; or (4) if the acknowledged that these implantation ICD–10–PCS code translations for ICD– increased average costs for cases of procedures are frequently performed in 9–CM code 37.79. They are procedure pulmonary embolism with tPA or other the outpatient setting. However, the codes 0JWT0PZ (Revision of cardiac

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rhythm related device in trunk designated as O.R. procedures and nonoperating room (non-O.R.) subcutaneous tissue and fascia, open group to the above listed MS–DRGs. procedures under the ICD–10 MS– approach) and 0JWT3PZ (Revision of According to the requestor, the DRGs. The requestor suggested that cardiac rhythm related device in trunk following six ICD–10–PCS procedure these codes be designated as O.R. subcutaneous tissue and fascia, codes identify the implantation or procedures and assigned to the same percutaneous approach), which are revision of a loop recorder and were not MS–DRGs as the former ICD–9–CM replicated appropriately because they procedure code 37.79: are currently designated as

ICD–10–PCS procedure code Description

0JH602Z ...... Insertion of monitoring device into chest subcutaneous tissue and fascia, open approach. 0JH632Z ...... Insertion of monitoring device into chest subcutaneous tissue and fascia, percutaneous approach. 0JH802Z ...... Insertion of monitoring device into abdomen subcutaneous tissue and fascia, open approach. 0JH832Z ...... Insertion of monitoring device into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JWT02Z ...... Revision of monitoring device in trunk subcutaneous tissue and fascia, open approach. 0JWT32Z ...... Revision of monitoring device in trunk subcutaneous tissue and fascia, percutaneous approach.

We examined the six ICD–10–PCS into that location and it would not be assignments for the other procedures procedure codes that the commenter clinically appropriate. describing lower extremity recommended be designated as O.R. Therefore, for FY 2017, we are thrombectomy, and would accurately procedures and assigned to the same proposing to designate the following replicate the logic of the ICD–9–CM MS–DRGs as ICD–9–CM procedure code four ICD–10–PCS codes as O.R. MS–DRGs Version 32. Under the ICD– 37.79. As discussed in section II.F.1.b. procedures within Appendix E of the 9–CM, endovascular thrombectomy of of the preamble of this proposed rule, in Version 34 ICD–10 MS–DRG Definitions the lower limbs is described by Manual: procedure code 39.79 (Other evaluating requested MS–DRG changes, • we determined if they could be 0JH602Z (Insertion of monitoring endovascular procedures on other replicated in the ICD–9–CM MS–DRGs device into chest subcutaneous tissue vessels). The commenter stated that, so as not to affect the FY 2017 relative and fascia, open approach); with deep vein thrombosis (DVT) or any • 0JH632Z (Insertion of monitoring payment weights. If the answer was other circulatory system disorders as the device into chest subcutaneous tissue principal diagnosis, cases involving ‘‘no,’’ we examined whether the change and fascia, percutaneous approach); in the ICD–10 MS–DRGs was likely to • procedures described by procedure code 0JWT02Z (Revision of monitoring 39.79 grouped to ICD–9–CM MS–DRGs cause a significant number of patient device in trunk subcutaneous tissue and cases to change or ‘‘shift’’ ICD–10 MS– 237 and 238 (Major Cardiovascular fascia, open approach); and Procedures with and without MCC, DRGs. If relatively few patient cases • 0JWT32Z (Revision of monitoring respectively). However, the commenter would be impacted, we evaluated if it device in trunk subcutaneous tissue and pointed out that, for FY 2016, ICD–9– would be feasible to propose the change fascia, percutaneous approach). even though it could not be replicated We also are proposing that the ICD– CM MS–DRGs 237 and 238 were deleted by the ICD–9 MS–DRGs logic because it 10 MS–DRG assignment for these four and replaced with ICD–10 Version 33 would not cause a material payment ICD–10–PCS codes replicate the ICD–9– MS–DRGs 268 and 269 (Aortic and Heart Assist Procedures Except redistribution. CM based MS–DRG assignment for procedure code 37.79; that is, MS–DRGs Pulsation Balloon with and without Under our review, we recognized that MCC, respectively), for the higher the six ICD–10–PCS procedure codes are 040, 041, 042, 260, 261, 262, 579,580, 581, 907, 908, 909, 957, 958, and 959 as complexity procedures, and MS–DRGs currently identified as comparable 270, 271, and 272 (Other Major translations of ICD–9–CM procedure cited earlier in this section. We are inviting public comments on Cardiovascular Procedures with MCC, code 86.09 (Other incision of skin and our proposals. with CC, and without CC/MCC, subcutaneous tissue), which was respectively), for the lower complexity designated as a non-O.R. procedure b. Endovascular Thrombectomy of the procedures (80 FR 49389). The code under the ICD–9–CM based MS– Lower Limbs commenter stated that ICD–9–CM DRGs. Therefore, changing the We received a comment stating that procedure code 39.79 describes the designation of the six ICD–10–PCS the logic for ICD–10 MS–DRGs Version lower complexity procedures assigned procedure codes from non-O.R. to O.R. 33 is not compatible with the ICD–9– to ICD–10–PCS MS–DRGs 270, 271, and for the ICD–10 MS–DRGs cannot be CM MS–DRGs Version 32 for the 272. The commenter believed that the replicated in the ICD–9–CM based MS– assignment of procedures describing comparable ICD–10–PCS procedure DRGs. In other words, we cannot endovascular thrombectomy of the codes also should have been assigned to designate ICD–9–CM procedure code lower limbs. The commenter asked CMS MS–DRGs 270, 271, and 272. 86.09 as an O.R. code. However, we to reconfigure the MS–DRG structure We agree with the requestor that believe that if we limit the change in within the ICD–10 MS–DRGs for procedures describing endovascular designation to four of the six identified endovascular thrombectomy of the thrombectomy of the lower limbs ICD–10–PCS procedure codes from non- lower limbs, specifically MS–DRGs 270, should be assigned to ICD–10 MS–DRGs O.R. to O.R., the change would not have 271, and 272 (Endovascular 270, 271, and 272. Therefore, for any impact. We are not including the Thrombectomy of the Lower Limbs with implementation October 1, 2016, we are two ICD–10–PCS procedure codes that MCC, with CC, and without CC/MCC, proposing to restructure the ICD–10– describe the insertion of a monitoring respectively). The commenter believed PCS MS–DRG configuration and add the device into the abdomen in our proposal that this requested restructuring would ICD–10–PCS code translations listed in because a loop recorder is not inserted be consistent with the MS–DRG the following chart (which would

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capture procedures describing lower limbs) to ICD–10–PCS Version 34 endovascular thrombectomy of the MS–DRGs 270, 271, and 272.

ICD–10–PCS ENDOVASCULAR THROMBECTOMY PROCEDURE CODES PROPOSED TO BE ASSIGNED TO MS–DRGS 270, 271, AND 272 FOR FY 2017

03C53ZZ ...... Extirpation of matter from right axillary artery, percutaneous approach. 03C63ZZ ...... Extirpation of matter from left axillary artery, percutaneous approach. 03C73ZZ ...... Extirpation of matter from right brachial artery, percutaneous approach. 03C83ZZ ...... Extirpation of matter from left brachial artery, percutaneous approach. 03C93ZZ ...... Extirpation of matter from right ulnar artery, percutaneous approach. 03CA3ZZ ...... Extirpation of matter from left ulnar artery, percutaneous approach. 03CB3ZZ ...... Extirpation of matter from right radial artery, percutaneous approach. 03CC3ZZ ...... Extirpation of matter from left radial artery, percutaneous approach. 03CD3ZZ ...... Extirpation of matter from right hand artery, percutaneous approach. 03CF3ZZ ...... Extirpation of matter from left hand artery, percutaneous approach. 03CY3ZZ ...... Extirpation of matter from upper artery, percutaneous approach. 04CK3ZZ ...... Extirpation of matter from right femoral artery, percutaneous approach. 04CL3ZZ ...... Extirpation of matter from left femoral artery, percutaneous approach. 04CM3ZZ ...... Extirpation of matter from right popliteal artery, percutaneous approach. 04CN3ZZ ...... Extirpation of matter from left popliteal artery, percutaneous approach. 04CP3ZZ ...... Extirpation of matter from right anterior tibial artery, percutaneous approach. 04CQ3ZZ ...... Extirpation of matter from left anterior tibial artery, percutaneous approach. 04CR3ZZ ...... Extirpation of matter from right posterior tibial artery, percutaneous approach. 04CS3ZZ ...... Extirpation of matter from left posterior tibial artery, percutaneous approach. 04CT3ZZ ...... Extirpation of matter from right peroneal artery, percutaneous approach. 04CU3ZZ ...... Extirpation of matter from left peroneal artery, percutaneous approach. 04CV3ZZ ...... Extirpation of matter from right foot artery, percutaneous approach. 04CW3ZZ ...... Extirpation of matter from left foot artery, percutaneous approach. 04CY3ZZ ...... Extirpation of matter from lower artery, percutaneous approach. 05C73ZZ ...... Extirpation of matter from right axillary vein, percutaneous approach. 05C83ZZ ...... Extirpation of matter from left axillary vein, percutaneous approach. 05C93ZZ ...... Extirpation of matter from right brachial vein, percutaneous approach. 05CA3ZZ ...... Extirpation of matter from left brachial vein, percutaneous approach. 05CB3ZZ ...... Extirpation of matter from right basilic vein, percutaneous approach. 05CC3ZZ ...... Extirpation of matter from left basilic vein, percutaneous approach. 05CD3ZZ ...... Extirpation of matter from right cephalic vein, percutaneous approach. 05CF3ZZ ...... Extirpation of matter from left cephalic vein, percutaneous approach. 05CG3ZZ ...... Extirpation of matter from right hand vein, percutaneous approach. 05CH3ZZ ...... Extirpation of matter from left hand vein, percutaneous approach. 05CL3ZZ ...... Extirpation of matter from intracranial vein, percutaneous approach. 05CM3ZZ ...... Extirpation of matter from right internal jugular vein, percutaneous approach. 05CN3ZZ ...... Extirpation of matter from left internal jugular vein, percutaneous approach. 05CP3ZZ ...... Extirpation of matter from right external jugular vein, percutaneous approach. 05CQ3ZZ ...... Extirpation of matter from left external jugular vein, percutaneous approach. 05CR3ZZ ...... Extirpation of matter from right vertebral vein, percutaneous approach. 05CS3ZZ ...... Extirpation of matter from left vertebral vein, percutaneous approach. 05CT3ZZ ...... Extirpation of matter from right face vein, percutaneous approach. 05CV3ZZ ...... Extirpation of matter from left face vein, percutaneous approach. 05CY3ZZ ...... Extirpation of matter from upper vein, percutaneous approach. 06C33ZZ ...... Extirpation of matter from esophageal vein, percutaneous approach. 06CM3ZZ ...... Extirpation of matter from right femoral vein, percutaneous approach. 06CN3ZZ ...... Extirpation of matter from left femoral vein, percutaneous approach. 06CP3ZZ ...... Extirpation of matter from right greater saphenous vein, percutaneous approach. 06CQ3ZZ ...... Extirpation of matter from left greater saphenous vein, percutaneous approach. 06CR3ZZ ...... Extirpation of matter from right lesser saphenous vein, percutaneous approach. 06CS3ZZ ...... Extirpation of matter from left lesser saphenous vein, percutaneous approach. 06CT3ZZ ...... Extirpation of matter from right foot vein, percutaneous approach.

We are inviting public comments on describe procedures involving We reviewed the list of ICD–10–PCS our proposal to assign the ICD–10–PCS pacemakers to determine if some procedure code combinations describing procedures describing the endovascular procedure code combinations were procedures involving pacemakers thrombectomy of the lower limbs listed excluded from the ICD–10 MS–DRG assigned to ICD–10 MS–DRGs 242, 243, in the table above to ICD–10 Version 34 assignments for MS–DRGs 242, 243, and and 244, and determined that our initial MS–DRGs 270, 271, and 272 for FY 244 (Permanent Cardiac Pacemaker approach of using specified procedure 2017. Implant with MCC, with CC, and code combinations to identify c. Pacemaker Procedures Code without CC/MCC). The requestor procedures involving pacemakers and Combinations believed that some ICD–10–PCS leads was overly complex and may have procedure code combinations describing led to inadvertent omissions of We received a request that CMS procedures involving pacemaker qualifying procedure code examine the list of ICD–10–PCS devices and leads are not included in combinations. Under our initial procedure code combinations that the current list. approach, we developed a list of

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possible ICD–10–PCS procedure code involving pacemaker devices and a procedures involving pacemaker combinations that describe procedures procedure code from the list of devices listed in column 1 of the table involving pacemaker devices and leads procedure codes describing procedures below is reported in combination with as well as ICD–10–PCS procedure code involving pacemaker leads are reported one of the ICD–10–PCS procedure codes combinations for procedures describing in combination with one another, the describing procedures involving leads the removal and replacement of case would be assigned to ICD–10 MS– listed in column 3 of the table below, pacemaker devices. We now believe that DRGs 242, 243, and 244. We believe that the case would be assigned to MS–DRGs a more appropriate approach would be this more generic approach would 242, 243, and 244. We believe that this to compile a list of all procedure codes capture a wider range of possible proposed simplified approach would describing procedures involving reported procedure codes describing capture all possible cases reporting pacemaker devices and a list of all procedures involving pacemaker procedure code combinations describing procedure codes describing procedures devices and leads. Therefore, we are procedures involving pacemaker involving pacemaker leads. If a proposing to modify the ICD–10 MS– devices and leads to ensure that these procedure code from the list of DRG logic so that if one of the ICD–10– cases would be assigned to MS–DRGs procedure codes describing procedures PCS procedure codes describing 242, 243, and 244.

ICD–10–PCS Procedure codes describing procedures ICD–10–PCS Procedure codes describing procedures involving cardiac pacemaker devices involving cardiac pacemaker leads (any one code reported from this column list) In combination (any one code reported from this column list) (1) with (3) (2) Procedure Procedure code Code description code Code description

0JH604Z ...... Insertion of pacemaker, single chamber into ...... 02H40JZ Insertion of pacemaker lead into coronary chest subcutaneous tissue and fascia, vein, open approach. open approach. 0JH605Z ...... Insertion of pacemaker, single chamber rate ...... 02H40MZ Insertion of cardiac lead into coronary vein, responsive into chest subcutaneous tissue open approach. and fascia, open approach. 0JH606Z ...... Insertion of pacemaker, dual chamber into ...... 02H43JZ Insertion of pacemaker lead into coronary chest subcutaneous tissue and fascia, vein, percutaneous approach. open approach. 0JH607Z ...... Insertion of cardiac resynchronization pace- ...... 02H43MZ Insertion of cardiac lead into coronary vein, maker pulse generator into chest subcuta- percutaneous approach. neous tissue and fascia, open approach. 0JH60PZ ...... Insertion of cardiac rhythm related device into ...... 02H44JZ Insertion of pacemaker lead into coronary chest subcutaneous tissue and fascia, vein, percutaneous endoscopic approach. open approach. 0JH634Z ...... Insertion of pacemaker, single chamber into ...... 02H44MZ Insertion of cardiac lead into coronary vein, chest subcutaneous tissue and fascia, percutaneous endoscopic approach. percutaneous approach. 0JH635Z ...... Insertion of pacemaker, single chamber rate ...... 02H60JZ Insertion of pacemaker lead into right atrium, responsive into chest subcutaneous tissue open approach. and fascia, percutaneous approach. 0JH636Z ...... Insertion of pacemaker, dual chamber into ...... 02H60MZ Insertion of cardiac lead into right atrium, chest subcutaneous tissue and fascia, open approach. percutaneous approach. 0JH637Z ...... Insertion of cardiac resynchronization pace- ...... 02H63JZ Insertion of pacemaker lead into right atrium, maker pulse generator into chest subcuta- percutaneous approach. neous tissue and fascia, percutaneous approach. 0JH63PZ ...... Insertion of cardiac rhythm related device into ...... 02H63MZ Insertion of cardiac lead into right atrium, chest subcutaneous tissue and fascia, percutaneous approach. percutaneous approach. 0JH804Z ...... Insertion of pacemaker, single chamber into ...... 02H64JZ Insertion of pacemaker lead into right atrium, abdomen subcutaneous tissue and fascia, percutaneous endoscopic approach. open approach. 0JH805Z ...... Insertion of pacemaker, single chamber rate ...... 02H64MZ Insertion of cardiac lead into right atrium, responsive into abdomen subcutaneous tis- percutaneous endoscopic approach. sue and fascia, open approach. 0JH806Z ...... Insertion of pacemaker, dual chamber into ...... 02H70JZ Insertion of pacemaker lead into left atrium, abdomen subcutaneous tissue and fascia, open approach. open approach. 0JH807Z ...... Insertion of cardiac resynchronization pace- ...... 02H70MZ Insertion of cardiac lead into left atrium, open maker pulse generator into abdomen sub- approach. cutaneous tissue and fascia, open approach. 0JH80PZ ...... Insertion of cardiac rhythm related device into ...... 02H73JZ Insertion of pacemaker lead into left atrium, abdomen subcutaneous tissue and fascia, percutaneous approach. open approach. 0JH834Z ...... Insertion of pacemaker, single chamber into ...... 02H73MZ Insertion of cardiac lead into left atrium, abdomen subcutaneous tissue and fascia, percutaneous approach. percutaneous approach.

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0JH835Z ...... Insertion of pacemaker, single chamber rate ...... 02H74JZ Insertion of pacemaker lead into left atrium, responsive into abdomen subcutaneous tis- percutaneous endoscopic approach. sue and fascia, percutaneous approach. 0JH836Z ...... Insertion of pacemaker, dual chamber into ...... 02H74MZ Insertion of cardiac lead into left atrium, abdomen subcutaneous tissue and fascia, percutaneous endoscopic approach. percutaneous approach. 0JH837Z ...... Insertion of cardiac resynchronization pace- ...... 02HK0JZ Insertion of pacemaker lead into right ven- maker pulse generator into abdomen sub- tricle, open approach. cutaneous tissue and fascia, percutaneous approach. 0JH83PZ ...... Insertion of cardiac rhythm related device into ...... 02HK0MZ Insertion of cardiac lead into right ventricle, abdomen subcutaneous tissue and fascia, open approach. percutaneous approach. 02HK3JZ Insertion of pacemaker lead into right ventricle, percutaneous approach. 02HK3MZ Insertion of cardiac lead into right ventricle, percutaneous approach. 02HK4JZ Insertion of pacemaker lead into right ventricle, percutaneous endoscopic approach. 02HK4MZ Insertion of cardiac lead into right ventricle, percutaneous endoscopic approach. 02HL0JZ Insertion of pacemaker lead into left ventricle, open approach. 02HL0MZ Insertion of cardiac lead into left ventricle, open approach. 02HL3JZ Insertion of pacemaker lead into left ventricle, percutaneous approach. 02HL3MZ Insertion of cardiac lead into left ventricle, percutaneous approach. 02HL4JZ Insertion of pacemaker lead into left ventricle, percutaneous endoscopic approach. 02HL4MZ Insertion of cardiac lead into left ventricle, percutaneous endoscopic approach. 02HN0JZ Insertion of pacemaker lead into pericardium, open approach. 02HN0MZ Insertion of cardiac lead into pericardium, open approach. 02HN3JZ Insertion of pacemaker lead into pericardium, percutaneous approach. 02HN3MZ Insertion of cardiac lead into pericardium, percutaneous approach. 02HN4JZ Insertion of pacemaker lead into pericardium, percutaneous endoscopic approach. 02HN4MZ Insertion of cardiac lead into pericardium, percutaneous endoscopic approach.

We are inviting public comments on (Cardiac Pacemaker Device Replacement 2017. Under the proposed approach, if our proposal to modify the MS–DRG with and without MCC, respectively). one of the procedure codes describing logic for MS–DRGs 242, 243, and 244 to Assignments of cases to these MS–DRGs procedures involving pacemaker device establish that cases reporting one ICD– also include qualifying ICD–10–PCS insertions is reported, and there are no 10–PCS code from the list of procedure procedure code combinations describing other procedure codes describing codes describing procedures involving procedures that involve the removal of procedures involving the insertion of a pacemaker devices and one ICD–10– pacemaker devices and the insertion of pacemaker lead reported in combination PCS code from the list of procedure new devices. We believe that this logic with one of these procedures, the case codes describing procedures involving may also be overly complex. Moreover, would be assigned to MS–DRG 258 and we believe that a more simplified pacemaker leads in combination with 259. Cases reporting any one of the one another would qualify the case for approach would be to compile a list of following ICD–10–PCS procedure codes assignment to MS–DRGs 242, 243, and all ICD–10–PCS procedure codes describing procedures involving 244. describing procedures involving cardiac We also examined our GROUPER pacemaker device insertions. Therefore, pacemaker device insertions would be logic for MS–DRGs 258 and 259 we are proposing this approach for FY assigned to MS–DRG 258 and 259.

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PROCEDURE CODES DESCRIBING PROCEDURES INVOLVING CARDIAC PACEMAKER DEVICE INSERTIONS REPORTED WITH- OUT ANY OTHER PACEMAKER DEVICE PROCEDURE CODE PROPOSED TO BE ASSIGNED TO ICD–10 MS–DRGS 258 AND 259

Procedure code Description

0JH604Z ...... Insertion of pacemaker, single chamber into chest subcutaneous tissue and fascia, open approach. 0JH605Z ...... Insertion of pacemaker, single chamber rate responsive into chest subcutaneous tissue and fascia, open approach. 0JH606Z ...... Insertion of pacemaker, dual chamber into chest subcutaneous tissue and fascia, open approach. 0JH607Z ...... Insertion of cardiac resynchronization pacemaker pulse generator into chest subcutaneous tissue and fascia, open approach. 0JH60PZ ...... Insertion of cardiac rhythm related device into chest subcutaneous tissue and fascia, open approach. 0JH634Z ...... Insertion of pacemaker, single chamber into chest subcutaneous tissue and fascia, percutaneous approach. 0JH635Z ...... Insertion of pacemaker, single chamber rate responsive into chest subcutaneous tissue and fascia, percutaneous approach. 0JH636Z ...... Insertion of pacemaker, dual chamber into chest subcutaneous tissue and fascia, percutaneous approach. 0JH637Z ...... Insertion of cardiac resynchronization pacemaker pulse generator into chest subcutaneous tissue and fascia, percutaneous approach. 0JH63PZ ...... Insertion of cardiac rhythm related device into chest subcutaneous tissue and fascia, percutaneous approach. 0JH804Z ...... Insertion of pacemaker, single chamber into abdomen subcutaneous tissue and fascia, open approach. 0JH805Z ...... Insertion of pacemaker, single chamber rate responsive into abdomen subcutaneous tissue and fascia, open approach. 0JH806Z ...... Insertion of pacemaker, dual chamber into abdomen subcutaneous tissue and fascia, open approach. 0JH807Z ...... Insertion of cardiac resynchronization pacemaker pulse generator into abdomen subcutaneous tissue and fascia, open approach. 0JH80PZ ...... Insertion of cardiac rhythm related device into abdomen subcutaneous tissue and fascia, open approach. 0JH834Z ...... Insertion of pacemaker, single chamber into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JH835Z ...... Insertion of pacemaker, single chamber rate responsive into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JH836Z ...... Insertion of pacemaker, dual chamber into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JH837Z ...... Insertion of cardiac resynchronization pacemaker pulse generator into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JH83PZ ...... Insertion of cardiac rhythm related device into abdomen subcutaneous tissue and fascia, percutaneous approach.

We are inviting public comments on include lists of procedure code describing procedures involving the our proposal to modify the GROUPER combinations describing procedures insertion of pacemaker leads is reported, logic for MS–DRGs 258 and 259 to involving the removal of pacemaker and there are no other procedure codes establish that a case reporting one leads and the insertion of new leads, in describing procedures involving the procedure code from the above list of addition to lists of single procedure insertion of a device reported, the case ICD–10–PCS procedure codes codes describing procedures involving would be assigned to MS–DRG 260, 261, describing procedures involving the insertion of pacemaker leads, and 262. We are proposing that the list pacemaker device insertions without removal of devices, and revision of of ICD–10–PCS procedure codes any other procedure codes describing devices. We believe that this logic may describing procedures involving also be overly complex. Moreover, we procedures involving pacemaker leads pacemaker lead insertion, removal, or believe that a more simplified approach reported would be assigned to MS– revisions and insertion of hemodynamic DRGs 258 and 259. would be to provide a single list of devices in the following table would be We also examined our GROUPER procedure codes describing procedures logic for MS–DRGs 260, 261, and 262 involving cardiac pacemaker lead assigned to MS–DRGs 260, 261, and (Cardiac Pacemaker Revision Except insertions and other related procedures 262. We are simply proposing to use a Device with MCC, with CC, and without involving device insertions that would single list of ICD–10–PCS procedure CC/MCC, respectively). Cases assigned be assigned to MS–DRGs 260, 261, and codes to determine the MS–DRG to MS–DRGs 260, 261, and 262 also 262. If one of these procedure codes assignment.

LIST OF PROCEDURE CODES PROPOSED TO BE ASSIGNED TO MS–DRGS 260, 261, AND 262

Procedure code Description

02H40JZ ...... Insertion of pacemaker lead into coronary vein, open approach. 02H40MZ ...... Insertion of cardiac lead into coronary vein, open approach. 02H43JZ ...... Insertion of pacemaker lead into coronary vein, percutaneous approach. 02H43MZ ...... Insertion of cardiac lead into coronary vein, percutaneous approach. 02H44JZ ...... Insertion of pacemaker lead into coronary vein, percutaneous endoscopic approach. 02H44MZ ...... Insertion of cardiac lead into coronary vein, percutaneous endoscopic approach. 02H60MZ ...... Insertion of pacemaker lead into right atrium, open approach. 02H63JZ ...... Insertion of cardiac lead into right atrium, open approach. 02H63MZ ...... Insertion of pacemaker lead into right atrium, percutaneous approach. 02H64JZ ...... Insertion of cardiac lead into right atrium, percutaneous approach. 02H64MZ ...... Insertion of pacemaker lead into right atrium, percutaneous endoscopic approach. 02H70JZ ...... Insertion of cardiac lead into right atrium, percutaneous endoscopic approach. 02H70MZ ...... Insertion of pacemaker lead into left atrium, open approach. 02H73JZ ...... Insertion of cardiac lead into left atrium, open approach. 02H73MZ ...... Insertion of pacemaker lead into left atrium, percutaneous approach. 02H74JZ ...... Insertion of cardiac lead into left atrium, percutaneous approach. 02H74MZ ...... Insertion of pacemaker lead into left atrium, percutaneous endoscopic approach. 02HK00Z ...... Insertion of cardiac lead into left atrium, percutaneous endoscopic approach.

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LIST OF PROCEDURE CODES PROPOSED TO BE ASSIGNED TO MS–DRGS 260, 261, AND 262—Continued

Procedure code Description

02HK02Z ...... Insertion of pressure sensor monitoring device into right ventricle, open approach. 02HK0JZ ...... Insertion of monitoring device into right ventricle, open approach. 02HK0MZ ...... Insertion of pacemaker lead into right ventricle, open approach. 02HK30Z ...... Insertion of cardiac lead into right ventricle, open approach. 02HK32Z ...... Insertion of pressure sensor monitoring device into right ventricle, percutaneous approach. 02HK3JZ ...... Insertion of monitoring device into right ventricle, percutaneous approach. 02HK3MZ ...... Insertion of pacemaker lead into right ventricle, percutaneous approach. 02HK40Z ...... Insertion of cardiac lead into right ventricle, percutaneous approach. 02HK42Z ...... Insertion of pressure sensor monitoring device into right ventricle, percutaneous endoscopic approach. 02HK4JZ ...... Insertion of monitoring device into right ventricle, percutaneous endoscopic approach. 02HK4MZ ...... Insertion of pacemaker lead into right ventricle, percutaneous endoscopic approach. 02HL0JZ ...... Insertion of cardiac lead into right ventricle, percutaneous endoscopic approach. 02HL0MZ ...... Insertion of pacemaker lead into left ventricle, open approach. 02HL3JZ ...... Insertion of cardiac lead into left ventricle, open approach. 02HL3MZ ...... Insertion of pacemaker lead into left ventricle, percutaneous approach. 02HL4JZ ...... Insertion of cardiac lead into left ventricle, percutaneous approach. 02HL4MZ ...... Insertion of pacemaker lead into left ventricle, percutaneous endoscopic approach. 02HN0JZ ...... Insertion of cardiac lead into left ventricle, percutaneous endoscopic approach. 02HN0MZ ...... Insertion of pacemaker lead into pericardium, open approach. 02HN3JZ ...... Insertion of cardiac lead into pericardium, open approach. 02HN3MZ ...... Insertion of pacemaker lead into pericardium, percutaneous approach. 02HN4JZ ...... Insertion of cardiac lead into pericardium, percutaneous approach. 02HN4MZ ...... Insertion of pacemaker lead into pericardium, percutaneous endoscopic approach. 02PA0MZ ...... Insertion of cardiac lead into pericardium, percutaneous endoscopic approach. 02PA3MZ ...... Removal of cardiac lead from heart, open approach. 02PA4MZ ...... Removal of cardiac lead from heart, percutaneous approach. 02PAXMZ ...... Removal of cardiac lead from heart, percutaneous endoscopic approach. 02WA0MZ ...... Revision of cardiac lead in heart, open approach. 02WA3MZ ...... Revision of cardiac lead in heart, percutaneous approach. 02WA4MZ ...... Revision of cardiac lead in heart, percutaneous endoscopic approach. 0JH600Z ...... Insertion of hemodynamic monitoring device into chest subcutaneous tissue and fascia, open approach. 0JH630Z ...... Insertion of hemodynamic monitoring device into chest subcutaneous tissue and fascia, percutaneous approach. 0JH800Z ...... Insertion of hemodynamic monitoring device into abdomen subcutaneous tissue and fascia, open approach. 0JH830Z ...... Insertion of hemodynamic monitoring device into abdomen subcutaneous tissue and fascia, percutaneous approach. 0JPT0PZ ...... Removal of cardiac rhythm related device from trunk subcutaneous tissue and fascia, open approach. 0JPT3PZ ...... Removal of cardiac rhythm related device from trunk subcutaneous tissue and fascia, percutaneous approach. 0JWT0PZ ...... Revision of cardiac rhythm related device in trunk subcutaneous tissue and fascia, open approach. 0JWT3PZ ...... Revision of cardiac rhythm related device in trunk subcutaneous tissue and fascia, percutaneous approach.

We are inviting public comments on through 27903) and final rule (77 FR In the FY 2016 IPPS/LTCH PPS final our proposal to modify the GROUPER 53308 through 53310), in response to rule (80 FR 49371), we finalized a logic for MS–DRGs 260, 261, and 262 so requests for MS–DRG reclassification, as modification to the MS–DRGs to which that cases reporting any one of the ICD– well as the FY 2014 IPPS/LTCH PPS the procedure involving the MitraClip® 10–PCS procedure codes describing proposed rule (78 FR 27547 through System was assigned. For the ICD–10 procedures involving pacemakers and 27552), under the new technology add- based MS–DRGs to fully replicate the related procedures and associated on payment policy. In the FY 2014 ICD–9–CM based MS–DRGs, ICD–10– devices listed in the table above would IPPS/LTCH PPS final rule (78 FR PCS code 02UG3JZ (Supplement mitral be assigned to MS–DRGs 260, 261, and 50575), the application for a new valve with synthetic substitute, 262. technology add-on payment for percutaneous approach), which ® MitraClip® was unable to be considered identifies the use of the MitraClip d. Transcatheter Mitral Valve Repair technology and is the ICD–10–PCS code With Implant further due to lack of FDA approval by the July 1, 2013 deadline. translation for ICD–9–CM procedure As we did for the FY 2015 IPPS/LTCH code 35.97 (Percutaneous mitral valve PPS proposed rule (79 FR 28008 In the FY 2015 IPPS/LTCH PPS final repair with implant), was assigned to through 28010), for FY 2017, we rule, we finalized our proposal to not new MS–DRGs 273 and 274 received a request to modify the MS– create a new MS–DRG or to reassign (Percutaneous Intracardiac Procedures DRG assignment for transcatheter mitral cases reporting procedures involving the with and without MCC, respectively) ® valve repair with implant procedures. MitraClip to another MS–DRG (79 FR and continued to be assigned to MS– We refer readers to detailed discussions 49890 through 49892). Under a separate DRGs 231 and 232 (Coronary Bypass of the MitraClip® System (hereafter process, the request for a new with PTCA with MCC and without referred to as MitraClip®) for technology add-on payment for the MCC, respectively). According to the transcatheter mitral valve repair in MitraClip® System was approved (79 FR requestor, there are substantial clinical previous rulemakings, including the FY 49941 through 49946). As discussed in and resource differences between the 2012 IPPS/LTCH PPS proposed rule (76 section II.I.4.e. of the preamble of this transcatheter mitral valve repair FR 25822) and final rule (76 FR 51528 proposed rule, we are proposing to procedure and other procedures through 51529) and the FY 2013 IPPS/ discontinue the new technology add-on currently grouping to MS–DRGs 273 and LTCH PPS proposed rule (77 FR 27902 payment for MitraClip® for FY 2017. 274, which are the focus of the request.

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The requestor submitted three options MS–DRGs 266 and 267 (Endovascular We analyzed claims data from the for CMS to consider for FY 2017. The Cardiac Valve Replacement with and December 2015 update of the FY 2015 first option was to create a new MS– without MCC, respectively); and the MedPAR file on reported cases of DRG for endovascular cardiac valve third option was to reassign cases percutaneous mitral valve repair with repair with implant; the second option involving the MitraClip® system to implant (ICD–9–CM procedure code ® was to reassign cases for the MitraClip another higher paying MS–DRG. 35.97) in MS–DRGs 273 and 274. Our implant from MS–DRGs 273 and 274 to findings are shown in the table below.

PERCUTANEOUS MITRAL VALVE REPAIR WITH IMPLANT

Average MS–DRG Number of length of Average cases stay costs

MS–DRG 273—All cases ...... 6,620 8.01 $27,625 MS–DRG 273—Cases with procedure code 35.97 ...... 457 7.57 50,560 MS–DRG 274—All cases ...... 14,220 3.46 19,316 MS–DRG 274—Cases with procedure code 35.97 ...... 693 2.67 37,686

As shown in the table, the total 14,220 cases with an average length of average costs in comparison to all the number of cases reported in MS–DRG stay of 3.46 days and average costs of cases within MS–DRGs 273 and 274. 273 was 6,620 and had an average $19,316. There were a total of 693 cases As stated above, the first option of the length of stay of 8.01 days and average in MS–DRG 274 that reported procedure requestor was that we create a new MS– costs of $27,625. The number of cases code 35.97; these cases had an average DRG for endovascular cardiac valve reporting the ICD–9–CM procedure code length of stay of 2.67 days and average repair with implant procedures for all 35.97 in MS–DRG 273 totaled 457 and costs of $37,686. We recognize that the cardiac valve repairs. We reviewed the had an average length of stay of 7.57 cases reporting procedure code 35.97 following list of ICD–10–PCS procedure days and average costs of $50,560. For had a shorter length of stay and higher codes that the requestor submitted to MS–DRG 274, there were a total of comprise this proposed new MS–DRG.

ICD–10–PCS Code Description

02UF37Z ...... Supplement aortic valve with autologous tissue substitute, percutaneous approach. 02UF38Z ...... Supplement aortic valve with zooplastic tissue, percutaneous approach. 02UF3JZ ...... Supplement aortic valve with synthetic substitute, percutaneous approach. 02UF3KZ ...... Supplement aortic valve with nonautologous tissue substitute, percutaneous approach. 02UG37Z ...... Supplement mitral valve with autologous tissue substitute, percutaneous approach. 02UG38Z ...... Supplement mitral valve with zooplastic tissue, percutaneous approach. 02UG3JZ ...... Supplement mitral valve with synthetic substitute, percutaneous approach. 02UG3KZ ...... Supplement mitral valve with nonautologous tissue substitute, percutaneous approach. 02UH37Z ...... Supplement pulmonary valve with autologous tissue substitute, percutaneous approach. 02UH38Z ...... Supplement pulmonary valve with zooplastic tissue, percutaneous approach. 02UH3JZ ...... Supplement pulmonary valve with synthetic substitute, percutaneous approach. 02UH3KZ ...... Supplement pulmonary valve with nonautologous tissue substitute, percutaneous approach. 02UJ37Z ...... Supplement tricuspid valve with autologous tissue substitute, percutaneous approach. 02UJ38Z ...... Supplement tricuspid valve with zooplastic tissue, percutaneous approach. 02UJ3JZ ...... Supplement tricuspid valve with synthetic substitute, percutaneous approach. 02UJ3KZ ...... Supplement tricuspid valve with nonautologous tissue substitute, percutaneous approach.

The above list of ICD–10–PCS percutaneous approach) is the cannot isolate those cases from procedure codes are currently assigned comparable translation for both ICD–9– procedure code 35.33. Under ICD–9– to MS–DRGs 216 through 221 (Cardiac CM procedure code 35.33 and ICD–9– CM, procedure code 35.33 does not Valve and Other Major Cardiovascular CM procedure code 35.97 (Percutaneous differentiate the specific type of Procedures with and without Cardiac mitral valve repair with implant), which approach used to perform the Catheterization with MCC, with CC, and grouped to MS–DRGs 273 and 274 as procedure. This is in contrast to the 60 without CC/MCC, respectively), with mentioned previously. comparable ICD–10 code translations the exception of procedure code Upon review of the 16 ICD–10–PCS that do differentiate among various 02UG3JZ, which is assigned to MS– procedure codes submitted for approaches (open, percutaneous, and DRGs 273 and 274, as noted earlier in consideration by the requestor, we percutaneous endoscopic). this section. determined that we cannot propose the As stated previously, if the ICD–9–CM All 16 of the ICD–10–PCS procedure suggested change because the resulting and ICD–10 versions of the MS–DRGs codes submitted by the requester are ICD–10 MS–DRG logic would not be an cease to be replications of each other, comparable translations of ICD–9–CM accurate replication of the ICD–9–CM the relative payment weights (computed procedure code 35.33 (Annuloplasty), based MS–DRG logic. Specifically, it is using the ICD–9–CM based MS–DRGs) which also grouped to MS–DRGs 216 not possible to replicate reassigning the would be inconsistent with the ICD–10 through 221. However, ICD–10–PCS percutaneous annuloplasty codes from MS–DRG assignment, which may cause procedure code 02UG3JZ (Supplement ICD–9–CM based MS–DRGs 216 through unintended payment redistribution. mitral valve with synthetic substitute, 221 to a new MS–DRG because we Therefore, we are not proposing to

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create a new MS–DRG for transcatheter repairs. Our clinical advisors do not involving the MitraClip® were mitral valve repair with implant believe that these procedures are reassigned to MS–DRGs 266 and 267, procedures for FY 2017. clinically coherent or similar in terms of they would be overpaid by The second option in the request was resource consumption because the approximately $10,000 as shown in the ® to evaluate reassigning cases involving MitraClip technology is utilized for a table below. Our clinical advisors agree ® the MitraClip to MS–DRGs 266 and percutaneous mitral valve repair, while that we should not propose to reassign 267. This option is not supported for the the other technologies assigned to MS– endovascular cardiac valve repair same reasons provided in previous DRGs 266 and 267 are utilized for procedures to the endovascular cardiac rulemaking regarding differences transcatheter/endovascular cardiac valve replacement MS–DRGs. between valve replacements and valve valve replacements. In addition, if cases

ENDOVASCULAR CARDIAC VALVE REPLACEMENT WITH AND WITHOUT MCC

MS–DRG 266—All cases ...... 7,436 8.54 $59,675 MS–DRG 267—All cases ...... 8,480 4.45 47,013

Next, we analyzed claims data from without CC/MCC, respectively). 230 did not support the required the December 2015 update of the FY However, as shown in the findings in criterion that there be at least a $2,000 2015 MedPAR file relating to the the table below, the claims data did not difference between subgroups. A possible reassignment of cases involving support this option under the current 3- reassignment would not meet the ® the MitraClip (identified by ICD–9–CM way severity level split. That is, the data requirement for the ‘‘with CC’’ and procedure code 35.97) to MS–DRGs 228, findings based on reassignment of ® ‘‘without CC/MCC’’ subgroups ($34,461 229, and 230 (Other Cardiothoracic MitraClip cases (ICD–9–CM procedure ¥ $33,216 = $1,245). Procedures with MCC, with CC, and code 35.97) to MS–DRGs 228, 229, and

OTHER CARDIOTHORACIC PROCEDURES (WITH PROCEDURE CODE 35.97)

Average MS–DRG Number of length of Average cases stay costs

MS–DRG 228—with MCC ...... 1,966 11.53 $51,634 MS–DRG 229—with CC ...... 2,318 6.28 34,461 MS–DRG 230—without CC/MCC ...... 709 3.76 33,216

We then performed additional no longer meet the criterion that there level split (with MCC and without MCC) analysis consisting of the base DRG be at least a 20-percent difference in based on 2 years (FY 2014 and FY 2015) report for MS–DRGs 228, 229 and 230. average costs between subgroups. These of MedPAR data. This option would As shown in the table below, the data findings support collapsing MS– involve the deletion of an MS–DRG. average costs between the ‘‘with CC’’ DRGs 228, 229, and 230 from a 3-way and the ‘‘without CC/MCC’’ subgroups severity level split into a 2-way severity

OTHER CARDIOTHORACIC PROCEDURES

Average Average Number length Average Number of length Average MS–DRG of cases of stay costs cases of stay costs FY 2015 FY 2015 FY 2015 FY 2014 FY 2014 FY 2014

MS–DRG 228—with MCC ...... 1,509 12.73 $51,960 1,486 12.75 $50,688 MS–DRG 229—with CC ...... 1,835 7.16 33,786 1,900 7.46 33,277 MS–DRG 230—without CC/MCC ...... 499 4.52 30,697 443 4.84 31,053

In the additional analysis, we cases with procedure code 35.97 from this approach would maintain clinical evaluated if reassignment of cases MS–DRGs 273 and 274 to this new coherence for these MS–DRGs and reporting ICD–9–CM procedure code structure would reflect these procedures reflect more appropriate payment for 35.97 to this proposed 2-way severity more accurately in the ICD–10 MS– procedures involving percutaneous split was supported. We confirmed that DRGs. Our clinical advisors agreed with mitral valve repair. The proposed the reassignment of ICD–9–CM a proposal to delete MS–DRG 230 and revisions to the MS–DRGs, which procedure code 35.97 could be reassign cases involving percutaneous include the MitraClip® cases, are shown replicated under the ICD–9 MS–DRGs. mitral valve repair with implant in the table below. We believe that deleting MS–DRG 230, (MitraClip®) to MS–DRG 228 and revising MS–DRG 229, and reassigning revised MS–DRG 229. We believe that

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OTHER CARDIOTHORACIC PROCEDURES

Average Proposed revised MS–DRGs Number of length Average cases of stay costs

MS–DRG 228—with MCC ...... 1,966 11.53 $51,634 MS–DRG 229—without MCC ...... 3,027 5.69 34,169

For FY 2017, we are proposing to to fully replicate the ICD–9–CM based of the surgical hierarchy GROUPER collapse MS–DRGs 228, 229, and 230 MS–DRG logic for ICD–9–CM procedure logic. from three severity levels to two severity code 35.97. If our proposal in this FY As a result, we are proposing to levels by deleting MS–DRG 230 and 2017 proposed rule to reassign ICD–10– remove ICD–10–PCS procedure code revising MS–DRG 229. We also are PCS code 02UG3JZ to MS–DRGs 228 02UG3JZ and ICD–9–CM procedure proposing to reassign ICD–9–CM and proposed revised MS–DRG 229 is code 35.97 from the PTCA list in MS– procedure code 35.97 and the cases finalized in the FY 2017 IPPS/LTCH DRGs 231 and 232 (Coronary Bypass reporting ICD–10–PCS procedure code PPS final rule, it will eliminate the need with PTCA with MCC and without 02UG3JZ (Supplement mitral valve with to continue having ICD–10–PCS code MCC, respectively) for FY 2017 if the synthetic substitute, percutaneous 02UG3JZ and ICD–9–CM code 35.97 proposal to reassign ICD–9–CM approach) from MS–DRGs 273 and 274 group to MS–DRGs 231 and 232. This is procedure code 35.97 and the cases to MS–DRG 228 and proposed revised due to the fact that, currently, MS–DRGs reporting ICD–10–PCS procedure codes MS–DRG 229. The title of MS–DRG 229 228, 229, and 230 are listed higher than 02UG3JZ from MS–DRGs 273 and 274 to would be modified as follows to reflect MS–DRGs 231 through 236 in the MS–DRGs 228 and proposed revised the ‘‘without MCC’’ designation. The MS–DRG 229 is finalized. We are surgical hierarchy, as shown in the ICD– title of proposed revised MS–DRG 229 inviting public comments on our 9 and ICD–10 MS–DRGs Definitions would be ‘‘Other Cardiothoracic proposals. Manual Files in Appendix D—MS–DRG Procedures without MCC’’. The title for e. MS–DRG 245 (AICD Generator MS–DRG 228 would remain the same: Surgical Hierarchy by MDC and MS– Procedures) MS–DRG 228 (Other Cardiothoracic DRG, which is available via the Internet Procedures with MCC). We are inviting on the CMS Web site at: https://www. In the FY 2016 IPPS/LTCH PPS final public comments on our proposals. cms.gov/Medicare/Medicare-Fee-for- rule (80 FR 49369), we stated that we We also note that, as discussed earlier Service-Payment/AcuteInpatientPPS/ would continue to monitor MS–DRG in this section, in the FY 2016 IPPS/ FY2016-IPPS-Final-Rule-Home-Page- 245 (AICD Generator Procedures) to LTCH PPS final rule (80 FR 49371), Items/FY2016-IPPS-Final-Rule-Data- determine if the data supported ICD–10–PCS code 02UG3JZ Files.html?DLPage=1&DLEntries=10& subdividing this base MS–DRG into (Supplement mitral valve with synthetic DLSort=0&DLSortDir=ascending. severity levels. As displayed in the table substitute, percutaneous approach) was Therefore, if the proposal is finalized for below, the results of the FY 2015 data assigned to MS–DRGs 231 and 232 FY 2017, cases reporting ICD–10–PCS analysis showed there were a total of (Coronary Bypass with PTCA with MCC procedure code 02UG3JZ will group to 1,464 cases, with an average length of and without MCC, respectively), in MS–DRGs 228 and revised MS–DRG 229 stay of 5.5 days and average costs of addition to new MS–DRGs 273 and 274, versus MS–DRGs 231 and 232 because $34,564 for MS–DRG 245.

AICD GENERATOR PROCEDURES

Average MS–DRG Number length of Average of cases stay costs

MS–DRG 245 ...... 1,464 5.5 $34,564

We applied the five criteria section II.F.1.b. of the preamble of this into severity levels. The table below established in the FY 2008 IPPS final proposed rule to determine if it was illustrates our findings. rule (72 FR 47169), as described in appropriate to subdivide MS–DRG 245

AICD GENERATOR PROCEDURES

Average MS–DRG by suggested severity level Number length of Average of cases stay costs

MS–DRG 245—with MCC ...... 449 8.37 $40,175 MS–DRG 245—with CC ...... 861 4.59 32,518 MS–DRG 245—without CC/MCC ...... 154 2.86 29,646

Based on our analysis of claims data do not support creating new severity severity level split as the criterion that from the December 2015 update of the levels. The findings show that the data there be at least a 20-percent difference FY 2015 MedPAR file, the data findings do not meet the criteria for a 3-way in average costs between subgroups is

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not met for the ‘‘with CC’’ and ‘‘without looked at the prospect of a 2-way CC/MCC’’ severity levels. We also severity level split.

AICD GENERATOR PROCEDURES

Average MS–DRG by suggested severity level Number length of Average of cases stay costs

MS–DRG 245—with MCC ...... 449 8.37 $40,175 MS–DRG 245—without MCC ...... 1,015 4.33 32,081

The findings do show that the data are the ICD–10 MS–DRGs Version 34 on also agree that ICD–10–PCS procedure close to meeting the criteria for a 2-way October 1, 2016. code 06183DY should be assigned to severity level split of ‘‘with MCC and We are inviting public comments on MDC 7 and MS–DRGs 405, 406, and without MCC.’’ However, the required our proposal. 407. Therefore, we are proposing to criterion that there must be at least 500 7. MDC 7 (Diseases and Disorders of the assign ICD–10–PCS procedure code cases in the MCC group is not met. Hepatobiliary System and Pancreas): 06183DY to MDC 7 and MS–DRGs 405, Therefore, for FY 2017, we are not Bypass Procedures of the Veins 406, and 407 for FY 2017. proposing to subdivide MS–DRG 245 We received a request to assign ICD– We are inviting public comments on into severity levels. We are inviting our proposal. public comments on our proposal to 10–PCS code 06183DY (Bypass portal maintain the current structure for MS– vein to lower vein with intraluminal 8. MDC 8 (Diseases and Disorders of the DRG 245. device, percutaneous approach) to MDC Musculoskeletal System and Connective 7 (Diseases and Disorders of the Tissue) 6. MDC 6 (Diseases and Disorders of the Hepatobiliary System and Pancreas) a. Proposed Updates to MS–DRGs 469 Digestive System): Excision of Ileum under MS–DRGs 405, 406, and 407 and 470 (Major Joint Replacement or We received a request to analyze an (Pancreas Liver and Shunt Procedures Reattachment of Lower Extremity With MS–DRG replication issue from the with MCC, with CC, and without CC/ and Without MCC, respectively) ICD–9–CM based MS–DRGs to the ICD– MCC, respectively). The requestor 10 based MS–DRGs for excision described this code as capturing a (1) Total Ankle Replacement (TAR) procedures performed on the ileum. transjugular intrahepatic portosystem Procedures Under ICD–9–CM, procedure code 45.62 shunt procedure. The requestor stated (Other partial resection of small that, under ICD–9–CM, when a We received a request to create a new intestine) was assigned to MS–DRGs procedure for cirrhosis of the liver was MS–DRG for total ankle replacement 329, 330 and 331 (Major Small and performed, the procedure was assigned (TAR) procedures, which are currently Large Bowel Procedures with MCC, with to ICD–9–CM code 39.1 (Intra- assigned to MS–DRGs 469 and 470 CC, and without CC/MCC, respectively). abdominal venous shunt). The requestor (Major Joint Replacement or Under the current ICD–10 MS–DRGs noted that when ICD–9–CM procedure Reattachment of Lower Extremity with Version 33, ICD–10–PCS procedure code 39.1 is reported with a principal and without MCC, respectively). We code 0DBB0ZZ (Excision of ileum, open diagnosis of cirrhosis of the liver, the previously discussed requested changes approach) is assigned to MS–DRGs 347, procedure was assigned to MS–DRG to the MS–DRG assignment for TAR 348, and 349 (Anal and Stomal 405, 406, or 407 in the ICD–9–CM MS– procedures in the FY 2015 IPPS/LTCH Procedures with MCC, with CC, and DRGs. PPS proposed rule (79 FR 28013 without CC/MCC, respectively). The Currently, ICD–10–PCS procedure through 28015) and in the FY 2015 requestor indicated that, despite the code 06183DY is assigned to only MDC IPPS/LTCH PPS final rule (79 FR 49896 variation in terms for ‘‘excision’’ and 5 (Diseases and Disorders of the through 49899). For FY 2015, we did ‘‘resection’’ between the two code sets, Circulatory System) and MS–DRGs 270, not change the MS–DRG assignment for the surgical procedure to remove a 271, and 272 (Other Major total ankle replacements. The requestor portion of the small intestine, whether Cardiovascular Procedures with MCC, stated that reassigning total ankle it is the ileum, duodenum, or jejunum, with CC, and without CC/MCC, replacement procedures from MS–DRGs has not changed and should not result respectively) under ICD–10 MS–DRGs 469 and 470 to a new MS–DRG would in different MS–DRG assignments when Version 33. The requestor stated that have an important benefit for the new translated from ICD–9–CM to ICD–10. ICD–10–PCS procedure code 06183DY Medicare Comprehensive Care for Joint We agree that this is a replication code should also be assigned to MDC 7 Replacement (CJR) model. The error. In addition to ICD–10–PCS code and MS–DRGs 405, 406, and 407 to be commenter noted that because total 0DBB0ZZ, we also reviewed the MS– consistent with the ICD–9–CM MS– ankle replacement cases currently are DRG assignments for ICD–10–PCS code DRGs Version 32. assigned to MS–DRGs 469 and 470, they 0DBA0ZZ (Excision of jejunum, open We analyzed this issue and agree that are included in the model. approach) and determined the MS–DRG the ICD–10 MS–DRGs do not fully Ankle replacement procedures were assignment for this code resulted in the replicate the ICD–9–CM MS–DRGs. We captured by ICD–9–CM code 81.56 same replication error. Therefore, we are agree that ICD–10–PCS procedure code (Total ankle replacement). We examined proposing to reassign ICD–10–PCS 06183DY should be assigned to MDC 7 claims data for total ankle procedures codes 0DBB0ZZ and 0DBA0ZZ from and MS–DRGs 405, 406, and 407 to using the December 2015 update of the MS–DRGs 347, 348, and 349 to MS– replicate the ICD–9–CM MS–DRGs. Our FY 2015 MedPAR file. Our findings are DRGs 329, 330, and 331, effective with clinical advisors reviewed this issue and displayed in the table below.

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TOTAL ANKLE REPLACEMENT CASES REPORTED IN MS–DRGS 469 AND 470

Number of Average MS–DRG cases length of stay Average costs

MS–DRG 469—All cases ...... 25,729 6.92 $22,358 MS–DRG 469—Total ankle replacement cases ...... 30 5.40 34,889 MS–DRG 470—All cases ...... 421,149 2.92 14,834 MS–DRG 470—Total ankle replacement cases ...... 1,626 1.94 20,019

As the total ankle replacement claims cases that have similar overall costs. requestor suggested that if such a new data analysis showed, these procedures Within a group of cases, one would MS–DRG could not be created, CMS represent a small fraction of the total expect that some cases have costs that consider reassigning all hip replacement number of cases reported in MS–DRGs are higher than the overall average and procedures with a principal diagnosis of 469 and 470. There were 30 total ankle some cases have costs that are lower hip fracture only to MS–DRG 469, even replacement cases reported in MS–DRG than the overall average. if there were no reported MCC. 469 and 1,626 total ankle replacement The data do not support creating a The requestors stated that hip cases in MS–DRG 470, compared to new total ankle replacement MS–DRG replacement procedures performed on 25,729 total cases reported in MS–DRG for this small number of cases. Also, our patients with hip fractures involve a 469 and 421,149 total cases reported in clinical advisors pointed out that more fragile population of patients than MS–DRG 470. The average length of stay creating a new MS–DRG for total ankle the typical patient population who for total ankle replacement cases was replacements would result in combining undergo elective hip or knee 5.40 days and average costs for total cases reporting an MCC with an average replacement and that these more fragile ankle replacement cases were $34,889 length of stay of 5.40 days and cases not patient cases also are assigned to MS– reported in MS–DRG 469, compared to reporting an MCC with an average DRGs 469 and 470. The requestors average length of stay of 6.92 days and length of stay of 1.94 days. Our clinical stated that cases of patients who have average costs of $22,358 for all cases advisors did not recommend the hip replacements with hip fractures may reported in MS–DRG 469. The average creation of a new MS–DRG for this have significant comorbidities not length of stay for total ankle single procedure with such a small present in patients who undergo replacement cases was 1.94 days and number of cases. They also stated that elective hip replacements. One average costs of total ankle replacement patients undergoing total ankle requestor stated that the absolute cases were $20,019 reported in MS–DRG replacement have similar clinical number of hospitalizations for hip 470, compared to an average length of features compared to other patients fractures in the United States is stay of 2.92 days and average costs of undergoing procedures included in MS– currently more than 350,000 and the $14,834 for all cases reported in MS– DRGs 469 and 470. Furthermore, we number is rising. The requestor stated DRG 470. believe that the volume of total ankle that 90 percent of hip fractures result Given the low volume of cases, we replacement procedures performed from a simple fall, and that hip fracture believe that these cost data may not be relative to hip and knee replacement rates increase with age. According to the a complete measure of actual differences procedures minimizes the benefit that a requestor, the 1-year mortality rate for in inpatient resource utilization for new MS–DRG would have on the patients who undergo hip replacement beneficiaries receiving total ankle Medicare CJR model. Our clinical procedures after a hip fracture was replacements. In addition, these total advisors determined that the cases approximately 20 percent, and the 3- ankle replacement cases may have been involving total ankle replacements are year mortality rate was up to 50 percent. impacted by other factors such as more appropriately assigned to MS– The requestor also stated that one out of complication or comorbidities. Several DRGs 469 and 470 with the two severity three adults who lived independently expensive cases could impact the levels. before their hip fracture remains in a average costs for a very small number of Based on the findings from our data nursing home for at least a year after the patients. The average cost of total ankle analysis and the recommendations from hip fracture. In contrast, the requestor replacement cases reported in MS–DRG our clinical advisors, we are not noted that patients under elective hip 469 was $12,531 higher than all cases proposing to create a new MS–DRG for replacement procedures for arthritis reported in MS–DRG 469 ($34,889 total ankle replacement procedures. We have fewer comorbidities, improved compared to $22,358 for all reported are proposing to maintain the current health after the procedure, low rates of cases), but there were only 30 cases MS–DRG structure for MS–DRGs 469 readmission, and less postacute needs. compared to a total of 25,729 cases and 470. The requestor believed that there are reported in MS–DRG 469. The average We are inviting public comments on many factors that impact the outcome of cost of total ankle replacement cases this proposal. hip replacements for hip fractures, reported in MS–DRG 470 was $5,185 including patient factors, fracture type, higher than all cases reported in MS– (2) Hip Replacement Procedures With surgeon and hospital factors, treatment DRG 470. There were 1,626 total ankle Principal Diagnosis of Hip Fracture decisions, complication rates, and replacement cases out of a total of We received several requests to rehabilitation factors/access. The 421,149 cases reported in MS–DRG 470. remove hip replacement procedures requestor added that, despite the The average costs of the total ankle with a principal diagnosis of hip commitment to standardization, the use replacement cases were higher than fracture from MS–DRGs 469 and 470 of protocol-driven care, early surgery those for all cases reported in MS–DRG (Major Joint Replacement or (<24 hours) after surgical optimization, 469 and 470. However, some cases have Reattachment of Lower Extremity with prevention of recurrent fractures, and higher and some cases have lower and without MCC, respectively) and to comanagement with medical/surgical average costs within any MS–DRG. MS– create a new MS–DRG for assignment of teams, many patients who undergo hip DRGs are groups of clinically similar these hip replacement procedures. One replacement procedures for hip

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fractures have serious renal, this effort. The requestors stated that the principal diagnosis of hip fracture to cardiovascular, and liver disease, as MS–DRG assignment for the hip MS–DRG 469 to recognize the more well as multiple medical comorbidities. replacement procedures with hip significant adverse health profile of The rates of postoperative infections, fractures has tremendous implications these types of cases. readmissions, and postacute care for the for successful participation in the BPCI We examined claims data for cases patients who undergo hip replacements because the BPCI’s clinical episodes reporting hip replacement procedures for hip fractures are higher than for track to MS–DRG assignment, and the for patients admitted with hip fractures patients who undergo elective hip Major Joint Replacement of the Lower under MS–DRGs 469 and 470 in the replacement. Some requestors Extremity Clinical Episode encompasses December 2015 update of the FY 2015 referenced the Bundled Payments for procedures assigned to MS–DRGs 469 MedPAR file. We used the following list Care Improvement Initiative (BPCI) and and 470. Alternatively, the requestors of ICD–9–CM diagnosis codes to believed that their requested changes to suggested that CMS reassign all cases of identify cases representing hip MS–DRGs 469 and 470 would support hip replacement procedures with a replacements for hip fractures:

ICD–9–CM DIAGNOSIS CODES REVIEWED FOR CASES REPRESENTING HIP REPLACEMENT FOR HIP FRACTURES

ICD–9–CM diagnosis code Descriptions

733.14 ...... Pathological fracture of neck of femur. 733.15 ...... Pathological fracture of other specified part of femur. 733.81 ...... Malunion of fracture. 733.82 ...... Nonunion of fracture. 733.96 ...... Stress fracture of femoral neck. 808.0 ...... Closed fracture of acetabulum. 808.1 ...... Open fracture of acetabulum. 820.8 ...... Fracture of unspecified part of neck of femur closed. 820.9 ...... Fracture of unspecified part of neck of femur open. 820.00 ...... Fracture of unspecified intracapsular section of neck of femur closed. 820.01 ...... Fracture of epiphysis (separation) (upper) of neck of femur closed. 820.02 ...... Fracture of midcervical section of femur closed. 820.03 ...... Fracture of base of neck of femur closed. 820.09 ...... Other transcervical fracture of femur closed. 820.10 ...... Fracture of unspecified intracapsular section of neck of femur open. 820.11 ...... Fracture of epiphysis (separation) (upper) of neck of femur open. 820.12 ...... Fracture of midcervical section of femur open. 820.13 ...... Fracture of base of neck of femur open. 820.19 ...... Other transcervical fracture of femur open. 820.20 ...... Fracture of unspecified trochanteric section of femur closed. 820.21 ...... Fracture of intertrochanteric section of femur closed. 820.22 ...... Fracture of subtrochanteric section of femur closed. 820.30 ...... Fracture of unspecified trochanteric section of femur open. 820.31 ...... Fracture of intertrochanteric section of femur open. 820.32 ...... Fracture of subtrochanteric section of femur open.

Our findings from our examination of the data are shown in the table below.

CASES OF HIP REPLACEMENTS WITH AND WITHOUT PRINCIPAL DIAGNOSIS OF HIP FRACTURE

Average MS–DRG Number of length of Average costs cases stay

MS–DRG 469—All cases ...... 25,729 6.9 $22,358 MS–DRG 469—Hip replacement cases with hip fractures ...... 14,459 7.9 22,852 MS–DRG 469—Hip replacement cases without hip fractures ...... 4,714 5.7 22,430 MS–DRG 470—All cases ...... 421,149 2.9 14,834 MS–DRG 470—Hip replacement cases with hip fractures ...... 49,703 4.7 15,795 MS–DRG 470—Hip replacement cases without hip fractures ...... 125,607 2.6 14,870

For MS–DRG 469, the average costs of replacements without hip fractures hip replacements without hip fractures all 25,729 reported cases were $22,358 reported, with average costs of $22,430 ($22,852 compared to $22,430). and the average length of stay was 6.9 and an average length of stay of 5.7 However, the average length of stay for days. Within MS–DRG 469, there were days. The average costs of reported cases of hip replacements with hip 14,459 cases of hip replacements with cases of hip replacements with hip fractures reported in MS–DRG 469 is hip fractures reported, with average fractures are similar to the average costs higher than the average length of stay costs of $22,852 and an average length of all cases reported within MS–DRG for all cases reported in MS–DRG 469 of stay of 7.9 days. Within MS–DRG 469 ($22,852 compared to $22,358), and and for cases of hip replacements 469, there were 4,714 cases of hip to the average costs of reported cases of without hip fractures reported in MS–

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DRG 469 (7.9 days compared to 6.9 days a hip fracture did not impact the average We are inviting public comments on and 5.7 days, respectively.) costs of cases reported in either MS– our proposals. For MS–DRG 470, the average costs of DRG 469 or MS–DRG 470. all 421,149 cases reported were $14,834 We also examined the data in relation b. Revision of Total Ankle Replacement and the average length of stay was 2.9 to the request to reassign all procedures Procedures days. Within MS–DRG 470, there were of hip replacement with hip fractures (1) Revision of Total Ankle Replacement 49,703 reported cases of hip from MS–DRG 470 to MS–DRG 469, Procedures replacements with hip fractures, with even if there is no MCC present. The average costs $15,795 and an average data showed that the 49,703 cases of hip We received a request to modify the length of stay of 4.7 days. Within MS– replacements with hip fractures MS–DRG assignment for revision of DRG 470, there were 125,607 cases of reported in MS–DRG 470 have average total ankle replacement procedures. hip replacements without hip fractures costs of $15,795 and an average length Currently, these procedures are assigned reported, with average costs of $14,870 of stay of 4.7 days. The 25,729 total to MS–DRGs 515, 516, and 517 (Other and an average length of stay of 2.6 cases of hip replacements reported in Musculoskeletal System and Connective days. However, the average length of MS–DRG 469 have average costs of Tissue O.R. Procedures with MCC, with stay for cases of hip replacements with $22,358 and an average length of stays CC and without CC/MCC, respectively). hip fractures reported in MS–DRG 470 of 6.9 days. Therefore, the data for This topic was discussed in the FY 2015 was higher than the average length of average costs and average length of stay IPPS/LTCH PPS proposed rule (79 FR stay for all cases and for cases of hip for all cases involving hip replacement 28013 through 28015) and the FY 2015 replacements without hip fractures procedures with hip fractures reported IPPS/LTCH PPS final rule (79 FR 49896 reported in MS–DRG 470 (4.7 days in MS–DRG 470 do not support through 49899). However, at that time, compared to 2.9 days and 2.6 days, reassigning all cases of hip replacement we did not change the MS–DRG respectively). Therefore, the average procedures with hip fractures to MS– assignment for revisions of total ankle costs of cases of hip replacements with DRG 469, even if there is no MCC replacement procedures. hip fractures were similar for both MS– present. The requestor presented two options DRG 469 and MS–DRG 470 ($22,852 Our clinical advisors reviewed this for consideration for modifying the MS– compared to $22,358 and $15,795 issue and agree that the hip replacement DRG assignment for the revisions of compared to $14,834, respectively). procedures performed for patients with total ankle replacement procedures. The However, the average lengths of stay are hip fractures are appropriately assigned requestor’s first option was to create a longer for cases of hip replacements to MS–DRGs 469 and 470. They did not new MS–DRG for the assignment of with hip fractures compared to all cases support reassigning these procedures revision of total ankle replacement reported in both MS–DRGs 469 and 470 from MS–DRGs 469 and 470 to a new procedures. The requestor believed that (7.9 days compared to 6.9 days and 4.7 MS–DRG or reassigning all cases of hip a new MS–DRG would be justified days compared to 2.9 days, replacement procedures with hip based on the distinct costs, resources, respectively). fractures to MS–DRG 469, even if the and utilization associated with ankle The claims data do not support case does not have an MCC. Our clinical joint revision cases. The requestor’s creating a new MS–DRG for the advisors stated that the surgical second option was to reassign revision assignment of cases of hip replacements techniques used for hip replacements of total ankle replacement procedures to with hip fractures. As discussed earlier, are similar for all patients. They advised MS–DRGs 466, 467, and 468 (Revision the average costs for cases of hip that the fact that some patients also had of Hip or Knee Replacement with MCC, replacements with hip fractures a hip fracture would not justify creating with CC, and without CC/MCC, reported in MS–DRG 469 and MS–DRG a new MS–DRG or reassigning all cases respectively) and rename MS–DRGs 470 are similar to the average costs for of hip replacement procedures with hip 466, 467, and 468 as ‘‘Revision of Hip, all cases reported in MS–DRG 469 and fractures to MS–DRG 469. Our clinical Knee, or Ankle with MCC, with CC, and MS–DRG 470. While the average length advisors noted that the costs of cases of without CC/MCC’’, respectively. The of stay is longer for cases of hip hip replacements are more directly requestor believed that this second replacements with hip fractures than for impacted by the presence or absence of option would be justified because it is cases of hip replacements without hip an MCC than the presence or absence of a reasonable, temporary approach until fractures reported within MS–DRGs 469 a hip fracture. CMS has sufficient utilization and cost and 470, the increased length of stay did Based on the findings from our data data for revision of total ankle not impact the average costs of reported analyses and the recommendations from replacement procedures based on the cases in either MS–DRG 469 or 470. The our clinical advisors, we are not reporting of the new and more specific data showed that cases of hip proposing to create a new MS–DRG for ICD–10–PCS procedure codes. The replacement procedures are clearly the assignment of procedures involving requestor pointed out that the following influenced by the presence of an MCC. hip replacement in patients who have more specific ICD–10–PCS procedure The average costs of all cases reported hip fractures or to reassign all codes were implemented effective in MS–DRG 469, which identifies an procedures involving hip replacements October 1, 2015, with the MCC, were $22,358, compared to with hip fractures to MS–DRG 469 even implementation of ICD–10. The average costs of $14,834 for all cases if there is no MCC present. We are requestor stated that these new codes reported in MS–DRG 470, which did not proposing to maintain the current MS– will provide improved data on these identify an MCC. The data showed that DRG structure for MS–DRGs 469 and procedures that can be analyzed for the presence of a principal diagnosis of 470. future MS–DRG updates.

ICD–10–PCS procedure code Description

0SWF0JZ ...... Revision of synthetic substitute in right ankle joint, open approach. 0SWF3JZ ...... Revision of synthetic substitute in right ankle joint, percutaneous approach. 0SWF4JZ ...... Revision of synthetic substitute in right ankle joint, percutaneous endoscopic approach.

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ICD–10–PCS procedure code Description

0SWFXJZ ...... Revision of synthetic substitute in right ankle joint, external approach. 0SWG0JZ ...... Revision of synthetic substitute in left ankle joint, open approach. 0SWG3JZ ...... Revision of synthetic substitute in left ankle joint, percutaneous approach. 0SWG4JZ ...... Revision of synthetic substitute in left ankle joint, percutaneous endoscopic approach. 0SWGXJZ ...... Revision of synthetic substitute in left ankle joint, external approach.

We agree with the requestor that the and final rule, ICD–9–CM procedure listed above. We also agree that the ICD– previous code used to identify revisions code 81.59 included procedures 10–PCS procedure codes will provide of total ankle replacement procedures, involving revisions of joint more precise data on revisions of ankle ICD–9–CM procedure code 81.59 replacements of a variety of lower replacements. (Revision of joint replacement of lower extremity joints, including the ankle, We examined claims data from the extremity, not elsewhere classified), is foot, and toe. Therefore, the ICD–9–CM December 2015 update of the FY 2015 not as precise as the new ICD–10–PCS procedure code does not provide precise MedPAR file on cases reporting procedure codes that were implemented information on the number of revisions procedure code 81.59 in MS–DRGs 515, on October 1, 2015. As discussed in the of total ankle replacement procedures as 516, and 517. The table below shows FY 2015 IPPS/LTCH PPS proposed rule do the ICD–10–PCS procedure codes our findings.

REVISIONS OF JOINT REPLACEMENTS PROCEDURES

Number of Average MS–DRG cases length of stay Average costs

MS–DRG 515—All cases ...... 3,852 8.54 $21,900 MS–DRG 515—Cases reporting procedure code 81.59 ...... 2 7.00 36,983 MS–DRG 516—All cases ...... 8,567 5.24 14,839 MS–DRG 516—Cases reporting procedure code 81.59 ...... 19 3.74 14,957 MS–DRG 517—All cases ...... 5,664 3.20 12,979 MS–DRG 517—Cases reporting procedure code 81.59 ...... 47 1.89 16,524

As can be seen from the data in the ($16,524 for cases reporting procedure cases and because we could not above table, there were only 68 total code 81.59 cases compared to $12,979 determine how many of these cases cases reported with procedure code for all cases reported in MS–DRG 517). were revisions of ankle replacements. 81.59 among MS–DRGs 515, 516, and While the average costs for cases Claims data on the ICD–10–PCS codes 517: 2 Cases in MS–DRG 515; 19 cases reporting procedure code 81.59 were will not be available until 2 years after in MS–DRG 516; and 47 in MS–DRG $3,545 higher than all cases reported in the implementation of the codes, which 517. We point out that while there were MS–DRG 517, we point out that there was October 1, 2015. 68 total cases reported with procedure were only 47 cases that reported Our clinical advisors reviewed this code 81.59 in MS–DRGs 515, 516, and procedure code 81.59 out of the 5,664 issue and determined that the revision 517, we are unable to determine how total cases reported in MS–DRG 517. of total ankle replacement procedures many of these cases were actually The relatively small number of cases are appropriately classified within MS– revisions of ankle replacements versus may have been impacted by other DRGs 515, 516, and 517 along with other revisions of joint replacement of factors. Several expensive cases could other orthopedic procedures captured lower extremities such as those of the impact the average costs for a very small by nonspecific codes. They do not foot or toe. This small number of cases number of patients. support reassignment of the procedures does not justify creating a new MS–DRG to MS–DRGs 466, 467, and 468 until As stated by the requestor, we do not such time as detailed data for ICD–10– as suggested by the requestor in its first yet have data using the more precise option. PCS claims are available to evaluate ICD–10–PCS revisions of total ankle revision of total ankle replacement While the average costs of cases replacement procedure codes that were procedures. Therefore, based on the reporting procedure code 81.59 in MS– implemented on October 1, 2015. These findings of our analysis of claims data DRG 515 were $36,983, compared to new codes will more precisely identify and the advice of our clinical advisors, $21,900 for all cases reported in MS– the number of patients who had a we are proposing to maintain the DRG 515, there were only 2 cases revision of total ankle replacement current MS–DRG assignment for reporting procedure code 81.59 in MS– procedure and the number of patients revision of total ankle replacement DRG 515, of the 3,852 total cases who had revisions of other lower joint procedures for FY 2017. reported in MS–DRG 515. In MS–DRG replacement procedures such as the foot We are inviting public comments on 516, the average costs of the 19 cases or toe. The available clinical data from our proposal. reporting procedure code 81.59 cases the December 2015 update of the FY were $14,957, which is very close to the 2015 MedPAR file do not support the (2) Combination Codes for Removal and average costs of $14,839 for all 8,567 creation of a new MS–DRG for the Replacement of Knee Joints cases reported in MS–DRG 516. The assignment of revisions of total ankle We received several requests asking average costs for cases reporting replacement procedures or the CMS to examine whether additional procedure code 81.59 in MS–DRG 517 reassignment of these cases to other combinations of procedure codes for the were higher than the average costs for MS–DRGs, such as MS–DRGs 466, 467, removal and replacements of knee joints all cases reported in MS–DRG 517 and 468, because there were so few should be added to MS–DRGs 466, 467,

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and 468 (Revision of Hip or Knee 24379 through 24395) and the FY 2016 code pairs that group to MS–DRGs 466, Replacement with MCC, with CC, and IPPS/LTCH PPS final rule (80 FR 49390 467, and 468 in the ICD–10 MS–DRGs without CC/MCC, respectively). This through 49406). One requestor stated Version 33. topic was discussed in the FY 2016 that the procedure codes in the IPPS/LTCH PPS proposed rule (80 FR following table were not included in the

ICD–10–PCS procedure code Description

0SPD08Z ...... Removal of spacer from left knee joint, open approach. 0SPD38Z ...... Removal of spacer from left knee joint, percutaneous approach. 0SPD48Z ...... Removal of spacer from left knee joint, percutaneous endoscopic approach. 0SPC08Z ...... Removal of spacer from right knee joint, open approach. 0SPC38Z ...... Removal of spacer from right knee joint, percutaneous approach. 0SPC48Z ...... Removal of spacer from right knee joint, percutaneous approach.

Other requestors stated that the combinations that group to MS–DRGs for the removal of synthetic substitute procedure codes in the following table 466, 467, and 468 when reported in from the joint in the ICD–10 MS–DRGs are not included in the list of conjunction with an ICD–10–PCS code Version 33.

ICD–10–PCS procedure code Description

0SRC0J9 ...... Replacement of right knee joint with synthetic substitute, cemented, open approach. 0SRC0JA ...... Replacement of right knee joint with synthetic substitute, uncemented, open approach. 0SRC0JZ ...... Replacement of right knee joint with synthetic substitute, open approach. 0SRC07Z ...... Replacement of right knee joint with autologous tissue substitute, open approach. 0SRC0KZ ...... Replacement of right knee joint with nonautologous tissue substitute, open approach.

We agree that the joint revision cases DRGs 466, 467, and 468 in ICD–10 MS– the following 58 new code combinations involving the removal of a spacer and DRGs Version 33 and identified 58 that capture the joint revisions to the subsequent insertion of a new knee joint additional combinations that also Version 34 MS DRG structure for MS– prosthesis should be assigned to MS– should be included so that the same DRGs 466, 467, and 468, effective DRGs 466, 467, and 468. We examined logic is used in the ICD–10 version of October 1, 2016. knee joint revision combination codes the MS–DRGs as is used in the ICD–9– that are not currently assigned to MS– CM version. We are proposing to add

ICD–10–PCS CODE PAIRS PROPOSED TO BE ADDED TO VERSION 34 ICD–10 MS–DRGS 466, 467, AND 468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS

Code Code description Code Code description

0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRC0J9 ..... Replacement of Right Knee Joint with Synthetic Approach. Substitute, Cemented, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRC0JA .... Replacement of Right Knee Joint with Synthetic Approach. Substitute, Uncemented, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRC0JZ ..... Replacement of Right Knee Joint with Synthetic Approach. Substitute, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRT0J9 ..... Replacement of Right Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRT0JA ..... Replacement of Right Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRT0JZ ..... Replacement of Right Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRV0J9 ..... Replacement of Right Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRV0JA ..... Replacement of Right Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC08Z ..... Removal of Spacer from Right Knee Joint, Open and 0SRV0JZ ..... Replacement of Right Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0J9 ..... Replacement of Right Knee Joint with Synthetic Percutaneous Approach. Substitute, Cemented, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0JA .... Replacement of Right Knee Joint with Synthetic Percutaneous Approach. Substitute, Uncemented, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0JZ ..... Replacement of Right Knee Joint with Synthetic Percutaneous Approach. Substitute, Open Approach.

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ICD–10–PCS CODE PAIRS PROPOSED TO BE ADDED TO VERSION 34 ICD–10 MS–DRGS 466, 467, AND 468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS—Continued

Code Code description Code Code description

0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0J9 ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0JA ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0JZ ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0J9 ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0JA ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC38Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0JZ ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0J9 ..... Replacement of Right Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Cemented, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0JA .... Replacement of Right Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Uncemented, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRC0JZ ..... Replacement of Right Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0J9 ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0JA ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRT0JZ ..... Replacement of Right Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0J9 ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0JA ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPC48Z ..... Removal of Spacer from Right Knee Joint, and 0SRV0JZ ..... Replacement of Right Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPC4JZ ...... Removal of Synthetic Substitute from Right Knee and 0SRT0JZ ..... Replacement of Right Knee Joint, Femoral Surface Joint, Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPC4JZ ...... Removal of Synthetic Substitute from Right Knee and 0SRV0JZ ..... Replacement of Right Knee Joint, Tibial Surface Joint, Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRD0J9 ..... Replacement of Left Knee Joint with Synthetic Approach. Substitute, Cemented, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRD0JA .... Replacement of Left Knee Joint with Synthetic Approach. Substitute, Uncemented, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRD0JZ ..... Replacement of Left Knee Joint with Synthetic Approach. Substitute, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRU0JZ ..... Replacement of Left Knee Joint, Femoral Surface Approach. with Synthetic Substitute, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRW0J9 .... Replacement of Left Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRW0JA .... Replacement of Left Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD08Z ..... Removal of Spacer from Left Knee Joint, Open and 0SRW0JZ .... Replacement of Left Knee Joint, Tibial Surface Approach. with Synthetic Substitute, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0J9 ..... Replacement of Left Knee Joint with Synthetic Percutaneous Approach. Substitute, Cemented, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0JA .... Replacement of Left Knee Joint with Synthetic Percutaneous Approach. Substitute, Uncemented, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0JZ ..... Replacement of Left Knee Joint with Synthetic Percutaneous Approach. Substitute, Open Approach.

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ICD–10–PCS CODE PAIRS PROPOSED TO BE ADDED TO VERSION 34 ICD–10 MS–DRGS 466, 467, AND 468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS—Continued

Code Code description Code Code description

0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JZ ..... Replacement of Left Knee Joint, Femoral Surface Percutaneous Approach. with Synthetic Substitute, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0J9 .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0JA .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD38Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0JZ .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Approach. with Synthetic Substitute, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0J9 ..... Replacement of Left Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Cemented, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0JA .... Replacement of Left Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Uncemented, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRD0JZ ..... Replacement of Left Knee Joint with Synthetic Percutaneous Endoscopic Approach. Substitute, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JA .... Replacement of Left Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRU0JZ ..... Replacement of Left Knee Joint, Femoral Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0J9 .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Cemented, Open Ap- proach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0JA .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Uncemented, Open Approach. 0SPD48Z ..... Removal of Spacer from Left Knee Joint, and 0SRW0JZ .... Replacement of Left Knee Joint, Tibial Surface Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach. 0SPD4JZ ...... Removal of Synthetic Substitute from Left Knee and 0SRU0JZ ..... Replacement of Left Knee Joint, Femoral Surface Joint, Percutaneous Endoscopic Approach. with Synthetic Substitute, Open Approach.

We are inviting public comments on Procedures Except Spinal Fusion with example, that ICD–10–PCS procedure our proposal to add the joint revision MCC or Disc Device or Neurostimulator, code 00NY0ZZ (Release lumbar spinal code combinations listed above to the with CC, or without CC/MCC, cord, open approach) is assigned to MS– ICD–10 Version 34 MS–DRGs 466, 467, respectively) in the ICD–10 MS–DRGs DRGs 028 through 030 and MS–DRGs and 468. Version 33. A commenter brought to our 518 through 520. However, ICD–10–PCS c. Decompression Laminectomy attention that codes describing release procedure code 01NB0ZZ (Release of specific peripheral nerve are assigned lumbar nerve, open approach) is Currently, under ICD–10–PCS, the to MS–DRGs 515, 516, and 517 (Other assigned to MS–DRGs 515 through 517. procedure describing a decompression laminectomy is coded for the ‘‘release’’ Musculoskeletal System and Connective We agree with the commenter’s of a specified area of the spinal cord. Tissue O.R. Procedures with MCC, with suggestion. Therefore, for FY 2017, we These decompression codes are CC, and without CC/MCC, respectively). are proposing to reassign the ICD–10– assigned to MS–DRGs 028, 029, and 030 The commenter suggested that a subset PCS procedure codes listed in the (Spinal Procedures with MCC, with CC of these codes also be assigned to MS– following table from MS–DRGs 515 or Spinal Neurostimulators, or without DRGs 028 through 030 and MS–DRGs through 517 to MS–DRGs 028 through CC/MCC, respectively) and to MS–DRGs 518 through 520 for clinical coherence 030 and MS–DRGs 518 through 520 518, 519, and 520 (Back and Neck purposes. The commenter stated, for under the ICD–10 MS–DRGs Version 34.

ICD–10–PCS procedure code Description

01N00ZZ ...... Release cervical plexus, open approach. 01N03ZZ ...... Release cervical plexus, percutaneous approach. 01N04ZZ ...... Release cervical plexus, percutaneous endoscopic approach. 01N10ZZ ...... Release cervical nerve, open approach. 01N13ZZ ...... Release cervical nerve, percutaneous approach.

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ICD–10–PCS procedure code Description

01N14ZZ ...... Release cervical nerve, percutaneous endoscopic approach. 01N80ZZ ...... Release thoracic nerve, open approach. 01N83ZZ ...... Release thoracic nerve, percutaneous approach. 01N84ZZ ...... Release thoracic nerve, percutaneous endoscopic approach. 01N90ZZ ...... Release lumbar plexus, open approach. 01N93ZZ ...... Release lumbar plexus, percutaneous approach. 01N94ZZ ...... Release lumbar plexus, percutaneous endoscopic approach. 01NA0ZZ ...... Release lumbosacral plexus, open approach. 01NA3ZZ ...... Release lumbosacral plexus, percutaneous approach. 01NA4ZZ ...... Release lumbosacral plexus, percutaneous approach. 01NB0ZZ ...... Release lumbar nerve, open approach. 01NB3ZZ ...... Release lumbar nerve, percutaneous approach. 01NB4ZZ ...... Release lumbar nerve, percutaneous endoscopic approach.

We are inviting public comments on • M40.50 (Lordosis, unspecified, site for ICD–10 MS–DRGs 332, 333, and 334 our proposal. unspecified); (Rectal Resection with MCC, with CC • M40.55 (Lordosis, unspecified, and without CC/MCC, respectively) d. Lordosis thoracolumbar region); under MDC 6 (Diseases and Disorders of • An ICD–10 replication issue involving M40.56 (Lordosis, unspecified, the Digestive System) and the lumbar region); and four diagnosis codes related to lordosis • GROUPER logic for MS–DRGs 734 and (excessive curvature of the lower spine) M40.57 (Lordosis, unspecified, 735 (Pelvic Evisceration, Radical was discovered in MS–DRGs 456, 457, lumbosacral region). Hysterectomy and Radical Vulvectomy We are proposing to remove the above and 458 (Spinal Fusion Except Cervical with CC/MCC and without CC/MCC, four diagnosis codes from the secondary with Spinal Curvature or Malignancy or respectively) under MDC 13 (Diseases diagnosis list. We also are proposing to Infection or Extensive Fusions with maintain these same four codes in the and Disorders of the Female MCC, with CC, and without CC/MCC). logic for the principal diagnosis list. Reproductive System) include a These MS–DRGs contain specific logic This proposed change for MS–DRGs ‘‘cluster’’ of ICD–10–PCS procedure that requires a principal diagnosis 456, 457, and 458 would be effective codes that describe pelvic evisceration. describing a spinal curvature, a October 1, 2016, in the ICD–10 MS– A ‘‘cluster’’ is the term used to describe malignancy, or infection or a secondary DRGs Version 34. a circumstance when a combination of diagnosis that describes a spinal We are inviting public comments on ICD–10–PCS procedure codes is needed curvature disorder related to another our proposals. to fully satisfy the equivalent meaning condition. of an ICD–9–CM procedure code for it Under the ICD–10 MS–DRGs Version 9. MDC 13 (Diseases and Disorders of to be considered a plausible code 33, the following diagnosis codes were the Female Reproductive System): translation. The code cluster in MS– listed on the principal diagnosis list and Pelvic Evisceration DRGs 332, 333, and 334 and MS–DRGs the secondary diagnosis list for MS– In the ICD–10 MS–DRG Definitions 734 and 735 is shown in the table DRGs 456, 457, and 458: Manual Version 33, the GROUPER logic below.

ICD–10–PCS procedure code Description in cluster

0TTB0ZZ ...... Resection of bladder, open approach. 0TTD0ZZ ...... Resection of urethra, open approach. 0UT20ZZ ...... Resection of bilateral ovaries, open approach. 0UT70ZZ ...... Resection of bilateral fallopian tubes, open approach. 0UT90ZZ ...... Resection of uterus, open approach. 0UTC0ZZ ...... Resection of cervix, open approach. 0UTG0ZZ ...... Resection of vagina, open approach.

Pelvic evisceration (or exenteration) is respectively. The inclusion term in the the terms in parentheses do not have to a procedure performed to treat ICD–9–CM Tabular List of Diseases for be documented to report the code. gynecologic cancers (cervical, uterine, pelvic evisceration (procedure code Because the removal of sigmoid colon vulvar, and vaginal, among others) and 68.8) was ‘‘Removal of ovaries, tubes, and the removal of rectum were involves resection of pelvic structures uterus, vagina, bladder, and urethra classified as non-essential modifiers such as the procedures described by the (with removal of sigmoid colon and under ICD–9–CM, documentation that cluster of procedure codes listed above. rectum).’’ In the ICD–9–CM Tabular identified that removal of those body Under the ICD–9–CM MS–DRGs List, the terms shown in parentheses are sites occurred was not required to report Version 32, procedure code 68.8 (Pelvic called a ‘‘non-essential modifier’’. A the procedure code describing pelvic evisceration) was used to report pelvic ‘‘non-essential modifier’’ is used in the evisceration (procedure code 68.8). In evisceration. ICD–9–CM procedure code classification to identify a other words, when a pelvic evisceration 68.8 also was assigned to ICD–9–CM supplementary word that may, or may procedure was performed and included MS–DRGs 332, 333, and 334 and MS– not, be present in the statement of a removal of other body sites (ovaries and DRGs 734 and 735 in MDCs 6 and 13, disease or procedure. In other words, tubes, among others) listed in the

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inclusion term, absent the terms in Disturbances and Intellectual 945 and 946. The requestor previously parentheses, procedure code 68.8 could Disability’’, effective October 1, 2016, in recommended that CMS review be reported and grouped appropriately the ICD–10 MS–DRGs Version 34. diagnosis codes in ICD–10–CM category to MDC 13 under MS–DRGs 734 and I69 for possible addition to MS–DRGs 11. MDC 23 (Factors Influencing Health 735. When a pelvic evisceration 945 and 946. The requestor stated that, Status and Other Contacts With Health procedure was performed and removal upon further review, they believe that a Services): Logic of MS–DRGs 945 and of the body sites listed in the inclusion great number of diagnosis codes beyond 946 (Rehabilitation With and Without term occurred, including the terms in sequelae of stroke (ICD–10–CM category CC/MCC, Respectively) parentheses, procedure code 68.8 could I69) would need to be added in order to be reported and grouped appropriately We received several requests to replicate the logic of the ICD–9–CM to MDC 6 under MS–DRGs 332 through examine the MS–DRG logic for MS– MS–DRGs. Therefore, they modified 334. DRGs 945 and 946 (Rehabilitation with their recommendation as follows: Under ICD–10–PCS, users are CC/MCC and without CC/MCC, • Designate MS–DRGs 945 and 946 as instructed to code separately the organs respectively). The requestors were pre-major diagnostic categories (Pre- or structures that are actually removed concerned that ICD–9–CM codes that MDC) MS–DRGs so that cases are and for which there is a distinctly clearly identified an encounter for grouped to these MS–DRGs on the basis defined body part. Therefore, the case of rehabilitation services such as of the procedure code rather than the a patient who undergoes a pelvic procedure codes V57.89 (Care involving principal diagnosis. The requestor evisceration (exenteration) that involves other specified rehabilitation procedure) stated that the ICD–10–PCS the removal of the sigmoid colon and and V57.9 (Care involving unspecified rehabilitation codes (Section F, Physical rectum would have each of those rehabilitation procedure) were not Rehabilitation and Diagnostic procedure sites (sigmoid colon and included in ICD–10–CM Version 33. In Audiology, Body system 0, rectum) coded and reported separately addition, the requestors pointed out that Rehabilitation) should be used to group (in addition to the procedure codes ICD–10–CM has significantly changed cases to MS–DRGs 945 and 946 similar displayed in the cluster). In this the guidelines for coding of admissions/ to how the MS–DRG GROUPER logic scenario, if the principal diagnosis is a encounters for rehabilitation. The currently treats lung transplants and condition from the MDC 6 diagnosis list, requestors pointed out that under ICD– tracheostomies. This would ensure that the case would group to MS–DRGs 332, 9–CM, Section I.B.15. of the Official the rehabilitation procedure codes drive 333, and 334, regardless of the code Guidelines for Coding and Reporting the MS–DRG assignment. cluster. In other words, it would not be indicates that ‘‘when the purpose for the • Revise ICD–10–PCS Official necessary to retain the code cluster admission/encounter is rehabilitation, Guidelines for Coding and Reporting describing procedures performed on sequence the appropriate V code from and designate that the ICD–10–PCS female pelvic organs in MDC 6. category V57, Care involving use of rehabilitation codes be used only for Therefore, for FY 2017, we are rehabilitation procedures, as the admissions for rehabilitation therapy. proposing to remove the procedure code principal/first listed diagnosis.’’ The We acknowledge that ICD–10–CM cluster for pelvic evisceration requestors stated that the concept of the does not have clear diagnosis codes that procedures from MDC 6 under the ICD– ICD–9–CM category V57 codes is no indicate the reason for the encounter 10 MS–DRGs Version 34. The cluster longer valid in ICD–10–CM and the was for rehabilitation services. For that would remain in ICD–10 MDC 13 under guidelines have been revised to provide reason, CMS had to modify the MS– MS–DRGs 734 and 735 only. We are greater specificity. Instead, the DRG logic using ICD–10–PCS procedure inviting public comments on our requestors added, the ICD–10–CM codes to assign these cases to MS–DRGs proposal. guidelines state in Section II.K., ‘‘When 945 and 946. The logic used in MS– the purpose for the admission/ DRGs 945 and 946 is shown in the 10. MDC 19 (Mental Diseases and encounter is rehabilitation, sequence Definitions Manual Version 33, which is Disorders): Proposed Modification of first the code for the condition for posted on the CMS Web site at: Title of MS–DRG 884 (Organic which the service is being performed. https://www.cms.gov/Medicare/ Disturbances and Mental Retardation) For example, for an admission/ Medicare-Fee-for-Service-Payment/ We received a request to change the encounter for rehabilitation for right- AcuteInpatientPPS/FY2016-IPPS-Final- title of MS–DRG 884 (Organic sided dominant hemiplegia following a Rule-Home-Page-Items/FY2016-IPPS- Disturbances and Mental Retardation) cerebrovascular infarction, report code Final-Rule-Data-Files.html?DLPage=1& under MDC 19 (Mental Diseases and I69.351, Hemiplegia and hemiparesis DLEntries=10&DLSort=0&DLSortDir= Disorders) to ‘‘MS–DRG 884 (Organic following cerebral infarction affecting ascending. We also posted a Frequently Disturbances and Intellectual right dominant side, as the first-listed or Asked Question section to explain how Disability)’’ to reflect more recent principal diagnosis.’’ inpatient admissions are assigned to terminology used to appropriately Given this lack of ICD–10–CM codes MS–DRGs 945 and 946, which is posted describe the latter medical condition in to indicate that the reason for the on the CMS Web site at: https:// the MDC. encounter was for rehabilitation, some questions.cms.gov/faq.php?id=5005& We agree with the requestor that the requesters asked that CMS review ICD– faqId=12548. As indicated in the reference to the phrase ‘‘Mental 10–CM codes for conditions requiring Frequently Asked Question section, the Retardation’’ should be changed to rehabilitation (such as codes from ICD–10–CM codes required a different ‘‘Intellectual Disability’’, to reflect the category I69) and add them to MS–DRGs approach to make sure the same cases current terminology used to describe the 945 and 946 when rehabilitation captured with ICD–9–CM codes would condition. Therefore, we are proposing services are provided in order to be captured with ICD–10–CM codes. As to change the title of MS–DRG 884 as replicate the logic found in the ICD–9– stated earlier, ICD–10–CM does not requested by the requestor. CM MS–DRG GROUPER. The requestors contain specific codes for encounters for We are inviting public comments on did not suggest any specific ICD–10–CM rehabilitation such as ICD–9–CM our proposal to change the title of MS– codes to add to MS–DRGs 945 and 946. procedure codes V57.89 and V57.9. In DRG 884 from ‘‘Organic Disturbances One requestor made a specific order to replicate the ICD–9–CM MS– and Mental Retardation’’ to ‘‘Organic recommendation for updating MS–DRGs DRG logic using ICD–10–CM and ICD–

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10–PCS codes, CMS developed the new MDC where the principal diagnosis Information Management Association logic included in the MS–DRG Version code is found. (AHIMA) to make ICD–10–PCS 33 Definitions Manual. Example: The encounter has a principal guidelines generic and applicable to all The Frequently Asked Question diagnosis code of S02119D (Unspecified types of inpatient facilities and for all section explains that, in order to be fracture of occiput, subsequent encounter for payer types. The current ICD–10–PCS assigned to ICD–10 MS–DRG 945 or 946, fracture with routine healing). This code is Guidelines for Coding and Reporting do a case must first have a principal included in MDC 8. Therefore, diagnosis not support this recommendation that diagnosis from MDC 23 (Factors code S02119D and a procedure code from the rehabilitation services could only be Influencing Health Status and Other MS–DRG 945 and 946 Rehabilitation coded and reported if the admission was Contacts with Health Services), where Procedure list, such as procedure code specifically for rehabilitation therapy. MS–DRGs 945 and 946 are assigned. F0706GZ (Therapeutic Exercise Treatment of The ICD–10–PCS codes were created to This is currently the logic with the ICD– Neurological System—Head and Neck using Aerobic Endurance and Conditioning accurately capture services provided. 9–CM MS–DRGs Version 33 where one Equipment) would not lead to assignment of We also have concerns about would first have to have a MDC 23 the case to MS–DRGs 945 and 946 because designating MS–DRGs 945 and 946 as principal diagnosis. A complete list of the principal diagnosis code is not included pre-MDCs so that cases are grouped to ICD–10–CM principal diagnoses for in MDC 23. these MS–DRGs on the basis of a MDC 23 can be found in the ICD–10 rehabilitation procedure code rather Diagnosis code S02119D is included MS–DRGs Version 33 Definitions than a principal diagnosis. Pre-MDCs in MDC 8 as was the ICD–9–CM Manual which is posted on the FY 2016 were an addition to Version 8 of the predecessor code, V54.19 (Aftercare for IPPS Final Rule Home Page under the Diagnosis Related Groups. This was the healing traumatic fracture of other link for the FY 2016 Final Rule Data first departure from the use of principal bone). Therefore, these cases would be Files at: https://www.cms.gov/Medicare/ diagnosis as the initial variable in DRG assigned to MS–DRGs 559, 560, and 561 Medicare-Fee-for-Service-Payment/ and subsequently MS–DRG assignment. AcuteInpatientPPS/FY2016-IPPS-Final- (Aftercare, Musculoskeletal System and For Pre-MDC DRGs, the initial step in Rule-Home-Page-Items/FY2016-IPPS- Connective Tissue with MCC, with CC, DRG assignment was not the principal Final-Rule-Data-Files.html. Look under and without MCC/CC, respectively) diagnosis, but was instead certain the Related Links section and select the within MDC 8. surgical procedures with extremely high ICD–10–CM/PCS MS–DRG v33 At this time, we do not have any costs such as heart transplant, liver Definitions Manual Table of Contents claims data that indicate how well this transplant, bone marrow transplant, and Full Titles HTML Version file. Open MS–DRG logic is working. We are tracheostomies performed on patients this file and the Table of Contents page hesitant to simply add more codes from on long-term ventilation. These types of will appear. Click on the link for MDC category I69 without evaluating the services were viewed as being very 23 (Factors Influencing Health Status impact of doing so using claims data. resource intensive. Recognizing these and Other Contacts with Health We also do not have claims data to resource intensive services and Services). On the next page that opens indicate whether or not there have been assigning them to one of the high-cost (MDC 23), click on the link titled ‘‘MDC changes in the types or numbers of cases MS–DRGs assures appropriate payment 23 Assignment of Diagnosis Codes’’ on assigned to MS–DRGs 945 and 946. We even if the patient is admitted for a the upper left side of the screen. By welcome specific suggestions of codes variety of principal diagnoses. We using the navigation arrows at the top to be added to MS–DRGs 945 and 946 believe it is inappropriate to consider right hand side of the page, users can based on hospitals’ experience in coding rehabilitation services in the same group review the 24 pages listing all of the these cases. We would evaluate these as high-cost procedures such as heart principal diagnosis codes assigned to suggestions once we have claims data to transplants. There is the significant MDC 23, including many injury codes study the impact. potential of patients being classified out for subsequent encounters. We have major concerns about the of higher paying surgical MS–DRGs in Under the GROUPER Logic, cases are recommendation to revise the ICD–10– other MDCs and into the lower paying assigned to MS–DRGs 945 and 946 in PCS Official Guidelines for Coding and MS–DRGs 945 and 946 based on the one of two ways as described in the Reporting and designate that the ICD– reporting of a rehabilitation procedure Definitions Manual as follows: 10–PCS rehabilitation codes be assigned code if these MS–DRGs are moved to the • The encounter has a principal and reported only for admissions for Pre-MDCs. We examined claims data for diagnosis code Z44.8 (Encounter for rehabilitation therapy. This would be a cases reporting a rehabilitation therapy fitting and adjustment of other external major new precedent for developing code and found cases assigned to a wide prosthetic devices) or Z44.9 (Encounter coding and reporting guidelines based variety of both medical and surgical for fitting and adjustment of unspecified on one specific payer’s payment polices, MS–DRGs. The current coding and external prosthetic device). Both of in this case Medicare inpatient acute reporting of rehabilitation procedure these codes are included in the list of care prospective payment system codes for services provided suggest the principal diagnosis codes assigned to policies. Hospitals would need to know potential of significant payment MDC 23. who the payer was prior to knowing problems if MS–DRGs 945 and 946 were • The encounter has an MDC 23 whether or not they could assign a code assigned to the Pre-MDC section and the principal diagnosis code and one of the for a rehabilitation service that they reporting of cases with a rehabilitation rehabilitation procedure codes listed provided. If those payment policies code led to an inappropriate under MS–DRGs 945 and 946. change, the hospital coder would need reassignment to the lower paying If the case does not have a principal to be aware of those changes in order to medical MS–DRGs 945 and 946. diagnosis code from the MDC 23 list, determine whether or not they could The following are only a few but does have a procedure code from the submit a code that captures the fact that examples of current claims data that list included under the Rehabilitation a rehabilitation service was provided. showed the hospital reported a Procedures for MS–DRGs 945 and 946, CMS has worked with the Centers for rehabilitation therapy procedure code the case will not be assigned to MS– Disease Control and Prevention (CDC), for services provided which did not DRGs 945 or 946. The case will instead the American Hospital Association impact the MS–DRG assignment. Under be assigned to a MS–DRG within the (AHA), and the American Health the suggested approach of making MS–

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DRGs 945 and 946 a Pre-MDC, these screens. The MCE screens are designed • Pediatric—Age is 0–17 years cases would move from the to identify cases that require further inclusive (e.g., Reye’s syndrome, routine appropriately assigned MS–DRGs which review before classification into an MS– child health exam). may have significantly higher average DRG. • Maternity—Age range is 12–55 costs, to MS–DRGs 945 and 946, which In the FY 2016 IPPS/LTCH PPS final years inclusive (e.g., diabetes in have much lower average costs. Based rule (80 FR 49409 through 49412), we pregnancy, antepartum pulmonary on claims data from the December 2015 finalized the ICD–10 Definitions of complication). • update of the FY 2015 MedPAR file, the Medicare Code Edits (ICD–10 MCE) Adult—Age range is 15–124 years average costs for cases reported in MS– Version 33. ICD–10 MCE Version 33 was inclusive (e.g., senile delirium, mature DRGs 945 and 946 were $8,531 and based on the FY 2015 ICD–9–CM MCE cataract). $8,411, respectively. Version 32 and the draft ICD–10 MCE (1) Newborn Diagnosis Category Examples of cases reporting a Version 32 that had been made publicly Under the ICD–10–CM Official rehabilitation therapy code that would available for comments in November Guidelines for Coding and Reporting move to MS–DRGs 945 and 946 based 2014 on the ICD–10 MS–DRG (available on the Web site at: https:// on the suggested logic change are as Conversion Project Web site at: https:// follows: www.cms.gov/Medicare/Coding/ICD10/ www.cms.gov/Medicare/Coding/ICD10/ 2016-ICD-10-CM-and-GEMs.html), there • An MS–DRG 460 (Spinal Fusion ICD-10-MS-DRG-Conversion- Except Cervical with MCC) case with are general guidelines and chapter- Project.html. In August 2015, we posted specific coding guidelines. The chapter- average costs of $42,390; the finalized FY 2016 ICD–10 MCE • specific guidelines state that diagnosis An MS–DRG 464 (Wound Version 33 manual file and an ICD–9– Debridement and Skin Graft Excluding codes from Chapter 16 (Certain CM MCE Version 33.0A manual file (for Conditions Originating in the Perinatal Hand, for Musculoskeletal Tissue analysis purposes only). The links to Disease with CC) case with average costs Period) may be reported throughout the these MCE manual files, along with the life of the patient if the condition is still of $55,633; links to purchase the mainframe and • An MS–DRG 579 (Other Skin, present. The requestors noted that computer software for the MCE Version several codes from this Chapter 16 Subcutaneous Tissue and Breast 33 (and ICD–10 MS–DRGs) were posted Procedure with MCC) case with average appear on the ICD–10 MCE Version 33 on the CMS Web site through the FY Age conflict edit for the newborn costs of $63,834; 2016 IPPS Final Rule Home Page at: • An MS–DRG 854 (Infectious and diagnosis category. Codes from this https://www.cms.gov/Medicare/ chapter are included in the P00 through Parasitic Diseases with O.R. procedure Medicare-Fee-for-Service-Payment/ with MCC) case with average costs of P96 code range. Therefore, the AcuteInpatientPPS/FY2016-IPPS-Final- requestors believed that because the $62,455; and Rule-Home-Page.html?DLSort=0& • An MS–DRG 021 (Intracranial chapter-specific guidelines state that DLEntries=10&DLPage=1&DLSortDir= Vascular Procedures with Principal codes within this chapter may be ascending. Diagnosis of Hemorrhage with CC) case reported throughout the life of a patient, with average costs of $90,522. After implementation of the ICD–10 all codes within this range (P00 through Our clinical advisors reviewed this MCE Version 33, we received several P96) should be removed from the issue and agreed that we should wait for requests to examine specific code edit newborn diagnosis category on the Age ICD–10 claims data to become available lists that the requestors believed were conflict edit code list. prior to proposing updates to MS–DRGs incorrect and that affected claims We examined the newborn diagnosis 945 and 946. They did not support processing functions. We received category on the age conflict edit list in adding MS–DRGs 945 and 946 to the requests to review the MCE relating the ICD–9–CM MCE Version 32 in Pre-MDCs because the rehabilitation specifically to the Age conflict edit, the comparison to the ICD–9–CM chapter- services are not as resource intensive as Sex conflict edit, the Non-covered specific guidelines. Under ICD–9–CM, are the other MS–DRGs in the Pre-MDC procedure edit, and the Unacceptable Chapter 15 (Certain Conditions section. principal diagnosis code edit. We Originating in the Perinatal Period) Considering these ICD–10–PCS discuss these code edit issues below. includes codes within the 760 through guideline concerns, the structure of the a. Age Conflict Edit 779 range. We found that the same pre-MDC section, and the lack of any chapter-specific guideline under ICD–10 ICD–10 claims data for MS–DRGs 945 In the MCE, the Age conflict edit exists under ICD–9–CM: Diagnosis and 946, we are proposing to maintain exists to detect inconsistencies between codes from Chapter 15 may be reported the current structure of MS–DRGs 945 a patient’s age and any diagnosis on the throughout the life of the patient if the and 946 and reconsider the issue when patient’s record; for example, a 5-year- condition is still present. Similar to the ICD–10 claims data become available old patient with benign prostatic ICD–10 MCE Version 33 newborn and prior to proposing any updates. hypertrophy or a 78-year-old patient diagnosis category in the Age conflict We are inviting public comments on coded with a delivery. In these cases, edit code list, we noted that several our proposal to maintain the current the diagnosis is clinically and virtually codes from this Chapter 15 appear on structure of MS–DRGs 945 and 946. impossible for a patient of the stated the ICD–9–CM MCE Version 32 Age age. Therefore, either the diagnosis or conflict edit for the newborn diagnosis 12. Proposed Medicare Code Editor the age is presumed to be incorrect. category. (MCE) Changes Currently, in the MCE, the following Because the full definition of the The Medicare Code Editor (MCE) is a four age diagnosis categories appear chapter-specific guideline for ‘‘Certain software program that detects and under the Age conflict edit and are Conditions Originating in the Perinatal reports errors in the coding of Medicare listed in the manual and written in the Period’’ clearly states the codes within claims data. Patient diagnoses, software program: the chapter may be reported throughout procedure(s), and demographic • Newborn—Age of 0 years; a subset the life of the patient if the condition is information are entered into the of diagnoses intended only for still present, we believe that, Medicare claims processing systems and newborns and neonates (e.g., fetal historically, under ICD–9–CM, this was are subjected to a series of automated distress, perinatal jaundice). the rationale for inclusion of the

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diagnosis codes that were finalized for within category P07 (Disorders of In the meantime, to address claims the newborn diagnosis category under newborn related to short gestation and processing concerns related to the the Age conflict edit (in code range 760 low birth weight, not elsewhere newborn diagnosis category on the Age through 779). For example, under ICD– classified) are for use for a child or adult conflict edit code list, we are proposing 9–CM, there are four diagnosis codes in who was premature or had a low birth to remove all the ICD–10–CM diagnoses the 760.6x series that specifically weight as a newborn and this condition in the code range of P00 through P96 include the term ‘‘newborn’’ in the title. is affecting the patient’s current health from the newborn diagnosis category in These diagnosis codes are: status. Therefore, we agree that codes the Age conflict code edit list for the • 760.61 (Newborn affected by within the range of P07.00 through ICD–10 MCE for FY 2017. We are amniocentesis); P07.39 should not be listed under inviting public comments on our • 760.62 (Newborn affected by other newborn diagnosis category on the Age proposal. We also are soliciting public in utero procedure); conflict edit code list in the ICD–10 comments on the appropriateness of the • 760.63 (Newborn affected by other MCE. It is unclear why this range of other diagnosis codes currently listed surgical operations on mother during codes within category P07 is under the newborn diagnosis category pregnancy); and distinguished separately when under in the Age conflict edit in the ICD–10 • 760.64 (Newborn affected by the General Perinatal Rules for Chapter MCE Version 33. We refer readers to previous surgical procedure on mother 16 (Certain Conditions Originating in Table 6P.1a. associated with this not associated with pregnancy). the Perinatal Period), section I.C.16.a.1. proposed rule (which is available via Under the ICD–9–CM classification, states that diagnosis codes from Chapter the Internet on the CMs Web site at: the chapter-specific guidelines in 16 may be reported throughout the life http://www.cms.gov/Medicare/ Chapter 15 (Certain Conditions of the patient if the condition is still Medicare-Fee-for-Service-Payment/ Originating in the Perinatal Period) state present. In addition, the guideline at AcuteInpatientPPS/index.html) for that, for coding and reporting purposes, section I.C.16.a.4. states that ‘‘should a review of the diagnosis codes we are the perinatal period is defined as before condition originate in the perinatal proposing to remove. In addition, for FY birth through the 28th day following period, and continue throughout the life 2017, we are examining the need to birth. As such, for coding and reporting of the patient, the perinatal code should revise the description for the newborn purposes, a patient that is beyond the continue to be used regardless of the diagnosis category in the Age conflict 28th day of life is no longer considered patient’s age.’’ According to these edit under the MCE. The current a newborn. Therefore, we believe that general guidelines, we could assume description as written, Newborn—Age the diagnosis codes listed on the that potentially all codes within Chapter of 0 years; a subset of diagnoses newborn diagnosis category in the Age 16 in the code range of P00 through P96 intended only for newborns and conflict edit code list are, in fact, should be considered for removal from neonates (e.g., fetal distress, perinatal appropriate because they identify what the newborn diagnosis category on the jaundice), is not consistent with the the title of Chapter 15 describes (certain Age conflict edit code list. However, a instructions for reporting the diagnosis conditions specific to beginning in the subsequent section of Chapter 16, codes in Chapter 16. We are inviting perinatal period); that is, a newborn. section 1.C.16.c.2. (Codes for conditions public comments on our proposal to The intent of the diagnosis codes specified as having implication for revise the description of the newborn included on the Age conflict edit code future health care needs), instructs users diagnosis category in the Age conflict list is to identify claims where any one to assign codes for conditions that have edit under the MCE. of the listed diagnoses is reported for a been specified by the provider as having (2) Pediatric Diagnosis Category patient who is beyond the 28th day of implications for future health care life. If that definition is met according Under the ICD–10 MCE Version 33, needs. Immediately below that to the patient’s date of birth, the edit is the pediatric diagnosis category for the instruction is a note which states: ‘‘This correctly triggered in those cases. Age conflict edit considers the age range guideline should not be used for adult Transitioning to the ICD–10 MCE was of 0 to 17 years inclusive. For that patients.’’ based on replication of the ICD–9–CM reason, the diagnosis codes on this Age based MCE (in parallel with the The ICD–10–CM Official Guidelines conflict edit list would be expected to transition to the ICD–10 MS–DRGs, for Coding and Reporting are updated apply to conditions or disorders specific which was based on replication of the separately from the IPPS rulemaking to that age group only. The code list for ICD–9–CM MS–DRGs). Therefore, the process. Due to the confusion with the the pediatric diagnosis category in the diagnosis codes included in the chapter-specific guidelines for codes in Age conflict edit currently includes 12 newborn diagnosis category on the Age Chapter 16 and how they impact the diagnosis codes that fall within the F90 conflict edit code list in the ICD–10 newborn diagnosis category on the Age through F98 code range. These codes MCE are a replication of the diagnosis conflict edit code list, we believe it were included as a result of replication code descriptions included on the would be beneficial to fully evaluate the from the ICD–9–CM MCE Version 32 newborn diagnosis category on the Age intent of these guidelines with the and the draft ICD–10 MCE Version 32. conflict edit code list under the ICD–9– Centers for Disease Control’s (CDC’s) We received a request to review the CM MCE. However, the chapter-specific National Center for Health Statistics 12 ICD–10–CM diagnosis codes listed in guideline in ICD–10–CM Chapter 16, (NCHS) because NCHS has the lead the following table because they appear section C.16.e. (Low birth weight and responsibility for the ICD–10–CM to conflict with guidance in the ICD–10– immaturity status), specifies that codes diagnosis codes. CM classification:

ICD–10–CM diagnosis Description code

F93.0 ...... Separation anxiety disorder of childhood. F93.8 ...... Other childhood emotional disorders. F93.9 ...... Childhood emotional disorder, unspecified.

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ICD–10–CM diagnosis Description code

F94.1 ...... Reactive attachment disorder of childhood. F94.2 ...... Disinhibited attachment disorder of childhood. F94.8 ...... Other childhood disorders of social functioning. F94.9 ...... Childhood disorder of social functioning, unspecified. F98.21 ...... Rumination disorder of infancy. F98.29 ...... Other feeding disorders of infancy and early childhood. F98.3 ...... Pica of infancy and childhood. F98.8 ...... Other specified behavioral and emotional disorders with onset usually occurring in childhood and adolescence. F98.9 ...... Unspecified behavioral and emotional disorders with onset usually occurring in childhood and adolescence.

Under the ICD–10–CM Tabular List of Because the note specifically states 10 MCE Version 33 pediatric diagnosis Diseases and Injuries, Chapter 5 that these codes may be used regardless category in the Age conflict edit. The (Mental, Behavioral and of the age of a patient, we believe they requestor stated that ICD–10–CM Neurodevelopmental Disorders) should not be included on the pediatric diagnosis codes describing infantile and contains a section titled ‘‘Behavioral diagnosis category on the Age conflict juvenile cataracts, by their titles, appear and emotional disorders with onset edit code list. Therefore, we are to merit inclusion on the pediatric usually occurring in childhood and proposing to remove the 12 codes that diagnosis category on the Age conflict adolescence’’ which includes codes for fall within the F90 through F98 code edit code list. However, according to the the F90 to F98 code range. At the range currently listed for the pediatric requestor, the diagnosis is not beginning of this tabular section is an diagnosis category on the ICD–10 MCE constrained to a patient’s age, but rather instructional ‘‘note’’ that states: ‘‘Codes age conflict edit code list, effective the ‘‘infantile’’ versus ‘‘juvenile’’ within categories F90–F98 may be used October 1, 2016, for FY 2017. We are reference is specific to the type of regardless of the age of a patient. These inviting public comments on our cataract the patient has. These diagnosis disorders generally have onset within proposal. codes that are currently listed for the the childhood or adolescent years, but We also received a request to review pediatric diagnosis category in the ICD– may continue throughout life or not be whether another group of diagnosis 10 MCE Age conflict edit code list are diagnosed until adulthood.’’ codes is clinically incorrect for the ICD– as follows:

ICD–10–CM diagnosis Description code

H26.001 ...... Unspecified infantile and juvenile cataract, right eye. H26.002 ...... Unspecified infantile and juvenile cataract, left eye. H26.003 ...... Unspecified infantile and juvenile cataract, bilateral. H26.009 ...... Unspecified infantile and juvenile cataract, unspecified eye. H26.011 ...... Infantile and juvenile cortical, lamellar, or zonular cataract, right eye. H26.012 ...... Infantile and juvenile cortical, lamellar, or zonular cataract, left eye. H26.013 ...... Infantile and juvenile cortical, lamellar, or zonular cataract, bilateral. H26.019 ...... Infantile and juvenile cortical, lamellar, or zonular cataract, unspecified eye. H26.031 ...... Infantile and juvenile nuclear cataract, right eye. H26.032 ...... Infantile and juvenile nuclear cataract, left eye. H26.033 ...... Infantile and juvenile nuclear cataract, bilateral. H26.039 ...... Infantile and juvenile nuclear cataract, unspecified eye. H26.041 ...... Anterior subcapsular polar infantile and juvenile cataract, right eye. H26.042 ...... Anterior subcapsular polar infantile and juvenile cataract, left eye. H26.043 ...... Anterior subcapsular polar infantile and juvenile cataract, bilateral. H26.049 ...... Anterior subcapsular polar infantile and juvenile cataract, unspecified eye. H26.051 ...... Posterior subcapsular polar infantile and juvenile cataract, right eye. H26.052 ...... Posterior subcapsular polar infantile and juvenile cataract, left eye. H26.053 ...... Posterior subcapsular polar infantile and juvenile cataract, bilateral. H26.059 ...... Posterior subcapsular polar infantile and juvenile cataract, unspecified eye. H26.061 ...... Combined forms of infantile and juvenile cataract, right eye. H26.062 ...... Combined forms of infantile and juvenile cataract, left eye. H26.063 ...... Combined forms of infantile and juvenile cataract, bilateral. H26.069 ...... Combined forms of infantile and juvenile cataract, unspecified eye. H26.09 ...... Other infantile and juvenile cataract.

Our clinical advisors reviewed the list and treated very rapidly to prevent October 1, 2016. We are inviting public of diagnoses presented above and amblyopia. Therefore, for FY 2017, we comments on our proposal. confirmed that these diagnosis codes are are not proposing to remove these codes As stated earlier, for the pediatric appropriate to include in the ICD–10 under the pediatric diagnosis category diagnosis category in the Age conflict MCE for the pediatric diagnosis category in the Age conflict edit. We are edit, the MCE considers the age range of in the Age conflict edit because the proposing to maintain this list in the 0 through 17 years inclusive. In the diseases described by these codes are ICD–10 MCE Version 34, effective ICD–10 MCE Version 33, there are four typically diagnosed in early childhood diagnosis codes describing the body

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mass index (BMI) for pediatric patients the Age conflict edit code list. The four the BMI percentiles for pediatric in the pediatric diagnosis category on ICD–10–CM diagnosis codes describing patients are as follows:

ICD–10–CM diagnosis Description code

Z68.51 ...... Body mass index (BMI) pediatric, less than 5th percentile for age. Z68.52 ...... Body mass index (BMI) pediatric, 5th percentile to less than 85th percentile for age. Z68.53 ...... Body mass index (BMI) pediatric, 85th percentile to less than 95th percentile for age. Z68.54 ...... Body mass index (BMI) pediatric, greater than or equal to 95th percentile for age.

Under the ICD–10–CM Tabular List of appropriate to report for adult patients, on the Diagnoses for females only edit Diseases and Injuries, the BMI pediatric noting that if a patient is diagnosed with code list. Therefore, when the diagnosis diagnosis codes are designated for use short stature as a child, the patient is reported for a male patient, the edit in persons 2 through 20 years of age. could very well carry over that will be triggered. However, the requester The percentiles are based on the growth diagnosis into adulthood. noted that the term ‘‘postmenopausal’’ charts published by the CDC. As a result During our review of the issue relating is enclosed in parentheses and is a of the age discrepancy between the MCE to the subcategory R62.5 pediatric ‘‘non-essential modifier.’’ A ‘‘non- pediatric diagnosis category in the Age diagnosis category on the Age conflict essential modifier’’ is used in the ICD– conflict edit (ages 0 through 17) and the edit code list, we identified another 10–CM classification to identify a Tabular reference for the BMI pediatric diagnosis code that also appeared supplementary word that may, or may codes (ages 2 through 20), we are appropriate to report for an adult not be present in the statement of a proposing to remove ICD–10 diagnosis patient. ICD–10–CM diagnosis code disease or procedure. In other words, codes Z68.51, Z68.52, Z68.53, and Y93.6A (Activity, physical games the term in parentheses does not have generally associated with school recess, Z68.54 from the ICD–10 MCE pediatric to be documented to report the code. If summer camp and children) is one of diagnosis category on the Age conflict the medical record documentation states several activity codes included in ICD– edit code list for Version 34, effective a female patient is undergoing hormone FY 2017. We are inviting public 10–CM Chapter 20 (External Causes of replacement therapy, the documentation comments on our proposal. Morbidity). This diagnosis code One requestor also asked that CMS includes games such as dodge ball and supports assignment of the case to ICD– review the ICD–10–CM diagnosis codes captures the flag, which one can 10–CM diagnosis code Z79.890 currently included in ICD–10–CM reasonably expect an adult to be (Hormone replacement therapy category R62 (Lack of expected normal engaged in for physical activity. (postmenopausal)). There does not need physiological development in childhood We discussed this diagnosis code to be a diagnostic statement that the and adults) series. Specifically, the with the NCHS staff to receive their patient is postmenopausal to assign the requestor noted that there are adult input on the intent for coding and code. The requester asked that CMS patients diagnosed with the conditions reporting the code. They agreed that review why this diagnosis code is being in subcategory R62.5 (Other and ICD–10–CM diagnosis code Y93.6A is classified as applicable to females only unspecified lack of expected normal applicable for adults as well as children. because, in the absence of the non- physiological development in Therefore, for FY 2017, we are essential modifier (postmenopausal), the childhood) and that three of these proposing to remove ICD–10–CM code could also apply to males. conditions also were listed in the ICD– diagnosis codes R62.50, R62.52, and We note that the ICD–9–CM 10 MCE Version 33 pediatric diagnosis R62.59 in subcategory R62.5 and ICD– equivalent code, V07.4 Hormone category on the Age conflict edit code 10–CM diagnosis code Y93.6A from the replacement therapy (postmenopausal) list. These three diagnosis codes are: ICD–10 MCE pediatric diagnosis has been on the female only edit since • R62.50 (Unspecified lack of category on the Age conflict edit code October 1, 1992 in the ICD–9–CM MCE. expected normal physiological list. We are inviting public comment on We consulted with the ICD–10–CM development in childhood); our proposal. classification staff at the NCHS to • R62.52 (Short stature (child)); and • b. Sex Conflict Edit determine the intended use and R62.59 (Other lack of expected reporting of this diagnosis code. The normal physiological development in In the MCE, the Sex conflict edit staff at NCHS acknowledged that, childhood). detects inconsistencies between a historically, the intent of the ICD–9–CM We acknowledge that subcategory patient’s sex and any diagnosis or diagnosis code was for females only. R62.5 can be confusing with regard to procedure on the patient’s record; for However, they agreed that, under ICD– how to appropriately report a condition example, a male patient with cervical 10–CM, the diagnosis code Z79.890 can diagnosed for an adult when the titles cancer (diagnosis) or a female patient be reported for both men and women. reference the terms ‘‘child’’ or with a prostatectomy (procedure). In Therefore, we are proposing to remove ‘‘childhood’’. Therefore, we consulted both instances, the indicated diagnosis this diagnosis code from the Diagnoses with the ICD–10–CM classification staff or the procedure conflicts with the for females only edit code list effective at the NCHS to determine the intended stated sex of the patient. Therefore, the October 1, 2016. We are inviting public use and reporting of the diagnosis codes patient’s diagnosis, procedure, or sex is R62.50, R62.52, and R62.59. The NCHS presumed to be incorrect. comments on our proposal. staff agreed that the three diagnosis We received a request to review ICD– We also considered the ICD–10–CM codes should not be restricted to the 10–CM diagnosis code Z79.890 diagnosis codes listed in the table below pediatric ages as defined by the MCE. (Hormone replacement therapy that are included on the Diagnoses for The NCHS staff stated the codes are (postmenopausal)). This code is listed females only edit code list.

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ICD–10–CM diagnosis Description code

Z44.30 ...... Encounter for fitting and adjustment of external breast prosthesis, unspecified breast. Z44.31 ...... Encounter for fitting and adjustment of external right breast prosthesis. Z44.32 ...... Encounter for fitting and adjustment of external left breast prosthesis). Z45.811 ...... Encounter for adjustment or removal of right breast implant. Z45.812 ...... Encounter for adjustment or removal of left breast implant. Z45.819 ...... Encounter for adjustment or removal of unspecified breast implant).

These codes describe encounters for howtorequestanNCD.html for additional remove a clot that is causing an breast implants or prostheses. Our information on this process. In addition, ischemic stroke was reported with clinical advisors and the NCHS staff there are procedures that would procedure code 39.74 (Endovascular agree that diagnosis codes Z44.30, normally not be paid by Medicare but, removal of obstruction from head and Z44.31, Z44.32, Z45.811, Z45.812, and due to the presence of certain diagnoses, neck vessel(s)) and is a well-recognized Z45.819 are clinically appropriate to are paid. procedure that has been covered by report for male patients and should not (1) Endovascular Mechanical Medicare. After implementation of ICD– be restricted to females. Therefore, we Thrombectomy 10 on October 1, 2015, claims that were are proposing to remove these diagnosis correctly submitted for endovascular codes from the Diagnoses for females We received several requests to mechanical thrombectomy procedures only edit code list in the ICD–10 MCE, review ICD–10–PCS procedure code with ICD–10–PCS procedure code effective October 1, 2016. We are 03CG3ZZ (Extirpation of matter from inviting public comments on our intracranial artery, percutaneous 03CG3ZZ were triggering the Non- proposal. approach) which is currently listed as a covered procedure edit. The requestors non-covered procedure in the ICD–10 sought clarification as to whether there c. Non-Covered Procedure Edit MCE Non-covered procedure edit code was a change in coverage or if there was In the MCE, the Non-covered list. The comparable ICD–9–CM code a replication issue. procedure edit identifies procedures for translations for ICD–10–PCS code Under the ICD–9–CM MCE Version which Medicare does not provide 03CG3ZZ are ICD–9–CM codes 17.54 32, procedure code 00.62 is listed on the payment. Payment is not provided due (Percutaneous atherectomy of Non-covered procedure edit code list. to specific criteria that are established in intracranial vessel(s)) and 39.74 Percutaneous angioplasty of an the National Coverage Determination (Endovascular removal of obstruction intracranial vessel procedure (with and (NCD) process. We refer readers to the from head and neck vessel(s)). without stent) may be reported under Web site at: https://www.cms.gov/ The requestors noted that, under ICD– Medicare/Coverage/ 9–CM, endovascular mechanical ICD–10 with the ICD–10–PCS procedure DeterminationProcess/ thrombectomy of a cerebral artery to codes listed in the following table:

ICD–10–PCS procedure code Description

037G34Z ...... Dilation of intracranial artery with drug-eluting intraluminal device, percutaneous approach. 037G3DZ ...... Dilation of intracranial artery with intraluminal device, percutaneous approach. 037G3ZZ ...... Dilation of intracranial artery, percutaneous approach. 037G44Z ...... Dilation of intracranial artery with drug-eluting intraluminal device, percutaneous endoscopic approach. 037G4DZ ...... Dilation of intracranial artery with intraluminal device, percutaneous endoscopic approach. 037G4ZZ ...... Dilation of intracranial artery, percutaneous endoscopic approach. 057L3DZ ...... Dilation of intracranial vein with intraluminal device, percutaneous approach. 057L4DZ ...... Dilation of intracranial vein with intraluminal device, percutaneous endoscopic approach.

We discovered that a replication error matter from intracranial vein, For FY 2017, we are proposing to occurred due to an outdated ICD–9–CM percutaneous approach) being listed as remove the ICD–10–PCS procedure entry for procedure code 00.62. This comparable translations for ICD–9–CM codes listed in the following table from error led to ICD–10–PCS procedure code 00.62. As a result, ICD–10–PCS the ICD–10 MCE Version 34.0 Non- codes 03CG3ZZ (Extirpation of matter procedure code 03CG3ZZ was included covered procedure edit code list. from intracranial artery, percutaneous on the ICD–10 MCE Version 33 Non- approach) and 05CL3ZZ (Extirpation of covered procedure edit code list.

ICD–10–PCS procedure code Description

03CG3ZZ ...... Extirpation of matter from intracranial artery, percutaneous approach. 03CG4ZZ ...... Extirpation of matter from intracranial artery, percutaneous endoscopic approach. 05CL3ZZ ...... Extirpation of matter from intracranial vein, percutaneous approach. 05CL4ZZ ...... Extirpation of matter from intracranial vein, percutaneous endoscopic approach.

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We are inviting public comments on Because radical procedures can have • 0VT07ZZ (Resection of prostate, via our proposal. different meanings, depending on the natural or artificial opening); or procedure, the term ‘‘radical’’ is not • (2) Radical Prostatectomy 0VT08ZZ Resection of prostate, via always reliable information for coding natural or artificial opening endoscopic; We received a request to review ICD– and reporting the procedure. Under in combination with one of the 10–PCS procedure codes related to a ICD–10–PCS, users are instructed to following codes: radical prostatectomy. Specifically, the code separately the organs or structures • 0VT30ZZ (Resection of bilateral requestor noted that when coding cases that were actually removed and for seminal vesicles, open approach); or where the removal of the vas deferens which there is a distinctly defined body • 0VT34ZZ (Resection of bilateral is also performed, a Non-covered part. A radical prostatectomy is coded procedure edit is triggered. The seminal vesicles, percutaneous as a ‘‘cluster’’ under ICD–10–PCS. A endoscopic approach). requestor suggested that the edit for this ‘‘cluster’’ is the term used to describe As stated earlier, under ICD–10–PCS, procedure may be intended for cases the circumstance when a combination of users are instructed to code separately where the removal of the vas deferens ICD–10–PCS procedure codes are the organs or structures that were is being performed for sterilization needed to fully satisfy the equivalent actually removed and for which there is (vasectomy) purposes. According to the meaning of an ICD–9–CM procedure a distinctly defined body part. requester, removal of the vas deferens code for it to be considered a plausible Therefore, a patient who undergoes a also may be involved with removing the translation. prostate in the radical prostatectomy radical prostatectomy that involves procedure. The requestor suggested that The cluster definition for a radical removal of the vas deferens would have CMS address this issue by revising the prostatectomy in ICD–10–PCS currently this procedure reported separately, in ICD–10 MCE Non-covered procedure consists of the one of the following addition to the options displayed in the edit code list to reflect non-coverage of codes: ‘‘cluster.’’ the procedure codes when the removal • 0VT00ZZ (Resection of prostate, The ICD–10–PCS procedure codes of vas deferens procedure is being open approach); that may be reported for sterilization performed solely for sterilization • 0VT04ZZ (Resection of prostate, and involve the bilateral vas deferens (vasectomy) purposes. percutaneous endoscopic approach); include the following:

ICD–10–PCS procedure code Description

0V5Q0ZZ ...... Destruction of bilateral vas deferens, open approach. 0V5Q3ZZ ...... Destruction of bilateral vas deferens, percutaneous approach. 0V5Q4ZZ ...... Destruction of bilateral vas deferens, percutaneous endoscopic approach. 0VBQ0ZZ ...... Excision of bilateral vas deferens, open approach. 0VBQ3ZZ ...... Excision of bilateral vas deferens, percutaneous approach. 0VBQ4ZZ ...... Excision of bilateral vas deferens, percutaneous endoscopic approach. 0VTQ0ZZ ...... Resection of bilateral vas deferens, open approach. 0VTQ4ZZ ...... Resection of bilateral vas deferens, percutaneous endoscopic approach.

The eight procedure codes listed In addition, while reviewing the Non- covered procedure. The procedure above describing various methods to covered procedure edit list of codes that codes shown below are identified as remove the bilateral vas deferens are may be reported to identify sterilization non-covered procedures only when currently listed on the ICD–10 MCE procedures for males, we considered the ICD–10–CM diagnosis code Z30.2 Version 33 Non-covered procedure edit procedure codes that may be reported to (Encounter for sterilization) is listed as code list. identify sterilization procedures for the principal diagnosis.’’ We refer readers to Table 6P.1b. The requester is correct in stating that females. We examined the list of ICD– associated with this proposed rule the codes related to removal of the 10–PCS procedure codes included on (which are available via the Internet on bilateral vas deferens are included on the ICD–10 MCE Version 33 Non- covered procedure edit code list that the CMS Web site at: the ICD–10 MCE Version 33 Non- http://www.cms.gov/Medicare/ covered procedure edit code list to could reflect female sterilization (removal of fallopian tubes) and Medicare-Fee-for-Service-Payment/ reflect a sterilization procedure. While AcuteInpatientPPS/index.html) to the vast majority of sterilization determined those codes also could be reported for other conditions and could review the proposed list of non-covered procedures will involve reporting the procedure codes describing sterilization bilateral procedure codes, there are be inappropriately subject to the current edit as well. procedures for males and females for instances where one vas deferens may this proposed Non-covered procedure have been previously removed for other Therefore, for FY 2017, we are edit. We are inviting public comments reasons and the remaining vas deferens proposing to create a new ICD–10 MCE on our proposal to create this new Non- requires sterilization. Therefore, the Version 34 Non-covered procedure edit covered procedure edit and also invite procedure codes describing removal of a to reflect that procedures performed on public comments on the proposed list of unilateral vas deferens are also included males involving the unilateral or codes to describe sterilization on the ICD–10 MCE Version 33 Non- bilateral vas deferens and procedures procedures for the proposed edit. covered procedure edit code list to performed on females involving the reflect a sterilization procedure. We fallopian tubes are not covered d. Unacceptable Principal Diagnosis agree that revising the language in the procedures for sterilization purposes. Edit edit will resolve the issue of covered The proposed new ICD–10 MCE Version In the MCE, there are select codes that procedures being inappropriately 34 Non-covered procedure edit would describe a circumstance which subject to the edit. be displayed as follows: ‘‘G. Non- influences an individual’s health status

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but does not actually describe a current (1) Liveborn Infant The ICD–10–CM diagnosis code illness or injury. There also are codes descriptions for liveborn infants differ that are not specific manifestations but We received a request to examine from the ICD–9–CM diagnosis code may be due to an underlying cause. ICD–10–CM diagnosis codes Z38.1 descriptions for liveborn infants. The These codes are considered (Single liveborn infant, born outside ICD–9–CM codes differentiate between a unacceptable as a principal diagnosis. In hospital), Z38.4 (Twin liveborn infant, liveborn infant that was born prior to limited situations, there are a few codes born outside hospital), and Z38.7 (Other admission and hospitalized versus a on the MCE Unacceptable principal multiple liveborn infant, born outside liveborn infant that was born prior to diagnosis edit code list that are hospital), all of which are currently admission and not hospitalized. The considered ‘‘acceptable’’ when a listed on the Unacceptable principal following codes in the ICD–9–CM MCE specified secondary diagnosis is also diagnosis edit code list for the ICD–10 Version 32 included on the coded and reported on the claim. MCE Version 33. The requestor believed Unacceptable principal diagnosis edit that these codes are listed in error and code list are those that describe a suggested their removal. liveborn infant that was born outside the hospital and not hospitalized:

ICD–9–CM diagnosis code Description

V30.2 ...... Single liveborn, born outside hospital and not hospitalized. V31.2 ...... Twin birth, mate liveborn, born outside hospital and not hospitalized. V32.2 ...... Twin birth, mate stillborn, born outside hospital and not hospitalized. V33.2 ...... Twin birth, unspecified whether mate liveborn or stillborn, born outside hospital and not hospitalized. V34.2 ...... Other multiple birth (three or more), mates all liveborn, born outside hospital and not hospitalized. V35.2 ...... Other multiple birth (three or more), mates all stillborn, born outside of hospital and not hospitalized. V36.2 ...... Other multiple birth (three or more), mates liveborn and stillborn, born outside hospital and not hospitalized. V37.2 ...... Other multiple birth (three or more), unspecified whether mates liveborn or stillborn, born outside of hospital. V39.1 ...... Liveborn, unspecified whether single, twin or multiple, born before admission to hospital. V39.2 ...... Liveborn, unspecified whether single, twin or multiple, born outside hospital and not hospitalized.

For replication purposes, the not, we agree it would not be in the edit and suggested that CMS comparable ICD–10–CM diagnosis codes appropriate to continue to include the evaluate further to determine if they for the above listed codes are: Z38.1 ICD–10–CM diagnosis codes on the were appropriate. (Single liveborn infant, born outside Unacceptable principal diagnosis list. In the ICD–10–CM classification, a hospital); Z38.4 (Twin liveborn infant, For FY 2017, we are proposing to single diagnosis code describes a born outside hospital); and Z38.7 (Other remove ICD–10–CM diagnosis codes multiple gestation and contains multiple liveborn infant, born outside Z38.1, Z38.4, and Z38.7 from the information pertaining to the placenta. Unacceptable principal diagnosis edit in hospital). There are no other ICD–10– This differs from the ICD–9–CM the ICD–10 MCE Version 34. We are CM diagnosis codes that describe a classification, where two diagnosis inviting public comments on our liveborn infant born outside a hospital. codes are required to separately report proposal. The liveborn infant codes are an (1) multiple gestation with a delivery or example of where a particular concept (2) Multiple Gestation complication and (2) multiple gestation involving the place of birth is not the We received a request to review the with the status of the placenta. same between the ICD–9–CM and ICD– ICD–10–CM diagnosis codes related to In the ICD–9–CM MCE Version 32, 10–CM classification systems. Because multiple gestation that are currently only the ICD–9–CM diagnosis codes the ICD–10–CM diagnosis codes do not listed on the ICD–10 MCE Version 33 describing the status of the placenta are include the same concept as the ICD–9– Unacceptable principal diagnosis edit listed on the Unacceptable principal CM diagnosis codes regarding whether code list. The requestor expressed diagnosis edit code list. These ICD–9– the liveborn infant was hospitalized or concern that these codes were included CM diagnosis codes are:

ICD–9–CM diagnosis code Description

V91.00 ...... Twin gestation, unspecified number of placenta, unspecified number of amniotic sacs. V91.01 ...... Twin gestation, monochorionic/monoamniotic (one placenta, one amniotic sac). V91.02 ...... Twin gestation, monochorionic/diamniotic (one placenta, two amniotic sacs). V91.03 ...... Twin gestation, dichorionic/diamniotic (two placentae, two amniotic sacs). V91.09 ...... Twin gestation, unable to determine number of placenta and number of amniotic sacs. V91.10 ...... Triplet gestation, unspecified number of placenta and unspecified number of amniotic sacs. V91.11 ...... Triplet gestation, with two or more monochorionic fetuses. V91.12 ...... Triplet gestation, with two or more monoamniotic fetuses. V91.19 ...... Triplet gestation, unable to determine number of placenta and number of amniotic sacs. V91.20 ...... (Quadruplet gestation, unspecified number of placenta and unspecified number of amniotic sacs. V91.21 ...... Quadruplet gestation, with two or more monochorionic fetuses. V91.22 ...... Quadruplet gestation, with two or more monoamniotic fetuses. V91.29 ...... Quadruplet gestation, unable to determine number of placenta and number of amniotic sacs. V91.90 ...... Other specified multiple gestation, unspecified number of placenta and unspecified number of amniotic sacs. V91.91 ...... Other specified multiple gestation, with two or more monochorionic fetuses. V91.92 ...... Other specified multiple gestation, with two or more monoamniotic fetuses.

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ICD–9–CM diagnosis code Description

V91.99 ...... Other specified multiple gestation, unable to determine number of placenta and number of amniotic sacs.

There are 68 ICD–10–CM diagnosis http://www.cms.gov/Medicare/ needed to describe a current codes included on the ICD–10 MCE Medicare-Fee-for-Service-Payment/ complication of the antenatal, delivery, Version 33 Unacceptable principal AcuteInpatientPPS/index.html) from the or perinatal period.’’ The requestor diagnosis edit code list as comparable ICD–10 MCE Version 34 Unacceptable stated that obstetric patients admitted as translations that describe multiple principal diagnosis list. We are inviting inpatients often meet the definition of gestation and status of the placenta. The public comments on our proposal. an elderly primigravida or elderly list of these codes is included in Table 1 (3) Supervision of High Risk Pregnancy multigravida, which is the appropriate 6P.1c. associated with this proposed condition to be reported as the principal We received a request to review the rule (which is available via the Internet diagnosis. However, because the codes ICD–10–CM diagnosis codes related to on the CMS Web site at: http://www. describing this condition are listed on cms.gov/Medicare/Medicare-Fee-for- supervision of high risk pregnancy (elderly primigravida and multigravida) the Unacceptable principal diagnosis Service-Payment/AcuteInpatientPPS/ edit code list, they are unable to be index.html). that are currently listed on the ICD–10 Because only one, and not both, MCE Version 33 Unacceptable principal reported. concepts from the ICD–9–CM diagnosis edit code list. The requestor The diagnosis codes describing high- classification was considered to be an stated that these codes were not risk patients admitted for delivery differ unacceptable principal diagnosis (status included in the edit under the ICD–9– between the ICD–10–CM and ICD–9–CM of placenta) in the ICD–9–CM MCE, we CM MCE. According to the requester, classifications. Under ICD–9–CM, two agree this was a replication error that the codes describing these conditions diagnosis codes are required to incorrectly included the ICD–10–CM should be allowed for reporting as a separately report concept 1 of elderly diagnosis codes that identify both principal diagnosis based on the ICD– primigravida or elderly multigravida concepts (multiple gestation and status 10–CM Tabular List of Diseases and whether a delivery occurred and of placenta) in a single code on the ICD– instructions for Chapter 15 (Certain concept 2 of supervision of high-risk 10 MCE. The edit cannot isolate the Conditions Originating in the Perinatal pregnancy with elderly primigravida or status of placenta for the ICD–10 MCE Period). The chapter-specific guidelines elderly multigravida. We display the because it is reported in combination for ICD–10–CM state that ‘‘diagnosis codes that correspond to these concepts code O80 (Encounter for full-term with the multiple gestation as a single below and titled them as Code List 1 uncomplicated delivery) should be code. Therefore, it is inappropriate to and Code List 2. A code from each list assigned when a woman is admitted for include these codes on the would be reported to fully describe the Unacceptable principal diagnosis edit a full-term normal delivery and delivers circumstances of the admission and the code list. a single, healthy infant without any For FY 2017, we are proposing to complications antepartum, during the patient. remove the ICD–10–CM diagnosis codes delivery, or postpartum during the Code List 1—We note that the listed in Table 6P.1c. associated with delivery episode. Code O80 is always a following codes are listed on the ICD– this proposed rule (which is available principal diagnosis. It is not to be used 9–CM MCE Version 32 Unacceptable via Internet on the CMS Web site at: if any other code from Chapter 15 is principal diagnosis edit code list:

ICD–9–CM diagnosis code Description

V23.81 ...... Supervision of high-risk pregnancy with elderly primigravida V23.82 ...... Supervision of high-risk pregnancy with elderly multigravida

Code List 2—We note that the Unacceptable principal diagnosis edit here for the benefit of the reader in the following codes are not listed on the code list. However, we display them discussion that follows. ICD–9–CM MCE Version 32

ICD–9–CM diagnosis code Description

659.50 ...... Elderly primigravida, unspecified as to episode of care or not applicable 659.51 ...... Elderly primigravida, delivered, with or without mention of antepartum condition 659.53 ...... Elderly primigravida, antepartum condition or complication 659.60 ...... Elderly multigravida, unspecified as to episode of care or not applicable 659.61 ...... Elderly multigravida, delivered with or without mention of antepartum condition 659.63 ...... Elderly multigravida, antepartum condition or complication

As noted above, in the ICD–9–CM diagnosis codes describing the listed on the Unacceptable principal MCE Version 32, only the ICD–9–CM supervision of high-risk pregnancy are diagnosis edit code list.

1 The ICD–10–CM classification defines an complication of the pregnancy since the management and care of the expectant mother is elderly primigravida or elderly multigravida as a affected by the fact they are an older patient.

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There are eight ICD–10–CM diagnosis concept of elderly primigravida or delivery occurred is not included in the codes included on the ICD–10 MCE elderly multigravida and supervision of code description for the eight codes. Version 33 Unacceptable principal high-risk pregnancy, in a single code. As diagnosis edit code list that describe the shown below, the concept of whether a

ICD–10–CM diagnosis code Description

O09.511 ...... Supervision of elderly primigravida, first trimester O09.512 ...... Supervision of elderly primigravida, second trimester O09.513 ...... Supervision of elderly primigravida, third trimester O09.519 ...... Supervision of elderly primigravida, unspecified trimester O09.521 ...... Supervision of elderly multigravida, first trimester O09.522 ...... Supervision of elderly multigravida, second trimester O09.523 ...... Supervision of elderly multigravida, third trimester O09.529 ...... Supervision of elderly multigravida, unspecified trimester

Because the concepts and coding 5A1955Z (Respiratory ventilation, inviting public comments on our guidelines between the ICD–9–CM and greater than 96 consecutive hours). The proposal. ICD–10–CM classifications differ greatly current description of the code edit (2) Maternity Diagnoses in how they define this subset of reads as follows: ‘‘The following patients, we acknowledge that the eight procedure code should only be coded We identified three ICD–10–CM ICD–10–CM diagnosis codes listed on claims with a length of stay greater diagnosis codes that describe conditions above should be removed from the ICD– than four days.’’ related to pregnancy or the puerperium 10 MCE Unacceptable principal As we strive to assist providers with that are not currently listed on the ICD– diagnosis edit code list to permit the correct coding and reporting of this 10 MCE Version 33 Age conflict edit reporting of these codes as principal service, we are proposing to further code list for maternity diagnoses. The diagnosis when the documentation diagnosis codes include: revise the description of this code edit. • supports such assignment. For FY 2017, we are proposing to C58 (Malignant neoplasm of We also note that during our analysis placenta); modify the edit description to read as • of the eight diagnosis codes describing follows: ‘‘The following procedure code D39.2 (Neoplasm of uncertain elderly primigravida and elderly should only be coded on claims when behavior of placenta); and • F53 (Puerperal psychosis). multigravida high risk pregnancy the respiratory ventilation is provided patients, we found additional codes on To be consistent with other related for greater than four consecutive days conditions currently included on the the ICD–10 MCE Version 33 during the length of stay.’’ Unacceptable principal diagnosis edit Age conflict edit code list for maternity We believe this modification will diagnoses, we are proposing to add ICD– code list related to high-risk pregnancy further clarify the appropriate that we believe should also be removed 10–CM diagnosis codes C58, D39.2, and circumstances in which ICD–10–PCS F53 to the Age conflict edit code list for so as to permit the reporting of these code 5A1955Z may be reported. We are codes as principal diagnosis when the maternity diagnoses. inviting public comments on our We are inviting public comments on documentation supports such proposal. assignment. our proposals for changes to the FY For FY 2017, we are proposing to Also, consistent with the discussion 2017 ICD–10 MCE Version 34. remove all the ICD–10–CM diagnosis in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49411 through 49412), we (3) Manifestation Codes Not Allowed as codes related to high-risk pregnancy Principal Diagnosis Edit currently listed in Table 6P.1d. believe it would be beneficial to revise associated with this proposed rule the title for ICD–10 MS–DRG 208 Section I.A.13. of the FY 2016 ICD– (which is available via Internet on the (Respiratory System Diagnosis with 10–CM Official Guidelines for Coding CMS Web site at: http://www.cms.gov/ Ventilator Support <96 Hours). and Reporting states that certain Medicare/Medicare-Fee-for-Service- Currently, this ICD–10 MS–DRG title conditions have both an underlying Payment/AcuteInpatientPPS/ references terminology for mechanical etiology and multiple body system index.html) from the ICD–10 MCE ventilation ‘‘< 96 hours’’ based on the manifestations due to the underlying Version 34 Unacceptable principal GROUPER logic for MS–DRG 208, etiology. For such conditions, the diagnosis edit code list. We are inviting which includes ICD–10–PCS codes classification has a coding convention public comment on our proposal. 5A1935Z (Respiratory ventilation, less that requires the underlying condition than 24 consecutive hours) and be sequenced first followed by the e. Other MCE Issues 5A1945Z (Respiratory ventilation, 24– manifestation. Wherever such a The following MCE discussion and 96 consecutive hours). Because ICD–10– combination exists, there is a ‘‘use proposals are the result of internal PCS code 5A1945Z includes mechanical additional code’’ note at the etiology review of other MCE issues. ventilation up to and including 96 code, and a ‘‘code first’’ note at the hours, we are proposing to modify the manifestation code. These instructional (1) Procedure Inconsistent With Length title of MS–DRG 208 by adding an notes indicate proper sequencing order of Stay Edit ‘‘equal’’ sign (=) after the ‘‘less than’’ (<) of the codes, etiology followed by In the FY 2016 IPPS/LTCH PPS final sign to better reflect the GROUPER manifestation. rule (80 FR 49411), we finalized a logic. We are proposing to revise the We found that in the ICD–10–CM revision for the language of the ICD–10 title of ICD–10 MS–DRG 208 as follows, Tabular List of Diseases at category MCE Version 33 edit for ‘‘Procedure effective October 1, 2016: MS–DRG 208 M02- (Postinfective and reactive inconsistent with length of stay’’ with (Respiratory System Diagnosis with arthropathies), a ‘‘Code first underlying regard to ICD–10–PCS procedure code Ventilator Support <=96 Hours). We are disease’’ note exists. This would

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indicate that there are codes in that • M02.88 (Other reactive not allowed as principal diagnosis edit category that are manifestations of an arthropathies, vertebrae); code list, it seems appropriate that all of underlying etiology. We then examined • M02.89 (Other reactive the diagnosis codes in subcategory the ICD–10 MCE Version 33 to arthropathies, multiple sites); and M02.8 should be identified as • determine if diagnosis codes from that M02.9 (Reactive arthropathy, manifestation codes. category were included on the unspecified). Based on the instructional note at the We are proposing to add the ICD–10– Manifestation codes not allowed as M02- category level, the title at CM diagnosis codes listed in the principal diagnosis edit code list. Only subcategory M02.8 (Other reactive following table to the ICD–10 MCE three ICD–10–CM diagnosis codes from arthropathies), and the three diagnosis Version 34 Manifestation codes not that category were listed: codes listed above on the current ICD– allowed as principal diagnosis edit code 10 MCE Version 33 Manifestation codes list.

ICD–10–CM diagnosis code Description

M02.80 ...... Other reactive arthropathies, unspecified site. M02.811 ...... Other reactive arthropathies, right shoulder. M02.812 ...... Other reactive arthropathies, left shoulder. M02.819 ...... Other reactive arthropathies, unspecified shoulder. M02.821 ...... Other reactive arthropathies, right elbow. M02.822 ...... Other reactive arthropathies, left elbow. M02.829 ...... Other reactive arthropathies, unspecified elbow. M02.831 ...... Other reactive arthropathies, right wrist. M02.832 ...... Other reactive arthropathies, left wrist. M02.839 ...... Other reactive arthropathies, unspecified wrist. M02.841 ...... Other reactive arthropathies, right hand. M02.842 ...... Other reactive arthropathies, left hand. M02.849 ...... Other reactive arthropathies, unspecified hand. M02.851 ...... Other reactive arthropathies, right hip. M02.852 ...... Other reactive arthropathies, left hip. M02.859 ...... Other reactive arthropathies, unspecified hip. M02.861 ...... Other reactive arthropathies, right knee. M02.862 ...... Other reactive arthropathies, left knee. M02.869 ...... Other reactive arthropathies, unspecified knee. M02.871 ...... Other reactive arthropathies, right ankle and foot. M02.872 ...... Other reactive arthropathies, left ankle and foot. M02.879 ...... Other reactive arthropathies, unspecified ankle and foot.

We are inviting public comments on • T88.7XXA (Unspecified adverse Medicare claims processing. As shown our proposal. effect of drug or medicament, initial in the FY 2016 ICD–10 MCE Version 33 encounter); manual file and an ICD–9–CM MCE (4) Questionable Admission Edit • T88.8XXA (Other specified Version 33.0A manual file (developed In the MCE, some diagnoses are not complications of surgical and medical for analysis only), an edit code list usually sufficient justification for care, not elsewhere classified, initial exists according to the definition or admission to an acute care hospital. For encounter); and criteria set forth for each specified type • T88.9XXA (Complication of example, if a patient is assigned ICD– of edit. Over time, certain edits under surgical and medical care, unspecified, the ICD–9–CM MCE became 10–CM diagnosis code R03.0 (Elevated initial encounter). discontinued as they were no longer blood pressure reading, without We are inviting public comments on needed. However, the MCE manual has diagnosis of hypertension), the patient our proposal. continued to make reference to these would have a questionable admission discontinued edits, including through because an elevated blood pressure (5) Removal of Edits and Future Enhancement the replication process with reading is not normally sufficient transitioning to ICD–10. justification for admission to a hospital. With the implementation of ICD–10, it Currently, the FY 2016 ICD–10 MCE Upon review of the ICD–10–CM is clear that there are several concepts Version 33 manual file displays the diagnosis codes listed under the ICD–10 that differ from the ICD–9–CM following edits: MCE Version 33 Questionable classification. These differences are • 12. Open biopsy check. Effective Admission edit, our clinical advisors evident in the MCE as discussed earlier October 1, 2010, the Open biopsy check determined that certain diagnoses in this section. Looking ahead to the edit was discontinued and will appear clinically warrant hospital admission. needs and uses of coded data as the data for claims processed using MCE Version Therefore, we are proposing to remove continue to evolve from the reporting, 2.0–26.0 only. • the following diagnosis codes from the collection, processing, coverage, 13. Bilateral procedure. Effective ICD–10 MCE Version 34.0 Questionable payment and analysis aspect, we believe with the ICD–10 implementation, the admission edit. the need to ensure the accuracy of the bilateral procedure edit will be • coded data becomes increasingly discontinued. T81.81XA (Complication of significant. Because these edits are no longer inhalation therapy, initial encounter); The purpose of the MCE is to ensure valid, we are proposing to remove the • T88.4XXA (Failed or difficult that errors and inconsistencies in the reference to them, effective with the intubation, initial encounter); coded data are recognized during ICD–10 MCE manual and software

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Version 34.0, for FY 2017. We are than that of MS–DRG 003, but the maintain the existing surgical hierarchy inviting public comments on our average costs of MS–DRGs 004 and 005 in MDC 5 for proposed revised MS– proposal. are higher than the average costs of MS– DRGs 228 and 229 (Other As we continue to evaluate the DRG 002. To determine whether Cardiothoracic Procedures with MCC purpose and function of the MCE with surgical class A should be higher or and without MCC, respectively). respect to the transition to ICD–10, we lower than surgical class B in the We are inviting public comments on encourage public input for future surgical hierarchy, we would weigh the our proposals. discussion. For instance, we recognize a average costs of each MS–DRG in the need to further examine the current list class by frequency (that is, by the 14. Proposed Changes to the MS–DRG of edits and the definitions of those number of cases in the MS–DRG) to Diagnosis Codes for FY 2017 edits. We encourage public comments determine average resource on whether there are additional consumption for the surgical class. The The tables identifying the proposed concerns with the current edits, surgical classes would then be ordered additions and deletions to the MCC including specific edits or language that from the class with the highest average severity levels list and the proposed should be removed or revised, edits that resource utilization to that with the additions and deletions to the CC should be combined, or new edits that lowest, with the exception of ‘‘other severity levels list for FY 2017 are should be added to assist in detecting O.R. procedures’’ as discussed in this available via the Internet on the CMS errors or inaccuracies in the coded data. rule. Web site at: http://cms.hhs.gov/ This methodology may occasionally Medicare/Medicare-Fee-for-Service- 13. Proposed Changes to Surgical result in assignment of a case involving Payment/AcuteInpatientPPS/index.html Hierarchies multiple procedures to the lower- as follows: Some inpatient stays entail multiple weighted MS–DRG (in the highest, most • Table 6I.1—Proposed Additions to surgical procedures, each one of which, resource-intensive surgical class) of the the MCC List—FY 2017; occurring by itself, could result in available alternatives. However, given • Table 6I.2—Proposed Deletions to assignment of the case to a different that the logic underlying the surgical the MCC List—FY 2017; MS–DRG within the MDC to which the hierarchy provides that the GROUPER • principal diagnosis is assigned. search for the procedure in the most Table 6J.1—Proposed Additions to Therefore, it is necessary to have a resource-intensive surgical class, in the CC List—FY 2017; and decision rule within the GROUPER by cases involving multiple procedures, • Table 6J.2—Proposed Deletions to which these cases are assigned to a this result is sometimes unavoidable. the CC List—FY 2017. single MS–DRG. The surgical hierarchy, We note that, notwithstanding the an ordering of surgical classes from foregoing discussion, there are a few 15. Proposed Complications or most resource-intensive to least instances when a surgical class with a Comorbidity (CC) Exclusions List resource-intensive, performs that lower average cost is ordered above a a. Background of the CC List and the CC function. Application of this hierarchy surgical class with a higher average cost. Exclusions List ensures that cases involving multiple For example, the ‘‘other O.R. surgical procedures are assigned to the procedures’’ surgical class is uniformly Under the IPPS MS–DRG MS–DRG associated with the most ordered last in the surgical hierarchy of classification system, we have resource-intensive surgical class. each MDC in which it occurs, regardless developed a standard list of diagnoses Because the relative resource intensity of the fact that the average costs for the that are considered CCs. Historically, we of surgical classes can shift as a function MS–DRG or MS–DRGs in that surgical developed this list using physician of MS–DRG reclassification and class may be higher than those for other panels that classified each diagnosis recalibrations, for FY 2017, we reviewed surgical classes in the MDC. The ‘‘other code based on whether the diagnosis, the surgical hierarchy of each MDC, as O.R. procedures’’ class is a group of when present as a secondary condition, we have for previous reclassifications procedures that are only infrequently would be considered a substantial and recalibrations, to determine if the related to the diagnoses in the MDC, but complication or comorbidity. A ordering of classes coincides with the are still occasionally performed on substantial complication or comorbidity intensity of resource utilization. patients with cases assigned to the MDC was defined as a condition that, because A surgical class can be composed of with these diagnoses. Therefore, of its presence with a specific principal one or more MS–DRGs. For example, in assignment to these surgical classes diagnosis, would cause an increase in MDC 11, the surgical class ‘‘kidney should only occur if no other surgical the length of stay by at least 1 day in transplant’’ consists of a single MS–DRG class more closely related to the at least 75 percent of the patients. (MS–DRG 652) and the class ‘‘major diagnoses in the MDC is appropriate. However, depending on the principal bladder procedures’’ consists of three A second example occurs when the diagnosis of the patient, some diagnoses MS–DRGs (MS–DRGs 653, 654, and difference between the average costs for on the basic list of complications and 655). Consequently, in many cases, the two surgical classes is very small. We comorbidities may be excluded if they surgical hierarchy has an impact on have found that small differences are closely related to the principal more than one MS–DRG. The generally do not warrant reordering of diagnosis. In FY 2008, we evaluated methodology for determining the most the hierarchy because, as a result of each diagnosis code to determine its resource-intensive surgical class reassigning cases on the basis of the impact on resource use and to involves weighting the average hierarchy change, the average costs are determine the most appropriate CC resources for each MS–DRG by likely to shift such that the higher- subclassification (non-CC, CC, or MCC) frequency to determine the weighted ordered surgical class has lower average assignment. We refer readers to sections average resources for each surgical class. costs than the class ordered below it. II.D.2. and 3. of the preamble of the FY For example, assume surgical class A Based on the changes that we are 2008 IPPS final rule with comment includes MS–DRGs 001 and 002 and proposing to make for FY 2017, as period for a discussion of the refinement surgical class B includes MS–DRGs 003, discussed in section II.F.4.c. of the of CCs in relation to the MS–DRGs we 004, and 005. Assume also that the preamble of this FY 2017 IPPS/LTCH adopted for FY 2008 (72 FR 47152 average costs of MS–DRG 001 are higher PPS proposed rule, we are proposing to through 47171).

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b. Proposed CC Exclusions List for FY we have developed Table 6G.1.— Code Titles for this proposed rule. 2017 Proposed Secondary Diagnosis Order However, a document containing the FY In the September 1, 1987 final notice Additions to the CC Exclusions List— 2017 revised procedure code titles, as (52 FR 33143) concerning changes to the FY 2017; Table 6G.2.—Proposed well as new procedure codes that have DRG classification system, we modified Principal Diagnosis Order Additions to been finalized to date since the GROUPER logic so that certain the CC Exclusions List—FY 2017; Table implementation of the partial code diagnoses included on the standard list 6H.1.—Proposed Secondary Diagnosis freeze, was made available in advance of CCs would not be considered valid Order Deletions to the CC Exclusions in response in response to requests from List—FY 2017; and Table 6H.2.— the health care industry. During the CCs in combination with a particular Proposed Principal Diagnosis Order March 9–10, 2016 ICD–10 Coordination principal diagnosis. We created the CC Deletions to the CC Exclusions List—FY and Maintenance Committee meeting, a Exclusions List for the following 2017. Each of these principal diagnosis discussion regarding this document was reasons: (1) To preclude coding of CCs codes for which there is a CC exclusion presented. Participants were informed for closely related conditions; (2) to is shown in Table 6G.2. with an asterisk that the document titled ‘‘FY 2017 New preclude duplicative or inconsistent and the conditions that will not count Revised ICD–10–PCS Codes’’ would coding from being treated as CCs; and as a CC are provided in an indented contain the information that would (3) to ensure that cases are appropriately column immediately following the otherwise be included for this table. classified between the complicated and affected principal diagnosis. Beginning This document is posted on the CMS uncomplicated DRGs in a pair. As with discharges on or after October 1 of Web site at: https://www.cms.gov/ previously indicated, we developed a each year, the indented diagnoses are Medicare/Coding/ICD9Provider list of diagnoses, using physician not recognized by the GROUPER as DiagnosticCodes/ICD-9-CM-C-and-M- panels, to include those diagnoses that, valid CCs for the asterisked principal Meeting-Materials-Items/2016-03-09- when present as a secondary condition, diagnoses. Tables 6G and 6H associated MeetingMaterials.html?DLPage=1& would be considered a substantial with this proposed rule are available via DLEntries=10&DLSort=0&DLSortDir= complication or comorbidity. In the Internet on the CMS Web site at: descending. previous years, we made changes to the http://www.cms.gov/Medicare/ As mentioned in section II.F.14. of list of CCs, either by adding new CCs or Medicare-Fee-for-Service-Payment/ this proposed rule, we are proposing deleting CCs already on the list. AcuteInpatientPPS/index.html. additions and deletions to the MS–DRG In the May 19, 1987 proposed notice To capture new and deleted diagnosis MCC and CC Lists for FY 2017 based on (52 FR 18877) and the September 1, and procedure codes, for FY 2017, we the creation of new ICD–10–CM codes. 1987 final notice (52 FR 33154), we have developed Table 6A.—New This information is available in Tables explained that the excluded secondary Diagnosis Codes, Table 6B.—New 6I.1 (Proposed Additions to the MCC diagnoses were established using the Procedure Codes, and Table 6C—Invalid List—FY 2017), 6I.2 (Proposed Deletions following five principles: Diagnosis Codes to this proposed rule. to the MCC List—FY 2017), 6J.1 • Chronic and acute manifestations of However, they are not published in the (Proposed Additions to the CC List—FY the same condition should not be Addendum to this proposed rule but are 2017), and 6J.2 (Proposed Deletions to considered CCs for one another; available via the Internet on the CMS the CC List—FY 2017). However, they • Specific and nonspecific (that is, Web site at: http://www.cms.gov/ are not published in the Addendum to not otherwise specified (NOS)) Medicare/Medicare-Fee-for-Service- this proposed rule but are available via diagnosis codes for the same condition Payment/AcuteInpatientPPS/ the Internet on the CMS Web site at: should not be considered CCs for one index.html, as described in section VI. http://www.cms.gov/Medicare/ another; of the Addendum to this proposed rule. Medicare-Fee-for-Service-Payment/ • Codes for the same condition that We note that while we did not AcuteInpatientPPS/index.html, as cannot coexist, such as partial/total, specifically develop a Table 6E.— described in section VI. of the unilateral/bilateral, obstructed/ Revised Diagnosis Code Titles for this Addendum to this proposed rule. unobstructed, and benign/malignant, proposed rule, a document containing 16. Review of Procedure Codes in MS should not be considered CCs for one the FY 2017 revised diagnosis code DRGs 981 Through 983; 984 Through another; titles, as well as new diagnosis codes 986; and 987 Through 989 • Codes for the same condition in that have been finalized to date since anatomically proximal sites should not implementation of the partial code Each year, we review cases assigned be considered CCs for one another; and freeze, was made available in advance to MS–DRGs 981, 982, and 983 • Closely related conditions should in response to requests from the health (Extensive O.R. Procedure Unrelated to not be considered CCs for one another. care industry. During the March 9–10, Principal Diagnosis with MCC, with CC, The creation of the CC Exclusions List 2016 ICD–10 Coordination and and without CC/MCC, respectively); was a major project involving hundreds Maintenance Committee meeting, a MS–DRGs 984, 985, and 986 (Prostatic of codes. We have continued to review discussion regarding this document was O.R. Procedure Unrelated to Principal the remaining CCs to identify additional presented. Participants were informed Diagnosis with MCC, with CC, and exclusions and to remove diagnoses that the document titled ‘‘FY 2017 New without CC/MCC, respectively); and from the master list that have been Released ICD–10–CM Codes’’ would MS–DRGs 987, 988, and 989 shown not to meet the definition of a contain the information that would (Nonextensive O.R. Procedure Unrelated CC. We refer readers to the FY 2014 otherwise be included for this table. to Principal Diagnosis with MCC, with IPPS/LTCH PPS final rule (78 FR 50541) This document has been posted along CC, and without CC/MCC, respectively) for detailed information regarding with the other March 9–10, 2016 ICD– to determine whether it would be revisions that were made to the CC 10 Coordination and Maintenance appropriate to change the procedures Exclusion Lists under the ICD–9–CM Committee meeting materials on the assigned among these MS–DRGs. MS– MS–DRGs. CDC Web site at: http://www.cdc.gov/ DRGs 981 through 983, 984 through 986, For FY 2017, we are proposing nchs/icd/icd9cm_maintenance.htm. and 987 through 989 are reserved for changes to the ICD–10 MS–DRGs In addition, we did not specifically those cases in which none of the O.R. Version 34 CC Exclusion List. Therefore, develop a Table 6F.—Revised Procedure procedures performed are related to the

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principal diagnosis. These MS–DRGs procedure codes were moved from these whether any of those procedures should are intended to capture atypical cases, DRGs from FY 2008 through FY 2016. be reassigned from one of those three that is, those cases not occurring with Our review of MedPAR claims data groups of MS–DRGs to another of the sufficient frequency to represent a showed that there are no cases that three groups of MS–DRGs based on distinct, recognizable clinical group. merited movement or should logically average costs and the length of stay. We Under ICD–9–CM, MS–DRGs 984 be reassigned from ICD–10 MS–DRGs look at the data for trends such as shifts through 986 are assigned to those 984 through 986 to any of the other in treatment practice or reporting discharges in which one or more of the MDCs. Therefore, for FY 2017, we are practice that would make the resulting following prostatic procedures are not proposing to change the procedures MS–DRG assignment illogical. If we find performed and are unrelated to the assigned among these MS–DRGs. We are these shifts, we would propose to move principal diagnosis: inviting public comments on our cases to keep the MS–DRGs clinically • 60.0 (Incision of prostate); proposal to maintain the current similar or to provide payment for the • 60.12 (Open biopsy of prostate); structure of these MS–DRGs. cases in a similar manner. Generally, we • 60.15 (Biopsy of periprostatic a. Moving Procedure Codes From MS– move only those procedures for which tissue); DRGs 981 Through 983 or MS–DRGs we have an adequate number of • 60.18 (Other diagnostic procedures 987 Through 989 Into MDCs discharges to analyze the data. on prostate and periprostatic tissue); There are no cases representing shifts • 60.21 (Transurethral We annually conduct a review of in treatment practice or reporting prostatectomy); procedures producing assignment to practice that would make the resulting • 60.29 (Other transurethral MS–DRGs 981 through 983 (Extensive MS–DRG assignment illogical, or that prostatectomy); O.R. Procedure Unrelated to Principal merited movement so that cases should • 60.61 (Local excision of lesion of Diagnosis with MCC, with CC, and logically be assigned to any of the other prostate); without CC/MCC, respectively) or MS– MDCs. Therefore, for FY 2017, we are • 60.69 (Prostatectomy, not elsewhere DRGs 987 through 989 (Nonextensive not proposing to move any procedure classified); O.R. Procedure Unrelated to Principal codes among these MS–DRGs. We are • 60.81 (Incision of periprostatic Diagnosis with MCC, with CC, and inviting public comments on our tissue); without CC/MCC, respectively) on the proposal. • 60.82 (Excision of periprostatic basis of volume, by procedure, to see if tissue); it would be appropriate to move c. Adding Diagnosis or Procedure Codes • 60.93 (Repair of prostate); procedure codes out of these MS–DRGs to MDCs • 60.94 (Control of (postoperative) into one of the surgical MS–DRGs for Based on the review of cases in the hemorrhage of prostate); the MDC into which the principal MDCs, we are proposing to add multiple • 60.95 (Transurethral balloon diagnosis falls. The data are arrayed in diagnosis and procedure codes to MDCs dilation of the prostatic urethra); two ways for comparison purposes. We for FY 2017 to address replication • 60.96 (Transurethral destruction of look at a frequency count of each major issues. We discuss each of these prostate tissue by microwave operative procedure code. We also proposals below. thermotherapy); compare procedures across MDCs by (1) Angioplasty of Extracranial Vessel • 60.97 (Other transurethral volume of procedure codes within each destruction of prostate tissue by other MDC. In the ICD–9–CM MS–DRGs Version thermotherapy); and We identify those procedures 32, procedures describing angioplasty of • 60.99 (Other operations on occurring in conjunction with certain an extracranial vessel were assigned to prostate). principal diagnoses with sufficient MDC 1 (Diseases and Disorders of the Under the ICD–10 MS–DRGs Version frequency to justify adding them to one Nervous System) under MS–DRGs 037, 33, the comparable ICD–10–PCS code of the surgical MS–DRGs for the MDC in 038, and 039 (Extracranial Procedures translations for the above list of codes which the diagnosis falls. Upon review with MCC, with CC, or without CC/ are available in Table 6P.2. associated of the claims data from the December MCC, respectively). Under ICD–9–CM, with this proposed rule (which is 2015 update of the FY 2015 MedPAR more than one ICD–9–CM code could be available via the Internet on the CMS file, we did not find any cases that reported for these procedures, Web site at: https://www.cms.gov/ merited movement or that should depending on the approach that was Medicare/Medicare-Fee-for-Service- logically be assigned to any of the other documented. For example, ICD–9–CM Payment/AcuteInpatientPPS/ MDCs. Therefore, for FY 2017, we are procedure code 00.61 (Percutaneous index.html). All remaining O.R. not proposing to remove any procedures angioplasty of extracranial vessel(s)) procedures are assigned to MS–DRGs from MS–DRGs 981 through 983 or MS– would have been appropriately reported 981 through 983 and 987 through 989, DRGs 987 through 989 into one of the if the percutaneous approach was with MS–DRGs 987 through 989 surgical MS–DRGs for the MDC into documented, and procedure code 39.50 assigned to those discharges in which which the principal diagnosis is (Angioplasty of other non-coronary the only procedures performed are assigned. We are inviting public vessel(s)) would have been nonextensive procedures that are comments on our proposal to maintain appropriately reported if a specified unrelated to the principal diagnosis. the current structure of these MS–DRGs. approach was not documented. We refer the reader to the FY 2014 A replication issue for 41 ICD–10– IPPS/LTCH PPS final rule (78 FR 50544 b. Reassignment of Procedures Among PCS procedure codes describing through 50545) for detailed information MS–DRGs 981 Through 983, 984 angioplasty with the open approach was regarding modifications that were made Through 986, and 987 Through 989 identified after implementation of the to the former ICD–9–CM CMS DRG 468 We also reviewed the list of ICD–10– ICD–10 MS–DRGs Version 33. In the (MS–DRGs 981 through 983), CMS DRG PCS procedures that, when in code translation, these 41 ICD–10–PCS 476 (MS–DRGs 984 through 986), and combination with their principal procedure codes were grouped and CMS DRG 477 (MS–DRGs 987 through diagnosis code, result in assignment to assigned to ICD–10 MS–DRGs 981 989) with regard to the movement of MS–DRGs 981 through 983, 984 through through 983 (Extensive O.R. Procedure procedure codes. We note that no 986, or 987 through 989, to ascertain Unrelated to Principal Diagnosis with

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MCC, with CC, and without CC/MCC, when a principal diagnosis was reported procedure codes listed in the following respectively). However, these procedure under MDC 1. table to ICD–10 MS–DRGs 037 through codes should have been grouped to To resolve this replication issue, we 039 under MDC 1. ICD–10 MS–DRGs 037 through 039 are proposing to add the 41 ICD–10–PCS

ICD–10–PCS procedure code Description

037H04Z ...... Dilation of right common carotid artery with drug-eluting intraluminal device, open approach. 037H0DZ ...... Dilation of right common carotid artery with intraluminal device, open approach. 037H0ZZ ...... Dilation of right common carotid artery, open approach. 037J04Z ...... Dilation of left common carotid artery with drug-eluting intraluminal device, open approach. 037J0DZ ...... Dilation of left common carotid artery with intraluminal device, open approach. 037J0ZZ ...... Dilation of left common carotid artery, open approach. 037K04Z ...... Dilation of right internal carotid artery with drug-eluting intraluminal device, open approach. 037K0DZ ...... Dilation of right internal carotid artery with intraluminal device, open approach. 037K0ZZ ...... Dilation of right internal carotid artery, open approach. 037L04Z ...... Dilation of left internal carotid artery with drug-eluting intraluminal device, open approach. 037L0DZ ...... Dilation of left internal carotid artery with intraluminal device, open approach. 037L0ZZ ...... Dilation of left internal carotid artery, open approach. 037M04Z ...... Dilation of right external carotid artery with drug-eluting intraluminal device, open approach. 037M0DZ ...... Dilation of right external carotid artery with intraluminal device, open approach. 037M0ZZ ...... Dilation of right external carotid artery, open approach. 037N04Z ...... Dilation of left external carotid artery with drug-eluting intraluminal device, open approach. 037N0DZ ...... Dilation of left external carotid artery with intraluminal device, open approach. 037N0ZZ ...... Dilation of left external carotid artery, open approach. 037P04Z ...... Dilation of right vertebral artery with drug-eluting intraluminal device, open approach. 037P0DZ ...... Dilation of right vertebral artery with intraluminal device, open approach. 037P0ZZ ...... Dilation of right vertebral artery, open approach. 037Q04Z ...... Dilation of left vertebral artery with drug-eluting intraluminal device, open approach. 037Q0DZ ...... Dilation of left vertebral artery with intraluminal device, open approach. 037Q0ZZ ...... Dilation of left vertebral artery, open approach. 037Y04Z ...... Dilation of upper artery with drug-eluting intraluminal device, open approach. 037Y0DZ ...... Dilation of upper artery with intraluminal device, open approach. 037Y0ZZ ...... Dilation of upper artery, open approach. 057M0DZ ...... Dilation of right internal jugular vein with intraluminal device, open approach. 057M0ZZ ...... Dilation of right internal jugular vein, open approach. 057N0DZ ...... Dilation of left internal jugular vein with intraluminal device, open approach. 057N0ZZ ...... Dilation of left internal jugular vein, open approach. 057P0DZ ...... Dilation of right external jugular vein with intraluminal device, open approach. 057P0ZZ ...... Dilation of right external jugular vein, open approach 057Q0DZ ...... Dilation of left external jugular vein with intraluminal device, open approach. 057Q0ZZ ...... Dilation of left external jugular vein, open approach. 057R0DZ ...... Dilation of right vertebral vein with intraluminal device, open approach. 057R0ZZ ...... Dilation of right vertebral vein, open approach. 057S0DZ ...... Dilation of left vertebral vein with intraluminal device, open approach. 057S0ZZ ...... Dilation of left vertebral vein, open approach. 057T0DZ ...... Dilation of right face vein with intraluminal device, open approach. 057T0ZZ ...... Dilation of right face vein, open approach.

We are inviting public comments on • MDC 5 (Diseases and Disorders of Injuries with MCC, with CC, and our proposal to add the above listed the Circulatory System): MS–DRGs 270 without CC/MCC, respectively); and codes to ICD–10 MS–DRGs 037, 038, through 272 (Other Major • MDC 24 (Multiple Significant and 039 (Extracranial Procedures with Cardiovascular Procedures with MCC, Trauma): MS–DRG 957 through 959 MCC, with CC, or without CC/MCC, with CC and without CC/MCC, (Other O.R. Procedures for Multiple respectively) under MDC 1, effective respectively); Significant Trauma without CC/MCC). October 1, 2016, for the ICD–10 MS– • MDC 6 (Diseases and Disorders of A replication issue for 34 ICD–10– DRGs Version 34. the Digestive System): MS–DRGs 356 PCS procedure codes describing (2) Excision of Abdominal Arteries through 358 (Other Digestive System aneurysmectomy procedures with the O.R. Procedures with MCC, with CC and open and percutaneous endoscopic In the ICD–9–CM MS–DRGs Version without CC/MCC, respectively); approach was identified after implementation of the ICD–10 MS– 32, procedures involving excision of a • MDC 11 (Diseases and Disorders of DRGs Version 33. For example, cases vessel and anastomosis, such as those the Kidney and Urinary Tract): MS– with a principal diagnosis of I72.2 performed for the treatment of an DRGs 673 through 675 (Other Kidney (Aneurysm of renal artery) and abdominal artery aneurysm and Urinary Tract Procedures with (aneurysmectomy), are identified with procedure code 04BA0ZZ (Excision of MCC, with CC and without CC/MCC, left renal artery, open approach) are procedure code 38.36 (Resection of respectively); vessel with anastomosis, abdominal resulting in assignment to ICD–10 MS– • MDC 21 (Injuries, Poisonings and arteries) and are assigned to the DRGs 981 through 983 (Extensive O.R. Toxic Effects of Drugs): MS–DRGs 907 Procedure Unrelated to Principal following MDCs and MS–DRGs: through 909 (Other O.R. Procedures for Diagnosis with MCC, with CC, and

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without CC/MCC, respectively) instead To resolve this replication issue, we ICD–10 MDCs 6, 11, 21, and 24. We note of to MDC 11 in MS–DRGs 673 through are proposing to add the 34 ICD–10–PCS that there is no replication issue related 675 (Other Kidney and Urinary Tract procedure codes listed in the following to MDC 5 as the ICD–10–PCS procedure Procedures with MCC, with CC, and table that are comparable translations of codes listed in the table below group without CC/MCC, respectively). ICD–9–CM procedure code 38.36 to there appropriately.

ICD–10–PCS procedure code Description

04B10ZZ ...... Excision of celiac artery, open approach. 04B14ZZ ...... Excision of celiac artery, percutaneous endoscopic approach. 04B20ZZ ...... Excision of gastric artery, open approach. 04B24ZZ ...... Excision of gastric artery, percutaneous endoscopic approach. 04B30ZZ ...... Excision of hepatic artery, open approach. 04B34ZZ ...... Excision of hepatic artery, percutaneous endoscopic approach. 04B40ZZ ...... Excision of splenic artery, open approach. 04B44ZZ ...... Excision of splenic artery, percutaneous endoscopic approach. 04B50ZZ ...... Excision of superior mesenteric artery, open approach. 04B54ZZ ...... Excision of superior mesenteric artery, percutaneous endoscopic approach. 04B60ZZ ...... Excision of right colic artery, open approach. 04B64ZZ ...... Excision of right colic artery, percutaneous endoscopic approach. 04B70ZZ ...... Excision of left colic artery, open approach. 04B74ZZ ...... Excision of left colic artery, percutaneous endoscopic approach. 04B80ZZ ...... Excision of middle colic artery, open approach. 04B84ZZ ...... Excision of middle colic artery, percutaneous endoscopic approach. 04B90ZZ ...... Excision of right renal artery, open approach. 04B94ZZ ...... Excision of right renal artery, percutaneous endoscopic approach. 04BA0ZZ ...... Excision of left renal artery, open approach. 04BA4ZZ ...... Excision of left renal artery, percutaneous endoscopic approach. 04BB0ZZ ...... Excision of inferior mesenteric artery, open approach. 04BB4ZZ ...... Excision of inferior mesenteric artery, percutaneous endoscopic approach. 04BC0ZZ ...... Excision of right common iliac artery, open approach. 04BC4ZZ ...... Excision of right common iliac artery, percutaneous endoscopic approach. 04BD0ZZ ...... Excision of left common iliac artery, open approach. 04BD4ZZ ...... Excision of left common iliac artery, percutaneous endoscopic approach. 04BE0ZZ ...... Excision of right internal iliac artery, open approach. 04BE4ZZ ...... Excision of right internal iliac artery, percutaneous endoscopic approach. 04BF0ZZ ...... Excision of left internal iliac artery, open approach. 04BF4ZZ ...... Excision of left internal iliac artery, percutaneous endoscopic approach. 04BH0ZZ ...... Excision of right external iliac artery, open approach. 04BH4ZZ ...... Excision of right external iliac artery, percutaneous endoscopic approach. 04BJ0ZZ ...... Excision of left external iliac artery, open approach. 04BJ4ZZ ...... Excision of left external iliac artery, percutaneous endoscopic approach.

Adding these procedures to those neoplasm, are identified with procedure implementation of the ICD–10 MS– MDCs in the ICD–10 MS–DRGs Version code 54.4 (Excision or destruction of DRGs Version 33. These procedure 34 will result in a more accurate peritoneal tissue) and are assigned to a codes are ICD–10–PCS codes 0WBH0ZZ replication for the same procedure number of MDCs and MS–DRGs across (Excision of retroperitoneum, open under the ICD–9–CM MS–DRGs Version a variety of body systems, some of approach), 0WBH3ZZ (Excision of 32. We also are proposing that these which include the following: retroperitoneum, percutaneous procedure codes be assigned to the • MDC 6 (Diseases and Disorders of approach), and 0WBH4ZZ (Excision of corresponding MS–DRGs in each the Digestive System): MS–DRGs 356 retroperitoneum, percutaneous respective MDC as listed above. The through 358 (Other Digestive System endoscopic approach). For example, proposed changes would eliminate O.R. Procedures with MCC, with CC, when an ICD–10–CM diagnosis code erroneous assignment to MS–DRGs 981 and without CC/MCC, respectively); such as D20.0 (Benign neoplasm of soft through 983 (Extensive O.R. Procedure • MDC 7 (Diseases and Disorders of tissue of retroperitoneum) is reported Unrelated to Principal Diagnosis with the Hepatobiliary System and Pancreas): with any one of these three ICD–10–PCS MCC, with CC, and without CC/MCC, MS–DRGs 423 through 425 (Other procedure codes, the case is assigned to respectively) for these procedures. Hepatobiliary or Pancreas O.R. MS–DRGs 981 through 983 (Extensive We are inviting public comments on Procedures with MCC, with CC, and O.R. Procedure Unrelated to Principal our proposal to add the above listed without CC/MCC, respectively); and Diagnosis with MCC, with CC, and codes to MDCs 6, 11, 21, and 24 in the • MDC 10 (Endocrine, Nutritional without CC/MCC, respectively). corresponding MS–DRGs, effective and Metabolic Diseases and Disorders): To resolve this replication issue, we October 1, 2016, in the ICD–10 MS– MS–DRGs 628 through 630 (Other are proposing to add the three ICD–10– DRGs Version 34. Endocrine, Nutritional and Metabolic PCS procedure codes to MDC 6 in MS– O.R. Procedures with MCC, with CC, DRGs 356 through 358 (Other Digestive (3) Excision of Retroperitoneal Tissue and without CC/MCC, respectively). System O.R. Procedures with MCC, with In the ICD–9–CM MS–DRGs Version A replication issue for the ICD–10– CC, and without CC/MCC, respectively). 32, procedures involving excision of a PCS procedure codes describing This would result in a more accurate retroperitoneal lesion (or tissue), such as excision of retroperitoneum that replication of the comparable procedure those performed for the treatment of a involves MDC 6 was identified after under the ICD–9–CM MS–DRGs Version

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32. The proposed changes also would 425, effective October 1, 2016, in the biopsy are identified with procedure eliminate erroneous assignment to MS– ICD–10 MS–DRGs Version 34. code 40.11 (Biopsy of lymphatic DRGs 981 through 983 for these structure), which may be assigned to (5) Excision of Vulva procedures. several MDCs representing various body We are inviting public comments on In the ICD–9–CM MS–DRGs Version systems. Under the ICD–10 MS–DRGs our proposal to add the three ICD–10– 32, procedures involving excision of the Version 33, this procedure has 114 ICD– PCS codes describing excision of vulva are identified with procedure 10–PCS procedure codes considered to retroperitoneum to MDC 6 in MS–DRGs code 71.3 (Other local excision or be comparable translations that describe 356 through 358, effective October 1, destruction of vulva and perineum) and diagnostic drainage or excision of 2016, in the ICD–10 MS–DRGs Version are assigned to the following MDCs and specified lymphatic structures and also 34. MS–DRGs: warrant assignment to the same MDCs • MDC 9 (Diseases & Disorders of the (4) Occlusion of Vessels: Esophageal across various body systems. Skin, Subcutaneous Tissue and Breast): A replication issue for the lymph Varices MS–DRGs 579 through 581 (Other Skin, node biopsy procedure involving MDC In the ICD–9–CM MS–DRGs Version Subcutaneous Tissue and Breast 4 (Diseases and Disorders of the 32, procedures including ligation or Procedures with MCC, with CC, and Respiratory System) under the ICD–10 surgical occlusion of esophageal varices without CC/MCC, respectively); and MS–DRGs Version 33 was identified are identified with procedure code • MDC 13 (Diseases & Disorders of after implementation on October 1, 42.91 (Ligation of esophageal varices) the Female Reproductive System): MS– 2015. For example, when a respiratory and are assigned to MDC 6 (Diseases DRG 746 (Vagina, cervix and vulva system diagnosis is reported with the and Disorders of the Digestive System) procedures with CC/MCC) and MS–DRG comparable ICD–10–PCS procedure under MS–DRGs 326 through 328 747 (Vagina, Cervix and Vulva code 07B74ZX (Excision of thorax (Stomach, Esophageal and Duodenal procedures without CC/MCC). lymphatic, percutaneous endoscopic Procedures with MCC, with CC, and A replication issue involving ICD–10– approach, diagnostic), the case is without CC/MCC, respectively) and PCS procedure code 0UBMXZZ assigned to MS–DRGs 987 through 989 MDC 7 (Diseases and Disorders of the (Excision of vulva, external approach) (Non-Extensive O.R. Procedure Hepatobiliary System and Pancreas) was identified after implementation of Unrelated to Principal Diagnosis with under MS–DRGs 423 through 425 (Other the ICD–10 MS–DRGs Version 33. For MCC, with CC, and without CC/MCC, Hepatobiliary or Pancreas O.R. example, when cases with an ICD–10– respectively). procedures with MCC, with CC, and CM principal diagnosis of code D07.1 To resolve this replication issue, we without CC/MCC, respectively). (Carcinoma in situ of vulva) are reported are proposing to add ICD–10–PCS A replication issue for MDC 7 with ICD–10–PCS procedure code procedure code 07B74ZX to MDC 4 involving ICD–10–PCS procedure codes 0UBMXZZ (Excision of vulva, external under MS–DRGs 166 through 168 (Other 06L30CZ (Occlusion of esophageal vein approach), they are resulting in Respiratory System O.R. Procedures with extraluminal device, open assignment to MS–DRGs 981 through with MCC, with CC, and without CC/ approach) and 06L30DZ (Occlusion of 983 (Extensive O.R. Procedure MCC, respectively) to more accurately esophageal vein with intraluminal Unrelated to Principal Diagnosis with replicate assignment of the comparable device, open approach) was identified MCC, with CC, and without CC/MCC, procedure code under the ICD–9–CM in the ICD–10 MS–DRGs Version 33 respectively). MS–DRGs Version 32. after implementation on October 1, To resolve this replication issue, we While reviewing that specific 2015. For instance, when an ICD–10– are proposing to add ICD–10–PCS example, we also identified two other CM diagnosis code such as K70.30 procedure code 0UBMXZZ to MDC 13 comparable ICD–10–PCS procedure (Alcoholic cirrhosis of liver without under MS–DRGs 746 and 747. Adding code translations of ICD–9–CM ascites) is reported with either one of procedure code 0UBMXZZ to MDC 13 procedure code 40.11 (Biopsy of the ICD–10–PCS procedure codes, it in MS–DRGs 746 and 747 would result lymphatic structure) describing results in assignment to MS–DRGs 981 in a more accurate replication of the diagnostic excision of thoracic through 983 (Extensive O.R. Procedure comparable procedure under the ICD–9– lymphatic structures that were not Unrelated to Principal Diagnosis with CM MS–DRGs Version 32. The proposed replicated consistent with the ICD–9– MCC, with CC, and without CC/MCC, changes also would eliminate erroneous CM MS–DRGs Version 32. These are respectively). assignment to MS–DRGs 981 through ICD–10–PCS procedure codes 07B70ZX To resolve this replication issue, we 983 for these procedures. In addition, (Excision of thorax lymphatic, open are proposing to add the two ICD–10– the proposed changes would be approach, diagnostic) and 07B73ZX PCS procedure codes describing consistent with the assignment of other (Excision of thorax lymphatic, occlusion of esophageal vein to MDC 7 clinically similar procedures, such as percutaneous approach, diagnostic). under MS–DRGs 423 through 425. This ICD–10–PCS procedure code 0WBNXZZ Therefore, we are proposing to add will result in a more accurate (Excision of female perineum, external these two ICD–10–PCS procedure codes replication of the comparable procedure approach). Finally, we note that there is to MDC 4 in MS–DRGs 166 through 168 under the ICD–9–CM MS–DRGs Version no replication issue for MDC 9 regarding as well. 32. The proposed changes also would this procedure code. Adding ICD–10–PCS procedure codes eliminate erroneous assignment to MS– We are inviting public comment on 07B74ZX, 07B70ZX, and 07B73ZX that DRGs 981 through 983 (Extensive O.R. our proposal to add ICD–10–PCS describe diagnostic excision of thoracic Procedure Unrelated to Principal procedure code 0UBMXZZ to MDC 13 lymphatic structures to MDC 4 under Diagnosis with MCC, with CC, and in MS–DRGs 746 and 747, effective MS–DRGs 166 through 168 would result without CC/MCC, respectively) for these October 1, 2016, in the ICD–10 MS– in a more accurate replication of the procedures. DRGs Version 34. comparable procedure under ICD–9–CM We are inviting public comments on MS–DRGs Version 32. The proposed our proposal to add ICD–10–PCS (6) Lymph Node Biopsy changes would eliminate erroneous procedure codes 06L30CZ and 06L30DZ In the ICD–9–CM MS–DRGs Version assignment to MS–DRGs 987 through to MDC 7 under MS–DRGs 423 through 32, procedures involving a lymph node 989 for these procedures.

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We are inviting public comments on Version 34 for MS–DRGs 166 through procedures that may be performed for our proposal to add ICD–10–PCS 168 in MDC 4, effective October 1, 2016. the repair of obstetrical lacerations was procedure codes 07B74ZX, 07B70ZX, (7) Obstetrical Laceration Repair identified after implementation of the and 07B73ZX to the ICD–10 MS–DRGs ICD–10 MS–DRGs Version 33. These A replication issue for eight ICD–10– codes are: PCS procedure codes describing

ICD–10–PCS procedure Description code

0DQQ0ZZ ...... Repair anus, open approach. 0DQQ3ZZ ...... Repair anus, percutaneous approach. 0DQQ4ZZ ...... Repair anus, percutaneous endoscopic approach. 0DQQ7ZZ ...... Repair anus, via natural or artificial opening. 0DQQ8ZZ ...... Repair anus, via natural or artificial opening endoscopic. 0DQR0ZZ ...... Repair anal sphincter, open approach. 0DQR3ZZ ...... Repair anal sphincter, percutaneous approach. 0DQR4ZZ ...... Repair anal sphincter, percutaneous endoscopic approach.

We discovered that the ICD–10 MDC Disease Control and Prevention, and Committee holds public meetings for and MS–DRG assignment are not CMS, charged with maintaining and discussion of educational issues and consistent with other ICD–10–PCS updating the ICD–9–CM system. The proposed coding changes. These procedure codes that identify and final update to ICD–9–CM codes was to meetings provide an opportunity for describe clinically similar procedures be made on October 1, 2013. Thereafter, representatives of recognized for the repair of obstetrical lacerations the name of the Committee was changed organizations in the coding field, such which are coded and reported based on to the ICD–10 Coordination and as the American Health Information the extent of the tear. For example, ICD– Maintenance Committee, effective with Management Association (AHIMA), the 10–PCS procedure code 0DQP0ZZ the March 19–20, 2014 meeting. The American Hospital Association (AHA), (Repair rectum, open approach) is ICD–10 Coordination and Maintenance and various physician specialty groups, appropriately assigned to MDC 14 Committee addresses updates to the as well as individual physicians, health (Pregnancy, Childbirth and the ICD–10–CM and ICD–10–PCS coding information management professionals, Puerperium) under MS–DRG 774 systems. The Committee is jointly and other members of the public, to (Vaginal Delivery with Complicating responsible for approving coding contribute ideas on coding matters. Diagnoses). This procedure may be changes, and developing errata, After considering the opinions performed in the treatment of a fourth- addenda, and other modifications to the expressed at the public meetings and in degree perineal laceration involving the coding systems to reflect newly writing, the Committee formulates rectal mucosa. In contrast, ICD–10–PCS developed procedures and technologies recommendations, which then must be procedure code 0DQR0ZZ (Repair anal and newly identified diseases. The approved by the agencies. sphincter, open approach), when Committee is also responsible for The Committee presented proposals reported for repair of a perineal promoting the use of Federal and non- for coding changes for implementation laceration, currently results in Federal educational programs and other in FY 2017 at a public meeting held on assignment to MS–DRGs 987 through communication techniques with a view September 22–23, 2015, and finalized 989 (Non-Extensive O.R. Procedure toward standardizing coding the coding changes after consideration Unrelated to Principal Diagnosis). applications and upgrading the quality of comments received at the meetings To resolve this replication issue, we of the classification system. and in writing by November 13, 2015. The Committee held its 2016 meeting are proposing to add these eight ICD– The official list of ICD–9–CM on March 9–10, 2016. It was announced 10–PCS procedure codes to MDC 14 in diagnosis and procedure codes by fiscal at this meeting that any new ICD–10– MS–DRG 774. The proposed changes year can be found on the CMS Web site CM/PCS codes for which there was would eliminate erroneous assignment at: http://cms.hhs.gov/Medicare/Coding/ consensus of public support and for to MS–DRGs 987 through 989 for these ICD9ProviderDiagnosticCodes/ which complete tabular and indexing procedures. codes.html. The official list of ICD–10– CM and ICD–10–PCS codes can be changes would be made by May 2016 We are inviting public comments on found on the CMS Web site at: http:// would be included in the October 1, our proposal to add the eight listed www.cms.gov/Medicare/Coding/ICD10/ 2016 update to ICD–10–CM/ICD–10– codes to MDC 14 under MS–DRG 774, index.html. PCS. As discussed in earlier sections of effective October 1, 2016, in the ICD–10 The NCHS has lead responsibility for this preamble, there are new and MS–DRGs Version 34. the ICD–10–CM and ICD–9–CM deleted ICD–10–CM diagnosis codes 17. Proposed Changes to the ICD–10– diagnosis codes included in the Tabular and ICD–10–PCS procedure codes that CM and ICD–10–PCS Coding Systems List and Alphabetic Index for Diseases, are captured in Table 6A.—New Diagnosis Codes, Table 6B.—New a. ICD–10 Coordination and while CMS has lead responsibility for Procedure Codes, and Table 6C.— Maintenance Committee the ICD–10–PCS and ICD–9–CM procedure codes included in the Invalid Diagnosis Codes for the In September 1985, the ICD–9–CM Tabular List and Alphabetic Index for proposed rule, which are available via Coordination and Maintenance Procedures. the Internet on the CMS Web site at: Committee was formed. This is a The Committee encourages http://www.cms.gov/Medicare/ Federal interdepartmental committee, participation in the previously Medicare-Fee-for-Service-Payment/ co-chaired by the National Center for mentioned process by health-related AcuteInpatientPPS/index.html. Because Health Statistics (NCHS), the Centers for organizations. In this regard, the of the length of these tables, they are not

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published in the Addendum to this diagnosis-related group classification) systems and obtain new code books and proposed rule. Rather, they are available until the fiscal year that begins after coding software. There was considerable via the Internet as discussed in section such date. This requirement improves concern expressed about the impact this VI. of the Addendum to this proposed the recognition of new technologies new April update would have on rule. under the IPPS system by providing providers. Live Webcast recordings of the information on these new technologies In the FY 2005 IPPS final rule, we discussions of procedure codes at the at an earlier date. Data will be available implemented section 1886(d)(5)(K)(vii) Committee’s September 22–23, 2015 6 months earlier than would be possible of the Act, as added by section 503(a) meeting and March 9–10, 2016 meeting with updates occurring only once a year of Public Law 108–173, by developing a can be obtained from the CMS Web site on October 1. mechanism for approving, in time for at: http://cms.hhs.gov/Medicare/Coding/ While section 1886(d)(5)(K)(vii) of the the April update, diagnosis and ICD9ProviderDiagnosticCodes/index. Act states that the addition of new procedure code revisions needed to html?redirect=/icD9ProviderDiagnostic diagnosis and procedure codes on April describe new technologies and medical Codes/03_meetings.asp. The minutes of 1 of each year shall not require the services for purposes of the new the discussions of diagnosis codes at the Secretary to adjust the payment, or DRG technology add-on payment process. We September 23–24, 2015 meeting and classification, under section 1886(d) of also established the following process March 9–10, 2016 meeting are found at: the Act until the fiscal year that begins for making these determinations. Topics http://www.cdc.gov/nchs/icd/icd9cm_ after such date, we have to update the considered during the Fall ICD–10 maintenance.html. These Web sites also DRG software and other systems in (previously ICD–9–CM) Coordination provide detailed information about the order to recognize and accept the new and Maintenance Committee meeting Committee, including information on codes. We also publicize the code are considered for an April 1 update if requesting a new code, attending a changes and the need for a mid-year a strong and convincing case is made by Committee meeting, and timeline systems update by providers to identify the requester at the Committee’s public requirements and meeting dates. the new codes. Hospitals also have to meeting. The request must identify the We encourage commenters to address obtain the new code books and encoder reason why a new code is needed in suggestions on coding issues involving updates, and make other system changes April for purposes of the new diagnosis codes to: Donna Pickett, Co- in order to identify and report the new technology process. The participants at Chairperson, ICD–10 Coordination and codes. the meeting and those reviewing the Maintenance Committee, NCHS, Room The ICD–10 (previously the ICD–9– Committee meeting summary report are 2402, 3311 Toledo Road, Hyattsville, CM) Coordination and Maintenance provided the opportunity to comment MD 20782. Comments may be sent by Committee holds its meetings in the on this expedited request. All other Email to: [email protected]. spring and fall in order to update the topics are considered for the October 1 Questions and comments concerning codes and the applicable payment and update. Participants at the Committee the procedure codes should be reporting systems by October 1 of each meeting are encouraged to comment on addressed to: Patricia Brooks, Co- year. Items are placed on the agenda for all such requests. There were no Chairperson, ICD–10 Coordination and the Committee meeting if the request is requests approved for an expedited Maintenance Committee, CMS, Center received at least 2 months prior to the April l, 2016 implementation of a code for Medicare Management, Hospital and meeting. This requirement allows time at the September 22–23, 2015 Ambulatory Policy Group, Division of for staff to review and research the Committee meeting. Therefore, there Acute Care, C4–08–06, 7500 Security coding issues and prepare material for were no new codes implemented on Boulevard, Baltimore, MD 21244–1850. discussion at the meeting. It also allows April 1, 2016. Comments may be sent by Email to: time for the topic to be publicized in ICD–9–CM addendum and code title ICDProcedureCodeRequest@ meeting announcements in the Federal information is published on the CMS cms.hhs.gov. Register as well as on the CMS Web site. Web site at: http://www.cms.hhs.gov/ In the September 7, 2001 final rule Final decisions on code title revisions Medicare/Coding/ICD9Provider implementing the IPPS new technology are currently made by March 1 so that DiagnosticCodes/index.html?redirect=/ add-on payments (66 FR 46906), we these titles can be included in the IPPS icD9ProviderDiagnosticCodes/ indicated we would attempt to include proposed rule. A complete addendum 01overview.asp#TopofPage. ICD–10–CM proposals for procedure codes that describing details of all diagnosis and and ICD–10–PCS addendum and code would describe new technology procedure coding changes, both tabular title information is published on the discussed and approved at the Spring and index, is published on the CMS and CMS Web site at: http://www.cms.gov/ meeting as part of the code revisions NCHS Web sites in May of each year. Medicare/Coding/ICD10/index.html. effective the following October. Publishers of coding books and software Information on ICD–10–CM diagnosis Section 503(a) of Public Law 108–173 use this information to modify their codes, along with the Official ICD–10– included a requirement for updating products that are used by health care CM Coding Guidelines, can also be diagnosis and procedure codes twice a providers. This 5-month time period has found on the CDC Web site at: http:// year instead of a single update on proved to be necessary for hospitals and www.cdc.gov/nchs/icd/icd10.htm. October 1 of each year. This other providers to update their systems. Information on new, revised, and requirement was included as part of the A discussion of this timeline and the deleted ICD–10–CM/ICD–10–PCS codes amendments to the Act relating to need for changes are included in the is also provided to the AHA for recognition of new technology under the December 4–5, 2005 ICD–9–CM publication in the Coding Clinic for IPPS. Section 503(a) amended section Coordination and Maintenance ICD–10. AHA also distributes 1886(d)(5)(K) of the Act by adding a Committee Meeting minutes. The public information to publishers and software clause (vii) which states that the agreed that there was a need to hold the vendors. Secretary shall provide for the addition fall meetings earlier, in September or CMS also sends copies of all ICD–10– of new diagnosis and procedure codes October, in order to meet the new CM and ICD–10–PCS coding changes to on April 1 of each year, but the addition implementation dates. The public its Medicare contractors for use in of such codes shall not require the provided comment that additional time updating their systems and providing Secretary to adjust the payment (or would be needed to update hospital education to providers.

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The code titles are adopted as part of was an announcement at the September only limited code updates to both the the ICD–10 (previously ICD–9–CM) 19, 2012 ICD–9–CM Coordination and ICD–9–CM and ICD–10 code sets to Coordination and Maintenance Maintenance Committee meeting that a capture new technologies and diseases Committee process. Therefore, although partial freeze of both ICD–9–CM and as required by section 1886(d)(5)(K) of we publish the code titles in the IPPS ICD–10 codes will be implemented as the Act. proposed and final rules, they are not follows: • On October 1, 2015, there will be • The last regular annual update to subject to comment in the proposed or only limited code updates to ICD–10 both ICD–9–CM and ICD–10 code sets final rules. code sets to capture new technologies was made on October 1, 2011. b. Code Freeze • On October 1, 2012 and October 1, and diagnoses as required by section 1886(d)(5)(K) of the Act. There will be In the January 16, 2009 ICD–10–CM 2013, there will be only limited code no updates to ICD–9–CM, as it will no and ICD–10–PCS final rule (74 FR updates to both ICD–9–CM and ICD–10 longer be used for reporting. 3340), there was a discussion of the code sets to capture new technology and need for a partial or total freeze in the new diseases. • On October 1, 2016 (1 year after • annual updates to both ICD–9–CM and On October 1, 2014, there were to implementation of ICD–10), regular ICD–10–CM and ICD–10–PCS codes. be only limited code updates to ICD–10 updates to ICD–10 will begin. The public comment addressed in that code sets to capture new technology and The ICD–10 (previously ICD–9–CM) diagnoses as required by section 503(a) final rule stated that the annual code set Coordination and Maintenance of Public Law 108–173. There were to updates should cease l year prior to the Committee announced that it would be no updates to ICD–9–CM on October implementation of ICD–10. The continue to meet twice a year during the 1, 2014. commenters stated that this freeze of • freeze. At these meetings, the public code updates would allow for On October 1, 2015, one year after the originally scheduled was encouraged to comment on whether instructional and/or coding software implementation of ICD–10, regular or not requests for new diagnosis and programs to be designed and purchased updates to ICD–10 were to begin. procedure codes should be created early, without concern that an upgrade On May 15, 2014, CMS posted an based on the need to capture new would take place immediately before updated Partial Code Freeze schedule technology and new diseases. Any code the compliance date, necessitating on the CMS Web site at: http://www. requests that do not meet the criteria additional updates and purchases. cms.gov/Medicare/Coding/ICD10/ICD-9- will be evaluated for implementation HHS responded to comments in the CM-Coordination-and-Maintenance- within ICD–10 one year after the ICD–10 final rule that the ICD–9–CM Committee-Meetings.html. This updated implementation of ICD–10, once the Coordination and Maintenance schedule provided information on the partial freeze is ended. Committee has jurisdiction over any extension of the partial code freeze until Complete information on the partial action impacting the ICD–9–CM and 1 year after the implementation of ICD– ICD–10 code sets. Therefore, HHS code freeze and discussions of the 10. As stated earlier, on April 1, 2014, issues at the Committee meetings can be indicated that the issue of consideration the Protecting Access to Medicare Act of of a moratorium on updates to the ICD– found on the ICD–10 Coordination and 2014 (PAMA) (Pub. L. 113–93) was Maintenance Committee Web site at: 9–CM, ICD–10–CM, and ICD–10–PCS enacted, which specified that the code sets in anticipation of the adoption http://www.cms.hhs.gov/Medicare/ Secretary may not adopt ICD–10 prior to Coding/ICD9ProviderDiagnosticCodes/ of ICD–10–CM and ICD–10–PCS would October 1, 2015. On August 4, 2014, the be addressed through the Committee at meetings.html. A summary of the Department published a final rule with September 19, 2012 Committee meeting, a future public meeting. a compliance date to require the use of The code freeze was discussed at along with both written and audio ICD–10 beginning October 1, 2015. The transcripts of this meeting, is posted on multiple meetings of the ICD–9–CM final rule also required HIPAA-covered Coordination and Maintenance the Web site at: http://www.cms. entities to continue to use ICD–9–CM hhs.gov/Medicare/Coding/ICD9Provider Committee and public comment was through September 30, 2015. DiagnosticCodes/ICD-9-CM-C-and-M- actively solicited. The Committee Accordingly, the updated schedule for Meeting-Materials-Items/2012-09-19- evaluated all comments from the partial code freeze was as follows: participants attending the Committee • The last regular annual updates to MeetingMaterials.html. meetings as well as written comments both ICD–9–CM and ICD–10 code sets This partial code freeze dramatically that were received. The Committee also were made on October 1, 2011. decreased the number of codes created considered the delay in implementation • On October 1, 2012, October 1, each year as shown by the following of ICD–10 until October 1, 2014. There 2013, and October 1, 2014, there will be information.

TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR

ICD–9–CM Codes ICD–10–CM and ICD–10–PCS Codes Fiscal year Number Change Fiscal year Number Change

FY 2009 (October 1, 2008) FY 2009 Diagnoses ...... 14,025 348 ICD–10–CM...... 68,069 +5 Procedures ...... 3,824 56 ICD–10–PCS...... 72,589 ¥14,327 FY 2010 (October 1, 2009) FY 2010 Diagnoses ...... 14,315 290 ICD–10–CM...... 69,099 +1,030 Procedures ...... 3,838 14 ICD–10–PCS...... 71,957 ¥632 FY 2011 (October 1, 2010) Diagnoses ...... 14,432 117 ICD–10–CM...... 69,368 +269 Procedures ...... 3,859 21 ICD–10–PCS...... 72,081 +124 FY 2012 (October 1, 2011) FY 2012 Diagnoses ...... 14,567 135 ICD–10–CM...... 69,833 +465

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TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR—Continued

ICD–9–CM Codes ICD–10–CM and ICD–10–PCS Codes Fiscal year Number Change Fiscal year Number Change

Procedures ...... 3,877 18 ICD–10–PCS...... 71,918 ¥163 FY 2013 (October 1, 2012) FY 2013 Diagnoses ...... 14,567 0 ICD–10–CM...... 69,832 ¥1 Procedures ...... 3,878 1 ICD–10–PCS...... 71,920 +2 FY 2014 (October 1, 2013) FY 2014 Diagnoses ...... 14,567 0 ICD–10–CM...... 69,823 ¥9 Procedures ...... 3,882 4 ICD–10–PCS...... 71,924 +4 FY 2015 (October 1, 2014) FY 2015 Diagnoses ...... 14,567 0 ICD–10–CM...... 69,823 0 Procedures ...... 3,882 0 ICD–10–PCS...... 71,924 0 FY 2016 (October 1, 2015) FY 2016 Diagnoses ...... 14,567 0 ICD–10–CM...... 69,823 0 Procedures ...... 3,882 0 ICD–10–PCS...... 71,924 0 Proposed FY 2017 (October 1, Proposed FY 2017 2016) Diagnoses ...... 14,567 0 ICD–10–CM...... 71,558 0 Procedures ...... 3,882 0 ICD–10–PCS...... 75,625 0

As mentioned previously, the public invited public comments on any code implantation of a device that has been is provided the opportunity to comment requests discussed at the September 22– recalled determined the base MS–DRG on any requests for new diagnosis or 23, 2015 and March 9–10, 2016 assignment. At that time, we specified procedure codes discussed at the ICD– Committee meetings for implementation that we will reduce a hospital’s IPPS 10 Coordination and Maintenance as part of the October 1, 2016 update. payment for those MS–DRGs where the Committee meeting. The public has The deadline for commenting on code hospital received a credit for a replaced supported only a limited number of new proposals discussed at the September device equal to 50 percent or more of codes during the partial code freeze, as 22–23, 2015 Committee meeting was the cost of the device. can be seen by previously shown data. November 13, 2015. The deadline for In the FY 2012 IPPS/LTCH PPS final We have gone from creating several commenting on code proposals rule (76 FR 51556 through 51557), we hundred new codes each year to discussed at the March 9–10, 2016 clarified this policy to state that the creating only a limited number of new Committee meeting was April 8, 2016. policy applies if the hospital received a ICD–9–CM and ICD–10 codes. At the September 22–23, 2015 and 18. Replaced Devices Offered Without credit equal to 50 percent or more of the March 9–10, 2016 Committee meetings, Cost or With a Credit cost of the replacement device and issued instructions to hospitals we discussed any requests we had a. Background received for new ICD–10–CM diagnosis accordingly. codes and ICD–10–PCS procedure codes In the FY 2008 IPPS final rule with b. Proposed Changes for FY 2017 that were to be implemented on October comment period (72 FR 47246 through 1, 2016. We did not discuss ICD–9–CM 47251), we discussed the topic of For FY 2017 we are proposing not to codes. Because the partial code freeze Medicare payment for devices that are add any MS–DRGs to the policy for will end on October 1, 2016, the public replaced without cost or where credit replaced devices offered without cost or no longer had to comment on whether for a replaced device is furnished to the with a credit. We are proposing to or not new ICD–10–CM and ICD–10– hospital. We implemented a policy to continue to include the existing MS– PCS codes should be created based on reduce a hospital’s IPPS payment for DRGs currently subject to the policy as the partial code freeze criteria. We certain MS–DRGs where the displayed in the table below.

MDC MS–DRG MS–DRG Title

Pre-MDC ... 001 Heart Transplant or Implant of Heart Assist System with MCC. Pre-MDC ... 002 Heart Transplant or Implant of Heart Assist System without MCC. 1 ...... 023 Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis with MCC or Chemo Implant. 1 ...... 024 Craniotomy with Major Device Implant/Acute Complex CNS Principal Diagnosis without MCC. 1 ...... 025 Craniotomy & Endovascular Intracranial Procedures with MCC. 1 ...... 026 Craniotomy & Endovascular Intracranial Procedures with CC. 1 ...... 027 Craniotomy & Endovascular Intracranial Procedures without CC/MCC. 1 ...... 040 Peripheral/Cranial Nerve & Other Nervous System Procedure with MCC. 1 ...... 041 Peripheral/Cranial Nerve & Other Nervous System Procedure with CC or Peripheral Neurostimulator. 1 ...... 042 Peripheral/Cranial Nerve & Other Nervous System Procedure without CC/MCC. 3 ...... 129 Major Head & Neck Procedures with CC/MCC or Major Device. 3 ...... 130 Major Head & Neck Procedures without CC/MCC. 5 ...... 215 Other Heart Assist System Implant. 5 ...... 216 Cardiac Valve & Other Major Cardiothoracic Procedure with Cardiac Catheter with MCC. 5 ...... 217 Cardiac Valve & Other Major Cardiothoracic Procedure with Cardiac Catheter with CC. 5 ...... 218 Cardiac Valve & Other Major Cardiothoracic Procedure with Cardiac Catheter without CC/MCC. 5 ...... 219 Cardiac Valve & Other Major Cardiothoracic Procedure without Cardiac Catheter with MCC. 5 ...... 220 Cardiac Valve & Other Major Cardiothoracic Procedure without Cardiac Catheter with CC.

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MDC MS–DRG MS–DRG Title

5 ...... 221 Cardiac Valve & Other Major Cardiothoracic Procedure without Cardiac Catheter without CC/MCC. 5 ...... 222 Cardiac Defibrillator Implant with Cardiac Catheter with AMI/Heart Failure/Shock with MCC. 5 ...... 223 Cardiac Defibrillator Implant with Cardiac Catheter with AMI/Heart Failure/Shock without MCC. 5 ...... 224 Cardiac Defibrillator Implant with Cardiac Catheter without AMI/Heart Failure/Shock with MCC. 5 ...... 225 Cardiac Defibrillator Implant with Cardiac Catheter without AMI/Heart Failure/Shock without MCC. 5 ...... 226 Cardiac Defibrillator Implant without Cardiac Catheter with MCC. 5 ...... 227 Cardiac Defibrillator Implant without Cardiac Catheter without MCC. 5 ...... 242 Permanent Cardiac Pacemaker Implant with MCC. 5 ...... 243 Permanent Cardiac Pacemaker Implant with CC. 5 ...... 244 Permanent Cardiac Pacemaker Implant without CC/MCC. 5 ...... 245 AICD Generator Procedures. 5 ...... 258 Cardiac Pacemaker Device Replacement with MCC. 5 ...... 259 Cardiac Pacemaker Device Replacement without MCC. 5 ...... 260 Cardiac Pacemaker Revision Except Device Replacement with MCC. 5 ...... 261 Cardiac Pacemaker Revision Except Device Replacement with CC. 5 ...... 262 Cardiac Pacemaker Revision Except Device Replacement without CC/MCC. 5 ...... 266 Endovascular Cardiac Valve Replacement with MCC. 5 ...... 267 Endovascular Cardiac Valve Replacement without MCC. 5 ...... 268 Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC. 5 ...... 269 Aortic and Heart Assist Procedures Except Pulsation Balloon without MCC. 5 ...... 270 Other Major Cardiovascular Procedures with MCC. 5 ...... 271 Other Major Cardiovascular Procedures with CC. 5 ...... 272 Other Major Cardiovascular Procedures without CC/MCC. 8 ...... 461 Bilateral or Multiple Major Joint Procedures Of Lower Extremity with MCC. 8 ...... 462 Bilateral or Multiple Major Joint Procedures of Lower Extremity without MCC. 8 ...... 466 Revision of Hip or Knee Replacement with MCC. 8 ...... 467 Revision of Hip or Knee Replacement with CC. 8 ...... 468 Revision of Hip or Knee Replacement without CC/MCC. 8 ...... 469 Major Joint Replacement or Reattachment of Lower Extremity with MCC. 8 ...... 470 Major Joint Replacement or Reattachment of Lower Extremity without MCC.

We are soliciting public comments on we are proposing to add the 208 ICD– developed to increase the chance of our proposal to continue to include the 10–PCS procedure codes shown in survival. Therefore, this scenario of a existing MS–DRGs currently subject to Table 6P.3a. associated with this patient who has fetal surgery but does the policy and to not add any additional proposed rule (which is available via not have a delivery during the same MS–DRGs to the policy. The final list of the Internet on the CMS Web site at: hospital stay is not appropriately MS–DRGs subject to the policy for FY http://www.cms.gov/Medicare/ captured in the GROUPER logic. We 2017 will be listed in the FY 2017 IPPS/ Medicare-Fee-for-Service-Payment/ believe that further analysis is LTCH PPS final rule, as well as issued AcuteInpatientPPS/index) to MDC 14 in warranted regarding a future proposal to providers in the form of a Change MS–DRG 768, effective October 1, 2016, for a new MS–DRG to better recognize Request (CR). in ICD–10 MS–DRGs Version 34. We are this subset of patients. inviting public comments on our In past rulemaking (72 FR 24700 and 19. Other Proposed Policy Changes proposal. 24705), we have acknowledged that a. MS–DRG GROUPER Logic Separate from the replication issue CMS does not have the expertise or data (1) Operations on Products of described above, during our internal to maintain the DRGs in clinical areas Conception review, we also concluded that the that have very low volume in the proposed MS–DRG logic for these Medicare population, including for In the ICD–9–CM MS–DRGs Version intrauterine procedures under ICD–10 conditions associated with and/or 32, intrauterine operations that may be may not accurately represent a subset of occurring in the maternal-fetal patient performed in an attempt to correct a the 208 ICD–10–PCS procedure codes population. Additional information is fetal abnormality are identified by ICD– (listed in Table 6P.3a.). For example, the needed to fully and accurately evaluate 9–CM procedure code 75.36 (Correction GROUPER logic for MS–DRG 768 all the possible fetal conditions that may of fetal defect). This procedure code is requires that a vaginal delivery occur fall under similar scenarios to the one designated as an O.R. procedure and is during the same episode of care in described above before making a assigned to MDC 14 (Pregnancy, which an intrauterine procedure is specific proposal. Therefore, we are Childbirth and the Puerperium) in MS– performed. However, this scenario may soliciting public comments on two DRG 768 (Vaginal Delivery with O.R. not be clinically consistent with all clinical concepts for consideration for a Procedure Except Sterilization and/or pregnant patients who undergo fetal possible future proposal for the FY 2018 Dilation and Curettage). surgery. For example, a pregnant patient ICD–10 MS–DRGs Version 35: (1) The A replication issue for 208 ICD–10– whose fetus is diagnosed with a ICD–10–CM diagnosis codes and ICD– PCS comparable code translations that congenital diaphragmatic hernia (CDH) 10–PCS procedure codes that describe describe operations on the products of may undergo a fetoscopic endoluminal fetal abnormalities for which fetal conception (fetus) to correct fetal defects tracheal occlusion (FETO) procedure in surgery may be performed in the was identified during an internal which the pregnant patient does not absence of a delivery during the same review. These 208 procedure codes were subsequently deliver during the same hospital stay; and (2) the ICD–10–CM inadvertently omitted from the MDC 14 hospital stay. The goal of this specific diagnosis codes and ICD–10–PCS GROUPER logic for ICD–10 MS–DRG fetal surgery is to allow the fetus to procedure codes that describe fetal 768. To resolve this replication issue, remain in utero until its lungs have abnormalities for which fetal surgery

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may be performed with a subsequent performed to restore blood flow to the 16 procedure codes were inadvertently delivery during the same hospital stay. heart are identified with procedure code omitted from the MDC 5 GROUPER This second concept is the structure of 36.39 (Other heart revascularization). logic for ICD–10 MS–DRGs 228 through current MS–DRG 768. Commenters This procedure code is designated as an 230. We note that, as discussed in should submit their code O.R. procedure and is assigned to MDC section II.F.5.d. of the preamble of this recommendations for these concepts to 5 (Diseases and Disorders of the proposed rule, we are proposing to the following email address Circulatory System) in MS–DRGs 228 delete MS–DRG 230 and revise MS– MSDRGClassificationChange@ through 230 (Other Cardiothoracic DRG 229. Accordingly, to resolve this cms.hhs.gov by December 7, 2016. We Procedures with MCC, with CC, and replication issue, we are proposing to encourage public comments as we without CC/MCC, respectively). add the 16 ICD–10–PCS procedure consider these enhancements for the FY codes listed in the table below to MDC 2018 ICD–10 MS–DRGs Version 35. A replication issue for 16 ICD–10– PCS comparable code translations that 5 in MS–DRG 228 and proposed revised (2) Other Heart Revascularization describe revascularization procedures MS–DRG 229. In the ICD–9–CM MS–DRGs Version was identified after implementation of 32, revascularization procedures that are the ICD–10 MS–DRGs Version 33. These

ICD–10–PCS procedure code Description

0210344 ...... Bypass coronary artery, one site from coronary vein with drug-eluting intraluminal device, percutaneous approach. 02103D4 ...... Bypass coronary artery, one site from coronary vein with intraluminal device, percutaneous approach. 0210444 ...... Bypass coronary artery, one site from coronary vein with drug-eluting intraluminal device, percutaneous endoscopic approach. 02104D4 ...... Bypass coronary artery, one site from coronary vein with intraluminal device, percutaneous endoscopic approach. 0211344 ...... Bypass coronary artery, two sites from coronary vein with drug-eluting intraluminal device, percutaneous approach. 02113D4 ...... Bypass coronary artery, two sites from coronary vein with intraluminal device, percutaneous approach. 0211444 ...... Bypass coronary artery, two sites from coronary vein with drug-eluting intraluminal device, percutaneous endoscopic approach. 02114D4 ...... Bypass coronary artery, two sites from coronary vein with intraluminal device, percutaneous endoscopic approach. 0212344 ...... Bypass coronary artery, three sites from coronary vein with drug-eluting intraluminal device, percutaneous approach. 02123D4 ...... Bypass coronary artery, three sites from coronary vein with intraluminal device, percutaneous approach. 0212444 ...... Bypass coronary artery, three sites from coronary vein with drug-eluting intraluminal device, percutaneous endoscopic approach. 02124D4 ...... Bypass coronary artery, three sites from coronary vein with intraluminal device, percutaneous endoscopic approach. 0213344 ...... Bypass coronary artery, four or more sites from coronary vein with drug-eluting intraluminal device, percutaneous approach. 02133D4 ...... Bypass coronary artery, four or more sites from coronary vein with intraluminal device, percutaneous approach. 0213444 ...... Bypass coronary artery, four or more sites from coronary vein with drug-eluting intraluminal device, percutaneous endoscopic approach. 02134D4 ...... Bypass coronary artery, four or more sites from coronary vein with intraluminal device, percutaneous endoscopic approach.

We are inviting public comments on omitted from the MDC 5 GROUPER A replication issue for four ICD–10– our proposal to add the above listed logic for ICD–10 MS–DRGs 252 through PCS comparable code translations was ICD–10–PCS procedure codes to MDC 5 254. To resolve this replication issue, identified after implementation of the in MS–DRG 228 and proposed revised we are proposing to add the 234 ICD– ICD–10 MS–DRGs Version 33. These MS–DRG 229 (Other Cardiothoracic 10–PCS procedure codes listed in Table four procedure codes are: Procedures with and without MCC, 6P.3b. associated with this proposed • 0DQF0ZZ (Repair right large respectively), effective October 1, 2016, rule (which is available via the Internet intestine, open approach); • in ICD–10 MS–DRGs Version 34. on the CMS Web site at: http://www. 0DQG0ZZ (Repair left large cms.gov/Medicare/Medicare-Fee-for- intestine, open approach); (3) Procedures on Vascular Bodies: • Service-Payment/AcuteInpatientPPS/ 0DQL0ZZ (Repair transverse colon, Chemoreceptors open approach); and index) to MDC 5 in MS–DRG 252, 253, • In the ICD–9–CM MS–DRGs Version and 254, effective October 1, 2016, in 0DQM0ZZ (Repair descending 32, procedures performed on the ICD–10 MS–DRGs Version 34. We are colon, open approach). sensory receptors are identified with inviting public comments on our These four ICD–10–PCS codes were ICD–9–CM procedure code 39.89 (Other proposal. inadvertently omitted from the MDC 6 operations on carotid body, carotid GROUPER logic for ICD–10 MS–DRGs sinus and other vascular bodies). This (4) Repair of the Intestine 329 through 331. To resolve this procedure code is designated as an O.R. replication issue, we are proposing to procedure and is assigned to MDC 5 In the ICD–9–CM MS–DRGs Version add the four ICD–10–PCS procedure (Diseases and Disorders of the 32, the procedure for a repair to the codes to MDC 6 in MS–DRG 329, 230, Circulatory System) in MS–DRGs 252, intestine may be identified with and 331, effective October 1, 2016, in 253, and 254 (Other Vascular procedure code 46.79 (Other repair of ICD–10 MS–DRGs Version 34. We are Procedures with MCC, with CC, and intestine). This procedure code is inviting public comments on our without CC/MCC, respectively). designated as an O.R. procedure and is proposal. A replication issue for 234 ICD–10– assigned to MDC 6 (Diseases and PCS comparable code translations that Disorders of the Digestive System) in (5) Insertion of Infusion Pump describe these procedures was MS–DRGs 329, 330, and 331 (Major In the ICD–9–CM MS–DRGs Version identified after implementation of the Small and Large Bowel Procedures with 32, the procedure for insertion of an ICD–10 MS–DRGs Version 33. These MCC, with CC, and without CC/MCC, infusion pump is identified with 234 procedure codes were inadvertently respectively). procedure code 86.06 (Insertion of

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totally implantable infusion pump), DRG Index, which is available on the DRGs to which procedure code 86.06 is which is designated as an O.R. CMS Web site at: https://www.cms.gov/ assigned procedure and assigned to a number of Medicare/Medicare-Fee-for-Service- A replication issue for 16 ICD–10– MDCs and MS–DRGs across various Payment/AcuteInpatientPPS/FY2016- PCS comparable code translations was body systems. We refer readers to the IPPS-Final-Rule-Home-Page-Items/ identified after implementation of the ICD–9–CM MS–DRG Definitions Manual FY2016-IPPS-Rule-Data-Files.html, for ICD–10 MS–DRGs Version 33. These 16 Appendix E—Operating Room the complete list of MDCs and MS– procedure codes are listed in the table Procedures and Procedure Code/MS– below:

ICD–10–PCS procedure code Description

0JHD0VZ ...... Insertion of infusion pump into right upper arm subcutaneous tissue and fascia, open approach. 0JHD3VZ ...... Insertion of infusion pump into right upper arm subcutaneous tissue and fascia, percutaneous approach. 0JHF0VZ ...... Insertion of infusion pump into left upper arm subcutaneous tissue and fascia, open approach. 0JHF3VZ ...... Insertion of infusion pump into left upper arm subcutaneous tissue and fascia, percutaneous approach. 0JHG0VZ ...... Insertion of infusion pump into right lower arm subcutaneous tissue and fascia, open approach. 0JHG3VZ ...... Insertion of infusion pump into right lower arm subcutaneous tissue and fascia, percutaneous approach. 0JHH0VZ ...... Insertion of infusion pump into left lower arm subcutaneous tissue and fascia, open approach. 0JHH3VZ ...... Insertion of infusion pump into left lower arm subcutaneous tissue and fascia, percutaneous approach. 0JHL0VZ ...... Insertion of infusion pump into right upper leg subcutaneous tissue and fascia, open approach. 0JHL3VZ ...... Insertion of infusion pump into right upper leg subcutaneous tissue and fascia, percutaneous approach. 0JHM0VZ ...... Insertion of infusion pump into left upper leg subcutaneous tissue and fascia, open approach. 0JHM3VZ ...... Insertion of infusion pump into left upper leg subcutaneous tissue and fascia, percutaneous approach. 0JHN0VZ ...... Insertion of infusion pump into right lower leg subcutaneous tissue and fascia, open approach. 0JHN3VZ ...... Insertion of infusion pump into right lower leg subcutaneous tissue and fascia, percutaneous approach. 0JHP0VZ ...... Insertion of infusion pump into left lower leg subcutaneous tissue and fascia, open approach. 0JHP3VZ ...... Insertion of infusion pump into left lower leg subcutaneous tissue and fascia, percutaneous approach.

These codes were inadvertently • 0M853ZZ (Division of right wrist ICD–10 MS–DRGs Version 33. These omitted from the MDCs and MS–DRGs bursa and ligament, percutaneous two procedure codes are: 0HQVXZZ to which they should be assigned approach); (Repair bilateral breast, external (consistent with the assignment of ICD– • 0M854ZZ (Division of right wrist approach) and 0HQYXZZ (Repair 9–CM procedure code 86.06) to bursa and ligament, percutaneous supernumerary breast, external accurately replicate the ICD–9–CM MS– endoscopic approach); approach). These ICD–10–PCS DRG logic. To resolve this replication • 0M860ZZ (Division of left wrist procedures codes were inadvertently issue, we are proposing to add the 16 bursa and ligament, open approach); assigned to ICD–10 MS–DRGs 981, 982, • ICD–10–PCS procedure codes listed 0M863ZZ (Division of left wrist and 983 (Extensive O.R. Procedure above to the corresponding MDCs and bursa and ligament, percutaneous Unrelated to Principal Diagnosis with approach); and MCC, with CC, and without CC, MS–DRGs, as set forth in the ICD–9–CM • MS–DRG Definitions Manual— 0M864ZZ (Division of left wrist respectively) in the ICD–10 MS–DRG GROUPER logic. To resolve this Appendix E—Operating Room bursa and ligament, percutaneous replication issue, we are proposing to Procedures and Procedure Code/MS– endoscopic approach). remove these two ICD–10–PCS DRG Index as described earlier, effective These codes were inadvertently omitted from the MDC 8 GROUPER procedure codes from MS–DRG 981, October 1, 2016, in ICD–10 MS–DRGs logic for ICD–10 MS–DRGs 500, 501, 982, and 983, to designate them as non- Version 34. We are inviting public and 502. To resolve this replication O.R. procedures, effective October 1, comments on our proposal. issue, we are proposing to add the six 2016, in ICD–10 MS–DRGs Version 34. (6) Procedures on the Bursa ICD–10–PCS procedure codes listed We are inviting public comments on our above to MDC 8 in MS–DRGs 500, 501, proposal. In the ICD–9–CM MS–DRGs Version and 502, effective October 1, 2016, in 32, procedures that involve cutting into (8) Excision of Subcutaneous Tissue and ICD–10 MS–DRGs Version 34. We are Fascia the bursa are identified with procedure inviting public comments on our code 83.03 (Bursotomy). This procedure proposal. In the ICD–9–CM MS–DRGs Version code is designated as an O.R. procedure 32, procedures involving excision of the (7) Procedures on the Breast and is assigned to MDC 8 (Diseases and skin and subcutaneous tissue are Disorders of the Musculoskeletal System In the ICD–9–CM MS–DRGs Version identified with procedure code 86.3 and Connective Tissue) in MS–DRGs 32, procedures performed for a simple (Other local excision of lesion or tissue 500, 501, and 502 (Soft Tissue repair to the skin of the breast may be of skin and subcutaneous tissue). This Procedures with MCC, with CC, and identified with procedure code 86.59 procedure code is designated as a non- without CC/MCC, respectively). (Closure of skin and subcutaneous O.R. procedure that affects MS–DRG tissue of other sites). This procedure assignment for MS–DRGs 579, 580, and A replication issue for six ICD–10– code is designated as a non-O.R. 581 (Other Skin, Subcutaneous Tissue PCS comparable code translations was procedure. Therefore, this procedure and Breast Procedures with MCC, with identified after implementation of the code does not have an impact on MS– CC and without CC/MCC, respectively) ICD–10 MS–DRGs Version 33. These six DRG assignment. in MDC 9 (Diseases and Disorders of the procedure codes are: A replication issue for two ICD–10– Skin, Subcutaneous Tissue and Breast). • 0M850ZZ (Division of right wrist PCS comparable code translations was A replication issue for 19 ICD–10– bursa and ligament, open approach); identified after implementation of the PCS comparable code translations was

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identified after implementation of the procedure codes are listed in the table ICD–10 MS–DRGs Version 33. These 19 below:

ICD–10–PCS code Description

0JB03ZZ ...... Excision of scalp subcutaneous tissue and fascia, percutaneous approach. 0JB43ZZ ...... Excision of anterior neck subcutaneous tissue and fascia, percutaneous approach. 0JB53ZZ ...... Excision of posterior neck subcutaneous tissue and fascia, percutaneous approach. 0JB63ZZ ...... Excision of chest subcutaneous tissue and fascia, percutaneous approach. 0JB73ZZ ...... Excision of back subcutaneous tissue and fascia, percutaneous approach. 0JB83ZZ ...... Excision of abdomen subcutaneous tissue and fascia, percutaneous approach. 0JB93ZZ ...... Excision of buttock subcutaneous tissue and fascia, percutaneous approach. 0JBB3ZZ ...... Excision of perineum subcutaneous tissue and fascia, percutaneous approach. 0JBC3ZZ ...... Excision of pelvic region subcutaneous tissue and fascia, percutaneous approach. 0JBD3ZZ ...... Excision of right upper arm subcutaneous tissue and fascia, percutaneous approach. 0JBF3ZZ ...... Excision of left upper arm subcutaneous tissue and fascia, percutaneous approach. 0JBG3ZZ ...... Excision of right lower arm subcutaneous tissue and fascia, percutaneous approach. 0JBH3ZZ ...... Excision of left lower arm subcutaneous tissue and fascia, percutaneous approach. 0JBL3ZZ ...... Excision of right upper leg subcutaneous tissue and fascia, percutaneous approach. 0JBM3ZZ ...... Excision of left upper leg subcutaneous tissue and fascia, percutaneous approach. 0JBN3ZZ ...... Excision of right lower leg subcutaneous tissue and fascia, percutaneous approach. 0JBP3ZZ ...... Excision of left lower leg subcutaneous tissue and fascia, percutaneous approach. 0JBQ3ZZ ...... Excision of right foot subcutaneous tissue and fascia, percutaneous approach. 0JBR3ZZ ...... Excision of left foot subcutaneous tissue and fascia, percutaneous approach.

These codes were inadvertently MS–DRGs 492, 493, and 494, effective (11) Insertion of Infusion Device omitted from the ICD–10 MS–DRG October 1, 2016, in ICD–10 MS–DRGs In the ICD–9–CM MS–DRGs Version GROUPER logic for MDC 9 in MS–DRGs Version 34. We are inviting public 32, the procedure for insertion of an 579, 580, and 581. To resolve this comments on our proposal. infusion pump is identified with replication issue, we are proposing to (10) Reposition procedure code 86.06 (Insertion of add the 19 ICD–10–PCS procedure totally implantable infusion pump) codes listed in the table above to MDC In the ICD–9–CM MS–DRGs Version 32, procedures that involve the which is designated as an O.R. 9 in MS–DRGs 579, 580, and 581, procedure and assigned to a number of effective October 1, 2016, in ICD–10 percutaneous repositioning of an area in the vertebra are identified with MDCs and MS–DRGs, one of which is MS–DRGs Version 34. We are inviting MDC 8 (Diseases and Disorders of the public comments on our proposal. procedure code 81.66 (Percutaneous vertebral augmentation). This procedure Musculoskeletal System and Connective (9) Shoulder Replacement code is designated as an O.R. procedure Tissue) in MS–DRGs 515, 516, and 517 and is assigned to MDC 8 (Diseases and (Other Musculoskeletal System and In the ICD–9–CM MS–DRGs Version Connective Tissue O.R. Procedures with 32, procedures that involve replacing a Disorders of the Musculoskeletal System and Connective Tissue) in MS–DRGs MCC, with CC, and without CC/MCC, component of bone from the upper arm respectively). are identified with procedure code 515, 516, and 517 (Other Musculoskeletal System and Connective A replication issue for 49 ICD–10– 78.42 (Other repair or plastic operations PCS comparable code translations that on bone, humerus). This procedure code Tissue Procedures with MCC, with CC, and without CC/MCC, respectively). describe insertion of an infusion device is designated as an O.R. procedure and into a joint or disc was identified after is assigned to MDC 8 (Diseases and A replication issue for four ICD–10– PCS comparable code translations was implementation of the ICD–10 MS– Disorders of the Musculoskeletal System DRGs Version 33. These 49 procedure and Connective Tissue) in MS–DRGs identified after implementation of the ICD–10 MS–DRGs Version 33. These codes appear to describe procedures 492, 493, and 494 (Lower Extremity and that utilize a specific type of infusion Humerus Procedures Except Hip, Foot four procedure codes are: • 0PS33ZZ (Reposition cervical device known as an infusion pump and and Femur with MCC, with CC, and vertebra, percutaneous approach); were inadvertently omitted from the without CC/MCC, respectively). • 0PS43ZZ (Reposition thoracic ICD–10 MS–DRG GROUPER logic for A replication issue for two ICD–10– vertebra, percutaneous approach); MDC 8. To resolve this replication issue, PCS comparable code translations was • 0QS03ZZ (Reposition lumbar we are proposing to add the 49 ICD–10– identified after implementation of the vertebra, percutaneous approach); and PCS procedure codes shown in Table ICD–10 MS–DRGs Version 33. These • 0QS13ZZ (Reposition sacrum, 6P.3c. (which is available via the two procedure codes are: 0PRC0JZ percutaneous approach). Internet on the CMS Web site at: http:// (Replacement of right humeral head These four ICD–10PCS procedure www.cms.gov/Medicare/Medicare-Fee- with synthetic substitute, open codes were inadvertently omitted from for-Service-Payment/AcuteInpatient approach) and 0PRD0JZ (Replacement the ICD–10 MS–DRG GROUPER logic PPS/index) to MDC 8 in MS–DRGs 515, of left humeral head with synthetic for MDC 8 and MS–DRGs 515, 516, and 516, and 517, effective October 1, 2016, substitute, open approach). These two 517. To resolve this replication issue, in ICD–10 MS–DRGs Version 34. We are codes were inadvertently omitted from we are proposing to add these four ICD– inviting public comments on our the ICD–10 MS–DRG GROUPER logic 10–PCS procedure codes to MDC 8 in proposal. for MDC 8 in MS–DRGs 492, 493, and MS–DRGs 515, 516, and 517, effective 494. To resolve this replication issue, October 1, 2016, in ICD–10 MS–DRGs (12) Bladder Neck Repair we are proposing to add these two ICD– Version 34. We are inviting public In the ICD–9–CM MS–DRGs Version 10–PCS procedure codes to MDC 8 in comments on our proposal. 32, a procedure involving a bladder

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repair is identified with procedure code reasonably be performed. Commenters We are inviting public comments on 57.89 (Other repair of bladder) which is should submit their recommendations our proposal to add ICD–10–CM designated as an O.R. procedure and for these code refinements to the diagnosis code O90.2 to MS–DRG 769 assigned to MDC 11 (Diseases and following email address: and MS–DRG 776 in MDC 14, effective Disorders of the Kidney and Urinary MSDRGClassificationChanges@ October 1, 2016, in the ICD–10 MS– Tract) in MS–DRGs 653, 654, and 655 cms.hhs.gov by December 7, 2016. DRGs Version 34. (Major Bladder Procedures with MCC, We also note that any suggestions that c. Other Operating Room (O.R.) and with CC, and without CC/MCC, are received by December 7, 2016 to Non-O.R. Issues respectively) and MDC 13 (Diseases and update ICD–10–PCS, including creating Disorders of the Female Reproductive new codes or deleting existing codes, (1) O.R. Procedures to Non-O.R. System) in MS–DRGs 749 and 750 will be addressed by the ICD–10 Procedures Coordination and Maintenance (Other Female Reproductive System For this FY 2017 IPPS/LTCH PPS Committee. Proposals to address the O.R. Procedures with CC/MCC and proposed rule, we continued our efforts modification of any ICD–10–PCS codes without CC/MCC, respectively). to address the MS–DRG replication are discussed at the ICD–10 A replication issue for five ICD–10– issues between ICD–9–CM logic and Coordination and Maintenance PCS comparable code translations that ICD–10 that were brought to our Committee meetings held in March and describe a bladder neck repair was attention. As a result of analyzing those September of each year. We refer the identified after implementation of the specific requests, we identified areas in ICD–10 MS–DRGs Version 33. These reader to section II.F.17. of the preamble of this proposed rule for information the ICD–10–PCS classification where five procedure codes are: additional refinements could further • 0TQC0ZZ (Repair Bladder Neck, related to this process to request support our replication efforts. We Open Approach); updates to ICD–10–PCS. • 0TQC3ZZ (Repair Bladder Neck, discuss these below. b. Issues Relating to MS–DRG 999 Percutaneous Approach); We evaluated specific groups of ICD– (Ungroupable) • 0TQC4ZZ (Repair Bladder Neck, 10–PCS procedure codes with respect to Percutaneous Endoscopic Approach); Under the ICD–9–CM MS–DRGs their current operating room (O.R.) • 0TQC7ZZ (Repair Bladder Neck, Version 32, a diagnosis of complications designation that were determined to be Via Natural or Artificial Opening); and of an obstetric surgical wound after inconsistent with the ICD–9–CM • 0TQC8ZZ (Repair Bladder Neck, delivery is identified with diagnosis procedure codes from which the Via Natural or Artificial Opening code 674.32 (Other complications of designation was initially derived. Our Endoscopic). obstetrical surgical wounds, delivered, review demonstrated that these ICD–10– These five ICD–10–PCS procedure with mention of postpartum PCS procedure codes should instead codes were inadvertently omitted from complication) and is assigned to MDC have the attributes of a more logical the ICD–10 MS–DRG GROUPER logic 14 (Pregnancy, Childbirth and the ICD–9–CM procedure code translation for MDC 11 in MS–DRGs 653, 654, and Puerperium) under MS–DRG 769 for MS–DRG replication purposes. As 655 and MDC 13 in MS–DRGs 749 and (Postpartum and Post Abortion specified below, we are proposing to 750. To resolve this replication issue, Diagnoses with O.R. Procedure) or MS– change the status of ICD–10–PCS we are proposing to add these five ICD– DRG 776 (Postpartum and Post Abortion procedure codes from being designated 10–PCS procedure codes to MDC 11 in Diagnoses without O.R. Procedure). A as O.R. to non-O.R. for the ICD–10 MS– MS–DRGs 653, 654, and 655 and MDC replication issue under the ICD–10 MS– DRGs Version 34. For each group 13 in MS–DRGs 749 and 750, effective DRGs Version 33 for this condition was summarized below, the detailed code October 1, 2016, in ICD–10 MS–DRGs identified after implementation on lists are shown in Tables 6P.4a. through Version 34. We are inviting public October 1, 2015. Under ICD–10–CM, 6P.4k. (ICD–10–CM and ICD–10–PCS comments on our proposal. diagnosis code O90.2 (Hematoma of Codes for Proposed MCE and MS–DRG obstetric wound) is the comparable Changes—FY 2017) associated with this (13) Future Consideration translation for ICD–9–CM diagnosis proposed rule, which are available via We note that commenters have code 674.32. We discovered that cases the Internet on the CMS Web site at: suggested that there are a number of where a patient has been readmitted to http://www.cms.gov/Medicare/ procedure codes that may not appear to the hospital after a delivery and ICD– Medicare-Fee-for-Service-Payment/ be clinically feasible due to a specific 10–CM diagnosis code O90.2 is reported AcuteInpatientPPS/index.html. approach or device value in relation to as the principal diagnosis are resulting (a) Endoscopic/Transorifice Insertion a unique body part in a given body in assignment to MS–DRG 999 system. These commenters have not (Ungroupable). We found 72 ICD–10–PCS procedure identified a comprehensive list of codes In the ICD–9–CM diagnosis code codes describing an endoscopic/ to be deleted. However, they have description, the concept of ‘‘delivery’’ is transorifice (via natural or artificial suggested that CMS examine these included in the code title. This concept opening) insertion of infusion and codes further. Due to the multiaxial is not present in the ICD–10–CM monitoring devices into various tubular structure of ICD–10–PCS, the current classification and has led to a body parts that, when coded under ICD– system allows for multiple possibilities replication issue for patients who 9–CM, would reasonably correlate to for a given procedure, some of which delivered during a previous stay and are other noninvasive catheterization and may not currently be used. As our focus subsequently readmitted for the monitoring types of procedure codes to refine the ICD–10 MS–DRGs complication. To resolve this replication versus an ‘‘incision of [body part]’’ or continues, for FY 2018, we will begin to issue, we are proposing to add ICD–10– ‘‘other operation on a [body part]’’ conduct an analysis of where such ICD– CM diagnosis code O90.2 to MDC 14 procedure code. We are proposing that 10–PCS codes may exist. We welcome under MS–DRGs 769 and 776. This the 72 ICD–10–PCS procedure codes in suggestions from the public of code refinement would be consistent with the Table 6P.4a. associated with this refinements that could address the issue ICD–9–CM diagnosis code assignment proposed rule (which is available via of current ICD–10–PCS codes that and result in a more accurate replication the Internet on the CMS Web site at: capture procedures that would not of the ICD–9–CM MS–DRGs Version 32. http://www.cms.gov/Medicare/

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Medicare-Fee-for-Service-Payment/ in column C. The ICD–9–CM procedure (f) Percutaneous Drainage AcuteInpatientPPS/index.html) be codes and descriptions in column C assigned the attributes of the ICD–9–CM would replace the ICD–9–CM procedure We found 518 ICD–10–PCS procedure procedure code specified in column C. codes and descriptions reflected in codes describing the percutaneous The ICD–9–CM procedure codes and column D, which are considered less therapeutic drainage of all body sites descriptions in column C would replace accurate correlations. We are inviting that do not have specific percutaneous the ICD–9–CM procedure codes and public comments on this proposal. drainage codes. The list includes descriptions reflected in column D, procedure codes for drainage with or which are considered less accurate (d) Endoscopic/Percutaneous Insertion without placement of a drainage device. correlations. We are inviting public Exceptions to this are cranial, comments on this proposal. We found 117 ICD–10–PCS procedure intracranial and the eye where small codes describing the endoscopic/ incisions are the norm and (b) Endoscopic/Transorifice Removal percutaneous insertion of infusion and appropriately classified as O.R. These We found 155 ICD–10–PCS procedure monitoring devices into vascular and 518 ICD–10–PCS procedures codes, codes describing an endoscopic/ musculoskeletal body parts that, when when coded under ICD–9–CM, would transorifice (via natural or artificial coded under ICD–9–CM, would reasonably correlate to the nonoperative opening) removal of common devices reasonably correlate to other puncture or drainage of various body such as a drainage device, infusion noninvasive catheterization and sites and other miscellaneous device, intraluminal device, or monitoring types of procedure codes procedures versus an ‘‘incision of [body monitoring device from various tubular versus an ‘‘incision of [body part]’’ or part]’’ procedure code. We are body parts that, when coded under ICD– ‘‘other operation on a [body part]’’ proposing that the 518 ICD–10–PCS 9–CM, would reasonably correlate to procedure code. We are proposing that procedure codes in Table 6P.4f. other nonoperative removal of a wide the 117 ICD–10–PCS procedure codes in associated with this proposed rule range of devices/appliances procedure Table 6P.4d. associated with this (which is available via the Internet on codes versus an ‘‘incision of [body proposed rule (which is available via the CMS Web site at: http://www.cms. part]’’ or ‘‘other operation on a [body the Internet on the CMS Web site at: gov/Medicare/Medicare-Fee-for-Service- part]’’ procedure code. We are http://www.cms.gov/Medicare/ Payment/AcuteInpatientPPS/ proposing that the 155 ICD–10–PCS Medicare-Fee-for-Service-Payment/ index.html) be assigned the attributes of procedure codes in Table 6P.4b. AcuteInpatientPPS/index.html be the ICD–9–CM procedure code specified associated with this proposed rule assigned the attributes of the ICD–9–CM in column C. The ICD–9–CM procedure (which is available via the Internet on procedure code specified in column C. codes and descriptions in column C the CMS Web site at: http://www.cms. would replace the ICD–9–CM procedure gov/Medicare/Medicare-Fee-for-Service- The ICD–9–CM procedure codes and descriptions in column C would replace codes and descriptions reflected in Payment/AcuteInpatientPPS/ column D, which are considered less index.html) be assigned the attributes of the ICD–9–CM procedure codes and descriptions reflected in column D, accurate correlations. We are inviting the ICD–9–CM procedure code specified public comments on this proposal. in column C. The ICD–9–CM procedure which are less accurate correlations. We codes and descriptions in column C are inviting public comments on this (g) Percutaneous Inspection would replace the ICD–9–CM procedure proposal. We found 131 ICD–10–PCS procedure codes and descriptions reflected in (e) Percutaneous Removal column D, which are considered less codes describing the percutaneous accurate correlations. We are inviting We found 124 ICD–10–PCS procedure inspection of body part sites, with the public comments on this proposal. codes describing the percutaneous exception of the cranial cavity and brain, whose designation is not removal of drainage, infusion and (c) Tracheostomy Device Removal consistent with other percutaneous monitoring devices from vascular and We found five ICD–10–PCS procedure inspection codes. When coded under musculoskeletal body parts that, when codes describing removal of a ICD–9–CM, these procedure codes coded under ICD–9–CM, would tracheostomy device with various would reasonably correlate to the ‘‘other approaches such that, when coded reasonably correlate to the nonoperative nonoperative examinations’’ and ‘‘other under ICD–9–CM, would reasonably removal of a wide range of devices/ diagnostic procedures on [body part]’’ correlate to the nonoperative removal of appliances procedure codes versus an codes where the approach is not a tracheostomy device procedure code ‘‘incision of [body part]’’ or ‘‘other specified and the codes are designated versus an ‘‘incision of [body part]’’ or operation on a [body part]’’ procedure as non-O.R. We are proposing that the ‘‘other operation on a [body part]’’ code. We are proposing that the 124 131 ICD–10–PCS procedure codes in procedure code. We acknowledge that, ICD–10–PCS procedure codes in Table Table 6P.4g. associated with this under ICD–10–PCS, an ‘‘open’’ 6P.4e. associated with this proposed proposed rule (which is available via approach is defined as ‘‘cutting rule (which is available via the Internet the Internet on the CMS Web site at: through.’’ However, this procedure was on the CMS Web site at: http://www. http://www.cms.gov/Medicare/ designated as non-O.R. under ICD–9– cms.gov/Medicare/Medicare-Fee-for- Medicare-Fee-for-Service-Payment/ CM. For replication purposes, we are Service-Payment/AcuteInpatientPPS/ AcuteInpatientPPS/index.html) be proposing that the five ICD–10–PCS index.html) be assigned the attributes of assigned the attributes of the ICD–9–CM procedure codes in Table 6P.4c. the ICD–9–CM procedure code specified procedure code specified in column C. associated with this proposed rule in column C. The ICD–9–CM procedure The ICD–9–CM procedure codes and (which is available via the Internet on codes and descriptions in column C descriptions in column C would replace the CMS Web site at: http://www.cms. would replace the ICD–9–CM procedure the ICD–9–CM procedure codes and gov/Medicare/Medicare-Fee-for-Service- codes and descriptions reflected in descriptions reflected in column D, Payment/AcuteInpatientPPS/ column D, which are considered less which are considered less accurate index.html) be assigned the attributes of accurate correlations. We are inviting correlations. We are inviting public the ICD–9–CM procedure code specified public comments on this proposal. comments on this proposal.

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(h) Inspection Without Incision 6P.4j. associated with this proposed rule October 1, 2015. The replication issue We found 40 ICD–10–PCS procedure (which is available via the Internet on involves the following four ICD–10–PCS codes describing the inspection of the CMS Web site at: http://www.cms. procedure codes: various body sites with endoscopic/ gov/Medicare/Medicare-Fee-for-Service- • 0W9940Z (Drainage of right pleural transorifice and external approaches. Payment/AcuteInpatientPPS/ cavity with drainage device, Under ICD–9–CM, these codes would index.html) be assigned the attributes of percutaneous endoscopic approach); reasonably correlate to ‘‘other diagnostic the ICD–9–CM code specified in column • 0W994ZZ (Drainage of right pleural C. The ICD–9–CM codes and procedures on [body part]’’ codes where cavity, percutaneous endoscopic descriptions in column C would replace the approach is not specified and the approach); codes are designated as non-O.R. We are the ICD–9–CM codes and descriptions • reflected in column D, which are 0W9B40Z (Drainage of left pleural proposing that the 40 ICD–10–PCS cavity with drainage device, codes in Table 6P.4h. associated with considered less accurate correlations. We are inviting public comments on percutaneous endoscopic approach); this proposed rule (which is available and via the Internet on the CMS Web site at: this proposal. • 0W9B4ZZ (Drainage of left pleural http://www.cms.gov/Medicare/ (k) Infusion Device Medicare-Fee-for-Service-Payment/ cavity, percutaneous endoscopic We found 82 ICD–10–PCS codes AcuteInpatientPPS/index.html) be approach). describing the insertion of an infusion assigned the attributes of the ICD–9–CM In the ICD–10 MS–DRGs Version 33, device to various body parts that, when code specified in column C. The ICD– these four ICD–10–PCS procedure codes coded under ICD–9–CM, would 9–CM codes and descriptions in column are not recognized as O.R. procedures reasonably correlate to the insertion of C would replace the ICD–9–CM codes for purposes of MS–DRG assignment. a common infusion catheter versus the and descriptions reflected in column D, We agree that this was a replication insertion of a totally implantable which are considered less accurate error and the designation and MS–DRG infusion pump. We are proposing that correlations. We are inviting public assignment should be consistent with the 82 ICD–10–PCS procedure codes in comments on this proposal. the designation and MS–DRG Table 6P.4k. associated with this assignment of ICD–9–CM procedure (i) Dilation of Stomach proposed rule (which is available via code 34.06. the Internet on the CMS Web site at: We found six ICD–10–PCS procedure To resolve this replication issue, we codes describing the dilation of stomach http://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ are proposing to add ICD–10–PCS and pylorus body sites with various procedure codes 0W9940Z, 0W994ZZ, approaches whose designation is not AcuteInpatientPPS/index) be assigned the attributes of the ICD–9–CM code 0W9B40Z, and 0W9B4ZZ to the FY consistent with all other gastrointestinal 2017 ICD–10 MS–DRGs Version 34 body parts dilation codes. Under ICD– specified in column C. The ICD–9–CM codes and descriptions in column C Definitions Manual in Appendix E— 9–CM, where a unique dilation code Operating Room Procedures and exists, the approach is not specified and would replace the ICD–9–CM codes and descriptions reflected in column D, Procedure Code/MS–DRG Index as O.R. these codes are designated as non-O.R. procedures assigned to MS–DRGs 166 Therefore, we are proposing that the six which are considered less accurate correlations. We are inviting public through 168 in MDC 4. We are inviting ICD–10–PCS procedure codes in Table public comments on our proposal. 6P.4i. (which is available via the comments on this proposal. Internet on the CMS Web site at: http:// (2) Non-O.R. Procedures to O.R. (b) Drainage of Cerebral Ventricle www.cms.gov/Medicare/Medicare-Fee- Procedures In the ICD–9–CM MS–DRGs Version for-Service-Payment/AcuteInpatient 32 Definitions Manual under Appendix PPS/index.html) be assigned the (a) Drainage of Pleural Cavity E—Operating Room Procedures and attributes of the ICD–9–CM code In the ICD–9–CM MS–DRGs Version Procedure Code/MS–DRG Index, specified in column C. The ICD–9–CM 32 Definitions Manual under Appendix procedure code 02.22 (Intracranial codes and descriptions in column C E—Operating Room Procedures and ventricular shunt or anastomosis) is would replace the ICD–9–CM codes and Procedure Code/MS–DRG Index, designated as an O.R. procedure code descriptions reflected in column D, procedure code 34.06 (Thoracoscopic which are considered less accurate drainage of pleural cavity) is designated and is assigned to MS–DRGs 023 correlations. We are inviting public as an O.R. procedure code and is through 027, collectively referred to as comments on this proposal. assigned to MS–DRGs 166 through 168 the ‘‘Craniotomy’’ MS–DRGs, in MDC 1 (Other Respiratory System O.R. (Diseases and Disorders of the Nervous (j) Endoscopic/Percutaneous Occlusion Procedures with MCC, with CC, and System). We found six ICD–10–PCS codes without CC/MCC, respectively) in MDC A replication issue regarding the describing percutaneous occlusion of 4 (Diseases and Disorders of the procedure code designation and MS– esophageal vein with and without a Respiratory System). DRG assignment for the comparable device that, when coded under ICD–9– A replication issue regarding the code translations under the ICD–10 MS– CM would reasonably correlate to the procedure code designation and MS– DRGs Version 33 was brought to our endoscopic excision or destruction of DRG assignment for the comparable attention after implementation on the vessel versus an open surgical code translations under the ICD–10 MS– October 1, 2015. The replication issue procedure. We are proposing that the six DRGs Version 33 was brought to our involves the following ICD–10–PCS ICD–10–PCS procedure codes in Table attention after implementation on procedure codes:

ICD–10–PCS procedure code Description

009130Z ...... Drainage of cerebral meninges with drainage device, percutaneous approach. 00913ZZ ...... Drainage of cerebral meninges, percutaneous approach. 009140Z ...... Drainage of cerebral meninges with drainage device, percutaneous endoscopic approach.

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ICD–10–PCS procedure code Description

00914ZZ ...... Drainage of cerebral meninges with drainage device, percutaneous endoscopic approach. 009230Z ...... Drainage of dura mater with drainage device, percutaneous approach. 00923ZZ ...... Drainage of dura mater, percutaneous approach. 009240Z ...... Drainage of dura mater with drainage device, percutaneous endoscopic approach. 00924ZZ ...... Drainage of dura mater, percutaneous endoscopic approach. 009430Z ...... Drainage of subdural space with drainage device, percutaneous approach. 00943ZZ ...... Drainage of subdural space, percutaneous approach. 009440Z ...... Drainage of subdural space with drainage device, percutaneous endoscopic approach. 00944ZZ ...... Drainage of subdural space, percutaneous endoscopic approach. 009530Z ...... Drainage of subarachnoid space with drainage device, percutaneous approach. 00953ZZ ...... Drainage of subarachnoid space, percutaneous approach. 009540Z ...... Drainage of subarachnoid space with drainage device, percutaneous endoscopic approach. 00954ZZ ...... Drainage of subarachnoid space, percutaneous endoscopic approach. 00963ZZ ...... Drainage of cerebral ventricle, percutaneous approach. 00964ZZ ...... Drainage of cerebral ventricle, percutaneous endoscopic approach.

In the ICD–10 MS–DRGs Version 33, MedPAR ‘‘GHO Paid’’ indicator field on 2. Methodology for Calculation of the these ICD–10–PCS procedure codes are the claim record is equal to ‘‘1’’ or when Proposed Relative Weights not recognized as O.R. procedures for the MedPAR DRG payment field, which As we explain in section II.E.2. of the purposes of MS–DRG assignment. We represents the total payment for the preamble of this proposed rule, we agree that this was a replication error claim, is equal to the MedPAR ‘‘Indirect calculated the proposed FY 2017 and their translation should be Medical Education (IME)’’ payment relative weights based on 19 CCRs, as consistent with the designation and field, indicating that the claim was an we did for FY 2016. The methodology MS–DRG assignment of ICD–9–CM ‘‘IME only’’ claim submitted by a we used to calculate the proposed FY procedure 02.22. teaching hospital on behalf of a 2017 MS–DRG cost-based relative To resolve this replication issue, we beneficiary enrolled in a Medicare weights based on claims data in the FY are proposing to add the ICD–10–PCS Advantage managed care plan. In 2015 MedPAR file and data from the FY procedure codes listed above to the FY addition, the December 31, 2015 update 2014 Medicare cost reports is as follows: • 2017 ICD–10 MS–DRGs Version 34 of the FY 2015 MedPAR file complies To the extent possible, all the Definitions Manual in Appendix E— with version 5010 of the X12 HIPAA claims were regrouped using the Operating Room Procedures and Transaction and Code Set Standards, proposed FY 2017 MS–DRG Procedure Code/MS–DRG Index as O.R. classifications discussed in sections II.B. and includes a variable called ‘‘claim procedures assigned to MS–DRGs 023 and II.F. of the preamble of this type.’’ Claim type ‘‘60’’ indicates that through 027 in MDC 1. We are inviting proposed rule. public comments on our proposal. the claim was an inpatient claim paid as • The transplant cases that were used fee-for-service. Claim types ‘‘61,’’ ‘‘62,’’ to establish the relative weights for heart G. Recalibration of the Proposed FY ‘‘63,’’ and ‘‘64’’ relate to encounter and heart-lung, liver and/or intestinal, 2017 MS–DRG Relative Weights claims, Medicare Advantage IME and lung transplants (MS–DRGs 001, 1. Data Sources for Developing the claims, and HMO no-pay claims. 002, 005, 006, and 007, respectively) Relative Weights Therefore, the calculation of the were limited to those Medicare- proposed relative weights for FY 2017 approved transplant centers that have In developing the proposed FY 2017 also excludes claims with claim type cases in the FY 2015 MedPAR file. system of weights, we used two data values not equal to ‘‘60.’’ The data (Medicare coverage for heart, heart-lung, sources: Claims data and cost report exclude CAHs, including hospitals that liver and/or intestinal, and lung data. As in previous years, the claims subsequently became CAHs after the transplants is limited to those facilities data source is the MedPAR file. This file period from which the data were taken. that have received approval from CMS is based on fully coded diagnostic and We note that the proposed FY 2017 as transplant centers.) procedure data for all Medicare • Organ acquisition costs for kidney, inpatient hospital bills. The FY 2015 relative weights are based on the ICD– 9–CM diagnoses and procedures codes heart, heart-lung, liver, lung, pancreas, MedPAR data used in this proposed rule and intestinal (or multivisceral organs) from the FY 2015 MedPAR claims data, include discharges occurring on October transplants continue to be paid on a grouped through the ICD–9–CM version 1, 2014, through September 30, 2015, reasonable cost basis. Because these based on bills received by CMS through of the FY 2017 GROUPER (Version 34). acquisition costs are paid separately December 31, 2015, from all hospitals The second data source used in the from the prospective payment rate, it is subject to the IPPS and short-term, acute cost-based relative weighting necessary to subtract the acquisition care hospitals in Maryland (which at methodology is the Medicare cost report charges from the total charges on each that time were under a waiver from the data files from the HCRIS. Normally, we transplant bill that showed acquisition IPPS). The FY 2015 MedPAR file used use the HCRIS dataset that is 3 years charges before computing the average in calculating the proposed relative prior to the IPPS fiscal year. cost for each MS–DRG and before weights includes data for approximately Specifically, we used cost report data eliminating statistical outliers. • 9,706,869 Medicare discharges from from the December 31, 2015 update of Claims with total charges or total IPPS providers. Discharges for Medicare the FY 2014 HCRIS for calculating the lengths of stay less than or equal to zero beneficiaries enrolled in a Medicare proposed FY 2017 cost-based relative were deleted. Claims that had an Advantage managed care plan are amount in the total charge field that weights. excluded from this analysis. These differed by more than $10.00 from the discharges are excluded when the sum of the routine day charges,

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intensive care charges, pharmacy POA reporting meets policy goals of of care. Under the BPCI initiative, charges, special equipment charges, encouraging quality care and generates organizations enter into payment therapy services charges, operating program savings, it presents an issue for arrangements that include financial and room charges, cardiology charges, the relative weight-setting process. performance accountability for episodes laboratory charges, radiology charges, Because cases identified as HACs are of care. For FY 2017, we are proposing other service charges, labor and delivery likely to be more complex than similar to continue to include all applicable charges, inhalation therapy charges, cases that are not identified as HACs, data from subsection (d) hospitals emergency room charges, blood charges, the charges associated with HAC cases participating in BPCI Models 1, 2, and and anesthesia charges were also are likely to be higher as well. 4 in our IPPS payment modeling and deleted. Therefore, if the higher charges of these ratesetting calculations. We refer readers • At least 92.4 percent of the HAC claims are grouped into lower to the FY 2013 IPPS/LTCH PPS final providers in the MedPAR file had severity MS–DRGs prior to the relative rule for a complete discussion on our charges for 14 of the 19 cost centers. All weight-setting process, the relative final policy for the treatment of claims of providers that did not have weights of these particular MS–DRGs hospitals participating in the BPCI charges greater than zero for at least 14 would become artificially inflated, initiative in our ratesetting process. For of the 19 cost centers were deleted. In potentially skewing the relative weights. additional information on the BPCI other words, a provider must have no In addition, we want to protect the initiative, we refer readers to the CMS’ more than five blank cost centers. If a integrity of the budget neutrality process Center for Medicare and Medicaid provider did not have charges greater by ensuring that, in estimating Innovation’s Web site at: http:// than zero in more than five cost centers, payments, no increase to the innovation.cms.gov/initiatives/Bundled- the claims for the provider were deleted. standardized amount occurs as a result Payments/index.html and to section • Statistical outliers were eliminated of lower overall payments in a previous IV.H.4. of the preamble of the FY 2013 by removing all cases that were beyond year that stem from using weights and IPPS/LTCH PPS final rule (77 FR 53341 3.0 standard deviations from the case-mix that are based on lower through 53343). geometric mean of the log distribution severity MS–DRG assignments. If this Once the MedPAR data were trimmed of both the total charges per case and would occur, the anticipated cost and the statistical outliers were the total charges per day for each MS– savings from the HAC policy would be removed, the charges for each of the 19 DRG. lost. • Effective October 1, 2008, because To avoid these problems, we reset the cost groups for each claim were hospital inpatient claims include a POA POA indicator field to ‘‘Y’’ only for standardized to remove the effects of indicator field for each diagnosis relative weight-setting purposes for all differences in area wage levels, IME and present on the claim, only for purposes claims that otherwise have an ‘‘N’’ or a DSH payments, and for hospitals of relative weight-setting, the POA ‘‘U’’ in the POA field. This resetting located in Alaska and Hawaii, the indicator field was reset to ‘‘Y’’ for ‘‘forced’’ the more costly HAC claims applicable cost-of-living adjustment. ‘‘Yes’’ for all claims that otherwise have into the higher severity MS–DRGs as Because hospital charges include an ‘‘N’’ (No) or a ‘‘U’’ (documentation appropriate, and the relative weights charges for both operating and capital insufficient to determine if the calculated for each MS–DRG more costs, we standardized total charges to condition was present at the time of closely reflect the true costs of those remove the effects of differences in inpatient admission) in the POA field. cases. geographic adjustment factors, cost-of- Under current payment policy, the In addition, in the FY 2013 IPPS/ living adjustments, and DSH payments presence of specific HAC codes, as LTCH PPS final rule, for FY 2013 and under the capital IPPS as well. Charges indicated by the POA field values, can subsequent fiscal years, we finalized a were then summed by MS–DRG for each generate a lower payment for the claim. policy to treat hospitals that participate of the 19 cost groups so that each MS– Specifically, if the particular condition in the Bundled Payments for Care DRG had 19 standardized charge totals. is present on admission (that is, a ‘‘Y’’ Improvement (BPCI) initiative the same These charges were then adjusted to indicator is associated with the as prior fiscal years for the IPPS cost by applying the national average diagnosis on the claim), it is not a HAC, payment modeling and ratesetting CCRs developed from the FY 2014 cost and the hospital is paid for the higher process without regard to hospitals’ report data. severity (and, therefore, the higher participation within these bundled The 19 cost centers that we used in weighted MS–DRG). If the particular payment models (that is, as if hospitals the proposed relative weight calculation condition is not present on admission were not participating in those models are shown in the following table. The (that is, an ‘‘N’’ indicator is associated under the BPCI initiative). The BPCI table shows the lines on the cost report with the diagnosis on the claim) and initiative, developed under the and the corresponding revenue codes there are no other complicating authority of section 3021 of the that we used to create the proposed 19 conditions, the DRG GROUPER assigns Affordable Care Act (codified at section national cost center CCRs. If the claim to a lower severity (and, 1115A of the Act), is comprised of four stakeholders have comments about the therefore, the lower weighted MS–DRG) broadly defined models of care, which groupings in this table, we may consider as a penalty for allowing a Medicare link payments for multiple services those comments as we finalize our inpatient to contract a HAC. While the beneficiaries receive during an episode policy.

Cost from HCRIS Charges from Medicare charges Revenue codes (worksheet C, HCRIS (work- from HCRIS Cost center group MedPAR charge contained in Cost report line Part 1, column 5 sheet C, Part 1, (worksheet D–3, name field MedPAR charge description and line number) column 6 & 7 and column & line (19 total) field form CMS–2552– line number) form number) form 10 CMS–2552–10 CMS–2552–10

Routine Days ...... Private Room 011X and 014X ..... Adults & Pediat- C_1_C5_30 ...... C_1_C6_30 ...... D3_HOS_C2_30 Charges. rics (General Routine Care).

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Semi-Private 012X, 013X and Room Charges. 016X–019X. Ward Charges .... 015X. Intensive Days ...... Intensive Care 020X ...... Intensive Care C_1_C5_31 ...... C_1_C6_31 ...... D3_HOS_C2_31 Charges. Unit. Coronary Care 021X ...... Coronary Care C_1_C5_32 ...... C_1_C6_32 ...... D3_HOS_C2_32 Charges. Unit. Burn Intensive C_1_C5_33 ...... C_1_C6_33 ...... D3_HOS_C2_33 Care Unit. Surgical Intensive C_1_C5_34 ...... C_1_C6_34 ...... D3_HOS_C2_34 Care Unit. Other Special C_1_C5_35 ...... C_1_C6_35 ...... D3_HOS_C2_35 Care Unit. Drugs ...... Pharmacy 025X, 026X and Intravenous Ther- C_1_C5_64 ...... C_1_C6_64 ...... D3_HOS_C2_64 Charges. 063X. apy. C_1_C7_64 Drugs Charged C_1_C5_73 ...... C_1_C6_73 ...... D3_HOS_C2_73 To Patient. C_1_C7_73 Supplies and Medical/Surgical 0270, 0271, 0272, Medical Supplies C_1_C5_71 ...... C_1_C6_71 ...... D3_HOS_C2_71 Equipment. Supply Charges. 0273, 0274, Charged to Pa- C_1_C7_71 0277, 0279, and tients. 0621, 0622, 0623. Durable Medical 0290, 0291, 0292 DME-Rented ...... C_1_C5_96 ...... C_1_C6_96 ...... D3_HOS_C2_96 Equipment and 0294-0299. C_1_C7_96 Charges. Used Durable 0293 ...... DME-Sold ...... C_1_C5_97 ...... C_1_C6_97 ...... D3_HOS_C2_97 Medical C_1_C7_97 Charges. Implantable De- ...... 0275, 0276, 0278, Implantable De- C_1_C5_72 ...... C_1_C6_72 ...... D3_HOS_C2_72 vices. 0624. vices Charged C_1_C7_72 to Patients. Therapy Services ... Physical Therapy 042X ...... Physical Therapy C_1_C5_66 ...... C_1_C6_66 ...... D3_HOS_C2_66 Charges. C_1_C7_66 Occupational 043X ...... Occupational C_1_C5_67 ...... C_1_C6_67 ...... D3_HOS_C2_67 Therapy Therapy. C_1_C7_67 Charges. Speech Pathology 044X and 047X ..... Speech Pathology C_1_C5_68 ...... C_1_C6_68 ...... D3_HOS_C2_68 Charges. C_1_C7_68 Inhalation Therapy Inhalation Ther- 041X and 046X ..... Respiratory Ther- C_1_C5_65 ...... C_1_C6_65 ...... D3_HOS_C2_65 apy Charges. apy. C_1_C7_65 Operating Room .... Operating Room 036X ...... Operating Room C_1_C5_50 ...... C_1_C6_50 ...... D3_HOS_C2_50 Charges. C_1_C7_50 071X ...... Recovery Room .. C_1_C5_51 ...... C_1_C6_51 ...... D3_HOS_C2_51 C_1_C7_51 Labor & Delivery .... Operating Room 072X ...... Delivery Room C_1_C5_52 ...... C_1_C6_52 ...... D3_HOS_C2_52 Charges. and Labor C_1_C7_52 Room. Anesthesia ...... Anesthesia 037X ...... Anesthesiology ... C_1_C5_53 ...... C_1_C6_53 ...... D3_HOS_C2_53 Charges. C_1_C7_53 Cardiology ...... Cardiology 048X and 073X ..... Electro-cardiology C_1_C5_69 ...... C_1_C6_69 ...... D3_HOS_C2_69 Charges. C_1_C7_69 Cardiac Catheter- ...... 0481 ...... Cardiac Catheter- C_1_C5_59 ...... C_1_C6_59 ...... D3_HOS_C2_59 ization. ization. C_1_C7_59 Laboratory ...... Laboratory 030X, 031X, and Laboratory ...... C_1_C5_60 ...... C_1_C6_60 ...... D3_HOS_C2_60 Charges. 075X. C_1_C7_60 PBP Clinic Lab- C_1_C5_61 ...... C_1_C6_61 ...... D3_HOS_C2_61 oratory Serv- C_1_C7_61 ices. 074X, 086X ...... Electro-Encepha- C_1_C5_70 ...... C_1_C6_70 ...... D3_HOS_C2_70 lography. C_1_C7_70 Radiology ...... Radiology 032X, 040X ...... Radiology—Diag- C_1_C5_54 ...... C_1_C6_54 ...... D3_HOS_C2_54 Charges. nostic. C_1_C7_54 028x, 0331, 0332, Radiology— C_1_C5_55 ...... C_1_C6_55 ...... D3_HOS_C2_55 0333, 0335, Therapeutic. 0339, 0342. 0343 and 344 ...... Radioisotope ...... C_1_C5_56 ...... C_1_C6_56 ...... D3_HOS_C2_56 C_1_C7_56 Computed Tomog- CT Scan Charges 035X ...... Computed To- C_1_C5_57 ...... C_1_C6_57 ...... D3_HOS_C2_57 raphy (CT) Scan. mography (CT) C_1_C7_57 Scan.

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Magnetic Reso- MRI Charges ...... 061X ...... Magnetic Reso- C_1_C5_58 ...... C_1_C6_58 ...... D3_HOS_C2_58 nance Imaging nance Imaging C_1_C7_58 (MRI). (MRI). Emergency Room .. Emergency Room 045x ...... Emergency ...... C_1_C5_91 ...... C_1_C6_91 ...... D3_HOS_C2_91 Charges. C_1_C7_91 Blood and Blood Blood Charges .... 038x ...... Whole Blood & C_1_C5_62 ...... C_1_C6_62 ...... D3_HOS_C2_62 Products. Packed Red C_1_C7_62 Blood Cells. Blood Storage/ 039x ...... Blood Storing, C_1_C5_63 ...... C_1_C6_63 ...... D3_HOS_C2_63 Processing. Processing, & C_1_C7_63 Transfusing. Other Services ...... Other Service 0002–0099, 022X, Charge. 023X, 024X, 052X, 053X. 055X–060X, 064X– 070X, 076X– 078X, 090X– 095X and 099X. Renal Dialysis ..... 0800X ...... Renal Dialysis ..... C_1_C5_74 ...... C_1_C6_74 ...... D3_HOS_C2_74 ESRD Revenue 080X and 082X– C_1_C7_74. Setting 088X. Charges. Home Program C_1_C5_94 ...... C_1_C6_94 ...... D3_HOS_C2_94 Dialysis. C_1_C7_94 Outpatient Serv- 049X ...... ASC (Non Distinct C_1_C5_75 ...... C_1_C6_75 ...... D3_HOS_C2_75 ice Charges. Part). C_1_C7_75 Lithotripsy Charge 079X. Other Ancillary .... C_1_C5_76 ...... C_1_C6_76 ...... D3_HOS_C2_76 C_1_C7_76 Clinic Visit 051X ...... Clinic ...... C_1_C5_90 ...... C_1_C6_90 ...... D3_HOS_C2_90 Charges. C_1_C7_90 Observation beds C_1_C5_92.01 .... C_1_C6_92.01 .... D3_HOS_C2_ C_1_C7_92.01 92.01 Professional Fees 096X, 097X, and Other Outpatient C_1_C5_93 ...... C_1_C6_93 ...... D3_HOS_C2_93 Charges. 098X. Services. C_1_C7_93 Ambulance 054X ...... Ambulance ...... C_1_C5_95 ...... C_1_C6_95 ...... D3_HOS_C2_95 Charges. C_1_C7_95 Rural Health Clin- C_1_C5_88 ...... C_1_C6_88 ...... D3_HOS_C2_88 ic. C_1_C7_88 FQHC ...... C_1_C5_89 ...... C_1_C6_89 ...... D3_HOS_C2_89 C_1_C7_89

3. Development of National Average center CCRs and removed any cost centers by the corresponding national CCRs center CCRs where the log of the cost average CCR, we summed the 19 ‘‘costs’’ center CCR was greater or less than the across each MS–DRG to produce a total We developed the national average mean log plus/minus 3 times the standardized cost for the MS–DRG. The CCRs as follows: standard deviation for the log of that average standardized cost for each MS– Using the FY 2014 cost report data, cost center CCR. Once the cost report DRG was then computed as the total we removed CAHs, Indian Health data were trimmed, we calculated a standardized cost for the MS–DRG Service hospitals, all-inclusive rate Medicare-specific CCR. The Medicare- divided by the transfer-adjusted case hospitals, and cost reports that specific CCR was determined by taking count for the MS–DRG. The average cost represented time periods of less than 1 the Medicare charges for each line item for each MS–DRG was then divided by year (365 days). We included hospitals from Worksheet D–3 and deriving the the national average standardized cost located in Maryland because we include Medicare-specific costs by applying the per case to determine the relative their charges in our claims database. We hospital-specific departmental CCRs to weight. then created CCRs for each provider for the Medicare-specific charges for each each cost center (see prior table for line line item from Worksheet D–3. Once The proposed FY 2017 cost-based items used in the calculations) and each hospital’s Medicare-specific costs relative weights were then normalized removed any CCRs that were greater were established, we summed the total by an adjustment factor of 1.690233 so than 10 or less than 0.01. We Medicare-specific costs and divided by that the average case weight after normalized the departmental CCRs by the sum of the total Medicare-specific recalibration was equal to the average dividing the CCR for each department charges to produce national average, case weight before recalibration. The by the total CCR for the hospital for the charge-weighted CCRs. normalization adjustment is intended to purpose of trimming the data. We then After we multiplied the total charges ensure that recalibration by itself took the logs of the normalized cost for each MS–DRG in each of the 19 cost neither increases nor decreases total

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payments under the IPPS, as required by When we recalibrated the DRG always encouraged non-Medicare payers section 1886(d)(4)(C)(iii) of the Act. weights for previous years, we set a to develop weights applicable to their The proposed 19 national average threshold of 10 cases as the minimum own patient populations, we have CCRs for FY 2017 are as follows: number of cases required to compute a received frequent complaints from reasonable weight. For FY 2017, we are providers about the use of the Medicare Group CCR proposing to use that same case relative weights in the pediatric Routine Days ...... 0.459 threshold in recalibrating the MS–DRG population. We believe that eliminating Intensive Days ...... 0.378 relative weights for FY 2017. Using data this age split in the MS–DRGs will Drugs ...... 0.194 from the FY 2015 MedPAR file, there provide more stable payment for Supplies & Equipment ...... 0.298 were 8 MS–DRGs that contain fewer pediatric cases by determining their Implantable Devices ...... 0.336 than 10 cases. Under the MS–DRGs, we payment using adult cases that are Therapy Services ...... 0.322 have fewer low-volume DRGs than much higher in total volume. Newborns Laboratory ...... 0.120 under the CMS DRGs because we no are unique and require separate MS– Operating Room ...... 0.192 Cardiology ...... 0.113 longer have separate DRGs for patients DRGs that are not mirrored in the adult Cardiac Catheterization ...... 0.119 aged 0 to 17 years. With the exception population. Therefore, it remains Radiology ...... 0.154 of newborns, we previously separated necessary to retain separate MS–DRGs MRIs ...... 0.079 some DRGs based on whether the for newborns. All of the low-volume CT Scans ...... 0.039 patient was age 0 to 17 years or age 17 MS–DRGs listed are for newborns. For Emergency Room ...... 0.172 years and older. Other than the age split, FY 2017, because we do not have Blood and Blood Products ...... 0.325 cases grouping to these DRGs are sufficient MedPAR data to set accurate Other Services ...... 0.368 Labor & Delivery ...... 0.411 identical. The DRGs for patients aged 0 and stable cost relative weights for these Inhalation Therapy ...... 0.170 to 17 years generally have very low low-volume MS–DRGs, we are Anesthesia ...... 0.090 volumes because children are typically proposing to compute relative weights ineligible for Medicare. In the past, we for the low-volume MS–DRGs by Since FY 2009, the relative weights have found that the low volume of cases adjusting their final FY 2016 relative have been based on 100 percent cost for the pediatric DRGs could lead to weights by the percentage change in the weights based on our MS–DRG grouping significant year-to-year instability in average weight of the cases in other MS– system. their relative weights. Although we have DRGs. The crosswalk table is shown:

Low-volume MS–DRG MS–DRG title Crosswalk to MS–DRG

768 ...... Vaginal Delivery with O.R. Procedure Final FY 2016 relative weight (adjusted by percent change in average weight of Except Sterilization and/or D&C. the cases in other MS–DRGs). 789 ...... Neonates, Died or Transferred to An- Final FY 2016 relative weight (adjusted by percent change in average weight of other Acute Care Facility. the cases in other MS–DRGs). 790 ...... Extreme Immaturity or Respiratory Dis- Final FY 2016 relative weight (adjusted by percent change in average weight of tress Syndrome, Neonate. the cases in other MS–DRGs). 791 ...... Prematurity with Major Problems ...... Final FY 2016 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). 792 ...... Prematurity without Major Problems ...... Final FY 2016 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). 793 ...... Full-Term Neonate with Major Problems Final FY 2016 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). 794 ...... Neonate with Other Significant Problems Final FY 2016 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs). 795 ...... Normal Newborn ...... Final FY 2016 relative weight (adjusted by percent change in average weight of the cases in other MS–DRGs).

We are inviting public comments on specifies that a new medical service or applicable to discharges involving the this proposal. technology may be considered for new medical service or technology is technology add-on payment if, based on determined to be inadequate; and (3) the H. Proposed Add-On Payments for New the estimated costs incurred with service or technology must demonstrate Services and Technologies for FY 2017 respect to discharges involving such a substantial clinical improvement over 1. Background service or technology, the DRG existing services or technologies. Below prospective payment rate otherwise we highlight some of the major statutory Sections 1886(d)(5)(K) and (L) of the applicable to such discharges under this and regulatory provisions relevant to the Act establish a process of identifying subsection is inadequate. We note that, new technology add-on payment and ensuring adequate payment for new beginning with discharges occurring in criteria, as well as other information. medical services and technologies FY 2008, CMS transitioned from CMS– For a complete discussion on the new (sometimes collectively referred to in DRGs to MS–DRGs. technology add-on payment criteria, we this section as ‘‘new technologies’’) The regulations at 42 CFR 412.87 refer readers to the FY 2012 IPPS/LTCH under the IPPS. Section implement these provisions and specify PPS final rule (76 FR 51572 through 1886(d)(5)(K)(vi) of the Act specifies three criteria for a new medical service 51574). that a medical service or technology will or technology to receive the additional Under the first criterion, as reflected be considered new if it meets criteria payment: (1) The medical service or in § 412.87(b)(2), a specific medical established by the Secretary after notice technology must be new; (2) the medical service or technology will be considered and opportunity for public comment. service or technology must be costly ‘‘new’’ for purposes of new medical Section 1886(d)(5)(K)(ii)(I) of the Act such that the DRG rate otherwise service or technology add-on payments

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until such time as Medicare data are Final-Rule-Tables.html to download and reduction or adjustment in aggregate available to fully reflect the cost of the view Table 10. payments under the IPPS due to add-on technology in the MS–DRG weights In the September 7, 2001 final rule payments for new medical services and through recalibration. We note that we that established the new technology technologies. Therefore, in accordance do not consider a service or technology add-on payment regulations (66 FR with section 503(d)(2) of Public Law to be new if it is substantially similar to 46917), we discussed the issue of 108–173, add-on payments for new one or more existing technologies. That whether the Health Insurance medical services or technologies for FY is, even if a technology receives a new Portability and Accountability Act 2005 and later years have not been FDA approval, it may not necessarily be (HIPAA) Privacy Rule at 45 CFR parts subjected to budget neutrality. considered ‘‘new’’ for purposes of new 160 and 164 applies to claims In the FY 2009 IPPS final rule (73 FR technology add-on payments if it is information that providers submit with 48561 through 48563), we modified our ‘‘substantially similar’’ to a technology applications for new medical service regulations at § 412.87 to codify our that was approved by FDA and has been and new technology add-on payments. longstanding practice of how CMS on the market for more than 2 to 3 years. We refer readers to the FY 2012 IPPS/ evaluates the eligibility criteria for new In the FY 2010 IPPS/RY 2010 LTCH PPS LTCH PPS final rule (76 FR 51573) for medical service or technology add-on final rule (74 FR 43813 through 43814), complete information on this issue. payment applications. That is, we first we established criteria for evaluating Under the third criterion, determine whether a medical service or whether a new technology is § 412.87(b)(1) of our existing regulations technology meets the newness criterion, substantially similar to an existing provides that a new technology is an and only if so, do we then make a technology, specifically: (1) Whether a appropriate candidate for an additional determination as to whether the product uses the same or a similar payment when it represents an advance technology meets the cost threshold and mechanism of action to achieve a that substantially improves, relative to represents a substantial clinical therapeutic outcome; (2) whether a technologies previously available, the improvement over existing medical product is assigned to the same or a diagnosis or treatment of Medicare services or technologies. We amended different MS–DRG; and (3) whether the beneficiaries. For example, a new § 412.87(c) to specify that all applicants new use of the technology involves the technology represents a substantial for new technology add-on payments treatment of the same or similar type of clinical improvement when it reduces must have FDA approval or clearance disease and the same or similar patient mortality, decreases the number of for their new medical service or population. If a technology meets all hospitalizations or physician visits, or technology by July 1 of each year prior three of these criteria, it would be reduces recovery time compared to the to the beginning of the fiscal year that considered substantially similar to an technologies previously available. (We the application is being considered. refer readers to the September 7, 2001 The Council on Technology and existing technology and would not be final rule for a more detailed discussion Innovation (CTI) at CMS oversees the considered ‘‘new’’ for purposes of new of this criterion (66 FR 46902).) agency’s cross-cutting priority on technology add-on payments. For a The new medical service or coordinating coverage, coding and detailed discussion of the criteria for technology add-on payment policy payment processes for Medicare with substantial similarity, we refer readers under the IPPS provides additional respect to new technologies and to the FY 2006 IPPS final rule (70 FR payments for cases with relatively high procedures, including new drug 47351 through 47352), and the FY 2010 costs involving eligible new medical therapies, as well as promoting the IPPS/LTCH PPS final rule (74 FR 43813 services or technologies while exchange of information on new through 43814). preserving some of the incentives technologies and medical services Under the second criterion, inherent under an average-based between CMS and other entities. The § 412.87(b)(3) further provides that, to prospective payment system. The CTI, composed of senior CMS staff and be eligible for the add-on payment for payment mechanism is based on the clinicians, was established under new medical services or technologies, cost to hospitals for the new medical section 942(a) of Public Law 108–173. the MS–DRG prospective payment rate service or technology. Under § 412.88, if The Council is co-chaired by the otherwise applicable to the discharge the costs of the discharge (determined Director of the Center for Clinical involving the new medical services or by applying cost-to-charge ratios (CCRs) Standards and Quality (CCSQ) and the technologies must be assessed for as described in § 412.84(h)) exceed the Director of the Center for Medicare adequacy. Under the cost criterion, full DRG payment (including payments (CM), who is also designated as the consistent with the formula specified in for IME and DSH, but excluding outlier CTI’s Executive Coordinator. section 1886(d)(5)(K)(ii)(I) of the Act, to payments), Medicare will make an add- The specific processes for coverage, assess the adequacy of payment for a on payment equal to the lesser of: (1) 50 coding, and payment are implemented new technology paid under the percent of the estimated costs of the by CM, CCSQ, and the local claims- applicable MS–DRG prospective new technology or medical service (if payment contractors (in the case of local payment rate, we evaluate whether the the estimated costs for the case coverage and payment decisions). The charges for cases involving the new including the new technology or CTI supplements, rather than replaces, technology exceed certain threshold medical service exceed Medicare’s these processes by working to assure amounts. Table 10 that was released payment); or (2) 50 percent of the that all of these activities reflect the with the FY 2016 IPPS/LTCH PPS final difference between the full DRG agency-wide priority to promote high- rule contains the final thresholds that payment and the hospital’s estimated quality, innovative care. At the same we used to evaluate applications for cost for the case. Unless the discharge time, the CTI also works to streamline, new medical service and new qualifies for an outlier payment, the accelerate, and improve coordination of technology add-on payments for FY additional Medicare payment is limited these processes to ensure that they 2017. We refer readers to the CMS Web to the full MS–DRG payment plus 50 remain up to date as new issues arise. site at: https://www.cms.gov/Medicare/ percent of the estimated costs of the To achieve its goals, the CTI works to Medicare-Fee-for-Service-Payment/ new technology or new medical service. streamline and create a more AcuteInpatientPPS/FY2016-IPPS-Final- Section 503(d)(2) of Public Law 108– transparent coding and payment Rule-Home-Page-Items/FY2016-IPPS- 173 provides that there shall be no process, improve the quality of medical

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decisions, and speed patient access to before the publication of the proposed Approximately 76 individuals effective new treatments. It is also rule for FY 2018, the CMS Web site also registered to attend the town hall dedicated to supporting better decisions will post the tracking forms completed meeting in person, while additional by patients and doctors in using by each applicant. individuals listened over an open Medicare-covered services through the telephone line. We also live-streamed 2. Public Input Before Publication of a promotion of better evidence the town hall meeting and posted the Notice of Proposed Rulemaking on Add- development, which is critical for town hall on the CMS YouTube Web On Payments improving the quality of care for page at: https://www.youtube.com/ Medicare beneficiaries. Section 1886(d)(5)(K)(viii) of the Act, watch?v=dn-R5KGQu-M. We considered To improve the understanding of as amended by section 503(b)(2) of each applicant’s presentation made at CMS’ processes for coverage, coding, Public Law 108–173, provides for a the town hall meeting, as well as written and payment and how to access them, mechanism for public input before comments submitted on the the CTI has developed an ‘‘Innovator’s publication of a notice of proposed applications that were received by the Guide’’ to these processes. The intent is rulemaking regarding whether a medical due date of February 26, 2016, in our to consolidate this information, much of service or technology represents a evaluation of the new technology add- which is already available in a variety substantial clinical improvement or on payment applications for FY 2017 in of CMS documents and in various advancement. The process for this proposed rule. places on the CMS Web site, in a user- evaluating new medical service and As indicated earlier in this section, friendly format. This guide was technology applications requires the CMS is required to provide, before published in 2010 and is available on Secretary to— publication of a proposed rule, for a the CMS Web site at: http://www.cms. • Provide, before publication of a meeting at which organizations gov/CouncilonTechInnov/Downloads/ proposed rule, for public input representing hospitals, physicians, InnovatorsGuide5_10_10.pdf. regarding whether a new service or manufacturers, and any other interested As we indicated in the FY 2009 IPPS technology represents an advance in party may present comments, final rule (73 FR 48554), we invite any medical technology that substantially recommendations, and data regarding product developers or manufacturers of improves the diagnosis or treatment of whether a new medical service or new medical services or technologies to Medicare beneficiaries; technology represents a substantial contact the agency early in the process • Make public and periodically clinical improvement to the clinical of product development if they have update a list of the services and staff of CMS. In recent years, CMS has questions or concerns about the technologies for which applications for live-streamed the town hall meeting evidence that would be needed later in add-on payments are pending; through the CMS YouTube Web page • the development process for the Accept comments, and later posted the recorded version of agency’s coverage decisions for recommendations, and data from the the town hall meeting, in addition to Medicare. public regarding whether a service or maintaining an open telephone line. We The CTI aims to provide useful technology represents a substantial are proposing to conduct future town information on its activities and clinical improvement; and hall meetings entirely via teleconference • initiatives to stakeholders, including Provide, before publication of a and Webcast using the same Medicare beneficiaries, advocates, proposed rule, for a meeting at which technologies. Under this proposal, we medical product manufacturers, organizations representing hospitals, would continue to publish a notice providers, and health policy experts. physicians, manufacturers, and any informing the public of the date of the Stakeholders with further questions other interested party may present meeting, as well as requirements for the about Medicare’s coverage, coding, and comments, recommendations, and data submission of presentations. We also payment processes, or who want further regarding whether a new medical would continue to maintain an open guidance about how they can navigate service or technology represents a telephone line, with an option for these processes, can contact the CTI at substantial clinical improvement to the participation in the Webcast. The [email protected]. clinical staff of CMS. recording of the town hall meeting We note that applicants for add-on In order to provide an opportunity for would continue to be available on the payments for new medical services or public input regarding add-on payments CMS You Tube Web page or other CMS technologies for FY 2018 must submit a for new medical services and Web site following the meeting. This formal request, including a full technologies for FY 2017 prior to recording would include closed description of the clinical applications publication of the FY 2017 IPPS/LTCH captioning of all presentations and of the medical service or technology and PPS proposed rule, we published a comments. In addition to submitting the results of any clinical evaluations notice in the Federal Register on materials for discussion at the town hall demonstrating that the new medical November 30, 2015 (80 FR 74774), and meeting, individuals would continue to service or technology represents a held a town hall meeting at the CMS be able to submit other written substantial clinical improvement, along Headquarters Office in Baltimore, MD, comments after the town hall meeting with a significant sample of data to on February 16, 2016. In the on whether the service or technology demonstrate that the medical service or announcement notice for the meeting, represents a substantial clinical technology meets the high-cost we stated that the opinions and improvement. We are inviting public threshold. Complete application presentations provided during the comments on this proposal. information, along with final deadlines meeting would assist us in our In response to the published notice for submitting a full application, will be evaluations of applications by allowing and the February 16, 2016 New posted as it becomes available on the public discussion of the substantial Technology Town Hall meeting, we CMS Web site at: http://www.cms.gov/ clinical improvement criterion for each received written comments regarding Medicare/Medicare-Fee-for-Service- of the FY 2017 new medical service and the applications for FY 2017 new Payment/AcuteInpatientPPS/ technology add-on payment technology add-on payments. We newtech.html. To allow interested applications before the publication of summarize below a general comment parties to identify the new medical the FY 2017 IPPS/LTCH PPS proposed that does not relate to a specific services or technologies under review rule. application for FY 2017 new technology

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add-on payments. We also summarize several of the new medical services and Therefore, cases of KcentraTM would comments regarding individual technologies that have been, or may be, incur an average cost per case of $3,175 applications, or, if applicable, indicate approved for new technology add-on ($635 × 5). Under § 412.88(a)(2), we that there were no comments received payments may now, and in the future, limit new technology add-on payments in section II.H.5. of the preamble of this be assigned a Section ‘‘X’’ code within to the lesser of 50 percent of the average proposed rule at the end of each the structure of the ICD–10–PCS. We cost of the technology or 50 percent of discussion of the individual posted ICD–10–PCS Guidelines on the the costs in excess of the MS–DRG applications. CMS Web site at: http://www.cms.gov/ payment for the case. As a result, the Comment: One commenter Medicare/Coding/ICD10/2016-ICD-10- maximum add-on payment for a case of recommended that CMS broaden the PCS-and-GEMs.html, including KcentraTM was $1,587.50 for FY 2014. criteria applied in making substantial guidelines for ICD–10–PCS ‘‘X’’ codes. We refer the reader to the FY 2014 IPPS/ clinical improvement determinations to We encourage providers to view the LTCH PPS final rule (78 FR 50579) for require, in addition to existing criteria, material provided on ICD–10–PCS complete details on the new technology consideration of whether the new Section ‘‘X’’ codes. add-on payments for KcentraTM. technology or medical service meets one As stated above, the new technology or more of the following additional 4. Proposed FY 2017 Status of add-on payment regulations provide suggested criteria: (1) Results in a Technologies Approved for FY 2016 that a medical service or technology reduction of the length of a hospital Add-On Payments may be considered new within 2 or 3 stay; (2) improves patient quality of life; a. KcentraTM years after the point at which data begin (3) creates long-term clinical efficiencies to become available reflecting the ICD– CSL Behring submitted an application in treatment; (3) addresses patient- 9–CM code assigned to the new service for new technology add-on payments for centered objectives as defined by the or technology (§ 412.87(b)(2)). Our KcentraTM TM Secretary; or (4) meets such other for FY 2014. Kcentra is a practice has been to begin and end new criteria as the Secretary may specify. replacement therapy for fresh frozen technology add-on payments on the The commenter also suggested that an plasma (FFP) for patients with an basis of a fiscal year, and we have entity that submits an application for acquired coagulation factor deficiency generally followed a guideline that uses due to warfarin and who are new technology add-on payments be TM a 6-month window before and after the entitled to administrative review of an experiencing a severe bleed. Kcentra start of the fiscal year to determine adverse determination made by the contains the Vitamin K dependent whether to extend the new technology Secretary. coagulation factors II, VII, IX and X, add-on payment for an additional fiscal Response: We appreciate these together known as the prothrombin year. In general, we extend add-on recommendations and suggestions and complex, and antithrombotic proteins C payments for an additional year only if will consider them in future and S. Factor IX is the lead factor for the the 3-year anniversary date of the rulemaking. potency of the preparation. The product product’s entry on the market occurs in We note that the commenter also is a heat-treated, non-activated, virus the latter half of the fiscal year (70 FR provided comments that were unrelated filtered and lyophilized plasma protein 47362). to the substantial clinical improvement concentrate made from pooled human With regard to the newness criterion criterion. As stated earlier, the purpose plasma. KcentraTM is available as a for KcentraTM, we considered the of the new technology town hall lyophilized powder that needs to be beginning of the newness period to meeting is specifically to discuss the reconstituted with sterile water prior to commence when KcentraTM was substantial clinical improvement administration via intravenous infusion. approved by the FDA on April 29, 2013. criterion in regard to pending new The product is dosed based on Factor IX Because the 3-year anniversary date for technology add-on payment units. Concurrent Vitamin K treatment KcentraTM will occur in the latter half of applications for FY 2017. Therefore, we is recommended to maintain blood FY 2016 (April 29, 2016), in the FY are not summarizing these additional clotting factor levels once the effects of 2016 IPPS/LTCH PPS final rule, we comments in this proposed rule. KcentraTM have diminished. continued new technology add-on However, the commenter is welcome to KcentraTM was approved by the FDA payments for this technology for FY resubmit its comments in response to on April 29, 2013. Under the ICD–10 2016 (80 FR 49437). However, for FY proposals presented in this proposed coding system, KcentraTM is uniquely 2017, the 3-year anniversary date of the rule. identified by ICD–10–CM procedure entry of KcentraTM on the U.S. market code 30283B1 (Transfusion of (April 29, 2016) will occur prior to the 3. ICD–10–PCS Section ‘‘X’’ Codes for nonautologous 4-factor prothrombin beginning of FY 2017. Therefore, we are Certain New Medical Services and complex concentrate into vein, proposing to discontinue new Technologies percutaneous approach). technology add-on payments for this As discussed in the FY 2016 IPPS/ After evaluation of the newness, cost, technology for FY 2017. We are inviting LTCH final rule (80 FR 49434), the ICD– and substantial clinical improvement public comments on this proposal. 10–PCS includes a new section criteria for new technology add-on ® containing the new Section ‘‘X’’ codes, payments for KcentraTM and b. Argus II Retinal Prosthesis System which began being used with discharges consideration of the public comments Second Sight Medical Products, Inc. occurring on or after October 1, 2015. we received in response to the FY 2014 submitted an application for new Decisions regarding changes to ICD–10– IPPS/LTCH PPS proposed rule, we technology add-on payments for the PCS Section ‘‘X’’ codes will be handled approved KcentraTM for new technology Argus® II Retinal Prosthesis System in the same manner as the decisions for add-on payments for FY 2014 (78 FR (Argus® II System) for FY 2014. The all of the other ICD–10–PCS code 50575 through 50580). In the Argus® II System is an active changes. That is, proposals to create, application, the applicant estimated that implantable medical device that is delete, or revise Section ‘‘X’’ codes the average Medicare beneficiary would intended to provide electrical under the ICD–10–PCS structure will be require an average dosage of 2500 stimulation of the retina to induce referred to the ICD–10 Coordination and International Units (IU). Vials contain visual perception in patients who are Maintenance Committee. In addition, 500 IU at a cost of $635 per vial. profoundly blind due to retinitis

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pigmentosa (RP). These patients have application, the applicant provided a waveform (including systolic, diastolic, bare or no light perception in both eyes. breakdown of the costs of the Argus® II and mean pressures) as well as heart The system employs electrical signals to System. The total operating cost of the rate. The sensor is permanently bypass dead photo-receptor cells and Argus® II System is $144,057.50. Under implanted in the distal pulmonary stimulate the overlying neurons § 412.88(a)(2), we limit new technology artery using transcatheter techniques in according to a real-time video signal add-on payments to the lesser of 50 the catheterization laboratory where it is that is wirelessly transmitted from an percent of the average cost of the device calibrated using a Swan-Ganz catheter. externally worn video camera. The or 50 percent of the costs in excess of PA pressures are transmitted by the Argus® II implant is intended to be the MS–DRG payment for the case. As patient at home in a supine position on implanted in a single eye, typically the a result, the maximum add-on payment a padded antenna, pushing one button worse-seeing eye. Currently, bilateral for a case involving the Argus® II which records an 18-second continuous implants are not intended for this System for FY 2014 was $72,028.75. waveform. The data also can be technology. According to the applicant, With regard to the newness criterion recorded from the hospital, physician’s the surgical implant procedure takes for the Argus® II System, we considered office or clinic. approximately 4 hours and is performed the beginning of the newness period to The hemodynamic data, including a under general anesthesia. commence when the Argus® II System detailed waveform, are transmitted to a With regard to the newness criterion, became available on the U.S. market on secure Web site that serves as the the applicant received a Humanitarian December 20, 2013. Because the 3-year Pulmonary Artery Pressure Database, so Device Exemption (HDE) approval from anniversary date for the Argus® II that information regarding PA pressure the FDA on February 14, 2013. System will occur after FY 2016 is available to the physician or nurse at However, in the FY 2015 IPPS/LTCH (December 20, 2016), in the FY 2016 any time via the Internet. Interpretation PPS final rule (79 FR 49924 through IPPS/LTCH PPS final rule, we of trend data allows the clinician to 49925), we discussed comments we had continued new technology add-on make adjustments to therapy and can be received informing CMS that the Argus® payments for this technology for FY used along with heart failure signs and II System was not available on the U.S. 2016 (80 FR 49439). However, for FY symptoms to adjust medications. market until December 20, 2013. The 2017, the 3-year anniversary date of the The applicant received FDA approval applicant explained that, as part of the entry of the Argus® II System on the on May 28, 2014. lengthy approval process, it was U.S. market (December 20, 2016) will After evaluation of the newness, costs, required to submit a request to the occur in the first half of FY 2017. As and substantial clinical improvement Federal Communications Commission discussed previously in this section, in criteria for new technology payments for (FCC) for a waiver of section 15.209(a) general, we extend new technology add- the CardioMEMSTM HF Monitoring of the FCC rules that would allow the on payments for an additional year only System and consideration of the public applicant to apply for FCC authorization if the 3-year anniversary date of the comments we received in response to to utilize this specific RF band. The FCC product’s entry on to the U.S. market the FY 2015 IPPS/LTCH PPS proposed approved the applicant’s waiver request occurs in the latter half of the fiscal rule, we approved the CardioMEMSTM on November 30, 2011. After receiving year. Therefore, we are proposing to HF Monitoring System for new the FCC waiver of the section 15.209(a) discontinue new technology add-on technology add-on payments for FY rules, the applicant requested and payments for this technology for FY 2015 (79 FR 49940). Cases involving the obtained a required Grant of Equipment 2017. We are inviting public comments CardioMEMSTM HF Monitoring System Authorization to utilize the specific RF on this proposal. that are eligible for new technology add- band, which the FCC issued on on payments are identified by either c. CardioMEMSTM HF (Heart Failure) December 20, 2013. Therefore, the ICD–10–PCS procedure code 02HQ30Z Monitoring System applicant stated that the date the Argus® (Insertion of pressure sensor monitoring II System first became available for CardioMEMS, Inc. submitted an device into right pulmonary artery, commercial sale in the United States application for new technology add-on percutaneous approach) or ICD–10–PCS was December 20, 2013. We agreed with payment for FY 2015 for the procedure code 02HR30Z (Insertion of the applicant that, due to the delay, the CardioMEMSTM HF (Heart Failure) pressure sensor monitoring device into date of newness for the Argus® II Monitoring System, which is an left pulmonary artery, percutaneous System was December 20, 2013, instead implantable hemodynamic monitoring approach). With the new technology of February 14, 2013. system comprised of an implantable add-on payment application, the After evaluation of the new sensor/monitor placed in the distal applicant stated that the total operating technology add-on payment application pulmonary artery. Pulmonary artery cost of the CardioMEMSTM HF and consideration of public comments hemodynamic monitoring is used in the Monitoring System is $17,750. Under received, we concluded that the Argus® management of heart failure. The § 412.88(a)(2), we limit new technology II System met all of the new technology CardioMEMSTM HF Monitoring System add-on payments to the lesser of 50 add-on payment policy criteria. measures multiple pulmonary artery percent of the average cost of the device Therefore, we approved the Argus® II pressure parameters for an ambulatory or 50 percent of the costs in excess of System for new technology add-on patient to measure and transmit data via the MS–DRG payment for the case. As payments in FY 2014 (78 FR 50580 a wireless sensor to a secure Web site. a result, the maximum new technology through 50583). Cases involving the The CardioMEMSTM HF Monitoring add-on payment for a case involving the Argus® II System that are eligible for System utilizes radiofrequency (RF) CardioMEMSTM HF Monitoring System new technology add-on payments energy to power the sensor and to is $8,875. currently are identified when one of the measure pulmonary artery (PA) pressure With regard to the newness criterion following ICD–10–PCS procedure codes and consists of three components: An for the CardioMEMSTM HF Monitoring is reported: 08H005Z (Insertion of Implantable Sensor with Delivery System, we considered the beginning of epiretinal visual prosthesis into right Catheter, an External Electronics Unit, the newness period to commence when eye, open approach); or 08H105Z and a Pulmonary Artery Pressure the CardioMEMSTM HF Monitoring (Insertion of epiretinal visual prosthesis Database. The system provides the System was approved by the FDA on into left eye, open approach). In the physician with the patient’s PA pressure May 28, 2014. Because the 3-year

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anniversary date of the entry of the details/nca-tracking- is a brain disorder characterized by CardioMEMSTM HF Monitoring System sheet.aspx?NCAId=273 for information recurrent, unprovoked seizures. on the U.S. market will occur in the related to this NCD. According to the applicant, the RNS® latter half of FY 2017 (May 28, 2017), After evaluation of the newness, costs, System is the first implantable medical we are proposing to continue new and substantial clinical improvement device (developed by NeuroPace, Inc.) technology add-on payments for this criteria for new technology payments for for treating persons diagnosed with technology for FY 2017. The maximum the MitraClip® System and epilepsy whose partial onset seizures payment for a case involving the consideration of the public comments have not been adequately controlled CardioMEMSTM HF Monitoring System we received in response to the FY 2015 with antiepileptic medications. The would remain at $8,875 for FY 2017. We IPPS/LTCH PPS proposed rule, we applicant further stated that, the RNS® are inviting public comments on our approved the MitraClip® System for System is the first closed-loop, proposal. new technology add-on payments for FY responsive system to treat partial onset 2015 (79 FR 49946). As discussed in the seizures. Responsive electrical d. MitraClip® System FY 2015 IPPS/LTCH PPS final rule, this stimulation is delivered directly to the Abbott Vascular submitted an approval is on the basis of using the seizure focus in the brain when application for new technology add-on MitraClip® consistent with the NCD. abnormal brain activity is detected. A ® payments for the MitraClip System for The average cost of the MitraClip® cranially implanted programmable ® FY 2015. The MitraClip System is a System is reported as $30,000. Under neurostimulator senses and records transcatheter mitral valve repair system section 412.88(a)(2), we limit new brain activity through one or two ® that includes a MitraClip device technology add-on payments to the electrode-containing leads that are implant, a Steerable Guide Catheter, and lesser of 50 percent of the average cost placed at the patient’s seizure focus/ a Clip Delivery System. It is designed to of the device or 50 percent of the costs foci. The neurostimulator detects perform reconstruction of the in excess of the MS–DRG payment for electrographic patterns previously insufficient mitral valve for high-risk the case. As a result, the maximum new identified by the physician as abnormal, patients who are not candidates for technology add-on payment for a case and then provides brief pulses of conventional open mitral valve repair involving the MitraClip® System is electrical stimulation through the leads surgery. $15,000 for FY 2015. to interrupt those patterns. Stimulation With regard to the newness criterion, With regard to the newness criterion is delivered only when abnormal ® the MitraClip System received a for the MitraClip® System, we electrocorticographic activity is premarket approval from the FDA on considered the beginning of the detected. The typical patient is treated ® October 24, 2013. The MitraClip newness period to commence when the with a total of 5 minutes of stimulation System is indicated ‘‘for the MitraClip® System was approved by the a day. The RNS® System incorporates percutaneous reduction of significant FDA on October 24, 2013. Because the remote monitoring, which allows symptomatic mitral regurgitation (MR 3-year anniversary date of the entry of patients to share information with their >= 3+) due to primary abnormality of the MitraClip® System on the U.S. physicians remotely. the mitral apparatus (degenerative MR) market (October 24, 2016) will occur With regard to the newness criterion, in patients who have been determined after FY 2016, in the FY 2016 IPPS/ the applicant stated that some patients to be at prohibitive risk for mitral valve LTCH PPS final rule, we continued new diagnosed with partial onset seizures surgery by a heart team, which includes technology add-on payments for this that cannot be controlled with a cardiac surgeon experienced in mitral technology for FY 2016 (80 FR 49442). antiepileptic medications may be valve surgery and a cardiologist However, for FY 2017, the 3-year candidates for the vagus nerve experienced in mitral valve disease, and anniversary date of the entry of stimulator (VNS) or for surgical removal in whom existing comorbidities would MitraClip® System on the U.S. market of the seizure focus. According to the not preclude the expected benefit from (October 24, 2016) will occur in the first applicant, these treatments are not reduction of the mitral regurgitation.’’ half of FY 2017. As discussed appropriate for, or helpful to, all ® The MitraClip System became previously in this section, in general, we patients. Therefore, the applicant immediately available on the U.S. extend new technology add-on believed that there is an unmet clinical market following FDA approval. The payments for an additional year only if need for additional therapies for partial ® MitraClip System is a Class III device, the 3-year anniversary date of the onset seizures. The applicant further and has an investigational device product’s entry on to the U.S. market stated that the RNS® System addresses exemption (IDE) for the EVEREST study occurs in the latter half of the fiscal this unmet clinical need by providing a (Endovascular Valve Edge-to-Edge year. Therefore, we are proposing to novel treatment option for treating Repair Study)—IDE G030061, and for discontinue new technology add-on persons diagnosed with medically the COAPT study (Cardiovascular payments for this technology for FY intractable partial onset seizures. The Outcomes Assessment of the MitraClip 2017. We are inviting public comments applicant received FDA premarket Percutaneous Therapy for Health on this proposal. approval on November 14, 2013. Failure Patients with Functional Mitral ® After evaluation of the newness, costs, Regurgitation)—IDE G120024. Cases e. Responsive Neurostimulator (RNS ) and substantial clinical improvement involving the MitraClip® System are System criteria for new technology payments for identified using ICD–10–PCS procedure NeuroPace, Inc. submitted an the RNS® System and consideration of code 02UG3JZ (Supplement mitral valve application for new technology add-on the public comments we received in with synthetic substitute, percutaneous payments for FY 2015 for the use of the response to the FY 2015 IPPS/LTCH approach). RNS® System. (We note that the PPS proposed rule, we approved the On August 7, 2014, CMS issued a applicant submitted an application for RNS® System for new technology add- National Coverage Decision (NCD) new technology add-on payments for FY on payments for FY 2015 (79 FR 49950). concerning Transcatheter Mitral Valve 2014, but failed to receive FDA approval Cases involving the RNS® System that Repair procedures. We refer readers to prior to the July 1 deadline.) Seizures are eligible for new technology add-on the CMS Web site at: http://www.cms. occur when brain function is disrupted payments are identified using the gov/medicare-coverage-database/ by abnormal electrical activity. Epilepsy following ICD–10–PCS procedure code

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combination: 0NH00NZ (Insertion of throughout the body. As a bi-specific T- on payments for FY 2016 (80 FR 49449). neurostimulator generator into skull, cell engager, the BLINCYTOTM Cases involving BLINCYTOTM that are open approach) in combination with technology attaches to a molecule on the eligible for new technology add-on 00H00MZ (Insertion of neurostimulator surface of the tumorous cell, as well as payments are identified using one of the lead into brain, open approach). to a molecule on the surface of normal following ICD–10–PCS procedure codes: According to the applicant, cases using T-cells, bringing the two into closer XW03351 (Introduction of the RNS® System would incur an proximity and allowing the normal T- Blinatumomab antineoplastic anticipated cost per case of $36,950. cell to destroy the tumorous cell. immunotherapy into peripheral vein, Under § 412.88(a)(2) of the regulations, Specifically, the BLINCYTOTM percutaneous approach, new technology we limit new technology add-on technology attaches to a cell identified group 1) or XW04351 (Introduction of payments to the lesser of 50 percent of as CD19, which is present on all of the Blinatumomab antineoplastic the average costs of the device or 50 cells of the malignant transformations immunotherapy into central vein, percent of the costs in excess of the MS– that cause Ph- R/R B-cell precursor ALL percutaneous approach, new technology DRG payment rate for the case. As a and helps attract the cell into close group1). result, the maximum new technology proximity of the T-cell CD3 with the As discussed in the FY 2016 IPPS/ add-on payment for cases involving the intent of getting close enough to allow LTCH final rule (80 FR 49449), the RNS® System is $18,475. the T-cell to inject toxins that destroy applicant recommended that CMS With regard to the newness criterion the cancerous cell. According to the consider and use the cost of the full 28- for the RNS® System, we considered the applicant, the BLINCYTOTM technology day inpatient treatment cycle as the beginning of the newness period to is the first, and the only, bi-specific expected length of treatment when commence when the RNS® System was CD19-directed CD3 T-cell engager determining the maximum new approved by the FDA on November 14, single-agent immunotherapy approved technology add-on payment for cases 2013. Because the 3-year anniversary by the FDA. involving the BLINCYTOTM rather than date of the entry of the RNS® System on BLINCYTOTM is administered as a the average cost of lesser number of the U.S. market (November 14, 2016) continuous IV infusion delivered at a days used as other variables. For the will occur after FY 2016, in the FY 2016 constant flow rate using an infusion reasons discussed, we disagreed with IPPS/LTCH PPS final rule, we pump. A single cycle of treatment the applicant and established the continued new technology add-on consists of 28 days of continuous maximum new technology add-on payments for this technology for FY infusion, and each treatment cycle payment amount for a case involving 2016 (80 FR 49443). However, for FY followed by 2 weeks without treatment the BLINCYTOTM technology for FY 2017, the 3-year anniversary date of the prior to administering any further 2016 using the weighted average of the entry of RNS® System on the U.S. treatments. A course of treatment would cycle 1 and cycle 2 observed treatment market (November 14, 2016) will occur consist of two phases. Phase 1 consists length. Specifically, in the Phase II trial, in the first half of FY 2017. As discussed of initial inductions or treatments the most recent data available, 92 previously in this section, in general, we intended to achieve remission followed patients received cycle 1 for an average extend new technology add-on by additional inductions and treatments length of 21.2 days, and 52 patients payments for an additional year only if to maintain consolidation; or treatments received cycle 2 for an average length of the 3-year anniversary date of the given after remission has been achieved 10.2 days. The weighted average of product’s entry on to the U.S. market to prolong the duration. During phase 1 cycle 1 and 2 treatment length is 17 occurs in the latter half of the fiscal of a single treatment course, up to two days. We noted that a small number of year. Therefore, we are proposing to cycles of BLINCYTOTM are patients also received 3 to 5 treatment discontinue new technology add-on administered, and up to three additional cycles. However, based on the data payments for this technology for FY cycles are administered during provided, these cases do not appear to 2017. We are inviting public comments consolidation. The recommended be typical at this point and we excluded on this proposal. dosage of BLINCYTOTM administered them from this calculation. We noted during the first cycle of treatment is 9 that, if we included all treatment cycles f. Blinatumomab (BLINCYTOTM Trade mcg per day for the first 7 days of in this calculation, the weighted average Brand) treatment. The dosage is then increased number of days of treatment is much Amgen, Inc. submitted an application to 28 mcg per day for 3 weeks until lower, 10 days. Using the clinical data for new technology add-on payments for completion. During phase 2 of the provided by the applicant, we stated FY 2016 for Blinatumomab treatment course, all subsequent doses that we believe that setting the (BLINCYTOTM), a bi-specific T-cell are administered as 28 mcg per day maximum new technology add-on engager (BiTE) used for the treatment of throughout the entire duration of the 28- payment amount for a case involving Philadelphia chromosome-negative (Ph- day treatment period. the BLINCYTOTM technology for FY ) relapsed or refractory (R/R) B-cell With regard to the newness criterion, 2016 based on a 17-day length of precursor acute-lymphoblastic leukemia the BLINCYTOTM technology received treatment cycle is representative of (ALL), which is a rare aggressive cancer FDA approval on December 3, 2014, for historical and current practice. We also of the blood and bone marrow. the treatment of patients diagnosed with stated that, for FY 2017, if new data on Approximately 6,050 individuals are Ph- R/R B-cell precursor ALL, and the length of treatment are available, we diagnosed with Ph- R/R B-cell precursor product gained entry onto the U.S. would consider any such data in ALL in the United States each year, and market on December 17, 2014. evaluating the maximum new approximately 2,400 individuals, After evaluation of the newness, costs, technology add-on payment amount. representing 30 percent of all new cases, and substantial clinical improvement However, we did not receive any new are adults. Ph- R/R B-cell precursor ALL criteria for new technology payments for data from the applicant to evaluate for occurs when there are malignant BLINCYTOTM and consideration of the FY 2017. transformations of B-cell or T-cell public comments we received in In the application, the applicant progenitor cells, causing an response to the FY 2016 IPPS/LTCH estimated that the average Medicare accumulation of lymphoblasts in the PPS proposed rule, we approved beneficiary would require a dosage of blood, bone marrow, and occasionally BLINCYTOTM for new technology add- 9mcg/day for the first 7 days under the

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first treatment cycle, followed by a (PAD). Typical treatments for patients that we believe that continuing our dosage of 28mcg/day for the duration of with PAD include angioplasty, stenting, current practice of extending a new the treatment cycle, as well as all days atherectomy and vascular bypass technology add-on payment without a included in subsequent cycles. All vials surgery. PAD most commonly occurs in further application from the contain 35mcg at a cost of $3,178.57 per the femoropopliteal segment of the manufacturer of the competing product vial. The applicant noted that all vials peripheral arteries, is associated with or a specific finding on cost and clinical are single-use. Therefore, we significant levels of morbidity and improvement if we make a finding of determined that cases involving the use impairment in quality of life, and substantial similarity among two of the BLINCYTOTM technology would requires treatment to reduce symptoms products is the better policy because we incur an average cost per case of and prevent or treat ischemic events.2 avoid— $54,035.69 (1 vial/day × 17 days × Treatment options for symptomatic PAD • Creating manufacturer-specific $3,178.57/vial). Under 42 CFR include noninvasive treatment such as codes for substantially similar products; 412.88(a)(2), we limit new technology medication and life-style modification • Requiring different manufacturers add-on payments to the lesser of 50 (for example, exercise programs, diet, of substantially similar products from percent of the average cost of the and smoking cessation) and invasive having to submit separate new technology or 50 percent of the costs in options which include endovascular technology applications; excess of the MS–DRG payment for the treatment and surgical bypass. The 2013 • Having to compare the merits of case. As a result, the maximum new American College of Cardiology and competing technologies on the basis of technology add-on payment amount for American Heart Association (ACC/ substantial clinical improvement; and a case involving the use of the AHA) guidelines for the management of • Bestowing an advantage to the first BLINCYTOTM is $27,017.85 for FY 2016. PAD recommend endovascular therapy applicant representing a particular new With regard to the newness criterion as the first-line treatment for technology to receive approval (70 FR for BLINCYTOTM, we considered the femoropopliteal artery lesions in 47351). beginning of the newness period to patients suffering from claudication CR Bard, Inc. received FDA approval commence when the product gained (Class I, Level A recommendation).3 for LUTONIX® on October 9, 2014. entry onto the U.S. market on December According to both applicants, Commercial sales in the U.S. market 17, 2014. Because the 3-year anniversary LUTONIX® and IN.PACTTM AdmiralTM began on October 10, 2014. Medtronic date of the entry of the BLINCYTOTM on are the first drug coated balloons that received FDA approval for IN.PACTTM the U.S. market will occur after FY 2017 can be used for treatment of patients AdmiralTM on December 30, 2014. (December 17, 2017), we are proposing who are diagnosed with PAD. In the FY Commercial sales in the U.S. market to continue new technology add-on 2016 IPPS/LTCH final rule, we stated began on January 29, 2015. payments for this technology for FY that because cases eligible for the two In accordance with our policy, we 2017. The maximum payment for a case devices would group to the same MS– stated in the FY 2016 IPPS\LTCH final involving BLINCYTOTM would remain DRGs and we believe that these devices rule (80 FR 49463) that we believe it is at $27,017.85 for FY 2017. We are are substantially similar to each other appropriate to use the earliest market inviting public comments on this (that is, they are intended to treat the availability date submitted as the proposal. same or similar disease in the same or beginning of the newness period. ® similar patient population and are Accordingly, for both devices, we stated g. Lutonix Drug Coated Balloon PTA purposed to achieve the same that the beginning of the newness TM TM Catheter and In.PACT Admiral therapeutic outcome using the same or period will be October 10, 2014. Paclitaxel Coated Percutaneous similar mechanism of action), we After evaluation of the newness, costs, Transluminal Angioplasty (PTA) evaluated both technologies as one and substantial clinical improvement Balloon Catheter application for new technology add-on criteria for new technology payments for Two manufacturers, CR Bard Inc. and payment under the IPPS. The applicants the LUTONIX® and IN.PACTTM Medtronic, submitted applications for submitted separate cost and clinical AdmiralTM technologies and new technology add-on payments for FY data, and we reviewed and discussed consideration of the public comments 2016 for LUTONIX® Drug-Coated each set of data separately. However, we we received in response to the FY 2016 Balloon (DCB) Percutaneous made one determination regarding new IPPS/LTCH PPS proposed rule, we Transluminal Angioplasty (PTA) technology add-on payments that approved the LUTONIX® and Catheter (LUTONIX®) and IN.PACTTM applied to both devices. We believe that IN.PACTTM AdmiralTM technologies for AdmiralTM Paclitaxel Coated this is consistent with our policy new technology add-on payments for FY Percutaneous Transluminal Angioplasty statements in the past regarding 2016 (80 FR 49469). Cases involving the (PTA) Balloon Catheter (IN.PACTTM substantial similarity. Specifically, we LUTONIX® and IN.PACTTM AdmiralTM AdmiralTM), respectively. Both of these have noted that approval of new technologies that are eligible for new technologies are drug-coated balloon technology add-on payments would technology add-on payments are angioplasty treatments for patients extend to all technologies that are identified using one of the ICD–10–PCS diagnosed with peripheral artery disease substantially similar (66 FR 46915), and procedure codes in the following table:

ICD–10–PCS Code Code description

047K041 ...... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, open approach.

2 Tepe G, Zeller T, Albrecht T, Heller S, 3 Anderson JL, Halperin JL, Albert NM, Bozkurt report of the American College of Cardiology Schwarzwalder U, Beregi JP, Claussen CD, B, Brindis RG, Curtis LH, DeMets D, Guyton RA, Foundation/American Heart Association Task Force Oldenburg A, Scheller B, Speck U.: Local delivery Hochman JS, Kovacs RJ, Ohman EM, Pressler SJ, on Practice Guidelines. J Am Coll Cardiol 2013; of paclitaxel to inhibit restenosis during angioplasty Sellke FW, Shen WK.: Management of patients with 61:1555–70. Available at: http://dx.doi.org/10.1016/ of the leg. N Engl J Med 2008; 358: 689–99. peripheral artery disease (compilation of 2005 and j.jacc.2013.01.004. 2011 ACCF/AHA guideline recommendations): a

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ICD–10–PCS Code Code description

047K0D1 ...... Dilation of right femoral artery with intraluminal device using drug-coated balloon, open approach. 047K0Z1 ...... Dilation of right femoral artery using drug-coated balloon, open approach. 047K341 ...... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 047K3D1 ...... Dilation of right femoral artery with intraluminal device using drug-coated balloon, percutaneous approach. 047K3Z1 ...... Dilation of right femoral artery using drug-coated balloon, percutaneous approach. 047K441 ...... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047K4D1 ...... Dilation of right femoral artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047K4Z1 ...... Dilation of right femoral artery using drug-coated balloon, percutaneous endoscopic approach. 047L041 ...... Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 047L0D1 ...... Dilation of left femoral artery with intraluminal device using drug-coated balloon, open approach. 047L0Z1 ...... Dilation of left femoral artery using drug-coated balloon, open approach. 047L341 ...... Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 047L3D1 ...... Dilation of left femoral artery with intraluminal device using drug-coated balloon, percutaneous approach. 047L3Z1 ...... Dilation of left femoral artery using drug-coated balloon, percutaneous approach. 047L441 ...... Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047L4D1 ...... Dilation of left femoral artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047L4Z1 ...... Dilation of left femoral artery using drug-coated balloon, percutaneous endoscopic approach. 047M041 ...... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 047M0D1 ...... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, open approach. 047M0Z1 ...... Dilation of right popliteal artery using drug-coated balloon, open approach. 047M341 ...... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 047M3D1 ...... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, percutaneous approach. 047M3Z1 ...... Dilation of right popliteal artery using drug-coated balloon, percutaneous approach. 047M441 ...... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047M4D1 ...... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047M4Z1 ...... Dilation of right popliteal artery using drug-coated balloon, percutaneous endoscopic approach. 047N041 ...... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 047N0D1 ...... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, open approach. 047N0Z1 ...... Dilation of left popliteal artery using drug-coated balloon, open approach. 047N341 ...... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 047N3D1 ...... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, percutaneous approach. 047N3Z1 ...... Dilation of left popliteal artery using drug-coated balloon, percutaneous approach. 047N441 ...... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047N4D1 ...... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 047N4Z1 ...... Dilation of left popliteal artery using drug-coated balloon, percutaneous endoscopic approach.

As discussed in the FY 2016 IPPS/ codes listed above (which are not manufacturer specific DCB by the case- LTCH final rule (80 FR 49469), each of manufacturer specific). Because ICD–10 weighted percentage (0.25 * the applicants submitted operating costs codes are not manufacturer specific, we $2,603=$662.41 for LUTONIX® and 0.75 for its DCB. The manufacturer of the cannot set one new technology add-on * $1,890=$1,409.03 for the IN.PACTTM LUTONIX® stated that a mean of 1.37 payment amount for IN.PACTTM AdmiralTM). This resulted in a case- drug-coated balloons was used during AdmiralTM and a different new weighted average cost of $2,071.45 for the LEVANT 2 clinical trial. The technology add-on payment amount for DCBs. Under § 412.88(a)(2), we limit acquisition price for the hospital will be LUTONIX®; both technologies will be new technology add-on payments to the $1,900 per drug-coated balloon, or captured by using the same ICD–10–PCS lesser of 50 percent of the average cost $2,603 per case (1.37 × $1,900). The procedure code. As such, we stated that of the device or 50 percent of the costs applicant projected that approximately we believe that the use of a weighted in excess of the MS–DRG payment for 8,875 cases will involve use of the average of the cost of the standard DCBs the case. As a result, the maximum LUTONIX® for FY 2016. The based on the projected number of cases payment for a case involving the manufacturer for the IN.PACTTM involving each technology to determine LUTONIX® or IN.PACTTM AdmiralTM AdmiralTM stated that a mean of 1.4 the maximum new technology add-on DCBs is $1,035.72. drug-coated balloons was used during payment would be most appropriate. To With regard to the newness criterion the IN.PACTTM AdmiralTM DCB arm. compute the weighted cost average, we for LUTONIX® and IN.PACTTM The acquisition price for the hospital summed the total number of projected AdmiralTM technologies, we considered will be $1,350 per drug-coated balloon, cases for each of the applicants, which the beginning of the newness period to or $1,890 per case (1.4 × $1,350). The equaled 34,875 cases (26,000 plus commence when LUTONIX® gained applicant projected that approximately 8,875). We then divided the number of entry onto the U.S. market on October 26,000 cases will involve use of the projected cases for each of the 10, 2014. Because the 3-year anniversary IN.PACTTM AdmiralTM for FY 2016. applicants by the total number of cases, date of the entry of LUTONIX® on the For FY 2016, we based the new which resulted in the following case- U.S. market will occur after FY 2017 technology add-on payment for cases weighted percentages: 25 Percent for the (October 10, 2017), we are proposing to involving these technologies on the LUTONIX® and 75 percent for the continue new technology add-on weighted average cost of the two DCBs IN.PACTTM AdmiralTM. We then payments for both the LUTONIX® and described by the ICD–10–PCS procedure multiplied the cost per case for the IN.PACTTM AdmiralTM technologies for

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FY 2017. The maximum add-on product uses the same or a similar the individual patient by the treating payment for a case involving mechanism of action to achieve a surgeon. LUTONIX® and IN.PACTTM AdmiralTM therapeutic outcome; (2) whether a With regard to the first criterion, we would remain at $1,035.72 for FY 2017. product is assigned to the same or a are concerned that the MAGEC® Spine We are inviting public comments on different MS–DRG; and (3) whether the uses the same mechanism of action, this proposal. new use of the technology involves the spinal rod distraction, to achieve the treatment of the same or similar type of same therapeutic outcome of spinal 5. Proposed FY 2017 Applications for alignment as other currently available New Technology Add-On Payments disease and the same or similar patient population. If a technology meets all technologies and treatment options for We are reviewing nine applications three of these criteria, it would be Medicare beneficiaries. Specifically, for new technology add-on payments for considered substantially similar to an TGRs are implanted and affixed to the FY 2017. In accordance with the existing technology and would not be immature spine in order to correct regulations under § 412.87(c), applicants considered ‘‘new’’ for purposes of new spinal deformities. As a child grows, the for new technology add-on payments technology add-on payments. For a TGRs must be distracted to must have FDA approval by July 1 of detailed discussion of the criteria for accommodate spinal growth. The each year prior to the beginning of the substantial similarity, we refer readers common denominator between TGRs ® fiscal year that the application is being to the FY 2006 IPPS final rule (70 FR and the MAGEC Spine is that they considered. One applicant withdrew its 47351 through 47352), and the FY 2010 both are devices (rods) that use the same application prior to the issuance of this IPPS/LTCH PPS final rule (74 FR 43813 mechanism of action to perform and proposed rule. through 43814). achieve spinal distraction, the a. MAGEC® Spinal Bracing and With regard to the first criterion, the implantation of rods that are later ® ® lengthened. While we acknowledge the Distraction System (MAGEC Spine) applicant stated that the MAGEC ® Spine’s mechanism of action is applicant noted that the MAGEC Spine Ellipse Technologies, Inc. submitted does not require the patient to endure an application for new technology add- dependent upon growing rods used for the treatment of patients diagnosed with the potential and adverse effects of on payments for FY 2017 for the additional surgeries, this assertion ® early onset scoliosis (EOS), and is MAGEC Spine. According to the seems to be a component of substantial ® unique because the technique uses applicant, the MAGEC Spine has been clinical improvement rather than a basis developed for use in the treatment of magnetic distraction (lengthening), which does not require the patients to to distinguish the mechanism of action. children diagnosed with severe spinal In consideration of the applicant’s be subjected to the potential and deformities, such as scoliosis. The statements that the mechanism of action adverse effects of additional surgeries. ® system can be used in the treatment of of the MAGEC Spine, which uses skeletally immature patients less than The applicant explained that growing rods in the treatment of 10 years of age who have been treatment of patients diagnosed with patients diagnosed with EOS, is unique diagnosed with severe progressive EOS involves the implantation of because the technique of using magnetic spinal deformities associated with or at traditional growth rods (TGRs) followed distraction (lengthening) does not risk of Thoracic Insufficiency Syndrome by surgery every 6 months to distract require patients to endure the potential (TIS). The MAGEC® Spine consists of a the rods to accommodate the growing and adverse effects of additional (spinal growth) rod that can be spine until the patient reaches a level of surgeries, we note that there are other lengthened through the use of magnets spinal maturity when the spine can then technologies and products currently that are controlled by an external remote be fused. The average number of available that achieve spinal growth controller (ERC). The rod(s) can be distraction surgeries per patient is 12 without the need to subject patients to implanted into children as young as 2 over the course of 6 years. Once spinal potential and adverse effects of years of age. According to the applicant, alignment and maturity is reached, the additional surgeries. For example, the use of the MAGEC® Spine has proven to TGRs are surgically and permanently Shilla growth guidance system, which be successfully used in the treatment of removed. The applicant stated that, received FDA approval in 2014, uses a patients diagnosed with scoliosis who while the most recent modification to non-locking set screw at the proximal ® have not been responsive to other the MAGEC Spine’s rods accomplish and distal portions of the construct’s treatments. the same goal as the predicate device, rods. This specific feature is designed to ® The MAGEC® Spine initially received Harrington rods, MAGEC Spine rods allow the rod to slide through the screw FDA approval for use of the predicate achieve the predetermined goal with heads as a child’s spine grows, while device, which used a Harrington Rod on minimally invasive techniques after still providing correction of the spinal February 27, 2014. Subsequent FDA implantation, which prevents the deformity. The Shilla technique also approval was granted for use of the patients from being subjected to the eliminates the need for scheduled modified device, which uses a shorter potential and adverse effects of distraction surgeries, as the applicant 70 mm on September 18, 2014. After numerous lengthening surgeries. The pointed out are needed with the use of minor modification of the product, the applicant further noted that after the TGRs. Therefore, we believe that the MAGEC® Spine received its final FDA MAGEC® Spine’s rod has been MAGEC® Spine’s mechanism of action approvals on March 24, 2015, and May implanted, the ERC is placed externally may be similar to the mechanism of 29, 2015, respectively. Currently, there over the patient’s spine at the location action employed by the Shilla growth is no ICD–9–CM or ICD–10–PCS code to of the magnet in the MAGEC® Spine’s guidance system because both uniquely describe procedures involving rod. Periodic, noninvasive distraction of technologies achieve the same the MAGEC® Spine. the rod is performed to lengthen the therapeutic outcome and do not require In the FY 2010 IPPS/RY 2010 LTCH spine and to provide adequate bracing the patient to endure the potential and PPS final rule (74 FR 43813 through during growth. Routine X-ray or adverse effects of additional surgeries. 43814), we established criteria for ultrasound procedures are used to With regard to the second criterion, evaluating whether a new technology is confirm the position and amount of cases that may be eligible for treatment substantially similar to an existing distraction. The frequency of distraction involving the MAGEC® Spine map to technology, specifically: (1) Whether a sessions is customized to the needs of the following MS–DRGs: 456 (Spinal

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Fusion Except Cervical With Spinal 458. The applicant based the • The applicant did not explain the Curvature or Malignancy or Infection or distribution of cases on data from its basis of using a 10-percent inflation Extensive Fusions with MCC); 457 medical advisors, customers, and factor. Specifically, the applicant used (Spinal Fusion Except Cervical with reimbursement support team. cases from CY 2016 and inflated the Spinal Curvature or Malignancy or The applicant used Medicare and costs to FY 2017 using a 10-percent Infection or Extensive Fusions with CC); non-Medicare data for six providers that inflation factor. However, the 1-year and 458 (Spinal Fusion Except Cervical used the MAGEC® Spine during CY inflation factor in the FY 2016 IPPS/ with Spinal Curvature or Malignancy or 2016. This resulted in an average LTCH final rule (80 FR 49784) is 3.7 Infection or Extensive Fusions without unstandardized case-weighted charge percent. Therefore, we do not believe CC/MCC). All cases involving per case of $243,999. The applicant then that a 10-percent inflation factor is procedures describing spinal distraction removed charges related to the predicate appropriate. devices, including those that use TGRs technology. Using the Impact File The applicant used the average and the Shilla growth guidance system, published with the FY 2016 IPPS/LTCH overall CCR of the six hospitals to currently map to the same MS–DRGs. PPS final rule, the applicant convert the costs of the MAGEC® Spine With regard to the third criterion, we standardized the charges and applied an to charges. However, rather than using ® believe that the MAGEC Spine inflation factor of 10 percent. The an average CCR, to increase the technology involves the treatment of the applicant computed an average CCR of precision of determining the charges of same or similar type of disease and the the six hospitals based on the overall the MAGEC® Spine, the applicant could same or similar patient population. hospitals CCRs in the FY 2016 IPPS/ have instead used each hospital’s Although the applicant stated that the LTCH final rule Impact File. The ® individual CCR or the implantable MAGEC Spine was developed for the applicant then computed the charges for device CCR of 0.337 as reported in the use in the treatment of children the device by dividing the costs of the FY 2016 IPPS/LTCH PPS final rule (80 diagnosed with severe spinal device by the average CCR and added ® FR 49429). deformities, the MAGEC Spine treats these charges to determine the inflated We are inviting public comments on the same patient population as other average standardized case-weighted whether the MAGEC® Spine meets the currently available spinal distraction charge per case. The applicant noted cost criterion, particularly with regard devices and technologies, including that the cost of the technology was to the concerns we have raised. those that use TGRs and the Shilla proprietary information. Based on the With regard to substantial clinical growth guidance system. Because it FY 2016 IPPS/LTCH PPS Table 10 ® improvement, the applicant stated that appears that the MAGEC Spine is thresholds, the average case-weighted use of the MAGEC® Spinal Bracing and substantially similar to these other threshold amount was $105,909. The Distraction System significantly currently available devices used to treat applicant computed an inflated average improves clinical outcomes for the the same or similar types of diseases standardized case-weighted charge per pediatric patient population with spinal and the same or similar patient case of $248,037. Because the inflated deformities when compared to populations, we are concerned that the average standardized case-weighted technologies and treatment options that technology may not be considered charge per case exceeds the average employ TGRs by decreasing the number ‘‘new’’ for the purposes of new case-weighted threshold amount, the of subsequent surgeries and potential technology add-on payments. We are applicant maintained that the adverse effects following implantation. inviting public comments on whether technology meets the cost criterion. The applicant provided results from a the MAGEC® Spine meets the newness We have the following concerns study 4, which demonstrated that criterion. regarding the applicant’s cost analysis: With regard to the cost criterion, the • The applicant did not specify how patients receiving treatment using the applicant maintained that there is an many cases were the basis for the magnetically controlled growth rods insufficient number of cases in the average standardized case-weighted (MCGR) system had 57 fewer surgeries Medicare claims data to evaluate charges per case. Therefore, we cannot as a whole than those patients receiving because of the small number of potential determine if the charges per case treatment options using TGRs. cases and cases reflecting patients who represent a statistical sample relative to According to the applicant, the results were actually diagnosed with or who the projected cases eligible for the further projected decreased rates of experience early onset scoliosis (EOS) MAGEC® Spine for the upcoming fiscal infection and attendant costs because requiring the implantation of growing year. the need for additional distraction rods. Specifically, the majority of the • The applicant did not specify how (lengthening) surgeries is eliminated. In Medicare population is 65 years of age many cases included in the analysis addition, the applicant stated that 1,500 and older, while patients who may be were Medicare and non-Medicare cases. patients located around the world have eligible for the MAGEC® Spine are We typically rely on Medicare data and been successfully treated with the use of typically less than 10 years of age. understand the limitations of this this technology. The applicant indicated 5 Therefore, the applicant estimated the patient population in the Medicare data that the results from another study number of EOS cases using internal (as the applicant explained above). cited the following qualitative estimates for de novo cases (<10 year of However, CMS would still like the outcomes: Minimal surgical scarring, age), as well as cases that could details regarding the numerical decreased psychological distress and potentially convert to using the representation of Medicare and non- improved quality of life, improved MAGEC® Spine without searching the Medicare cases the applicant used in its 4 MedPAR data file or any other data analysis. Akbarnia BA, Cheung K, Noordeen H et al. • Traditional rods versus magnetically controlled source. The applicant estimated that a The applicant did not explain the growing rods in early onset scoliosis: a case- total of 2,500 EOS cases may be eligible methodology it used to remove the matched two year study. 2013. for treatment using the MAGEC® Spine charges for the predicate technology, as 5 Cheng, KMC, Cheung JPY, Damartzis, D, Mak, in FY 2016. According to the applicant, well as the type of technology that the KC, Wong, WYC, Akbaria, BA, Luk KDK. Magnetically controlled growing rods for sever 580 cases would map to MS–DRG 456, charges replaced. Therefore, we are spinal curvature in young children. A prospective 870 cases would map to MS–DRG 457, unable to validate the accuracy of the study. Lancet 379 (830) 26 May–1 June 2012, pp. and 1,050 cases would map to MS–DRG applicant’s methodology. 1967–1974.

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pulmonary function tests (PFTs), and compression of the liver. This allows for product sourced from porcine liver and capabilities to continuously monitor the retention of the native liver undergoes a unique, patented process of neurological behaviors because the structure, including the vasculature, perfusion decellularization that rapidly patient is not exposed to anesthesia within MIRODERM. The applicant removes cellular material, while during follow-up distractions. noted that the MIRODERM is the only maintaining the native architecture, We are concerned that the applicant’s acellular skin substitute product that is vasculature and tissue structure. The assertions that the MAGEC® Spine derived from the liver. applicant explained that MIRODERM is technology leads to significantly better According to the applicant, isolated from partial thickness liver clinical outcomes; specifically, MIRODERM is positioned to completely sections following slight compression of decreased rates of infection, when contact the entire surface of the wound the liver, which allows for the retention compared to treatment options that use bed and extend slightly beyond all of the native liver structure, including TGRs has not been shown by the results wound margins. As required, it is the vasculature, within MIRODERM. of the studies provided. The results of securely anchored to the wound site The applicant stated that partial the studies provided did not compare with a physician’s preferred fixation thickness allows for one surface of rates of infection for patients receiving method. An appropriate, primary non- MIRODERM to retain the native liver treatment using the MAGEC® Spine adherent wound dressing is then capsule (an epithelial basement versus patients receiving treatment applied over the MIRODERM matrix. A membrane) and the other opposite using TGRs or other spinal growth rods. secondary dressing (multi-layer surface to be comprised of open liver Also, as previously mentioned, there are compression bandage system), total matrix. The applicant further stated that other currently available technologies contact cast, or other appropriate case studies of the MIRODERM and devices such as the Shilla growth dressing that will manage the wound demonstrated accelerated healing, guidance system that also achieve the exudate should be applied in order to which is likely the result of the unique same therapeutic outcome and do not keep the MIRODERM matrix moist and perfusion decellularization technology require the patient to be subjected to the keep all layers securely in place. that retains a 3-dimensional potential and adverse effects of Additional applications of MIRODERM extracellular matrix that includes the additional surgery. Therefore, we are are applied as needed until the wound vasculature. concerned that the MAGEC® Spine may closes. With regard to the first criterion, not represent a substantial clinical MIRODERM received FDA approval similar to other current wound matrix improvement over existing technologies. for its use on January 27, 2015. treatments, the MIRODERM uses a We are inviting public comments on Currently, there are no ICD–10–PCS collagen matrix for tissue repair and whether the MAGEC® Spine meets the procedure codes to uniquely identify regeneration. Therefore, we are substantial clinical improvement the use of MIRODERM. The applicant concerned that MIRODERM employs the criterion. submitted a request for a unique ICD– same mechanism of action as other We did not receive any written public 10–PCS procedure code that was wound matrix treatments. Although the comments in response to the February presented at the March 2016 ICD–10 applicant has described how the 2016 New Technology Town Hall Coordination and Maintenance MIRODERM differs from other wound meeting regarding this application for Committee meeting. If approved, the matrix treatments due to the perfusion new technology add-on payments. procedure codes would become decellularization process, and is the first effective on October 1, 2016 (FY 2017). b. MIRODERM Biologic Wound Matrix product that is derived from the porcine More information on this request can be (MIRODERM) liver, we believe that the mechanism of found on the CMS Web site located at: action of MIRODERM may be Miromatrix Medical, Inc. submitted http://www.cms.gov/Medicare/Coding/ substantially similar or the same as an application for new technology add- ICD10ProviderDiagnosticCodes/ICD-10- those employed by other wound on payments for FY 2017 for CM-C-and-M-Meeting-Materials.html. treatment matrixes. With regard to the MIRODERM. MIRODERM is a non- As discussed earlier, if a technology second criterion, whether a product is crosslinked acellular wound matrix that meets all three of the substantial assigned to the same or a different MS– is derived from the porcine liver and is similarity criteria, it would be DRG, cases that may be eligible for processed and stored in a phosphate considered substantially similar to an treatment using MIRODERM map to the buffered aqueous solution. MIRODERM existing technology and would not be same MS–DRGs as other currently is clinically indicated for the considered ‘‘new’’ for purposes of new approved wound treatment matrixes. management of wounds, including: technology add-on payments. With regard to the third criterion, Partial and full-thickness wounds, With regard to the first substantial whether the new use of the technology pressure ulcers, venous ulcers, chronic similarity criterion, whether the product involves the treatment of the same or vascular ulcers, diabetic ulcers, trauma uses the same or a similar mechanism similar type of disease and the same or wounds, drainage wounds, and surgical of action to achieve a therapeutic similar patient population, MIRODERM wounds. Typical decellularization outcome, the applicant stated that is used to treat the same patient where tissues are immersed in a current wound healing therapies are population as other currently approved decellularization solution is a diffusion- provided in several different modalities, wound treatment matrixes. Because it based process, and thereby limits the which include hyperbaric oxygen appears that the MIRODERM may be ability to fully decellularize thick, treatment, negative wound pressure substantially similar to currently complex tissues such as the liver. therapy, and treatment with other approved wound treatment matrixes, we MIRODERM uses a perfusion bioengineered skin substitute products. are concerned that the technology may decellularization process that rapidly The applicant noted that other products not be considered ‘‘new’’ for the removes cellular material while that have been commonly used for purposes of new technology add-on maintaining the native architecture, similar procedures are Oasis Wound payments. We are inviting public vasculature and tissue structure. Matrix, Primatrix Dermal Repair, and comments on whether MIRODERM Following decellularization, Theraskin. The applicant asserted that meets the newness criterion. MIRODERM is isolated from partial MIRODERM is different from these With regard to the cost criterion, the thickness liver sections following slight other products because it is the only applicant conducted the following

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analysis. The applicant began by three applications to close a wound as experience, observation, and typical researching the 2014 Medicare Inpatient opposed to treatment using sizes and depths of wounds that would Hospital Standard Analytical File (SAF) MIRODERM, which requires only two be present on different parts of the body. file for cases primarily associated with applications. Based on this assumption, The applicant stated that because dermal regenerative grafts that may be the applicant noted that it assumed that MIRODERM has shown greater efficacy eligible for treatment using MIRODERM. the first application required 100 in wound closure based on their case The applicant searched for claims that percent of the amount of skin substitute series, the applicant modeled for only reported ICD–9–CM procedure code required to treat the original wound two applications with 50 percent 86.67 (Dermal regenerative graft) that area, the second application required 70 closure of the wound after the first mapped to one of the following MS– percent, and the third application application and full closure of the DRGs: 463, 464, and 465 (Wound required 40 percent, totaling 210 wound after the second application. Debridement and Skin Graft Except percent. To compute the total amount of Based on this assumption, the applicant Hand for Musculoskeletal System and square centimeters used for each case noted that it assumed that the first Connective Tissue Disorders with MCC, within the MS–DRG, the applicant application required 100 percent of the with CC, or without CC/MCC, multiplied this percentage (210 percent) amount of skin substitute required to respectively); 573, 574, and 575 (Skin by the amount of square centimeters treat the original wound area and the Graft for Skin Ulcer or Cellulitis with used for the first application for each second application required 50 percent, MCC, with CC, or without CC/MCC, case within the MS–DRG. The applicant totaling 150 percent. To compute the respectively); 576, 577, and 578 (Skin then multiplied the average cost of the total amount of square centimeters used Graft Except for Skin Ulcer or Cellulitis other previously used dermal for each MS–DRG, the applicant with MCC, with CC, or without CC/ regenerative grafts ($29.72/cm2) by the multiplied this percentage (150 percent) MCC, respectively); 622, 623, and 624 average amount of centimeters used for by the amount of square centimeters (Skin Grafts and Wound Debridement each case within the MS–DRG to used for the first application for each for Endocrine, Nutritional and determine the average cost of the other MS–DRG. The applicant then multiplied Metabolic Diseases with MCC, with CC previously used dermal regenerative the cost per square centimeter for or without CC/MCC, respectively); and grafts for each case within the MS–DRG. MIRODERM by the average amount of 904 and 905 (Skin Grafts for Injuries To convert the costs to charges, the centimeters used for each case within with CC/MCC or without CC/MCC, applicant computed an average CCR for the MS–DRG to determine the average respectively). As a result, the applicant each MS–DRG using CCRs from the FY cost of MIRODERM grafts used for each identified 1,130 cases across the MS– 2014 Standardizing File of the hospitals MS–DRG. Similar to above, to convert DRGs listed, which resulted in an indicated on each of the claims for each the costs to charges, the applicant used average case-weighted charge per case of case within the MS–DRG. The applicant the same average CCRs for each MS– $83,059. then divided the average cost of the DRG and divided the average cost of MIRODERM for each MS–DRG by the Included in the average case-weighted other previously used dermal regenerative grafts for each MS–DRG by average CCR for each MS–DRG to charge per case were charges for other determine the average charges of previously used dermal regenerative the average CCR for each MS–DRG to determine the average charges of the MIRODERM for each MS–DRG. The grafts. According to the applicant, the applicant then added charges related to MIRODERM would replace the need for other previously used dermal regenerative grafts for each MS–DRG. the use of MIRODERM to the inflated other dermal regenerative grafts and, average standardized charges and therefore, the applicant removed The applicant also reduced the charges for the number of days of determined a final inflated average charges related to the use of other standardized case-weighted charge per currently used dermal regenerative hospitalization by 30 percent because the applicant believed that MIRODERM case of $94,009. Using the FY 2016 IPPS grafts from the average case-weighted Table 10 thresholds, the average case- charge per case. Specifically, using the heals patients faster than the other currently used dermal regenerative weighted threshold amount was $67,559 January 2016 CMS Part B Drug Pricing (all calculations above were performed grafts, resulting in a reduction in the File, the applicant first computed an using unrounded numbers). Because the average lengths of stay. The applicant average cost per square centimeter for final inflated average standardized case- then deducted the charges related to the currently used dermal regenerative weighted charge per case exceeds the 2 other previously used dermal grafts (Apligraf $31.207/cm , Oasis average case-weighted threshold 2 2 regenerative grafts and the charges for $10.676/cm , Integra DRT $21.585/cm , amount, the applicant maintained that 2 the reduction in the average lengths of Dermagraft $32.858/cm , Integra skin the technology meets the cost criterion. substitute $35.627/cm2, Primatrix stay from the average case-weighted We are inviting public comments on $37.590/cm2, and Theraskin $38.474/ charge per case and then standardized whether the MIRODERM technology cm2), which equaled $29.72/cm2. To the charges, which resulted in an meets the cost criterion. determine the average amount of square average standardized case-weighted With regard to substantial clinical centimeters of the other dermal charge per case of $34,279. The improvement, the applicant believed regenerative grafts used for each case applicant then inflated the average that the technology represents a within the MS–DRG, given the vast standardized case-weighted charge per substantial clinical improvement over complexity and variation in wounds, case by 7.7 percent, the same inflation existing technologies because patients the applicant used clinical judgment factor used by CMS to update the FY treated with the MIRODERM for based on experience, observation and 2016 outlier threshold (80 FR 49784). complicated wounds heal quicker and typical sizes and depths of wounds that After inflating the charges it was avoid additional surgeries. To would present on different parts of the necessary to add the associated charges demonstrate that the technology meets body. For an example, wounds on the for the use of MIRODERM. The the substantial clinical improvement hand would typically be smaller than applicant conducted a similar criterion, the applicant submitted the those located on the lower extremities. calculation to compute the charges for results of two actual case studies of a The applicant also assumed that other MIRODERM. Specifically, the applicant complicated wound from necrotizing dermal regenerative grafts would require used clinical judgment based on fasciitis that was treated with the

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MIRODERM. According to the new technology add-on payments for FY Dabigatran reversal agent into central applicant, one case study involved a 2016, but failed to obtain FDA approval vein, percutaneous approach, New complicated wound that would prior to the July 1 deadline.) Dabigatran Technology Group 1). We are inviting typically be treated with a diverting is an oral direct thrombin inhibitor public comments on whether colostomy. The applicant noted that that currently indicated to: (1) Reduce the Idarucizumab meets the newness the patient was discharged with intact risk of stroke and systemic embolism in criterion. anoplasty and good sphincter control patients who have been diagnosed with With regard to the cost criterion, the after 35 days and four applications for nonvalvular atrial fibrillation (NVAF); applicant conducted two analyses. The MIRODERM. The applicant further (2) treat deep venous thrombosis (DVT) applicant began by researching claims stated that the use of MIRODERM and pulmonary embolism (PE) in data in the FY 2014 MedPAR file for demonstrated rapid healing and likely patients who have been administered a cases that may be eligible for avoided at least two major debilitating parenteral anticoagulant for 5 to 10 Idarucizumab using a combination of surgeries, as well as the emotional and days; and (3) reduce the risk of ICD–9–CM diagnosis and procedure physical impact of a colostomy for 3 to recurrence of DVT and PE in patients codes. Specifically, the applicant 6 months. In the second case study, who have been previously diagnosed searched the database for cases according to the applicant, the attending with NVAF. Currently, unlike the reporting anticoagulant therapy physician estimated the wound would anticoagulant Warfarin, there is no diagnosis code E934.2 (Agents primarily likely take greater than 90 days to close specific way to reverse the anticoagulant affecting blood constituents, using traditional wound care matrixes. effect of Dabigatran in the event of a anticoagulants) or V58.61 (Long-term The applicant stated that after 12 days major bleeding episode. (current) use of anticoagulants) in and two applications of MIRODERM the Idarucizumab is a humanized combination with either current patient was discharged and after 21 days fragment antigen binding (Fab) standard of care procedure code 99.03 the wound was sutured closed. molecule, which specifically binds to (Other transfusion of whole blood), The applicant noted that additional Dabigatran to deactivate the 99.04 (Transfusion of packed cells), patients have been treated with anticoagulant effect, thereby allowing 99.05 (Transfusion of platelets), 99.06 MIRODERM. According to the thrombin to act in blood clot formation. (Transfusion of coagulation factors), applicant, given the recent product The applicant stated that Idarucizumab 99.07 (Transfusion of other serum), or launch, the case studies have not been represents a new pharmacologic 39.95 (Hemodialysis), and Dabigatran completed, but similar results have been approach to neutralizing the specific indication diagnosis code 427.31 (Atrial communicated to the applicant. anticoagulant effect of Dabigatran in fibrillation), 453.40 (Acute venous We are concerned that the clinical emergency situations. Idarucizumab was embolism and thrombosis of data the applicant submitted is from a approved by the FDA on October 16, unspecified deep vessels of lower very small sample with no comparisons 2015. The applicant noted that extremity), 453.41 (Acute venous to other currently approved wound Idarucizumab is the only FDA-approved embolism and thrombosis of deep treatment matrixes. Specifically, the therapy available to neutralize the vessels of proximal lower extremity), applicant submitted data from only two anticoagulant effect of Dabigatran. 453.42 (Acute venous embolism and case studies. Also, the applicant Before the FDA approval of thrombosis of deep vessels of distal compared the use of MIRODERM to the Idarucizumab, the approach for the lower extremity), 453.50 (Chronic use of other treatments, such as management of the anticoagulant effect venous embolism and thrombosis of diverting colostomy. While MIRODERM of Dabigatran prior to an invasive unspecified deep vessels of lower may represent an improvement in procedure was to withhold extremity), 453.51 (Chronic venous treatment options compared to the other administration of Dabigatran, when embolism and thrombosis of deep treatment options such as diverting possible, for a certain duration of time vessels of proximal lower extremity), colostomy, we are unable to determine prior to the procedure to allow 453.52 (Chronic venous embolism and if use of MIRODERM represents a sufficient time for the patient’s kidneys thrombosis of deep vessels of distal substantial clinical improvement when to flush out the medication. The lower extremity), 415.11 (Iatrogenic compared to other wound treatment duration of time needed to flush out the pulmonary embolism and infarction), matrixes of other currently approved medication prior to the surgical 415.12 (Septic pulmonary embolism), treatments. We are inviting public procedure is based on the patient’s 415.13 (Saddle embolus of pulmonary comments on whether MIRODERM kidney function. According to the artery), 415.19 (Other pulmonary meets the substantial clinical applicant, if surgery cannot be delayed embolism and infarction), 416.2 improvement criterion. to allow the kidneys the necessary time (Chronic pulmonary embolism), V12.51 We did not receive any written public to flush out the traces of Dabigatran, (Personal history of venous thrombosis comments in response to the February there is an increased risk of bleeding. and embolism), or V12.55 (Personal 2016 New Technology Town Hall Based on the FDA indication for history of pulmonary embolism). meeting regarding this application for Idarucizumab, the product can be used To further target potential cases that new technology add-on payments. in the treatment of patients who have may be eligible for Idarucizumab, the been diagnosed with NVAF and applicant also excluded specific cases c. Idarucizumab administered Dabigatran to reverse life- based on Dabigatran contraindications, Boehringer Ingelheim threatening bleeding events, or who including all cases representing patients Pharmaceuticals, Inc. submitted an require emergency surgery or medical who have been diagnosed with chronic application for new technology add-on procedures and rapid reversal of the kidney disease (CKD) stage V (diagnosis payments for FY 2017 for Idarucizumab; anticoagulant effects of Dabigatran is code 585.5), end-stage renal disease a product developed as an antidote to necessary and desired. The applicant (diagnosis code 585.6), prosthetic heart reverse the effects of PRADAXA® received a unique ICD–10–PCS valves (diagnosis code V43.3), and cases (Dabigatran), which is also procedure code that became effective representing patients who have been manufactured by Boehringer Ingelheim October 1, 2015. The approved diagnosed with both CKD stage IV Pharmaceuticals, Inc. (We note that the procedure code is XW03331 (diagnosis code 585.4) and either DVT applicant submitted an application for (Introduction of Idarucizumab, or PE (using the same ICD–9–CM

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diagnosis codes listed above). As a DRGs is $63,323 (all calculations above percent, respectively). The use of PCCs, result, the applicant identified 84,224 were performed using unrounded recombinant factor VIIa and other cases that mapped to 684 MS–DRGs. numbers). Because the inflated average coagulation factor replacements in the The applicant standardized the charges case-weighted standardized charge per treatment of patients who were and computed an average case-weighted case exceeds the average case-weighted administered both Warfarin and 150 mg standardized charge per case of $60,089. threshold amount, the applicant of Dabigatran was minimal, and did not The applicant then identified hospital maintained that the technology also significantly differ in frequency when charges potentially associated with the meets the cost criterion under this compared among patients assigned to current treatments to reverse analysis. We are inviting public either group. Hemodialysis was used in anticoagulation, specifically charges comments regarding the applicant’s a single case. associated with pharmacy services, analyses with regard to the cost The applicant reported that, currently, dialysis services, and laboratory services criterion. it is recommended that the for blood work. Due to limitations With regard to substantial clinical administration of Dabigatran be associated with the claims data, the improvement, according to the discontinued 1 to 2 days (CrCl ≥50 ml/ applicant was unable to determine the applicant, aside from Idarucizumab, min) or 3 to 5 days (CrCl <50 ml/min), specific drugs used to reverse there are no other FDA-approved if possible, before invasive or surgical anticoagulation and if these cases antidotes to reverse the anticoagulant procedures because of the increased risk represented patients who required effects of Dabigatran. Management of the of bleeding.7 A longer period of laboratory services for blood work or treatment of patients who have been discontinuation time should be dialysis services unrelated to the diagnosed with NVAF and administered considered for patients undergoing reversal of anticoagulation. Therefore, Dabigatran and experience bleeding may major surgery, spinal puncture, or the applicant subtracted 40 percent of often include supportive care such as placement of a spinal or epidural the charges related to these three Hemodialysis and the use of fresh catheter or port, if complete hemostasis categories from the standardized charge frozen plasma, blood factor products is required. The applicant stated that per case, based on the estimation that such as prothrombin complex delaying emergency medical or surgical the full amount of charges associated concentrates (PCC), activated procedures can cause urgent conditions with these services would not be prothrombin complex concentrates, and to become more severe if intervention is incurred by hospitals when recombinant factor VIIa or delayed not initiated. The applicant further Idarucizumab is administered for use in intervention. Protamine sulfate and maintained that delaying emergency the treatment of patients who have been Vitamin K are typically used to reverse medical or surgical procedures for an diagnosed with NVAF and Dabigatran is the effects of Heparin and Warfarin, extended period of time can ultimately administered during treatment. The respectively. However, due to the lead to negative healthcare outcomes applicant then inflated the standardized mechanism of action in Dabigatran, the and increased healthcare costs. The charge per case by 7.665 percent, the applicant maintained that the use of applicant asserted that rapidly reversing same inflation factor used by CMS to protamine sulfate and Vitamin K may the anticoagulant effect of Dabigatran update the FY 2016 outlier threshold not be effective to reverse the administered to patients that require an (80 FR 49784) and added charges for anticoagulant effect of Dabigatran. urgent medical procedure or surgery Idarucizumab. This resulted in an The applicant provided information allows the medical procedure or surgery inflated average case-weighted regarding the management of major to be performed in a timely manner, standardized charge per case of $67,617. bleeding events experienced by patients which in turn may decrease Using the FY 2016 IPPS Table 10 who were administered Dabigatran and complications and minimize the need thresholds, the average case-weighted Warfarin during the RE–LY trial.6 for more costly therapies. threshold amount across all 684 MS– During this study, most major bleeding The applicant also provided interim DRGs is $55,586 (all calculations above events were only managed by data from an ongoing Phase III trial 89 in were performed using unrounded supportive care. Patients who were patients who may have life-threatening numbers). Because the inflated average administered 150 mg of Dabigatran were bleeding, or require emergency case-weighted standardized charge per transfused with pack red blood cells procedures. The applicant noted that case exceeds the average case-weighted more often when compared to patients published results of the interim data threshold amount, the applicant who were administered Warfarin (61.4 based on 90 patients suggested the maintained that the technology meets percent versus 49.9 percent, following: Reversal of the Dabigatran the cost criterion under this analysis. respectively). However, patients who anticoagulant effect, which was evident Further, the applicant conducted an were administered Warfarin were immediately after administration; additional analysis using the same data transfused with plasma more often reversal was 100 percent in the first 4 from the FY 2014 MedPAR file and when compared to patients who were hours and greater than 89 percent of variables used in the previous analysis. administered 150 mg of Dabigatran (30.2 patients achieved complete reversal; However, instead of using potentially percent versus 21.6 percent, hemostasis in 35 patients in Group A eligible cases that mapped to 100 respectively). In addition, the use of was restored at a median of 11.4 hours. percent of the 684 MS–DRGs identified, Vitamin K in the treatment of patients Also, the 5 gram dose of Idarucizumab the applicant used potentially eligible who were administered Warfarin was was calculated to reverse the total body cases that mapped to the top 75 percent more frequent when compared to the load of Dabigatran that was associated of the 684 MS–DRGs identified. By frequency of use in the treatment of applying this limitation, the applicant patients who were administered 150 mg 7 Pradaxa® (Dabigatran Etexilate Mesylate) identified 63,033 cases that mapped to of Dabigatran (27.3 percent versus 10.3 prescribing information. Ridgefield, CT: Boehringer 87 MS–DRGs. The applicant computed Ingelheim; 2014. an inflated average case-weighted 6 Healy, et al.: Periprocedural bleeding and 8 Pollack C, et al. Design and rationale for RE– standardized charge per case of $55,872. thromboembolic events with dabigatran compared VERSE AD: A phase 3 study of idarucizumab, a with Warfarin: results from the randomized specific reversal agent for dabigatran. Thromb Using the FY 2016 IPPS Table 10 evaluation of long-term anticoagulation therapy Haemost. 2015 Jul; 114(1):198–205. thresholds, the average case-weighted (RE–LY) randomized trial, Circulation, 2012; 9 Pollack C, et al. Idarucizumab for Dabigatran threshold amount across all 87 MS– 126:343–348. Reversal. N Engl J Med. 2015 Aug 6; 373(6):511–20.

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with the 99th percentile of the According to the applicant, the patients receiving treatment for Dabigatran levels measured in the RE– combination of surface topographies diagnoses associated with lumbar LY trial. enables initial implant fixation, mimics procedures that may be eligible for use The applicant provided safety data an osteoclastic pit for bone growth, and of the technology under the first from three Phase I studies and interim produces the nano-scale features that indication are not expected to be data from the Phase III study. In the interface with the integrins on the assigned to the same MS–DRGs as Phase I study, 110 healthy male patients outside of the cellular membrane. patients receiving treatment for enrolled in the study were administered Further, the applicant noted that these diagnoses associated with cervical dosages of Idarucizumab that ranged features generate better osteogenic and procedures using the technology under from 20 mg to 8 grams. In this study, angiogenic responses that enhance bone the second indication. Specifically, 135 patients received placebo. The growth, fusion, and stability. The cases representing patients who have applicant reported that adverse events applicant asserted that the Titan Spine been diagnosed with lumbar DDD and TM were generally mild in intensity and nanoLOCK ’s clinical features also received treatment that involved nonspecific. Healthy human volunteers reduce pain, improve recovery time, and implanting a lumbar device map to MS– enrolled in the Phase I study were produces lower rates of device DRGs 028 (Spinal Procedures with administered Idarucizumab in dosages complications such as debris and MCC), 029 (Spinal Procedures with CC of 2 and 4 grams, which resulted in inflammation. immediate and complete reversal of the On October 27, 2014, the Titan Spine or Spinal Neurostimulators), 030 (Spinal anticoagulant effect of Dabigatran that nanoLOCKTM received FDA approval for Procedures without CC/MCC), 453 was sustained for several hours. In the the use of five lumbar interbody devices (Combined Anterior/Posterior Spinal Phase III study, five thrombotic events and one cervical interbody device: The Fusion with MCC), 454 (Combined occurred. One occurred 2 days after nanoLOCKTM TA-Sterile Packaged Anterior/Posterior Spinal Fusion with treatment and the remainder occurred 7, Lumbar ALIF Interbody Fusion Device CC), 455 (Combined Anterior/Posterior 9, 13, and 26 days after treatment. These with nanoLOCKTM surface, available in Spinal Fusion without CC/MCC), 456 patients were not receiving multiple sizes to accommodate (Spinal Fusion Except Cervical with antithrombotic therapy when the events anatomy; the nanoLOCKTM TAS-Sterile Spinal Curvature or Malignancy or occurred, and complications or adverse Packaged Lumbar ALIF Stand Alone Infection or Extensive Fusions with effects can be attributed to patients’ Interbody Fusion Device with MCC), 457 (Spinal Fusion Except underlying medical conditions. Twenty- nanoLOCKTM surface, available in Cervical with Spinal Curvature or one patients (13 in Group A and 8 in multiple sizes to accommodate Malignancy or Infection or Extensive Group B) had a serious adverse event. anatomy; the nanoLOCKTM TL-Sterile Fusion without MCC), 458 (Spinal The most frequently reported adverse Packaged Lumbar Lateral Approach Fusion Except Cervical with Spinal reactions in greater than or equal to 5 Interbody Fusion Device with Curvature or Malignancy or Infection or percent of the patients treated with nanoLOCKTM surface, available in Extensive Fusions without CC/MCC), Idarucizumab were hypokalemia, multiple sizes to accommodate 459 (Spinal Fusion Except Cervical with delirium, constipation, pyrexia, and anatomy; the nanoLOCKTM TO-Sterile MCC), and 460 (Spinal Fusion Except pneumonia. The applicant concluded Packaged Lumbar Oblique/PLIF Cervical without MCC), while cases that the data from these studies Approach Interbody Fusion Device with representing patients who have been demonstrated that Idarucizumab nanoLOCKTM surface, available in diagnosed with cervical DDD and effectively, safely, and potently reverses multiple sizes to accommodate received treatment that involved the anticoagulant effect of Dabigatran. anatomy; the nanoLOCKTM TT-Sterile implanting a cervical interbody device We are inviting public comments on Packaged Lumbar TLIF Interbody map to MS–DRGs 471 (Cervical Spinal whether Idarucizumab meets the Fusion Device with nanoLOCKTM Fusion with MCC), 472 (Cervical Spinal substantial clinical improvement surface, available in multiple sizes to Fusion with CC), and 473 (Cervical criterion. accommodate anatomy and the Spinal Fusion without CC/MCC). We did not receive any written public nanoLOCKTM TC-Sterile Packaged Procedures involving the lumbar and comments in response to the February Cervical Interbody Fusion Device with cervical interbody devices are assigned 2016 New Technology Town Hall nanoLOCKTM surface, available in to separate MS–DRGs. Therefore, the meeting regarding this application for multiple sizes to accommodate devices categorized as lumbar devices new technology add-on payments. anatomy. The applicant received FDA and the devices categorized as cervical d. Titan Spine (Titan Spine approval on December 14, 2015, for the devices must distinctively (each nanoLOCKTM TCS-Sterile Package Endoskeleton® nanoLOCKTM Interbody category) meet the cost criterion and the Cervical Stand Alone Interbody Fusion substantial clinical improvement Device) TM Device with nanoLOCK surface, criterion in order to be eligible for new Titan Spine submitted an application available in multiple sizes to technology add-on payments beginning for new technology add-on payments for accommodate anatomy. Currently, there ® in FY 2017. We discuss application of the Titan Spine Endoskeleton are no ICD–10–PCS procedure codes nanoLOCKTM Interbody Device (the these criteria following discussion of the that uniquely describe procedures newness criterion. Titan Spine nanoLOCKTM) for FY 2017. involving use of the Titan Spine The Titan Spine nanoLOCKTM is a nanoLOCKTM surface technology. As discussed previously in this nanotechnology-based interbody We note that cases reporting section, if a technology meets all three medical device with a dual acid-etched procedures involving lumbar and of the substantial similarity criteria, it titanium interbody system used to treat cervical interbody devices map to would be considered substantially patients diagnosed with degenerative different MS–DRGs. As discussed in the similar to an existing technology and disc disease (DDD). One of the key Inpatient New Technology Add-On would not be considered ‘‘new’’ for the distinguishing features of the device is Payment Final Rule (66 FR 46915), two purposes of new technology add-on the surface manufacturing technique separate reviews and evaluations of the payments. We note that the substantial and materials, which produce macro, technologies are necessary in this similarity discussion is applicable to micro, and nano surface textures. instance because cases representing both the lumbar and the cervical devices

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because all of the devices use the Titan applicant, which compared angiogenic technology, their surfaces also are made Spine nanLOCKTM technology. factor production using PEEK-based of titanium. Therefore, we believe that With regard to the first criterion, versus titanium alloy surfaces, the Titan Spine nanoLOCKTM interbody whether a product uses the same or a osteogenic production levels were devices may be substantially similar to similar mechanism of action to achieve greater with the use of rough titanium currently available titanium interbody a therapeutic outcome, the applicant alloy surfaces than the levels produced devices. stated that, for both interbody devices using smooth titanium alloy surfaces. We are seeking public comments on (the lumbar and the cervical interbody The results of an additional study 11 whether the Titan Spine Endoskeleton® device), the Titan Spine nanoLOCKTM’s provided by the applicant examined nanoLOCKTM Interbody Devices are surface stimulates osteogenic cellular whether inflammatory substantially similar to existing response to assist in bone formation microenvironment generated by cells as technologies and whether these devices during fusion. During the manufacturing a result of use of titanium aluminum- meet the newness criterion. process, the surface produces macro, vanadium (Ti-alloy, TiAlV) surfaces is (1) Titan Spine Endoskeleton® micro, and nano-surface textures. The effected by surface microtexture, and nanoLOCKTM Interbody Device for applicant believed that this unique whether it differs from the effects Lumbar DDD combination and use of these surface generated by PEEK-based substrates. topographies represents a new approach As previously mentioned, the Titan The applicant noted that the use of TM to stimulating osteogenic cellular microtextured surfaces has Spine nanoLOCK received FDA response. The applicant asserted that demonstrated greater promotion of approval for the use of five lumbar the macro-scale textured features are osteoblast differentiation when interbody devices on October 27, 2014. important for initial implant fixation. To demonstrate that the Titan Spine compared to use of PEEK-based TM The micro-scale textured features mimic surfaces. nanoLOCK for Lumbar DDD technology meets the cost criterion, the an osteoclastic pit for supporting bone With regard to the second criterion, applicant researched claims data in the growth. The nano-scale textured whether a product is assigned to the FY 2014 MedPAR file for cases assigned features interface with the integrins on same or a different MS–DRG, cases that to MS–DRGs 028, 029, 030, 453, 454, the outside of the cellular membrane, may be eligible for treatment involving and 455 reporting any of the ICD–9–CM which generates the osteogenic and the Titan Spine nanoLOCKTM map to procedure codes within the code series angiogenic (mRNA) responses necessary the same MS–DRGs as other (lumbar 81.xx (Repair and plastic operations on to promote healthy bone growth and and cervical) interbody devices joint structures) or code series 084.6x fusion. The applicant provided the currently available to Medicare (Replacement of spinal disk), excluding results from in vitro studies, using beneficiaries and also are used for the human mesenchymal cells (MSCs), cases reporting the following ICD–9–CM treatment of patients who have been procedure codes describing cervical which showed positive effects on bone diagnosed with DDD (lumbar or growth related to cellular signaling fusion: 81.01 (Atlas-axis spinal fusion), cervical). 81.02 (Other cervical fusion, anterior achieved by using the device’s surface, With regard to the third criterion, and osteoblasts exhibited a more technique), 81.03 (Other cervical fusion, whether the new use of the technology posterior technique), 81.31 (Refusion of differentiated phenotype and increased involves the treatment of the same or bone morphogenetic protein (BMP) atlas-axis spine), 81.32 (Refusion of similar type of disease and the same or other cervical spine, anterior technique), production using titanium alloy similar patient population, the applicant substrates as opposed to poly-ether- or 81.33 (Refusion of other cervical stated that the Titan Spine nanoLOCKTM ether-ketone (PEEK) substrates. The spine, posterior technique). As a result, can be used in the treatment of patients applicant stated that Titan Spine’s the applicant found that all cases diagnosed with similar types of proprietary and unique surface potentially eligible for treatment using diseases, such as DDD, and for a similar technology, the Titan Spine the technology mapped to MS–DRGs patient population receiving treatment nanoLOCKTM interbody devices, contain 456, 457, 458, 459, and 460. However, involving both lumbar and cervical optimized nano-surface characteristics, the applicant focused its analyses on interbody devices. which generate the distinct cellular MS–DRGs 028 through 030, 453 through In summary, the applicant maintained responses necessary for improved bone 455, and 456 through 460 because these that the Titan Spine nanoLOCKTM growth, fusion, and stability. The are the MS–DRGs to which cases treated technology has a different mechanism of applicant further stated that the Titan with interbody fusion devices for action when compared to other spinal Spine nanoLOCKTM’s surface engages degenerative disc disease would most fusion devices. Therefore, the applicant with the strongest portion of the likely be assigned. The applicant did not believe that the Titan Spine endplate, which enables better applied CMS’ relative weight filtering nanoLOCKTM technology is resistance to subsidence because a process as described in the FY 2016 substantially similar to existing unique dual acid-etched titanium IPPS/LTCH PPS final rule (80 FR 49424) technologies. surface promotes earlier bone in-growth. to ensure the correct claim types were After reviewing the applicant’s The Titan Spine nanoLOCKTM’s surface used and the charge details across the statements regarding nonsubstantial is created by using a reductive process cost centers were appropriate. similarity of its technology with other of the titanium itself. The applicant According to the applicant, 78.03 existing technologies, we are still asserted that use of the Titan Spine percent of the 96,281 cases found in the concerned that there are other titanium nanoLOCKTM significantly reduces the FY 2014 MedPAR file mapped to MS– surfaced devices currently available on potential for debris generated during DRG 460, while the remaining 21.97 the U.S. market. While these devices do impaction when compared to treatments percent of cases mapped to MS–DRGs not use the Titan Spine nanoLOCKTM using PEEK-based implants coated with 028 through 030, 453 through 455, and 456 through 459. This resulted in an titanium. According to the results of an Angiogenic Factors. The Spine Journal, 2013, ep.13. 10 average case-weighted charge per case of in vitro study provided by the 1563–1570. 11 Olivares-Navrrete R, Hyzy s, Slosar P, et al. $127,082. The applicant then removed 10 Olivares-Navarrete R, Hyzy S, Gittens R. Implant Materials Generate Different Peri-implant $15,766 for associated charges for other Titanium Alloys Regulate Osteoblast Production of Inflammatory Factors. SPINE. 2015: 40:6:339–404. previously used spinal devices. The

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applicant determined the associated (2) Titan Spine Endoskeleton® standardized case-weighted charge per charges to be removed for other nanoLOCKTM Interbody Device for case of $114,472. Using the FY 2016 previously used devices based on Cervical DDD IPPS Table 10 thresholds, the average current Titan Spine sales data for the As previously mentioned, Titan Spine case-weighted threshold amount was TM Titan Spine nanolock for Lumbar received FDA approval for the use of the $79,827 (all calculations above were DDD various sizes. The applicant nanoLOCKTM TC-Sterile Packaged performed using unrounded numbers). computed the associated charges by Cervical Interbody Fusion Device with Because the final inflated average multiplying the weighted sales mix by nanoLOCKTM surface on October 27, standardized case-weighted charge per the average sales price for each product 2014, and the nanoLOCKTM TCS-Sterile case exceeds the average case-weighted in the Titan Spine nanoLOCKTM for Package Cervical Interbody Fusion threshold amount, the applicant Lumbar DDD product line. After the Device with nanoLOCKTM surface on maintained that the technology meets charges for other previously used December 14, 2015. To demonstrate that the cost criterion. We are inviting public comments on technologies were removed, the the Titan Spine nanoLOCKTM for whether the Titan Spine nanoLOCKTM applicant standardized the charges for Cervical DDD meets the cost criterion, for Cervical DDD meets the cost all cases using the FY 2014 the applicant researched claims data in standardizing file posted on the CMS criterion. the FY 2014 MedPAR file for cases With regard to the substantial clinical Web site. The applicant excluded all assigned to MS–DRGs 028, 029, 030, cases without standardized charges, improvement criterion for the Titan 453, 454, and 455 reporting any of the ® TM resulting in a total of 96,281 cases. The Spine Endoskeleton nanoLOCK following ICD–9–CM cervical fusion Interbody Device for Lumbar and applicant then inflated the average procedure codes: 81.01, 81.02, 81.03, standardized case-weighted charges Cervical DDD, the applicant asserted 81.32, 81.33. The applicant found that TM from 2014 to 2016 by applying a 2-year that the Titan Spine nanoLOCK all of the cases mapped to MS–DRGs substantially improves the treatment of rate of inflation factor of 7.7 percent, 471, 472, and 473. However, the which is the same inflation factor used Medicare beneficiaries who have been applicant focused its analysis on MS– diagnosed with and receive treatment by CMS to update the FY 2016 outlier DRGs 028 through 030, 453 through 455, threshold (80 FR 49784). for serious spinal pathologies, such as and 471 through 473 because these are DDD, compared to the currently To calculate the appropriate charges the MS–DRGs to which cases treated available technologies and treatment for the Titan Spine nanoLOCKTM for with the implantation of cervical spinal options, especially in terms of improved Lumbar DDD, the applicant used a case- devices for degenerative disc disease fusion, decreased pain, greater stability, weighted charge because the devices would most likely be assigned. Similar faster recovery times, and lower rates of implanted are produced and made to the sensitivity analysis submitted for interbody device related complications, available in different sizes. To calculate the Titan Spine nanoLOCKTM for such as debris and inflammation. the case-weighted charge for different Lumbar DDD, the applicant applied The applicant noted that the cellular lumbar device sizes, the applicant CMS’ relative weight filtering process as process that occurs after implantation of determined the average cost to the described in the FY 2016 IPPS/LTCH the Titan Spine nanoLOCKTM induces hospital per device and divided that PPS final rule (80 FR 49424) to ensure the body to produce and regulate its amount by the national average CCR for the correct claim types were used and own bone morphogenetic proteins implantable devices (0.337) published the charge details across the cost centers (BMP), which help stimulate bone in the FY 2016 IPPS/LTCH PPS final were appropriate. growth naturally in the human body. rule (80 FR 49429). Based on sales data, According to the applicant, 59.47 According to the applicant, this result the applicant then applied a factor of 1.5 percent of the 48,187 cases mapped to supports new bone growth without per patient to the case-weighted charge MS–DRG 473 and 25.65 percent of the requiring use of exogenous BMP. The by dividing the total number of products cases mapped to MS–DRG 472, while applicant explained that exogenous sold in the United States by the total the remaining 14.88 percent of the cases rhBMPs trigger a significant cytokine invoices generated; with one invoice mapped to MS–DRGs 028 through 030, related anti-inflammatory reaction that being the equivalent to one patient and 453 through 455, and 471. This resulted has resulted in adverse side effects. The a single surgery. The applicant then in an average case-weighted charge per applicant stated that the Titan Spine added the device-related charges to the case of $83,841. Using the same nanoLOCKTM’s proprietary surface and inflated average standardized charge per methodology described above, the use promotes endogenous production of case, which resulted in an inflated applicant removed $4,423 for associated osteogenic growth factors, such as BMP– average standardized case-weighted charges for other previously used 2, BMP–4, BMP–7, and TGF–b1.2, charge per case of $167,197. Using the technologies from the average case- which produce only the physiologic FY 2016 IPPS Table 10 thresholds, the weighted charge per case using current amounts necessary for bone production average case-weighted threshold amount Titan Spine sales data for cervical without the concomitant cytokine was $112,825 (all calculations above device sizes and then standardized the related to anti-inflammatory reaction. were performed using unrounded charges. The applicant then inflated the The applicant also stated that the numbers). Because the final inflated average standardized case-weighted unique surface of the TitanSpine average standardized case-weighted charges from 2014 to 2016 by applying nanoLOCKTM differentiates the charge per case exceeds the average the same 2-year rate of inflation factor technology from existing interbody case-weighted threshold amount, the used above (7.7 percent). Similar to the devices, which use materials such as applicant maintained that the methodology described above, the PEEK-based or ceramic surfaces. The technology meets the cost criterion. applicant calculated $36,023 for applicant explained that these materials We are inviting public comments on associated device related charges for the cause stem cells to flatten on the surface whether the Titan Spine nanoLOCKTM Titan Spine nanoLOCKTM for Cervical of the implant and primarily for Lumbar DDD meets the cost DDD and added this amount to the differentiate into fibroblasts (fiber- criterion, particularly with regard to the inflated average standardized case- producing cells). This result is avoided assumptions and methodology used in weighted charge per case, which by using the Titan Spine nanoLOCKTM the applicant’s analyses. resulted in a final inflated average because the nano-textured surface

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promotes differentiation of osteoblasts e. Andexanet Alfa considered ‘‘new’’ for purposes of new (bone-forming cells), which increases technology add-on payments. bone production around the implant site Portola Pharmaceuticals, Inc. (Portola) The applicant believed that, if and increases the potential for a faster submitted an application for new approved, Andexanet Alfa would be the and more robust fusion. The applicant technology add-on payments for FY first and only antidote available used to further stated that use of titanium and 2017 for use of Andexanet Alfa, an treat patients receiving treatment with titanium alloy surfaces with rough antidote used to treat patients who are an oral Factor Xa inhibitor who suffer a microtopography demonstrate greater receiving treatment with an oral Factor major bleeding episode and require bone apposition, but use of Xa inhibitor who suffer a major bleeding urgent reversal of direct and indirect macrotextured titanium and titanium episode and require urgent reversal of Factor Xa anticoagulation. Therefore, alloy surfaces, such as the Titan Spine direct and indirect Factor Xa the applicant asserted that the nanoLOCKTM, promotes osteoblast anticoagulation. Patients at high risk for technology is not substantially similar thrombosis, including those who have differentiation and productions of to any other currently approved and been diagnosed with atrial fibrillation factors that favor bone formation, available treatment options for Medicare (AF) and venous thrombosis (VTE), whereas PEEK-based surfaces do not. beneficiaries. typically receive treatment using long- With regard to the first criterion, As previously noted, the applicant term oral anticoagulation agents, such as whether a product uses the same or a provided results from in vitro studies, Warfarin. Factor Xa inhibitors are similar mechanism of action to achieve using human MSCs, which showed included in a new class of a therapeutic outcome, Andexanet Alfa, positive effects on bone growth related anticoagulants. Factor Xa inhibitors are if approved, would be the first reversal to cellular signaling achieved from use oral anticoagulants used to prevent agent that binds to direct Factor Xa of the device’s surface, and osteoblasts stroke and systemic embolism in inhibitors with high affinity, exhibited a more differentiated patients who have been diagnosed with sequestering the inhibitors, and phenotype and increased bone AF. These oral anticoagulants are also consequently rapidly reducing free morphogenetic protein BMP production used to treat patients diagnosed with plasma concentration of Factor Xa using titanium alloy substrates as deep-vein thrombosis (DVT) and its inhibitors and neutralizing the opposed to PEEK-based substrates. The complications, pulmonary embolism inhibitors’ anticoagulant effect, which applicant believed that the Titan Spine (PE), and patients who have undergone allows for the restoration of normal nanoLOCKTM substantially improves the knee, hip, or abdominal surgery. hemostasis. Andexanet Alfa also binds treatment of Medicare beneficiaries Rivarobaxan (Xarelto®), apixaban to and sequesters antithrombin III diagnosed with and receiving treatment (Eliqis®), and edoxaban (Savaysa®) also molecules that are complexed with for serious spinal pathologies, such as are included in the new class of Factor indirect inhibitor molecules, disrupting DDD, compared to currently available Xa inhibitors, and are often referred to the capacity of the antithrombin technologies and treatment options for as ‘‘novel oral anticoagulants’’ (NOACs) complex to bind to native Factor Xa Medicare beneficiaries, especially in or ‘‘non-vitamin K antagonist oral inhibitors. According to the applicant, terms of improved fusion, decreased anticoagulants.’’ Although these Andexanet Alfa represents a significant pain, greater stability, faster recovery anticoagulants have been commercially therapeutic advance by providing rapid times, and lower rates of interbody available since 2010, there is no FDA- reversal of anticoagulation therapy in device related complications, such as approved therapy used for the urgent the event of a serious bleeding episode. debris and inflammation. reversal of any Factor Xa inhibitor as a Other reversal agents, such as KcentraTM We are concerned that the results of result of serious bleeding episodes. and Idarucizumab, do not reverse the the in vitro studies may not necessarily effects of Factor Xa inhibitors. Andexanet Alfa has not received FDA With regard to the second criterion, correlate with the clinical results approval at the time of the development whether a product is assigned to the specified by the applicant. Specifically, of this proposed rule. The applicant same or a different MS–DRG, Andexanet because the applicant has only anticipates receiving FDA approval for Alfa would be the first FDA approved conducted in vitro studies without use of the technology in approximately reversal agent for Factor Xa inhibitors. obtaining any clinical data from live June of 2016. Currently, there are no Therefore, the MS–DRGs do not contain subjects during a specific clinical trial, ICD–10–PCS procedure codes that cases representing patients that have we are unable to substantiate the uniquely identify the use of and been treated with any reversal agents for clinical results that the applicant administration of Andexanet Alfa. We Factor Xa inhibitors. believed the technology achieved from a note that the applicant submitted a With regard to the third criterion, clinical standpoint based on the results request for unique ICD–10–PCS whether the new use of the technology of the studies provided. As a result, we procedure codes that was presented at involves the treatment of the same or are concerned that the results of the the March 2016 ICD–10 Coordination similar type of disease and the same or studies provided by the applicant do not and Maintenance Committee meeting. If similar patient population, Andexanet demonstrate that the Titan Spine approved, the procedure codes would Alfa, if approved, would be the only TM nanoLOCK technologies meet the become effective on October 1, 2016 (FY reversal agent available for treating substantial clinical improvement 2017). More information on this request patients receiving direct or indirect criterion. We are inviting public can be found on the CMS Web site Factor Xa therapy who experience comments on whether the Titan Spine located at: http://www.cms.gov/ serious, uncontrolled bleeding events or TM nanoLOCK technologies meet the Medicare/Coding/ICD10Provider who require emergency surgery. substantial clinical improvement DiagnosticCodes/ICD-10-CM-C-and-M- Therefore, Andexanet Alfa would be the criterion. Meeting-Materials.html. first type of treatment option available We did not receive any written public As discussed earlier, if a technology to this patient population, As a result, comments in response to the February meets all three of the substantial it appears that Andexanet Alfa is not 2016 New Technology Town Hall similarity criteria, it would be substantially similar to any existing meeting regarding this application for considered substantially similar to an technologies. We are inviting public new technology add-on payments. existing technology and would not be comments on whether Andexanet Alfa

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meets the substantial similarity criteria three sets of ICD–9–CM codes to identifying cases of patients who and whether Andexanet Alfa meets the identify these cases: (1) Codes experienced bleeding episodes as the newness criterion. identifying cases of patients who were reason for the current admission. The With regard to the cost criterion, the treated with an anticoagulant and, applicant included with its application applicant researched the FY 2014 therefore, are at risk of bleeding; (2) the following table displaying a MedPAR claims data file for cases that Codes identifying cases of patients with complete list of ICD–9–CM codes that may be eligible for treatment using a history of conditions that were treated met its selection criteria: Andexanet Alfa. The applicant used with Factor Xa inhibitors; and (3) codes

ICD–9–CM codes applicable Applicable ICD–9–CM code description

V12.50 ...... Personal history of unspecified circulatory disease. V12.51 ...... Personal history of venous thrombosis and embolism. V12.52 ...... Personal history of thrombophlebitis. V12.54 ...... Personal history of transient ischemic attack (TIA), and cerebral infarction without residual deficits. V12.55 ...... Personal history of pulmonary embolism. V12.59 ...... Personal history of other diseases of circulatory system. V43.64 ...... Hip joint replacement. V43.65 ...... Knee joint replacement. V58.43 ...... Aftercare following surgery for injury and trauma. V58.49 ...... Other specified aftercare following surgery. V58.73 ...... Aftercare following surgery of the circulatory system, NEC. V58.75 ...... Aftercare following surgery of the teeth, oral cavity and digestive system, NEC. V58.61 ...... Long-term (current) use of anticoagulants. E934.2 ...... Anticoagulants causing adverse effects in therapeutic use. 99.00 ...... Perioperative autologous transfusion of whole blood or blood components. 99.01 ...... Exchange transfusion. 99.02 ...... Transfusion of previously collected autologous blood. 99.03 ...... Other transfusion of whole blood. 99.04 ...... Transfusion of packed cells. 99.05 ...... Transfusion of platelets. 99.06 ...... Transfusion of coagulation factors. 99.07 ...... Transfusion of other serum.

The applicant identified a total of administration because all of the eligible for treatment using Andexanet 54,200 cases that mapped to 680 MS– charges cannot be attributed to Factor Alfa would exceed the average case- DRGs, resulting in an average case- Xa reversal. The applicant maintained weighted threshold amounts in Table 10 weighted charge per case of $67,197. that the amounts of blood and blood of the FY 2016 IPPS/LTCH PPS final The applicant also provided an analysis products required for treatment vary rule by approximately $3,247 to $7,844, limited to 80 percent of all cases (47,273 according to the severity of the bleeding. depending on the results determined by cases), which mapped to the top 147 Therefore, the use of Andexanet Alfa using the combination of variables of MS–DRGs. Under this analysis, the may replace 60 percent of blood and the two areas of uncertainty and the average case-weighted charge per case blood product administration charges number of MS–DRGs analyzed. was $64,095. Under each of these two for cases with less severity of bleeding, The applicant’s order of operations analyses, the applicant also provided but only 40 percent of charges for cases used for each analysis follows: (1) sensitivity analyses based on variables with more severe bleeding. Removing 60 percent or 40 percent of representing two areas of uncertainty: • The applicant maintained that blood and blood administration charges (1) Whether to remove 40 percent or 60 FEIBA is the highest priced clotting and up to 100 percent of pharmacy percent of blood and blood factor used for Factor Xa inhibitor charges for PI5 or FEIBA from the administration charges; and (2) whether reversal, and it is unlikely that average unstandardized case-weighted to remove pharmacy charges based on pharmacy charges for Factor Xa reversal charge per case; (2) standardizing the the ceiling price of factor eight inhibitor would exceed the FEIBA ceiling price of charges per cases using the Impact File bypass activity (FEIBA), a branded anti- $10,570. Therefore, the applicant published with the FY 2014 IPPS/LTCH inhibitor coagulant complex, or on the capped the charges to be removed at PPS final rule. After removing the pharmacy indicator 5 (PI5) in the $10,570, which in many cases removed charges for the prior technology and MedPAR data file, which correlates to 100 percent of the pharmacy charges. standardizing charges, the applicant cases utilizing generic coagulation The applicant also considered an applied an inflation factor of 1.076647, factors. Overall, the applicant alternative scenario in which charges which is the 2-year inflation factor in conducted eight sensitivity analyses, associated with pharmacy indicator 5 the FY 2016 IPPS/LTCH final rule (80 and provided the following rationales: (PI5) were removed from the costs of FR 49784) to update the charges from • The applicant chose to remove 40 cases that included this indicator in the FY 2014 to FY 2016. The applicant percent and 60 percent of blood and MedPAR data. On average, charges noted that it did not add charges for blood administration charges because removed from the costs of cases Andexanet Alfa and related services. patients who require Andexanet Alfa for utilizing generic coagulation factors Under each scenario, the applicant Factor Xa reversal may still require were much lower than the total stated that the inflated average blood and blood products to treat other pharmacy charges. standardized case-weighted charge per conditions. Therefore, it would be The applicant noted that, in all eight case exceeded the average case- inappropriate to remove all of the scenarios, the average standardized weighted threshold (based on the FY charges associated with blood and blood case-weighted charge per case for cases 2016 IPPS Table 10 thresholds). Below

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we provide a table for all eight scenarios that the technology meets the cost that the applicant indicated demonstrate criterion.

Inflated average Average standardized case-weighted Scenario case-weighted threshold charge per amount case

100 Percent of Cases, FEIBA, 60 Percent Removal of Blood and Blood Administration Costs ...... $60,231 $55,799 100 Percent of Cases, PI5, 60 Percent Removal of Blood and Blood Administration Costs ...... 63,643 55,799 100 Percent of Cases, FEIBA, 40 Percent Removal of Blood and Blood Administration Costs ...... 61,651 55,799 100 Percent of Cases, PI5, 40 Percent Removal of Blood and Blood Administration Costs ...... 64,203 55,799 80 Percent of Cases, FEIBA, 60 Percent Removal of Blood and Blood Administration Costs ...... 57,686 54,413 80 Percent of Cases, PI5, 60 Percent Removal of Blood and Blood Administration Costs ...... 60,994 54,413 80 Percent of Cases, FEIBA, 40 Percent Removal of Blood and Blood Administration Costs ...... 59,096 54,413 80 Percent of Cases, PI5, 40 Percent Removal of Blood and Blood Administration Costs ...... 61,558 54,413

The applicant noted that 25 percent of thrombogenic, as no serious adverse anticoagulant treatment are blood the total volume of cases map to the effects of thrombosis were observed in transfusions, most frequently with following 10 MS–DRGs: MS–DRG 378 clinical trials; and could supplant packed red blood cells or fresh frozen (Gastrointestinal Hemorrhage with CC), current treatments for bleeding from plasma; and Vitamin K therapy was 7.56 percent of all cases; MS–DRG 812 anti-Factor Xa treatment, which have used only in 1 percent of Medicare (Red Blood Cell Disorders without not been shown to be effective in the beneficiaries who were receiving MCC), 3.13 percent of all cases; MS– treatment of all patients. treatment with the indirect Factor Xa DRG 377 (Gastrointestinal Hemorrhage With regard to addressing an unmet inhibitor enoxaparin. with MCC), 2.68 percent of all cases; need for a universal antidote to direct The applicant asserted that laboratory MS–DRG 470 (Major Joint Replacement and indirect Factor Xa inhibitors, the studies have failed to provide consistent or Reattachment of Lower Extremity applicant asserted that the use of any evidence of ‘‘reversal’’ of the without MCC), 2.32 percent of all cases); anticoagulant is associated with an anticoagulant effect of Factor Xa MS–DRG 871 (Septicemia or Severe increased risk of bleeding, and bleeding inhibitors across a range of different Sepsis without Mechanical Ventilation complications can be life-threatening. PCC products and concentrations. >96 hours with MCC), 2.26 percent of Bleeding is especially concerning in Results of thrombin generation assays all cases; MS–DRG 481 (Hip & Femur patients treated with Factor Xa have varied depending on the format of Procedures, Except Major Joint with inhibitors because there are currently no the assay. Despite years of experience CC), 2.08 percent of all cases; MS–DRG antidotes to Factor Xa inhibitors with low molecular weight heparins and 811 (Red Blood Cell Disorders with available. The applicant stated that pentasaccharide anticoagulants, neither MCC), 1.70 percent of all cases; MS– Andexanet Alfa has a unique PCCs nor factor eight inhibitor DRG 291 (Heart Failure and Shock with mechanism of action and represents a bypassing activity are recognized as safe MCC), 1.22 percent of all cases; MS– new biological approach to the and effective reversal agents for these DRG 379 (Gastro intestinal Hemorrhage treatment of patients who have been Factor Xa inhibitors. Unlike patients without CC/MCC), 1.12 percent of all diagnosed with acute severe bleeding taking Vitamin K antagonists, patients cases; and MS–DRG 683 (Renal Failure who require immediate reversal of the receiving treatment with oral Factor Xa with CC), 1.06 percent of all cases. We Factor Xa inhibitor therapy. The inhibitor drugs have normal levels of are concerned that the applicant did not applicant explained that although clotting factors. Therefore, a strategy include sensitivity analyses for this Andexanet Alfa is structurally very based on ‘‘repleting’’ factor levels is of subset of cases. similar to native Factor Xa inhibitors, it uncertain foundation and could result We are inviting public comments on has undergone several modifications in supra-normal levels of coagulation whether Andexanet Alfa meets the cost that restrict its biological activity to factors after rapid metabolism and criterion, including with regard to the reversing the effects of Factor Xa clearance of the oral anticoagulant. concern we have raised. inhibitors by binding with and The applicant provided results from With regard to the substantial clinical sequestering direct or indirect Factor Xa two Phase III studies 12 13 in which older improvement criterion, the applicant inhibitors, which allows native Factor healthy volunteers pretreated with asserted that Andexanet Alfa represents Xa inhibitors to dictate the normal direct or indirect Factor Xa inhibitors a substantial clinical improvement for coagulation and hemostasis process. As (apixaban, edoxaban, rivaroxaban, and the treatment of patients receiving direct a result, the applicant maintained that enoxaparin) demonstrated the or indirect Factor Xa therapy who Andexanet Alfa represents a safe and following: Rapid and sustainable experience serious, uncontrolled effective therapy for the management of reversal of anticoagulation; reduced bleeding events or who require bleeding in a fragile patient population Factor Xa inhibitor free plasma levels by emergency surgery because it addresses and a substantial clinical improvement at least 80 percent below a calculated an unmet medical need for a universal over existing technologies and reversal no-effect level; and reduced anti-Factor antidote to direct and indirect Factor Xa strategies. Xa activity to the lowest level of inhibitors; if approved, would be the The applicant noted the following: On detection within 2 to 5 minutes of only agent shown in prospective clinical average, patients with a bleeding trials to rapidly (within 2–5 minutes) complication were hospitalized for 6.3 12 Conners, J.M. Antidote for Factor Xa Anticoagulants. N Engl J Med. 2015 Nov 13. and sustainably reverse the to 7.4 days; the most common therapies 13 Siegal DM, Curnutte JT, Connolly SJ, et al. anticoagulation activity of Factor Xa currently used to manage bleeding Andexanet Alfa for the Reversal of Factor Xa inhibitors; is potentially non- events in patients undergoing Inhibitor Activity. N Engl J Med. 2015 Nov 11.

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infusion. The applicant noted that applicant noted that the case reports restrictions. The commenter believed decreased Factor Xa inhibitor levels provide a snapshot of emergent that a significant disadvantage of Factor have been shown to correspond to treatment of these often medically Xa inhibitors is the lack of an effective decreased bleeding complications, complex anti-Factor Xa-treated patients strategy to rapidly reverse the reconstitution of activity of coagulation with major bleeds. However, the anticoagulant effects in patients factors, and correction of coagulation. applicant stated that these analyses requiring emergency surgery or The applicant stated that the results reveal the inconsistent approach in presenting with an emergent bleed. from the two Phase III studies and assessing the degree of anticoagulation There is currently no agent indicated or previous proof-of-concept Phase II dose- in the patient and the variability in proven to be effective for the treatment finding studies 2 showed that use of treatment strategy. The applicant of patients with Factor Xa inhibitor Andexanet Alfa can rapidly reverse explained that little or no assessment of related bleeding. The commenter anticoagulation activity of Factor Xa efficacy in restoring coagulation in the believed that Andexanet Alfa would inhibitors and sustain that reversal. patients was performed, and the major provide clinicians and their patients the Therefore, the applicant asserted that outcomes measures were bleeding ability to restore homeostasis in critical Andexanet Alfa has the potential to cessation or mortality. The applicant emergency settings for the broad range successfully treat patients who only concluded that overall, there is very of bleeds experienced by patients need short-duration reversal of the little evidence for the efficacy suggested receiving treatment using Factor Xa Factor Xa inhibitor anticoagulant, as in some guidelines, and the evidence is inhibitors. The commenter compared well as patients who require longer- insufficient to draw any conclusions. Andexanet Alfa to KcentraTM and duration reversal, such as patients We are inviting public comments on FEIBA, and noted that both work experiencing a severe intracranial whether Andexanet Alfa meets the upstream in the coagulation cascade and hemorrhage or requiring emergency substantial clinical improvement thus cannot overcome the effects of the surgery. Furthermore, the applicant criterion. Factor Xa inhibitors. The commenter noted that its technology’s duration of Below is a summary of the written further stated that human plasma- action allows for a gradual return of comments we received on the derived clotting factors were not Factor Xa inhibitor concentrations to Andexanet Alfa application in response designed to reverse Factor Xa inhibitors. placebo control levels within 2 hours to the February 2016 New Technology The commenter also believed that it is following the end of infusion. Town Hall meeting and our response: well recognized among clinicians that With regard to Andexanet Alfa’s non- Comment: Two commenters there is a critical need for a reversal thrombogenic nature, as no serious supported the approval of new agent for the new oral anticoagulants adverse effects of thrombosis were technology add-on payments for (NOAC) that will rapidly restore normal observed in clinical trials, the applicant Andexanet Alfa. According to the coagulation, and stated that Andexanet provided clinical trial data which commenters, Andexanet Alfa is a Alfa represents a significant clinical revealed participants in Phase II and significant clinical improvement over improvement over existing therapies Phase III trials had no thrombotic events existing therapies used to reverse major that should be approved for the new and there were no serious or severe bleeding in patients receiving treatment technology add-on payments. adverse events reported. Results also using Factor Xa inhibitors. One Another commenter also believed that showed that use of Andexanet Alfa has commenter stated that Andexanet Alfa Andexanet Alfa represents a significant a much lower risk of thrombosis than would be the first and only antidote to clinical improvement over existing typical procoagulants because it lacks treat patients receiving an oral Factor Xa therapies. The commenter stated that, in the region responsible for inducing inhibitor who have suffered a major the dire moment that a patient presents coagulation. Furthermore, the applicant bleeding episode and require urgent a critical care team with a life- asserted that Andexanet Alfa is not reversal of Factor Xa anticoagulation. threatening bleed, reversing coagulation associated with the known Based on professional experience as a immediately provides the foundation for complications seen with red blood cell first line clinician charged with stabilizing the patient, which is needed transfusions. stabilizing and treating patients with to prevent further morbidity and The applicant asserted that, while the bleeding events or trauma such as mortality. The commenter also noted Phase II and Phase III trials and studies assaults and motor vehicle accidents, KcentraTM’s and FEIBA’s inability to measured physiological hallmarks of the commenter stated that patients on affect Factor Xa inhibitors because they reversal of NOACs, it is expected that anticoagulation therapy present a act on upstream coagulation cascade the availability of a safe and reliable difficult scenario and they often have factors. The commenter further believed Factor Xa reversal will result in an comorbidities, which complicate the that Andexanet Alfa’s mechanism of overall better prognosis for patients— effectiveness of medical care and put action is different from the mechanism potentially leading to a reduction in them at risk for complications. The of action of existing treatments. length of hospital stay, fewer commenter stated that major bleeding is Response: We appreciate the complications, and decreased mortality observed in approximately five percent commenters’ input. We will take these associated with unexpected bleeding of patients receiving treatment using comments into consideration when episodes. Factor Xa inhibitors, but only a small deciding whether to approve new The applicant also stated that use of subset of those patients require urgent technology add-on payments for Andexanet Alfa can supplant currently reversal of anti-Factor Xa activity. The Andexanet Alfa for FY 2017. available treatments used for reversing commenter believed that, in spite of oral ® bleeding from anti-Factor Xa treatments, Factor Xa inhibitor’s short half-life (7 to f. Defitelio (Defibrotide) which have not been shown to be 9 hours) and similar or even lower Jazz Pharmaceuticals submitted an effective in the treatment of all patients. bleeding rates than with warfarin or low application for new technology add-on With regard to PCCs, NOACs, and FFP, molecular weight heparin, the lack of a payments for FY 2017 for Defibrotide the applicant stated that there is a lack targeted antidote that is safe for Factor (Defitelio®), a treatment for patients of clinical evidence available for Xa inhibitors is believed to limit these diagnosed with hepatic veno-occlusive patients taking Factor Xa inhibitors that anticoagulants, which do not have a disease (VOD) with evidence of multi- experience bleeding events. The monitoring requirement, nor any dietary organ dysfunction. VOD is a potentially

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life-threatening complication resulting ICD10ProviderDiagnosticCodes/ICD-10- treatments for VOD other than from hematopoietic stem cell CM-C-and-M-Meeting-Materials.html. supportive care, such as dialysis or transplantation (HSCT), with an As discussed earlier, if a technology ventilation. In addition, the applicant incidence rate of 8 percent to 15 percent meets all three of the criteria for stated that poor outcomes have been of patients experiencing its effects after substantial similarity, it would be reported for patients treated with HSCT. Diagnoses of VOD range in considered substantially similar to an nonapproved pharmacological severity from what has been classically existing technology and would not be treatments for VOD. These treatments defined as a disease limited to the liver considered ‘‘new’’ for purposes of new have largely been discontinued because (mild) and reversible, to a severe technology add-on payments. of the high incidence of hemorrhagic syndrome associated with multi-organ With regard to the first criterion, complications, particularly among dysfunction or failure and death. whether the product uses the same or patients diagnosed with multi-organ Patients treated with HSCT who similar mechanism of action to achieve failure. According to the applicant, a therapeutic outcome, the applicant ® develop VOD with evidence of multi- ® Defitelio would be the first and only organ dysfunction face an immediate maintained that Defitelio has a unique FDA-approved treatment for VOD with risk of death, with a mortality rate of mechanism of action that is not shared evidence of multi-organ failure. more than 80 percent when only by any other drug on the market used However, we are concerned that the supportive care is used. to treat patients diagnosed with VOD applicant did not include in its with evidence of multi-organ failure. application data comparing the VOD is believed to be the result of According to the applicant, there are no endothelial cell damage and outcomes of patients treated with FDA-approved treatments for VOD other Defitelio® to outcomes of patients hepatocellular injury from high-dose than supportive care. Anticoagulants conditioning regimens administered treated only for supportive care. We are such as heparin, antithrombin, and concerned that Defitelio® may not prior to receiving treatment with HSCT. tissue plasminogen factor have been ® produce outcomes that are significantly Preclinical data suggest that Defitelio used to treat patients diagnosed with different than the outcomes of patients stabilizes endothelial cells by reducing VOD, but there is a lack of conclusive treated with supportive care. endothelial cell activation and by evidence that these treatments are protecting endothelial cells from further effective and they also present a high We are inviting public comments on ® ® damage. Defitelio is administered as a risk of bleeding. The applicant whether Defitelio is substantially 2-hour intravenous infusion every 6 maintained that Defitelio® addresses the similar to existing technologies and hours. The recommended dosage is 6.25 underlying pathology of VOD with whether it meets the newness criterion. mg/kg body weight (25mg/kg/day). evidence of multi-organ failure and its ® With regard to the cost criterion, the Defitelio should be administered for a use is effective as a treatment for this applicant conducted sensitivity analyses minimum of 21 days. If after 21 days the form of the disease. According to the using claims data from 2012 through signs and symptoms associated with applicant, it is speculated that the 2014 and determined the results in hepatic VOD are not resolved, the mechanism of action of the Defitelio® ® aggregate and by year. The applicant administration of Defitelio should be revolves around the stabilization of researched 100 percent of the 2012 continued until clinical resolution. endothelial cells because endothelial through 2014 Inpatient Standard With regard to the newness criterion, cell damage is believed to be a major Analytic Files (SAFs) for cases eligible according to the manufacturer, contributing factor to the development for Defitelio®. Because an ICD–9–CM Defitelio® received FDA approval in of VOD. However, we are concerned code specific to treatment for VOD does March 30, 2016 and is expected to be that this mechanism of action is not not exist, the applicant used an commercially available on the U.S. well understood by the manufacturer algorithm to identify cases to use in its and we are unable to determine whether market on April 6, 2016. At this time, ® sensitivity analyses. The most the applicant has not submitted any Defitelio is substantially similar to the appropriate ICD–9–CM diagnosis codes specific information to establish that the other drugs on the market without full were identified based on clinical criteria technology was not available on the U.S. understanding of its distinct mechanism used to diagnose VOD and were used to market as of the FDA approval date or of action. identify cohorts of patients diagnosed to describe the reasons for a delay of With regard to the second criterion, with VOD and VOD with multi-organ availability until the first week of April whether a product is assigned to the dysfunction. The applicant first 2016. Therefore, we believe the newness same or a different MS–DRG, the identified claims with an ICD–9–CM ® applicant maintained that cases period for Defitelio would begin on procedure code indicating an HSCT potentially eligible for treatment using March 30, 2016, the date of FDA (Group A) within a 30-day window; Defitelio® and representing the target approval. VOD most commonly occurs after patient population mainly group to two receipt of HSCT. The applicant then There are currently no ICD–10–PCS MS–DRGs: MS–DRG 014 (Allogeneic looked for cases with ICD–9–CM codes to uniquely identify the Bone Marrow Transplant) and MS–DRG diagnosis codes related to liver injury intravenous administration of 016 (Autologous Bone Marrow ® (Group B) or clinical evidence of Defitelio . The applicant submitted an Transplant with CC/MCC). We believe suspected VOD symptoms based on at application for the March 9–10, 2016 that these are the same MS–DRGs that least two relevant ICD–9 diagnosis meeting of the ICD–10 Coordination and identify cases of patients treated with codes (Group C). Lastly, the applicant Maintenance Committee for a unique supportive care for VOD with multi- ICD–10–PCS procedure code to identify organ failure. filtered out cases that did not show the use of Defitelio. If approved, the With regard to the third criterion, clinical evidence of multi-organ procedure code would become effective whether the new use of the technology dysfunction based on at least one on October 1, 2016 (FY 2017). More involves the treatment of the same or relevant ICD–9–CM code (Group D). information on this request can be similar type of disease and the same or The applicant submitted the following found on the CMS Web site located at: similar patient population, the applicant table indicating the ICD–9–CM codes http://www.cms.gov/Medicare/Coding/ asserted that there are no FDA-approved used for each category of the algorithm.

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TABLE 12—ICD–9 CODES USED FOR THE PREMIER VOD ALGORITHM

ICD–9–CM Group Title Code Description

A ...... Hematopoietic Stem Cell 41.00 Bone marrow transplant, not otherwise specified. Transplant (HSCT) (at 41.01 Autologous bone marrow transplant without purging. least one code). 41.02 Allogeneic bone marrow transplant with purging. 41.03 Allogeneic bone marrow transplant without purging. 41.04 Autologous hematopoietic stem cell transplant without purging. 41.05 Allogeneic hematopoietic stem cell transplant without purging. 41.06 Cord blood stem cell transplant. 41.07 Autologous hematopoietic stem cell transplant with purging. 41.08 Allogeneic hematopoietic stem cell transplant. 41.09 Autologous bone marrow transplant with purging. B ...... Liver Injury (at least one 453.xx Other venous embolism and thrombosis. code). 570.xx Acute and subacute necrosis of liver. 573.8 Other specified disorders of liver. 573.9 Unspecified disorder of liver. 459.89 Other specified disorders of the circulatory system. 277.4 Disorders of bilirubin excretion. C ...... VOD Symptoms (at least 782.4 Hyperbilirubinemia. two codes). 789.1 Hepatomegaly. 783.1 Abnormal weight gain. 789.5 Ascites. D ...... Multi-Organ Dysfunction (at 518.8x Acute/Chronic Respiratory Failure. least one code). 786.09 Other respiratory abnormalities (respiratory distress, except that associated with trauma/surgery in adults, or with RDS in newborns). 799.02 Hypoxemia. 518.81 Acute respiratory failure. V46.2 Other dependence on machines, supplemental oxygen. 96.7x Other continuous invasive mechanical ventilation. 93.90, 93.91, Non-invasive mechanical ventilation. 93.93, 93.99 584.X Acute renal failure. 586.X Renal failure unspecified. 593.9 Renal Failure. 39.27, 39.42, Dialysis, including hemodialysis, peritoneal dialysis, hemofiltration. 39.95, 54.98

Using the above algorithm, the from 2012 through 2014. The applicant and twice to FY 2014 claims to inflate applicant identified a total of 267 assumed there would be a reduction in all charges to 2016. The applicant patient cases of VOD with multi-organ the use of selected drugs as a result of computed an inflated average dysfunction in the 2012–2014 Inpatient using Defitelio® and removed 50 standardized case-weighted charge per SAFs, with 78 patient cases in 2012, 102 percent of the estimated charges for case of $356,015. Using the FY 2016 patient cases in 2013, and 87 patient heparin, furosemide, and IPPS Table 10 thresholds, the average cases in 2014, or an average annual spironolactone. The charges for these case-weighted threshold amount was patient case volume of 89. The applicant drugs were estimated based on pricing $157,951 (all calculations above were determined that these cases grouped taken from the Medispan PriceRx performed using unrounded numbers). mainly into two MS–DRGs: 014 and database, whose costs were marked up Because the inflated average 016. The applicant noted that there were according to the inverse of CCRs from standardized case-weighted charge per no cases in the data from MS–DRG 017 cost center 073 (Drugs Charged to case exceeds the average case-weighted (Autologous Bone Marrow Transplant Patients) obtained from providers’ 2012, threshold amount, the applicant without CC/MCC). The applicant further 2013, and 2014 cost reports. The maintained that the technology meets noted that there were no cases from applicant matched these CCRs with the the cost criterion. The applicant noted MS–DRG 017 because the ICD–9–CM provider numbers on each claim. The that it did not include charges for codes identifying VOD with multi-organ applicant removed an average of $2,631 Defitelio® in the inflated average dysfunction include serious medical in charges for these drugs from the standardized case-weighted charge per conditions that are listed on the MCC overall unstandardized charges for case because the inflated average and CC lists. In total, 38 MS–DRGs were Defitelio®. standardized case-weighted charge per represented in the patient cohort, with The applicant then standardized the case exceeded the average case- 27 percent of cases mapping to MS–DRG charges and calculated an average weighted threshold amount without 014 and 42 percent of cases mapping to standardized case-weighted charge per charges for Defitelio®. MS–DRG 016. The remaining cases case of $310,651. To update the charge The applicant provided a similar mapped to 1 of the 36 remaining MS– data to the current fiscal year, the analysis for each individual year of the DRGs with fewer than 11 cases. applicant inflated the charges based on SAF data rather than combining all the For results in the aggregate, the the charge inflation factor of 1.048116 in data from all 3 years into one analysis. applicant calculated an average case- the FY 2016 IPPS/LTCH final rule (80 Under the other three analyses, the weighted charge per case of $427,440 FR 49779). The 1-year inflation factor applicant noted that the average across 267 cases representing diagnoses was applied four times to FY 2012 standardized case-weighted charge per of VOD with multi-organ dysfunction claims, three times to FY 2013 claims, case exceeded the average case-

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weighted threshold amount (as shown charges and without adding any charges comments on whether Defitelio® meets in the table below) without inflating the for Defitelio®. We are inviting public the cost criterion.

Average Average standardized SAF year case-weighted case-weighted threshold charge per amount case

2012 ...... $161,469 $347,910 2013 ...... 150,585 326,445 2014 ...... 163,434 404,883

With regard to the substantial clinical pivotal trial 2005–01. We believe that to the FDA for pre-market approval of improvement criterion, the applicant the discrepancy between the size of the the INTUITY valve and anticipates FDA maintained that Defitelio® is an treatment group (N=102) and the approval prior to July 1, 2016. The effective treatment for VOD as an early historical control group (N=32) may applicant indicated that the device onset cause of mortality following skew the trial results in favor of the would be available on the market HSCT. According to the applicant, treatment group. We also are uncertain, shortly after approval. The applicant patients treated with Defitelio® have given the small sample size and submitted a request for a unique ICD– improved survival and efficacy rates historical data used, whether the 10–PCS code for consideration at the compared to patients who were not historical control group is representative March 2016 ICD–10 Coordination and treated with Defitelio®. In increasing the of patients with VOD with multi-organ Maintenance Committee meeting. If chances of post-HSCT survival, failure. According to the applicant, approved, the codes will be effective on Defitelio® affords the transplant patient patients in the historical control group October 1, 2016 (FY 2017). More the opportunity for engraftment, which were hospitalized between January 1995 information on this request can be could be a potential cure for the and November 2007. Because of found on the CMS Web site located at: underlying disease that required HSCT. advancements in medicine within this http://www.cms.gov/Medicare/Coding/ The applicant supported these timeframe, we are concerned that the ICD10ProviderDiagnosticCodes/ICD-10- assertions with clinical evidence from patients in the historical control group CM-C-and-M-Meeting-Materials.html. pivotal trial 2005–01, a Phase III cannot be appropriately compared to As discussed earlier, if a technology historical control study in which patients in the treatment group. meets all three of the substantial patients with VOD with multi-organ Moreover, we believe that it is difficult similarity criteria, it would be ® to attribute improved survival and CR considered substantially similar to an failure were given Defitelio in doses of ® 25/mg/kg/day for the recommended rates only to Defitelio treatment. existing technology and would not be We are inviting public comments on considered ‘‘new’’ for purposes of new minimum treatment duration of 21 days. ® Patients in the historical control group whether Defitelio meets the substantial technology add-on payments. With regard to the first criterion, were selected by an independent clinical improvement criterion. We did not receive any written public whether a product uses the same or a medical review committee (MRC) from comments in response to the February similar mechanism of action to achieve a pool of 6,867 medical charts of 2016 New Technology Town Hall a therapeutic outcome, the applicant patients receiving HSCT that were meeting regarding this application for described three aspects of the valve hospitalized from January 1995 through new technology add-on payments. system that are unique relative to November 2007. The trial consisted of existing devices. First, the valve system ® g. EDWARDS INTUITY EliteTM Valve 102 patients in the Defitelio treated has a deployment mechanism that System group and 32 patients in the historical allows for rapid deployment and only control group. The trial used the Edwards Lifesciences submitted an requires 3 sutures, as opposed to 12 to survival rate and rate of Complete application for new technology add-on 18 sutures used in standard valve Response (CR) at Day+100 as clinical payments for the EDWARDS INTUITY replacement procedures. Second, the endpoints. The observed survival rate at EliteTM Valve System (INTUITY) for FY ® flexible deployment arm allows Day+100 in the Defitelio treated group 2017. The device uses a rapid improved surgical access and was 38.2 percent compared to 25 deployment valve system and serves as visualization, making the surgery less percent in the historical control group. a prosthetic aortic valve, which is challenging for the surgeon, which Moreover, the rate of CR by Day+100 inserted using surgical aortic valve ® improves the likelihood that the surgeon post-HSCT for the Defitelio treated replacement (AVR). The device replaces can use a minimally invasive approach. group was 25.5 percent compared to the diseased native valve in patients Third, the assembly of the device only 12.5 percent in the historical control with aortic valve disease, including allows the correct valve size to be fitted, group. The applicant conducted aortic stenosis. The components of the which ensures that the valve does not additional analyses that showed device are: (1) A bovine pericardial slip or migrate, which prevents improvements in survival outcomes aortic bioprosthetic valve; (2) a balloon paravalvular leaks and patient among subgroups of patients with expandable stainless steel frame; and (3) prosthetic mismatch. The applicant baseline prognostic factors related to a textured sealing cloth. The INTUITY maintained that the INTUITY has a worse outcomes. valve shares many basic features with different mechanism of action than According to the applicant, running a other tissue, bioprosthetic valves. The other prosthetic aortic valves and, controlled, blinded, and randomized leaflets are made of bovine pericardium, therefore, is not substantially similar to trial in a patient population with high rather than porcine valve tissue, or those used in standard aortic valve mortality rates would be unethical. We purely mechanical elements. replacement procedures. are concerned that there are limitations With regard to the newness criterion, With regard to the second and third to the historical control group used in the applicant submitted an application criteria, the device is used in the same

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patient population and would be the substantial similarity criteria used in aortic valve replacement. We are assigned to the same MS–DRGs as cases discussed above, we have the following inviting public comments on whether involving other prosthetic aortic valves. concerns. First, it appears that this the INTUITY meets the newness We also received information about the device uses a similar mechanism of criterion. Perceval aortic valve (LivaNova), which action as standard aortic valves; the With regard to the cost criterion, the received FDA approval in January 2016 differences described in the application, applicant researched the FY 2014 and which appears to be a substantially with respect to how the valve is placed MedPAR claims data file to identify similar aortic valve. If the INTUITY and secured, and the number of sutures valve were to receive approval for new required, do not readily distinguish the cases of patients who represent technology add-on payments, we would mechanism of action from other aortic potential recipients of treatment using consider whether the INTUITY valve is valves. Second, the MS–DRGs to which the INTUITY. The applicant identified substantially similar to the device that cases using the INTUITY would be claims that had an ICD–9–CM diagnosis has already received FDA approval. If assigned, as indicated in the code of 424.1 (Aortic valve disorder) in we determine that it is substantially application, are the same MS–DRGs to combination with an ICD–9–CM similar, we note that the start date for which cases involving standard aortic procedure code of 35.21 (Replacement determining the duration of new valves would be assigned. Third, the of aortic valve with tissue) or 35.22 technology add-on payments would be device is used to treat the same disease (Open and other replacement of aortic the date of FDA approval for the and patient population as standard valve). The applicant also identified Perceval aortic valve. aortic valves. In light of these concerns, cases with or without a coronary artery After reviewing the information we believe that this device appears to be bypass graft (CABG) using the ICD–9– provided by the applicant with regard to substantially similar to other valves CM procedure codes in the table below.

ICD–9–CM code Code description

36.10 ...... Aortocoronary bypass for heart revascularization, not otherwise specified. 36.11 ...... (Aorto)coronary bypass of one coronary artery. 36.12 ...... (Aorto)coronary bypass of two coronary arteries. 36.13 ...... (Aorto)coronary bypass of three coronary arteries. 36.14 ...... (Aorto)coronary bypass of four or more coronary arteries. 36.15 ...... Single internal mammary-coronary artery bypass. 36.16 ...... Double internal mammary-coronary artery bypass. 36.17 ...... Abdominal-coronary artery bypass.

The applicant identified a total of calculated the average expected charge information from the applicant 15,291 cases that mapped to MS–DRGs using the same price as charged in the regarding how it decided upon which 216 (Cardiac Valve & Other Major recent IDE trial. Although the applicant cases to include in the sensitivity Cardiothoracic Procedures with Cardiac submitted data that related to the analysis, as well as further details about Catheterization with MCC), 217 (Cardiac estimated clinical trial cost of the how and on what basis the applicant Valve & Other Major Cardiothoracic INTUITY, the applicant noted that the weighted CABG and non-CABG cases. Procedures with Cardiac Catheterization cost of the technology was proprietary We are inviting public comments on with CC), 218 (Cardiac Valve & Other information. To add charges for the new whether the INTUITY meets the cost Major Cardiothoracic Procedures with technology, the applicant assumed a criterion, including with regard to the Cardiac Catheterization without CC/ hospital mark-up of approximately 3.0 concerns we have raised. MCC), 219 (Cardiac Valve & Other Major percent, based on the current average With regard to the substantial clinical Cardiothoracic Procedures without CCR for implantable devices (0.337) as improvement criterion, the applicant Cardiac Catheterization with MCC), 220 reported in the FY 2016 IPPS/LTCH PPS stated that the device improves clinical (Cardiac Valve & Other Major final rule (80 FR 49429). Based on the outcomes for patients undergoing Cardiothoracic Procedures without FY 2016 IPPS/LTCH PPS Table 10 minimally invasive AVR and full- Cardiac Catheterization with CC), and thresholds, the average case-weighted sternotomy AVR. The applicant also 221 (Cardiac Valve & Other Major threshold amount was $163,173. The stated that the rapid deployment Cardiothoracic Procedures without applicant computed an inflated average technology enables reduced operative Cardiac Catheterization without CC/ standardized case-weighted charge per time, specifically cross-clamp time, MCC). The applicant calculated an case of $185,982, which is $22,809 thereby reducing the period of average unstandardized charge per case above the average case-weighted myocardial ischemia. The applicant also of $178,608 for all cases. The applicant threshold amount. Because the inflated indicated that the flexible deployment then removed 100 percent of the charges average standardized case-weighted arm increases the likelihood that a for pacemakers, investigational devices, charge per case exceeds the average minimally invasive approach can be and other implants that would not be case-weighted threshold amount, the used. In addition, the applicant required for patients receiving treatment applicant maintained that the suggested that the device offers a using the INTUITY. technology meets the cost criterion. reduction in operative time for full- The applicant standardized the We are concerned that the number of sternotomy AVR. The applicant noted charges and then applied an inflation individual cases that were identified that clinical results demonstrated factor of 1.076647, which is the 2-year and provided by the applicant indicated significant patient outcome and inflation factor in the FY 2016 IPPS/ a total of 26,520 cases that would be utilization improvements, including LTCH final rule (80 FR 49784), to eligible for treatment using the improved patient satisfaction, faster update the charges from FY 2014 to FY INTUITY, but the applicant only return to normal activity, decreased 2016. Because the price of the INTUITY included 15,291 cases in the final post-operative pain, reduced mortality has yet to be determined, the applicant sensitivity analysis. We would like more and decreased complications, including

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need for reoperation due to bleeding, did not provide any details about these valves. The applicant requested that reduced recovery time, and reduced outcomes, stating that the data would be Perceval and INTUITY valves be length of stay. submitted for publication after FDA considered in the same category for the According to the applicant, the valve review. new technology add-on payment. has been tested clinically in several After reviewing the information Response: We appreciate the programs. In the TRITON trial (Kocher provided by the applicant, we have the commenter’s input. We welcome et al., 2013 14), 287 patients with aortic following concerns. We are concerned additional input from the public and stenosis underwent surgery in 1 of 6 that the INTUITY does not have will take these comments into European centers. The first 149 patients sufficient advantages over other consideration when deciding whether to received the first generation Model alternative surgically implanted valve approve new technology add-on 8300A valve, and the next 138 patients systems to constitute a substantial payments for the INTUITY valve for FY received the second generation Model clinical improvement. While the studies 2017. 8300AB. The average age of the patients included with the application h. GORE® EXCLUDER® Iliac Branch was 75.7 years. Early, 30-day mortality demonstrate reduced aortic cross-clamp Endoprosthesis (IBE) was 1.7 percent (5/287), the post- time, conventional aortic valve operative valve gradient was low, and replacement was used in the W.L. Gore and Associates, Inc. 75 percent of the patients improved comparison group; therefore, it is submitted an application for new functionally. A total of four valves were unclear whether the reduced aortic technology add-on payments for the ® ® explanted in the final 30 days due to cross-clamp time is associated with the GORE EXCLUDER Iliac Branch bleeding, and three were explanted later INTUITY valve or with MIS surgery in Endoprosthesis (GORE IBE device) for for paravalvular leak, endocarditis, and general. We understand that this issue is FY 2017. The device consists of two aortic root aneurysms. Follow-up currently being studied in the components: The Iliac Branch extended to 3 years (mean 1.8 years). Transform trial, which is in progress. Component (IBC) and the Internal Iliac Implantation of the INTUITY using We also note that, there have been no Component (IIC). The applicant minimally invasive surgery was conducted trials of the INTUITY valve, indicated that each endoprosthesis is compared with conventional aortic implanted using minimally invasive pre-mounted on a customized delivery valve replacement in the CADENCE– surgery, versus traditional transcatheter and deployment system allowing for MIS randomized trial (Borger et al., aortic valve replacement (TAVR) controlled endovascular delivery via 2015 15) of 100 patients treated in 1 of procedures, which we believe would be bilateral femoral access. According to 5 centers in Germany (3). Aortic cross- the most relevant comparison. We also the applicant, the device is designed to ® clamp time was reduced from 54.0 to do not believe that the applicant be used in conjunction with the GORE ® 41.3 minutes (p<0.0001), and provided evidence to support its EXCLUDER AAA Endoprosthesis for cardiopulmonary bypass time was assertion that the use of the INTUITY the treatment of patients requiring reduced from 74.4 to 68.8 minutes valve increase the likelihood of MIS repair of common iliac or aortoiliac (p=0.21). Early clinical outcomes were surgery being performed. We are aneurysms. When deployed, the GORE similar: Two deaths in the MIS group inviting public comments on whether IBE device excludes the common iliac versus one death in the conventional the INTUITY valve meets the substantial aneurysm from systemic blood flow, surgery group (p = 0.53), reoperation in clinical improvement criterion. while preserving blood flow in the one patient in each group, and no Below is a summary of the written external and internal iliac arteries. differences in other clinical outcomes. comments we received on the INTUITY With regard to the newness criterion, The aortic valve gradient was valve in response to the February 2016 the applicant submitted an application significantly lower in the MIS group: 8.5 New Technology Town Hall meeting to the FDA for pre-market approval of vs. 10.3 mmHg. and our response. the GORE IBE device, but has not yet The applicant also provided Comment: One commenter stated that received FDA approval. The applicant information referring to unpublished the Perceval bioprothesis is submitted a request for a unique ICD– data about the preliminary outcomes of substantially similar to the INTUITY 10–PCS code that was presented at the the Transform trial; this trial included a valve, in that they both map to the same March 2016 ICD–10 Coordination and study arm that compared MIS surgery MS–DRGs 219, 220, and 221; they Maintenance Committee meeting. If with the INTUITY valve to historical utilize the same ICD–10 code 02RF8Z approved, the code will be effective on comparators that involved MIS surgery (Replacement of aortic valve with October 1, 2016 (FY 2017). More with another valve. The applicant zooplastic tissue, open approach); they information on this request can be indicated that key findings of this trial are intended to treat the same or similar found on the CMS Web site at: http:// included reduced procedure times and disease and patient population; they are www.cms.gov/Medicare/Coding/ cross-clamp times, reduced reoperations intended to achieve the same ICD10ProviderDiagnosticCodes/ICD-10- and 30-day mortality, and reduced therapeutic outcome; and they are both CM-C-and-M-Meeting-Materials.html. length of stay for the INTUITY valve considered to be sutureless/rapid As discussed earlier, if a technology relative to historical comparators that deployment aortic heart valves used for meets all three of the substantial involved another valve. The applicant the replacement of diseased, damaged, similarity criteria, it would be or malfunctioning native or prosthetic considered substantially similar to an 14 Kocher AA, Laufer G, Haverich A, et al. One- aortic valves. The commenter cited existing technology and would not be year outcomes of the surgical treatment of aortic several meta-analyses that include both considered ‘‘new’’ for purposes of new stenosis with a next generation surgical aortic valve the Perceval and INTUITY valves and technology add-on payments. (TRITON) trial: A prospective multicenter study of rapid-deployment aortic valve replacement with the consider them clinically equivalent With regard to the first criterion, EDWARDS INTUITY valve system. J Thorac technologies. The commenter also cited whether a product uses the same or a Cardiovasc Surg. 2013; 145:110–116. excerpts from articles as well as a similar mechanism of action to achieve 15 Borger MA, Moustafine V, Conradi L, et al. A description of the ongoing Perceval IDE a therapeutic outcome, the applicant randomized multicenter trial of minimally invasive rapid deployment versus conventional full study to provide support for the indicated that the GORE IBE device is sternotomy aortic valve replacement. Ann Thorac substantial clinical improvement of based on the same design principles as Surg 2015; 99:17–25. sutureless/rapid deployment heart other endovascular repair devices, and

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its use differs because of the specific with AAAs. We are inviting public The applicant compared the average target site for implantation. comments on whether Gore IBE device unstandardized O.R. and radiology Consequently, it has a different shape is substantially similar to existing charges associated with the new and method of delivery from other technologies and whether the technology from the clinical trial data endovascular devices. The GORE IBE technology meets the newness criterion. with the unstandardized O.R. and device is similar to the GORE® With regard to the cost criterion, the radiology charges associated with the ® EXCLUDER AAA Endoprosthesis, applicant researched the FY 2014 prior technology from the MedPAR data primarily differing in device dimensions MedPAR claims data to identify patients and noted that O.R. and radiology to fit within the iliac artery anatomy. who may be eligible for treatment using charges for resources related to the new With regard to the first criterion, we are the GORE IBE device. The applicant technology and the prior technology concerned that the GORE IBE device has noted that cases eligible for the GORE were similar. However, with regard to a similar mechanism of action to other IBE device would map to MS–DRGs 268 charges in the intensive care unit (ICU), stenting grafts used to treat patients (Aortic and Heart Assist Procedures there was a reduction of 56 percent in with abdominal aortic aneurysms Except Pulsation Balloon with MCC) ICU associated charges for the new (AAAs) because it repairs the abdominal and 269 (Aortic and Heart Assist technology. Therefore, the applicant aortoiliac aneurysm from the inside and Procedures Except Pulsation Balloon offset the ICU associated charge by 56 is inserted in a similar manner to other without MCC). The applicant provided percent and deducted this amount from abdominal aortoiliac endovascular two analyses. The first analysis searched the average unstandardized case- aneurysm repair devices. for cases that may be potentially eligible weighted charge per case. The applicant With regard to the second criterion, for the GORE IBE device by identifying then standardized the charges, but noted whether a product is assigned to the cases with endovascular aneurysm that it did not inflate the charges. The same or a different MS–DRG, the repair (EVAR) with iliac diagnoses. To applicant added charges for the GORE applicant indicated that cases using the identify these cases, the applicant IBE device by converting the costs of the GORE IBE device would map to the searched for cases that had an ICD–9– device to charges using the average CCR same MS–DRGs as cases involving other CM primary procedure code of 39.71 for implantable devices (0.337) as stent-grafts used to treat patients with (Endovascular implantation of other reported in the FY 2016 IPPS/LTCH PPS AAAs. Specifically, similar to cases graft in abdominal aorta) in combination final rule (80 FR 49429). The applicant involving other stent-grafts used to treat with a primary diagnosis code of 441.4 noted that the cost of the technology AAAs, cases involving the GORE IBE (Abdominal aneurysm without mention was proprietary information. Based on device would be assigned to MS–DRG of rupture) or 441.02 (Dissection of the FY 2016 IPPS/LTCH PPS Table 10 268 (Aortic and Heart Assist Procedures aorta, abdominal). The applicant thresholds, the average case-weighted except Pulsation Balloon with MCC) excluded cases with a diagnosis code of threshold amount was $109,241. The and MS–DRG 269 (Aortic and Heart 441.3 (Abdominal aneurysm, ruptured), applicant computed an average Assist Procedures except Pulsation and cases with atherosclerosis of the standardized case-weighted charge per Balloon without MCC). case of $124,129. Because the average With regard to the third criterion, lower extremities (ICD–9–CM diagnosis standardized case-weighted charge per whether the new use of the technology code 440.20 through 440.28). The case exceeds the average case-weighted involves the treatment of the same or applicant then identified a subset of threshold amount, the applicant similar type of disease and the same or cases (1,615 cases) with significant iliac maintained that the technology meets similar patient population, the applicant involvement (which indicated use of the the cost criterion. indicated that the GORE IBE device is prior technology as well as disease intended to be used in the treatment of extent where the new technology could The second analysis was similar to patients requiring repair of common be used) by searching for cases with a the first analysis, but searched the iliac or aortoiliac aneurysms. The secondary ICD–9–CM diagnosis code of MedPAR claims data file for cases with applicant stated that this device, if 442.2 (Aneurysm of iliac artery) or an EVAR with an iliac diagnosis and approved, would be the first purpose- 443.22 (Dissection of iliac artery). This procedure instead of cases with EVAR built endovascular device for patients subset of cases was used in the analysis and only an iliac diagnosis. The whose conditions (common iliac or with 205 cases that mapped to MS–DRG applicant used the same ICD–9–CM aortoiliac aneurysm) put them at risk for 268 and 1,410 cases that mapped to procedure and diagnoses codes as used negative clinical outcomes due to MS–DRG 269. As discussed below, the in the first analysis, but used the limitations of current treatment remaining cases (11,926 cases) were following ICD–9–CM procedure codes to methods, which may not preserve used to help evaluate and compare identify cases that had an iliac internal iliac artery perfusion. The subsequent offset charge calculations procedure: 39.79 (Other endovascular applicant described current repair (base EVAR cases). procedures on other vessels) in options for these patients as: (a) Using the 1,615 cases, the applicant combination with 39.29 (Other Intentional occlusion and coverage of calculated an average unstandardized (peripheral) vascular shunt or bypass), the internal iliac artery; (b) undergoing case-weighted charge per case of 39.79 in combination with 39.90 a more extensive surgical operation to $121,527. Charges for the prior (Insertion of non-drug-eluting place a bypass graft; or (c) use of technology (implants), which would be peripheral (non-coronary) vessel combinations of devices in a offset by the new technology were stent(s)) without 39.29, 39.90 in nonindicated, variable, and inconsistent established by subtracting the average combination with 00.41 (Procedure on manner. With regard to the third implant charge in the 1,615 cases from two vessels), 00.46 (Insertion of two criterion, we are concerned that this the average implant charge in the base vascular stents), and 00.47 (Insertion of device appears to treat a similar type of EVAR sample. The excess implant three vascular stents) without 39.79 and disease to existing stent grafts. charge represents current implant 39.29. The applicant noted that the Based on the statements above, the charges being used in EVAR cases with expected distribution of cases for the applicant maintained that the GORE IBE iliac involvement, and was subtracted GORE IBE device is that 20 percent of device is not substantially similar to from the average unstandardized case- the cases would map to MS–DRG 268 other stent-grafts used to treat patients weighted charge per case. and 80 percent of the cases would map

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to MS–DRG 269. Because this analysis increased patency rates. The applicant device meets the substantial clinical represents cases that had an actual iliac asserted that because the GORE IBE improvement criterion. procedure, the applicant applied this device preserves flow to the internal We did not receive any written public distribution to the cases. The applicant iliac artery, the risk of complications is comments in response to the February then followed the same methodology reduced, which represents a substantial 2016 New Technology Town Hall above and removed charges for the prior clinical improvement relative to current meeting regarding this application for technology and resources related to the treatment approaches. The applicant new technology add-on payments. prior technology, standardized the also stated that, compared with i. VistogardTM (Uridine Triacetate) charges, and then added charges related historical data for procedures done to the GORE IBE device. Based on the using contralateral hypogastric BTG International Inc., submitted an FY 2016 IPPS/LTCH PPS Table 10 embolization, the GORE IBE device is application for new technology add-on TM thresholds, the average case-weighted associated with reduced procedure time, payments for the Vistogard for FY TM threshold amount was $113,015. The reduced fluoroscopy time, reduced 2017. Vistogard (Uridine Triacetate) applicant computed an inflated average reintervention rates, reduced incidence was developed as an antidote to standardized case-weighted charge per of aneurysm enlargement, and improved Fluorouracil toxicity. Chemotherapeutic case of $138,179. Because the inflated patency rates. agent 5-fluorouracil (5–FU) is used to average standardized case-weighted treat specific solid tumors. It acts upon The applicant submitted several deoxyribonucleic acid (DNA) and charge per case exceeds the average research articles with its application, case-weighted threshold amount, the ribonucleic acid (RNA) in the body, as which consisted of a few very small case uracil is a naturally occurring building applicant maintained that the series of 23 total patients technology meets the cost criterion. 17 18 19 block for genetic material. Fluorouracil published, as well as some is a fluorinated pyrimidine. As a With regard to the second analysis, abstracts of other case series. These the applicant imputed the distribution chemotherapy agent, Fluorouracil is publications describe the procedural absorbed up by cells and causes the cell of cases. We are not sure how the results of using the device, with applicant determined which cases to metabolize into byproducts that are angiographic endpoints, and would map to MS–DRG 268 or MS–DRG toxic and used to destroy cancerous demonstrate the feasibility of insertion. 269, if the distribution was imputed. cells. The byproducts fluorodoxyuridine The applicant also indicated that other Also, the applicant did not disclose how monophosphate (F-dUMP) and treatment approaches, including open many cases were found in the claims floxuridine triphosphate (FUTP) are surgery, are done infrequently, while data after filtering the case volume using believed to do the following: Reduce other approaches are not approved for ICD–9–CM procedure codes identifying DNA synthesis, lead to DNA this purpose. Therefore, the applicant cases that had an iliac procedure. We fragmentation, and disrupt RNA indicated that it would be impractical to are inviting public comments on synthesis. Fluorouracil is used to treat a conduct comparative studies. whether the GORE IBE device meets the variety of solid tumors such as cost criterion, including with regard to After reviewing the information colorectal, head and neck, breast, and the concerns we have raised. provided by the applicant, we have the ovarian cancer. With different tumor With regard to the substantial clinical following concerns: We are concerned treatments, different dosages, and improvement criterion, the applicant about the lack of clinical studies different dosing schedules, there is a indicated that current treatment comparing the GORE IBE device with risk for toxicity in these patients. approaches have substantial risks of alternative methods of treatment, and Patients may suffer from fluorouracil complications that can negatively note that the application did not toxicity/death if 5–FU is delivered in impact quality of life. Available provide data that supported its slight excess or at faster infusion rates treatment methods that do not preserve assertions that the GORE IBE device is than prescribed. The cause of overdose internal iliac artery perfusion increase associated with reduced procedure time, can happen for a variety of reasons risks for negative clinical outcomes; reduced fluoroscopy time, reduced including: Pump malfunction, incorrect compared to methods that preserve the reintervention rates, reduced incidence pump programming or miscalculated internal iliac artery, those that use of aneurysm enlargement, and improved doses, and accidental or intentional contralateral hypogastric embolization patency rates. We also note that the ingestion. result in a higher incidence of buttock applicant’s assertions about decreased According to the applicant, current claudication (15–55 percent), sexual rates of complications appear to treatment for fluorouracil toxicity is dysfunction (5–45 percent), ischemia of compare a small number of published supportive care, including the colon (2.6 percent), and rarely, cases of the use of the GORE IBE device discontinuation of the drug, hydration, ischemia of the spine. The applicant with complication rates cited in the filgrastim for neutropenia, as well as cited the ‘‘12–04’’ study,16 which the literature, which does not indicate antibiotics, antiemetics, and treatments applicant suggested showed the GORE whether there is a valid basis for that are required for potential IBE device to have 0 percent rates of comparison. We are inviting public gastrointestinal and cardiovascular buttock claudication, new onset erectile comments on whether the GORE IBE compromise. VistogardTM is an antidote dysfunction, colonic ischemia, and to Fluorouracil toxicity and is a pro- spinal cord ischemia. The applicant also 17 DeRubertis BG, Quinones-Baldrich WJ, drug of uridine. Once the drug is suggested that the 12–04 study showed Greenberg JI, Jimenez JC, Lee JT. Results of a metabolized into uridine, it competes the GORE IBE device to have reduced double-barrel technique with commercially with the toxic byproduct FUTP in available devices for hypogastric preservation procedure time, reduced fluoroscopy during aortoilac endovascular abdominal aortic binding to RNA, thus reducing the time, reduced reintervention rates, and aneurysm repair. J Vasc Surg 2012;56:1252–1259. impact FUTP has on cell death. 18 Ferrer C, De Crescenzo F, Coscarella C, Cao P. With regard to the newness criterion, 16 DeRubertis BG, Quinones-Baldrich WJ, Early experience with the Excluder(R) iliac branch VistogardTM received FDA approval on Greenberg JI, Jimenez JC, Lee JT. Results of a endoprosthesis. J Cardiovasc Surg 2014;55:679–683. December 11, 2015. The applicant noted 19 double-barrel technique with commercially Scho¨nhofer S, Mansour R, Ghotbi R. Initial TM available devices for hypogastric preservation results of the management of aortoiliac aneurysms that Vistogard is the first FDA during aortoilac endovascular abdominal aortic with GORE(R) Excluder(R) iliac branched approved antidote used to reverse aneurysm repair. J Vasc Surg 2012;56:1252–1259. endoprosthesis. J Cardiovasc Surg 2015;56:883–888. fluorouracil toxicity. Currently, there

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are no ICD–10–CM procedure codes that (UTP), which competes with FUTP for Therefore, the applicant believed that uniquely identify the use of incorporation into RNA, preventing VistogardTM is not substantially similar VistogardTM. The applicant presented an further cell destruction and dose- to any other currently approved application at the March 9–10, 2016 limiting toxicities. technology. We are inviting public meeting of the ICD–10 Coordination and With regard to the second criterion, comments on whether VistogardTM is Maintenance Committee for a unique whether the product is assigned to the substantially similar to existing ICD–10–PCS procedure code to identify same or a different MS–DRG, the technologies and whether it meets the the use of VistogardTM. If approved, the applicant noted that Xuriden (uridine newness criterion. code will be effective on October 1, triacetate) was also approved by the With regard to the cost criterion, the 2016 (FY 2017). More information on FDA on September 8, 2015, as a applicant searched the claims data from this request can be found on the CMS pyrimidine analog for uridine the 2013 and 2014 Inpatient SAFs for Web site at: http://www.cms.gov/ replacement indicated for the treatment cases that may be eligible for treatment Medicare/Coding/ of hereditary orotic aciduria (HOA). involving VistogardTM. Specifically, the ICD10ProviderDiagnosticCodes/ICD-10- According to the applicant, HOA is a applicant searched for cases reporting a CM-C-and-M-Meeting-Materials.html. rare, potentially life-threatening, genetic primary ICD–9–CM diagnosis code for As discussed earlier, if a technology disorder in which patients (primarily colorectal cancer, head and neck cancer, meets all three of the substantial pediatric patients) lack the ability to gastric cancers and pancreatic cancer. similarity criteria, it would be synthesize adequate amounts of uridine The applicant further narrowed the considered substantially similar to an and consequently can suffer from potential target patient population by existing technology and would not be hematologic abnormalities, failure to identifying cases reporting toxicity due considered ‘‘new’’ for purposes of new thrive, a range of developmental delays, to an antineoplastic. In order to include technology add-on payments. and episodes of crystalluria leading to only patients diagnosed with severe With regard to the first criterion, obstructive uropathy. The applicant toxicity that would be eligible for whether the product uses the same or a stated that, although Xuriden is treatment using VistogardTM, using similar mechanism of action to achieve approved as a chronic, once daily revenue center codes and ICD–9–CM V a therapeutic outcome, the applicant medication (not to exceed 8 grams) that codes, the applicant included an stated that VistogardTM is the first FDA- is administered orally in the patient’s additional cohort of cases representing approved antidote used to reverse home and also used to replace uridine, patients admitted from the emergency fluorouracil toxicity. The applicant Xuriden is not administered in a department, an observation unit, maintained that VistogardTM has a hospital setting and cases involving the another short-term, acute care hospital, unique mechanism of action that is not use of Xuriden would not be assigned to or who have received chemotherapy comparable to any other drug’s the same MS–DRGs associated with the treatment during the inpatient stay mechanism of action that is currently use of VistogardTM in the treatment of included on the claim. Because 5–FU available on the U.S. market. The patients experiencing 5–FU overdose or toxicity is associated with a high applicant described in technical detail severe toxicity. Therefore, the applicant mortality rate, the applicant identified a how the novel and unique mechanism maintained that no other technology subgroup of patients diagnosed with of action provides bioavailable uridine, similar to VistogardTM would map to the chemotherapy toxicity who expired a direct biochemical antagonist of 5–FU same MS–DRGs as cases involving the during their inpatient visit or within 7 toxicity; quickly absorbs into the use of VistogardTM. days of discharge. The applicant gastrointestinal tract due to its With regard to the third criterion, provided two analyses to determine that lipophilic nature; in normal cells, stops whether the new use of the technology the technology meets the cost criterion: the process of cell damage and cell involves the treatment of the same or One analysis of patients that destruction caused by 5–FU and similar type of disease and the same or experienced toxicity with mortality and counteracts the effects of 5–FU toxicity; similar patient population, similar to a second analysis using the broader protects normal cells and allows above, the applicant maintained that chemotherapy toxicity cohort, which recovery from damage caused by 5–FU, VistogardTM is the first FDA approved includes patients who did not expire. without interfering with the primary antidote to reverse fluorouracil toxicity The table below provides the diagnosis antitumor mechanism of 5–FU; and uses and, therefore, no other technology codes and information the applicant uridine derived from VistogardTM to treats this disease or patient population used to identify cases for both of these convert it into uridine triphosphate to reverse fluorouracil toxicity. analyses.

Criterion ICD–9 code Description

Colorectal, head and neck, gastric, or pancreatic cancer (at 153.x ...... Malignant neoplasm of colon. least one code). 154.x ...... Malignant neoplasm of rectum, rectosigmoid junction, and anus. 171.0 ...... Malignant neoplasm of head, face, and neck. 151.x ...... Malignant neoplasm of stomach. 157.x ...... Malignant neoplasm of pancreas. Toxicity due to an antineoplastic (at least one code) ...... 963.1 ...... Poisoning by antineoplastic and immunosuppressive drugs. E933.1 ...... Antineoplastic and immunosuppressive drugs causing adverse effects in therapeutic use. Admission to Inpatient Setting Admitted from ED ...... Revenue Center Revenue Center Codes 450, 451, 452, 456, 459. or observation unit ...... Revenue Center Revenue Center Codes 760, 761, 762, 769. or short-term, acute care hospital ...... N/A ...... Source of admission code = ‘‘4’’ ‘‘Transfer from hospital (Dif- ferent facility)’’. or received chemotherapy during inpatient stay ...... V58.0 ...... Encounter or admission for radiation. V58.11 ...... Encounter for antineoplastic chemotherapy. V58.12 ...... Encounter for antineoplastic immunotherapy (Must be primary diagnosis on the claim).

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Criterion ICD–9 code Description

Expired during inpatient stay or within seven days of dis- N/A ...... Determined by patient discharge status code. charge (at least one code) a. N/A ...... If date of death in 100 percent Denominator File pertaining to the year of the claim was within 7 days of claim discharge date. a Required only for toxicity with mortality cohort. Source: KNG Health analysis of 2013–2014 100% Inpatient Standard Analytic Files and 2013–2014 100% Denominator Files.

Under the first analysis, the applicant remaining number of cases spread studies (Study 1, an open-label, single found 76 cases with 18.42 percent of across several MS–DRGs. The inflated arm, multi-center expanded access those cases mapping to MS–DRG 871 average standardized case-weighted study and Study 2, an open-label, single (Septicemia or Severe Sepsis without charge per case was $42,708. Using the arm, multi-center emergency use study), Mechanical Ventilation > 96 hours with FY 2016 IPPS Table 10 thresholds, the which combined enrolled 135 patients. MCC), and the remaining number of average case-weighted threshold amount The applicant noted that 130 patients cases mapping to MS–DRGs with less was $42,377 (all calculations above treated with VistogardTM survived than 11 cases. According to the were performed using unrounded through the 30-day treatment and applicant, the results of the analysis of numbers). Similar to the results of the observation period (95 percent the MS–DRGs with less than 11 cases first analysis, the applicant noted that Confidence Interval: 0.92, 0.99). Of the could not be discussed separately the inflated average standardized case- 135 patients, 30 percent were 65 years because of the small sample sizes. The weighted charge per case exceeded the old and older, including 11 percent of applicant believed that it was average case-weighted threshold amount patients who were 75 years old and unnecessary to remove any charges for without including charges for older. other previously used technologies VistogardTM. Therefore, because the According to the applicant, the because although VistogardTM is inflated average standardized case- studies’ results demonstrate that singular in its ability to treat 5–FU weighted charge per case exceeds the VistogardTM reduced the incidence, toxicity, the associated charges for average case-weighted threshold severity and virulence of toxicities palliative care would continue to be amount, the applicant maintained that associated with 5–FU toxicity due to necessary to treat the symptoms of the the technology also meets the cost overdose or rapid onset. Specifically, toxicity, even though it is possible that criterion under the second analysis. the applicant noted the following the use of VistogardTM may reduce a We note that the applicant used the results: patient’s hospital length of stay. To inflation factor of 1.048116 from the FY • VistogardTM ameliorated the update the charge data to the current 2016 IPPS/LTCH proposed rule instead progression of mucositis, leukopenia fiscal year, the applicant inflated the of the inflation factor of 1.037616 from and thrombocytopenia; leukopenia and charges based on the charge inflation the FY 2016 IPPS/LTCH final rule (80 thrombocytopenia were resolved in factor of 1.048116 in the FY 2016 IPPS/ FR 49784). We believe that the applicant almost all patients by the 4th week, LTCH proposed rule (80 FR 24632). A should use the most recent data indicating recovery of the hematopoietic 1-year inflation factor was applied three available, which is the inflation factor system; mucositis also was resolved in times for FY 2013 claims and two times from the final rule. The inflation factor almost all patients within the 30-day for FY 2014 claims, inflating all claims from the FY 2016 IPPS/LTCH final rule observation period with the incidence of to FY 2016. This resulted in an inflated is lower than the inflation factor from serious (Grade 3 or 4) mucositis being average standardized case-weighted the proposed rule. However, the very low; and no grade 4 mucositis was charge per case of $51,451. Using the FY difference between these two factors is observed in any patients who received 2016 IPPS Table 10 thresholds, the marginal. Also, as the applicant noted, treatment using VistogardTM within 96 average case-weighted threshold amount it did not include charges for hours after 5–FU. was $46,233 (all calculations above VistogardTM in its analysis. Therefore, • Thirty-eight percent of patients who were performed using unrounded we believe that it is likely that the experienced 5–FU overdose were able to numbers). The applicant noted that the applicant would still meet the cost resume chemotherapy treatment in less inflated average standardized case- criterion under both analyses even if it than 30 days after 5–FU toxicity, with weighted charge per case exceeded the used the lower inflation factor from the the majority of these patients resuming average case-weighted threshold amount FY 2016 final rule. We are inviting treatment within 21 days. According to without including charges for public comments on whether the applicant, 21 percent of the patients VistogardTM. Therefore, because the VistogardTM meets the cost criterion who presented with rapid onset of inflated average standardized case- under both analyses. serious toxicities resumed weighted charge per case exceeds the With regard to substantial clinical chemotherapy treatment (typically with average case-weighted threshold improvement, the applicant maintained a different agent than 5–FU) in less than amount, the applicant maintained that that VistogardTM represents a substantial 30 days, with an overall median time to the technology meets the cost criterion. clinical improvement. The applicant resumption of chemotherapy of 19 days. Under the second analysis, the noted that VistogardTM is the first and • The safety and tolerability profile of applicant used the same methodology it only antidote indicated to treat adult VistogardTM is consistent with what used in its first analysis, except that the and pediatric patients following a would be expected for patients analysis included cases representing fluorouracil overdose, regardless of the diagnosed with cancer following 5–FU patients who did not expire. The presence of symptoms or whether a chemotherapy treatment, but is applicant found 879 cases with 8.53 patient exhibits early-onset, severe or generally less in severity and incidence percent of those cases mapping to MS– life-threatening toxicity within 96 hours when compared to what would be DRG 392 (Esophagitis, Gastroenteritis following the conclusion of fluorouracil expected with patients who experience and Miscellaneous Digestive System or capecitabine administration. The a 5–FU overdose. Specifically, during Disorders without MCC), and the applicant provided data from two Study 1, there were no patients that

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discontinued uridine triacetate Under section 1886(d)(8)(D) of the Act, Bulletin No. 13–01 that was issued on treatment as a result of adverse events, the Secretary is required to adjust the February 28, 2013. The attachment to and during Study 2, three patients standardized amounts so as to ensure OMB Bulletin No. 15–01 provides discontinued uridine triacetate that aggregate payments under the IPPS detailed information on the update to treatment as a result of adverse events, after implementation of the provisions statistical areas since February 28, 2013. one of which was considered possibly of sections 1886(d)(8)(B), 1886(d)(8)(C), The updates provided in OMB Bulletin related to uridine triacetate (nausea and and 1886(d)(10) of the Act are equal to No. 15–01 are based on the application vomiting). the aggregate prospective payments that of the 2010 Standards for Delineating We are inviting public comments on would have been made absent these Metropolitan and Micropolitan whether VistogardTM meets the provisions. The proposed budget Statistical Areas to Census Bureau substantial clinical improvement neutrality adjustment for FY 2017 is population estimates for July 1, 2012 criterion. discussed in section II.A.4.b. of the and July 1, 2013. The complete list of We did not receive any written public Addendum to this proposed rule. statistical areas incorporating these comments in response to the February Section 1886(d)(3)(E) of the Act also changes is provided in the attachment to 2016 New Technology Town Hall provides for the collection of data every OMB Bulletin No. 15–01. According to meeting regarding this application for 3 years on the occupational mix of OMB, ‘‘[t]his bulletin establishes revised new technology add-on payments. employees for short-term, acute care delineations for the Nation’s III. Proposed Changes to the Hospital hospitals participating in the Medicare Metropolitan Statistical Areas, Wage Index for Acute Care Hospitals program, in order to construct an Micropolitan Statistical Areas, and occupational mix adjustment to the Combined Statistical Areas. The bulletin A. Background wage index. A discussion of the also provides delineations of 1. Legislative Authority occupational mix adjustment that we Metropolitan Divisions as well as are proposing to apply to the FY 2017 delineations of New England City and Section 1886(d)(3)(E) of the Act wage index, appears under sections Town Areas.’’ A copy of this bulletin requires that, as part of the methodology III.E.3. and F. of the preamble of this may be obtained on the Web site at: for determining prospective payments to proposed rule. https://www.whitehouse.gov/omb/ hospitals, the Secretary adjust the _ 2. Core-Based Statistical Areas (CBSAs) bulletins default. standardized amounts for area OMB Bulletin No. 15–01 made the Revisions for the Proposed FY 2017 differences in hospital wage levels by a following changes that are relevant to Hospital Wage Index factor (established by the Secretary) the IPPS wage index: reflecting the relative hospital wage The wage index is calculated and • Garfield County, OK, with principal level in the geographic area of the assigned to hospitals on the basis of the city Enid, OK, which was a hospital compared to the national labor market area in which the hospital Micropolitan (geographically rural) area, average hospital wage level. We is located. Under section 1886(d)(3)(E) now qualifies as an urban new CBSA currently define hospital labor market of the Act, beginning with FY 2005, we 21420 called Enid, OK. areas based on the delineations of delineate hospital labor market areas • The county of Bedford City, VA, a statistical areas established by the Office based on OMB-established Core-Based component of the Lynchburg, VA CBSA of Management and Budget (OMB). A Statistical Areas (CBSAs). The current 31340, changed to town status and is discussion of the proposed FY 2017 statistical areas (which were added to Bedford County. Therefore, the hospital wage index based on the implemented beginning with FY 2015) county of Bedford City (SSA State statistical areas appears under sections are based on revised OMB delineations county code 49088, FIPS State County III.A.2. and G. of the preamble of this issued on February 28, 2013, in OMB Code 51515) is now part of the county proposed rule. Bulletin No. 13–01. OMB Bulletin No. of Bedford, VA (SSA State county code Section 1886(d)(3)(E) of the Act 13–01 established revised delineations 49090, FIPS State County Code 51019). requires the Secretary to update the for Metropolitan Statistical Areas, However, the CBSA remains Lynchburg, wage index annually and to base the Micropolitan Statistical Areas, and VA, 31340. update on a survey of wages and wage- Combined Statistical Areas in the • The name of Macon, GA, CBSA related costs of short-term, acute care United States and Puerto Rico based on 31420, as well as a principal city of the hospitals. (CMS collects these data on the 2010 Census, and provided guidance Macon-Warner Robins, GA combined the Medicare cost report, CMS Form on the use of the delineations of these statistical area, is now Macon-Bibb 2552–10, Worksheet S–3, Parts II, III, statistical areas using standards County, GA. The CBSA code remains as and IV. The OMB control number for published on June 28, 2010 in the 31420. approved collection of this information Federal Register (75 FR 37246 through We believe that it is important for the is 0938–0050.) This provision also 37252). We refer readers to the FY 2015 IPPS to use the latest labor market area requires that any updates or adjustments IPPS/LTCH PPS final rule (79 FR 49951 delineations available as soon as is to the wage index be made in a manner through 49963) for a full discussion of reasonably possible in order to maintain that ensures that aggregate payments to our implementation of the new OMB a more accurate and up-to-date payment hospitals are not affected by the change labor market area delineations system that reflects the reality of in the wage index. The proposed beginning with the FY 2015 wage index. population shifts and labor market adjustment for FY 2017 is discussed in Generally, OMB issues major conditions (79 FR 28055). Therefore, we section II.B. of the Addendum to this revisions to statistical areas every 10 are proposing to implement these proposed rule. years, based on the results of the revisions, effective October 1, 2016, As discussed in section III.J. of the decennial census. However, OMB beginning with the FY 2017 wage preamble of this proposed rule, we also occasionally issues minor updates and indexes. We are proposing to use these take into account the geographic revisions to statistical areas in the years new definitions to calculate area wage reclassification of hospitals in between the decennial censuses. On indexes in a manner that is generally accordance with sections 1886(d)(8)(B) July 15, 2015, OMB issued OMB consistent with the CBSA-based and 1886(d)(10) of the Act when Bulletin No. 15–01, which provides methodologies finalized in the FY 2005 calculating IPPS payment amounts. updates to and supersedes OMB and the FY 2015 IPPS final rules. For FY

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2017, Tables 2 and 3 for this proposed 3. Use of Wage Index Data by Suppliers FY 2017 wage index. We also adjusted rule and the County to CBSA Crosswalk and Providers Other Than Acute Care certain aberrant data and included these File and Urban CBSAs and Constituent Hospitals Under the IPPS data in the proposed wage index. For Counties for Acute Care Hospitals File Data collected for the IPPS wage example, in situations where a hospital posted on the CMS Web site reflect index also are currently used to did not have documentable salaries, these CBSA changes. We are inviting calculate wage indexes applicable to wages, and hours for housekeeping and public comments on these proposals. suppliers and other providers, such as dietary services, we imputed estimates, in accordance with policies established B. Worksheet S–3 Wage Data for the SNFs, home health agencies (HHAs), in the FY 2015 IPPS/LTCH PPS final Proposed FY 2017 Wage Index ambulatory surgical centers (ASCs), and hospices. In addition, they are used for rule (79 FR 49965 through 49967). The proposed FY 2017 wage index prospective payments to IRFs, IPFs, and In constructing the proposed FY 2017 values are based on the data collected LTCHs, and for hospital outpatient wage index, we included the wage data from the Medicare cost reports services. We note that, in the IPPS rules, for facilities that were IPPS hospitals in submitted by hospitals for cost reporting we do not address comments pertaining FY 2013, inclusive of those facilities periods beginning in FY 2013 (the FY to the wage indexes of any supplier or that have since terminated their 2016 wage indexes were based on data provider except IPPS providers and participation in the program as from cost reporting periods beginning LTCHs. Such comments should be made hospitals, as long as those data did not during FY 2012). in response to separate proposed rules fail any of our edits for reasonableness. 1. Included Categories of Costs for those suppliers and providers. We believed that including the wage data for these hospitals is, in general, The proposed FY 2017 wage index C. Verification of Worksheet S–3 Wage appropriate to reflect the economic includes all of the following categories Data conditions in the various labor market of data associated with costs paid under The wage data for the proposed FY areas during the relevant past period the IPPS (as well as outpatient costs): and to ensure that the current wage • Salaries and hours from short-term, 2017 wage index were obtained from index represents the labor market area’s acute care hospitals (including paid Worksheet S–3, Parts II and III of the current wages as compared to the lunch hours and hours associated with Medicare cost report (Form CMS–2552– national average of wages. However, we military leave and jury duty); 10, OMB control number 0938–0050) for • Home office costs and hours; cost reporting periods beginning on or excluded the wage data for CAHs as • Certain contract labor costs and after October 1, 2012, and before discussed in the FY 2004 IPPS final rule hours, which include direct patient October 1, 2013. For wage index (68 FR 45397 through 45398). For the care, certain top management, purposes, we refer to cost reports during this proposed rule, we removed 3 pharmacy, laboratory, and nonteaching this period as the ‘‘FY 2013 cost report,’’ hospitals that converted to CAH status physician Part A services, and certain the ‘‘FY 2013 wage data,’’ or the ‘‘FY on or after February 5, 2015, the cut-off contract indirect patient care services 2013 data.’’ Instructions for completing date for CAH exclusion from the FY (as discussed in the FY 2008 final rule the wage index sections of Worksheet 2016 wage index, and through and with comment period (72 FR 47315 S–3 are included in the Provider including January 22, 2016, the cut-off through 47317)); and Reimbursement Manual (PRM), Part 2 date for CAH exclusion from the FY • Wage-related costs, including (Pub. No. 15–2), Chapter 40, Sections 2017 wage index. After removing pension costs (based on policies 4005.2 through 4005.4. The data file hospitals that converted to CAH status, adopted in the FY 2012 IPPS/LTCH PPS used to construct the proposed FY 2017 we calculated the proposed FY 2017 final rule (76 FR 51586 through 51590)) wage index includes FY 2013 data wage index based on 3,345 hospitals. and other deferred compensation costs. submitted to us as of February 29, 2016. For the proposed FY 2017 wage As in past years, we performed an index, we allotted the wages and hours 2. Excluded Categories of Costs extensive review of the wage data, data for a multicampus hospital among Consistent with the wage index mostly through the use of edits for the different labor market areas where methodology for FY 2016, the proposed reasonableness designed to identify its campuses are located in the same wage index for FY 2017 also excludes aberrant data. manner that we allotted such hospitals’ the direct and overhead salaries and We asked our MACs to revise or verify data in the FY 2016 wage index (80 FR hours for services not subject to IPPS data elements that result in specific edit 49489 through 49491). Table 2, which payment, such as skilled nursing facility failures. For the proposed FY 2017 wage contains the proposed FY 2017 wage (SNF) services, home health services, index, we identified and excluded 62 index associated with proposed rule costs related to GME (teaching providers with aberrant data that should (available via the Internet on the CMS physicians and residents) and certified not be included in the proposed wage Web site), includes separate wage data registered nurse anesthetists (CRNAs), index. Of these 62 providers that we for the campuses of 9 multicampus and other subprovider components that excluded from the proposed wage hospitals. are not paid under the IPPS. The index, 47 have data that we do not D. Method for Computing the Proposed proposed FY 2017 wage index also expect to change such that the data FY 2017 Unadjusted Wage Index excludes the salaries, hours, and wage- would be included in the final wage related costs of hospital-based rural index (for example, among the reasons The method used to compute the health clinics (RHCs), and Federally these providers were excluded is they proposed FY 2017 wage index without qualified health centers (FQHCs) are low Medicare utilization providers, an occupational mix adjustment follows because Medicare pays for these costs they closed and failed edits for the same methodology that we used to outside of the IPPS (68 FR 45395). In reasonableness, or they have extremely compute the FY 2012, FY 2013, FY addition, salaries, hours, and wage- high or low average hourly wages that 2014, FY 2015, and FY 2016 final wage related costs of CAHs are excluded from are atypical for their CBSAs). If data indexes without an occupational mix the wage index for the reasons elements for some of these providers are adjustment (76 FR 51591 through 51593, explained in the FY 2004 IPPS final rule corrected, we intend to include those 77 FR 53366 through 53367, 78 FR (68 FR 45397 through 45398). providers in the calculation of the final 50587 through 50588, 79 FR 49967 and

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80 FR 49491 through 49492, percent of the Puerto Rico-specific Act to require CMS to collect data every respectively). standardized amount. As a result, we 3 years on the occupational mix of As discussed in the FY 2012 IPPS/ calculated a Puerto Rico-specific wage employees for each short-term, acute LTCH PPS final rule, in ‘‘Step 5,’’ for index that was applied to the labor care hospital participating in the each hospital, we adjust the total share of the Puerto Rico-specific Medicare program. We collected data in salaries plus wage-related costs to a standardized amount. Section 601 of the 2013 to compute the occupational mix common period to determine total Consolidated Appropriations Act, 2016 adjustment for the FY 2016, FY 2017, adjusted salaries plus wage-related (Pub. L. 114–113), enacted on December and FY 2018 wage indexes. A new costs. To make the wage adjustment, we 18, 2015, amended section 1886(d)(9)(E) measurement of occupational mix is estimate the percentage change in the of the Act to specify that the payment required for FY 2019. employment cost index (ECI) for calculation with respect to operating The 2013 survey included the same compensation for each 30-day costs of inpatient hospital services of a data elements and definitions as the increment from October 14, 2012, subsection (d) Puerto Rico hospital for previous 2010 survey and provided for through April 15, 2014, for private inpatient hospital discharges on or after the collection of hospital-specific wages industry hospital workers from the BLS’ January 1, 2016, shall use 100 percent and hours data for nursing employees Compensation and Working Conditions. of the national standardized amount. for calendar year 2013 (that is, payroll We have consistently used the ECI as Because Puerto Rico hospitals are no periods ending between January 1, 2013 the data source for our wages and longer paid with a Puerto Rico-specific and December 31, 2013). We published salaries and other price proxies in the standardized amount as of January 1, the 2013 survey in the Federal Register IPPS market basket, and we are not 2016, under section 1886(d)(9)(E) of the on February 28, 2013 (78 FR 13679 proposing any changes to the usage for Act, as amended by section 601 of the through 13680). This survey was FY 2017. The factors used to adjust the Consolidated Appropriations Act, 2016, approved by OMB on May 14, 2013, and hospital’s data were based on the there is no longer a need to calculate a is available on the CMS Web site at: midpoint of the cost reporting period, as Puerto Rico-specific average hourly https://www.cms.gov/Medicare/ indicated in the following table. wage and wage index. Hospitals in Medicare-Fee-for-Service-Payment/ Puerto Rico are now paid 100 percent of AcuteInpatientPPS/Wage-Index-Files- MIDPOINT OF COST REPORTING the national standardized amount and, Items/Medicare-Wage-Index- PERIOD therefore, are subject to the national Occupational-Mix-Survey2013.html. average hourly wage (unadjusted for The 2013 Occupational Mix Survey Adjust- occupational mix) (which would be Hospital Reporting Form CMS–10079 After Before ment $41.1026 for this FY 2017 proposed for the Wage Index Beginning FY 2016 factor rule) and the national wage index, (in Excel format) is available on the which is applied to the national labor CMS Web site at: https://www.cms.gov/ 10/14/2012 ...... 11/15/2012 ...... 1.02321 Medicare/Medicare-Fee-for-Service- 11/14/2012 ...... 12/15/2012 ...... 1.02183 share of the national standardized 12/14/2012 ...... 01/15/2013 ...... 1.02040 amount. Accordingly, for FY 2017, we Payment/AcuteInpatientPPS/Wage- 01/14/2013 ...... 02/15/2013 ...... 1.01894 are not proposing a Puerto Rico-specific Index-Files-Items/Medicare-Wage- 02/14/2013 ...... 03/15/2013 ...... 1.01743 overall average hourly wage or wage Index-Occupational-Mix- 03/14/2013 ...... 04/15/2013 ...... 1.01592 index. Survey2013.html. Hospitals were 04/14/2013 ...... 05/15/2013 ...... 1.01443 required to submit their completed 2013 05/14/2013 ...... 06/15/2013 ...... 1.01297 E. Proposed Occupational Mix surveys to their MACs by July 1, 2014. 06/14/2013 ...... 07/15/2013 ...... 1.01152 Adjustment to the FY 2017 Wage Index The preliminary, unaudited 2013 survey 07/14/2013 ...... 08/15/2013 ...... 1.01006 As stated earlier, section 1886(d)(3)(E) data were posted on the CMS Web site 08/14/2013 ...... 09/15/2013 ...... 1.00859 of the Act provides for the collection of on July 11, 2014. As with the Worksheet 09/14/2013 ...... 10/15/2013 ...... 1.00711 data every 3 years on the occupational 10/14/2013 ...... 11/15/2013 ...... 1.00561 S–3, Parts II and III cost report wage 11/14/2013 ...... 12/15/2013 ...... 1.00408 mix of employees for each short-term, data, we asked our MACs to revise or 12/14/2013 ...... 01/15/2014 ...... 1.00260 acute care hospital participating in the verify data elements in hospitals’ 01/14/2014 ...... 02/15/2014 ...... 1.00124 Medicare program, in order to construct occupational mix surveys that result in 02/14/2014 ...... 03/15/2014 ...... 1.00000 an occupational mix adjustment to the certain edit failures. 03/14/2014 ...... 04/15/2014 ...... 0.99878 wage index, for application beginning 2. Development of the 2016 Medicare October 1, 2004 (the FY 2005 wage Wage Index Occupational Mix Survey For example, the midpoint of a cost index). The purpose of the occupational for the FY 2019 Wage Index reporting period beginning January 1, mix adjustment is to control for the 2013, and ending December 31, 2013, is effect of hospitals’ employment choices As stated earlier, section 304(c) of June 30, 2013. An adjustment factor of on the wage index. For example, Public Law 106–554 amended section 1.01152 would be applied to the wages hospitals may choose to employ 1886(d)(3)(E) of the Act to require CMS of a hospital with such a cost reporting different combinations of registered to collect data every 3 years on the period. nurses, licensed practical nurses, occupational mix of employees for each Using the data as previously nursing aides, and medical assistants for short-term, acute care hospital described, the proposed FY 2017 the purpose of providing nursing care to participating in the Medicare program. national average hourly wage their patients. The varying labor costs We collected data in 2013 to compute (unadjusted for occupational mix) is associated with these choices reflect the occupational mix adjustment for the $41.1026. hospital management decisions rather FY 2016, FY 2017, and FY 2018 wage Previously, we would also provide a than geographic differences in the costs indexes. A new measurement of Puerto Rico overall average hourly of labor. occupational mix is required for FY wage. As discussed in section IV.A. of 2019. The FY 2019 occupational mix the preamble of this proposed rule, prior 1. Use of 2013 Occupational Mix Survey adjustment will be based on a new to January 1, 2016, Puerto Rico hospitals for the FY 2017 Proposed Wage Index calendar year (CY) 2016 survey. The CY were paid based on 75 percent of the Section 304(c) of Public Law 106–554 2016 survey (CMS Form CMS–10079) is national standardized amount and 25 amended section 1886(d)(3)(E) of the currently awaiting approval by OMB,

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and can be accessed at http:// or hospitals that submitted erroneous or the labor-related share of the Puerto www.reginfo.gov/public/do/ aberrant data in the same manner that Rico-specific standardized amount. PRAViewICR?ref_nbr=201512-0938-011. we applied proxy data for such Section 601 of the Consolidated hospitals in the FY 2012 wage index 3. Calculation of the Proposed Appropriations Act, 2016 (Pub. L. 114– occupational mix adjustment (76 FR Occupational Mix Adjustment for FY 113), enacted on December 18, 2015, 2017 51586). amended section 1886(d)(9)(E) of the Act to specify that the payment For FY 2017, we are proposing to F. Analysis and Implementation of the Proposed Occupational Mix Adjustment calculation with respect to operating calculate the occupational mix costs of inpatient hospital services of a adjustment factor using the same and the Proposed FY 2017 Occupational Mix Adjusted Wage Index subsection (d) Puerto Rico hospital for methodology that we used for the FY inpatient hospital discharges on or after 2012, FY 2013, FY 2014, FY 2015, and 1. Analysis of the Occupational Mix January 1, 2016, shall use 100 percent FY 2016 wage indexes (76 FR 51582 Adjustment and the Occupational Mix of the national standardized amount. through 51586, 77 FR 53367 through Adjusted Wage Index Because Puerto Rico hospitals are no 53368, 78 FR 50588 through 50589, 79 longer paid with a Puerto Rico-specific FR 49968, and 80 FR 49492 through As discussed in section III.E. of the standardized amount as of January 1, 49493, respectively) and to apply the preamble of this proposed rule, for FY 2016 under section 1886(d)(9)(E) of the occupational mix adjustment to 100 2017, we are proposing to apply the Act, as amended by section 601 of the percent of the FY 2017 wage index. occupational mix adjustment to 100 Consolidated Appropriations Act, 2016, Because the statute requires that the percent of the FY 2017 wage index. We there is no longer a need to calculate a Secretary measure the earnings and paid calculated the proposed occupational Puerto Rico-specific average hourly hours of employment by occupational mix adjustment using data from the wage and wage index. Hospitals in category not less than once every 3 2013 occupational mix survey data, Puerto Rico are now paid 100 percent of years, all hospitals that are subject to using the methodology described in the the national standardized amount and, payments under the IPPS, or any FY 2012 IPPS/LTCH PPS final rule (76 hospital that would be subject to the FR 51582 through 51586). therefore, are subject to the national IPPS if not granted a waiver, must Using the occupational mix survey average hourly wage (adjusted for complete the occupational mix survey, data and applying the occupational mix occupational mix) (which would be unless the hospital has no associated adjustment to 100 percent of the FY $41.0651 for this FY 2017 IPPS cost report wage data that are included 2017 wage index results in a proposed proposed rule) and the national wage in the FY 2017 wage index. For the FY national average hourly wage of index, which is applied to the national 2017 wage index, we are using the $41.0651. Previously, we would also labor share of the national standardized Worksheet S–3, Parts II and III wage provide a Puerto Rico overall average amount. Accordingly, for FY 2017, we data of 3,345 hospitals, and we are using hourly wage. As discussed in section are not proposing a Puerto Rico-specific the occupational mix surveys of 3,143 IV.A. of the preamble of this proposed overall average hourly wage or wage hospitals for which we also have rule, prior to January 1, 2016, Puerto index. Worksheet S–3 wage data, which Rico hospitals were paid based on 75 The proposed FY 2017 national represents a ‘‘response’’ rate of 94 percent of the national standardized average hourly wages for each percent (3,143/3,345). For the proposed amount and 25 percent of the Puerto occupational mix nursing subcategory FY 2017 wage index in this proposed Rico-specific standardized amount. As a as calculated in Step 2 of the rule, we applied proxy data for result, we calculated a Puerto Rico- occupational mix calculation are as noncompliant hospitals, new hospitals, specific wage index that was applied to follows:

Average hourly Occupational mix nursing subcategory wage

National RN ...... $38.814164598 National LPN and Surgical Technician ...... 22.733613839 National Nurse Aide, Orderly, and Attendant ...... 15.94875556 National Medical Assistant ...... 18.058859076 National Nurse Category ...... 32.844074591

The proposed national average hourly Based on the 2013 occupational mix unadjusted wage indexes for each wage for the entire nurse category as survey data, we determined (in Step 7 CBSA. As a result of applying the computed in Step 5 of the occupational of the occupational mix calculation) that occupational mix adjustment to the mix calculation is $32.844074591. the national percentage of hospital wage data, the proposed wage index Hospitals with a nurse category average employees in the nurse category is 42.6 values for 221 (54.2 percent) urban areas hourly wage (as calculated in Step 4) of percent, and the national percentage of and 24 (51.1 percent) rural areas would greater than the national nurse category hospital employees in the all other increase. One hundred and three (25.2 average hourly wage receive an occupations category is 57.4 percent. At percent) urban areas would increase by occupational mix adjustment factor (as the CBSA level, the percentage of greater than or equal to 1 percent but calculated in Step 6) of less than 1.0. hospital employees in the nurse less than 5 percent, and 6 (1.5 percent) Hospitals with a nurse category average category ranged from a low of 25.6 urban areas would increase by 5 percent hourly wage (as calculated in Step 4) of percent in one CBSA to a high of 80.5 or more. Nine (19.1 percent) rural areas less than the national nurse category percent in another CBSA. would increase by greater than or equal average hourly wage receive an We compared the proposed FY 2017 to 1 percent but less than 5 percent, and occupational mix adjustment factor (as occupational mix adjusted wage indexes no rural areas would increase by 5 calculated in Step 6) of greater than 1.0. for each CBSA to the proposed percent or more. However, the proposed

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wage index values for 185 (45.3 percent) through 49960) and as discussed below, were added to another urban labor urban areas and 23 (48.9 percent) rural for FY 2017, we will be in the third and market area under the new OMB areas would decrease. Eighty-nine (21.8 final year of two 3-year transition delineations. If the hospital could not be percent) urban areas would decrease by periods for wage index (1) for hospitals assigned the wage index value of the greater than or equal to 1 percent but that, for FY 2014, were located in an CBSA in which it was geographically less than 5 percent, and no urban area urban county that became rural under located in FY 2014 because that CBSA would decrease by 5 percent or more. the new OMB delineations, and had no split apart and no longer exists, and Seven (14.9 percent) rural areas would form of wage index reclassification or some or all of its constituent counties decrease by greater than or equal to 1 redesignation in place for FY 2015 (that were added to another urban labor percent and less than 5 percent, and no is, MGCRB reclassifications under market area under the new OMB rural areas would decrease by 5 percent section 1886(d)(10) of the Act, delineations, we established that or more. The largest positive impacts redesignations under section hospitals located in such counties that would be 17.4 percent for an urban area 1886(d)(8)(B) of the Act, or rural became rural under the new OMB and 2.9 percent for a rural area. The reclassifications under section delineations were assigned the wage largest negative impacts would be 4.9 1886(d)(8)(E) of the Act); and (2) for index of the urban labor market area percent for an urban area and 2.1 hospitals deemed urban under section that contained the urban county in their percent for a rural area. Two urban 1886(d)(8)(B) of the Act where the urban FY 2014 CBSA to which they were areas’ wage indexes, but no rural area area became rural under the new OMB closest (with the rural and imputed wage indexes, would remain unchanged delineations. floors applied and with the rural floor budget neutrality adjustment applied). by application of the proposed 2. Transition for Hospitals in Urban Any such assignment made in FY 2015 occupational mix adjustment. These Areas That Became Rural results indicate that a larger percentage and continued in FY 2016 will continue of urban areas (54.2 percent) would In the FY 2015 IPPS/LTCH PPS final for FY 2017, except as discussed later in benefit from the proposed occupational rule (79 FR 49957 through 49959), for this section. We continue to believe this mix adjustment than would rural areas hospitals that, for FY 2014, were located approach minimizes the negative effects (51.1 percent). in an urban county that became rural of the change in the OMB delineations. under the new OMB delineations, and Under the policy adopted in the FY G. Transitional Wage Indexes had no form of wage index 2015 IPPS/LTCH PPS final rule, if a reclassification or redesignation in place 1. Background hospital for FY 2014 was located in an for FY 2015 (that is, MGCRB urban county that became rural for FY In the FY 2015 IPPS/LTCH PPS reclassifications under section 2015 under the new OMB delineations proposed rule and final rule (79 FR 1886(d)(10) of the Act, redesignations and such hospital sought and was 28060 and 49957, respectively), we under section 1886(d)(8)(B) of the Act, granted reclassification or redesignation stated that, overall, we believed or rural reclassifications under section for FY 2015 or FY 2016, or such hospital implementing the new OMB labor 1886(d)(8)(E) of the Act), we adopted a seeks and is granted any reclassification market area delineations would result in policy to assign them the urban wage or redesignation for FY 2017, the wage index values being more index value of the CBSA in which they hospital will permanently lose its 3-year representative of the actual costs of were physically located for FY 2014 for transitional assigned wage index status, labor in a given area. However, we a period of 3 fiscal years (with the rural and will not be eligible to reinstate it. recognized that some hospitals would and imputed floors applied and with the We established the transition policy to experience decreases in wage index rural floor budget neutrality adjustment assist hospitals if they experience a values as a result of the implementation applied to the area wage index). FY negative payment impact specifically of these new OMB labor market area 2017 will be the third year of this due to the adoption of the new OMB delineations. We also realized that some transition policy, and we are not delineations in FY 2015. If a hospital hospitals would have higher wage index proposing any changes to this policy in chooses to forego this transition values due to the implementation of the this proposed rule. In the FY 2015 IPPS/ adjustment by obtaining some form of new OMB labor market area LTCH PPS final rule (79 FR 49957) and reclassification or redesignation, we do delineations. the FY 2016 IPPS/LTCH PPS final rule not believe reinstatement of this The FY 2015 IPPS/LTCH PPS final (80 FR 49495), we stated our belief that transition adjustment would be rule (79 FR 49957) explained the it is appropriate to apply a 3-year appropriate. The purpose of the methodology utilized in implementing transition period for hospitals located in transition adjustment policy is to assist prior transition periods when adopting urban counties that would become rural hospitals that may be negatively changes that have significant payment under the new OMB delineations, given impacted by the new OMB delineations implications, particularly large negative the potentially significant payment in transitioning to a wage index based impacts. Specifically, for FY 2005, in impacts for these hospitals. We continue on these delineations. By obtaining a the FY 2005 IPPS final rule (69 FR to believe that assigning the wage index reclassification or redesignation, we 49032 through 49034), we provided of the hospitals’ FY 2014 area for a 3- believe that the hospital has made the transitional wage indexes when the year transition is the simplest and most determination that the transition OMB definitions were implemented effective method for mitigating negative adjustment is not necessary because it after the 2000 Census. The FY 2015 payment impacts due to the adoption of has other viable options for mitigating IPPS/LTCH PPS final rule (79 FR 49957 the new OMB delineations. the impact of the transition to the new through 49962) established similar In the FY 2015 IPPS/LTCH PPS final OMB delineations. transition methodologies to mitigate any rule (79 FR 49959), we noted that there As we did for FY 2015 (79 FR 49959) negative payment impacts experienced were situations where a hospital could and FY 2016 (80 FR 49495), with by hospitals due to our adoption of the not be assigned the wage index value of respect to the wage index computation new OMB labor market area the CBSA in which it geographically for FY 2017, we will follow our existing delineations for FY 2015. was located in FY 2014 because that policy regarding the inclusion of a As finalized in the FY 2015 IPPS/ CBSA split and no longer exists and hospital’s wage index data in the CBSA LTCH PPS final rule (79 FR 49957 some or all of the constituent counties in which it is geographically located (we

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refer readers to Step 6 of the method for hospitals that are deemed urban under H. Proposed Application of the computing the unadjusted wage index section 1886(d)(8)(B) of the Act under Proposed Rural, Imputed, and Frontier in the FY 2012 IPPS/LTCH PPS final the FY 2014 labor market area Floors rule (76 FR 51592)). Accordingly, for FY delineations, but are considered rural 1. Proposed Rural Floor 2017, the wage data of all hospitals under the new OMB delineations, receiving this type of 3-year transition assuming no other form of wage index Section 4410(a) of Public Law 105–33 adjustment will be included in the reclassification or redesignation is provides that, for discharges on or after October 1, 1997, the area wage index statewide rural area in which they are granted. We assign these hospitals the applicable to any hospital that is located geographically located under the new area wage index value of hospitals OMB labor market area delineations. in an urban area of a State may not be reclassified to the urban CBSA (that is, After the 3-year transition period, less than the area wage index applicable the attaching wage index) to which they beginning in FY 2018, these formerly to hospitals located in rural areas in that urban hospitals will receive their were redesignated in FY 2014 (with the State. This provision is referred to as the statewide rural wage index, absent any rural and imputed floors applied and ‘‘rural floor.’’ Section 3141 of Public reclassification or redesignation. with the rural floor budget neutrality Law 111–148 also requires that a In addition, we established in the FY adjustment applied). If the hospital national budget neutrality adjustment be 2015 IPPS/LTCH PPS final rule (79 FR cannot be assigned the reclassified wage applied in implementing the rural floor. 49959) that the hospitals receiving this index value of the CBSA to which it was Based on the proposed FY 2017 wage 3-year transition because they are in redesignated in FY 2014 because that index associated with this proposed rule counties that were urban under the FY CBSA was split apart and no longer (which is available via the Internet on 2014 CBSA definitions, but are rural exists, and some or all of its constituent the CMS Web site), we estimated that under the new OMB delineations, will counties were added to another urban 371 hospitals would receive an increase not be considered urban hospitals. labor market area under the new OMB in their FY 2017 proposed wage index Rather, they will maintain their status as delineations, such hospitals are due to the application of the rural floor. rural hospitals for other payment assigned the wage index of the hospitals 2. Proposed Imputed Floor for FY 2017 considerations. This is because our reclassified to the urban labor market In the FY 2005 IPPS final rule (69 FR application of a 3-year transitional wage area that contained the urban county in index for these newly rural hospitals 49109 through 49111), we adopted the their FY 2014 redesignated CBSA to ‘‘imputed floor’’ policy as a temporary only applies for the purpose of which they were closest. We assign calculating the wage index under our 3-year regulatory measure to address these hospitals the area wage index of adoption of the new OMB delineations. concerns from hospitals in all-urban hospitals reclassified to a CBSA because States that have argued that they are 3. Transition for Hospitals Deemed hospitals deemed urban under section disadvantaged by the absence of rural Urban Under Section 1886(d)(8)(B) of 1886(d)(8)(B) of the Act are treated as hospitals to set a wage index floor for the Act Where the Urban Area Became reclassified under current policy, under those States. Since its initial Rural Under the New OMB Delineations which such hospitals receive an area implementation, we have extended the As discussed in the FY 2015 IPPS/ wage index that includes wage data of imputed floor policy six times, the last LTCH PPS final rule (79 FR 49959 all hospitals reclassified to the area. of which was adopted in the FY 2016 through 49960) and FY 2016 IPPS/LTCH This wage index assignment will be IPPS/LTCH PPS final rule and is set to PPS final rule (80 FR 49495 through forfeited if the hospital obtains any form expire on September 30, 2016. (We refer 49496), there were some hospitals that, of wage index reclassification or readers to further discussions of the for FY 2014, were geographically redesignation. imputed floor in the FY 2014, FY 2015, located in rural areas but were deemed and FY 2016 IPPS/LTCH PPS final rules to be urban under section 1886(d)(8)(B) 4. Budget Neutrality (78 FR 50589 through 50590, 79 FR of the Act. For FY 2015, some of these 49969 through 49970, and 80 FR 49497 hospitals redesignated under section In the FY 2015 IPPS/LTCH PPS final through 49498, respectively) and to the 1886(d)(8)(B) of the Act were no longer rule (79 FR 50372 through 50373), for regulations at 42 CFR 412.64(h)(4).) eligible for deemed urban status under FY 2015, and in the FY 2016 IPPS/ Currently, there are three all-urban the new OMB delineations, as discussed LTCH PPS final rule (80 FR 49496), for States—Delaware, New Jersey, and in detail in section III.H.3. of the FY 2016, we applied the 3-year Rhode Island—with a range of wage preamble of the FY 2015 IPPS/LTCH transition wage index adjustments in a indexes assigned to hospitals in these PPS final rule. Similar to the policy budget neutral manner. For FY 2017, we States, including through implemented in the FY 2005 IPPS final are proposing to apply the 3-year reclassification or redesignation. (We rule (69 FR 49059), and consistent with transition adjustments in a budget refer readers to discussions of the FY 2015 policy we established for neutral manner. We are proposing to geographic reclassifications and other hospitals in counties that were make an adjustment to the standardized redesignations in section III.J. of the urban and became rural under the new amount to ensure that the total preamble of this proposed rule.) OMB delineations, we finalized a policy payments, including the effect of the In computing the imputed floor for an to apply a 3-year transition to these transition provisions, would equal what all-urban State under the original hospitals redesignated to urban areas payments would have been if we would methodology, which was established under section 1886(d)(8)(B) of the Act not be providing for any transitional beginning in FY 2005, we calculated the for FY 2014 that are no longer deemed wage indexes under the new OMB ratio of the lowest-to-highest CBSA urban under the new OMB delineations delineations. For a complete discussion wage index for each all-urban State as and revert to being rural. on the proposed budget neutrality well as the average of the ratios of For FY 2017, we are not proposing adjustment for FY 2017, we refer readers lowest-to-highest CBSA wage indexes of any changes to this policy and will those all-urban States. We then to section II.A.4.b. of the Addendum to continue the third and final year of the compared the State’s own ratio to the this proposed rule. implementation of our policy to provide average ratio for all-urban States and a 3-year transition adjustment to whichever is higher is multiplied by the

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highest CBSA wage index value in the wage indexes assigned to its hospitals, through September 30, 2017. The wage State—the product of which established but the State cannot benefit under the index and impact tables associated with the imputed floor for the State. As of FY original methodology. this FY 2017 IPPS/LTCH PPS proposed 2012, there were only two all-urban In the FY 2014 IPPS/LTCH PPS final rule (which are available on the Internet States—New Jersey and Rhode Island— rule (78 FR 50589 through 50590), we via the CMS Web site) reflect the and only New Jersey benefitted under extended the imputed floor policy (both proposed continued application of the this methodology. Under the previous the original methodology and the imputed floor policy at § 412.64(h)(4) OMB labor market area delineations, alternative methodology) for 1 and a proposed national budget Rhode Island had only one CBSA additional year, through September 30, neutrality adjustment for the imputed (Providence-New Bedford-Fall River, 2014, while we continued to explore floor for FY 2017. There are 20 RI–MA) and New Jersey had 10 CBSAs. potential wage index reforms. providers in New Jersey that would Therefore, under the original In the FY 2015 IPPS/LTCH PPS final receive an increase in their proposed FY methodology, Rhode Island’s own ratio rule (79 FR 49969 through 49970), for 2017 wage index due to the proposed equaled 1.0, and its imputed floor was FY 2015, we adopted a policy to extend continued application of the imputed equal to its original CBSA wage index the imputed floor policy (both the floor policy under the original value. However, because the average original methodology and alternative methodology, and 10 hospitals in Rhode ratio of New Jersey and Rhode Island methodology) for another year, through Island that would benefit under the was higher than New Jersey’s own ratio, September 30, 2015, as we continued to alternative methodology. No providers this methodology provided a benefit for explore potential wage index reforms. In in Delaware would benefit under the New Jersey, but not for Rhode Island. that final rule, we revised the original methodology or the alternative regulations at § 412.64(h)(4) and methodology. In the FY 2013 IPPS/LTCH PPS final (h)(4)(vi) to reflect the 1-year extension rule (77 FR 53368 through 53369), we of the imputed floor. 3. Proposed State Frontier Floor for FY retained the imputed floor calculated As discussed in section III.B. of the 2017 under the original methodology as preamble of that FY 2015 final rule, we Section 10324 of Public Law 111–148 discussed above, and established an adopted the new OMB labor market area requires that hospitals in frontier States alternative methodology for computing delineations beginning in FY 2015. cannot be assigned a wage index of less the imputed floor wage index to address Under the new OMB delineations, than 1.0000 (we refer readers to the concern that the original imputed Delaware became an all-urban State, regulations at 42 CFR 412.64(m) and to floor methodology guaranteed a benefit along with New Jersey and Rhode a discussion of the implementation of for one all-urban State with multiple Island. Under the new OMB this provision in the FY 2011 IPPS/ wage indexes (New Jersey) but could not delineations, Delaware has three CBSAs, LTCH PPS final rule (75 FR 50160 benefit the other all-urban State (Rhode New Jersey has seven CBSAs, and through 50161)). Fifty hospitals would Island). The alternative methodology for Rhode Island continues to have only receive the frontier floor value of 1.0000 calculating the imputed floor was one CBSA (Providence-Warwick, RI- established using data from the MA). We refer readers to a detailed for their FY 2017 wage index in this application of the rural floor policy for discussion of our adoption of the new proposed rule. These hospitals are FY 2013. Under the alternative OMB labor market area delineations in located in Montana, Nevada, North methodology, we first determined the section III.B. of the preamble of the FY Dakota, South Dakota, and Wyoming. average percentage difference between 2015 IPPS/LTCH PPS final rule. We are not proposing any changes to the post-reclassified, pre-floor area wage Therefore, under the adopted new OMB the frontier floor policy for FY 2017. index and the post-reclassified, rural delineations discussed in section III.B. The areas affected by the proposed floor wage index (without rural floor of the preamble of the FY 2015 IPPS/ rural, imputed, and frontier floor budget neutrality applied) for all CBSAs LTCH PPS final rule, Delaware became policies for the proposed FY 2017 wage receiving the rural floor. (Table 4D an all-urban State and was subject to an index are identified in Table 2 associated with the FY 2013 IPPS/LTCH imputed floor as well for FY 2015. associated with this proposed rule, PPS final rule (which is available via the In the FY 2016 IPPS/LTCH PPS final which is available via the Internet on Internet on the CMS Web site) included rule (80 FR 49497 through 49498), for the CMS Web site. the CBSAs receiving a State’s rural floor FY 2016, we extended the imputed floor I. Proposed FY 2017 Wage Index Tables wage index.) The lowest post- policy (under both the original reclassified wage index assigned to a methodology and the alternative In the FY 2016 IPPS/LTCH PPS final hospital in an all-urban State having a methodology) for 1 additional year, rule (80 FR 49498 and 49807 through range of such values then is increased through September 30, 2016. In that 49808), we finalized a proposal to by this factor, the result of which final rule, we revised the regulations at streamline and consolidate the wage establishes the State’s alternative § 412.64(h)(4) and (h)(4)(vi) to reflect index tables associated with the IPPS imputed floor. We amended this additional 1-year extension. proposed and final rules for FY 2016 § 412.64(h)(4) of the regulations to add For FY 2017, we are proposing to and subsequent fiscal years. Prior to FY new paragraphs to incorporate the extend the imputed floor policy (under 2016, the wage index tables had finalized alternative methodology, and both the original methodology and the consisted of 12 tables (Tables 2, 3A, 3B, to make reference and date changes. In alternative methodology) for 1 4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) summary, for the FY 2013 wage index, additional year, through September 30, that were made available via the we did not make any changes to the 2017, while we continue to explore Internet on the CMS Web site. Effective original imputed floor methodology at potential wage index reforms. We are beginning FY 2016, with the exception § 412.64(h)(4) and, therefore, made no proposing to revise the regulations at of Table 4E, we streamlined and changes to the New Jersey imputed floor § 412.64(h)(4) and (h)(4)(vi) to reflect consolidated 11 tables (Tables 2, 3A, 3B, computation for FY 2013. Instead, for this proposed additional 1-year 4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into FY 2013, we adopted a second, extension. We are inviting public 2 tables (Tables 2 and 3). We refer alternative methodology for use in cases comments on the proposed additional 1- readers to section VI. of the Addendum where an all-urban State has a range of year extension of the imputed floor to this proposed rule for a discussion of

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the proposed wage index tables for FY requests. Based on such reviews, there b. Requirements for FY 2018 2017. are 299 hospitals approved for wage Applications and Proposed Revisions Regarding Paper Application J. Proposed Revisions to the Wage Index index reclassifications by the MGCRB Based on Hospital Redesignations and starting in FY 2017. Because MGCRB Requirements Reclassifications wage index reclassifications are Applications for FY 2018 effective for 3 years, for FY 2017, reclassifications are due to the MGCRB 1. General Policies and Effects of hospitals reclassified beginning in FY by September 1, 2016 (the first working Reclassification and Redesignation 2015 or FY 2016 are eligible to continue day of September 2016). We note that Under section 1886(d)(10) of the Act, to be reclassified to a particular labor this is also the deadline for canceling a the Medicare Geographic Classification market area based on such prior previous wage index reclassification Review Board (MGCRB) considers reclassifications for the remainder of withdrawal or termination under 42 applications by hospitals for geographic their 3-year period. There were 302 CFR 412.273(d). Applications and other reclassification for purposes of payment hospitals approved for wage index information about MGCRB under the IPPS. Hospitals must apply to reclassifications in FY 2015 that will reclassifications may be obtained, the MGCRB to reclassify not later than continue for FY 2017, and 266 hospitals beginning in mid-July 2016, via the 13 months prior to the start of the fiscal approved for wage index Internet on the CMS Web site at year for which reclassification is sought reclassifications in FY 2016 that will https://www.cms.gov/Regulations-and- (usually by September 1). Generally, continue for FY 2017. Of all the Guidance/Review-Boards/MGCRB/ hospitals must be proximate to the labor hospitals approved for reclassification index.html, or by calling the MGCRB at market area to which they are seeking (410) 786–1174. The mailing address of reclassification and must demonstrate for FY 2015, FY 2016, and FY 2017, based upon the review at the time of the MGCRB is: 2520 Lord Baltimore characteristics similar to hospitals Drive, Suite L, Baltimore, MD 21244– this proposed rule, 867 hospitals are in located in that area. The MGCRB issues 2670. a reclassification status for FY 2017. its decisions by the end of February for Under existing regulations at 42 CFR reclassifications that become effective Under the regulations at 42 CFR 412.256(a)(1), applications for for the following fiscal year (beginning 412.273, hospitals that have been reclassification must be mailed or October 1). The regulations applicable reclassified by the MGCRB are delivered to the MGCRB, with a copy to to reclassifications by the MGCRB are permitted to withdraw their CMS, and may not be submitted through located in 42 CFR 412.230 through applications within 45 days of the the facsimile (FAX) process or by other 412.280. (We refer readers to a publication of a proposed rule. For electronic means. While existing discussion in the FY 2002 IPPS final information about withdrawing, regulations exclusively require paper rule (66 FR 39874 and 39875) regarding terminating, or canceling a previous applications, we believe this policy to how the MGCRB defines mileage for withdrawal or termination of a 3-year be outdated and overly restrictive. purposes of the proximity reclassification for wage index Therefore, to promote ease of requirements.) The general policies for purposes, we refer readers to 42 CFR application for FY 2018 and subsequent reclassifications and redesignations that 412.273, as well as the FY 2002 IPPS years, we are proposing to revise this we are proposing for FY 2017, and the final rule (66 FR 39887 through 39888) policy to require applications and policies for the effects of hospitals’ supporting documentation to be reclassifications and redesignations on and the FY 2003 IPPS final rule (67 FR 50065 through 50066). Additional submitted via the method prescribed in the wage index, are the same as those instructions by the MGCRB, with an discussion on withdrawals and discussed in the FY 2012 IPPS/LTCH electronic copy to CMS. Therefore, we terminations, and clarifications PPS final rule for the FY 2012 final are proposing to revise § 412.256(a)(1) to regarding reinstating reclassifications wage index (76 FR 51595 and 51596). In specify that an application must be addition, in the FY 2012 IPPS/LTCH and ‘‘fallback’’ reclassifications, were submitted to the MGCRB according to PPS final rule, we discussed the effects included in the FY 2008 IPPS final rule the method prescribed by the MGCRB, on the wage index of urban hospitals (72 FR 47333). with an electronic copy of the reclassifying to rural areas under 42 CFR Changes to the wage index that result application sent to CMS. We are 412.103. Hospitals that are from withdrawals of requests for specifying that CMS copies should be geographically located in States without reclassification, terminations, wage sent via email to wageindex@ any rural areas are ineligible to apply for index corrections, appeals, and the cms.hhs.gov. We are inviting public rural reclassification in accordance with Administrator’s review process for FY comments on this proposal. the provisions of 42 CFR 412.103. 2017 will be incorporated into the wage c. Other Policy Regarding 2. MGCRB Reclassification and index values published in the FY 2017 Reclassifications for Terminated Redesignation Issues for FY 2017 IPPS/LTCH PPS final rule. These Hospitals changes affect not only the wage index a. FY 2017 Reclassification Under longstanding CMS policy, if a value for specific geographic areas, but Requirements and Approvals hospital that has an approved also the wage index value that Under section 1886(d)(10) of the Act, reclassification by the MGCRB redesignated/reclassified hospitals the MGCRB considers applications by terminates its CMS certification number receive; that is, whether they receive the hospitals for geographic reclassification (CCN), we terminate the reclassification for purposes of payment under the IPPS. wage index that includes the data for status for that hospital when calculating The specific procedures and rules that both the hospitals already in the area the wage index, because the CCN is no apply to the geographic reclassification and the redesignated/reclassified longer active, and because the MGCRB process are outlined in regulations hospitals. Further, the wage index value makes its reclassification decisions under 42 CFR 412.230 through 412.280. for the area from which the hospitals are based on CCNs. We believe this policy At the time this proposed rule was redesignated/reclassified may be results in more accurate reclassifications constructed, the MGCRB had completed affected. when compiling CBSA labor market its review of FY 2017 reclassification wage data, as it is often the case that

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hospitals that have terminated their 2010 Decennial Census data to identify reclassification for purposes of CCNs have also terminated operations, counties in which hospitals qualify calculating the wage index in and can no longer make timely and under section 1886(d)(8)(B) of the Act to accordance with section informed decisions regarding receive the wage index of the urban 1886(d)(8)(C)(iii) of the Act. (Section reclassification statuses, which could area. Hospitals located in these counties 1886(d)(8)(C)(iii) of the Act states that have ramifications for various wage are referred to as ‘‘Lugar’’ hospitals and the application of section 1886(d)(8)(B) index floors and labor market values. the counties themselves are often of the Act or a decision of the MGCRB However, as discussed in response to referred to as ‘‘Lugar’’ counties. The or the Secretary under section a comment in the FY 2016 IPPS/LTCH chart for this FY 2017 proposed rule 1886(d)(10) of the Act may not result in PPS final rule (80 FR 49499 through with the listing of the rural counties the reduction of any county’s wage 49500), in the case of a merger or containing the hospitals designated as index to a level below the wage index acquisition where the acquiring hospital urban under section 1886(d)(8)(B) of the for rural areas in the State in which the accepted the Medicare provider Act is available via the Internet on the county is located.) The wage index agreement of the acquired hospital CMS Web site. associated with the Lugar status, and located in a different market area that In an interim final rule with comment not the wage index associated with the has an existing MGCRB reclassification, period (IFC) (CMS–1664–IFC) that § 412.103 reclassification, is reflected we do believe that the acquiring appeared elsewhere in this issue of the accordingly in Table 2 associated with hospital should be able to make Federal Register, CMS made regulatory this proposed rule (which is available determinations regarding the changes in order to implement the via the Internet on the CMS Web site). reclassification status of the subordinate decisions in Geisinger Community We note that, for payment purposes campus. While the original CCN for the Medical Center v. Secretary, United other than the wage index, a hospital acquired hospital would be considered States Department of Health and with simultaneous § 412.103 status and terminated or ‘‘tied out’’ by CMS, in the Human Services, 794 F.3d 383 (3d Cir. Lugar reclassification receives payment specific situations where a hospital 2015) and Lawrence + Memorial as a rural hospital. merges with or acquires another Hospital v. Burwell, No. 15–164, 2016 hospital located in a different labor WL 423702 (2d Cir. Feb. 4, 2015) in a 4. Waiving Lugar Redesignation for the market area to create a ‘‘multicampus’’ nationally consistent manner. Out-Migration Adjustment hospital and accepts the Medicare Specifically, the IFC revises the In the FY 2012 IPPS/LTCH PPS final provider agreement of the acquired regulations at § 412.230(a)(5)(ii) and rule (76 FR 51599 through 51600), we hospital, the reclassification status of removes the regulatory provision at adopted the policy that, beginning with the subordinate campus remains in § 412.230(a)(5)(iii) to allow hospitals FY 2012, an eligible hospital that waives effect. The acquired campus (that is, the nationwide to reclassify based on their its Lugar status in order to receive the hospital whose CCN is no longer active) acquired rural status, effective with out-migration adjustment has effectively may continue to receive its previously reclassifications beginning with FY waived its deemed urban status and, approved reclassification status, and the 2018. The IFC also gives hospitals with thus, is rural for all purposes under the acquiring hospital is authorized to make an existing MGCRB reclassification the IPPS, including being considered rural timely requests to terminate, withdraw, opportunity to seek rural reclassification for the DSH payment adjustment, or reinstate any reclassification for the for IPPS payment and other purposes effective for the fiscal year in which the subordinate campus for any remaining under § 412.103 and keep their existing hospital receives the out-migration years of the reclassification. We believe MGCRB reclassification. adjustment. (We refer readers to a this policy is consistent with existing As a consequence of the regulatory discussion of DSH payment adjustment regulations regarding reclassification changes in the IFC that allow a hospital under section IV.F. of the preamble of status of ‘‘multicampus’’ hospitals at to have more than one reclassification this proposed rule.) § 412.230(d)(2)(v). Hospitals should take simultaneously, we are clarifying in this In addition, we adopted a minor care to review their status on Table 2 proposed rule that a hospital with Lugar procedural change in that rule that associated with this proposed rule status may simultaneously receive an allows a Lugar hospital that qualifies for (which is available via the Internet on urban to rural reclassification under and accepts the out-migration the CMS Web site) and notify CMS if § 412.103. The IFC provides that when adjustment (through written notification they believe a reclassification for a there is both a § 412.103 reclassification to CMS within 45 days from the hospital was mistakenly terminated by and an MGCRB reclassification, the publication of the proposed rule) to CMS. MGCRB reclassification controls for waive its urban status for the full 3-year wage index calculation and payment period for which its out-migration 3. Redesignation of Hospitals Under purposes (the IFC can be downloaded adjustment is effective. By doing so, Section 1886(d)(8)(B) of the Act from the CMS Web site at: https://www. such a Lugar hospital would no longer Section 1886(d)(8)(B)(i) of the Act cms.gov/Medicare/Medicare-Fee-for- be required during the second and third requires the Secretary to treat a hospital Service-Payment/AcuteInpatientPPS/ years of eligibility for the out-migration located in a rural county adjacent to one IPPS-Regulations-and-Notices.html). adjustment to advise us annually that it or more urban areas as being located in Similarly, in this proposed rule, we are prefers to continue being treated as rural the urban MSA to which the greatest clarifying that we are treating the wage and receive the out-migration number of workers in the county data of hospitals with simultaneous adjustment. Therefore, under the commute if certain adjacency and Lugar status and § 412.103 procedural change, a Lugar hospital that commuting criteria are met. The criteria reclassification as Lugar for wage index requests to waive its urban status in utilize standards for designating MSAs calculation and wage index payment order to receive the rural wage index in published in the Federal Register by the purposes. We believe it is appropriate to addition to the out-migration Director of the Office of Management apply a similar policy for simultaneous adjustment would be deemed to have and Budget (OMB) based on the most MGCRB reclassification and § 412.103 accepted the out-migration adjustment recently available decennial population reclassifications, and simultaneous and agrees to be treated as rural for the data. Effective beginning FY 2015, we Lugar and § 412.103 reclassifications, duration of its 3-year eligibility period, use the OMB delineations based on the because CMS treats Lugar status as a unless, prior to its second or third year

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of eligibility, the hospital explicitly 2010 Census data beginning with FY in the rural area (as defined in notifies CMS in writing, within the 2016. paragraph (2)(D)) of the State in which required period (generally 45 days from To determine the out-migration the hospital is located. We refer readers the publication of the proposed rule), adjustments and applicable counties for to the regulations at 42 CFR 412.103 for that it instead elects to return to its FY 2016, we analyzed commuting data the general criteria and application deemed urban status and no longer compiled by the Census Bureau that requirements for a subsection (d) wishes to accept the out-migration were derived from a custom tabulation hospital to reclassify from urban to rural adjustment. If the hospital does notify of the American Community Survey status in accordance with section CMS that it is electing to return to its (ACS), an official Census Bureau survey, 1886(d)(8)(E) of the Act. The FY 2012 deemed urban status, it would again be utilizing 2008 through 2012 (5-Year) IPPS/LTCH PPS final rule (76 FR 51595 treated as urban for all IPPS payment Microdata. The data were compiled through 51596) includes our policies purposes. from responses to the ACS questions regarding the effect of wage data from We refer readers to the FY 2012 IPPS/ regarding the county where workers reclassified or redesignated hospitals. LTCH PPS final rule (76 FR 51599 reside and the county to which workers Hospitals must meet the criteria to be through 51600) for a detailed discussion commute. As we discussed in the FY reclassified from urban to rural status of the policy and process for waiving 2016 IPPS/LTCH PPS final rule (80 FR under § 412.103, as well as fulfill the Lugar status for the out-migration 49501), the same policies, procedures, requirements for the application adjustment. and computation that were used for the process. However, under existing FY 2012 out-migration adjustment were § 412.103(b), there is no timeframe K. Proposed Out-Migration Adjustment applicable for FY 2016, and we are requirement as to when hospitals must Based on Commuting Patterns of proposing to use them again for FY apply for the urban to rural Hospital Employees for FY 2017 2017. We have applied the same reclassification. Therefore, a hospital In accordance with section policies, procedures, and computations can apply for the urban to rural 1886(d)(13) of the Act, as added by since FY 2012, and we believe they reclassification at any time, and under section 505 of Public Law 108–173, continue to be appropriate for FY 2017. § 412.103(d), the effective date of the beginning with FY 2005, we established We refer readers to the FY 2016 IPPS/ hospital’s rural status, once approved, is a process to make adjustments to the LTCH PPS final rule (80 FR 49500 the filing date of the application. There may be one or more reasons hospital wage index based on through 49502) for a full explanation of the revised data source. that a hospital applies for the urban to commuting patterns of hospital For FY 2017, until such time that rural reclassification, and the timeframe employees (the ‘‘out-migration’’ CMS finalizes out-migration that a hospital submits an application is adjustment). The process, outlined in adjustments based on the next Census, often dependent on those reason(s). the FY 2005 IPPS final rule (69 FR the out-migration adjustment continues Because there are no timeframes for 49061), provides for an increase in the to be based on the data derived from the when a hospital must submit its wage index for hospitals located in custom tabulation of the ACS utilizing application under § 412.103, it is the certain counties that have a relatively 2008 through 2012 (5-Year) Microdata. hospital’s prerogative as to when it files high percentage of hospital employees For FY 2017, we are not proposing any the application with the CMS Regional who reside in the county but work in a changes to the methodology or data Office. Because the wage index is part different county (or counties) with a source that we used for FY 2016. (We of the methodology for determining the higher wage index. refer readers to a full discussion of the prospective payments to hospitals for Section 1886(d)(13)(B) of the Act out-migration adjustment, including each fiscal year, we believe there should requires the Secretary to use data the rules on deeming hospitals reclassified be a definitive timeframe within which Secretary determines to be appropriate under section 1886(d)(8) or section a hospital should apply for rural status to establish the qualifying counties. 1886(d)(10) of the Act to have waived in order for the reclassification to be When the provision of section the out-migration adjustment, in the FY reflected in the next Federal fiscal year’s 1886(d)(13) of the Act was implemented 2012 IPPS/LTCH PPS final rule (76 FR wage data used for setting payment for the FY 2005 wage index, we 51601 through 51602).) Table 2 rates. As hospitals are aware, the IPPS analyzed commuting data compiled by associated with this proposed rule ratesetting process that CMS undergoes the U.S. Census Bureau that were (which is available via the Internet on each proposed and final rulemaking is derived from a special tabulation of the the CMS Web site) includes the complex and labor-intensive, and 2000 Census journey-to-work data for all proposed out-migration adjustments for subject to a compressed timeframe in industries (CMS extracted data the FY 2017 wage index. order to issue the final rule each year applicable to hospitals). These data within the timeframes for publication. were compiled from responses to the L. Notification Regarding Proposed CMS Accordingly, CMS must ensure that it ‘‘long-form’’ survey, which the Census ‘‘Lock-In’’ Date for Urban to Rural receives, in a timely fashion, the Bureau used at the time and which Reclassifications Under § 412.103 necessary data, including, but not contained questions on where residents Under section 1886(d)(8)(E) of the limited to, the list of hospitals that are in each county worked (69 FR 49062). Act, a qualifying prospective payment reclassified from urban to rural status However, the 2010 Census was ‘‘short hospital located in an urban area may under § 412.103, in order to calculate form’’ only; information on where apply for rural status for payment the wage indexes and other IPPS rates. residents in each county worked was purposes separate from reclassification Therefore, in this proposed rule, we not collected as part of the 2010 Census. through the MGCRB. Specifically, are proposing a date by when we would The Census Bureau worked with CMS to section 1886(d)(8)(E) of the Act provides ‘‘lock in’’ the list of hospitals that are provide an alternative dataset based on that, not later than 60 days after the reclassified from urban to rural status the latest available data on where receipt of an application (in a form and under § 412.103 in order to include residents in each county worked in manner determined by the Secretary) them in the upcoming Federal fiscal 2010, for use in developing a new out- from a subsection (d) hospital that year’s wage index calculation provided migration adjustment based on new satisfies certain criteria, the Secretary for at § 412.64(h) and budget neutrality commuting patterns developed from the shall treat the hospital as being located calculations provided for at

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§§ 412.64(e)(1)(ii), (e)(2), and (e)(4) that reclassification status after the second In the interest of meeting the data are part of the ratesetting process). The Monday in June, for wage index and needs of the public, beginning with the ratesetting process is described in the budget neutrality purposes, the proposed FY 2009 wage index, we post Addendum of the annual proposed and reclassification would not be reflected an additional PUF on our Web site that final rules and includes the budget in the payment rates until the following reflects the actual data that are used in neutrality adjustments in accordance Federal fiscal year; that is, the Federal computing the proposed wage index. with the regulations at fiscal year following the next Federal The release of this file does not alter the §§ 412.64(e)(1)(ii), (e)(2), and (e)(4), as fiscal year. We are proposing to revise current wage index process or schedule. well as adjustments for differences in § 412.103(b) by adding a new paragraph We notify the hospital community of the area wage levels provided for at (6) to incorporate this proposed policy. availability of these data as we do with § 412.64(h). We believe that this Proposed § 412.103(b)(6) would specify the current public use wage data files proposal would introduce additional that in order for a hospital to be treated through our Hospital Open Door Forum. transparency and predictability as rural in the wage index and budget We encourage hospitals to sign up for regarding the timing of accounting for neutrality calculations under automatic notifications of information urban or rural status in the IPPS §§ 412.64(e)(1)(ii), (e)(2), (e)(4), and (h) about hospital issues and about the ratesetting each Federal fiscal year. We for payment rates for the next Federal dates of the Hospital Open Door Forums are proposing that this date for ‘‘locking fiscal year, the hospital’s filing date at the CMS Web site at: http://www.cms. in’’ the list of hospitals with rural status must be no later than 70 days prior to gov/Outreach-and-Education/Outreach/ achieved under § 412.103 would be the the second Monday in June of the OpenDoorForums/index.html. second Monday in June of each year. current Federal fiscal year and the In a memorandum dated April 30, Therefore, if a hospital is applying for application must be approved by the 2015, we instructed all MACs to inform an urban to rural reclassification under CMS Regional Office in accordance with the IPPS hospitals that they service of § 412.103 for the purpose and the requirements of § 412.103. the availability of the wage index data expectation that its rural status be M. Process for Requests for Wage Index files and the process and timeframe for reflected in the wage index and budget Data Corrections requesting revisions (including the specific deadlines listed later in this neutrality calculations for setting The preliminary, unaudited section). We also instructed the MACs payment rates for the next Federal fiscal Worksheet S–3 wage data files for the to advise hospitals that these data were year, the hospital would need to file its proposed FY 2017 wage index were also made available directly through application with the CMS Regional made available on May 15, 2015, and their representative hospital Office not later than 70 days prior to the the preliminary CY 2013 occupational organizations. second Monday in June. Because, under mix data files on May 15, 2015, through 412.103(c), the CMS Regional Office the Internet on the CMS Web site at: If a hospital wished to request a must notify the hospital of its approval https://www.cms.gov/Medicare/ change to its data as shown in May 15, or disapproval of the application within Medicare-Fee-for-Service-Payment/ 2015 wage data files and May 15, 2015 60 days of the hospital’s filing date (the AcuteInpatientPPS/Wage-Index-Files- occupational mix data files, the hospital date it is received by the CMS Regional Items/FY2017-Wage-Index-Home- was to submit corrections along with Office, in accordance with Page.html. complete, detailed supporting § 412.103(b)(5)), we would expect that On January 29, 2016, we posted a documentation to its MAC by the extra 10 days would provide the public use file (PUF) at https://www. September 2, 2015. Hospitals were CMS Regional Office with sufficient cms.gov/Medicare/Medicare-Fee-for- notified of this deadline and of all other processing and administrative time to Service-Payment/AcuteInpatientPPS/ deadlines and requirements, including notify the CMS Central Office of the Wage-Index-Files-Items/FY2017-Wage- the requirement to review and verify reclassification status of the Index-Home-Page.html containing FY their data as posted in the preliminary applications by the second Monday in 2017 wage index data available as of wage index data files on the Internet, June of each year. This is the latest date January 28, 2016. This PUF contains a through the letters sent to them by their that CMS would need the information in tab with the Worksheet S–3 wage data MACs. order to ensure that reclassified (which includes Worksheet S–3, Parts II November 4, 2015 was the date by hospitals would be included as such in and III wage data from cost reporting when MACs notified State hospital the wage index and budget neutrality periods beginning on or after October l, associations regarding hospitals that calculations for setting payment rates 2012 through September 30, 2013; that failed to respond to issues raised during for the next Federal fiscal year. This is, FY 2013 wage data), a tab with the the desk reviews. The MACs notified does not preclude a hospital from occupational mix data (which includes the hospitals by mid-January 2016 of applying for reclassification under data from the CY 2013 occupational mix any changes to the wage index data as § 412.103 earlier or later than the survey, Form CMS–10079), and new for a result of the desk reviews and the proposed deadline. Nor does the FY 2017, a tab containing the Worksheet resolution of the hospitals’ revision proposed deadline change the fact that S–3 wage data of hospitals deleted from requests. The MACs also submitted the the rural reclassification is effective as the January 29, 2016 wage data PUF and revised data to CMS by January 22, of its filing date, in accordance with a tab containing the CY 2013 2016. CMS published the proposed § 412.103(d). However, in order to occupational mix data (if any) of the wage index PUFs that included ensure that a reclassification is reflected hospitals deleted from the January 29, hospitals’ revised wage index data on in the wage index and budget neutrality 2016 wage data PUF. In a memorandum January 29, 2016. Hospitals had until calculations for setting payment rates dated January 21, 2016, we instructed February 16, 2016, to submit requests to for the next Federal fiscal year, all MACs to inform the IPPS hospitals the MACs for reconsideration of applications must be received by the that they service of the availability of adjustments made by the MACs as a CMS Regional Office (the filing date) by the January 29, 2016 wage index data result of the desk review, and to correct no later than 70 days prior to the second PUFs, and the process and timeframe for errors due to CMS’ or the MAC’s Monday in June of each year. If the CMS requesting revisions in accordance with mishandling of the wage index data. Central Office is informed of a the FY 2017 Wage Index Timetable. Hospitals also were required to submit

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sufficient documentation to support • Requests for wage index data provides hospitals with sufficient their requests. corrections that were submitted too late opportunity to bring errors in their wage After reviewing requested changes to be included in the data transmitted to and occupational mix data to the MAC’s submitted by hospitals, MACs were CMS by the MACs on or before March attention. Moreover, because hospitals required to transmit to CMS any 24, 2016. have access to the final wage index data additional revisions resulting from the • Requests for correction of errors PUFs by late April 2016, they have the hospitals’ reconsideration requests by that were not, but could have been, opportunity to detect any data entry or March 24, 2016. The deadline for a identified during the hospital’s review tabulation errors made by the MAC or hospital to request CMS intervention in of the January 29, 2016 wage index CMS before the development and cases where a hospital disagreed with a PUFs. publication of the final FY 2017 wage MAC’s policy interpretation was April • Requests to revisit factual index by August 2016, and the 5, 2016. We note that, as we did for the determinations or policy interpretations implementation of the FY 2017 wage FY 2016 wage index, for the FY 2017 made by the MAC or CMS during the index on October 1, 2016. Given these wage index, in accordance with the FY wage index data correction process. processes, the wage index implemented 2017 wage index timeline posted on the If, after reviewing the April 2016 final on October 1 should be accurate. CMS Web site at https://www.cms.gov/ wage index data PUFs, a hospital Nevertheless, in the event that errors are Medicare/Medicare-Fee-for-Service- believes that its wage or occupational identified by hospitals and brought to Payment/AcuteInpatientPPS/Wage- mix data were incorrect due to a MAC our attention after May 23, 2016, we Index-Files-Items/FY2017-Wage-Index- or CMS error in the entry or tabulation retain the right to make midyear Home-Page.html, the April appeals have of the final data, the hospital is given changes to the wage index under very to be sent via mail and email. We refer the opportunity to notify both its MAC limited circumstances. readers to the wage index timeline for and CMS regarding why the hospital Specifically, in accordance with 42 complete details. believes an error exists and provide all CFR 412.64(k)(1) of our regulations, we Hospitals are given the opportunity to supporting information, including make midyear corrections to the wage examine Table 2, which is listed in relevant dates (for example, when it first index for an area only if a hospital can section VI. of the Addendum to this became aware of the error). The hospital show that: (1) The MAC or CMS made proposed rule and available via the is required to send its request to CMS an error in tabulating its data; and (2) Internet on the CMS Web site at: and to the MAC no later than May 23, the requesting hospital could not have https://www.cms.gov/Medicare/ 2016. Similar to the April appeals, known about the error or did not have Medicare-Fee-for-Service-Payment/ beginning with the FY 2015 wage index, an opportunity to correct the error, AcuteInpatientPPS/Wage-Index-Files- in accordance with the FY 2017 wage before the beginning of the fiscal year. Items/FY2017-Wage-Index-Home- index timeline posted on the CMS Web For purposes of this provision, ‘‘before Page.html. Table 2 contains each site at https://www.cms.gov/Medicare/ the beginning of the fiscal year’’ means hospital’s proposed adjusted average Medicare-Fee-for-Service-Payment/ by the May deadline for making hourly wage used to construct the wage AcuteInpatientPPS/Wage-Index-Files- corrections to the wage data for the index values for the past 3 years, Items/FY2017-Wage-Index-Home.html, following fiscal year’s wage index (for including the FY 2013 data used to the May appeals must be sent via mail example, May 23, 2016 for the FY 2017 construct the proposed FY 2017 wage and email to CMS and the MACs. We wage index). This provision is not index. We note that the proposed refer readers to the wage index timeline available to a hospital seeking to revise hospital average hourly wages shown in for complete details. another hospital’s data that may be Table 2 only reflect changes made to a Verified corrections to the wage index affecting the requesting hospital’s wage hospital’s data that were transmitted to data received timely by CMS and the index for the labor market area. As CMS by late February 2016. MACs (that is, by May 23, 2016) will be indicated earlier, because CMS makes We plan to post the final wage index incorporated into the final FY 2017 the wage index data available to data PUFs in late April 2016 on the wage index, which will be effective hospitals on the CMS Web site prior to Internet at: https://www.cms.gov/ October 1, 2016. publishing both the proposed and final Medicare/Medicare-Fee-for-Service- We created the processes previously IPPS rules, and the MACs notify Payment/AcuteInpatientPPS/Wage- described to resolve all substantive hospitals directly of any wage index Index-Files-Items/FY2017-Wage-Index- wage index data correction disputes data changes after completing their desk Home-Page.html. The April 2016 PUFs before we finalize the wage and reviews, we do not expect that midyear are made available solely for the limited occupational mix data for the FY 2017 corrections will be necessary. However, purpose of identifying any potential payment rates. Accordingly, hospitals under our current policy, if the errors made by CMS or the MAC in the that do not meet the procedural correction of a data error changes the entry of the final wage index data that deadlines set forth above will not be wage index value for an area, the resulted from the correction process afforded a later opportunity to submit revised wage index value will be previously described (revisions wage index data corrections or to effective prospectively from the date the submitted to CMS by the MACs by dispute the MAC’s decision with respect correction is made. March 24, 2016). to requested changes. Specifically, our In the FY 2006 IPPS final rule (70 FR After the release of the April 2016 policy is that hospitals that do not meet 47385 through 47387 and 47485), we wage index data PUFs, changes to the the procedural deadlines set forth above revised 42 CFR 412.64(k)(2) to specify wage and occupational mix data can will not be permitted to challenge later, that, effective on October 1, 2005, that only be made in those very limited before the PRRB, the failure of CMS to is, beginning with the FY 2006 wage situations involving an error by the make a requested data revision. We refer index, a change to the wage index can MAC or CMS that the hospital could not readers also to the FY 2000 IPPS final be made retroactive to the beginning of have known about before its review of rule (64 FR 41513) for a discussion of the Federal fiscal year only when CMS the final wage index data files. the parameters for appeals to the PRRB determines all of the following: (1) The Specifically, neither the MAC nor CMS for wage index data corrections. MAC or CMS made an error in will approve the following types of Again, we believe the wage index data tabulating data used for the wage index requests: correction process described earlier calculation; (2) the hospital knew about

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the error and requested that the MAC attributable to wages and wage-related As discussed in section IV.A of the and CMS correct the error using the costs as the labor-related share. The preamble of this proposed rule, prior to established process and within the labor-related share of the prospective January 1, 2016, Puerto Rico hospitals established schedule for requesting payment rate is adjusted by an index of were paid based on 75 percent of the corrections to the wage index data, relative labor costs, which is referred to national standardized amount and 25 before the beginning of the fiscal year as the wage index. percent of the Puerto Rico-specific for the applicable IPPS update (that is, Section 403 of Public Law 108–173 standardized amount. As a result, we by the May 23, 2016 deadline for the FY amended section 1886(d)(3)(E) of the applied the Puerto Rico-specific labor- Act to provide that the Secretary must 2017 wage index); and (3) CMS agreed related share percentage and nonlabor- employ 62 percent as the labor-related before October 1 that the MAC or CMS related share percentage to the Puerto made an error in tabulating the share unless this would result in lower Rico-specific standardized amount. hospital’s wage index data and the wage payments to a hospital than would index should be corrected. otherwise be made. However, this Section 601 of the Consolidated In those circumstances where a provision of Public Law 108–173 did Appropriations Act, 2016 (Pub. L. 114– hospital requested a correction to its not change the legal requirement that 113) amended section 1886(d)(9)(E) of wage index data before CMS calculated the Secretary estimate from time to time the Act to specify that the payment the final wage index (that is, by the May the proportion of hospitals’ costs that calculation with respect to operating 23, 2016 deadline for the FY 2017 wage are attributable to wages and wage- costs of inpatient hospital services of a index), and CMS acknowledges that the related costs. Thus, hospitals receive subsection (d) Puerto Rico hospital for error in the hospital’s wage index data payment based on either a 62-percent inpatient hospital discharges on or after was caused by CMS’ or the MAC’s labor-related share, or the labor-related January 1, 2016, shall use 100 percent mishandling of the data, we believe that share estimated from time to time by the of the national standardized amount. the hospital should not be penalized by Secretary, depending on which labor- Because Puerto Rico hospitals are no our delay in publishing or related share resulted in a higher longer paid with a Puerto Rico-specific implementing the correction. As with payment. standardized amount as of January 1, our current policy, we indicated that the In the FY 2014 IPPS/LTCH PPS final 2016, under section 1886(d)(9)(E) of the provision is not available to a hospital rule (78 FR 50596 through 50607), we Act as amended by section 601 of the rebased and revised the hospital market seeking to revise another hospital’s data. Consolidated Appropriations Act, 2016, basket. We established a FY 2010-based In addition, the provision cannot be there is no longer a need for us to used to correct prior years’ wage index IPPS hospital market basket to replace calculate a Puerto Rico-specific labor- data; and it can only be used for the the FY 2006-based IPPS hospital market related share percentage and nonlabor- current Federal fiscal year. In situations basket, effective October 1, 2013. In that where our policies would allow midyear final rule, we presented our analysis related share percentage for application corrections other than those specified in and conclusions regarding the frequency to the Puerto Rico-specific standardized 42 CFR 412.64(k)(2)(ii), we continue to and methodology for updating the labor- amount. Hospitals in Puerto Rico are believe that it is appropriate to make related share for FY 2014. Using the FY now paid 100 percent of the national prospective-only corrections to the wage 2010-based IPPS market basket, we standardized amount and, therefore, are index. finalized a labor-related share for FY subject to the national labor-related We note that, as with prospective 2014, FY 2015, and FY 2016 of 69.6 share and nonlabor-related share changes to the wage index, the final percent. In addition, in FY 2014, we percentages that are applied to the retroactive correction will be made implemented this revised and rebased national standardized amount. irrespective of whether the change labor-related share in a budget neutral Accordingly, for FY 2017, we are not increases or decreases a hospital’s manner (78 FR 51016). However, proposing a Puerto Rico-specific labor- payment rate. In addition, we note that consistent with section 1886(d)(3)(E) of related share percentage or a nonlabor- the policy of retroactive adjustment will the Act, we did not take into account related share percentage. still apply in those instances where a the additional payments that would be final judicial decision reverses a CMS made as a result of hospitals with a Tables 1A and 1B, which are denial of a hospital’s wage index data wage index less than or equal to 1.0000 published in section VI. of the revision request. being paid using a labor-related share Addendum to this FY 2017 IPPS/LTCH lower than the labor-related share of PPS proposed rule and available via the N. Proposed Labor Market Share for the hospitals with a wage index greater than Internet on the CMS Web site, reflect the Proposed FY 2017 Wage Index 1.0000. proposed national labor-related share, Section 1886(d)(3)(E) of the Act The labor-related share is used to which is also applicable to Puerto Rico directs the Secretary to adjust the determine the proportion of the national hospitals. For FY 2017, for all IPPS proportion of the national prospective IPPS base payment rate to which the hospitals (including Puerto Rico payment system base payment rates that area wage index is applied. In this hospitals) whose wage indexes are less are attributable to wages and wage- proposed rule, for FY 2017, we are not than or equal to 1.0000, we are related costs by a factor that reflects the proposing to make any further changes proposing to apply the wage index to a relative differences in labor costs among to the national average proportion of labor-related share of 62 percent of the geographic areas. It also directs the operating costs that are attributable to national standardized amount. For all Secretary to estimate from time to time wages and salaries, employee benefits, IPPS hospitals (including Puerto Rico the proportion of hospital costs that are contract labor, the labor-related portion hospitals) whose wage indexes are labor-related and to adjust the of professional fees, administrative and greater than 1.000, for FY 2017, we are proportion (as estimated by the facilities support services, and all other proposing to apply the wage index to a Secretary from time to time) of labor-related services. Therefore, for FY proposed labor-related share of 69.6 hospitals’ costs which are attributable to 2017, we are proposing to continue to wages and wage-related costs of the use a labor-related share of 69.6 percent percent of the national standardized DRG prospective payment rates. We for discharges occurring on or after amount. refer to the portion of hospital costs October 1, 2016.

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O. Solicitation of Comments on related costs associated with excluded impacted, hospitals that have Treatment of Overhead and Home areas (Worksheet S–3, Part II, line 15 on particularly large excluded areas Office Costs in the Wage Index CMS Form 2552–96 and line 19 on CMS experience large and inappropriate Calculation Form 2552–10). Therefore, we increases to their average hourly wages. Section III.D. of the preamble of this determined that it was necessary to For example, one hospital with an proposed rule states that the method estimate and remove overhead wage- excluded area percentage of 95 percent used to compute the proposed FY 2017 related costs allocated to excluded that has an average hourly wage of wage index without an occupational areas, and we have been doing so in approximately $32 under our current mix adjustment follows the same ‘‘Step 4’’ of the unadjusted wage index methodology would have an average methodology that we used to compute calculation since FY 2002. hourly wage of $128 under the formula With the implementation of CMS the FY 2012, FY 2013, FY 2014, FY in effect prior to FY 2002 (that is, Form 2552–10, Worksheet S–3, Part IV 2015, and FY 2016 final wage indexes without removal of overhead wage- was added to the cost report on which without an occupational mix adjustment related costs). Accordingly, we believe hospitals are required to itemize their (76 FR 51591 through 51593, 77 FR that, at this point, there is a need for wage-related costs (formerly reported on 53366 through 53367, 78 FR 50587 CMS to continue to estimate and remove Exhibit 6 of CMS Form-339). The total through 50588, 79 FR 49967, and 80 FR the overhead wage-related costs amount of wage-related costs reported 49491 through 49492, respectively). associated with excluded areas from the As discussed in the FY 2012 IPPS/ on Worksheet S–3, Part II, lines 17 unadjusted wage index calculation. through 25 (CMS Form 2552–10) must LTCH PPS final rule (76 FR 51592), in However, in an effort to improve correspond to the total core wage- ‘‘Step 4’’ of the calculation of the consistency in hospital cost reporting related costs on Worksheet S–3, Part IV, unadjusted wage index, for each practices and to improve the accuracy of line 24. (We refer readers to the hospital reporting both total overhead the wage index, we are considering the instructions for line 17 of Worksheet S– salaries and total overhead hours greater possibility of future rulemaking or cost 3, Part II, which state: ‘‘Enter the core than zero, we allocate overhead costs to reporting changes, or a combination of wage-related costs from Worksheet S–3, areas of the hospital excluded from the both, where hospitals would apply a Part IV, line 24.’’) Hospitals report wage- wage index calculation. We also single allocation methodology between related costs associated with excluded compute the amounts of overhead wage- Worksheet S–3, Part IV and Worksheet areas of the hospital on Worksheet S–3, related costs to be allocated to excluded S–3, Part II, lines 17 through 25. For Part II, line 19. We understand that example, one possibility is the areas. Finally, we subtract the computed hospitals use an allocation methodology overhead salaries, overhead wage- modification and expansion of to allocate total wage-related costs to Worksheet S–3, Part IV to add columns related costs, and hours associated with each of lines Worksheet S–3, Part II, excluded areas from the total salaries that would correspond to each line 17 lines 17 through 25 respectively, through 25 of Worksheet S–3, Part II. In (plus allowable wage-related costs) and typically based on the ratio of hours derived in ‘‘Steps 2 and 3’’ of the addition, Worksheet S–3, Part IV could individual line costs to total wage- employ one or two standard statistical calculation of the unadjusted wage related costs on lines 17 through 25. index. (We refer readers to the FY 2012 allocation methods, facilitating a direct Alternatively, we understand that flow of the allocated amounts to each IPPS/LTCH PPS final rule (76 FR 51592) hospitals use the ratio of full-time for a description of the calculation of line 17 through 25 of Worksheet S–3, equivalent (FTE) hours of an individual Part II. We are soliciting comments from the unadjusted wage index.) We first line to total FTE hours for those lines 17 stakeholders to gain a better began to remove from the wage index through 25. Because the wage-related understanding of the nature of hospitals’ the overhead salaries and hours costs of employees who work in reporting of wage-related costs on allocated to excluded areas beginning overhead areas of the hospital are Worksheet S–3, Part IV, statistical with the FY 1999 wage index included in the wage-related costs of the allocation methods that hospitals calculation (63 FR 40971 and 40972). hospital reported on Worksheet S–3, typically use to allocate their wage- Beginning with the FY 2002 wage index Part IV, and in turn, on Worksheet S– related costs, the treatment of direct calculation, we estimated and removed 3, Part II, it is possible to conclude that versus overhead employee wage-related overhead wage-related costs allocated to hospitals’ own allocation methodologies costs, and suggestions for possible excluded areas in addition to removing are properly allocating an accurate overhead salaries and hours allocated to amount of wage-related costs for both modifications to Worksheet S–3, Parts II excluded areas (66 FR 39863 and direct cost centers and overhead areas to and IV respectively, which would 39864). We began to estimate and line 19 for the excluded areas. preempt the need for CMS to estimate remove overhead wage-related costs Accordingly, the question has been and remove overhead wage-related costs associated with excluded areas because raised whether it continues to be associated with excluded areas from the we realized that without doing so, the necessary for CMS to estimate and unadjusted wage index. formula resulted in large and remove the overhead wage-related costs Another issue about which we are inappropriate increases in the average associated with excluded areas from the concerned and would like to solicit hourly wages of some hospitals, unadjusted wage index calculation. public comments relates to inconsistent particularly hospitals with large We have tested the effect on the reporting of home office salaries and overhead and excluded area costs. average hourly wages of hospitals if we wage-related costs. Worksheet S–2, Part These findings led us to believe that not would not estimate and remove the I, line 140, requires hospitals to all hospitals were fully or consistently overhead wage-related costs associated complete Worksheet A–8–1 if they have allocating their overhead salaries among with excluded areas from the any related organization or home office the lines on Worksheet S–3, Part II, of unadjusted wage index calculation. The costs claimed as defined in the Provider the hospital cost report for allowable results show that the problem Reimbursement Manual, CMS Pub. 15– wage-related costs (Worksheet S–3, Part manifested in the formula prior to FY 1, Chapter 10, Section 1002, and 42 CFR II, lines 13 and 14 on CMS Form 2552– 2002 continues to be a concern; that is, 413.17. Then, line 14 of Worksheet S– 96, and lines 17 and 18 on CMS Form while the average hourly wages of all 3, Part II instructs hospitals to enter the 2552–10), and nonallowable wage- hospitals with excluded areas are salaries and wage-related costs paid to

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personnel who are affiliated with a have not properly completed those lines 1, 2016. Change Request 9523 can be home office and/or related organization, 32 through 35. Hospitals whose downloaded from the CMS Web site at: who provide services to the hospital, housekeeping or dietary services (either https://www.cms.gov/Regulations-and- and whose salaries are not included on direct or under contract) are provided Guidance/Guidance/Transmittals/2016- Worksheet A, Column 1. Because home through their home office are not Transmittals-Items/R3449CP.html. office salaries and wage-related costs are exempt from this requirement to report For operating costs for inpatient not included on Worksheet A, Column wages and hours on the specific cost hospital discharges occurring in FY 1, we are concerned that hospitals are centers for housekeeping and dietary. 2017 and subsequent fiscal years, not including home office costs on Hospitals should also take care to report consistent with the provisions of section Worksheet A, Column 2 or Column 6 in housekeeping and dietary services in 1886(d)(9)(E) of the Act as amended by the appropriate cost centers on lines 4 the appropriate cost centers on section 601 of Public Law 114–113, through 17, adjusted from Worksheet A– Worksheet A, lines 9 and 10 subsection (d) Puerto Rico hospitals will 8 or Worksheet A–8–1.20 Another respectively. Because the nature of continue to be paid based on 100 concern is a hospital’s inadvertent services provided by home office percent of the national standardized inclusion on line 14 of the home office personnel are for general management amount. salaries or wage-related costs associated or administrative services related to the In this proposed rule, we are with excluded areas on Worksheet S–3, provision of patient care (CMS Pub. 15– proposing to make conforming changes Part II, lines 9 or 10. In addition, we are 1, Chapter 21, Section 2150), and may to the regulations at 42 CFR 412.204 to concerned about the amalgam of be provided to multiple areas of the reflect the current law that is effective personnel costs that hospitals report on hospital, we are considering ending for discharges occurring on or after line 14, particularly when another more reporting of home office costs on line 14 January 1, 2016. Specifically, we are precise line exists for those personnel of Worksheet S–3, Part II, and instead proposing to add a new paragraph (e) to costs to be reported. For example, if we may require reporting of home office § 412.204 to reflect that, beginning cafeteria services are provided through costs as part of the overhead lines, January 1, 2016, subsection (d) Puerto the home office, those wages and hours possibly by adding lines or columns, or Rico hospitals are paid based on 100 should not be reported on line 14, but subscripting existing line 27 percent of the national standardized instead should be reported on the more (Administrative & General), and line 28 amount. We also are proposing to revise specific cost center for Cafeteria, (Administrative & General for contract paragraph (d) of § 412.204 to specify Worksheet S–3, Part II, line 36 labor). We are soliciting public that subsection (d) Puerto Rico hospitals (corresponding to Cafeteria on comments to gain a better were paid based on 75 percent of the Worksheet A, line 11 21). We note that, understanding of hospitals’ reporting of national standardized amount and 25 in the FY 2015 IPPS/LTCH PPS final home office salaries and wage-related percent of the Puerto Rico-specific rule (79 FR 49965 through 49967), we costs for possible future revisions to the standardized amount for discharges reiterated our requirement that all cost report instructions and lines. occurring through December 31, 2015. hospitals must document salaries, wages, and hours for the purpose of IV. Other Decisions and Changes to the B. Proposed Changes in the Inpatient reporting this information on Worksheet IPPS for Operating Costs and Direct Hospital Update for FY 2017 S–3, Part II, lines 32, 33, 34, and/or 35 Graduate Medical Education (GME) (§ 412.64(d)) and Indirect Medical Education (IME) (for either directly employed 1. Proposed FY 2017 Inpatient Hospital Costs housekeeping and dietary employees on Update lines 32 and 34, and contract labor on A. Changes to Operating Payments for In accordance with section lines 33 and 35). We have learned of Subsection (d) Puerto Rico Hospitals as instances where housekeeping or 1886(b)(3)(B)(i) of the Act, each year we a Result of Section 601 of Public Law update the national standardized dietary services are provided through 114–113 the home office, and the hospital amount for inpatient hospital operating reported those wages and hours on line Prior to January 1, 2016, Puerto Rico costs by a factor called the ‘‘applicable 14. This is inconsistent with other hospitals were paid with respect to percentage increase.’’ For FY 2017, we hospitals’ reporting of housekeeping operating costs of inpatient hospital are setting the applicable percentage and dietary services on lines 32 through services for inpatient hospital increase by applying the adjustments 35. As stated in the FY 2015 IPPS/LTCH discharges based on 75 percent of the listed in this section in the same PPS final rule, we have instructed the national standardized amount and 25 sequence as we did for FY 2016. MACs to impute housekeeping or percent of the Puerto Rico-specific Specifically, consistent with section dietary wages and hours when hospitals standardized amount. Section 601 of the 1886(b)(3)(B) of the Act, as amended by Consolidated Appropriations Act, 2016 sections 3401(a) and 10319(a) of the 20 CMS Pub. 15–2, Chapter 40, Section 4013, (Pub. L. 114–113) amended section Affordable Care Act, we are setting the Worksheet A instructions for column 6: ‘‘Enter on 1886(d)(9)(E) of the Act to specify that applicable percentage increase by the appropriate lines in column 6 the amounts of the payment calculation with respect to applying the following adjustments in any adjustments to expenses indicated on operating costs of inpatient hospital the following sequence. The applicable Worksheet A–8, column 2,’’ and the note for line 12 of Worksheet A–8, section 4016: ‘‘Worksheet A– services of a subsection (d) Puerto Rico percentage increase under the IPPS is 8–1 represents the detail of the various cost centers hospital for inpatient hospital equal to the rate-of-increase in the on Worksheet A which must be adjusted.’’ discharges on or after January 1, 2016, hospital market basket for IPPS 21 CMS Pub. 15–2, Chapter 40, Section 4013, shall use 100 percent of the national hospitals in all areas, subject to— Worksheet A instructions under Line Descriptions: ‘‘The trial balance of expenses is broken down into standardized amount. As a result of the (a) A reduction of one-quarter of the general service, inpatient routine service, ancillary amendment made by section 601 of applicable percentage increase (prior to service, outpatient service, other reimbursable, Public Law 114–113, on February 4, the application of other statutory special purpose, and nonreimbursable cost center 2016, we issued Change Request 9523 adjustments; also referred to as the categories to facilitate the transfer of costs to the market basket update or rate-of-increase various worksheets. The line numbers on Worksheet which updated the payment rates for A are used on subsequent worksheets. * * *’’ subsection (d) Puerto Rico hospitals for (with no adjustments)) for hospitals that (emphasis added). discharges occurring on or after January fail to submit quality information under

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rules established by the Secretary in rule, in accordance with section site at http://www.bls.gov/mfp for the accordance with section 1886(b)(3)(B) of the Act, we are BLS historical published MFP data. 1886(b)(3)(B)(viii) of the Act; proposing to base the proposed FY 2017 MFP is derived by subtracting the (b) A reduction of three-quarters of market basket update used to determine contribution of labor and capital input the applicable percentage increase (prior the applicable percentage increase for growth from output growth. The to the application of other statutory the IPPS on IHS Global Insight, Inc.’s projections of the components of MFP adjustments; also referred to as the (IGI’s) first quarter 2016 forecast of the are currently produced by IGI, a market basket update or rate-of-increase FY 2010-based IPPS market basket rate- nationally recognized economic (with no adjustments)) for hospitals not of-increase with historical data through forecasting firm with which CMS considered to be meaningful EHR users fourth quarter 2015, which is estimated contracts to forecast the components of in accordance with section to be 2.8 percent. We are proposing that the market baskets and MFP. As we 1886(b)(3)(B)(ix) of the Act; if more recent data subsequently discussed in the FY 2016 IPPS/LTCH (c) An adjustment based on changes become available (for example, a more PPS final rule (80 FR 49509), beginning in economy-wide productivity (the recent estimate of the market basket and with the FY 2016 rulemaking cycle, the multifactor productivity (MFP) the MFP adjustment), we would use MFP adjustment is calculated using the adjustment); and such data, if appropriate, to determine revised series developed by IGI to proxy (d) An additional reduction of 0.75 the FY 2017 market basket update and the aggregate capital inputs. percentage point as required by section the MFP adjustment in the final rule. Specifically, in order to generate a 1886(b)(3)(B)(xii) of the Act. forecast of MFP, IGI forecasts BLS Sections 1886(b)(3)(B)(xi) and For FY 2017, depending on whether aggregate capital inputs using a (b)(3)(B)(xii) of the Act, as added by a hospital submits quality data under regression model. A complete section 3401(a) of the Affordable Care the rules established in accordance with description of the MFP projection Act, state that application of the MFP section 1886(b)(3)(B)(viii) of the Act methodology is available on the CMS adjustment and the additional FY 2017 (hereafter referred to as a hospital that Web site at: http://www.cms.gov/ adjustment of 0.75 percentage point may submits quality data) and is a Research-Statistics-Data-and-Systems/ result in the applicable percentage meaningful EHR user under section Statistics-Trends-and-Reports/ increase being less than zero. 1886(b)(3)(B)(ix) of the Act (hereafter MedicareProgramRatesStats/ We note that, in compliance with referred to as a hospital that is a MarketBasketResearch.html. As section 404 of the MMA, in the FY 2014 meaningful EHR user), there are four IPPS/LTCH PPS final rule (78 FR 50596 discussed in the FY 2016 IPPS/LTCH possible applicable percentage increases PPS final rule, if IGI makes changes to through 50607), we replaced the FY that can be applied to the standardized 2006-based IPPS operating and capital the MFP methodology, we will amount as specified in the table that announce them on our Web site rather market baskets with the revised and appears later in this section. rebased FY 2010-based IPPS operating than in the annual rulemaking. and capital market baskets for FY 2014. In the FY 2012 IPPS/LTCH PPS final For FY 2017, we are proposing an In the FY 2015 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we MFP adjustment of 0.5 percentage point. rule (79 FR 49993 through 49996) and finalized our methodology for Similar to the market basket update, for the FY 2016 IPPS/LTCH PPS final rule calculating and applying the MFP the proposed rule, we used the most (80 FR 49508 through 49511), we adjustment. As we explained in that recent data available to compute the continued to use the FY 2010-based rule, section 1886(b)(3)(B)(xi)(II) of the MFP adjustment. As noted previously, IPPS operating and capital market Act, as added by section 3401(a) of the we are proposing that if more recent baskets for FY 2015 and FY 2016 and Affordable Care Act, defines this data subsequently become available, we the labor-related share of 69.6 percent, productivity adjustment as equal to the would use such data, if appropriate, to which was based on the FY 2010-based 10-year moving average of changes in determine the FY 2017 market basket IPPS market basket. For FY 2017, we are annual economy-wide, private nonfarm update and MFP adjustment for the final proposing to continue using the FY business MFP (as projected by the rule. 2010-based IPPS operating and capital Secretary for the 10-year period ending Based on the most recent data market baskets and the proposed labor- with the applicable fiscal year, calendar available for this proposed rule, as related share of 69.6 percent, which is year, cost reporting period, or other described previously, we have based on the FY 2010-based IPPS annual period). The Bureau of Labor determined four proposed applicable market basket. Statistics (BLS) publishes the official percentage increases to the standardized Based on the most recent data measure of private nonfarm business amount for FY 2017, as specified in the available for this FY 2017 proposed MFP. We refer readers to the BLS Web following table:

PROPOSED FY 2017 APPLICABLE PERCENTAGE INCREASES FOR THE IPPS

Hospital sub- Hospital did Hospital did Hospital submitted quality NOT submit NOT submit mitted quality data and is quality data quality data FY 2017 data and is a NOT a mean- and is a and is NOT a meaningful ingful EHR meaningful meaningful EHR user user EHR user EHR user

Proposed Market Basket Rate-of-Increase ...... 2.8 2.8 2.8 2.8 Proposed Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ...... 0.0 0.0 ¥0.7 ¥0.7 Proposed Adjustment for Failure to be a Meaningful EHR User under Sec- tion 1886(b)(3)(B)(ix) of the Act ...... 0.0 ¥2.1 0.0 ¥2.1 Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act ...... ¥0.5 ¥0.5 ¥0.5 ¥0.5 Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ...... ¥0.75 ¥0.75 ¥0.75 ¥0.75

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PROPOSED FY 2017 APPLICABLE PERCENTAGE INCREASES FOR THE IPPS—Continued

Proposed Applicable Percentage Increase Applied to Standardized Amount 1.55 ¥0.55 0.85 ¥1.25

We are proposing to revise the mentioned previously, for this FY 2017 established by the Secretary, is not existing regulations at 42 CFR 412.64(d) proposed rule, we are using IGI’s first applicable to hospitals located in Puerto to reflect the current law for the FY quarter 2016 forecast of the FY 2010- Rico. 2017 update. Specifically, in accordance based IPPS market basket update with In addition, section 602 of Public Law with section 1886(b)(3)(B) of the Act, we historical data through fourth quarter 114–113 amended section 1886(n)(6)(B) are proposing to add a new paragraph 2015. Similarly, we are using IGI’s first of the Act to specify that Puerto Rico (vii) to § 412.64(d)(1) to reflect the quarter 2016 forecast of the MFP hospitals are eligible for incentive applicable percentage increase to the FY adjustment. We are proposing that if payments for the meaningful use of 2017 operating standardized amount as more recent data subsequently become certified EHR technology, effective the percentage increase in the market available (for example, a more recent beginning FY 2016, and also to apply basket index, subject to the reductions estimate of the market basket increase the adjustments to the applicable specified under § 412.64(d)(2) for a and the MFP adjustment), we would use percentage increase under section hospital that does not submit quality such data, if appropriate, to determine 1886(b)(3)(B)(ix) of the Act to Puerto data and § 412.64(d)(3) for a hospital the update for SCHs and MDHs in the Rico hospitals that are not meaningful that is not a meaningful EHR user, less final rule. EHR users, effective FY 2022. an MFP adjustment and less an Accordingly, because the provisions of 2. Proposed FY 2017 Puerto Rico additional reduction of 0.75 percentage section 1886(b)(3)(B)(ix) of the Act are Hospital Update point. not applicable to hospitals located in Section 1886(b)(3)(B)(iv) of the Act As discussed in section IV.A. of the Puerto Rico until FY 2022, the provides that the applicable percentage preamble of this proposed rule, prior to adjustments under this provision are not increase to the hospital-specific rates for January 1, 2016, Puerto Rico hospitals applicable for FY 2017. SCHs and MDHs equals the applicable were paid based on 75 percent of the C. Rural Referral Centers (RRCs): percentage increase set forth in section national standardized amount and 25 Proposed Annual Updates to Case-Mix 1886(b)(3)(B)(i) of the Act (that is, the percent of the Puerto Rico-specific Index and Discharge Criteria (§ 412.96) standardized amount. Section 601 of same update factor as for all other Under the authority of section Public Law 114–113 amended section hospitals subject to the IPPS). Therefore, 1886(d)(5)(C)(i) of the Act, the the update to the hospital-specific rates 1886(d)(9)(E) of the Act to specify that regulations at § 412.96 set forth the for SCHs and MDHs also is subject to the payment calculation with respect to criteria that a hospital must meet in section 1886(b)(3)(B)(i) of the Act, as operating costs of inpatient hospital order to qualify under the IPPS as a amended by sections 3401(a) and services of a subsection (d) Puerto Rico rural referral center (RRC). RRCs receive 10319(a) of the Affordable Care Act. We hospital for inpatient hospital some special treatment under both the note that section 205 of the Medicare discharges on or after January 1, 2016, DSH payment adjustment and the Access and CHIP Reauthorization Act of shall use 100 percent of the national criteria for geographic reclassification. 2015 (MACRA) (Pub. L. 114–10, enacted standardized amount. Because Puerto Section 402 of Public Law 108–173 on April 16, 2015) extended the MDH Rico hospitals are no longer paid with raised the DSH payment adjustment for program (which, under previous law, a Puerto Rico-specific standardized RRCs such that they are not subject to was to be in effect for discharges on or amount under the amendments to the 12-percent cap on DSH payments before March 31, 2015 only) for section 1886(d)(9)(E) of the Act, there is that is applicable to other rural discharges occurring on or after April 1, no longer a need for us to propose an hospitals. RRCs also are not subject to 2015, through FY 2017 (that is, for update to the Puerto Rico standardized the proximity criteria when applying for discharges occurring on or before amount. Hospitals in Puerto Rico are geographic reclassification. In addition, September 30, 2017). now paid 100 percent of the national they do not have to meet the For FY 2017, we are proposing the standardized amount and, therefore, are requirement that a hospital’s average following updates to the hospital- subject to the same update to the hourly wage must exceed, by a certain specific rates applicable to SCHs and national standardized amount discussed percentage, the average hourly wage of MDHs: A proposed update of 1.55 under section IV.B.1. of the preamble of the labor market area in which the percent for a hospital that submits this proposed rule. Accordingly, for FY hospital is located. quality data and is a meaningful EHR 2017, we are proposing an applicable Section 4202(b) of Public Law 105–33 user; a proposed update of 0.85 percent percentage increase of 1.55 percent to states, in part, that any hospital for a hospital that fails to submit quality the standardized amount for hospitals classified as an RRC by the Secretary for data and is a meaningful EHR user; a located in Puerto Rico. FY 1991 shall be classified as such an proposed update of ¥0.55 percent for a We note that section RRC for FY 1998 and each subsequent hospital that submits quality data and is 1886(b)(3)(B)(viii) of the Act, which fiscal year. In the August 29, 1997 IPPS not a meaningful EHR user; and a specifies the adjustment to the final rule with comment period (62 FR proposed update of ¥1.25 percent for a applicable percentage increase for 45999), we reinstated RRC status for all hospital that fails to submit quality data ‘‘subsection (d)’’ hospitals that do not hospitals that lost that status due to and is not a meaningful EHR user. As submit quality data under the rules triennial review or MGCRB

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reclassification. However, we did not hospitals within each census region, 2. Discharges reinstate the status of hospitals that lost excluding those hospitals with RRC status because they were now approved teaching programs (that is, Section 412.96(c)(2)(i) provides that urban for all purposes because of the those hospitals that train residents in an CMS set forth the national and regional OMB designation of their geographic approved GME program as provided in numbers of discharges criteria in each area as urban. Subsequently, in the § 413.75). These proposed values are year’s annual notice of prospective August 1, 2000 IPPS final rule (65 FR based on discharges occurring during payment rates for purposes of 47089), we indicated that we were FY 2015 (October 1, 2014 through determining RRC status. As specified in revisiting that decision. Specifically, we September 30, 2015), and include bills section 1886(d)(5)(C)(ii) of the Act, the stated that we would permit hospitals posted to CMS’ records through national standard is set at 5,000 that previously qualified as an RRC and December 2015. discharges. For FY 2017, we are proposing to update the regional lost their status due to OMB We are proposing that, in addition to redesignation of the county in which standards based on discharges for urban meeting other criteria, if rural hospitals hospitals’ cost reporting periods that they are located from rural to urban, to with fewer than 275 beds are to qualify be reinstated as an RRC. Otherwise, a began during FY 2014 (that is, October for initial RRC status for cost reporting hospital seeking RRC status must satisfy 1, 2013 through September 30, 2014), periods beginning on or after October 1, all of the other applicable criteria. We which are the latest cost report data 2016, they must have a CMI value for use the definitions of ‘‘urban’’ and available at the time this proposed rule FY 2015 that is at least— ‘‘rural’’ specified in Subpart D of 42 CFR was developed. • part 412. One of the criteria under 1.6125 (national—all urban); or We are proposing that, in addition to which a hospital may qualify as an RRC • The median CMI value (not meeting other criteria, a hospital, if it is is to have 275 or more beds available for transfer-adjusted) for urban hospitals to qualify for initial RRC status for cost use (§ 412.96(b)(1)(ii)). A rural hospital (excluding hospitals with approved reporting periods beginning on or after that does not meet the bed size teaching programs as identified in October 1, 2016, must have, as the requirement can qualify as an RRC if the § 413.75) calculated by CMS for the number of discharges for its cost hospital meets two mandatory census region in which the hospital is reporting period that began during FY prerequisites (a minimum case-mix located. 2014, at least— index (CMI) and a minimum number of • discharges), and at least one of three The proposed CMI values by region 5,000 (3,000 for an osteopathic optional criteria (relating to specialty are set forth in the following table. hospital); or composition of medical staff, source of • The median number of discharges Case-mix inpatients, or referral volume). (We refer Region index value for urban hospitals in the census region readers to § 412.96(c)(1) through (c)(5) in which the hospital is located as and the September 30, 1988 Federal 1. New England (CT, ME, indicated in the following table. Register (53 FR 38513) for additional MA, NH, RI, VT) ...... 1.3637 discussion.) With respect to the two 2. Middle Atlantic (PA, NJ, Region Number of mandatory prerequisites, a hospital may NY) ...... 1 .4441 discharges be classified as an RRC if— 3. South Atlantic (DE, DC, • The hospital’s CMI is at least equal FL, GA, MD, NC, SC, VA, 1. New England (CT, ME, WV) ...... 1.51235 MA, NH, RI, VT) ...... 8,090 to the lower of the median CMI for 2. Middle Atlantic (PA, NJ, urban hospitals in its census region, 4. East North Central (IL, IN, MI, OH, WI) ...... 1 .5324 NY) ...... 10,745 excluding hospitals with approved 3. South Atlantic (DE, DC, teaching programs, or the median CMI 5. East South Central (AL, KY, MS, TN) ...... 1 .45055 FL, GA, MD, NC, SC, VA, for all urban hospitals nationally; and WV) ...... 10,309 6. West North Central (IA, • The hospital’s number of discharges 4. East North Central (IL, IN, KS, MN, MO, NE, ND, SD) 1.59535 is at least 5,000 per year, or, if fewer, the MI, OH, WI) ...... 8,090 7. West South Central (AR, 5. East South Central (AL, median number of discharges for urban LA, OK, TX) ...... 1.643 KY, MS, TN) ...... 7,457 hospitals in the census region in which 8. Mountain (AZ, CO, ID, the hospital is located. The number of 6. West North Central (IA, MT, NV, NM, UT, WY) ...... 1.6966 KS, MN, MO, NE, ND, SD) 7,718 discharges criterion for an osteopathic 9. Pacific (AK, CA, HI, OR, hospital is at least 3,000 discharges per 7. West South Central (AR, WA) ...... 1.616 LA, OK, TX) ...... 5,027 year, as specified in section 8. Mountain (AZ, CO, ID, 1886(d)(5)(C)(i) of the Act. We intend to update the preceding MT, NV, NM, UT, WY) ...... 8,621 1. Case-Mix Index (CMI) CMI values in the FY 2017 final rule to 9. Pacific (AK, CA, HI, OR, WA) ...... 8,509 Section 412.96(c)(1) provides that reflect the updated FY 2015 MedPAR CMS establish updated national and file, which would contain data from regional CMI values in each year’s additional bills received through March We intend to update these numbers in annual notice of prospective payment 2016. the FY 2017 final rule based on the rates for purposes of determining RRC A hospital seeking to qualify as an latest available cost report data. status. The methodology we used to RRC should obtain its hospital-specific We note that the median number of determine the national and regional CMI CMI value (not transfer-adjusted) from discharges for hospitals in each census values is set forth in the regulations at its MAC. Data are available on the region is greater than the national § 412.96(c)(1)(ii). The proposed national Provider Statistical and Reimbursement standard of 5,000 discharges. Therefore, median CMI value for FY 2017 is based (PS&R) System. In keeping with our under this proposed rule, 5,000 on the CMI values of all urban hospitals policy on discharges, the CMI values are discharges is the minimum criterion for nationwide, and the proposed regional computed based on all Medicare patient all hospitals, except for osteopathic median CMI values for FY 2017 are discharges subject to the IPPS MS–DRG- hospitals for which the minimum based on the CMI values of all urban based payment. criterion is 3,000 discharges.

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D. Proposed Payment Adjustment for adjustment originally provided for by hospitals with fewer than 1,600 Low-Volume Hospitals (§ 412.101) the Affordable Care Act, we refer Medicare discharges based on the readers to the following Federal claims data from the December 2015 1. Background Register documents: The FY 2013 IPPS update of the FY 2015 MedPAR file and Section 1886(d)(12) of the Act notice (78 FR 14689 through 14691); the their potential proposed low-volume provides for an additional payment to FY 2014 IPPS/LTCH PPS final rule (78 payment adjustment for FY 2017. each qualifying low-volume hospital FR 50611 through 50612); the FY 2014 Consistent with past practice, we note that is paid under IPPS beginning in FY IPPS interim final rule with comment that this list of hospitals with fewer than 2005, and the low-volume hospital period (79 FR 15022 through 15025); the 1,600 Medicare discharges in Table 14 payment policy is set forth in the FY 2014 IPPS notice (79 FR 34444 does not reflect whether or not the regulations at 42 CFR 412.101. Sections through 34446); the FY 2015 IPPS/LTCH hospital meets the mileage criterion. 3125 and 10314 of the Affordable Care PPS final rule (79 FR 49998 through Eligibility for the low-volume hospital Act provided for a temporary change in 50001); and the FY 2016 IPPS interim payment adjustment for FY 2017 also is the low-volume hospital payment policy final rule with comment period (80 FR dependent upon meeting the mileage for FYs 2011 and 2012. Specifically, the 49594 through 49595). criterion specified at § 412.101(b)(2)(ii); provisions of the Affordable Care Act 2. Proposed Low-Volume Hospital that is, the hospital must be located amended the qualifying criteria for low- more than 15 road miles from any other volume hospitals to specify, for FYs Definition and Payment Adjustment for FY 2017 IPPS hospital. In other words, eligibility 2011 and 2012, that a hospital qualifies for the low-volume hospital payment as a low-volume hospital if it is more Under section 1886(d)(12) of the Act, adjustment for FY 2017 also is than 15 road miles from another as amended by section 204 of the dependent upon meeting (in the case of subsection (d) hospital and has less than MACRA, the temporary changes in the a hospital that did not qualify for the 1,600 discharges of individuals entitled low-volume hospital payment policy low-volume hospital payment to, or enrolled for, benefits under originally provided by the Affordable adjustment in FY 2016) or continuing to Medicare Part A during the fiscal year. Care Act and extended through meet (in the case of a hospital that did In addition, the statute as amended by subsequent legislation, are effective qualify for the low-volume hospital the Affordable Care Act, provides that through FY 2017. In this proposed rule, payment adjustment in FY 2016) the the low-volume hospital payment consistent with our historical approach, mileage criterion specified at adjustment (that is, the percentage we are proposing to update the § 412.101(b)(2)(ii). Consistent with increase) is determined using a discharge data source used to identify historical practice, we are proposing continuous linear sliding scale ranging qualifying low-volume hospitals and that if more recent Medicare discharge from 25 percent for low-volume calculate the payment adjustment data become available, we would use hospitals with 200 or fewer discharges (percentage increase) for FY 2017. that updated data to determine of individuals entitled to, or enrolled Under § 412.101(b)(2)(ii), for the qualifying low-volume hospitals and for, benefits under Medicare Part A in applicable fiscal years, a hospital’s their payment adjustment in the final the fiscal year to 0 percent for low- Medicare discharges from the most rule, and update Table 14 to reflect that volume hospitals with greater than recently available MedPAR data, as updated data. 1,600 discharges of such individuals in determined by CMS, are used to the fiscal year. We revised the determine if the hospital meets the In order to receive a low-volume regulations governing the low-volume discharge criteria to receive the low- hospital payment adjustment under hospital payment adjustment policy at volume payment adjustment in the § 412.101 for FY 2017, consistent with § 412.101 to reflect the changes to the current year and to determine the our previously established procedure, qualifying criteria and the calculation of applicable low-volume percentage we are proposing that a hospital must the payment adjustment for low-volume increase for qualifying hospitals. The notify and provide documentation to its hospitals according to the provisions of applicable low-volume percentage MAC that it meets the discharge and the Affordable Care Act in the FY 2011 increase for FY 2017 is determined mileage criteria under IPPS/LTCH PPS final rule (75 FR 50238 using a continuous linear sliding scale § 412.101(b)(2)(ii). Specifically, for FY through 50275 and 50414). equation that results in a low-volume 2017, we are proposing that a hospital The temporary changes to the low- hospital payment adjustment ranging must make a written request for low- volume hospital qualifying criteria and from an additional 25 percent for volume hospital status that is received the payment adjustment originally hospitals with 200 or fewer Medicare by its MAC no later than September 1, provided for by the Affordable Care Act discharges to a zero percent additional 2016, in order for the applicable low- have been extended by subsequent payment adjustment for hospitals with volume hospital payment adjustment to legislation as follows: Through FY 2013, 1,600 or more Medicare discharges. For be applied to payments for its FY 2017 by the American Taxpayer Relief Act of FY 2017, consistent with our historical discharges occurring on or after October 2012 (ATRA), Public Law 112–240; policy, we are proposing that qualifying 1, 2016. Under this procedure, a through March 31, 2014, by the Pathway low-volume hospitals and their payment hospital that qualified for the low- for SGR Reform Act of 2013, Public Law adjustment would be determined using volume hospital payment adjustment in 113– 167; through March 31, 2015, by the most recently available Medicare FY 2016 may continue to receive a low- the Protecting Access to Medicare Act of discharge data from the December 2015 volume hospital payment adjustment for 2014 (PAMA), Public Law 113–93; and update of the FY 2015 MedPAR file, as FY 2017 without reapplying if it most recently through FY 2017, by the these data are the most recent data continues to meet the Medicare Medicare Access and CHIP available. Table 14 listed in the discharge criterion established for FY Reauthorization Act of 2015 (MACRA), Addendum of this proposed rule (which 2017 and the mileage criterion. Public Law 114–10. For additional is available via the Internet on the CMS However, the hospital must send details on the implementation of the Web site at: http://www.cms.gov/ written verification that is received by previous extensions of the temporary Medicare/Medicare-Fee-for-Service- its MAC no later than September 1, changes to the low-volume hospital Payment/AcuteInpatientPPS/ 2016, stating that it continues to be qualifying criteria and payment index.html) lists the ‘‘subsection (d)’’ located more than 15 miles from any

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other subsection (d) hospital. This years thereafter, the IME formula A. The Medicaid fraction is computed written verification could be a brief multiplier is 1.35. Accordingly, for by dividing the hospital’s number of letter to the MAC stating that the discharges occurring during FY 2017, inpatient days furnished to patients hospital continues to meet the low- the formula multiplier is 1.35. We who, for such days, were eligible for volume hospital mileage criterion as estimate that application of this formula Medicaid, but were not entitled to documented in a prior low-volume multiplier for the FY 2017 IME benefits under Medicare Part A, by the hospital status request. We also are adjustment will result in an increase in hospital’s total number of inpatient days proposing that if a hospital’s written IPPS payment of 5.5 percent for every in the same period. request for low-volume hospital status approximately 10 percent increase in Because the DSH payment adjustment for FY 2017 is received after September the hospital’s resident to bed ratio. is part of the IPPS, the DSH statutory 1, 2016, and if the MAC determines that references (under section 1886(d)(5)(F) 2. Other Proposed Policies Related to the hospital meets the criteria to qualify of the Act) to ‘‘days’’ apply only to IME as a low-volume hospital, the MAC hospital acute care inpatient days. would apply the applicable low-volume We refer readers to section IV.I. of the Regulations located at § 412.106 govern hospital payment adjustment to preamble of this proposed rule for a the Medicare DSH payment adjustment determine the payment for the hospital’s discussion of the proposed policy and specify how the DPP is calculated FY 2017 discharges effective changes relating to medical residency as well as how beds and patient days are prospectively within 30 days of the date training programs (or rural tracks) at counted in determining the Medicare of its low-volume hospital status urban hospitals that also affect DSH payment adjustment. Under determination, consistent with past payments for IME. § 412.106(a)(1)(i), the number of beds for practice. (For additional details on our the Medicare DSH payment adjustment F. Proposed Payment Adjustment for is determined in accordance with bed established process for the low-volume Medicare Disproportionate Share hospital payment adjustment, we refer counting rules for the IME adjustment Hospitals (DSHs) for FY 2017 and under § 412.105(b). readers to the FY 2013 IPPS/LTCH PPS Subsequent Years (§ 412.106) final rule (77 FR 53408) and the FY Section 3133 of the Patient Protection 2015 IPPS/LTCH PPS final rule (79 FR 1. General Discussion and Affordable Care Act, as amended by 50000 through 50001).) section 10316 of the same Act and Section 1886(d)(5)(F) of the Act section 1104 of the Health Care and We note that, in the FY 2016 IPPS provides for additional Medicare interim final rule with comment period Education Reconciliation Act (Pub. L. payments to subsection (d) hospitals 111–152), added a new section 1886(r) (80 FR 49595), we revised the that serve a significantly regulations at § 412.101 to conform the to the Act that modifies the disproportionate number of low-income methodology for computing the text to the provisions of section 204 of patients. The Act specifies two methods the MACRA, which extended the Medicare DSH payment adjustment. by which a hospital may qualify for the (For purposes of this proposed rule, we changes to the qualifying criteria and Medicare disproportionate share the payment adjustment methodology refer to these provisions collectively as hospital (DSH) adjustment. Under the section 3133 of the Affordable Care Act.) for low-volume hospitals through FY first method, hospitals that are located 2017 (that is, through September 30, Beginning with discharges in FY 2014, in an urban area and have 100 or more hospitals that qualify for Medicare DSH 2017). We intend to finalize the low- beds may receive a Medicare DSH volume hospital provisions (as well as payments under section 1886(d)(5)(F) of payment adjustment if the hospital can the Act receive 25 percent of the amount the Medicare-dependent small rural demonstrate that, during its cost they previously would have received hospital (MDH) provisions at § 412.108) reporting period, more than 30 percent under the statutory formula for included in that FY 2016 interim final of its net inpatient care revenues are Medicare DSH payments. This provision rule with comment period in the FY derived from State and local applies equally to hospitals that qualify 2017 IPPS/LTCH PPS final rule. government payments for care furnished for DSH payments under section E. Indirect Medical Education (IME) to needy patients with low incomes. 1886(d)(5)(F)(i)(I) of the Act and those Payment Adjustment Factor for FY 2017 This method is commonly referred to as hospitals that qualify under the Pickle (§ 412.105) the ‘‘Pickle method.’’ The second method under section 1886(d)(5)(F)(i)(II) method for qualifying for the DSH of the Act. 1. IME Adjustment for FY 2017 payment adjustment, which is the most The remaining amount, equal to an Under the IPPS, an additional common, is based on a complex estimate of 75 percent of what otherwise payment amount is made to hospitals statutory formula under which the DSH would have been paid as Medicare DSH with residents in an approved graduate payment adjustment is based on the payments, reduced to reflect changes in medical education (GME) program in hospital’s geographic designation, the the percentage of individuals under age order to reflect the higher indirect number of beds in the hospital, and the 65 who are uninsured, is available to patient care costs of teaching hospitals level of the hospital’s disproportionate make additional payments to each relative to nonteaching hospitals. The patient percentage (DPP). A hospital’s hospital that qualifies for Medicare DSH payment amount is determined by use DPP is the sum of two fractions: the payments and that has uncompensated of a statutorily specified adjustment ‘‘Medicare fraction’’ and the ‘‘Medicaid care. The payments to each hospital for factor. The regulations regarding the fraction.’’ The Medicare fraction (also a fiscal year are based on the hospital’s calculation of this additional payment, known as the ‘‘SSI fraction’’ or ‘‘SSI amount of uncompensated care for a known as the IME adjustment, are ratio’’) is computed by dividing the given time period relative to the total located at § 412.105. We refer readers to number of the hospital’s inpatient days amount of uncompensated care for that the FY 2012 IPPS/LTCH PPS final rule that are furnished to patients who were same time period reported by all (76 FR 51680) for a full discussion of the entitled to both Medicare Part A and hospitals that receive Medicare DSH IME adjustment and IME adjustment Supplemental Security Income (SSI) payments for that fiscal year. factor. Section 1886(d)(5)(B)(ii)(XII) of benefits by the hospital’s total number As provided by section 3133 of the the Act provides that, for discharges of patient days furnished to patients Affordable Care Act, section 1886(r) of occurring during FY 2008 and fiscal entitled to benefits under Medicare Part the Act requires that, for FY 2014 and

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each subsequent fiscal year, a letter from the Director of the methodology made by section 3133 of subsection (d) hospital that would Congressional Budget Office to the the Affordable Care Act for FY 2014. In otherwise receive DSH payments made Speaker of the House. (The March 20, those rules, we noted that, because under section 1886(d)(5)(F) of the Act 2010 letter is available for viewing on section 1886(r) of the Act modifies the receives two separately calculated the following Web site: http:// payment required under section payments. Specifically, section www.cbo.gov/sites/default/files/ 1886(d)(5)(F) of the Act, it affects only 1886(r)(1) of the Act provides that the cbofiles/ftpdocs/113xx/doc11379/ the DSH payment under the operating Secretary shall pay to such a subsection amendreconprop.pdf.) IPPS. It does not revise or replace the (d) hospital (including a Pickle hospital) For FY 2018 and subsequent fiscal capital IPPS DSH payment provided 25 percent of the amount the hospital years, the second factor is 1 minus the under the regulations at 42 CFR part would have received under section percent change in the percent of 412, subpart M, which were established 1886(d)(5)(F) of the Act for DSH individuals who are uninsured, as through the exercise of the Secretary’s payments, which represents the determined by comparing the percent of discretion in implementing the capital empirically justified amount for such individuals who were uninsured in IPPS under section 1886(g)(1)(A) of the payment, as determined by the MedPAC 2013 (as estimated by the Secretary, Act. in its March 2007 Report to the based on data from the Census Bureau Finally, section 1886(r)(3) of the Act Congress. We refer to this payment as or other sources the Secretary provides that there shall be no the ‘‘empirically justified Medicare DSH determines appropriate, and certified by administrative or judicial review under payment.’’ the Chief Actuary of CMS), and the section 1869, section 1878, or otherwise In addition to this empirically percent of individuals who were of any estimate of the Secretary for justified Medicare DSH payment, uninsured in the most recent period for purposes of determining the factors section 1886(r)(2) of the Act provides which data are available (as so described in section 1886(r)(2) of the that, for FY 2014 and each subsequent estimated and certified), minus 0.2 Act or of any period selected by the fiscal year, the Secretary shall pay to percentage point for FYs 2018 and 2019. Secretary for the purpose of determining such subsection (d) hospital an Therefore, for FY 2018 and subsequent those factors. Therefore, there is no additional amount equal to the product fiscal years, the statute provides some administrative or judicial review of the of three factors. The first factor is the greater flexibility in the choice of the estimates developed for purposes of difference between the aggregate data sources to be used for the estimate applying the three factors used to amount of payments that would be of the change in the percent of determine uncompensated care made to subsection (d) hospitals under uninsured individuals. payments, or the periods selected in section 1886(d)(5)(F) of the Act if The third factor is a percent that, for order to develop such estimates. subsection (r) did not apply and the each subsection (d) hospital, represents 2. Eligibility for Empirically Justified aggregate amount of payments that are the quotient of the amount of Medicare DSH Payments and made to subsection (d) hospitals under uncompensated care for such hospital Uncompensated Care Payments section 1886(r)(1) of the Act for each for a period selected by the Secretary (as fiscal year. Therefore, this factor estimated by the Secretary, based on As indicated earlier, the payment amounts to 75 percent of the payments appropriate data), including the use of methodology under section 3133 of the that would otherwise be made under alternative data where the Secretary Affordable Care Act applies to section 1886(d)(5)(F) of the Act. determines that alternative data are ‘‘subsection (d) hospitals’’ that would The second factor is, for FYs 2014 available which are a better proxy for otherwise receive a DSH payment made through 2017, 1 minus the percent the costs of subsection (d) hospitals for under section 1886(d)(5)(F) of the Act. change in the percent of individuals treating the uninsured, and the Therefore, hospitals must receive under the age of 65 who are uninsured, aggregate amount of uncompensated empirically justified Medicare DSH determined by comparing the percent of care for all subsection (d) hospitals that payments in a fiscal year in order to such individuals who were uninsured receive a payment under section 1886(r) receive an additional Medicare in 2013, the last year before coverage of the Act. Therefore, this third factor uncompensated care payment for that expansion under the Affordable Care represents a hospital’s uncompensated year. Specifically, section 1886(r)(2) of Act (as calculated by the Secretary care amount for a given time period the Act states that, in addition to the based on the most recent estimates relative to the uncompensated care payment made to a subsection (d) available from the Director of the amount for that same time period for all hospital under section 1886(r)(1) of the Congressional Budget Office before a hospitals that receive Medicare DSH Act, the Secretary shall pay to such vote in either House on the Health Care payments in the applicable fiscal year, subsection (d) hospitals an additional and Education Reconciliation Act of expressed as a percent. amount. Because section 1886(r)(1) of 2010 that, if determined in the For each hospital, the product of these the Act refers to empirically justified affirmative, would clear such Act for three factors represents its additional Medicare DSH payments, the additional enrollment), and the percent of payment for uncompensated care for the payment under section 1886(r)(2) of the individuals who were uninsured in the applicable fiscal year. We refer to the Act is limited to hospitals that receive most recent period for which data are additional payment determined by these empirically justified Medicare DSH available (as so calculated) minus 0.1 factors as the ‘‘uncompensated care payments in accordance with section percentage point for FY 2014, and payment.’’ 1886(r)(1) of the Act for the applicable minus 0.2 percentage point for FYs 2015 Section 1886(r) of the Act applies to fiscal year. through 2017. For FYs 2014 through FY 2014 and each subsequent fiscal In the FY 2014 IPPS/LTCH PPS final 2017, the baseline for the estimate of the year. In the FY 2014 IPPS/LTCH PPS rule (78 FR 50622) and the FY 2014 change in uninsurance is fixed by the final rule (78 FR 50620 through 50647) IPPS interim final rule with comment most recent estimate of the and the FY 2014 IPPS interim final rule period (78 FR 61193), we provided that Congressional Budget Office before the with comment period (78 FR 61191 hospitals that are not eligible to receive final vote on the Health Care and through 61197), we set forth our policies empirically justified Medicare DSH Education Reconciliation Act of 2010, for implementing the required changes payments in a fiscal year will not which is contained in a March 20, 2010 to the Medicare DSH payment receive uncompensated care payments

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for that year. We also specified that we determinations will be made at the end Medicare Modernization Act do not would make a determination concerning of the cost reporting period at receive DSH payments and, therefore, eligibility for interim uncompensated settlement, and both interim empirically are excluded from receiving empirically care payments based on each hospital’s justified Medicare DSH payments and justified Medicare DSH payments and estimated DSH status for the applicable uncompensated care payments will be uncompensated care payments under fiscal year (using the most recent data adjusted accordingly (78 FR 50624 and the new DSH payment methodology (78 that are available). We indicated that 79 FR 50007). FR 50625 and 79 FR 50008). There are our final determination on the hospital’s • MDHs are paid based on the IPPS 14 hospitals currently participating in eligibility for uncompensated care Federal rate or, if higher, the IPPS the program; 10 will continue to payments would be based on the Federal rate plus 75 percent of the participate through the end of FY 2016, hospital’s actual DSH status at cost amount by which the Federal rate is and 4 will continue to participate report settlement for that payment year. exceeded by the updated hospital- through the scheduled end of the In the FY 2014 IPPS/LTCH PPS final specific rate from certain specified base program on December 31, 2016. Once a rule (78 FR 50622) and the FY 2015 years (76 FR 51684). The IPPS Federal hospital’s participation in the IPPS/LTCH PPS final rule (79 FR rate used in the MDH payment demonstration program ends, the 50006), we specified our policies for methodology is the same IPPS Federal hospital will be treated like a subsection several specific classes of hospitals rate that is used in the SCH payment (d) hospital and subject to the IPPS. within the scope of section 1886(r) of methodology. Section 205 of the Therefore, once their participation ends, the Act. We refer readers to those two Medicare Access and CHIP these hospitals could be eligible to final rules for a detailed discussion of Reauthorization Act of 2015 (MACRA), receive empirically justified Medicare our policies. In summary, we specified Public Law 114–10, enacted April 16, DSH payments and uncompensated care the following: 2015, extended the MDH program for payments and, if so, will be treated • Subsection (d) Puerto Rico hospitals discharges on or after April 1, 2015, accordingly for interim and final that are eligible for DSH payments also through September 30, 2017. Because payments. We will apply the same are eligible to receive empirically MDHs are paid based on the IPPS process to determining their eligibility justified Medicare DSH payments and Federal rate, for FY 2017, MDHs will as we do for all other IPPS hospitals, uncompensated care payments under continue to be eligible to receive and will make interim and final DSH the new payment methodology (78 FR empirically justified Medicare DSH and uncompensated care payments 50623 and 79 FR 50006). payments and uncompensated care accordingly. • Maryland hospitals are not eligible payments if their DPP is at least 15 to receive empirically justified Medicare percent. We will apply the same process 3. Empirically Justified Medicare DSH DSH payments and uncompensated care to determine MDHs’ eligibility for Payments payments under the payment empirically justified Medicare DSH and As we have discussed earlier, section methodology of section 1886(r) of the uncompensated care payments, as we 1886(r)(1) of the Act requires the Act because they are not paid under the do for all other IPPS hospitals, through Secretary to pay 25 percent of the IPPS. As discussed in the FY 2015 IPPS/ September 30, 2017. Moreover, we will amount of the Medicare DSH payment LTCH PPS final rule (79 FR 50007), continue to make a determination that would otherwise be made under effective January 1, 2014, the State of concerning eligibility for interim section 1886(d)(5)(F) of the Act to a Maryland elected to no longer have uncompensated care payments based on subsection (d) hospital. Because section Medicare pay Maryland hospitals in each hospital’s estimated DSH status for 1886(r)(1) of the Act merely requires the accordance with section 1814(b)(3) of the applicable fiscal year (using the program to pay a designated percentage the Act and entered into an agreement most recent data that are available). Our of these payments, without revising the with CMS that Maryland hospitals will final determination on the hospital’s criteria governing eligibility for DSH be paid under the Maryland All-Payer eligibility for uncompensated care payments or the underlying payment Model. However, under the Maryland payments will be based on the hospital’s methodology, we stated in the FY 2014 All-Payer Model, Maryland hospitals actual DSH status at cost report IPPS/LTCH PPS final rule that we did still are not paid under the IPPS. settlement for that payment year. In not believe that it was necessary to Therefore, they remain ineligible to addition, as we do for all IPPS hospitals, develop any new operational receive empirically justified Medicare we calculate a numerator for Factor 3 for mechanisms for making such payments. DSH payments or uncompensated care all MDHs, regardless of whether they are Therefore, in the FY 2014 IPPS/LTCH payments under section 1886(r) of the projected to be eligible for Medicare PPS final rule (78 FR 50626), we Act. DSH payments during the fiscal year, implemented this provision by advising • SCHs that are paid under their but the denominator for Factor 3 will be MACs to simply adjust the interim hospital-specific rate are not eligible for based on the uncompensated care data claim payments to the requisite 25 Medicare DSH payments. SCHs that are from the hospitals that we have percent of what would have otherwise paid under the IPPS Federal rate receive projected to be eligible for Medicare been paid. We also made corresponding interim payments based on what we DSH payments during the fiscal year. changes to the hospital cost report so estimate and project their DSH status to • IPPS hospitals that have elected to that these empirically justified Medicare be prior to the beginning of the Federal participate in the Bundled Payments for DSH payments can be settled at the fiscal year (based on the best available Care Improvement initiative continue to appropriate level at the time of cost data at that time) subject to settlement be paid under the IPPS (77 FR 53342) report settlement. We provided more through the cost report, and if they and, therefore, are eligible to receive detailed operational instructions and receive interim empirically justified empirically justified Medicare DSH cost report instructions following Medicare DSH payments in a fiscal year, payments and uncompensated care issuance of the FY 2014 IPPS/LTCH PPS they also will receive interim payments (78 FR 50625 and 79 FR final rule that are available on the CMS uncompensated care payments for that 50008). Web site at: http://www.cms.gov/ fiscal year on a per discharge basis, • Hospitals participating in the Rural Regulations-and-Guidance/Guidance/ subject as well to settlement through the Community Hospital Demonstration Transmittals/2014-Transmittals-Items/ cost report. Final eligibility Program under section 410A of the R5P240.html.

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4. Uncompensated Care Payments Therefore, Factor 1 is the difference paid under their hospital-specific rate As we have discussed earlier, section between our estimates of: (1) The are excluded from the application of 1886(r)(2) of the Act provides that, for amount that would have been paid in section 1886(r) of the Act, these each eligible hospital in FY 2014 and Medicare DSH payments for the fiscal hospitals also were excluded from the subsequent years, the uncompensated year, in the absence of the new payment March 2016 Medicare DSH estimates. care payment is the product of three provision; and (2) the amount of Furthermore, because section 1886(r) of factors. These three factors represent our empirically justified Medicare DSH the Act specifies that the estimate of 75 percent of the amount of payments that are made for the fiscal uncompensated care payment is in Medicare DSH payments that would year, which takes into account the addition to the empirically justified otherwise have been paid, an requirement to pay 25 percent of what Medicare DSH payment (25 percent of would have otherwise been paid under adjustment to this amount for the DSH payments that would be made section 1886(d)(5)(F) of the Act. In other percent change in the national rate of without regard to section 1886(r) of the words, this factor represents our uninsurance compared to the rate of Act), Maryland hospitals participating estimate of 75 percent (100 percent uninsurance in 2013, and each eligible in the Maryland All-Payer Model that minus 25 percent) of our estimate of hospital’s estimated uncompensated do not receive DSH payments are also Medicare DSH payments that would care amount relative to the estimated excluded from the Office of the otherwise be made, in the absence of uncompensated care amount for all Actuary’s Medicare DSH estimates. section 1886(r) of the Act, for the fiscal eligible hospitals. Below we discuss the Because the Rural Community Hospital year. data sources and methodologies for Demonstration program is scheduled to As we did for FY 2016, in order to end on December 31, 2016, hospitals computing each of these factors, our determine Factor 1 in the final policies for FYs 2014 through that are participating in the program are uncompensated care payment formula included in this estimate for FY 2017. 2016, and our proposed policies for FY for FY 2017, we are proposing to 2017. However, we have excluded 25 percent continue the policy established in the of our estimate of DSH payments that a. Calculation of Proposed Factor 1 for FY 2014 IPPS/LTCH PPS final rule (78 would otherwise be made to the 4 FY 2017 FR 50628 through 50630) and in the FY hospitals whose participation in the 2014 IPPS interim final rule with Section 1886(r)(2)(A) of the Act program will continue through comment period (78 FR 61194) of December 31, 2016, as these hospitals establishes Factor 1 in the calculation of determining Factor 1 by developing the uncompensated care payment. will be excluded from receiving DSH estimates of both the aggregate amount payments until that time. The estimate Section 1886(r)(2)(A) of the Act states of Medicare DSH payments that would that this factor is equal to the difference includes the total DSH payments that be made in the absence of section would be made to the 10 hospitals between (1) the aggregate amount of 1886(r)(1) of the Act and the aggregate payments that would be made to whose participation in the Rural amount of empirically justified Community Hospital Demonstration subsection (d) hospitals under section Medicare DSH payments to hospitals 1886(d)(5)(F) of the Act if section program will continue only through under 1886(r)(1) of the Act. These September 30, 2016. 1886(r) of the Act did not apply for such estimates will not be revised or updated fiscal year (as estimated by the after we know the final Medicare DSH Using the data sources discussed Secretary); and (2) the aggregate amount payments for FY 2017. above, the Office of the Actuary uses the of payments that are made to subsection Therefore, in order to determine the most recently submitted Medicare cost (d) hospitals under section 1886(r)(1) of two elements of Factor 1 for FY 2017 report data to identify Medicare DSH the Act for such fiscal year (as so (Medicare DSH payments prior to the payments and the most recent Medicare estimated). Therefore, section application of section 1886(r)(1) of the DSH payment adjustments provided in 1886(r)(2)(A)(i) of the Act represents the Act, and empirically justified Medicare the IPPS Impact File, and applies estimated Medicare DSH payments that DSH payments after application of inflation updates and assumptions for would have been made under section section 1886(r)(1) of the Act), we used future changes in utilization and case- 1886(d)(5)(F) of the Act if section the most recently available projections mix to estimate Medicare DSH 1886(r) of the Act did not apply for such of Medicare DSH payments for the fiscal payments for the upcoming fiscal year. fiscal year. Under a prospective year, as calculated by CMS’ Office of the The March 2016 Office of the Actuary payment system, we would not know Actuary using the most recently filed estimate for Medicare DSH payments for the precise aggregate Medicare DSH Medicare hospital cost report with FY 2017, without regard to the payment amount that would be paid for Medicare DSH payment information and application of section 1886(r)(1) of the a Federal fiscal year until cost report the most recent Medicare DSH patient Act, is approximately $14.227 billion. settlement for all IPPS hospitals is percentages and Medicare DSH payment This estimate excludes Maryland completed, which occurs several years adjustments provided in the IPPS hospitals participating in the Maryland after the end of the Federal fiscal year. Impact File. All-Payer Model, SCHs paid under their Therefore, section 1886(r)(2)(A)(i) of the For purposes of calculating Factor 1 hospital-specific payment rate, and 25 Act provides authority to estimate this and modeling the impact of this FY percent of payments to the 4 hospitals amount, by specifying that, for each 2017 IPPS/LTCH PPS proposed rule, we whose participation in the Rural fiscal year to which the provision used the Office of the Actuary’s March Community Hospital Demonstration applies, such amount is to be estimated 2016 Medicare DSH estimates, which program will continue through by the Secretary. Similarly, section are based on data from the December December 31, 2016. Therefore, based on 1886(r)(2)(A)(ii) of the Act represents 2015 update of the Medicare Hospital the March 2016 estimate, the estimate the estimated empirically justified Cost Report Information System (HCRIS) for empirically justified Medicare DSH Medicare DSH payments to be made in and the FY 2016 IPPS/LTCH PPS final payments for FY 2017, with the a fiscal year, as prescribed under section rule IPPS Impact file, published in application of section 1886(r)(1) of the 1886(r)(1) of the Act. Again, section conjunction with the publication of the Act, is approximately $3.556 billion (or 1886(r)(2)(A)(ii) of the Act provides FY 2016 IPPS/LTCH PPS final rule. 25 percent of the total amount of authority to estimate this amount. Because SCHs that are projected to be estimated Medicare DSH payments for

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FY 2017). Under § 412.l06(g)(1)(i) of the 75 percent of the total amount of expenditures for FY 2013. The following regulations, Factor 1 is the difference estimated Medicare DSH payments for table shows the factors applied to between these two estimates of the FY 2017 ($14,227,372,794.46 minus update this baseline through the current Office of the Actuary. Therefore, in this $3,556,843,198.62). estimate for FY 2017: proposed rule, we are proposing that The Office of the Actuary’s estimates Factor 1 for FY 2017 is for FY 2017 begin with a baseline of $10,670,529,595.84, which is equal to $12.154 billion in Medicare DSH

FACTORS APPLIED FOR FY 2014 THROUGH FY 2017 TO ESTIMATE MEDICARE DSH EXPENDITURES USING 2013 BASELINE

Estimated FY Update Discharge Case-mix Other Total DSH payment (in billions)

2014 ...... 1.009 0.9553 1.015 1.04795 1.025268 $12.461 2015 ...... 1.014 0.9894 1.005 1.0702 1.079048 13.446 2016 ...... 1.009 1.0078 1.005 0.9993 1.021239 13.732 2017 ...... 1.0005 1.0168 1.005 1.0134 1.036095 14.227

In this table, the discharge column Medicare Advantage (MA) plans. The inpatient hospital discharges and the shows the increase in the number of case-mix column shows the increase in IPPS discharges, various adjustments to Medicare FFS inpatient hospital case-mix for IPPS hospitals. The case- the payment rates that have been discharges. The figures for FYs 2014 and mix figures for FYs 2014 and 2015 are included over the years but are not 2015 are based on Medicare claims data based on actual data adjusted by a reflected in the other columns (such as that have been adjusted by a completion completion factor. The FY 2016 and FY the change in rates for the 2-midnight factor. The discharge figure for FY 2016 2017 increases are based on the stay policy). In addition, the ‘‘other’’ is based on preliminary data for 2016. recommendation of the 2010–2011 column includes a factor for the The discharge figure for FY 2017 is an Medicare Technical Review Panel. The Medicaid expansion due to the assumption based on recent trends ‘‘other’’ column shows the increase in Affordable Care Act. recovering back to the long-term trend other factors that contribute to the The table below shows the factors that and assumptions related to how many Medicare DSH estimates. These factors are included in the ‘‘Update’’ column of beneficiaries will be enrolled in include the difference between the total the above table:

Affordable Market basket Care Act Multifactor Documentation Total update FY percentage payment productivity and coding percentage reductions adjustment

2014 ...... 2.5 ¥0.3 ¥0.5 ¥0.8 0.9 2015 ...... 2.9 ¥0.2 ¥0.5 ¥0.8 1.4 2016 ...... 2.4 ¥0.2 ¥0.5 ¥0.8 0.9 2017 ...... 2.8 ¥0.75 ¥0.5 ¥1.5 0.05 Note: All numbers are based on the FY 2017 President’s Budget projections.

b. Calculation of Proposed Factor 2 for enrollment); and (2) who are uninsured 111–152) was enacted on March 30, FY 2017 in the most recent period for which data 2010. It was passed in the House of Section 1886(r)(2)(B) of the Act are available (as so calculated), minus Representatives on March 21, 2010, and establishes Factor 2 in the calculation of 0.1 percentage point for FY 2014 and by the Senate on March 25, 2010. the uncompensated care payment. minus 0.2 percentage point for each of Because the House of Representatives Specifically, section 1886(r)(2)(B)(i) of FYs 2015, 2016, and 2017. was the first House to vote on the Health the Act provides that, for each of FYs Section 1886(r)(2)(B)(i)(I) of the Act Care and Education Reconciliation Act 2014, 2015, 2016, and 2017, a factor further indicates that the percent of of 2010 on March 21, 2010, we have equal to 1 minus the percent change in individuals under 65 without insurance determined that the most recent the percent of individuals under the age in 2013 must be the percent of such estimate available from the Director of of 65 who are uninsured, as determined individuals who were uninsured in the Congressional Budget Office ‘‘before by comparing the percent of such 2013, the last year before coverage a vote in either House on the Health individuals (1) who were uninsured in expansion under the Affordable Care Care and Education Reconciliation Act 2013, the last year before coverage Act (as calculated by the Secretary of 2010 . . .’’ (emphasis added) expansion under the Affordable Care based on the most recent estimates appeared in a March 20, 2010 letter Act (as calculated by the Secretary available from the Director of the from the director of the CBO to the based on the most recent estimates Congressional Budget Office before a Speaker of the House. Therefore, we available from the Director of the vote in either House on the Health Care believe that only the estimates in this Congressional Budget Office before a and Education Reconciliation Act of March 20, 2010 letter meet the statutory vote in either House on the Health Care 2010 that, if determined in the requirement under section and Education Reconciliation Act of affirmative, would clear such Act for 1886(r)(2)(B)(i)(I) of the Act. (To view 2010 that, if determined in the enrollment). The Health Care and the March 20, 2010 letter, we refer affirmative, would clear such Act for Education Reconciliation Act (Pub. L. readers to the Web site at: http://

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www.cbo.gov/sites/default/files/ used the CBO insurance rate figure and estimate of the rate of uninsurance in cbofiles/ftpdocs/113xx/doc11379/ subtracted that amount from 100 CY 2016 is 11 percent (that is, 100 amendreconprop.pdf.) percent (that is the total population percent minus 89 percent). Similarly, In its March 20, 2010 letter to the without regard to insurance status) to the CBO’s March 2015 estimate of Speaker of the House of Representatives, estimate the 2013 baseline percent of individuals under the age of 65 with the CBO provided two estimates of the individuals without insurance. insurance in CY 2017 is 90 percent. ‘‘post-policy uninsured population.’’ Therefore, for FYs 2014 through 2017, Therefore, the CBO’s most recent The first estimate is of the ‘‘Insured our estimate of the uninsurance estimate of the rate of uninsurance in Share of the Nonelderly Population percentage for 2013 is 18 percent. CY 2017 available for this proposed rule Including All Residents’’ (82 percent) Section 1886(r)(2)(B)(i) of the Act is 10 percent (that is, 100 percent minus and the second estimate is of the requires that we compare the baseline 90 percent). ‘‘Insured Share of the Nonelderly uninsurance rate to the percent of such The calculation of the proposed Population Excluding Unauthorized individuals who are uninsured in the Factor 2 for FY 2017, employing a Immigrants’’ (83 percent). In the FY most recent period for which data are weighted average of the CBO projections for CY 2016 and CY 2017, is as follows: 2014 IPPS/LTCH PPS final rule (78 FR available (as so calculated). In the FY • 50631), we used the first estimate that 2014, FY 2015, and FY 2016 IPPS/LTCH CY 2016 rate of insurance coverage (March 2015 CBO estimate): 89 percent. includes all residents, including PPS final rules (78 FR 50634, 79 FR • unauthorized immigrants. We stated 50014, and 80 FR 49522, respectively), CY 2017 rate of insurance coverage (March 2015 CBO estimate): 90 percent. that we believe this estimate is most we used the same data source, CBO • consistent with the statute, which estimates, to calculate this percent of FY 2016 rate of insurance coverage: requires us to measure ‘‘the percent of individuals without insurance. In (89 percent * .25) + (90 percent * .75) = 89.75 percent. individuals under the age of 65 who are response to public comments, we also • uninsured’’ and provides no exclusions agreed that we should normalize the Percent of individuals without except for individuals over the age of CBO estimates, which are based on the insurance for 2013 (March 2010 CBO estimate): 18 percent. 65. In addition, we stated that we calendar year, for the Federal fiscal • believe that this estimate more fully years for which each calculation of Percent of individuals without reflects the levels of uninsurance in the Factor 2 is made (78 FR 50633). insurance for FY 2017 (weighted United States that influence Therefore, for this FY 2017 IPPS/LTCH average): 10.25 percent. uncompensated care for hospitals than PPS proposed rule, we used the most 1¥|((0.1025–0.18)/0.18)| = 1 ¥ 0.4306 = the estimate that reflects only legal recently available estimate of the 0.5694 (56.94 percent) residents. The March 20, 2010 CBO uninsurance rate, which is based on the 0.5694 (56.94 percent) ¥ .002 (0.2 letter reports these figures as the CBO’s March 2015 estimates of the percentage points for FY 2017 estimated percentage of individuals effects of the Affordable Care Act on under section 1886(r)(2)(B)(i) of the with insurance. However, because health insurance coverage (which are Act) = 0.5674 or 56.74 percent section 1886(r)(2)(B)(i) of the Act available at http://www.cbo.gov/sites/ 0.5674 = Factor 2 requires that we compare the percent of default/files/cbofiles/attachments/ Therefore, the proposed Factor 2 for individuals who are uninsured in the 43900–2014–04–ACAtables2.pdf). The FY 2017 is 56.74 percent. most recent period for which data are CBO’s March 2015 estimate of The FY 2017 Proposed available with the percent of individuals individuals under the age of 65 with Uncompensated Care Amount is: who were uninsured in 2013, in the FY insurance in CY 2016 is 89 percent. $10,670,529,595.84 × 0.5674 = 2014 IPPS/LTCH PPS final rule, we Therefore, the CBO’s most recent $6,054,458,492.68.

FY 2017 Proposed Uncompensated Care Total Available ...... $6,054,458,492.68

c. Calculation of Proposed Factor 3 for under section 1886(r) of the Act for such requirements for this factor of the FY 2017 period (as so estimated, based on such uncompensated care payment formula, data). it was necessary to determine: (1) The Section 1886(r)(2)(C) of the Act defines Factor 3 in the calculation of the Therefore, Factor 3 is a hospital- definition of uncompensated care or, in uncompensated care payment. As we specific value that expresses the other words, the specific items that are have discussed earlier, section proportion of the estimated to be included in the numerator (that is, 1886(r)(2)(C) of the Act states that Factor uncompensated care amount for each the estimated uncompensated care 3 is equal to the percent, for each subsection (d) hospital and each amount for an individual hospital) and subsection (d) hospital, that represents subsection (d) Puerto Rico hospital with the denominator (that is, the estimated the quotient of (1) the amount of the potential to receive Medicare DSH uncompensated care amount for all uncompensated care for such hospital payments relative to the estimated hospitals estimated to receive Medicare for a period selected by the Secretary (as uncompensated care amount for all DSH payments in the applicable fiscal estimated by the Secretary, based on hospitals estimated to receive Medicare year); (2) the data source(s) for the appropriate data (including, in the case DSH payments in the fiscal year for estimated uncompensated care amount; where the Secretary determines which the uncompensated care payment and (3) the timing and manner of alternative data are available that are a is to be made. Factor 3 is applied to the computing the quotient for each better proxy for the costs of subsection product of Factor 1 and Factor 2 to hospital estimated to receive Medicare (d) hospitals for treating the uninsured, determine the amount of the DSH payments. The statute instructs the the use of such alternative data)); and uncompensated care payment that each Secretary to estimate the amounts of (2) the aggregate amount of eligible hospital will receive for FY uncompensated care for a period based uncompensated care for all subsection 2014 and subsequent fiscal years. In on appropriate data. In addition, we (d) hospitals that receive a payment order to implement the statutory note that the statute permits the

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Secretary to use alternative data in the payments prior to FY 2014, which could entitled to Medicaid is not reported by case where the Secretary determines affect the accuracy and completeness of hospitals on the Medicare cost report. that such alternative data are available the information reported on Worksheet Therefore, we sought an alternative that are a better proxy for the costs of S–10. As described more fully below method using publicly available subsection (d) hospitals for treating regarding the time period of the data Medicare data for determining a proxy individuals who are uninsured. used to calculate Factor 3, for FY 2017, to account for the fact that residents of In the course of considering how to we are using data from hospital cost Puerto Rico are not eligible for SSI, and determine Factor 3 during the reports that precede FY 2014 to therefore Puerto Rico hospitals have a rulemaking process for FY 2014, we determine Factor 3 of the relatively low number of Medicare SSI considered defining the amount of uncompensated care payments days in the Factor 3 computation. We uncompensated care for a hospital as methodology. Therefore, for FY 2017, believe it is appropriate to use data from the uncompensated care costs of each we remain concerned about the the Medicare cost report to develop a hospital and determined that Worksheet accuracy and consistency of the data Puerto Rico Medicare SSI days proxy S–10 of the Medicare cost report reported on Worksheet S–10 and are because they are publicly available, potentially provides the most complete proposing to continue to employ the used for payment purposes, and subject data regarding uncompensated care utilization of insured low-income to audit. However, we acknowledge that costs for Medicare hospitals. However, patients (defined as inpatient days of there are other data sources that could because of concerns regarding variations Medicaid patients plus inpatient days of be included to develop such a proxy, in in the data reported on the Worksheet Medicare SSI patients as defined in particular the SSI ratios posted on the S–10 and the completeness of these § 412.106(b)(4) and § 412.106(b)(2)(i), Medicare DSH Web site at: https://www. data, we did not propose to use data respectively) to determine Factor 3. We cms.gov/Medicare/Medicare-Fee-for- from the Worksheet S–10 to determine also are proposing to continue the Service-Payment/AcuteInpatientPPS/ the amount of uncompensated care for policies that were finalized in the FY dsh.html, and therefore are soliciting FY 2014, the first year this provision 2015 IPPS/LTCH PPS final rule (79 FR public comment on their use. was in effect, or for FY 2015 and FY 50020) to address several specific issues To develop a Puerto Rico Medicare 2016. We instead employed the concerning the process and data to be SSI days proxy using data from the utilization of insured low income employed in determining Factor 3 in the Medicare cost report, our Office of the patients, defined as inpatient days of case of hospital mergers for FY 2017 and Actuary examined data from 2013 cost Medicaid patients plus inpatient days of subsequent fiscal years. reports and analyzed the relationship Medicare SSI patients as defined in § 412.106(b)(4) and § 412.106(b)(2)(i) of We also are proposing to make a between Medicare SSI days (estimated the regulations, respectively, to change to the data that will be used to using SSI ratios on the cost report and determine Factor 3. We believed that calculate Factor 3 for Puerto Rico Medicare days from the same cost these alternative data, which are hospitals. We received a comment in report) and Medicaid days (reported by currently reported on the Medicare cost response to the FY 2016 IPPS/LTCH the hospitals in accordance with report, would be a better proxy for the PPS proposed rule that requested CMS § 412.106(b)(4)). Nationally, excluding amount of uncompensated care to create a proxy for the SSI days used Puerto Rico, the Office of the Actuary provided by hospitals. We also in the Factor 3 calculation for Puerto found that, on average and across States, indicated that we were expecting Rico hospitals (80 FR 49526). for every 100 Medicaid inpatient days, reporting on the Worksheet S–10 to Specifically, commenters were hospitals had 14 Medicare SSI days. In improve over time and remained concerned that residents of Puerto Rico other words, the relationship between convinced that the Worksheet S–10 are not eligible for SSI benefits. Medicare SSI days and Medicaid days could ultimately serve as an appropriate Although we did not have logical reported by hospitals in States, source of more direct data regarding outgrowth to adopt any change for FY excluding Puerto Rico, was uncompensated care costs for purposes 2016, we indicated that we planned to approximately 14 percent. We believe it of determining Factor 3. As discussed in address this issue in the FY 2017 IPPS/ would be appropriate to extrapolate this section IV.F.3.d. of the preamble of this LTCH PPS proposed rule if we also relationship to Puerto Rico hospitals to proposed rule, since the introduction of proposed to continue using inpatient approximate how many patient days for the uncompensated care payment in FY days of Medicare SSI patients as a proxy these hospitals would be Medicare SSI 2014, we believe that hospitals have for uncompensated care in FY 2017. days if Puerto Rico residents were been submitting more accurate and Because we are proposing to continue eligible to receive SSI. Therefore, to consistent data through Worksheet S–10 using insured low-income patient days calculate Factor 3 for FY 2017, we are and that it is appropriate to begin as a proxy for uncompensated care in proposing to use a proxy for Medicare incorporating Worksheet S–10 data for FY 2017, we believe it is important to SSI days for each Puerto Rico hospital purposes of calculating Factor 3 starting consider the commenter’s request equal to 14 percent (or 0.14) of its in FY 2018. As discussed in greater regarding the data used to calculate Medicaid days. In other words, for each detail in section IV.F.3.d. of the Factor 3 for Puerto Rico hospitals. Puerto Rico hospital, we would preamble of this proposed rule, we are Accordingly, we are proposing to create compute a value that is equal to 14 proposing a methodology and timeline a proxy for SSI days for Puerto Rico percent of its Medicaid days, where for incorporating Worksheet S–10 data hospitals for use in the Factor 3 Medicaid days are determined in and invite public comments on such a calculation. The commenter specifically accordance with § 412.106(b)(4). proposal. mentioned the use of inpatient days for Because this is a proposed proxy for the For FY 2017, we believe it remains Medicare beneficiaries receiving Puerto Rico hospital’s Medicare SSI premature to propose the use of Medicaid as this proxy. We have days, this value would replace whatever Worksheet S–10 data for purposes of examined this concept and have been value would otherwise be computed for determining Factor 3 because hospitals unable to identify a systematic source the hospital under § 412.106(b)(2)(i). were not on notice that Worksheet S–10 for these data for Puerto Rico hospitals. Specifically, we would first remove any would be used for purposes of Specifically, we note that inpatient Medicare SSI days that a Puerto Rico computing uncompensated care utilization for Medicare beneficiaries hospital has from our calculation for

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purposes of determining the numerator [email protected]. After report years (2012/2011) used to of Factor 3 for the hospital and, if the the publication of the FY 2017 IPPS/ determine Medicaid days in FY 2015. hospital is projected to be eligible for LTCH final rule, hospitals will have We made this change in order to refine DSH payments in FY 2017, the until August 31, 2016, to review and the balance between the recency and denominator of Factor 3. Second, we submit comments on the accuracy of the accuracy of the data used in the Factor would add the proxy to the hospital’s table published in conjunction with the 3 calculation. Because we make Medicaid days for purposes of final rule. Comments can be submitted prospective determinations of the determining the numerator of Factor 3 to the CMS inbox at Section3133DSH@ uncompensated care payment without for the hospital and, if the hospital is cms.hhs.gov through August 31, 2016, reconciliation, we believed this change projected to be eligible for DSH and any changes to Factor 3 will be would increase the accuracy of the data payments in FY 2017, the denominator posted on the CMS Web site prior to used to determine Factor 3, and of Factor 3. We note that we continue October 1, 2016. accordingly each eligible hospital’s to encourage Puerto Rico hospitals to The statute also allows the Secretary allocation of the overall uncompensated report uncompensated care costs on the discretion to determine the time care amount by providing hospitals with Worksheet S–10 of the Medicare cost periods from which we will derive the more time to submit these data before report completely and accurately in data to estimate the numerator and the they are used in the computation of light of our proposal to begin denominator of the Factor 3 quotient. Factor 3. As in prior years, if the more incorporating data from Worksheet S–10 Specifically, section 1886(r)(2)(C)(i) of recent of the two cost reporting periods in the computation of hospitals’ the Act defines the numerator of the did not reflect data for a 12-month uncompensated care payments starting quotient as the amount of period, we used data from the earlier of in FY 2018, as described in more detail uncompensated care for such hospital the two periods so long as that earlier in section IV.F.3.d. of the preamble of for a period selected by the Secretary. period reflected data for a period of 12 this proposed rule. Section 1886(r)(2)(C)(ii) of the Act months. If neither of the two periods In summary, we are inviting public defines the denominator as the aggregate reflected 12 months, we used the period comments on these proposals to amount of uncompensated care for all that reflected a longer amount of time. continue to use insured low-income subsection (d) hospitals that receive a We also finalized a proposal to continue days (that is, to use data for Medicaid payment under section 1886(r) of the to extract Medicaid days from the most and Medicare SSI patient days Act for such period. In the FY 2014 recent HCRIS database update and to determined in accordance with IPPS/LTCH PPS final rule (78 FR use Medicare SSI days from the most § 412.106(b)(2)(i) and (b)(4) as a proxy 50638), we adopted a process of making recent SSI ratios available to us during for uncompensated care, as permitted by interim payments with final cost report the time of rulemaking to calculate statute, including a proxy for Medicare settlement for both the empirically Factor 3. We stated that, for subsequent SSI days for Puerto Rico hospitals), to justified Medicare DSH payments and fiscal years, if we propose and finalize determine Factor 3 for FY 2017. These the uncompensated care payments a policy of using insured low-income proposals would be codified in our required by section 3133 of the days in computing Factor 3, we would regulations at § 412.106(g)(1)(iii)(C). We Affordable Care Act. Consistent with continue to use the most recent HCRIS also are inviting public comments on that process, we also determined the database extract at the time of the our proposal to continue the policies time period from which to calculate the annual rulemaking cycle, and to use the concerning the process and data to be numerator and denominator of the subsequent year of cost reports (that is, employed in determining Factor 3 in the Factor 3 quotient in a way that would to advance the 12-month cost reports by case of hospital mergers. be consistent with making interim and 1 year). In addition, for any subsequent As we have done for every proposed final payments. Specifically, we must fiscal years in which we finalize a rule beginning in FY 2014, for this FY have Factor 3 values available for policy to use insured low-income days 2017 IPPS/LTCH PPS proposed rule, we hospitals that we estimate will qualify to compute Factor 3, our intention are publishing on the CMS Web site a for Medicare DSH payments and for would be to continue to use the most table listing Factor 3 for all hospitals those hospitals that we do not estimate recently available SSI ratio data at the that we estimate would receive will qualify for Medicare DSH payments time of annual rulemaking to calculate empirically justified Medicare DSH but that may ultimately qualify for Factor 3. We believed that it was payments in FY 2017 (that is, hospitals Medicare DSH payments at the time of that we project would receive interim cost report settlement. appropriate to state our intentions uncompensated care payments during In the FY 2014 IPPS/LTCH PPS final regarding the specific data we would the fiscal year), and for the remaining rule (78 FR 50638) and the FY 2015 use in the event Factor 3 was subsection (d) hospitals and subsection IPPS/LTCH PPS final rule (79 FR determined on the basis of low-income (d) Puerto Rico hospitals that have the 50018), we finalized a policy of using insured days for subsequent years to potential of receiving a Medicare DSH the most recent available full year of provide hospitals with as much payment in the event that they receive Medicare cost report data for guidance as possible so they may best an empirically justified Medicare DSH determining Medicaid days and the consider how and when to submit cost payment for the fiscal year as most recently available SSI ratios to report information in the future. We determined at cost report settlement. calculate Factor 3. In the FY 2016 IPPS/ noted that we would make proposals This table also contains a list of the LTCH PPS final rule (80 FR 49528), we with regard to our methodology for mergers that we are aware of and the held constant the cost reporting years calculating Factor 3 for subsequent computed uncompensated care payment used to determine Medicaid days in the fiscal years through notice-and- for each merged hospital. Hospitals have calculation of Factor 3. That is, instead comment rulemaking. 60 days from the date of public display of calculating the numerator and the Since the publication of the FY 2016 of this FY 2017 IPPS/LTCH PPS denominator of Factor 3 for hospitals IPPS/LTCH PPS final rule, we have proposed rule to review this table and based on the most recently available full learned that some members of the notify CMS in writing of any year of Medicare cost report data with hospital community have been inaccuracies. Comments can be respect to a Federal fiscal year, we used disadvantaged by our policy of using submitted to the CMS inbox at data from the more recent of the cost only one cost reporting period to

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determine their share of uncompensated words, we would divide the sum of the Step 1: Calculate Factor 3 for FY 2011 by care. Specifically, many hospitals have individual Factor 3s by the number of summing a hospital’s FY 2011 Medicaid days reported unpredictable swings and cost reporting periods for which there and FY 2012 SSI days and dividing by all are data. If a hospital has merged, we DSH eligible hospitals’ FY 2011 Medicaid anomalies in their low-income insured days and FY 2012 SSI days. days between cost reporting periods. would combine data from both hospitals Step 2: Calculate Factor 3 for FY 2012 by These hospitals expressed concern that for the cost reporting periods in which summing a hospital’s FY 2012 Medicaid days the use of only one cost reporting period the merger is not reflected in the and FY 2013 SSI days and dividing by all is a poor predictor of their future surviving hospital’s cost report data to DSH eligible hospitals’ FY 2012 Medicaid uncompensated care burden and results compute Factor 3 for the surviving days and FY 2013 SSI days. in inadequate payments. Because the hospital. Moreover, to further reduce Step 3: Calculate Factor 3 for FY 2013 by data used to make uncompensated care undue fluctuations in a hospital’s summing a hospital’s FY 2013 Medicaid days uncompensated care payments, if a and FY 2014 SSI days and dividing by all payment determinations are not subject DSH eligible hospitals’ FY 2013 Medicaid to reconciliation after the end of the hospital filed multiple cost reports days and FY 2014 SSI days. fiscal year, we believe that it would be beginning in the same fiscal year, we are Step 4: Sum the Factor 3 calculated for FY appropriate to expand the time period proposing to combine data from the 2011, FY 2012, and FY 2013 and divide by for the data used to calculate Factor 3 multiple cost reports so that a hospital the number of cost reporting periods with from one cost reporting period to three may have a Factor 3 calculated using data to compute an average Factor 3. cost reporting periods. Using data from more than one cost report within a cost For illustration purposes, in Table 18 more than one cost reporting period reporting period. We are proposing to associated with the FY 2017 proposed would mitigate undue fluctuations in codify these changes for FY 2017 by rule (which is available via the Internet the amount of uncompensated care amending the regulations at on the CMS Web site), we compute payments to hospitals from year to year § 412.106(g)(1)(iii)(C). We are inviting Factor 3 using hospitals’ FY 2011, FY and smooth over anomalies between public comments on this proposal, 2012, and FY 2013 cost reports from the cost reporting periods. Moreover, this which we describe more fully below. December 2015 update of HCRIS to policy would have the benefit of For the FY 2016 IPPS/LTCH PPS final obtain Medicaid days and the FY 2012 supplementing the data of hospitals that rule, we used the most recent of and FY 2013 SSI ratios published on the filed cost reports that are less than 12 hospitals’ 12-month 2012 or 2011 cost following CMS Web site to determine months, such that the basis of their reports and 2012 cost report data Medicare SSI days: http://www.cms.gov/ uncompensated care payments and submitted to CMS by IHS hospitals to Medicare/Medicare-Fee-for-Service- those of hospitals that filed full-year 12- obtain the Medicaid days to calculate Payment/AcuteInpatientPPS/dsh.html. Factor 3. In addition, we used Medicare month cost reports would be more Because the FY 2014 SSI ratios are not SSI days from the FY 2013 SSI ratios equitable. We believe that computing yet available, for purposes of this published on the following CMS Web Factor 3 using data from three cost proposed rule, we computed Factor 3 site to calculate Factor 3: http://www. reporting periods would best stabilize for FY 2013 using FY 2013 Medicaid cms.gov/Medicare/Medicare-Fee-for- hospitals’ uncompensated care days and FY 2013 SSI days. However, Service-Payment/AcuteInpatientPPS/ payments while maintaining the we expect that the FY 2014 SSI ratios recency of the data used in the Factor dsh.html. Under our proposal to calculate will be available to calculate Factor 3 for 3 calculation. We believe that using data Factor 3 for FY 2017 using data from the FY 2017 IPPS/LTCH PPS final rule. from two cost reporting periods would For subsequent years, we are three cost reporting periods, we would not be as stable while using data from proposing to continue to use the most use data from hospitals’ FY 2011, FY more than three cost reporting periods 2012, and FY 2013 cost reporting recent HCRIS database extract at the could result in using overly dated periods extracted from the most recent time of the annual rulemaking cycle and information. update of the hospital cost report data to advance the three cost reporting Therefore, for FY 2017, we are in the HCRIS database and the FY 2011 periods used to determine Factor 3 by proposing to use an average of data and FY 2012 cost report data submitted 1 year as appropriate. For instance, if we derived from three cost reporting to CMS by IHS hospitals to obtain the were to finalize a proposal to continue periods instead of one cost reporting Medicaid days to calculate Factor 3. (We using the proxy in FY 2018, we would period to compute Factor 3. That is, we note that, starting with the FY 2013 cost use FY 2012, FY 2013, and FY 2014 cost would calculate a Factor 3 for each cost reports, data for IHS hospitals will be reports from the most recent available reporting period and calculate the included in the HCRIS database and extract of HCRIS for Medicaid days and average. We would calculate their will no longer be submitted separately.) FY 2013, FY 2014, and FY 2015 SSI average by adding these amounts In addition, to calculate Factor 3 for FY ratios to obtain the Medicare SSI days together, and dividing the sum by three, 2017, we anticipate that, under our and follow the same methodology in order to calculate Factor 3 for FY proposal discussed earlier to use the outlined earlier to determine Factor 3. 2017. Consistent with the policy most recent available 3 years of data on However, as discussed earlier, we adopted in the FY 2016 IPPS/LTCH PPS Medicare SSI utilization, we would believe that it is possible to begin final rule, we would advance the most obtain Medicare SSI days from the FY incorporating data from Worksheet S–10 recent cost report years used to obtain 2012, FY 2013, and FY 2014 SSI ratios into the computation of Factor 3 starting Medicaid days and Medicare SSI days (or, for Puerto Rico hospitals, substitute in FY 2018 and outline a proposal for in FY 2017 by one year and continue to Medicare SSI days with a proxy as doing so using data from three cost extract Medicaid days data from the described earlier). We expect the FY reporting periods in the following most recent update of HCRIS, which for 2014 SSI ratios to be published on the section. FY 2017 would be the March 2015 CMS Web site when available at: d. Proposed Calculation of Factor 3 for update of HCRIS. If the hospital does http://www.cms.gov/Medicare/ FY 2018 and Subsequent Years not have data for one or more of the Medicare-Fee-for-Service-Payment/ three cost reporting periods, we AcuteInpatientPPS/dsh.html. Under this (1) Background compute Factor 3 for the periods proposal, we would calculate Factor 3 In response to commenters’ requests available and average those. In other as follows: for a timeline and transition for

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introducing Worksheet S–10 data into payments. Hospitals’ cost reports from 10 data and IRS Form 990 data from the the calculation of Factor 3, in this FY 2014 have been publically available same years. Using IRS Form 990 data for section, we discuss our proposed plans for some time now. Furthermore, tax years 2010, 2011, and 2012 (the on how to begin incorporating hospitals’ MedPAC has provided analyses that latest available years) as a benchmark, Worksheet S–10 data into the found that current Worksheet S–10 data we compared key variables derived from calculation of Factor 3, in order to are a better proxy for predicting audited Worksheet S–10 and IRS Form 990 data, allocate payments based on a hospital’s uncompensated care costs than such as charity care and bad debt. The share of overall uncompensated care Medicaid/Medicare SSI days. analysis was completed using data from costs reported on Worksheet S–10. Specifically, MedPAC submitted a hospitals that had completed both When we first discussed using public comment discussed in the FY Worksheet S–10 and IRS Form 990 Worksheet S–10 to allocate hospitals’ 2016 IPPS/LTCH PPS final rule that across all study years, yielding a sample shares of uncompensated care costs in cited its 2007 analysis of data from the of 788 not-for-profit hospitals the FY 2014 IPPS/LTCH PPS final rule Government Accountability Office (representing 668 unique Taxpayer (78 FR 50638), we explained why we (GAO) and data from the American Identification Numbers). Because Factor believed that it was premature to use Hospital Association (AHA), which 3 is used to determine the Medicare uncompensated care costs reported on suggests that Medicaid days and low- uncompensated care payment amount Worksheet S–10 for FY 2014. income Medicare days are not a good for each hospital, we calculated the Specifically, at that time, the most proxy for uncompensated care costs (80 amounts for Factor 3 for the matched recent available cost reports would have FR 49525). Analysis performed by hospitals using charity care and bad been from FYs 2010 and 2011, which MedPAC showed that the correlation debt, and compared the Factor 3 were submitted on or after May 1, 2010, between audited uncompensated care distributions calculated using data from when the new Worksheet S–10 went data from 2009 and the data from FY IRS Form 990 and Worksheet S–10. Key into effect. We believed that ‘‘[c]oncerns 2011 Worksheet S–10 was over 0.80, as findings indicate that the amounts for about the standardization and compared to a correlation of Factor 3 derived using the IRS Form 990 completeness of the Worksheet S–10 approximately 0.50 for 2011 Medicare and Worksheet S–10 data are highly data could be more acute for data SSI and Medicaid days. MedPAC correlated. In addition, the correlation collected in the first year of the concluded that use of Worksheet S–10 coefficient between the amounts for Worksheet’s use’’ (78 FR 50635). In data was already better than using Factor 3 calculated from the IRS Form addition, we believed that it would be Medicare SSI and Medicaid days as a 990 and Worksheet S–10 has increased most appropriate to use data elements proxy for uncompensated care costs, over time, from 0.71 in 2010 to 0.80 in that have been historically publicly and that the data on Worksheet S–10 2012, suggesting some convergence in available, subject to audit, and used for would improve over time as the data are the data sources over time. This strong payment purposes (or that the public actually used to make payments. correlation indicates that Worksheet S– 10 data would be a statistically valid understands will be used for payment We also have undertaken an extensive purposes) to determine the amount of source to use as part of the calculation analysis of the Worksheet S–10 data, of the uncompensated care payments in uncompensated care for purposes of benchmarking it against the data on Factor 3 (78 FR 50635). At the time we FY 2018. uncompensated care costs reported to Accordingly, because hospitals have issued the FY 2014 IPPS/LTCH PPS the Internal Revenue Service (IRS) on been on notice since the FY 2014 final rule, we did not believe that the Form 990 by not-for-profit hospitals. rulemaking that CMS intended available data regarding uncompensated The purpose of this analysis, performed eventually to use Worksheet S–10 as the care from Worksheet S–10 met these by Dobson DaVanzo & Associates, LLC, data source for calculating criteria and, therefore, we believed they under contract to CMS, was to uncompensated care payments, and in were not reliable enough to use for determine if Worksheet S–10 light of growing evidence that determining FY 2014 uncompensated uncompensated care data are becoming Worksheet S–10 data are improving over care payments. Accordingly, for FY more stable over time. (This analysis, time, we believe it would be appropriate 2014, we concluded that utilization of included in a report entitled to use Worksheet S–10 as a data source insured low-income patients would be a ‘‘Improvements to Medicare for determining Factor 3 starting in FY better proxy for the costs of hospitals in Disproportionate Share Hospital (DSH) 2018. We discuss our proposed treating the uninsured. For FYs 2015, Payments Report: Benchmarking S–10 methodology below for how we would 2016, and 2017, the cost reports used for Data Using IRS Form 990 Data and begin to incorporate Worksheet S–10 calculating uncompensated care Worksheet S–10 Trend Analyses,’’ is data into the calculation of Factor 3 of payments (that is, FYs 2011, 2012, and available on the CMS Web site at: the uncompensated care payment 2013) were also submitted prior to the https://www.cms/gov/Medicare/ methodology. time that hospitals were on notice that Medicare-Fee-for-Service-Payment/ Worksheet S–10 could be the data AcuteInpatientPPS/dsh.html under the (2) Proposed Data Source and Time source for calculating uncompensated Downloads section.) Although we Period for FY 2018 and Subsequent care payments. Therefore, we believe it acknowledge that the analysis was Years, Including Methodology for is also appropriate to use proxy data to limited to not-for-profit hospitals, we Incorporating Worksheet S–10 Data calculate Factor 3 for these years. believe it is relevant to our assessment For the reasons explained earlier, we We believe that, for FY 2018, many of of the overall quality of the data believe that, starting with Worksheet S– these concerns would no longer be reported on Worksheet S–10. Because 10 data reported for FY 2014, it is relevant. That is, as described more many not-for-profit hospitals are eligible appropriate to begin to incorporate fully below regarding the use of for empirically justified Medicare DSH Worksheet S–10 data into the Worksheet S–10 from FY 2014, payments and, therefore, computation of Factor 3 and the hospitals were on notice as of FY 2014 uncompensated care payments, they allocation of uncompensated care that Worksheet S–10 could eventually represent a suitable standard of payments. Specifically, we are become the data source for CMS to comparison. We conducted an analysis proposing to continue to use low- calculate uncompensated care of 2010, 2011, and 2012 Worksheet S– income insured patient days as a proxy

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for uncompensated care for cost to compute this average for each not 12 months in length, and using a reporting periods before FY 2014 and to hospital by— proxy for Medicare SSI days for use Worksheet S–10 data for FY 2014 • Step 1: Calculating Factor 3 using hospitals in Puerto Rico, as described and subsequent fiscal years to calculate the low-income insured days proxy earlier for the calculation of Factor 3 for uncompensated care payments for FY based on FY 2012 cost report data and FY 2017). With regard to FY 2019 and 2018 and subsequent fiscal years, the FY 2014 SSI ratio; subsequent years, we believe it would which, when combined with our • Step 2: Calculating Factor 3 using continue to be appropriate to advance proposal to use data from three cost the insured low-income days proxy the 3-year time period we are using by reporting periods to calculate Factor 3, based on FY 2013 cost report data and 1 year to compute Factor 3. would have the effect of transitioning the FY 2015 SSI ratio; Accordingly, we are proposing to use toward exclusive use of Worksheet S–10 • Step 3: Calculating Factor 3 based FY 2013, FY 2014, and FY 2015 cost data. Under this proposed approach, we on the FY 2014 Worksheet S–10 data; report data from the most recent would use only Worksheet S–10 data to and available update of HCRIS to compute calculate Factor 3 for FY 2020 and • Step 4: Averaging the Factor 3 Factor 3 and allocate uncompensated subsequent fiscal years. values that are computed in Steps 1, 2, care payments for FY 2019. As we stated As discussed previously, for FY 2017, and 3; that is, adding the Factor 3 values earlier, with regard to the data used to we are proposing to calculate a from FY 2012, FY 2013, and FY 2014 for compute Factor 3, we believe that it hospital’s share of uncompensated care each hospital, and dividing that amount would be appropriate to use Worksheet based on the proxy of its share of low- by the number of cost reporting periods S–10 data from FY 2014 and subsequent income insured days using a time with data to compute an average Factor periods to calculate Factor 3 and period that includes three cost reports 3. hospitals’ uncompensated care (that is, FY 2011, FY 2012, and FY 2013 The denominator would be the sum of payments for FY 2018 and subsequent cost reports). For the reasons we the averages of the FY 2012, FY 2013, fiscal years. Because we are proposing described earlier, we believe it would and FY 2014 amounts from Step 4 for to use FY 2013, FY 2014, and FY 2015 not be appropriate to use Worksheet S– each hospital that is estimated to be cost reports to determine Factor 3 for FY 10 data for periods prior to FY 2014. For eligible for Medicare DSH payments in 2019, we are proposing to calculate cost reporting periods prior to FY 2014, FY 2018. For example, assuming there Factor 3 with a proxy calculated based we believe it would be appropriate to are only three hospitals in the IPPS and on FY 2013 cost report data and FY continue to use low-income insured Hospitals A and B are estimated to be 2015 SSI ratios and based on Worksheet days for the reasons we have previously eligible for Medicare DSH payments in S–10 uncompensated care costs from FY described. Accordingly, with a time FY 2018, while Hospital C is estimated 2014 and FY 2015 cost reports. We are period that includes three cost reporting as ineligible for Medicare DSH proposing to calculate Factor 3 for FY periods consisting of FY 2014 and two payments in FY 2018, each hospital’s 2019 based on an average of Factor 3 preceding periods, we are proposing to proposed share of the overall amount amounts calculated using data from the use Worksheet S–10 data for the FY available for uncompensated care three cost reporting periods in the 2014 cost reporting period and the low- payments would be calculated as manner described earlier for FY 2018. income insured day proxy data for the follows: For FY 2020, we are proposing to two earlier cost reporting periods, [(Hospital A FY 2012 Factor 3 proxy) + continue to advance the three cost drawing three sets of data from the most (Hospital A FY 2013 Factor 3 proxy) reports used by 1 year, and we are recently available HCRIS extract. That + (Hospital A FY 2014 Factor 3 S– proposing to calculate Factor 3 using is, for FY 2018, to compute Factor 3, we only data from the Worksheet S–10, are proposing to continue to advance 10)] / 3 = X [(Hospital B FY 2012 Factor 3 proxy) + from cost reports from FY 2014, FY the 3-year time period we are using by 2015, and FY 2016. For FY 2021 and 1 year and therefore to use FY 2012, FY (Hospital B FY 2013 Factor 3 proxy) subsequent fiscal years, we would 2013, and FY 2014 cost report data from + (Hospital B FY 2014 Factor 3 S– continue to base our estimates of the the most recent update of HCRIS. In 10)] / 3 = Y amount of hospital uncompensated care addition, for FY 2018, we are proposing [(Hospital C FY 2012 Factor 3 proxy) + on uncompensated care costs, using to use Medicaid days from FY 2012 and (Hospital C FY 2013 Factor 3 proxy) three cost reporting periods from the FY 2013 cost reports and FY 2014 and + (Hospital C FY 2014 Factor 3 S– most recently available HCRIS database, FY 2015 SSI ratios. We believe this 10)] / 3 = Z approach would have a transitioning Hospital A’s Factor 3 or proposed share and in each fiscal year, the cost effect of incorporating data from of the overall uncompensated care reporting periods would be advanced Worksheet S–10 into the calculation of amount in FY 2018 would be equal forward by 1 year (for example, for FY Factor 3 starting in FY 2018. to (X) / (X+Y). 2021, FY 2015, FY 2016, and FY 2017 Consistent with our proposal to Hospital B’s Factor 3 or proposed share cost reports would be used). We are determine Factor 3 using data over a of the overall uncompensated care soliciting comments on the proposed period of 3 cost reporting periods, we amount in FY 2018 would be equal data sources, time periods, and method are proposing to calculate a Factor 3 for to (Y) / (X+Y). for calculating uncompensated care each of the three cost reporting periods. Hospital C’s Factor 3 or proposed share costs in FY 2018 and subsequent years. Specifically, we are proposing to of the overall uncompensated care Although our proposal for FY 2018 is calculate Factor 3 for FY 2018 based on amount in FY 2018 would be equal to calculate Factor 3 based on an an average of Factor 3 calculated using to (Z) / (X+Y). average of the Factor 3 amounts low-income insured days (proxy data) We note that, under this proposal, the calculated using 2 years of proxy data determined using Medicaid days from methodology for calculating Factor 3 for and 1 year of data from the FY 2014 FY 2012 and FY 2013 cost reports and each subsequent year would remain Worksheet S–10, readers may find it FY 2014 and FY 2015 SSI ratios, and unchanged (such as using all cost useful to review a file posted on the Factor 3 calculated using reports for eligible hospitals that begin CMS Web site at: https://www.cms.gov/ uncompensated care data based on FY during the relevant cost reporting years, Medicare/Medicare-Fee-for-Service- 2014 Worksheet S–10. We are proposing including cost reporting periods that are Payment/AcuteInpatientPPS/dsh.html

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under the Downloads section, which potential definitions of uncompensated from these sources indicated that there shows preliminary uncompensated care care: Charity care; charity care + bad is some variation in how different costs calculated by hospital using only debt; and charity care + bad debt + States, provider organizations, and Worksheet S–10 data from FY 2014 cost Medicaid shortfalls. As we explained in Federal programs define reports extracted from the December the FY 2014 IPPS/LTCH PPS final rule ‘‘uncompensated care.’’ However, a 2015 update of HCRIS. To the extent (78 FR 50634), we considered proposing common theme of almost all these that hospitals have either not submitted to define the amount of uncompensated definitions is that they include both a Worksheet S–10 with their FY 2014 care for a hospital as the ‘‘charity care’’ and ‘‘bad debt’’ as cost report or find errors on a submitted uncompensated care costs of that components of ‘‘uncompensated care.’’ Worksheet S–10, we encourage hospital and considered potential data Therefore, a definition that incorporates hospitals to work with MACs to sources for those costs. We examined the most commonly used factors within complete and revise, as appropriate, the literature on uncompensated care their FY 2014 Worksheet S–10 as soon uncompensated care as reported by as possible. and the concepts of uncompensated care stakeholders would include charity care used in various public and private costs and bad debt costs. Worksheet S– (3) Proposed Definition of programs, and considered input from 10 employs the definition of charity care Uncompensated Care for FY 2018 and stakeholders and public comments in plus non-Medicare bad debt. Subsequent Fiscal Years various forums, including the national Specifically: In the FY 2014 IPPS/LTCH PPS provider call that we held in January rulemaking, we considered three 2013. Our review of the information

Where: shortfalls). Proponents of including uncompensated care for patients with • Cost of charity care = Cost of initial Medicare shortfalls advance two no insurance coverage. obligation of patients approved for arguments: We believe these arguments for charity care (line 21) minus partial • Medicaid payment shortfalls excluding Medicare shortfalls from the payment by patients approved for charity represent non-covered care; therefore, definition of uncompensated care are care (line 22). • hospitals have unmet costs when compelling. In addition, we believe that Cost of non-Medicare bad debt expense = it is advisable to adopt a definition that Cost to charge ratio (line 1) times non- treating these patients. Medicare and nonreimbursable bad debt • The goal of Medicare DSH is used by several government agencies expense (line 28). payments is to provide partial relief and key stakeholders. Therefore, we are proposing that, for purposes of We believe a definition that from charity care that is provided to (primarily) low-income patients. calculating Factor 3 and the amount of incorporates the most commonly used uncompensated care for a hospital factors within uncompensated care as Because Medicaid enrollees are low- income persons, the underpayments beginning in FY 2018, ‘‘uncompensated reported by stakeholders would include care’’ would be defined as the cost of charity care costs and non-Medicare bad associated with their care are a form of charity care. charity care and the cost of non- debt costs which correlates to line 30 of Medicare bad debt. We also are Worksheet S–10. Therefore, we are In contrast, there are several arguments to support excluding proposing to exclude Medicaid proposing that, for purposes of shortfalls reported on Worksheet S–10 Medicaid shortfalls from the definition calculating Factor 3 and uncompensated from the definition of uncompensated care costs beginning in FY 2018, of uncompensated care: • care for purposes of calculating Factor 3. ‘‘uncompensated care’’ would be Several government agencies and We are proposing to codify this defined as the amount on line 30 of key stakeholders define uncompensated definition in the regulation at Worksheet S–10, which is the cost of care as bad debt plus charity care, § 412.106(g)(1)(iii)(C) and are inviting charity care and the cost of non- without consideration for Medicaid public comment on our proposed Medicare bad debt. payment shortfalls. Specifically, definition. We believe that We have received many comments MedPAC, GAO, and the AHA exclude uncompensated care costs as reported and questions from hospitals and Medicaid underpayments from the on line 30 of Worksheet S–10 best hospital associations regarding whether definition of uncompensated care. reflect our proposed definition of • Medicaid payment shortfalls should be Including Medicaid shortfalls in the uncompensated care at this time, but we included in the definition of calculation of Medicare uncompensated welcome public input on this issue. uncompensated care. Some stakeholders care payments would represent a form argue that such payment shortfalls are of cross-subsidization from Medicare to (4) Other Methodological unreimbursed care for low-income cover Medicaid costs. In the past, CMS Considerations for FY 2018 and patients and that the definition of and MedPAC have not supported such Subsequent Fiscal Years uncompensated care should be action. In the past several years, we also have consistent across Medicare and • Excluding Medicaid shortfalls from received technical comments from Medicaid (where the longstanding the uncompensated care definition stakeholders regarding the timing of Medicaid definition of uncompensated allows Medicare DSH payments to reporting charity care and the CCRs care used for Medicaid hospital-specific better target hospitals with a used in determining uncompensated DSH limits includes Medicaid payment disproportionate share of care costs. We discuss these issues and

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how we are proposing to incorporate of teaching hospitals are artificially low, calculate high-cost outlier payments to them into the calculation of not capturing true uncompensated care eliminate anomalies in payment uncompensated care costs for purposes costs, thereby disadvantaging teaching determinations (§ 412.84(h)(3)(ii)), it is of determining uncompensated care hospitals in the calculation of their appropriate to apply statistical trims to payments for FY 2018 and subsequent uncompensated care costs. the CCRs that are considered anomalies fiscal years below. Using data from FY 2011 and 2012 on Worksheet S–10, Line 1. Specifically, • Timing of Reporting Charity Care. cost reports, we analyzed the effect on § 412.84(h)(3)(ii) states that the The determination and write-off of all hospitals’ uncompensated care costs Medicare contractor may use a charity care often happens outside of when GME costs are included in the statewide CCR for hospitals whose the hospital fiscal year in which the numerator. Specifically, instead of operating or capital CCR is in excess of services are provided. Some calculating the CCRs as specified 3 standard deviations above the commenters have requested that the currently on line 1 of Worksheet S–10 corresponding national geometric mean charity care captured on Line 20 of (which pulls the CCR from Worksheet C, (that is, the CCR ‘‘ceiling’’). This mean Worksheet S–10 include only the Part I, column 3, line 202/Worksheet C, is recalculated annually by CMS and charity care that was written off in the column 8, line 202), we calculated the published in the proposed and final particular cost reporting year, regardless CCRs using Worksheet B, Part I, column IPPS rules each year. To control for data of when the services were provided, 24, line 118/Worksheet C, Part I, column anomalies, we are considering proposals consistent with charity write-offs that 8, line 202. As can be seen on the file which would trim hospitals’ CCRs to hospitals report in accordance with posted on the CMS Web site at: https:// ensure reasonable CCRs are used to GAAP. In addition, hospitals currently www.cms.gov/Medicare/Medicare-Fee- convert charges to costs for purposes of report non-Medicare bad debt without for-Service-Payment/AcuteInpatient determining uncompensated care costs. regard to when the services were PPS/dsh.html under the Downloads One approach we are considering as provided. The current Worksheet S–10 section, and as expected, including a possible proposal for FY 2018 and does not follow this hospital practice, GME costs in the numerator of the CCR subsequent years would be a ‘‘double and specifies that charity care provided results in an increased share of trim’’ methodology as follows: (not necessarily written off) during the uncompensated care payments being period should to be recorded on Line made to teaching hospitals. Of the more First Trim 20. (Instructions for Line 20 of than 1,000 teaching hospitals included Step 1: Prior to calculating the Worksheet S–10 of the Medicare cost in the analysis, the CCRs of 830 statewide average CCRs, all hospitals report CMS-Form-2552–10, ‘‘Enter the hospitals increase by less than 5 with a CCR reported on Worksheet S– total initial payment obligation of percent, 178 hospitals’ CCRs increase by 10, line 1, of greater than the patients who are given a full or partial more than 5 percent but less than 10 corresponding CCR ‘‘ceiling’’ (that is, discount based on the hospital’s charity percent, and 71 hospitals’ CCRs increase the CCR ‘‘ceiling’’ published in the final care criteria (measured at full charges), by 10 percent or more. Thirty-three rule of the fiscal year that is for care delivered during this cost hospitals experience a decrease in their contemporaneous to the particular reporting period for the entire facility CCRs, with 32 hospitals experiencing a Worksheet S–10 data) would be . . .’’ (emphasis added) are included in decrease of less than 5 percent, and 1 removed from the calculation. We are CMS Pub. 15–2, Chapter 40, Section hospital experiencing a decrease of proposing to remove the hospitals with 4012).) While these differences in more than 5 percent, but less than 10 a CCR of greater than 3 standard reporting should average out over time percent. As we have stated previously in deviations above the corresponding for a hospital, consistency in reporting response to this issue, we believe that national geometric mean in order to has been requested by some the purpose of uncompensated care calculate the statewide average CCRs so stakeholders. We acknowledge these payments is to provide additional that these aberrant CCRs do not skew concerns, and we intend to revise the payment to hospitals for treating the the statewide average CCR. current Worksheet S–10 cost report uninsured, not for the costs incurred in instructions for Line 20 concerning the training residents. In addition, because Step 2: Using the CCRs for the timing of reporting charity care, such the CCR on line 1 of Worksheet S–10 remaining hospitals in Step 1, that charity care will be reported based pulled from Worksheet C, Part I, is also determine the statewide average CCRs on date of write-off, and not based on used in other IPPS ratesetting contexts using line 1 of Worksheet S–10 for date of service. (such as high-cost outliers and the hospitals within each State (including • Revisions to the CCR on Line 1 of calculation of the MS–DRG relative non-DSH eligible hospitals). Worksheet S–10. Many commenters weights) from which it is appropriate to Step 3: Calculate the simple average have requested that the CCR used to exclude GME because GME is paid CCR (not weighted by hospital size) for convert charges to costs should include separately from the IPPS, we hesitate to each State. the cost of training residents (direct adjust the CCRs in the narrower context Step 4: First CCR Trim—Assign the GME costs). The CCR on line 1 of of calculating uncompensated care statewide average CCR calculated in Worksheet S–10 currently does not costs. Therefore, at this time, we do not Step 3 to all hospitals with a CCR include GME costs, while the charges of believe it is appropriate to modify the greater than 3 standard deviations above teaching hospitals do include charges calculation of the CCR on line 1 of the corresponding national geometric for GME. Thus, the CCR excludes GME Worksheet S–10 to include GME costs mean (that is, the CCR ‘‘ceiling’’). costs in the cost component (or in the numerator. Second Trim numerator), but includes GME costs in • Trims to Apply to CCRs on Line 1 the charge component (or denominator). of Worksheet S–10. Commenters also Step 5: Calculate the natural Commenters have requested that CMS have suggested that uncompensated care logarithm of the CCR for all hospitals consider using the GME costs reported costs reported on Worksheet S–10 (including those with replaced CCRs in Worksheet B Part I (column 24, line should be audited due to extremely high and those not eligible for Medicare DSH 118) to capture these additional costs. values consistently reported by some payments). Unless these GME costs are included, hospitals. We believe that, just as we Step 6: Calculate the geometric mean commenters maintained that the CCRs apply trims to hospitals’ CCRs used to and standard deviation of the log values

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across all hospitals (including those not We are inviting public comments on also established a new Subpart I under eligible for Medicare DSH payments). these methodological considerations. 42 CFR part 412 (§§ 412.150 through Step 7: Second CCR Trim—Assign the 412.154) to codify rules for G. Hospital Readmissions Reduction statewide average CCR calculated in implementing the Hospital Program: Proposed Updates and Step 3 to each Medicare DSH eligible Readmissions Reduction Program. Changes (§§ 412.150 Through 412.154) hospital with a CCR greater than 3.0 In the FY 2014 IPPS/LTCH PPS final standard deviations above the geometric 1. Statutory Basis for the Hospital rule (78 FR 50649 through 50676), we mean. All hospitals not eligible for Readmissions Reduction Program finalized our policies that relate to refinement of the readmissions Medicare DSH payments should be Section 3025 of the Affordable Care measures and related methodology for excluded from further analyses. Act, as amended by section 10309 of the the current applicable conditions, Analysis we performed under this Affordable Care Act, added section expansion of the ‘‘applicable ‘‘double trim’’ approach was based on 1886(q) to the Act, which establishes the CCRs from FY 2012 Worksheet S–10, conditions’’ for FY 2015 and subsequent ‘‘Hospital Readmissions Reduction fiscal years, and clarification of the Line 1. Under Step 1, we used the FY Program’’ effective for discharges from 2013 CCR ‘‘ceiling’’ of 1.146 published process for reporting hospital-specific ‘‘applicable hospitals’’ beginning on or information, including the opportunity in the FY 2013 IPPS/LTCH PPS final after October 1, 2012. Under the rule (77 FR 53697). (We used the FY to review and submit corrections. We Hospital Readmissions Reduction also established policies related to the 2013 CCR ‘‘ceiling’’ because it was Program, payments to applicable computed from the March 2012 update calculation of the adjustment factor for hospitals may be reduced to account for FY 2014. of the Provider Specific File, which certain excess readmissions. We refer contained CCRs that are relatively In the FY 2015 IPPS/LTCH PPS final readers to section IV.E.1. of the FY 2016 rule (79 FR 50024 through 50048), we contemporaneous to the CCRs in the FY IPPS/LTCH PPS final rule (80 FR 49530 2012 cost reports.) Our analysis shows made refinements to the readmissions through 49531) for a detailed discussion measures and related methodology for that 27 hospitals would receive their and additional information on of the respective statewide average CCR. (We applicable conditions for FY 2015 and statutory history of the Hospital subsequent fiscal years, discussed the refer readers to our analysis posted on Readmissions Reduction Program. the CMS Web site at: https://www.cms. maintenance of technical specifications gov/Medicare/Medicare-Fee-for-Servie- 2. Regulatory Background for quality measures, and described a waiver from the Hospital Readmissions Payment/AcuteInpatientPPS/dsh.html In the FY 2012 IPPS/LTCH PPS final under the Downloads section.) Reduction Program for hospitals rule (76 FR 51660 through 51676), we formerly paid under section 1814(b)(3) Alternatively, we are considering addressed the issues of the selection of of the Act (§ 412.154(d)). We also proposing for FY 2018 and subsequent readmission measures and the specified the ‘‘applicable period’’ for FY years to use the same trim process that calculation of the excess readmissions 2015 and made changes to the is used for high-cost outliers under ratio, which will be used, in part, to calculation of the aggregate payments § 412.84(i), under which we calculate calculate the readmissions adjustment for excess readmissions so as to include separate urban and rural average CCRs factor. Specifically, in that final rule, we two additional applicable conditions for for each state. Thus, the CCR of an finalized policies that relate to the the FY 2015 payment determination. urban or rural hospital above the portions of section 1886(q) of the Act Finally, we expanded the list of applicable CCR ‘‘ceiling’’ for a given that address the selection of and applicable conditions for the FY 2017 fiscal year would be replaced by its measures for the applicable conditions, payment determination to include the respective urban or rural statewide the definitions of ‘‘readmission’’ and Hospital-Level, 30-Day, All-Cause, average CCR. As a reference, the FY ‘‘applicable period,’’ and the Unplanned Readmission Following 2013 IPPS statewide average urban and methodology for calculating the excess Coronary Artery Bypass Graft (CABG) rural CCRs are in Table 8A included on readmissions ratio. We also established Surgery measure. the CMS Web site at: https://www.cms. policies with respect to measures for In the FY 2016 IPPS/LTCH PPS final gov/Medicare/Medicare-Fee-for-Service- readmission for the applicable rule (80 FR 49530 through 49543), we Payment/AcuteInpatientPPS/Acute- conditions and our methodology for made a refinement to the pneumonia Inpatient-Files-for-Download-Items/ calculating the excess readmissions readmissions measure that expanded FY2013-FinalRule-CorrectionNotice- ratio. the measure cohort for the FY 2017 Files.html. In the FY 2013 IPPS/LTCH PPS final payment determination and subsequent After applying the applicable trims to rule (77 FR 53374 through 53401), we years (80 FR 49532 through 49536); a hospital’s CCR as appropriate, we finalized policies that relate to the adopted an extraordinary circumstance would calculate a hospital’s portions of section 1886(q) of the Act exception policy to address hospitals uncompensated care costs as being that address the calculation of the that experience a disaster or other equal to line 30, which is the sum of hospital readmission payment extraordinary circumstance beginning in line 23 and line 29, as follows: adjustment factor and the process by FY 2016 and for subsequent years (80 Hospital Uncompensated Care Costs = which hospitals can review and correct FR 49542 through 49543); specified the line 30 (=line 23 + line 29), which their data. Specifically, in that final adjustment factor floor for FY 2016 (80 is equal to— rule, we addressed the base operating FR 49537); and specified the calculation [(Line 1 CCR adjusted by trim if DRG payment amount, aggregate of aggregate payments for excess applicable × charity care line 20) ¥ payments for excess readmissions and readmissions for FY 2016 (80 FR 49537 (Payments received for charity care aggregate payments for all discharges, through 49542). line 22)] the adjustment factor, applicable + hospital, limitations on review, and 3. Proposed Policies for the FY 2017 [(Line 1 CCR adjusted by trim if reporting of hospital-specific Hospital Readmissions Reduction applicable × Non-Medicare and information, including the process for Program non-reimbursable Bad Debt line hospitals to review readmission In this proposed rule, we are 28)]. information and submit corrections. We proposing to—

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• Clarify that public reporting of as performance scores with and without data from the 3-year time period of July excess readmission ratios will be posted sociodemographic factors in the risk 1, 2012 through June 30, 2015. on an annual basis to the Hospital adjustment model. 6. Proposed Calculation of Aggregate Compare Web site as soon as is feasible Furthermore, the Office of the Payments for Excess Readmissions for following the preview period. Assistant Secretary for Planning and • Discuss the proposed methodology Evaluation (ASPE) is conducting FY 2017 to include the addition of the CABG research to examine the impact of Section 1886(q)(3)(B) of the Act applicable condition in the calculation sociodemographic status on quality specifies the ratio used to calculate the of the readmissions payment adjustment measures, resource use, and other adjustment factor under the Hospital for FY 2017. measures under the Medicare program Readmissions Reduction Program. It as directed by the IMPACT Act. We will states that the ratio is equal to 1 minus 4. Maintenance of Technical closely examine the findings of the the ratio of—(i) The aggregate payments Specifications for Quality Measures ASPE reports and related Secretarial for excess readmissions and (ii) the We refer readers to the FY 2015 IPPS/ recommendations and consider how aggregate payments for all discharges. LTCH PPS final rule (79 FR 50039) for they apply to our quality programs at The definition of ‘‘aggregate payments a discussion of the maintenance of such time as they are available. for excess readmissions’’ and ‘‘aggregate technical specifications for quality payments for all discharges,’’ as well as measures for the Hospital Readmissions 5. Proposed Applicable Period for FY a methodology for calculating the Reduction Program. Technical 2017 numerator of the ratio (aggregate specifications of the readmission Under section 1886(q)(5)(D) of the payments for excess readmissions) and measures are provided on our Web site Act, the Secretary has the authority to the denominator of the ratio (aggregate in the Measure Methodology Reports at: specify the applicable period with payments for all discharges) are codified http://www.cms.gov/Medicare/Quality- respect to a fiscal year under the at § 412.154(c)(2). Initiatives-Patient-Assessment- Hospital Readmissions Reduction Section 1886(q)(4) of the Act sets forth Instruments/HospitalQualityInits/ Program. In the FY 2012 IPPS/LTCH the definitions of ‘‘aggregate payments Measure-Methodology.html. Additional PPS final rule (76 FR 51671), we for excess readmissions’’ and ‘‘aggregate resources about the Hospital finalized our policy to use 3 years of payments for all discharges’’ for an Readmissions Reduction Program and claims data to calculate the readmission applicable hospital for the applicable measure technical specifications are on measures. In the FY 2013 IPPS/LTCH period. The term ‘‘aggregate payments the QualityNet Web site on the PPS final rule (77 FR 53675), we for excess readmissions’’ is defined in Resources page at: http://www. codified the definition of ‘‘applicable section 1886(q)(4)(A) of the Act and qualitynet.org/dcs/ContentServer?c= period’’ in the regulations at 42 CFR § 412.152 of our regulations as, for a Page&pagename=QnetPublic%2FPage 412.152 as the 3-year period from which hospital for an applicable period, the %2FQnetTier3&cid=1228772412995. data are collected in order to calculate sum, for applicable conditions of the We want to remind readers that, in excess readmissions ratios and product, for each applicable condition, the FY 2016 IPPS/LTCH PPS final rule adjustments for the fiscal year, which of: (i) The base operating DRG payment (80 FR 49532), we discussed our includes aggregate payments for excess amount for such hospital for such policies regarding the use of readmissions and aggregate payments applicable period for such condition; (ii) sociodemographic factors in quality for all discharges used in the calculation the number of admissions for such measures. We understand the important of the payment adjustment. condition for such hospital for such role that sociodemographic status plays In the FY 2016 IPPS/LTCH PPS final applicable period; and (iii) the excess in the care of patients. However, we rule (80 FR 49537), for FY 2016, readmissions ratio for such hospital for continue to have concerns about consistent with the definition specified such applicable period minus 1. holding hospitals to different standards at § 412.152, we established an The excess readmissions ratio is a for the outcomes of their patients of ‘‘applicable period’’ for the Hospital hospital-specific ratio calculated for diverse sociodemographic status Readmissions Reduction Program of the each applicable condition. Specifically, because we do not want to mask 3-year period from July 1, 2011 through section 1886(q)(4)(C) of the Act defines potential disparities or minimize June 30, 2014. In other words, the the excess readmissions ratio as the incentives to improve the outcomes of excess readmissions ratios and the ratio of ‘‘risk-adjusted readmissions disadvantaged populations. We payment adjustment (including based on actual readmissions’’ for an routinely monitor the impact of aggregate payments for excess applicable hospital for each applicable sociodemographic status on hospitals’ readmissions and aggregate payments condition, to the ‘‘risk-adjusted results on our measures. for all discharges) for FY 2016 were expected readmissions’’ for the The NQF is currently undertaking a 2- determined using data from the 3-year applicable hospital for the applicable year trial period in which new measures time period of July 1, 2011 through June condition. We refer readers to the FY and measures undergoing maintenance 30, 2014. 2012 IPPS/LTCH PPS final rule (76 FR review will be assessed to determine if In this proposed rule, for FY 2017, 51673) for additional information on the risk-adjusting for sociodemographic consistent with the definition specified methodology for the calculation of the factors is appropriate. For 2 years, NQF at § 412.152, we are proposing that the excess readmissions ratio. ‘‘Aggregate will conduct a trial of temporarily ‘‘applicable period’’ for the Hospital payments for excess readmissions’’ is allowing inclusion of sociodemographic Readmissions Reduction Program will the numerator of the ratio used to factors in the risk-adjustment approach be the 3-year period from July 1, 2012 calculate the adjustment factor under for some performance measures. At the through June 30, 2015. In other words, the Hospital Readmissions Reduction conclusion of the trial, NQF will issue we are proposing that the excess Program. recommendations on future permanent readmissions ratios and the payment The term ‘‘aggregate payments for all inclusion of sociodemographic factors. adjustment (including aggregate discharges’’ is defined at section During the trial, measure developers are payments for excess readmissions and 1886(q)(4)(B) of the Act as for a hospital encouraged to submit information such aggregate payments for all discharges) for an applicable period, the sum of the as analyses and interpretations as well for FY 2017 would be calculated using base operating DRG payment amounts

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for all discharges for all conditions from payments for all discharges, as this data update of the FY 2015 MedPAR file to such hospital for such applicable source is consistent with the claims data identify claims within FY 2015 with period. We codified this definition of source used in IPPS rulemaking to discharge dates no later than June 30, ‘‘aggregate payments for all discharges’’ determine IPPS rates. 2015. For the final rule, we are under the regulations at § 412.152. For FY 2017, we are proposing to use proposing to use the same MedPAR files ‘‘Aggregate payments for all discharges’’ MedPAR claims with discharge dates as listed above for claims within FY is the denominator of the ratio used to that are on or after July 1, 2012, and no 2012, FY 2013 and FY 2014, and for calculate the adjustment factor under later than June 30, 2015, consistent with claims within FY 2015, we are the Hospital Readmissions Reduction our historical use of a 3-year applicable proposing to use the March 2016 update Program. period. Under our established of the FY 2015 MedPAR file. The Hospital Readmissions Reduction methodology, we use the update of the For a discussion of how we identified Program currently includes the MedPAR file for each Federal fiscal the applicable conditions to calculate following five applicable conditions: year, which is updated 6 months after the aggregate payments for excess acute myocardial infarction (AMI), heart the end of each Federal fiscal year readmissions for FY 2016, we refer failure (HF), pneumonia (PN), total hip within the applicable period, as our data readers to the FY 2016 IPPS/LTCH PPS arthroplasty/total knee arthroplasty source (that is, the March updates of the final rule (80 FR 49538 through 49541). (THA/TKA), and chronic obstructive respective Federal fiscal year MedPAR For FY 2017, with the addition of the pulmonary disease (COPD). In the FY files) for the final rules. CABG measure to the applicable 2015 IPPS/LTCH PPS final rule effective The FY 2012 through FY 2015 conditions under the Hospital for FY 2017 (79 FR 50033 through MedPAR data files can be purchased Readmissions Reduction Program, we 50039), we finalized the inclusion of an from CMS. Use of these files allows the are proposing to follow this same additional applicable condition, public to verify the readmissions approach. Hospital-Level, 30-Day, All-Cause, adjustment factors. Interested In this proposed rule, for FY 2017, we Unplanned Readmission Following individuals may order these files are proposing to continue to apply the Coronary Artery Bypass Graft (CABG) through the CMS Web site at: http:// same exclusions to the claims in the Surgery. www.cms.hhs.gov/LimitedDataSets/ by MedPAR file as we applied for FY 2016 In this section, we discuss the clicking on MedPAR Limited Data Set for the AMI, HF, PN, THA/TKA, and proposed methodology to include this (LDS)-Hospital (National). This Web COPD applicable conditions. We refer additional measure in the calculation of page describes the files and provides readers to the FY 2016 IPPS/LTCH PPS the readmissions payment adjustment directions and detailed instructions for final rule (80 FR 49539) for a list of for FY 2017. Specifically, we are how to order the data sets. these exclusions. Updates to these proposing how the addition of CABG In this proposed rule, for FY 2017, we exclusions will be posted on the applicable conditions would be are proposing to determine aggregate QualityNet Web site at: http://www. included in the calculation of the payments for excess readmissions and QualityNet.org > Hospital-Inpatient > aggregate payments for excess aggregate payments for all discharges Claims-Based Measures > Readmission readmissions (the numerator of the using data from MedPAR claims with Measures > Measure Methodology. readmissions payment adjustment). We discharge dates that are on or after July In addition to the exclusions note that this proposal does not alter our 1, 2012, and no later than June 30, 2015. described above, for FY 2017, we are established methodology for calculating However, we note that, for the purpose proposing the following steps to identify aggregate payments for all discharges; of modeling the proposed FY 2017 admissions specifically for CABG for the that is, the denominator of the ratio. readmissions payment adjustment purposes of calculating aggregate When calculating the numerator factors for this proposed rule, we use payments for excess readmissions. (aggregate payments for excess excess readmissions ratios for These exclusions were previously readmissions), we determine the base applicable hospitals from the FY 2016 finalized in the FY 2015 IPPS/LTCH operating DRG payments for the Hospital Readmissions Reduction PPS final rule (79 FR 50037): applicable period. ‘‘Aggregate payments Program applicable period. For the FY • Admissions for patients who are for excess readmissions’’ (the 2017 final rule, applicable hospitals will discharged against medical advice numerator) is defined as the sum, for have had the opportunity to review and (excluded because providers do not applicable conditions, of the product, correct data from the proposed FY 2017 have the opportunity to deliver full care for each applicable condition, of: (i) The applicable period of July 1, 2012 to June and prepare the patient for discharge); base operating DRG payment amount for 30, 2015, before they are made public • Admissions for patients who die such hospital for such applicable period under our policy regarding the preview during the initial hospitalization (these for such condition; (ii) the number of and reporting of hospital-specific patients are not eligible for admissions for such condition for such information, which we discussed in the readmission); hospital for such applicable period; and FY 2013 IPPS/LTCH PPS final rule (77 • Admissions for patients with (iii) the excess readmissions ratio for FR 53374 through 53401). subsequent qualifying CABG procedures such hospital for such applicable period In this proposed rule, for FY 2017, we during the measurement period (a minus 1. are proposing to use MedPAR data from repeat CABG procedure during the When determining the base operating July 1, 2012 through June 30, 2015. measurement period very likely DRG payment amount for an individual Specifically, for this proposed rule, we represents a complication of the original hospital for such applicable period for are using the March 2013 update of the CABG procedure and is a clinically such condition, we use Medicare FY 2012 MedPAR file to identify claims more complex and higher risk surgery; inpatient claims from the MedPAR file within FY 2012 with discharges dates therefore, we select the first CABG with discharge dates that are within the that are on or after July 1, 2012, the admission for inclusion in the measure same applicable period to calculate the March 2014 update of the FY 2013 and exclude subsequent CABG excess readmissions ratio. We use MedPAR file to identify claims within admissions from the cohort); and MedPAR claims data as our data source FY 2013, the March 2015 update of the • Admissions for patients without at for determining aggregate payments for FY 2014 MedPAR file to identify claims least 30 days post-discharge enrollment excess readmissions and aggregate within FY 2014, and the December 2015 in Medicare FFS (excluded because the

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30-day readmission outcome cannot be payments for the excess readmissions than the average hospital with similar assessed in this group). ratios for FY 2017. For a complete list patients. Each product in this As noted previously, these exclusions of the ICD–9–CM codes we are computation represents the payments are consistent with our current proposing to use to identify the for excess readmissions for that methodology, and any updates to these applicable conditions, we refer readers condition. We are proposing to then exclusions will be posted on the to the following tables of those reports: sum the resulting products which QualityNet Web site at: http://www. • 2015 Measure Updates: AMI, HF, represent a hospital’s proposed QualityNet.org > Hospital-Inpatient > Pneumonia, COPD, Stroke Readmission ‘‘aggregate payments for excess Claims-Based Measures > Readmission (AMI-Version 8.0, HF-Version 8.0, readmissions’’ (the numerator of the Measures > Measure Methodology. Pneumonia-Version 8.0, COPD-Version ratio). Because this calculation is Furthermore, we would only identify 4.0, and Stroke-Version 4.0: 2015 performed separately for each of the six Medicare FFS claims that meet the Condition-Specific Readmission conditions, a hospital’s excess criteria (that is, claims paid for under Measures Updates and Specifications readmissions ratio must be less than or Medicare Part C, Medicare Advantage, Report)— equal to 1 on each measure to avoid would not be included in this ++ Table D.1.1—ICD–9–CM Codes for CMS’ determination that there were calculation), consistent with the AMI Cohort (page 74). payments made by CMS for excess methodology to calculate excess ++ Table D.2.1—ICD–9–CM Codes for readmissions (resulting in a payment readmissions ratios based solely on HF Cohort (page 78). reduction under the Hospital admissions and readmissions for ++ Table D.3.1—ICD–9–CM Codes for Readmissions Reduction Program). In Medicare FFS patients. Therefore, Pneumonia Cohort (page 82). other words, in order to avoid a consistent with our established ++ Table D.4.1—ICD–9–CM Codes for payment reduction a hospital’s excess methodology, for FY 2017, we would COPD Cohort (page 87). exclude admissions for patients enrolled • 2015 Measure Updates: THA/TKA readmissions ratio must be less than or in Medicare Advantage as identified in and CABG Readmission (THA and/or equal to 1 on each measure. We note the Medicare Enrollment Database. This TKA-Version 4.0, CABG-Version 2.0: that we are not proposing any changes policy is consistent with how 2015 Procedure-Specific Readmission to our existing methodology to calculate admissions for Medicare Advantage Measures Updates and Specifications ‘‘aggregate payments for all discharges’’ patients are identified in the calculation Report,)— (the denominator of the ratio). of the excess readmissions ratios under ++ Table D.1.1—ICD–9–CM Codes Section 1886(q)(3)(A) of the Act our established methodology. Used to Identify Eligible THA/TKA defines the ‘‘adjustment factor’’ for an In order to identify the admissions for Procedures (page 45). applicable hospital for a fiscal year as each applicable condition for FY 2017 ++ Table D.2.1—ICD–9–CM Codes equal to the greater of (i) The ratio to calculate the aggregate payments for Used to Identify Eligible CABG described in subparagraph (B) for the excess readmissions for an individual Procedures (page 53). hospital for the applicable period (as hospital, we are proposing to identify For FY 2017, we are proposing to defined in paragraph (5)(D)) for such each applicable condition, including the calculate aggregate payments for excess fiscal year; or (ii) the floor adjustment CABG condition, using the appropriate readmissions, using MedPAR claims factor specified in subparagraph (C). ICD–9–CM codes. (Although the from July 1, 2012 to June 30, 2015, to Section 1886(q)(3)(B) of the Act, in turn, compliance date for the ICD–10–CM and identify applicable conditions based on describes the ratio used to calculate the ICD–10–PCS code sets was October 1, the same ICD–9–CM codes used to adjustment factor. Specifically, it states 2015, these proposed policies apply to identify the conditions for the that the ratio is equal to 1 minus the data submitted prior to this compliance readmissions measures, and to apply the ratio of—(i) the aggregate payments for date.) Under our existing policy, we proposed exclusions for the types of excess readmissions and (ii) the identify eligible hospitalizations and admissions (as previously discussed). aggregate payments for all discharges. readmissions of Medicare patients To calculate aggregate payments for The calculation of this ratio is codified discharged from an applicable hospital excess readmissions for each hospital, at § 412.154(c)(1) of the regulations and having a principal diagnosis for the we are proposing to calculate the base the floor adjustment factor is codified at measured condition in an applicable operating DRG payment amounts for all § 412.154(c)(2) of the regulations. period (76 FR 51669). The discharge claims in the 3-year applicable period Section 1886(q)(3)(C) of the Act diagnoses for each applicable condition for each applicable condition (AMI, HF, specifies the floor adjustment factor at are based on a list of specific ICD–9–CM PN, COPD, THA/TKA, and CABG) based 0.97 for FY 2015 and subsequent fiscal codes for that condition. The ICD–9–CM on the claims we have identified as years. codes for the AMI, HF, PN, THA/TKA, described above. Once we have COPD, and CABG applicable conditions calculated the base operating DRG Consistent with section 1886(q)(3) of can be found on the QualityNet Web site amounts for all the claims for the six the Act, codified at § 412.154(c)(2), for at: http://www.QualityNet.org > applicable conditions, we are proposing FY 2017, the adjustment factor is either Hospital-Inpatient > Claims-Based to sum the base operating DRG the greater of the ratio or the floor Measures > Readmission Measures > payments amounts by each condition, adjustment factor of 0.97. Under our Measure Methodology. Consistent with resulting in six summed amounts, one established policy, the ratio is rounded our established policy (76 FR 51673 amount for each of the six applicable to the fourth decimal place. In other through 51676), we are proposing to use conditions. We are proposing to then words, for FY 2017, a hospital subject to the ICD–9–CM codes to identify the multiply the amount for each condition the Hospital Readmissions Reduction applicable conditions in calculation of by the respective excess readmissions Program will have an adjustment factor the excess readmissions ratios, which ratio minus 1 when that excess that is between 1.0 (no reduction) and are provided in the measure readmissions ratio is greater than 1, 0.9700 (greatest possible reduction). methodology reports on the QualityNet which indicates that a hospital has We are proposing the following Web site, to identify each applicable performed, with respect to readmissions methodology for FY 2017 as displayed condition to calculate the aggregate for that applicable condition, worse in the chart below.

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FORMULAS TO CALCULATE THE READMISSIONS ADJUSTMENT FACTOR FOR FY 2017

Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI x (Excess Readmissions Ratio for AMI–1)] + [sum of base operating DRG payments for HF x (Excess Readmissions Ratio for HF–1)] + [sum of base operating DRG payments for PN x (Excess Readmissions Ratio for PN–1)] + [sum of base operating DRG payments for COPD) x (Excess Readmissions Ratio for COPD–1)] + [sum of base operating DRG payments for THA/TKA x (Excess Readmissions Ratio for THA/TKA–1)] + [sum of base operating DRG payments for CABG x (Excess Readmissions Ratio for CABG–1)]. * We note that if a hospital’s excess readmissions ratio for a condition is less than/equal to 1, there are no aggregate payments for excess readmissions for that condition included in this calculation. Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1 ¥ (Aggregate payments for excess readmissions/Aggregate payments for all discharges). Proposed Readmissions Adjustment Factor for FY 2017 is the higher of the ratio or 0.9700. * Based on claims data from July 1, 2012 to June 30, 2015 for FY 2017.

We are inviting public comment on (must include a physical address; a post as the Hospital IQR Program and the these proposals. office box address is not acceptable); Hospital VBP Program. • Hospital’s reason for requesting an 7. Extraordinary Circumstance This policy does not preclude CMS exception, including: from granting extraordinary Exception Policy ++ CMS program name (for example, circumstance exceptions to hospitals We refer readers to the FY 2016 IPPS/ the Hospital Readmissions Reduction that do not request them if we LTCH PPS final rule (80 FR 49542 Program, the Hospital VBP Program, or through 49543) for a detailed discussion the Hospital IQR Program); determine at our discretion that a of our Extraordinary Circumstance ++ The measure(s) and submission disaster or other extraordinary Exception policy for the Hospital quarters affected by the extraordinary circumstance has affected an entire Readmissions Reduction Program. circumstance that the hospital is seeking region or locale. If CMS makes such a During the review of a hospital’s an exception for should be accompanied determination to grant an extraordinary request for an extraordinary with the specific reasons why the circumstance exception to hospitals in circumstance exception, we maintain exception is being sought; and an affected region or locale, we would the general principle that providing ++ How the extraordinary convey this decision through routine high quality of care and ensuring patient circumstance negatively impacted communication channels to hospitals, safety is of paramount importance. We performance on the measure(s) for vendors, and QIOs, including, but not intend to provide relief only for which an exception is being sought; limited to, issuing memos, emails, and hospitals whose ability to accurately or • Evidence of the impact of the notices on the QualityNet Web site. This timely submit all of their claims (from extraordinary circumstances, including provision aligns with the Hospital IQR which readmission measures data are but not limited to, photographs, Program’s extraordinary circumstances derived) has been negatively impacted newspaper, and other media articles; extensions or exemptions policy. as a direct result of experiencing a and significant disaster or other • The request form must be signed by 8. Timeline for Public Reporting of extraordinary circumstance beyond the the hospital’s CEO or designated non- Excess Readmission Ratios on Hospital control of the hospital. In the FY 2016 CEO contact and submitted to CMS. Compare for the FY 2017 Payment IPPS/LTCH PPS final rule (80 FR 49542 The same set of information is Determination through 49543) we finalized that the currently required under the Hospital request process for an extraordinary IQR Program and the Hospital VBP Section 1886(q)(6) of the Act requires circumstance exception begins with the Program on the request form from a the Secretary to make information submission of an extraordinary hospital seeking an extraordinary available to the public regarding circumstance exception request form by circumstance exception with respect to readmission rates of each subsection (d) a hospital within 90 calendar days of these programs. The specific list of hospital under the program, and states the natural disaster or other required information is subject to that such information shall be posted on extraordinary circumstance. Under this change from time to time at the the Hospital Compare Internet Web site policy, a hospital is able to request a discretion of CMS. in an easily understandable format. Hospital Readmissions Reduction Following receipt of the request form, Accordingly, in the FY 2013 IPPS/LTCH Program extraordinary circumstance CMS will: (1) Provide a written PPS final rule (77 FR 53401), we exception at the same time it may acknowledgement of receipt of the indicated that public reporting for request a similar exception under the request using the contact information excess readmission ratios could be Hospital IQR Program, the Hospital VBP provided in the request form to the CEO available on the Hospital Compare Web Program, and the HAC Reduction and any additional designated hospital site as early as mid-October. In this Program. The extraordinary personnel; and (2) provide a formal proposed rule, we are clarifying that circumstance exception request form is response to the CEO and any additional public reporting of excess readmission available on the QualityNet Web site. designated hospital personnel using the ratios will be posted on an annual basis The following information is required contact information provided in the to the Hospital Compare Web site as to submit the request: request notifying them of our decision. soon as is feasible following the review • We review each request for an Hospital CCN; period. This may occur as early as • Hospital name; extraordinary circumstance exception October, but it could occur later for a • Hospital Chief Executive Officer on a case-by-case basis at our discretion. particular year in order to streamline (CEO) and any other designated To the extent feasible, we also review personnel contact information, requests in conjunction with any similar reporting and align with other hospital including name, email address, requests made under other IPPS quality quality reporting and performance telephone number, and mailing address reporting and payment programs, such programs.

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H. Hospital Value-Based Purchasing (77 FR 53571 through 53573), we available for the FY 2017 program year. (VBP) Program: Proposed Policy estimate that the total amount available We expect that Table 16B will be posted Changes for the FY 2018 Program Year for value-based incentive payments for on the CMS Web site in October 2016. and Subsequent Years FY 2017 is approximately $1.7 billion, 2. PSI 90 Measure in the FY 2018 based on the December 2015 update of Program and Future Program Years 1. Background the FY 2015 MedPAR file. We intend to a. Statutory Background and Overview update this estimate for the FY 2017 a. Proposed PSI 90 Measure of Past Program Years IPPS/LTCH PPS final rule, using the Performance Period Change for the FY Section 1886(o) of the Act, as added March 2016 update of the FY 2015 2018 Program Year by section 3001(a)(1) of the Affordable MedPAR file. As finalized in the FY 2013 IPPS/ We previously finalized the Care Act, requires the Secretary to LTCH PPS final rule, we will utilize a performance period for the PSI 90: establish a hospital value-based linear exchange function to translate Patient Safety for Selected Indicators purchasing program (the Hospital VBP this estimated amount available into a (Composite Measure) (then referred to as Program) under which value-based value-based incentive payment both the ‘‘PSI–90 measure’’ and the incentive payments are made in a fiscal percentage for each hospital, based on ‘‘AHRQ PSI Composite Measure’’) for year to hospitals that meet performance its Total Performance Score (TPS) (77 the FY 2018 program year (78 FR standards established for a performance FR 53573 through 53576). We will then 50694). We have calculated and period for such fiscal year. Both the calculate a value-based incentive finalized performance standards for the performance standards and the payment adjustment factor that will be FY 2018 program year based on a performance period for a fiscal year are applied to the base operating DRG baseline period that uses ICD–9–CM to be established by the Secretary. payment amount for each discharge claims data. The previously finalized For more of the statutory background occurring in FY 2017, on a per-claim performance period for the FY 2018 and descriptions of our current policies basis. We are publishing proxy value- program year runs from July 1, 2014 for the Hospital VBP Program, we refer based incentive payment adjustment through June 30, 2016. Because readers to the Hospital Inpatient VBP factors in Table 16 associated with this hospitals began ICD–10–CM/PCS Program final rule (76 FR 26490 through proposed rule (which is available via implementation on October 1, 2015, the 26547); the FY 2012 IPPS/LTCH PPS the Internet on the CMS Web site). The performance period as currently final rule (76 FR 51653 through 51660); proxy factors are based on the TPSs finalized for the FY 2018 program year the CY 2012 OPPS/ASC final rule with from the FY 2016 program year. These would necessitate using both ICD–9 and comment period (76 FR 74527 through FY 2016 performance scores are the ICD–10 claims data to calculate 74547); the FY 2013 IPPS/LTCH PPS most recently available performance performance standards for the PSI 90 final rule (77 FR 53567 through 53614); scores that hospitals have been given measure. the FY 2014 IPPS/LTCH PPS final rule the opportunity to review and correct. Since the ICD–10 transition was (78 FR 50676 through 50707); the CY The slope of the linear exchange implemented on October 1, 2015, we 2014 OPPS/ASC final rule (78 FR 75120 function used to calculate those proxy have been monitoring our systems, and through 75121); the FY 2015 IPPS/LTCH value-based incentive payment claims are processing normally. PPS final rule (79 FR 50048 through adjustment factors is 2.7714997322. Currently, the measure steward, AHRQ, 50087); and the FY 2016 IPPS/LTCH This slope, along with the estimated is reviewing any potential issues related PPS final rule with comment period (80 amount available for value-based to ICD–10 conversion of coded FR 49544 through 49570). incentive payments, is also published in operating room procedures (https:// We also have codified certain Table 16. www.cms.gov/icd10manual/fullcode_ requirements for the Hospital VBP We intend to update this table as cms/P1616.html), which directly impact Program at 42 CFR 412.160 through Table 16A in the final rule (which will the AHRQ PSI 90 component indicators. 412.167. be available via the Internet on the CMS Nevertheless, given the complexity of b. FY 2017 Program Year Payment Web site) to reflect changes based on the converting the PSI 90 component Details March 2016 update to the FY 2015 indicators from ICD–9 to ICD–10 and MedPAR file. We also intend to update Section 1886(o)(7)(B) of the Act considering that there are approximately the slope of the linear exchange 70,000 22 ICD–10 codes, the measure instructs the Secretary to reduce the function used to calculate those updated base operating DRG payment amount for steward has recommended against proxy value-based incentive payment combining measure performance data a hospital for each discharge in a fiscal adjustment factors. The updated proxy that use both ICD–9 and ICD–10 data at year by an applicable percent. Under value-based incentive payment this time. In addition, to meet program section 1886(o)(7)(A) of the Act, the sum adjustment factors for FY 2017 will requirements and implementation total of these reductions in a fiscal year continue to be based on historic FY schedules, our system requires an ICD– must equal the total amount available 2016 program year TPSs because 10 risk-adjusted version of the AHRQ QI for value-based incentive payments for hospitals will not have been given the PSI software 23 by December 2016 for all eligible hospitals for the fiscal year, opportunity to review and correct their use in the FY 2018 payment year. At as estimated by the Secretary. We actual TPSs for the FY 2017 program this time, a risk adjusted ICD–10 version finalized details on how we would year until after the FY 2017 IPPS/LTCH implement these provisions in the FY PPS final rule is published. After 2013 IPPS/LTCH PPS final rule (77 FR hospitals have been given an 22 International Classification of Diseases (ICD– 10–CM/PCS) Transition—Background. Available at: 53571 through 53573) and refer readers opportunity to review and correct their http://www.cdc.gov/nchs/icd/icd10cm_pcs_ to that rule for further details. actual TPSs for FY 2017, we will add background.htm. Under section 1886(o)(7)(C)(iv) of the Table 16B (which will be available via 23 The AHRQ QI Software is the software used to Act, the applicable percent for the FY the Internet on the CMS Web site) to calculate PSIs and the composite measure. More information is available at: http:// 2017 program year is 2.00 percent. display the actual value-based incentive www.qualityindicators.ahrq.gov/Downloads/ Using the methodology we adopted in payment adjustment factors, exchange Resources/Publications/2015/Empirical_Methods_ the FY 2013 IPPS/LTCH PPS final rule function slope, and estimated amount 2015.pdf.

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of the PSI 90 software is not expected recommendations of the measure 3. Retention Policy, Domain Name to be available until late CY 2017. steward, the feasibility of using a Proposal, and Updating of Quality To address the above issues, we are combination of ICD–9 and ICD–10 data Measures for the FY 2019 Program Year proposing to shorten the performance without the availability of the a. Retention of Previously Adopted period for the FY 2018 program year. appropriate measure software, Hospital VBP Program Measures We are proposing to use a 15-month minimizing provider burden, program performance period from July 1, 2014 implementation timelines, and the Since the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we have through September 30, 2015 for the FY reliability of using shortened retained measures from prior program 2018 program year. The 15-month performance periods, as well as the years for each successive program year, performance period would only apply to importance of continuing to publicly the FY 2018 program year and would unless otherwise proposed and report this measure. We believe that only use ICD–9 data. For the FY 2018 finalized. We are not proposing any using a 15-month performance period program year, the performance changes to this policy. for FY 2018 best serves the need to standards that were previously b. Proposed Domain Name Change established and announced in past rules provide important information on would not change because they were hospital patient safety and adverse We strive to align quality calculated based on the baseline period events by allowing sufficient time to measurement and value-based of July 1, 2010 through June 30, 2012, process the claims data and calculate purchasing programs with the NQS which would remain the same. In order the measures, while minimizing the priority and the CMS Quality Strategy. to align the use of this measure with reporting burden and program Value-based purchasing programs in other hospital quality programs, we are disruption. particular allow us to link the CMS proposing similar modifications to the Furthermore, we plan to propose to Quality Strategy with Medicare FY 2018 reporting period for the PSI 90 adopt the modified PSI 90 measure, payments to providers and suppliers on a national scale. Given this objective, as measure for the HAC Reduction which includes several substantive well as our objective to focus quality Program, as set forth in section IV.I. of measure updates, for the Hospital VBP measurement on the patient-centered the preamble of this proposed rule, and Program in subsequent rulemaking, as outcome of interest to the extent for the Hospital IQR Program, as set soon as it is feasible. We discuss this forth in section VIII.A. of the preamble possible, we proposed to reclassify the future proposed adoption in section Hospital VBP Program measures into of this proposed rule. IV.H.2.b. of the preamble of this We are aware that the FY 2019 domains based on the six priorities of program year also has a performance proposed rule. the CMS Quality Strategy. In the FY period that contains ICD–9 and ICD–10 We are inviting public comments on 2014 IPPS/LTCH PPS final rule (78 FR data (79 FR 50072 through 50073). We this proposed plan to shorten the 50702), we proposed to combine the will continue to review our options for performance period for the PSI 90 priorities of Care Coordination and calculating the performance period for measure for the FY 2018 program year. Patient- and Caregiver-Centered the FY 2019 program year and further Experience of Care into one domain for address this in next year’s rulemaking. b. Intent To Propose in Future purposes of aligning the Hospital VBP Therefore, we are not proposing to make Rulemaking To Adopt the Modified PSI Program domains with the CMS Quality any changes to the FY 2019 program 90 Measure Strategy. The domain name is often shortened to say PCCEC/CC. The year, which runs from July 1, 2015 The PSI 90 measure underwent NQF HCAHPS measure, which includes the through June 30, 2017. maintenance review in 2014. The 2014 We note that in proposing a shortened care transitions measure (CTM–3), NQF maintenance review process has performance period for the PSI 90 currently comprises the Patient- and been completed and has led to several Caregiver-Centered Experience of Care/ measure, a prior reliability analysis of 25 the PSI 90 measure shows that the changes to the measure. Due to Care Coordination domain. 26 majority of hospitals attain a moderate statutory requirements in the Hospital This domain name has proven to be or high level of reliability for the PSI 90 VBP Program, we would not be able to long and unwieldy. Therefore, we are measure after a 12-month period.24 We adopt the NQF-endorsed modified PSI proposing to change the domain name do not anticipate any delay for hospitals 90 measure, now known as Patient from Patient- and Caregiver-Centered to review their TPS for the FY 2018 Safety and Adverse Events Composite, Experience of Care/Care Coordination program year during the review and until a future program year. We refer to, more simply, Person and Community correction period. readers to section VIII.A. of the Engagement beginning with the FY 2019 Prior to deciding to propose an preamble of this proposed rule relating program year. We believe that this abbreviated performance period for the to the Hospital IQR Program for a domain name captures two goals of the FY 2018 program year, we took several discussion of the modified PSI 90 CMS Quality Strategy, as shown in the factors into consideration, including the measure update. table below:

Hospital VBP program domain CMS Quality strategy goal

Safety ...... Make Care Safer by Reducing Harm Caused in the Delivery of Care.

24 Mathematica Policy Research (November 2011). Indicators (modified version of PSI90) (Composite performance period for a new measure until data on Reporting period and reliability of AHRQ, CMS 30- Measure)’’ found at https://www.qualityforum.org/ the measure have been posted on Hospital Compare day and HAC Quality Measures—Revised. QPS/MeasureDetails.aspx?standardID=321&print= for at least one year. Finally, section 1886(o)(3)(C) Available at: http://www.cms.gov/Medicare/ 0&entityTypeID=3. of the Act requires that the Hospital VBP Program Quality-Initiatives-Patient-Assessment-Instruments/ 26 First, section 1886(o)(2)(A) of the Act requires establish performance standards for each measure hospital-value-based-purchasing/Downloads/ the Program to select measures that have been not later than 60 days prior to the beginning of the HVBP_Measure_Reliability-.pdf. specified for the Hospital IQR Program. Second, 25 National Quality Forum QPS Measure section 1886(o)(2)(C)(i) of the Act requires the performance period. Description for ‘‘Patient Safety for Selected Hospital VBP Program to refrain from beginning the

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Hospital VBP program domain CMS Quality strategy goal

Efficiency and Cost Reduction ...... Make Care Affordable. Clinical Care ...... Promote Effective Prevention and Treatment of Chronic Disease. Person and Community Engagement ...... Promote Effective Communication and Coordination of Care. Strengthen Persons and Their Families as Partners in Their Care. N/A ...... Work with Communities to Promote Best Practices of Healthy Living.

We are inviting public comments on intent to consider using data from year (80 FR 49576 through 49578). This this proposal. selected ward (non-ICU) locations for expansion is also consistent with the the Hospital VBP Program beginning in c. Proposed Inclusion of Selected Ward NQF reendorsement update to these Non-Intensive Care Unit (ICU) Locations the FY 2019 program year for purposes measures, which allows application of in Certain NHSN Measures Beginning of calculating performance standards for the measures beyond ICU locations (78 With the FY 2019 Program Year the CAUTI and CLABSI measures (79 FR 50787). The MAP conditionally FR 50061; 80 FR 49556). Several public supported the expansion of the CAUTI The Hospital VBP Program has used commenters supported our proposal to (MUC–S0138) and CLABSI (MUC– the CLABSI measure since the FY 2015 include performance data from non-ICU S0139) measures for the Hospital VBP program year and has used the CAUTI locations in the CLABSI and CAUTI Program on the condition of gaining measure since the FY 2016 program measures beginning in the FY 2019 year. Both measures use adult, pediatric, experience publicly reporting these program year, noting that CLABSI and measure data, as detailed in the and neonatal intensive care unit (ICU) CAUTI measures are important targets data to calculate performance standards ‘‘Spreadsheet of MAP 2015 Final for dedicated surveillance and Recommendations.’’ 27 We continue to and measure scores (79 FR 50061). In prevention efforts outside the ICU the FY 2014 IPPS/LTCH PPS final rule believe this expansion of the measures setting (80 FR 49566). (78 FR 50787), we expanded the CAUTI would allow all hospitals, including and CLABSI measures to selected ward Based on the public comments we hospitals that do not have ICU locations, (non-ICU) settings for the Hospital IQR have received in prior rulemaking, we to use the tools and resources of the Program, effective January 1, 2015 (78 are proposing to include the selected NHSN for quality improvement and FR 50787). Data were first posted on ward (non-ICU) locations in the CAUTI public reporting efforts. and CLABSI measures for the Hospital Hospital Compare in December 2015. We are inviting public comments on VBP Program beginning with the FY Selected ward (non-ICU) locations are this proposal. defined as adult or pediatric medical, 2019 program year, with a baseline surgical, and medical/surgical wards (78 period of January 1, 2015 through d. Summary of Previously Adopted FR 50787; 79 FR 50061). More December 31, 2015 and a performance Measures and Newly Proposed Measure information on the CLABSI and CAUTI period of January 1, 2017 through Refinements for the FY 2019 Program measures can be found at: http:// December 31, 2017. This expansion of Year www.cdc.gov/nhsn/pdfs/pscmanual/ the CAUTI and CLABSI measures aligns 4psc_clabscurrent.pdf and http:// with the Hospital IQR Program. It also In summary, for the FY 2019 program www.cdc.gov/nhsn/pdfs/pscmanual/ aligns with the HAC Reduction year, we have finalized the following 7psccauticurrent.pdf, respectively. Program, which adopted the expansion measure set and are proposing the In the FY 2015 and FY 2016 IPPS/ of the CAUTI and CLABSI measures refinement of certain NHSN measures, LTCH PPS final rules, we discussed our beginning with its FY 2018 program as indicated:

PREVIOUSLY ADOPTED MEASURES AND NEWLY PROPOSED MEASURE REFINEMENTS FOR THE FY 2019 PROGRAM YEAR ±

Short name Domain/Measure name NQF #

Person and Community Engagement Domain *

HCAHPS ...... HCAHPS + 3-Item Care Transition Measure ...... 0166 0228

Clinical Care Domain

MORT–30–AMI ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myo- 0230 cardial Infarction (AMI) Hospitalization. MORT–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Heart Fail- 0229 ure (HF) Hospitalization. MORT–30–PN ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Pneumonia 0468 Hospitalization. THA/TKA ...... Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total 1550 Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).

Safety Domain

CAUTI ** ...... National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection 0138 (CAUTI) Outcome Measure.

27 ‘‘Spreadsheet of MAP 2015 Final linkit.aspx?LinkIdentifier=id&ItemID=78711 and www.qualityforum.org/Publications/2015/01/ Recommendations’’ available at: http:// ‘‘Process and Approach for MAP Pre-Rulemaking Process_and_Approach_for_MAP_Pre-Rulemaking_ www.qualityforum.org/WorkArea/ Deliberations 2015’’ available at: http:// Deliberations_2015.aspx.

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PREVIOUSLY ADOPTED MEASURES AND NEWLY PROPOSED MEASURE REFINEMENTS FOR THE FY 2019 PROGRAM YEAR ±—Continued

Short name Domain/Measure name NQF #

CLABSI ** ...... National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection 0139 (CLABSI) Outcome Measure. Colon and Abdominal American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) 0753 Hysterectomy SSI. Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. MRSA Bacteremia ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin- 1716 resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure. CDI ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium 1717 difficile Infection (CDI) Outcome Measure. PSI 90 ...... Patient Safety for Selected Indicators (Composite Measure) ...... 0531 PC–01 ...... Elective Delivery ...... 0469

Efficiency and Cost Reduction Domain

MSPB ...... Payment-Standardized Medicare Spending Per Beneficiary (MSBP) ...... 2158 ± We are changing some of the short names for measures from previous years’ rulemakings to align these names with the usage in the Hos- pital IQR Program, and we are changing some measure names from previous years’ rulemakings to use complete NQF-endorsed measure names. * We are proposing, in section IV.H.3.b. of the preamble of this proposed rule, to change the name of this domain from Patient- and Caregiver- Centered Experience of Care/Care Coordination domain to Person and Community Engagement domain beginning with the FY 2019 program year. ** Proposed to include selected ward (non-ICU) locations in the measure as discussed in section IV.H.3.c. of the preamble of this proposed rule.

4. Newly Proposed Measures and critical to examine measures of resource as an important next step in the Measure Refinements for the FY 2021 use, efficiency, and cost reduction. evolution of value-based purchasing to Program Year and Subsequent Years In prior rules we have discussed our transform how Medicare pays for care We consider measures for adoption interest in expanding the Hospital VBP and services. based on the statutory requirements, Program’s Efficiency and Cost We recognize that high or low including specification under the Reduction domain to include condition- payments to hospitals are difficult to Hospital IQR Program, posting dates on specific or treatment-specific Medicare interpret in isolation. Some high the Hospital Compare Web site, and our payment measures, and we have sought payment hospitals may produce better priorities for quality improvement as public comments (78 FR 50688; 79 FR clinical outcomes when compared with outlined in the current CMS Quality 50066). In response to comments, we low payment hospitals, while other high Strategy, available at: https://www.cms. have stated that risk-adjusted payment hospitals may not produce gov/Medicare/Quality-Initiatives- standardized Medicare payments, better outcomes. For this reason, Patient-Assessment-Instruments/ viewed in light of other quality payment measure results viewed in QualityInitiativesGenInfo/CMS-Quality- measures in a program, are an isolation are not necessarily an Strategy.html. appropriate indicator of efficiency indication of quality. However, by Due to the time necessary to adopt because they allow us to compare viewing such information along with measures, we often adopt policies for hospitals without regard to factors such quality measure results, we believe that the Hospital VBP Program well in as geography and teaching status. This consumers, payers, and providers would advance of the program year for which comparison is particularly important be able to better assess the value of care. they will be applicable (for example, 76 with clinically coherent episodes We believe that adopting condition- FR 26490 through 26547; 76 FR 51653 because it distinguishes the degree to specific or treatment-specific payment through 51660; 76 FR 74527 through which practice pattern variation measures for the Hospital VBP Program 74547; 77 FR 53567 through 53614; 78 influences the cost of care. In addition, that can be more directly paired with FR 50676 through 50707; 78 FR 75120 we have stated that the granularity of clinical outcome measures, aligned by through 75121; 79 FR 50048 through condition-specific or treatment-specific comparable populations, performance 50087; 80 FR 49556 through 49559). payment measures may provide specific periods, or risk-adjustment actionable feedback to hospitals to methodologies, help move toward a. Condition-Specific Hospital Level, implement targeted improvements. The achievement of this goal. We also Risk-Standardized Payment Measures observed differences in episode believe that adopting condition-specific Providing high-value care is an payments revealed by these measures or treatment-specific payment measures essential part of our mission to provide may also encourage hospitals to assess would create stronger incentives for better health care for individuals, better local, postacute health care services (for appropriately reducing practice pattern health for populations, and lower example, SNF and home health variation to achieve the aim of lowering healthcare costs. Our aim is to services) to ensure that efficient services the cost of care and creating better encourage higher value care where there are available to all patients. Given these coordinated care for Medicare is the most opportunity for factors, we believe that the addition of beneficiaries. improvement, the greatest number of condition-specific or treatment-specific In the Hospital VBP Program, we patients to benefit from improvements, payment measures to the Hospital VBP adopted the Medicare Spending per and the largest sample size to ensure Program is necessary not only to Beneficiary (MSPB) measure beginning reliability. In order to incentivize facilitate a better understanding of with the FY 2015 program year to innovation that promotes high-quality service utilization and costs associated incentivize hospitals to redesign care care at high value, we believe it is with conditions or treatments, but also systems in order to provide coordinated,

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high-quality, and cost-efficient care (77 50805). The measure includes Medicare Efficiency and Cost Reduction domain. FR 53590). Currently, the Hospital VBP FFS patients aged 65 or older admitted The proposed measure fulfills all Program measures efficiency by for an AMI and calculates payments for statutory requirements for the Hospital weighting and combining the MSPB these patients over a 30-day episode-of- VBP Program based on our adoption of measure with other quality measures in care, beginning with the index the measure in the Hospital IQR order to calculate each hospital’s TPS. admission, using administrative claims Program, and our posting of measure However, we have previously expressed data. In general, the measure uses the data on Hospital Compare for at least our interest in expanding the Efficiency same approach to risk-adjustment as our one year before the beginning of the and Cost Reduction domain and 30-day outcome measures previously performance period. The AMI Payment continue to believe that additional adopted for the Hospital VBP Program, measure (MUC15–369) was reviewed by supplemental measures would create including the AMI mortality measure. the MAP in December 2015 and did not incentives for greater coordination Initial measure data were posted on receive support for adoption into the between hospitals and physicians to Hospital Compare in December 2014 Hospital VBP Program.30 The result of optimize the care they provide to and the full measure specifications are the MAP vote was 27 percent support, Medicare beneficiaries (78 FR 50688; 79 available at: https://www.cms.gov/ 15 percent conditional support, and 58 FR 50066). Medicare/Quality-Initiatives-Patient- percent do not support. MAP members We believe that when examining Assessment-Instruments/ expressed concern that treatment- variation in payments, an episode-of- HospitalQualityInits/Measure- specific or condition-specific payment care triggered by admission is Methodology.html. measures may overlap and double count meaningful for several reasons. First, AMI remains a high-volume condition services that are already captured in the hospitalizations represent brief periods that is one of the top 20 conditions MSPB measure. In addition, of illness that require ongoing contributing to Medicare costs.28 There stakeholders expressed a desire to have management post-discharge, and is evidence of variation in payment for more experience with the measure in decisions made at the admitting hospital AMI patients among hospitals; median the Hospital IQR Program to understand affect payments for care in the 30-day risk-standardized payment (in whether there may be unintended immediate postdischarge period. 2013 dollars) for AMI was $21,620 and consequences or a need to adjust for Second, attributing payments for a ranged from $12,862 to $29,802 for the sociodemographic status (SDS). continuous episode-of-care to admitting July 2011 through June 2014 reporting With respect to MAP stakeholder hospitals may reveal variations in care period in the Hospital IQR Program.29 concerns that treatment-specific or decision-making and resource This variation in payment suggests there condition-specific payment measures utilization. Third, an episode-of-care is opportunity for improvement. may overlap and double count services, with a specified time period (30 days in We believe it is important to adopt the we note that these measures cover the case of the measures proposed AMI Payment measure because topics of critical importance to quality below) provides a standard observation variation in payment may reflect improvement in the inpatient hospital period by which to compare all differences in care decision-making and setting. As discussed above, we selected hospitals. For all of the reasons resource utilization (for example, these measures because we believe that described above, we are proposing to treatment, supplies, or services) for it is appropriate to provide stronger add two condition-specific payment patients with AMI both during incentives for hospitals to provide high- measures in the Hospital VBP Program hospitalization and immediately post- value and efficient care. We believe that that can be directly paired with existing discharge. The AMI Payment measure even if some services were double clinical outcome measures in the also addresses the NQS priority and counted, hospitals that offer quality program. CMS Quality Strategy goal to make service and maintain better results on We are inviting public comments on quality care more affordable. Lastly, the the MSPB and condition-specific the proposed measures as detailed AMI Payment measure is intended to be payment measures relative to other below. We are further inviting public paired with our 30-day AMI mortality hospitals in the Hospital VBP Program comment on the addition of other measure, MORT–30–AMI, thereby could receive an increased benefit by condition-specific or treatment-specific directly linking payment to quality by performing well on both quality payment measures that are directly the alignment of comparable measures and payment measures. paired with quality measures, as well as populations and risk-adjustment Furthermore, because hospitals would episode-based payment measures not methodologies to facilitate the have bigger financial incentives, they directly paired with quality measures, assessment of efficiency and value of would strive to perform better, which for future program years. care. would lead to better quality. At the (1) Proposed New Measure for the FY We are proposing the AMI Payment same time, however, we are proposing 2021 Program Year: Hospital-Level, measure beginning with the FY 2021 that the Efficiency and Cost Reduction Risk-Standardized Payment Associated program year. The AMI Payment domain remain weighted at 25 percent With a 30-Day Episode-of-Care for Acute measure would be added to the of the TPS even as additional payment Myocardial Infarction (AMI) (NQF measures may be adopted for this #2431) 28 Torio, C.M. and Andrews, R.M., 2013. National domain in the FY 2021 program year; inpatient hospital costs: The most expensive therefore, the impact of poor Hospital-Level, Risk-Standardized conditions by payer, 2011. In Agency for Healthcare performance on the MSPB measure or Payment Associated with a 30-Day Research and Quality, Healthcare Cost and on any other particular payment Episode-of-Care for AMI (NQF #2431) Utilization Project Statistical Brief# 160. Available at: https://www.hcup-us.ahrq.gov/reports/statbriefs/ measure would be reduced. (AMI Payment) is an NQF-endorsed sb160.pdf. measure assessing hospital risk- 29 2015 Condition-Specific Measure Updates and 30 ‘‘Spreadsheet of MAP 2015–2016 Final standardized payment associated with a Specifications Report Hospital-Level 30-Day Risk Recommendations’’ available at: http:// 30-day episode-of-care for AMI. We Standardized Payment Measures. AMI, HF, PN www.qualityforum.org/map/ and ‘‘Process and Payment Updates (zip file). Available at: https:// Approach for MAP Pre-Rulemaking Deliberations adopted this measure in the Hospital www.cms.gov/Medicare/Quality-Initiatives-Patient- 2016’’ found at: http://www.qualityforum.org/ IQR Program in the FY 2014 IPPS/LTCH Assessment-Instruments/HospitalQualityInits/ Publications/2016/02/Process_and_Approach_for_ PPS final rule (78 FR 50802 through Measure-Methodology.html. MAP_Pre-Rulemaking_Deliberations.aspx.

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In regard to MAP stakeholder efficiency.31 We believe that the payment (in 2013 dollars) among concerns regarding the need to adjust condition-specific payment measures Medicare FFS patients aged 65 or older for SDS, we note that the AMI Payment we are proposing, which directly pair was $15,139, and ranged from $11,086 measure already incorporates a risk- with clinical outcome measures already to $21,867 for the July 2011 through adjustment methodology that accounts in the Hospital VBP Program, follow June 2014 reporting period in the for age and comorbidities. We this recommended approach. Based on Hospital IQR Program.34 This variation understand the important role that our analysis of the issues surrounding in payment suggests there is sociodemographic status plays in the condition-specific payment measures, opportunity for improvement. We believe it is important to adopt the care of patients. However, we continue we believe that the benefits of adopting this measure into the Hospital VBP HF Payment measure because variation to have concerns about holding Program outweigh any potential risks; in payment may reflect differences in hospitals to different standards for the however, we remain committed to care decision making and resource outcomes of their patients of diverse monitoring for unintended utilization (for example, treatment, sociodemographic status because we do consequences. supplies, or services) for patients with not want to mask potential disparities or We are inviting public comments on heart failure both during hospitalization minimize incentives to improve the this proposal. and immediately post-discharge. The outcomes of disadvantaged populations. (2) Proposed New Measure for the FY HF Payment measure also addresses the We routinely monitor the impact of NQS priority and CMS Quality Strategy sociodemographic status on hospitals’ 2021 Program Year: Hospital-Level, Risk-Standardized Payment Associated goal to make quality care more results on our measures. With a 30-Day Episode-of-Care for Heart affordable. Lastly, the HF Payment NQF is currently undertaking a 2-year Failure (HF) (NQF #2436) measure is intended to be paired with trial period in which new measures and our 30-day HF mortality measure, Hospital-Level, Risk-Standardized measures undergoing maintenance MORT–30–HF, thereby directly linking Payment Associated with a 30-Day payment to quality by the alignment of review will be assessed to determine if Episode-of-Care for HF (NQF #2436) (HF risk-adjusting for sociodemographic comparable populations and risk- Payment) is an NQF-endorsed measure adjustment methodologies to facilitate factors is appropriate. For 2 years, NQF assessing hospital risk-standardized will conduct a trial of temporarily the assessment of efficiency and value Medicare payment associated with a 30- of care. allowing inclusion of sociodemographic day episode-of-care for heart failure. We are proposing the HF Payment factors in the risk-adjustment approach The measure includes Medicare FFS measure beginning with the FY 2021 for some performance measures. At the patients aged 65 or older admitted for program year. The HF Payment measure conclusion of the trial, NQF will issue heart failure and calculates payments would be added to the Efficiency and recommendations on future permanent for these patients over a 30-day episode- Cost Reduction domain. The measure inclusion of sociodemographic factors. of-care, beginning with the index fulfills all statutory requirements for the During the trial, measure developers are admission, using administrative claims Hospital VBP Program based on our expected to submit information such as data. In general, the measure uses the adoption of the measure in the Hospital analyses and interpretations as well as same approach to risk-adjustment as our IQR Program and our posting of measure performance scores with and without 30-day outcome measures previously data on Hospital Compare for at least sociodemographic factors in the risk- adopted for the Hospital VBP Program, one year before the beginning of the adjustment model. including the HF mortality measure. We performance period for this measure. adopted this measure in the Hospital The HF Payment measure (MUC15–322) Furthermore, ASPE is conducting IQR Program in the FY 2015 IPPS/LTCH research to examine the impact of was reviewed by the MAP in December PPS final rule (79 FR 50231 through 2015 and did not receive support for sociodemographic status on quality 50235). Initial measure data were posted measures, resource use, and other adoption into the Hospital VBP on Hospital Compare in July 2015 and Program, due to the same concerns that measures under the Medicare program the full measure specifications are as directed by the IMPACT Act. We will we noted in our discussion of the AMI available at: https://www.cms.gov/ Payment measure.35 The result of the closely examine the findings of the Medicare/Quality-Initiatives-Patient- ASPE reports and related Secretarial MAP vote was 27 percent support, 8 Assessment-Instruments/ percent conditional support, and 65 recommendations and consider how HospitalQualityInits/Measure- they apply to our quality programs at percent do not support. Although the Methodology.html. final MAP decision was ‘‘do not such time as they are available. Heart failure is one of the leading support,’’ we continue to believe that causes of hospitalization for Americans Finally, we note that some MAP the NQF-endorsed HF Payment measure 65 and over and costs roughly $34 members did express support for the provides beneficiaries and hospitals billion annually.32 33 There is evidence AMI Payment measure and other with valuable information about relative of variation in Medicare payments at condition-specific payment measures. value for an episode-of-care. We support Members agreed that the increased hospitals for heart failure patients; median 30-day risk-standardized granularity provided by condition- 34 2015 Condition-Specific Measure Updates and specific payment measures will provide Specifications Report Hospital-Level 30-Day Risk- 31 Ryan A.M., Tompkins C.P. Efficiency and Standardized Payment Measures. AMI, HF, PN valuable feedback to hospitals for Value in Healthcare: Linking Cost and Quality Payment Updates (zip file). Available at: https:// targeted improvement. A recent NQF- Measures. Washington, DC: NQF; 2014. www.cms.gov/Medicare/Quality-Initiatives-Patient- commissioned white paper also 32 Russo C.A., Elixhauser, A. Hospitalizations in Assessment-Instruments/HospitalQualityInits/ supports the position that cost or the Elderly Population, 2003. Agency for Healthcare Measure-Methodology.html. Research and Quality. 2006. 35 ‘‘Spreadsheet of MAP 2015–2016 Final payment measures should be 33 Heidenriech P.A., Trogdon J.G., Khavjou O.A., Recommendations’’ available at: http:// interpreted in the context of quality Butler J, Dracup K., Ezekowitz M.D., et al. www.qualityforum.org/map/ and ‘‘Process and measures and that measures that link Forecasting the future of cardiovascular disease in Approach for MAP Pre-Rulemaking Deliberations cost and quality are the preferred the United States: A policy statement from the 2016’’ found at: http://www.qualityforum.org/ American Heart Association. Circulation. Publications/2016/02/Process_and_Approach_for_ method of assessing hospital 2011;123(8):933–44. MAP_Pre-Rulemaking_Deliberations.aspx.

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the HF Payment measure for the same hospital whose individual AMI measures in the Efficiency and Cost reasons that we noted in our general spending or HF spending ratios fall Reduction domain. discussion of condition-specific above the achievement threshold would We also considered and seek public payment measures in section IV.H.4.a. score 0 achievement points on the feedback on scoring the AMI Payment of the preamble of this proposed rule measure. A hospital for which and HF Payment measures using the and in our discussion of the AMI individual AMI spending or HF same methodology that we use to score Payment measure in section IV.H.4.a.(2) spending ratios fall at or below the most other measures, including the of the preamble of this proposed rule. benchmark would score the maximum MORT–30–AMI and MORT–30–HF We note that some MAP members did 10 achievement points on the measure. measures. Under that scoring express support for the HF Payment A hospital for which individual AMI methodology, hospitals receive measure and other condition-specific spending or HF spending ratios fall at or achievement points along an payment measures. Members agreed that below the achievement threshold but achievement range, which is a scale the increased granularity provided by above the benchmark would score between the achievement threshold (the condition-specific payment measures between 1 and 9 points according to the minimum level of hospital performance will provide valuable feedback to following formula: required to receive achievement points) and the benchmark (the mean of the top hospitals for targeted improvement. In [9 * ((achievement decile of hospital performance during addition, we believe that the condition- threshold¥Hospital’s performance the baseline period). A hospital receives specific payment measures we are period ratio)/(achievement improvement points for a measure if the proposing, which directly pair with threshold¥benchmark))] + 0.5 clinical outcome measures already in hospital improves upon its measure the Hospital VBP Program, follow the For improvement points, we are score from its own baseline period recommended approach outlined in the proposing to calculate a spending ratio measure score (76 FR 26514). We NQF white paper on how best to of AMI spending and HF spending for decided to propose the scoring measure efficiency.36 Based on our each hospital to the median AMI methodology that more closely aligns analysis of the issues surrounding spending and median HF spending, with the MSPB measure because we condition-specific payment measures, respectively, across all hospitals during believe it would be helpful for hospitals we believe that the benefits of adopting the performance period. We would then to be compared against performance this measure into the Hospital VBP use each hospital’s AMI spending ratio standards constructed from more program outweigh any potential risks. and the HF spending ratio to calculate current performance period data, given However, we remain committed to between 0 and 9 improvement points by potential changes in Medicare payment monitoring for unintended comparing each hospital’s ratio to its policy, changes in market forces, and consequences. own performance during the baseline changes in utilization practices. We are inviting public comments on period. We are proposing to set the We are inviting public comment on this proposal. improvement benchmark as the mean of the proposed scoring methodology in the lowest decile of AMI spending and the calculation of achievement and (3) Proposed Scoring Methodology for HF spending ratios across all hospitals. improvement points for the AMI the Proposed AMI Payment and HF Therefore, a hospital for which AMI Payment and HF Payment measures Payment Measures spending or HF spending ratios are beginning with the FY 2021 program We are proposing to score the equal to or higher than its baseline year. proposed AMI Payment and HF period ratios would score 0 In addition, we are considering Payment measures using the same improvement points on the measure. If adopting a scoring methodology for a methodology we use to score the MSPB a hospital’s score on the measure during future program year that would assess measure, so that all measures in the the performance period is less than its quality measures and efficiency Efficiency and Cost Reduction domain baseline period score but above the measures in tandem to produce a are scored in the same manner and have benchmark, the hospital would receive composite score reflective of value. To the same case minimum threshold. a score of 0 to 9 according to the support the goals of value-based For achievement points, we are following formula: purchasing and to provide consumers and purchasers with information about proposing to calculate a spending ratio [10 * ((Hospital baseline period value of care provided by hospitals, we of AMI spending and HF spending for ratio¥Hospital performance period each hospital to the median AMI are soliciting public comments on ways ratio)/(Hospital baseline period we can incorporate scoring value into spending and median HF spending, ratio¥benchmark))] ¥0.5 respectively, across all hospitals during the Hospital VBP Program. The concept For more information about the the performance period. We would then of value reflects highest quality proposed scoring methodology for the use each hospital’s AMI spending ratio achieved with most efficiency or least AMI Payment and HF Payment and HF spending ratio to calculate costs. Currently, the Hospital VBP measures, we refer readers to the FY between 0 and 10 achievement points. Program assesses quality and efficiency 2012 IPPS/LTCH PPS final rule (76 FR We are proposing to set the achievement separately through distinct performance 51654 through 51656) and to 42 CFR thresholds at the median AMI spending measures and domains. Because each 412.160 where we discuss the MSPB ratio and HF spending ratio across all domain is weighted and combined to measure’s identical scoring determine each hospital’s TPS, a hospitals during the performance methodology in detail. hospital could earn a higher payment period. We are proposing to set the In order to codify this scoring adjustment relative to other hospitals by benchmarks at the mean of the lowest methodology for the proposed payment performing well on the quality-related decile of the AMI spending ratios and measures, we are proposing to amend domains but without performing well in the HF spending ratios during the our regulations at 42 CFR 412.160 to the Efficiency and Cost Reduction performance period. Therefore, a revise the definitions of ‘‘Achievement domain, or vice versa. Without a threshold’’ and ‘‘Benchmark’’ to reflect measure or score for value that reflects 36 Ryan A.M., Tompkins C.P. Efficiency and Value in Healthcare: Linking Cost and Quality this methodology, not just for the MSPB both quality and costs, our ability to Measures. Washington, DC: NQF; 2014. measure, but more generally for all assess value is limited.

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There are various different ways value b. Proposed Update to an Existing with pneumonia. Recent evidence has could be incorporated into the Hospital Measure for the FY 2021 Program Year: shown an increase in the use of sepsis VBP Program. We are seeking public Hospital 30-Day, All-Cause, Risk- as a principal diagnosis code among comments on two general approaches. Standardized Mortality Rate (RSMR) patients hospitalized with pneumonia.38 First, specific measures of value could Following Pneumonia Hospitalization In response to this emerging evidence, be developed by measure developers (NQF #0468) (Updated Cohort) we examined coding patterns across and incorporated into the Hospital IQR The Hospital 30-Day, All-Cause, hospitals caring for Medicare patients Program and then the Hospital VBP RSMR Following Pneumonia and sought to forecast the impact of Program through the measure Hospitalization (NQF #0468) (MORT– enhancing or broadening the measure cohort to include the complete patient development process. This may be a 30–PN (updated cohort)) measure is a population, at each hospital, who are lengthy process and will depend upon risk-adjusted, NQF-endorsed mortality measure monitoring mortality rates receiving clinical management and interest from measure developers. treatment for pneumonia. Our findings However, specific measures of value following PN hospitalizations. As part of the CMS measure reevaluation were consistent with a published could be more interpretable by 39 process, the MORT–30–PN measure study. That is, our results suggested consumers, and would have rates that that there is: (1) An increasing use of could be trended, benchmarked, and underwent a substantive revision, which expanded the measure cohort to sepsis as a principal discharge scored using the current Hospital VBP include: (1) Patients with a principal diagnoses for pneumonia patients; and Program scoring methodology for discharge diagnosis of pneumonia (the (2) wide variation across hospitals in the assessing achievement and current reported cohort); (2) patients use of these codes. These published improvement. with a principal discharge diagnosis of studies and CMS analyses also show A second potential approach is for the aspiration pneumonia; and (3) patients that hospitals that use sepsis codes for Hospital VBP Program to use the with a principal discharge diagnosis of the principal diagnosis frequently have Program’s scoring methodology to sepsis (excluding severe sepsis) with a better performance on the currently incorporate value based on the secondary diagnosis of pneumonia adopted MORT–30–PN measure. This coding practice improves performance performance of hospitals by either: (a) coded as present on admission. For the purposes of describing the refinement of on the measure because patients with Comparing scores on specific quality greatest severity of illness (for example, and cost measures; or (b) comparing this measure, we note that ‘‘cohort’’ is defined as the hospitalizations, or those with sepsis) are systematically quality and efficiency domain scores. excluded from the measure under First, the measure-specific approach ‘‘index admissions,’’ that are included in the measure and evaluated to current measure specifications, leaving could target high-cost, high clinical- only patients with less severity of impact conditions by pairing condition- ascertain whether the patient subsequently died within 30 days of the illness in the cohort. specific quality and cost measures, such index admission. This cohort is the set In addition to assessing the use of the as by assessing a ratio of a hospital’s of hospitalizations that meet all of the principal diagnosis codes of sepsis, we also analyzed coding patterns and the reported quality over costs. A value inclusion and exclusion criteria. score based on the paired clinical The Hospital IQR Program adopted impact of expanding the pneumonia outcome and cost measures could be this measure refinement of MORT–30– measure to include patients with the incorporated into the existing Efficiency PN (updated cohort) in the FY 2016 principal diagnosis of aspiration and Cost Reduction domain (or Clinical IPPS/LTCH PPS final rule (80 FR 49653 pneumonia. We noted after our analyses Care or Safety domains) or included in through 49660), with initial MORT–30– that aspiration pneumonia: (1) Is a a separate new ‘Value’ domain. PN (updated cohort) data to be posted common reason for pneumonia Alternatively, a domain-based value on Hospital Compare on or around July hospitalization, particularly among the elderly; (2) is currently not included in scoring approach could be similar to the 21, 2016. The MORT–30–PN (updated the CMS hospital outcome measure current quality/cost tiering approach in cohort) measure (MUC–E0468) was specifications for pneumonia patients; the Physician Value-Based Modifier included on the ‘‘List of Measures and (3) appears to be similarly subject Under Consideration for December 1, Program, which tiers providers into nine to variation in diagnosis, 2014’’ and received conditional support high, average, or low cost and quality documentation, and coding. The from the MAP, pending NQF (or ‘‘value’’) categories to determine findings of published studies and CMS endorsement of the updated cohort as payments. The domain-based value analyses suggested that a MORT–30–PN detailed in the ‘‘Spreadsheet of MAP score could be weighted and measure with an enhanced or broader 2015 Final Recommendations.’’ 37 The incorporated into the calculation of a cohort would ensure that the population full measure specifications are available hospital’s overall Hospital VBP Program of patients with pneumonia is more at: https://www.cms.gov/Medicare/ TPS along with the other existing complete and comparable across Quality-Initiatives-Patient-Assessment- domains, or potentially as a multiplier hospitals. Instruments/HospitalQualityInits/ or adjuster to additionally reward higher We are proposing this measure Measure-Methodology.html. refinement for the Hospital VBP value hospitals. This refinement to the MORT–30–PN We welcome the public’s feedback measure was adopted to more accurately 38 Lindenauer P.K., Lagu T., Shieh M.S., Pekow and suggestions on how to appropriately reflect quality and outcomes for patients P.S., Rothberg M.B. Association of diagnostic incorporate the concept of value in the coding with trends in hospitalizations and mortality Hospital VBP Program, and we are 37 ‘‘Spreadsheet of MAP 2015 Final of patients with pneumonia, 2003–2009. Journal of inviting specific suggestions on how to Recommendations’’ available at: http:// the American Medical Association. Apr 4 www.qualityforum.org/WorkArea/ 2012;307(13):1405–1413. measure or score value that will be linkit.aspx?LinkIdentifier=id&ItemID=78711 and 39 Rothberg M.B., Pekow P.S., Priya A., meaningful to consumers, purchasers, ‘‘Process and Approach for MAP Pre-Rulemaking Lindenauer P.K. Variation in diagnostic coding of and providers. Deliberations 2015’’ available at: http:// patients with pneumonia and its association with www.qualityforum.org/Publications/2015/01/ hospital risk-standardized mortality rates: A cross- Process_and_Approach_for_MAP_Pre-Rulemaking_ sectional analysis. Annals of Internal Medicine. Mar Deliberations_2015.aspx. 18 2014;160(6):380–388.

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Program based on our adoption of the Medicare beneficiaries had 121,744 through improved coordination of measure refinement in the Hospital IQR CABG surgery admissions, with or perioperative care and discharge Program, and our posting of measure without percutaneous coronary planning. This is further supported by data on Hospital Compare for at least 1 intervention or valve surgery.41 CABG the success of registry-based mortality year prior to the start of the measure surgeries are costly procedures that measures in reducing CABG mortality performance period. In addition, the account for a large percentage of cardiac rates. For example, CABG mortality in MORT–30–PN (updated cohort) surgeries performed nationally. For California declined from 2.9 percent in measure addresses a high volume, high example, isolated CABG surgeries 2003, the first year that the State cost condition. The measure aligns with accounted for almost half (40.02 implemented a mandatory CABG the NQS priority and CMS Quality percent) of all cardiac surgery hospital mortality reporting measure, to 2.1 Strategy Goal of ‘‘Effective Prevention admissions in Massachusetts in FY percent in 2012.46 and Treatment of Chronic Disease.’’ 2012.42 This provides an example of the We are proposing the MORT–30– Based on the continued high risk of frequency in which a CABG is CABG measure for the Hospital VBP mortality after pneumonia performed for a patient admitted for Program beginning with the FY 2022 hospitalizations, we are proposing to cardiac surgery. The average Medicare program year because it addresses a add it to the Clinical Care domain payment was $32,564 for CABG without high-volume, high-cost procedure with beginning with the FY 2021 program valve and $48,461 for CABG plus valve variation in performance. The measure year. surgeries in 2011.43 also aligns with the CMS Quality We are inviting public comments on Mortality rates following CABG Strategy Goal of Effective Prevention this proposal. surgery are not insignificant and vary and Treatment of Chronic Disease. The across hospitals. For the July 2011 measure fulfills all statutory 5. Proposed New Measure for the FY through June 2014 Hospital IQR requirements for the Hospital VBP 2022 Program Year: Hospital 30-Day, Program reporting period, the median Program based on our adoption of the All-Cause, Risk-Standardized Mortality hospital-level risk-standardized measure in the Hospital IQR Program Rate (RSMR) Following Coronary Artery mortality rate after CABG was 3.1 and our posting of measure data on Bypass Graft (CABG) Surgery (NQF percent and ranged from 1.6 percent to Hospital Compare for at least one year #2558) 9.2 percent.44 Variation in mortality before the beginning of the measure The Hospital 30-Day, All-Cause, Risk- rates following CABG surgery can be performance period. The MAP Standardized Mortality Rate (RSMR) seen not only nationally, but also within supported the inclusion of the MORT– Following CABG Surgery (NQF #2558) a single State. Within the State of New 30–CABG measure (MUC15–395) in the (MORT–30–CABG) measure is a risk- York, the risk-adjusted mortality rate Hospital VBP Program as detailed in the adjusted, NQF-endorsed mortality among patients who were discharged ‘‘Spreadsheet of MAP 2016 Final measure monitoring mortality rates after CABG surgery (without any other Recommendations.’’ 47 Based on the following CABG hospitalizations. This major heart surgery earlier in the continued high risk of mortality after measure includes Medicare FFS patients hospital stay) ranged from 0.0 percent to CABG hospitalizations, we are aged 65 or older who receive a 4.58 percent in 2011.45 Variation in risk- proposing to add this measure to the qualifying CABG procedure and standardized mortality rates among U.S. Clinical Care domain beginning with the assesses hospitals’ 30-day, all-cause hospitals suggests that there is room for FY 2022 program year. risk-standardized rate of mortality, improvement. We are inviting public comments on beginning with the date of the index An all-cause, risk-adjusted mortality this proposal. procedure. The measure is calculated measure for patients who undergo 6. Previously Adopted and Newly using administrative claims data. In CABG surgery would provide hospitals Proposed Baseline and Performance general, the measure uses the same with an incentive to reduce mortality Periods approach to risk adjustment as our 30- day outcome measures previously In Agency for Healthcare Research and Quality, a. Background Healthcare Cost and Utilization Project Statistical adopted for the Hospital VBP Program. Brief #186. Available at: https://www.hcup- Section 1886(o)(4) of the Act requires We adopted this measure in the us.ahrq.gov/reports/statbriefs/sb186-Operating- the Secretary to establish a performance Hospital IQR Program in the FY 2015 Room-Procedures-United-States-2012.pdf. period for the Hospital VBP Program IPPS/LTCH PPS final rule (79 FR 50224 41 Culler S.D., Kugelmass A.D., Brown P.P., that begins and ends prior to the through 50227). Initial measure data Reynolds M.R., Simon A.W. Trends in coronary revascularization procedures among Medicare beginning of such fiscal year. We refer were posted on Hospital Compare in beneficiaries between 2008 and 2012. Circulation. readers to the FY 2016 IPPS/LTCH PPS July 2015 and the full measure 2014 Dec 22: CIRCULATIONAHA–114. final rule (80 FR 49561 through 49562) specifications are available at: https:// 42 Massachusetts Data Analysis Center. Adult for the baseline and performance www.cms.gov/Medicare/Quality- Coronary Artery Bypass Graft Surgery in the Commonwealth of Massachusetts: Hospital and periods for the Clinical Care, Person and Initiatives-Patient-Assessment- Surgeons Risk-Standardized 30-Day Mortality Rates. Community Engagement, Safety, and Instruments/HospitalQualityInits/ Fiscal Year 2012 Report. Available at: http:// Measure-Methodology.html. www.massdac.org/wp-content/uploads/CABG- 46 California Office of Statewide Health Planning CABG is a priority area because it is FY2012-Update.pdf. and Development. CABG Outcomes Reporting a common procedure associated with 43 Pennsylvania Health Care Cost Containment Program. The California Report on Coronary Artery Council. Cardiac Surgery in Pennsylvania 2011– Bypass Graft Surgery: 2003–2012 Trendlines. considerable morbidity, mortality, and 2013. Harrisburg; 2013:60. Available at: http://www.oshpd.ca.gov/hid/ healthcare spending. In the United 44 September 2015 Medicare Hospital Products/Clinical_Data/CABG/03-12_Trends.html States, over 200,000 CABG procedures Performance Report on Outcome Measures: or http://www.oshpd.ca.gov/HID/Products/Clinical_ are performed annually, and the Available at: https://www.cms.gov/Medicare/ Data/CABG/2012/ExecutiveSummary.pdf. Quality-Initiatives-Patient-Assessment-Instruments/ 47 ‘‘Spreadsheet of MAP 2015–2016 Final majority of procedures are performed on HospitalQualityInits/OutcomeMeasures.html. 40 Recommendations’’ available at: http:// Medicare beneficiaries. In 2012, 45 New York State Department of Health. Adult www.qualityforum.org/map/ and ‘‘Process and Cardiac Surgery in New York State 2009–2011. Approach for MAP Pre-Rulemaking Deliberations 40 Fingar, K.R., Stocks, C., Weiss, A.J. and Steiner, Available at: https://www.health.ny.gov/statistics/ 2016’’ found at http://www.qualityforum.org/ C.A., 2014. Most frequent operating room diseases/cardiovascular/heart_disease/docs/2009- Publications/2016/02/Process_and_Approach_for_ procedures performed in U.S. hospitals, 2003–2012. 2011_adult_cardiac_surgery.pdf. MAP_Pre-Rulemaking_Deliberations.aspx.

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Efficiency and Cost Reduction domains program years, unless otherwise noted using an entirely distinct set of patients that we have adopted for the FY 2018 in future rulemaking. Therefore, for the from the same time period. If the RSPs program year. In past final rules, we FY 2019 program year and future for both the 36-month and the 24-month have proposed and adopted a new program years, we are proposing to performance periods agree, we can baseline and performance period for adopt a performance period that runs on demonstrate that the measure assesses each program year for each domain in the calendar year 2 years prior to the the quality of the hospital rather than each final rule. This year, we are applicable program year. We are the types of patients treated. To proposing to adopt the following proposing to adopt a baseline period calculate agreement between these baseline and performance periods for all that runs on the calendar year 4 years measure subsets, we calculated the ICC future program years, unless otherwise prior to the applicable program year. (2,1) 49 for both the 36-month and 24- noted in future rulemaking. Applying these proposed new policies, month performance periods. for the FY 2019 program year, the For the AMI Payment measure, there b. Patient- and Caregiver-Centered baseline period for the MSPB measure were 459,874 index admissions and Experience of Care/Care Coordination would run from January 1, 2015 through 2,342 hospitals that met the minimum Domain (Proposed Person and December 31, 2015. The performance threshold for reporting a measure result Community Engagement Domain) period would run from January 1, 2017 (at least 25 cases) in the 36-month Since the FY 2015 program year, we through December 31, 2017. performance period. We also calculated have adopted a 12-month baseline the RSP using a random split-sample of period and a 12-month performance (2) AMI Payment and HF Payment the combined 24-month performance period for measures in the proposed Measures in the FY 2021 Program Year period (we used July 1, 2012 through Person and Community Engagement We are also proposing to adopt the June 30, 2014). There were 309,067 domain (currently referred to as the AMI Payment and HF Payment index admissions and 2,141 hospitals Patient- and Caregiver-Centered measures as two new measures for the that met the minimum threshold for Experience of Care/Care Coordination Efficiency and Cost Reduction domain reporting a measure result in the 24- domain) (77 FR 53598; 78 FR 50692; 79 beginning in the FY 2021 program year. month performance period. FR 50072; 80 FR 49561). We continue to In order to adopt the measures as early For the 36-month performance period, believe that a 12-month period provides as feasible into the Hospital VBP the ICC for the two independent us sufficient data on which to score Program, we are proposing to adopt a assessments of each hospital was 0.775. hospital performance. 36-month baseline period and a 24- For the 24-month performance period, Therefore, we are proposing to adopt month performance period. Therefore, the ICC for the two independent this baseline and performance period for the FY 2021 program year, we are assessments of each hospital was 0.742. length for the FY 2019 program year and proposing to adopt a 24-month Therefore, the data subsets showcase all future program years, unless performance period that runs from July ‘‘substantial’’ agreement of hospital otherwise noted in future rulemaking. 1, 2017 to June 30, 2019. We are performance, and we can demonstrate Therefore, for the FY 2019 program year proposing to adopt a 36-month baseline that, even with a 24-month performance and future program years, we are period that runs from July 1, 2012 to period, the measure assesses the quality proposing to adopt a performance June 30, 2015. of care provided at the hospital rather We believe that using a 24-month than the types of patients that these period that runs on the calendar year 2 50 years prior to the applicable program performance period for the AMI hospitals treat. To assess whether using 24 months of year. We are proposing to adopt a Payment and HF Payment measures, data instead of 36 months of data baseline period that runs on the rather than a 36-month performance changes the performance in the same calendar year 4 years prior to the period, in the FY 2021 program year hospital, we compared the percent applicable program year. Applying these would accurately assess the quality of change in a hospital’s predicted/ proposed new policies, for the FY 2019 care provided by hospitals and would expected (P/E) ratio. For hospitals that program year, the baseline period for the not substantially change hospitals’ performance on the measure. To met the minimum case threshold in the Person and Community Engagement 24-month performance period, the domain (proposed name change) would determine the viability of using a 24- ¥ month performance period to calculate median percent change was 0.06 run from January 1, 2015 through percent (with an interquartile range of December 31, 2015. The performance the AMI Payment and HF Payment ¥ measures’ scores, we compared the 1.7 percent to 1.5 percent). These period would run from January 1, 2017 results suggest minimal difference in through December 31, 2017. measure score reliability for a 24-month and 36-month performance period. We same-hospital performance when using a 24-month measurement period. c. Efficiency and Cost Reduction calculated the Intraclass Correlation To determine the viability of using a Domain Coefficient (ICC) to determine the extent 24-month performance period for the (1) MSPB Measure to which assessments of a hospital using HF Payment measure, we assessed different but randomly selected subsets Since the FY 2016 program year, we reliability and change in hospital of patients produces similar measures of have adopted a 12-month baseline performance for a 24-month and 36- hospital performance.48 We calculated period and a 12-month performance month performance period using the the risk-standardized payment (RSP) period for the MSPB measure in the same process as the AMI Payment using a random split-sample of a 36- Efficiency and Cost Reduction domain measure. For the HF Payment measure, month performance period (we used (78 FR 50692; 79 FR 50072; 80 FR there were 877,856 index admissions July 1, 2012 through June 30, 2015). 49562). We continue to believe that a and 2,981 hospitals that met the For both the 36-month and the 24- 12-month period for this measure month performance periods, we provides sufficient data on which to 49 Shrout P., Fleiss J. Intraclass Correlations: Uses obtained two RSPs for each hospital, score hospital performance. We are in Assessing Rater Reliability. Pyschol Bull. Mar 1979;86(2):420–428. proposing to adopt this baseline and 48 Shrout P., Fleiss J. Intraclass Correlations: Uses 50 Landis J, Koch G. The Measurement of performance period length for the FY in Assessing Rater Reliability. Pyschol Bull. Mar Observer Agreement for Categorical Data. 2019 program year and all future 1979;86(2):420–428. Biometrics. Mar 1997 1977;33(1):159–174.

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minimum threshold for reporting a stated in past rules that we would strive e. Clinical Care Domain measure result (at least 25 cases) in the to adopt 36-month performance periods (1) Currently Adopted Measures in the 36-month performance period. We also and baseline periods when possible to Clinical Care Domain calculated the RSP using a random split- accommodate the time needed to sample of a 24-month performance process measure data and to ensure that For the FY 2019, FY 2020, and FY 2021 program years, we have adopted a period (we used July 1, 2012 through we collect enough measure data for 36-month baseline period and a 36- June 30, 2014). There were 580,741 reliable performance scoring for all index admissions and 2,883 hospitals month performance period for currently mortality measures (80 FR 49588; 79 FR adopted measures in the Clinical Care that met the minimum threshold for 50057; 78 FR 50074). Therefore, for the reporting a measure result in the 24- domain (78 FR 50692 through 50694; 79 FY 2022 program year, we are proposing FR 50073; 80 FR 49563).52 For the FY month performance period. to adopt a 36-month performance period For the 36-month performance period, 2022 program year, we are proposing to that runs from July 1, 2017 to June 30, the ICC for the two independent adopt a 36-month performance period assessments of each hospital was 0.83. 2020. We are proposing to adopt a 36- and a 36-month baseline period for each For the 24-month performance period, month baseline period that runs from of the other measures in the Clinical the ICC for the two independent July 1, 2012 to June 30, 2015. Care domain, the MORT–30–AMI, assessments of each hospital was 0.81. d. Safety Domain MORT–30–HF, and MORT–30–COPD Therefore, the data subsets showcase measures, as well as the newly proposed ‘‘almost perfect’’ agreement of hospital Since the FY 2016 program year, we MORT–30–CABG measure. The performance, and we can demonstrate have adopted a 12-month baseline performance periods for these measures that, even with a 24-month performance period and 12-month performance would run for 36-months from July 1, period, the measure assesses the quality period for all measures in the Safety 2017 through June 30, 2020. The of care provided at the hospital rather domain, with the exception of the PSI baseline period would run from July 1, than the types of patients that these 90 measure (78 FR 50692; 79 FR 50071; 2012 through June 30, 2015. We are hospitals treat.51 80 FR 49562). We continue to believe proposing that the THA/TKA measure To assess whether using a 24-month that a 12-month period for these performance period would run from April 1, 2017 through March 31, 2020. performance period instead of a 36- measures provides us sufficient data on The baseline period would run from month performance period changes the which to score hospital performance. performance in the same hospital, we April 1, 2012 through March 31, 2015. compared the percent change in a Therefore, we are proposing to adopt a 12-month baseline period and a 12- (2) MORT–30–PN (Updated Cohort) hospital’s P/E ratio. For hospitals that Measure in the FY 2021 Program Year met the minimum case threshold in the month performance period for all 24-month performance period, the measures in the Safety domain, with the In order to adopt the newly proposed median percent change for hospitals’ exception of the PSI 90 measure for the MORT–30–PN (updated cohort) P/E ratio using 24-month performance FY 2019 program year and all future measure into the Hospital VBP Program periods compared with 36-month program years, unless otherwise noted as early as feasible, we are proposing to performance periods was ¥0.02 percent in future rulemaking. Under this adopt a 36-month baseline period and a (with an interquartile range of ¥1.9 proposed policy, for the FY 2019 23-month performance period for the FY percent to 1.8 percent). These results program year and future program years, 2021 program year. We are proposing to suggest minimal difference in same- we are proposing to adopt a adopt a 23-month performance period because the measure will not be posted hospital performance when using a 24- performance period that runs on the on Hospital Compare for one year until month measurement period. calendar year 2 years prior to the July 21, 2017. We are proposing to begin Therefore, we believe that using a 24- applicable program year. We are month performance period rather than a the performance period on August 1, proposing to adopt a baseline period 2017 to accommodate this statutory 36-month performance period would that runs on the calendar year 4 years not substantially change hospitals’ requirement. prior to the applicable program year. We believe that using a 23-month performance on the AMI Payment and Applying these proposed new policies, HF Payment measures. In sum, based on performance period for the MORT–30– for the FY 2019 program year, the the analyses described earlier, we PN (updated cohort) measure, rather baseline period for all measures in the believe that using 24-month than a 36-month performance period, in Safety domain except for the PSI 90 performance periods, rather than 36- the FY 2021 program year would month performance periods, for the measure would run from January 1, accurately assess the quality of care initial performance period for this 2015 through December 31, 2015. The provided by hospitals and would not measure would accurately assess the performance period would run from substantially change hospitals’ quality of care provided by that hospital January 1, 2017 through December 31, performance on the measure. To and would not substantially change that 2017. determine the viability of using a 23- hospital’s performance on the measure. As discussed in section IV.H.2.a. of month performance period to calculate the MORT–30–PN (updated cohort) (3) AMI Payment and HF Payment the preamble of this proposed rule, we are proposing to shorten the Measures in the FY 2022 Program Year 52 The currently adopted measures in the Clinical performance period for the PSI 90 Care domain include: MORT–30–AMI, MORT–30– For the FY 2022 program year, we are measure in the FY 2018 program year. HF, MORT–30–PN, and THA/TKA. The THA/TKA proposing to adopt a 36-month Under this proposal, the performance measure was added for the FY 2019 program year performance period and a 36-month with a 36-month baseline period and a 24-month period for the PSI 90 measure for the FY performance period (79 FR 50072), but we have baseline period for the AMI Payment 2018 program year would be July 1, and HF Payment measures. We have since adopted 36-month baseline and performance 2014 through September 30, 2015. As periods for the FY 2021 program year (80 FR stated earlier, the baseline period for the 49563). We intend to continue having 36-month 51 Landis J., Koch G. The Measurement of baseline periods and 36-month performance periods Observer Agreement for Categorical Data. measure for FY 2018 that we previously in the future for all measures in the Clinical Care Biometrics. Mar 1997 1977;33(1):159–174. established would not change. domain.

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measure score, we compared the data performance period, the agreement substantially change that hospital’s measure score reliability for a 23-month between the two independent performance on the measure. and a 36-month performance period. We assessments of each hospital was 0.58. Further, adopting this proposed calculated the ICC to determine the Therefore, the data subsets showcase performance period would enable us to extent to which assessments of a ‘‘moderate’’ agreement of hospital include the updated measure cohort in hospital using different but randomly performance, and we can demonstrate the FY 2021 Hospital VBP Program, selected subsets of patients produces that, even with a 23-month performance which would ensure that MORT–30–PN similar measures of hospital period, the measure moderately assesses more accurately reflects quality and performance. We calculated the RSMR the quality of care provided at the outcomes for patients with pneumonia. using a random split-sample of the hospital rather than the types of patients Therefore, for the MORT–30–PN combined 36-month performance period that these hospitals treat.53 (updated cohort) measure, we are (we used July 1, 2012 through June 30, To assess whether using a 23-month proposing a performance period that 2015). There were 1,292,701 index performance period instead of a 36- would run from August 1, 2017 through admissions and 3,103 hospitals that met month performance period changes the June 30, 2019 for the FY 2021 program the minimum threshold for reporting a performance in the same hospital, we year. The baseline period would run measure result (at least 25 cases) in the from July 1, 2012 through June 30, 2015. compared the percent change in a 36-month performance period. We also hospital’s RSMR. In some cases, (3) MORT–30–PN (Updated Cohort) calculated the RSMR using a random changing the performance period from Measure in the FY 2022 Program Year split-sample of the combined 23-month 36 months to 23 months resulted in performance period (we used July 1, For the FY 2022 program year and hospitals failing to meet the case 2012 through May 31, 2014). There were subsequent years, we are proposing to threshold to report a measure score; 798,746 index admissions and 3,043 lengthen the MORT–30–PN (updated therefore, these hospitals were removed hospitals that met the minimum cohort) performance period to nearly a from the measure. For the remaining threshold for reporting a measure result 36-month performance period (35 hospitals, the median percent change in the 23-month performance period. months) and continue to adopt a 36- For both the 36-month data and the was 1.52 percent (with an interquartile month baseline period. For the FY 2022 23-month performance periods, we range of 2.32 percent to 5.32 percent). program year, we are proposing a obtained two RSMRs for each hospital, These results suggest minimal performance period that would run from using an entirely distinct set of patients difference in hospital performance August 1, 2017 through June 30, 2020. from the same time period. If the RSMRs when using a 23-month measurement The baseline period would run from for both the 36-month subset and the 23- period. July 1, 2012 through June 30, 2015. month performance periods agree, we Therefore, we believe that using 23 f. Summary of Previously Adopted and can demonstrate that the measure months of data rather than 36 months of Newly Proposed Baseline and assesses the quality of the hospital data would not substantially change Performance Periods for the FY 2018, rather than the types of patients treated. hospitals’ performance on this measure. FY 2019, FY 2020, FY 2021, and FY To calculate agreement between these In summary, based on the analyses 2022 Program Years measure subsets, we calculated the ICC further described earlier, we believe that for both the 36-month and 23-month using 23 months of data, rather than 36 The tables below summarize the performance periods. months of data, for the initial baseline and performance periods that For the 36-month data performance performance period for this measure we are proposing to adopt (and include period, the agreement between the two would, with moderate accuracy, assess previously adopted baseline and independent assessments of each the quality of care provided by that performance periods for the Clinical hospital was 0.69. For the 23-month hospital. In addition, it would not Care domain).

NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2018 PROGRAM YEAR

Domain Baseline period Performance period

Safety: • PSI 90 * ...... July 1, 2010–June 30, 2012 ...... July 1, 2014–September 30, 2015. * We are proposing to shorten the performance period for the PSI 90 measure for the FY 2018 program year as discussed in section IV.H.2.a. of the preamble of this proposed rule.

PREVIOUSLY ADOPTED AND NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2019 PROGRAM YEAR

Domain Baseline period Performance period

Person and Community Engagement: • HCAHPS + 3-Item Care Transition ...... January 1, 2015–December 31, January 1, 2017–December 31, 2015. 2017. Clinical Care: • Mortality (MORT–30–AMI, MORT–30–HF, MORT–30–PN) * ...... • July 1, 2009–June 30, 2012 ...... • July 1, 2014–June 30, 2017. • THA/TKA * ...... • July 1, 2010–June 30, 2013 ...... • January 1, 2015–June 30, 2017. Safety:

53 Landis J, Koch G. The Measurement of Observer Agreement for Categorical Data. Biometrics. Mar 1997 1977;33(1):159–174.

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PREVIOUSLY ADOPTED AND NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2019 PROGRAM YEAR—Continued

Domain Baseline period Performance period

• PSI 90 ...... • July 1, 2011–June 30, 2013 ...... • July 1, 2015 through June 30, 2017. • PC–01 and NHSN measures (CAUTI, CLABSI, SSI, CDI, • January 1, 2015–December 31, • January 1, 2017–December 31, MRSA). 2015. 2017. Efficiency and Cost Reduction: • MSPB ...... January 1, 2015–December 31, January 1, 2017–December 31, 2015. 2017. * Previously adopted baseline and performance periods that remain unchanged (80 FR 49562 through 49563).

PREVIOUSLY ADOPTED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2020 PROGRAM YEAR

Domain Baseline period Performance period

Clinical Care: • Mortality (MORT–30–AMI, MORT–30–HF, MORT–30–PN) * ...... • July 1, 2010–June 30, 2013 ...... • July 1, 2015–June 30, 2018. • THA/TKA * ...... • July 1, 2010–June 30, 2013 ...... • July 1, 2015–June 30, 2018. Safety: • PSI 90 * ...... July 1, 2012–June 30, 2014 ...... July 1, 2016–June 30, 2018. * Previously adopted baseline and performance periods that remain unchanged (80 FR 49562 through 49563).

PREVIOUSLY ADOPTED AND NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2021 PROGRAM YEAR

Domain Baseline period Performance period

Clinical Care: • Mortality (MORT–30–AMI, MORT–30–HF, MORT–30–COPD) * • July 1, 2011–June 30, 2014 ...... • July 1, 2016–June 30, 2019. • THA/TKA * ...... • April 1, 2011–March 31, 2014 ... • April 1, 2016–March 31, 2019. • MORT–30–PN (updated cohort) ...... • July 1, 2012–June 30, 2015 ...... • August 1, 2017–June 30, 2019. Efficiency and Cost Reduction: • Payment (AMI Payment and HF Payment) ...... July 1, 2012 to June 30, 2015 ...... July 1, 2017 to June 30, 2019. * Previously adopted baseline and performance periods that remain unchanged (80 FR 49562 through 49563).

NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2022 PROGRAM YEAR

Domain Baseline period Performance period

Clinical Care: • Mortality (MORT–30–AMI, MORT–30–HF, MORT–30–COPD, • July 1, 2012–June 30, 2015 ...... • July 1, 2017–June 30, 2020. MORT–30–CABG). • THA/TKA ...... • April 1, 2012–March 31, 2015 ... • April 1, 2017–March 31, 2020. • MORT–30–PN (updated cohort) ...... • July 1, 2012–June 30, 2015 ...... • August 1, 2017–June 30, 2020. Efficiency and Cost Reduction: • Payment (AMI Payment, HF Payment) ...... July 1, 2012–June 30, 2015 ...... July 1, 2017–June 30, 2020.

We are inviting public comments on In 42 CFR 412.160 of our Hospital the finalized performance period for the these proposals. VBP Program regulations, we define the applicable program year does not meet term ‘‘Cited for deficiencies that pose the definition of the term ‘‘hospital,’’ 7. Proposed Immediate Jeopardy Policy immediate jeopardy’’ to mean that and thus is excluded from the Hospital Changes ‘‘during the applicable performance VBP Program for that program year. a. Background period, the Secretary cited the hospital Because the Hospital VBP Program for immediate jeopardy on at least two currently uses measures with 12-month, Section 1886(o)(1)(C) of the Act states surveys using the Form CMS–2567, 24-month, and 36-month performance that the Hospital VBP Program applies Statement of Deficiencies and Plan of periods, a hospital’s immediate jeopardy to subsection (d) hospitals (as defined in Correction’’ (OMB Control Number citations could result in its exclusion section 1886(d)(1)(B) of the Act), but 0938–0391). In 42 CFR 412.160, we also from the Hospital VBP Program for excludes from the definition of the term adopted the definition of ‘‘immediate multiple program years. ‘‘hospital’’ with respect to a fiscal year jeopardy’’ found in 42 CFR 489.3 of our b. Proposed Increase of Immediate a hospital ‘‘for which, during the regulations. Jeopardy Citations From Two to Three performance period for such fiscal year, Our current interpretation of the Surveys the Secretary has cited deficiencies that Hospital VBP Program’s statute is that a We are proposing to amend our pose immediate jeopardy to the health hospital cited for deficiencies that pose regulations at 42 CFR 412.160 to change or safety of patients.’’ immediate jeopardy during any part of the definition of the term ‘‘Cited for

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deficiencies that pose immediate care while being as inclusive of hospitals receive official notification of jeopardy’’ to increase the number of hospitals as possible. an immediate jeopardy citation based on surveys on which a hospital must be c. EMTALA-Related Immediate the issuance date of Form CMS–2567 as cited for immediate jeopardy before Jeopardy Citations this date will be weeks, if not months, being excluded from the Hospital VBP after the survey end date. Hospitals may Program pursuant to section Hospitals are often alerted to continue to receive preliminary notice immediate jeopardy situations when a 1886(o)(1)(C) of the Act from two to during the onsite EMTALA surveyor or team of surveyors is in the three. In other words, we are proposing investigation survey that they may that a hospital must be cited on Form process of conducting a survey of compliance with the Medicare receive an immediate jeopardy citation CMS–2567, Statement of Deficiencies based on survey findings. However, and Plan of Correction, for immediate condition of participation (CoPs) at the hospital and identifies those situations because the decision-making jeopardy on at least three surveys during responsibility in EMTALA the performance period in order to meet that immediately jeopardize the health investigations always rests with the the standard for exclusion from the and safety of patients (77 FR 53610). CMS Regional Office, the final Hospital VBP Program under section Following the survey, the Form CMS– 1886(o)(1)(C)(ii)(II) of the Act. Beginning 2567, Statement of Deficiencies and determination and notification of on the effective date of this change, Plan of Correction, is sent to the immediate jeopardy citations will hospitals would be excluded from the hospital, which contains the survey always be delayed. The Form CMS– Hospital VBP Program for a particular findings, including any immediate 2567 constitutes the official notice to a program year if, during the performance jeopardy situations. For EMTALA- healthcare facility of the survey period for that fiscal year, they were related immediate jeopardy situations, findings. however, the CMS Regional Office cited three times by the Secretary for Finally, in instances where one onsite determines whether there was an deficiencies that pose immediate hospital survey resulted in both hospital EMTALA violation after reviewing the jeopardy to the health or safety of CoP immediate jeopardy citation(s) as patients. State Survey Agency’s report and an expert physician review’s findings, and, well as EMTALA immediate jeopardy Because we expect that the effective if so, whether it constituted an citation(s), the survey end date would date of this change will be October 1, immediate jeopardy (77 FR 53610). The be the default date for potential 2016 (the first day of the FY 2017 CMS Regional Office then sends the exclusion from the Hospital VBP Hospital VBP program year), only Form CMS–2567 to the hospital. Program. CMS recognizes the hospital hospitals that were cited three times Currently, the Automated Survey will receive notification of the EMTALA during the performance period that Processing Environment (ASPEN) immediate jeopardy citation(s) at a later applies to the FY 2017 program year system, an electronic system that date than the CoP immediate jeopardy would be excluded from the Hospital supports our survey and certification citation(s). However, because the VBP Program. Hospitals that were, as of activity, catalogs deficient practices hospital was notified of the CoP October 1, 2016, cited for immediate (that is, noncompliance) identified immediate jeopardy citation(s) at the jeopardy on two surveys during the during a survey and generates the Form time of survey, this date will be used for performance period that applies to the CMS–2567 that is sent to the hospital the performance period for potential FY 2017 program year could participate after the survey. The survey end date in the Hospital VBP Program for the FY exclusion from the Hospital VBP generated in ASPEN is currently used as Program. Even though there may be 2017 program year. the date for assignment of the We are proposing this change to be separate enforcement actions resulting immediate jeopardy citation to a from the same survey, we will consider more inclusive of hospitals and to particular performance period (77 FR each Form CMS–2567 with immediate ensure that we are not too quickly 53613). The additional processes for jeopardy findings to be one citation for excluding a hospital from participation EMTALA-related immediate jeopardy in the Hospital VBP Program. After citations can result in significant purposes of the Hospital VBP Program reviewing the survey and certification notification delays to hospitals (often (77 FR 53613). data, we have determined that limiting several months or longer). We are proposing to revise our exclusion to those hospitals that have In the case of EMTALA-related regulations at 42 CFR 412.160 to reflect been cited for immediate jeopardy three immediate jeopardy citations only, we the above proposal and specify use of or more times during the applicable are proposing to change our policy the date of CMS’ issuance of Form performance period, rather than two, regarding the date of the immediate CMS–2567 to the hospital for EMTALA would continue to appropriately jeopardy citation for possible exclusion immediate jeopardy citation(s). We also exclude hospitals that are cited for from the Hospital VBP Program from the specify that in instances where one jeopardizing patient safety while survey end date generated in ASPEN to onsite hospital survey resulted in both allowing hospitals with a lower number the date of CMS’ final issuance of Form hospital CoP immediate jeopardy of immediate jeopardy citations over CMS–2567 to the hospital. Form CMS– citation(s) as well as EMTALA significantly longer performance periods 2567 is not considered final until it is immediate jeopardy citation(s), the to continue to participate in the transmitted to the healthcare facility, Hospital VBP Program. Many immediate either by the State Survey Agency, or, in survey end date would be the date we jeopardy citations involve systematic all EMTALA cases and certain other use for purposes of assigning the issues of patient safety, and we believe cases, by the CMS Regional Office. The citations to a performance period to that hospitals that are, during the date of final issuance is also tracked in determine whether the hospital should performance period, cited by the ASPEN. The date the Form CMS–2567 be excluded from the Hospital VBP Secretary for three or more deficiencies is sent by the CMS Regional Office to Program for a particular program year. that pose immediate jeopardy should be the hospital (via mail, electronically, or We are inviting public comments on excluded from the Hospital VBP both) is the date of final issuance this proposal. Program. This proposal would ensure recorded in ASPEN. We believe this that we continue to assure high quality change would accurately reflect the date

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8. Proposed Performance Standards for during previous performance periods; and Abdominal Hysterectomy SSI the Hospital VBP Program (2) historical performance standards; (3) measure are computed separately for a. Background improvement rates; and (4) the each procedure stratum, and we will opportunity for continued first award achievement and Section 1886(o)(3)(A) of the Act improvement. improvement points to each stratum requires the Secretary to establish We refer readers to the FY 2013, FY separately, then compute a weighted performance standards for the measures 2014, and FY 2015 IPPS/LTCH PPS final average of the points awarded to each selected under the Hospital VBP rules (77 FR 53604 through 53605; 78 stratum by predicted infections. Program for a performance period for FR 50694 through 50698; and 79 FR b. Previously Adopted and Newly the applicable fiscal year. The 50077 through 50079) for a more Proposed Performance Standards for the performance standards must include detailed discussion of the general FY 2019 Program Year levels of achievement and improvement, scoring methodology used in the as required by section 1886(o)(3)(B) of Hospital VBP Program. In accordance with our finalized the Act, and must be established no We note that the performance methodology for calculating later than 60 days before the beginning standards for the following measures are performance standards (discussed more of the performance period for the fiscal calculated with lower values fully in the Hospital Inpatient VBP year involved, as required by section representing better performance: Program final rule (76 FR 26511 through • The NHSN measures (the CLABSI, 1886(o)(3)(C) of the Act. We refer 26513)), we are proposing to adopt the CAUTI, CDI and MRSA Bacteremia readers to the Hospital Inpatient VBP following additional performance measures); Program final rule (76 FR 26511 through • standards for the FY 2019 program year. 26513) for further discussion of The PSI 90 measure; • The Colon and Abdominal We note that the numerical values for achievement and improvement Hysterectomy SSI measure; the performance standards displayed standards under the Hospital VBP • The THA/TKA measure; below represent estimates based on the Program. • The MSPB measure; and, most recently available data, and we In addition, when establishing the • The proposed HF and AMI Payment intend to update the numerical values performance standards, section measures. in the FY 2017 IPPS/LTCH PPS final 1886(o)(3)(D) of the Act requires the This distinction is made in contrast to rule. We note further that the MSPB Secretary to consider appropriate other measures for which higher values measure’s performance standards are factors, such as: (1) Practical experience indicate better performance. As based on performance period data; with the measures, including whether a discussed further in the FY 2014 IPPS/ therefore, we are unable to provide significant proportion of hospitals failed LTCH PPS final rule (78 FR 50684), the numerical equivalents for the standards to meet the performance standard performance standards for the Colon at this time.

PREVIOUSLY ADOPTED AND NEWLY PROPOSED PERFORMANCE STANDARDS FOR THE FY 2019 PROGRAM YEAR: SAFETY, CLINICAL CARE, AND EFFICIENCY AND COST REDUCTION MEASURES

Measure ID Description Achievement threshold Benchmark

Safety Measures

CAUTI * ...... National Healthcare Safety Network (NHSN) Catheter- 0.438000 ...... 0.000000. associated Urinary Tract Infection (CAUTI) Outcome Measure. CLABSI * ...... National Healthcare Safety Network (NHSN) Central 0.465000 ...... 0.000000. line-associated Bloodstream Infection (CLABSI) Out- come Measure. CDI * ...... National Healthcare Safety Network (NHSN) Facility- 0.823000 ...... 0.013000. wide Inpatient Hospital-onset Clostridium difficile In- fection (CDI) Outcome Measure. MRSA Bacteremia* ...... National Healthcare Safety Network (NHSN) Facility- 0.812000 ...... 0.000000. wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Out- come Measure. PSI 90 * ± ...... Patient Safety for Selected Indicators (Composite 0.084034 ...... 0.058946. Measure). Colon and Abdominal American College of Surgeons—Centers for Disease • 0.856000 ...... • 0.000000. Hysterectomy SSI *. Control and Prevention (ACS–CDC) Harmonized • 0.682000 ...... • 0.000000. Procedure Specific Surgical Site Infection (SSI) Out- come Measure. PC–01 ...... Elective Delivery ...... 0.012384 ...... 0.000000.

Clinical Care Measures

MORT–30–AMI ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.850671 ...... 0.873263. tality Rate (RSMR) Following Acute Myocardial In- farction (AMI) Hospitalization. MORT–30–HF ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.883472 ...... 0.908094. tality Rate (RSMR) Following Heart Failure (HF) Hospitalization. MORT–30–PN ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.882334 ...... 0.907906. tality Rate (RSMR) Following Pneumonia Hos- pitalization.

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PREVIOUSLY ADOPTED AND NEWLY PROPOSED PERFORMANCE STANDARDS FOR THE FY 2019 PROGRAM YEAR: SAFETY, CLINICAL CARE, AND EFFICIENCY AND COST REDUCTION MEASURES—Continued

Measure ID Description Achievement threshold Benchmark

THA/TKA * ± ...... Hospital-Level Risk-Standardized Complication Rate 0.032229 ...... 0.023178. (RSMR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).

Efficiency and Cost Reduction Measure

MSPB * ...... Payment-Standardized Medicare Spending Per Bene- Median Medicare Spending Mean of the lowest decile ficiary (MSPB). per Beneficiary ratio Medicare Spending per across all hospitals dur- Beneficiary ratios across ing the performance pe- all hospitals during the riod. performance period. * Lower values represent better performance. ± Previously adopted performance standards.

In the past, we have used the each of the nine dimensions, of the nine dimensions is of equal ‘‘normalization’’ approach to scoring the Achievement Points (0–10 points) and weight, so that the normalized HCAHPS Patient- and Caregiver-Centered Improvement Points (0–9 points) are Base Score would range from 0 to 80 Experience of Care/Care Coordination calculated, the larger of which is points. HCAHPS Consistency Points are domain (which we are proposing, in summed across the nine dimensions to then calculated and range from 0 to 20 section IV.H.3.b. of the preamble of this create a prenormalized HCAHPS Base points. The Consistency Points now proposed rule, to rename the Person and Score (0–90 points). The prenormalized consider scores across all nine of the Community Engagement domain HCAHPS Base Score is then multiplied Person and Community Engagement beginning with the FY 2019 program by 8/9 (0.88888) and rounded according dimensions. The final element of the year). The nine dimensions of the to standard rules (values of 0.5 and scoring formula is the sum of the HCAHPS measure, one of which is the higher are rounded up, values below 0.5 HCAHPS Base Score and the HCAHPS CTM–3 measure, are calculated to are rounded down) to create the Consistency Points and will range from generate the HCAHPS Base Score. For normalized HCAHPS Base Score. Each 0 to 100 points.

PROPOSED PERFORMANCE STANDARDS FOR THE FY 2019 PROGRAM YEAR PROPOSED PERSON AND COMMUNITY ENGAGEMENT DOMAIN *

Achievement HCAHPS survey dimension Floor threshold Benchmark (percent) (percent) (percent)

Communication with Nurses ...... 16.32 78.59 86.81 Communication with Doctors ...... 22.56 80.33 88.55 Responsiveness of Hospital Staff ...... 21.91 65.00 80.27 Pain Management ...... 16.02 70.04 78.60 Communication about Medicines ...... 6.19 63.18 73.51 Hospital Cleanliness & Quietness ...... 13.78 65.64 79.12 Discharge Information ...... 60.58 86.88 91.73 3-Item Care Transition ...... 4.26 51.35 62.73 Overall Rating of Hospital ...... 30.52 70.58 84.68 * We are proposing, in section IV.H.3.b. of the preamble of this proposed rule, to change the name of this domain from Patient- and Caregiver- Centered Experience of Care/Care Coordination domain to Person and Community Engagement domain beginning with the FY 2019 program year.

We are inviting public comments on baseline and performance periods of IPPS/LTCH PPS final rule (79 FR these proposed performance standards. sufficient length for performance 50077), we adopted performance c. Previously Adopted Performance scoring purposes. In the FY 2015 IPPS/ standards for the MORT–30–AMI, Standards for Certain Measures for the LTCH PPS final rule (79 FR 50062 MORT–30–HF, MORT–30–PN, and FY 2020 Program Year through 50065), we adopted the PSI 90 THA/TKA for the FY 2020 program measure in the Safety domain and the year. In the FY 2016 IPPS/LTCH PPS As discussed above, we have adopted THA/TKA measure in the Clinical Care final rule (80 FR 49566), we also certain Safety and Clinical Care domain domain for the FY 2019 program year adopted performance standards for the measures for future program years in and subsequent years. In the FY 2015 PSI–90 measure. order to ensure that we can adopt

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PREVIOUSLY ADOPTED PERFORMANCE STANDARDS FOR CERTAIN CLINICAL CARE DOMAIN AND SAFETY DOMAIN MEASURES FOR THE FY 2020 PROGRAM YEAR

Achievement Measure ID Description threshold Benchmark

Safety Domain

PSI 90 * ...... Patient Safety for Selected Indicators (Composite Measure) ...... 0.778761 0.545903

Clinical Care Domain

MORT–30–AMI ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 0.853715 0.875869 Following Acute Myocardial Infarction (AMI) Hospitalization. MORT–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 0.881090 0.906068 Following Heart Failure (HF) Hospitalization. MORT–30–PN ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 0.882266 0.909532 Following Pneumonia Hospitalization. THA/TKA * ...... Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 0.032229 0.023178 Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). * Lower values represent better performance.

d. Previously Adopted and Newly performance standards for the FY 2021 Payment and HF Payment, beginning Proposed Performance Standards for program year for the Clinical Care with the FY 2021 program year. The Certain Measures for the FY 2021 domain measures (THA/TKA, MORT– previously adopted and proposed Program Year 30–HF, MORT–30–AMI, MORT–30–PN, performance standards for these In the FY 2016 IPPS/LTCH PPS final and MORT–30–COPD). We are measures are set out below. rule (80 FR 49567), we adopted proposing to add two measures, AMI

PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2021 PROGRAM YEAR

Measure ID Description Achievement threshold Benchmark

Clinical Care Measures

MORT–30–AMI ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.860355 ...... 0.879714. tality Rate (RSMR) Following Acute Myocardial In- farction (AMI) Hospitalization. MORT–30–HF ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.883803 ...... 0.906144. tality Rate (RSMR) Following Heart Failure (HF) Hospitalization. MORT–30–PN ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.886443 ...... 0.910670. tality Rate (RSMR) Following Pneumonia Hos- pitalization. MORT–30–COPD ± ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.923253 ...... 0.938664. tality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. THA/TKA * ± ...... Hospital-Level Risk-Standardized Complication Rate 0.030890 ...... 0.022304. (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).

Efficiency and Cost Reduction Measures

AMI Payment *# ...... Hospital-Level, Risk-Standardized Payment Associ- Median Hospital-Level, Mean of the lowest decile ated with a 30-Day Episode-of-Care for Acute Myo- Risk-Standardized Pay- Hospital-Level, Risk- cardial Infarction (AMI). ment Associated with a Standardized Payment 30-Day Episode-of-Care Associated with a 30- across all hospitals dur- Day Episode-of-Care ing the performance pe- across all hospitals dur- riod. ing the performance period. HF Payment *# ...... Hospital-Level, Risk-Standardized Payment Associ- Median Hospital-Level, Mean of the lowest decile ated with a 30-Day Episode-of-Care for Heart Fail- Risk-Standardized Pay- Hospital-Level, Risk- ure (HF). ment Associated with a Standardized Payment 30-Day Episode-of-Care Associated with a 30- across all hospitals dur- Day Episode-of-Care ing the performance pe- across all hospitals dur- riod. ing the performance period. ± Previously adopted performance standards.

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* Lower values represent better performance. # Proposed to be scored the same as the MSPB measure.

e. Proposed Performance Standards for program year for the Clinical Care Certain Measures for the FY 2022 domain measures (THA/TKA, MORT– Program Year 30–AMI, MORT–30–HF, MORT–30–PN, We are proposing the following MORT–30–COPD), and the newly performance standards for the FY 2022 proposed MORT–30–CABG:

PROPOSED PERFORMANCE STANDARDS FOR THE FY 2022 PROGRAM YEAR

Measure ID Description Achievement threshold Benchmark

Clinical Care Measures

MORT–30–AMI ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.861793 ...... 0. 881305. tality Rate Following (RSMR) Acute Myocardial In- farction (AMI) Hospitalization. MORT–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.879869 ...... 0.903608. tality Rate (RSMR) Following Heart Failure (HF) Hospitalization. MORT–30–PN (updated co- Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.836122 ...... 0.870506. hort). tality Rate (RSMR) Following Pneumonia Hos- pitalization. MORT–30–COPD ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.920058 ...... 0.936962. tality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization. THA/TKA * ...... Hospital-Level Risk-Standardized Complication Rate 0.029599 ...... 0.021439. (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). MORT–30–CABG ...... Hospital 30-Day, All-Cause, Risk-Standardized Mor- 0.979000 ...... 0.968210. tality Rate (RSMR) Following Coronary Artery By- pass Graft (CABG) Surgery.

Efficiency and Cost Reduction Measures

AMI Payment * # ...... Hospital-Level, Risk-Standardized Payment Associ- Median Hospital-Level, Mean of the lowest decile ated with a 30-Day Episode-of-Care for Acute Myo- Risk-Standardized Pay- Hospital-Level, Risk- cardial Infarction (AMI). ment Associated with a Standardized Payment 30-Day Episode-of-Care Associated with a 30- across all hospitals dur- Day Episode-of-Care ing the performance pe- across all hospitals dur- riod.. ing the performance period HF Payment * # ...... Hospital-Level, Risk-Standardized Payment Associ- Median Hospital-Level, Mean of the lowest decile ated with a 30-Day Episode-of-Care for Heart Fail- Risk-Standardized Pay- Hospital-Level, Risk- ure (HF). ment Associated with a Standardized Payment 30-Day Episode-of-Care Associated with a 30- across all hospitals dur- Day Episode-of-Care ing the performance pe- across all hospitals dur- riod. ing the performance period. * Lower values represent better performance. # Proposed to be scored the same as the MSPB measure.

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9. FY 2019 Program Year Scoring section IV.H.3.b. of the preamble of this 2. Statutory Basis for the HAC Methodology proposed rule, to rename the Person and Reduction Program a. Domain Weighting for the FY 2019 Community Engagement domain beginning with the FY 2019 program We refer readers to section V.I.2. of Program Year for Hospitals That Receive the FY 2014 IPPS/LTCH PPS final rule a Score on All Domains year) score. • Hospitals must meet the (78 FR 50708 through 50709) for a In the FY 2016 IPPS/LTCH PPS final requirements to receive a MSPB detailed discussion of the statutory basis rule (80 FR 49568 through 49570), we measure score in order to receive an of the HAC Reduction Program. adopted equal weight of 25 percent for Efficiency and Cost Reduction domain 3. Overview of Previous HAC Reduction each of the four domains in the FY 2018 score. Hospitals must report a minimum Program Rulemaking program year for hospitals that receive number of 25 cases for the MSPB a score in all domains. For the FY 2019 measure (77 FR 53609 through 53610) For a further description of our program year, we are not proposing to and the AMI Payment and HF Payment policies for the HAC Reduction remove any measures nor are we measures. Program, we refer readers to the FY • proposing to adopt any new measures. Hospitals must receive a minimum 2014 IPPS/LTCH PPS final rule (78 FR We also are not proposing any changes of two measure scores within the 50707 through 50729), the FY 2015 to the domain weighting for hospitals Clinical Care domain. Hospitals must IPPS/LTCH PPS final rule (79 FR 50087 receiving a score on all domains. report a minimum number of 25 cases through 50104) and the FY 2016 IPPS/ for each of the mortality measures (77 LTCH PPS final rule (80 FR 49570 DOMAIN WEIGHTS FOR THE FY 2019 FR 53609 through 53610) and the THA/ through 49581). These policies describe PROGRAM YEAR FOR HOSPITALS TKA measure. • the general framework for RECEIVING A SCORE ON ALL DO- Hospitals must receive a minimum implementation of the HAC Reduction MAINS of three measure scores within the Program, including: (a) The relevant Safety domain. definitions applicable to the program; Weight ++ Hospitals must report a minimum (b) the payment adjustment under the Domain (percent) of three cases for any underlying program; (c) the measure selection and indicator for the PSI 90 measure based conditions for the program, including a Safety ...... 25 on AHRQ’s measure methodology (77 Clinical Care ...... 25 risk-adjustment and scoring Efficiency and Cost Reduction ... 25 FR 53608 through 53609). methodology; (d) performance scoring; ++ Hospitals must report a minimum Person and Community Engage- (e) the process for making hospital- of one predicted infection for NHSN- ment * ...... 25 specific performance information based surveillance measures based on available to the public, including the * We are proposing, in section IV.H.3.b. of CDC’s minimum case criteria (77 FR the preamble of this proposed rule, to change opportunity for a hospital to review the 53608 through 53609). the name of this domain from Patient- and information and submit corrections; and Caregiver-Centered Experience of Care/Care ++ Hospitals must report a minimum Coordination domain to Person and Commu- of 10 cases for the PC–01 measure (76 (f) limitation of administrative and nity Engagement domain beginning with the FR 26530). judicial review. FY 2019 program year. We are not proposing any changes to We also have codified certain b. Domain Weighting for the FY 2019 the minimum numbers of domain requirements of the HAC Reduction Program Year and Future Years for scores, cases, and measures outlined Program at 42 CFR 412.170 through Hospitals Receiving Scores on Fewer above. We continue to believe that these 412.172. Than Four Domains requirements appropriately balance our desire to enable as many hospitals as 4. Implementation of the HAC For the FY 2017 program year and Reduction Program for FY 2017 subsequent years, we adopted a policy possible to participate in the Hospital that hospitals must receive domain VBP Program and the need for TPSs to In the FY 2014 IPPS/LTCH PPS final scores on at least three of four quality be sufficiently reliable to provide rule (78 FR 50717), we finalized the domains in order to receive a TPS, and meaningful distinctions between following measures for use in the FY hospitals with sufficient data on only hospitals’ performance on quality 2017 Program: PSI 90 measure for three domains will have their TPSs measures. We are inviting public Domain 1 and the CDC NHSN measures proportionately reweighted (79 FR comment on these proposals. CLABSI, CAUTI, Colon and Abdominal 50084 through 50085). I. Proposed Changes to the Hospital- Hysterectomy SSI, MRSA Bacteremia, Under these policies, in order to Acquired Condition (HAC) Reduction and CDI for Domain 2. We are not receive a TPS for the FY 2019 program Program proposing any changes to this measure year and future years: set for FY 2017. We also are not • Hospitals must report a minimum 1. Background proposing to make any changes to the number of 100 completed HCAHPS We refer readers to section V.I.1.a. of measures that were finalized for use in surveys for a hospital to receive a the FY 2014 IPPS/LTCH PPS final rule the FY 2016 program (CAUTI, CLABSI, Patient- and Caregiver-Centered (78 FR 50707 through 50708) for a and Colon and Abdominal Experience of Care/Care Coordination general overview of the HAC Reduction Hysterectomy SSI) or the FY 2017 domain (which we are proposing, in Program. program (MRSA Bacteremia and CDI).

HAC REDUCTION PROGRAM MEASURES FOR FY 2017

Short name Measure name NQF No.

Domain 1

PSI 90 ...... Patient Safety for Selected Indicators (Composite Measure) ...... 0531

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HAC REDUCTION PROGRAM MEASURES FOR FY 2017—Continued

Short name Measure name NQF No.

Domain 2

CAUTI ...... National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract In- 0138 fection (CAUTI) Outcome Measure. CDI ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset 1717 Clostridium difficile Infection (CDI) Outcome Measure. CLABSI ...... National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream 0139 Infection (CLABSI) Outcome Measure. Colon and Abdominal Hysterectomy SSI American College of Surgeons—Centers for Disease Control and Prevention 0753 (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Out- come Measure. MRSA Bacteremia ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset 1716 Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Meas- ure.

In the FY 2014 IPPS/LTCH PPS final and (2) a proposal for NHSN CDC HAI a score on the PSI 90 measure, and that rule (78 FR 50717), we finalized and data submission requirements for newly the resulting score may not be reflective codified at 42 CFR 412.170 a 2-year opened hospitals. Each policy is of the hospital’s clinical performance. period during which we collect data described in more detail below. While the PSI 90 measure continues to used to calculate the Total HAC Score. play a vital role in patient safety and is a. Clarification of Complete Data In the FY 2016 IPPS/LTCH PPS final an integral part of the HAC Reduction Requirements for Domain 1 rule (80 FR 49574), we finalized the 2- Program, we believe that reliable data is year time periods for the calculation of In the FY 2014 IPPS/LTCH PPS final a critical component of accurately HAC Reduction Program measure rule (78 FR 50722) we finalized our plan assessing hospital performance. results for FY 2017. For the Domain 1 to use the PSI 90 measure for Domain To address this concern, we are measure (PSI 90 measure), we will use 1. Because hospitals may not have proposing to clarify the term ‘‘complete the 24-month period from July 1, 2013 complete data for every AHRQ indicator data’’ for the PSI 90 measure within through June 30, 2015. The claims for in the PSI 90 measure, we decided to Domain 1 to require that hospitals have all Medicare FFS beneficiaries use the same methodology used for the three or more eligible discharges for at discharged during this period would be Hospital VBP Program to determine the least one component indicator and 12 included in the calculations of measure minimum number of indicators with months or more of data to receive a results for FY 2017. For the CDC NHSN complete data to be included in the Domain 1 score. Under this proposal, measures previously finalized for use in calculation of the Domain 1 measure. In hospitals with less than 12 months of the FY 2017 HAC Reduction Program addition, we finalized the following PSI 90 data would not receive a Domain (CLABSI, CAUTI, Colon and Abdominal rules to determine the number of AHRQ 1 score, regardless of the number of Hysterectomy SSI, MRSA Bacteremia, indicators to be included in the eligible discharges at the hospital. If a and CDI), we will use data from CYs calculation for a hospital’s Domain 1 hospital has 12 months or more of PSI 2014 and 2015. score. For Domain 1, we defined 90 data, the hospital would have to have We also note that we anticipate we ‘‘complete data’’ as whether a hospital three or more eligible discharges for at will be able to provide hospitals with has enough eligible discharges to least one component indicator to receive their confidential hospital-specific calculate a rate for a measure. In order a Domain 1 score. We believe this is the reports and discharge level information to have complete data for the PSI 90 most favorable method for scoring used in the calculation of their FY 2017 measure, a hospital must have three or measure results for hospitals. Total HAC Score in late summer 2016 more eligible discharges for at least one We believe, after weighing the via the QualityNet Secure Portal.54 In component indicator. considerations, that this additional order to access their hospital-specific In establishing the performance policy should be incorporated into the HAC Reduction Program for FY 2017 reports, hospitals must register for a period for the PSI 90 measure, we relied and subsequent years, primarily because QualityNet Secure Portal account. We upon an analysis by Mathematica Policy this approach greatly improves the did not make any changes to the review Research, a CMS contractor, which measure’s assessment of quality and, and correction policies for FY 2016. found the measure was most reliable therefore, its implementation should not Hospitals have a period of 30 days after with a 24-month performance period. be unnecessarily delayed. This the information is posted to the This analysis also indicated the measure clarification would be a change to the QualityNet Secure Portal to review and was unreliable with a performance 55 Domain 1 criteria and would not change submit corrections for the calculation of period of less than 12 months. We our current scoring policy for Domain 2. their HAC Reduction Program measure have since determined that the current As previously finalized in the FY 2014 scores, domain scores, and Total HAC definition for ‘‘complete data’’ may IPPS/LTCH PPS final rule (78 FR 50722 Score for the fiscal year. result in facilities with less than 12 through 50723), if a hospital does not For FY 2017, we are proposing months of data being eligible to receive have enough data to calculate the PSI 90 updates to the following HAC Reduction 55 measure score for Domain 1 but has Program policies: (1) A proposal to Mathematica Policy Research (November 2011). Reporting period and reliability of AHRQ, CMS 30- ‘‘complete data’’ for at least one measure clarify data requirements for Domain 1; day and HAC Quality Measures—Revised. in Domain 2, its Total HAC Score will Available at: https://www.cms.gov/Medicare/ 54 Available at: https://www.qualitynet.org/dcs/ Quality-Initiatives-Patient-Assessment-Instruments/ depend entirely on its Domain 2 score. ContentServer?c=Page&pagename=QnetPublic% hospital-value-based-purchasing/Downloads/ Similarly, if a hospital has ‘‘complete 2FPage%2FQnetBasic&cid=1228773343598. HVBP_Measure_Reliability-.pdf. data’’ to calculate the PSI 90 measure

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score in Domain 1 but none of the that these requirements do not affect Composite; (2) defining the applicable measures in Domain 2, its Total HAC any requirements for facilities in States time periods for the FY 2018 HAC Score will be based entirely on its that are required by law to report HAI Reduction Program and the FY 2019 Domain 1 score. If a hospital does not data to NHSN. HAC Reduction Program; (3) changes to have ‘‘complete data’’ to calculate the • If a hospital files a notice of the scoring methodology; and (4) a PSI 90 measure score for Domain 1 or participation (NOP) with the Hospital request for comments on additional any of the measures in Domain 2, we IQR Program within 6 months of measures for potential future adoption. will not calculate a Total HAC Score for opening, the hospital would be required a. Proposed Adoption of Modified PSI this hospital. We refer readers to the FY to begin submitting data for the CDC 90: Patient Safety and Adverse Events 2014 IPPS/LTCH PPS final rule (78 FR NHSN HAI measures no later than the Composite (NQF #0531) 50722 through 50723) for a detailed first day of the quarter following the discussion of Domain 2 scoring. NOP. (1) Background • We are inviting public comments on If a hospital does not file a NOP We are proposing to adopt our proposal to require that hospitals with the Hospital IQR Program within 6 refinements to the Agency for have three or more eligible discharges months of opening, the hospital would Healthcare Research and Quality for at least one component indicator and be required to begin submitting data for (AHRQ) Patient Safety and Adverse 12 months or more of data to receive a the CDC NHSN HAI measures on the Events Composite (NQF #0531) for the Domain 1 score beginning in the FY first day of the quarter following the end HAC Reduction Program beginning with 2017 HAC Reduction Program. of the 6-month period to file the NOP. the FY 2018 payment determination and For example, if a subsection (d) b. Clarification of NHSN CDC HAI Data subsequent years. In summary, the PSI hospital opens on January 1 and it 90 measure was refined to reflect the Submission Requirements for Newly intends to participate in the Hospital Opened Hospitals relative importance and harm associated IQR Program, the hospital would be with each component indicator to We have encountered issues with required to file a Hospital IQR Program provide a more reliable and valid signal some newly opened hospitals that do NOP no later than July 1, and begin of patient safety events. We believe not appear to understand that they must submitting data to NHSN no later than refining PSI 90 will provide strong submit CDC NHSN HAI data for the October 1. If a subsection (d) hospital incentives for hospitals to ensure that HAC Reduction Program, even when opens on January 1 and it does not patients are not harmed by the medical they may not be required to report intend to participate in the Hospital IQR care they receive, a critical under the Hospital IQR Program. As set Program (that is, no NOP is filed), it consideration in quality improvement. forth in the FY 2015 IPPS/LTCH PPS must begin submitting data to NHSN no In the FY 2014 IPPS/LTCH PPS final final rule (79 FR 50098), a hospital that later than July 1 of that year. We believe rule (78 FR 50712 through 50717), we does not have an ICU waiver or other that these data submission requirements adopted the PSI 90 measure (NQF waiver for the CDC NHSN HAI measures are clear, align with the Hospital IQR #0531) in the HAC Reduction Program and does not submit data will receive Program, and are fair and equitable for as an important measure of patient the maximum of 10 points for that all newly opened hospitals. Hospitals safety and adverse events. As previously measure. We noted in the FY 2014 IPPS/ that are not required to submit data adopted, PSI 90 consisted of eight LTCH PPS final rule (78 FR 50723) that, within the respective HAC Reduction component indicators: (1) PSI 3 Pressure for Domain 2, we will obtain measure Program year will not receive a score. Ulcer Rate; (2) PSI 6 Iatrogenic results that hospitals submitted to the These hospitals will receive a Pneumothorax Rate; (3) PSI 7 Central CDC NHSN from the Hospital IQR designation of ‘‘NEW,’’ and will not Venous Catheter-Related Blood Stream Program.56 However, we note that receive any points for CDC NHSN HAI Infections Rate; (4) PSI 8 Postoperative participation in the Hospital IQR measures. Hip Fracture Rate; (5) PSI 12 Program is voluntary, while We further note that this clarification Perioperative Pulmonary Embolism/ participation in the HAC Reduction does not affect the narrative rules used Deep Vein Thrombosis Rate; (6) PSI 13 Program is mandatory for almost all in calculation of the Domain 2 Score. Postoperative Sepsis Rate; (7) PSI 14 IPPS hospitals (we refer readers to We will continue to follow all Domain Postoperative Wound Dehiscence Rate; section 1886(d)(1)(B) of the Act; 42 CFR 2 scoring procedures as previously and (8) PSI 15 Accidental Puncture and 412.170 (definition of the term finalized, and we refer readers to the FY 57 ‘‘applicable hospital’’); and 42 CFR Laceration Rate. 2016 IPPS/LTCH PPS final rule (80 FR The currently adopted eight-indicator 412.172(e)). The HAC Reduction 49575) for further discussion of the version of the measure underwent Program does not apply to hospitals and narrative rules used in calculation of the extended NQF maintenance hospital units that are excluded from Domain 2 Score. We believe that this reendorsement in the 2014 NQF Patient the IPPS, such as LTCHs, cancer proposal should be incorporated into Safety Committee due to concerns with hospitals, children’s hospitals, IRFs, the HAC Reduction Program for FY the underlying component indicators IPFs, CAHs, and Puerto Rico hospitals 2017 and subsequent years. and their composite weights. In the (79 FR 50087 through 50088). We are inviting public comments on We believe that it is important to NQF-Endorsed Measures for Patient our proposal to adopt these policies Safety, Final Report,58 the NQF Patient establish data submission requirements related to the data submission for all applicable hospitals under the Safety Committee deferred its final requirements beginning in the FY 2017 decision for the PSI 90 measure until HAC Reduction Program. We are HAC Reduction Program. proposing the following requirements 57 for newly opened hospitals for CDC 5. Implementation of the HAC NQF-Endorsed Measures for Patient Safety, Reduction Program for FY 2018 Final Report. Available at: http://www.quality NHSN HAI data submissions. We note forum.org/Publications/2015/01/NQF-Endorsed_ For FY 2018, we are proposing the Measures_for_Patient_Safety_Final_Report.aspx. 56 For a further discussion of CDC NHSN HAI following HAC Reduction Program 58 NQF-Endorsed Measures for Patient Safety, Data submission requirements for the Hospital IQR Final Report available at: http:// Program, we refer readers to the FY 2013 IPPS/ policies: (1) Adoption of the modified www.qualityforum.org/Publications/2015/01/NQF- LTCH PPS final rule (77 FR 53536) and 42 CFR version of the NQF-endorsed PSI 90: Endorsed_Measures_for_Patient_Safety,_Final_ 412.140(a)(3)(i) and 412.140(b). Patient Safety and Adverse Events Report.aspx.

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the following measure evaluation cycle. to this updated version of the measure. Safety Report,64 the modified PSI 90 In the meantime, AHRQ worked to PSIs were better linked to important also respecified two component address many of the NQF stakeholders’ changes in clinical status with ‘harm indicators, PSI 12 and PSI 15. concerns about PSI 90, which weights’ that are based on diagnoses Specifically, for PSI 12 Perioperative PE subsequently completed NQF that were assigned after the or DVT rate, the NQF received public maintenance re-review and received complication. This is intended to allow comments concerning the inclusion of: reendorsement on December 10, 2015. the measure to more accurately reflect (1) Extracorporeal membrane The PSI 90 measure’s extended NQF the impact of the events.’’ 61 The oxygenation (ECMO) procedures in the reendorsement led to several changes to measure received support for inclusion denominator; and (2) intra-hospital the measure.59 First, the name of the PSI in the HAC Reduction Program as variability in the documentation of calf 90 measure has changed to ‘‘Patient referenced in the MAP Final vein thromboses (which have uncertain Safety and Adverse Events Composite’’ Recommendations Report.62 clinical significance). As such, the (NQF #0531) (herein referred to as the (2) Overview of the Measure Changes revised PSI 12 component indicator no ‘‘modified PSI 90’’). Second, the longer includes ECMO procedures in modified PSI 90 measure includes the First, the name of the PSI 90 measure the denominator or isolated deep vein has changed from the ‘‘Patient Safety for addition of three indicators: (1) PSI 09 thrombosis of the calf veins in the Selected Indicators Composite Measure’’ Perioperative Hemorrhage or Hematoma numerator. PSI 15 was also respecified to the ‘‘Patient Safety and Adverse Rate; (2) PSI 10 Physiologic and further to focus on the most serious Events Composite’’ (NQF #0531) to Metabolic Derangement Rate; and (3) intraoperative injuries—those that were more accurately capture the indicators PSI 11 Postoperative Respiratory Failure unrecognized until they required a Rate. Third, PSI 12 Perioperative included in the measure. Second, the PSI 90 measure has subsequent reparative procedure. The Pulmonary Embolism (PE) or Deep Vein modified denominator of PSI 15 now is Thrombosis (DVT) Rate and PSI 15 expanded from 8 to 10 component indicators. The modified PSI 90 is a limited to discharges with an Accidental Puncture or Laceration Rate abdominal/pelvic operation, rather than have been respecified in the modified weighted average of the following 10 risk-adjusted and reliability-adjusted including all medical and surgical PSI 90. Fourth, PSI 07 Central Venous discharges. In addition, to identify Catheter-Related Blood Stream Infection individual component PSI rates: • PSI 03 Pressure Ulcer Rate; events that are more likely to be Rate has been removed in the modified • PSI 06 Iatrogenic Pneumothorax clinically significant and preventable, PSI 90. Fifth, the weighting of Rate; the PSI 15 numerator was modified to component indicators in the modified • PSI 08 Postoperative Hip Fracture require both: (1) A diagnosis of an PSI 90 is based not only on the volume Rate; accidental puncture and/or laceration; of each of the patient safety and adverse • PSI 09 Postoperative Hemorrhage or and (2) an abdominal/pelvic reoperation events, but also the harms associated Hematoma Rate;* one or more days after the index • with the events. PSI 10 Physiologic and Metabolic surgery. We consider these changes to the Derangement Rate;* modified PSI 90 to be substantive • PSI 11 Postoperative Respiratory Finally, the NQF Patient Safety changes to the measure. Therefore, we Failure Rate;* Review Committee raised concerns are proposing to adopt the modified PSI • PSI 12 Perioperative Pulmonary about the weighting scheme of the 90 for the HAC Reduction Program Embolism (PE) or Deep Vein component indicators. In prior versions beginning with the FY 2018 payment Thrombosis (DVT) Rate; of the measure, the weights of each determination and subsequent years. We • PSI 13 Postoperative Sepsis Rate, component PSI were based solely on explain the modified PSI 90 more fully • PSI 14 Postoperative Wound volume (numerator rates). In the below, and also refer readers to the Dehiscence Rate; and modified PSI 90, the rates of each measure description on the NQF Web • PSI 15 Accidental Puncture or component PSI are weighted based on site at: https://www.qualityforum.org/ Laceration Rate.63 statistical and empirical analyses of QPS/MeasureDetails.aspx? (* Denotes new component for the volume, excess clinical harm associated standardID=321&print= modified PSI 90 measure.) with the PSI, and disutility (individual 0&entityTypeID=3. As stated above, the modified PSI 90 preference for a health state linked to a We note that the proposed modified measure also removed PSI 07, Central harm, such as death or disability). The PSI 90 (MUC15–604) was included on a Venous Catheter-Related Blood Stream final weight for each component publicly available document entitled Infection Rate, because of potential indicator is the product of harm weights ‘‘2015 Measures Under Consideration overlap with the CLABSI measure (NQF and volume weights (numerator for December 1, 2015’’ 60 in compliance #0139) which has been included in the weights). Harm weights are calculated with section 1890A(a)(2) of the Act, and Hospital IQR Program since the FY 2011 by multiplying empirical estimates of IPPS/LTCH PPS final rule (75 FR 50201 was reviewed by the MAP. The MAP excess harms associated with the patient through 50202), the HAC Reduction supported this measure, stating that safety event by utility weights linked to Program since the FY 2014 IPPS/LTCH ‘‘the PSI measures were developed to each of the harms. Excess harms are PPS final rule (78 FR 50717), and the identify harmful healthcare related estimated using statistical models Hospital VBP Program since the FY events that are potentially preventable. comparing patients with a safety event Three additional PSIs have been added 2013 IPPS/LTCH PPS final rule (77 FR 53597 through 53598). to those without a safety event in a In response to stakeholder concerns, Medicare FFS sample. Volume weights 59 National Quality Forum QPS Measure highlighted in the NQF 2014 Patient are calculated based on the number of Description for ‘‘Patient Safety for Selected safety events for the component Indicators (modified version of PSI90) (Composite measure)’’ found at: https://www.qualityforum.org/ 61 MAP Final Recommendations available at: QPS/MeasureDetails.aspx?standardID=321&print= http://www.qualityforum.org/Publications/2016/02/ 64 NQF Endorsed Measures for Patient Safety, 0&entityTypeID=3. MAP_2016_Considerations_for_Implementing_ Final Report. Available at: http:// 60 2015 Measures Under Consideration List Measures_in_Federal_Programs_-_Hospitals.aspx. www.qualityforum.org/Publications/2015/01/NQF- available at: http://www.qualityforum.org/ 62 Ibid. Endorsed_Measures_for_Patient_Safety,_Final_ ProjectMaterials.aspx?projectID=75367. 63 http://www.qualityforum.org/QPS/0531. Report.aspx.

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indicators in an all-payer reference b. Applicable Time Periods for the FY adjusted ICD–10 version of the PSI 90 population. 2018 HAC Reduction Program and the Patient Safety and Adverse Events For more information on the modified FY 2019 HAC Reduction Program Composite software is not expected to PSI 90 measure and component Section 1886(p)(4) of the Act gives the be available until late CY 2017. Secretary the statutory authority to To address these issues, for the indicators, we refer readers to the current Domain 1 measure (PSI 90 Quality Indicator Empirical Methods determine the applicable period for the HAC Reduction Program. In the FY 2014 Patient Safety and Adverse Events available online at: Composite), we are proposing to use the www.qualityindicators.ahrq.gov. IPPS/LTCH PPS final rule (78 FR 50717), we finalized and codified at 42 15-month performance period from July (3) Risk Adjustment CFR 412.170 that we would use a 2-year 1, 2014 through September 30, 2015, for time period of performance data to the FY 2018 HAC Reduction Program. The risk adjustment and statistical calculate the Total HAC Score. We This 15-month performance period modeling approaches of the models believe the 24-month performance would utilize only ICD–9–CM data and remain unchanged in the modified PSI period provides hospitals and the public only apply to the FY 2018 payment 90. In summary, the predicted value for with the most current data available, year. The claims for all Medicare FFS each case is computed using a modeling while allowing sufficient time to beneficiaries discharged during this approach that includes, but is not complete the complex calculation period would be included in the limited to, applying a Generalized process for these measures. The 24- calculations of measure results for FY Estimating Equation (GEE) hierarchical month performance period was chosen 2018. For the FY 2019 HAC Reduction model (logistic regression with hospital because it tended to show that between Program, we are proposing to use the 21-month performance period from random effect) and covariates for 50 to 90 percent of hospitals attained a October 1, 2015 through September 30, gender, age, Modified MS–DRG moderate or high level of reliability for AHRQ measures (78 FR 50717). 2017. This 21-month performance (MDRG), Major Diagnostic Category, period would utilize only ICD–10 data transfer in, point of origin not available, Although we believe the 24-month time is the preferred length of time for and only apply to the FY 2019 payment procedure days not available, and year. The claims for all Medicare FFS AHRQ comorbidity (COMORB). performance data, there may be situations, discussed in more detail beneficiaries discharged during this The expected rate for each of the below, where the collection of 24 period would be included in the calculations of measure results for FY indicators is computed as the sum of the months of data is not operationally 2019. predicted value for each case divided by feasible. Prior to deciding to propose the number of cases for the unit of Therefore, we are proposing, abbreviated data collection periods for analysis of interest (that is, hospital). beginning in FY 2017 and for the FY 2018 and the FY 2019 payment The risk-adjusted rate for each of the subsequent years, to permit flexibility to determinations, we took several factors indicators is computed using indirect use a period other the 2 years from into consideration. These included the standardization as the observed rate which data are collected in order to recommendations of the measure calculate the Total HAC Score under the divided by the expected rate, multiplied steward, the feasibility of using a HAC Reduction Program. We also are by the reference population rate. For combination of ICD–9 and ICD–10 data, proposing to change the definition of more details about risk adjustment, we minimizing provider burden, program refer readers to: http://www.quality ‘‘applicable period,’’ in 42 CFR 412.170, implementation timelines, and the indicators.ahrq.gov/Downloads/ to reflect this proposed change. reliability of using shortened data Since the ICD–10 transition was Resources/Publications/2015/ collection periods, as well as the implemented on October 1, 2015, we Empirical_Methods_2015.pdf. importance of continuing to publicly have been monitoring our systems and report this measure. We believe that (4) Adoption of the NQF-Endorsed so far claims are processing normally. using a 15-month data collection period Version of the Modified PSI 90 The measure steward, AHRQ, has been for FY 2018 and a 21-month data reviewing the measure for any potential In summary, the PSI 90 measure was collection period for FY 2019 best serve issues related to the conversion of the need to provide important revised to reflect the relative importance approximately 70,000 ICD–10 coded and harm associated with each 65 information on hospital patient safety operating room procedures (https:// and adverse events by allowing component indicator to provide a more www.cms.gov/icd10manual/fullcode_ reliable and valid signal of patient safety sufficient time to process the claims cms/P1616.html), which could directly data and calculate the measures, while events. We believe that adopting the affect the modified PSI 90 component modified PSI 90 would continue to minimizing reporting burden and indicators. In addition, to meet program program disruption. provide strong incentives for hospitals requirements and implementation Because this issue only impacts the to ensure that patients are not harmed schedules, our system would require an PSI 90 Patient Safety and Adverse by the medical care they receive, which ICD–10 risk-adjusted version of the Events Composite in Domain 1, for the is a critical consideration in quality AHRQ QI PSI software 66 by December CDC NHSN measures previously improvement. We are proposing to 2016 for the FY 2018 payment finalized for use in the FY 2017 HAC adopt the modified PSI 90 for the HAC determination year. At this time, a risk- Reduction Program (CLABSI, CAUTI, Reduction Program for FY 2018 and Colon and Abdominal Hysterectomy subsequent years. We will continue to 65 International Classification of Diseases, (ICD– SSI, MRSA Bacteremia, and CDI), we use the currently adopted eight- 10–CM/PCS) Transition—Background. Available at: http://www.cdc.gov/nchs/icd/icd10cm_pcs_ would use the 24-month performance indicator version of the PSI 90 measure background.htm. period from January 1, 2015 through for the HAC Reduction Program for FY 66 The AHRQ QI Software is the software used to December 31, 2016 (CYs 2015 and 2016) 2017. We are inviting public comment calculate PSIs and the composite measure. More for the FY 2018 HAC Reduction on our proposal to adopt the modified information is available at: http:// www.qualityindicators.ahrq.gov/Downloads/ Program. For the FY 2019 HAC PSI 90 measure (NQF #0531) for the Resources/Publications/2015/Empirical_Methods_ Reduction Program, we are proposing to HAC Reduction Program for FY 2018. 2015.pdf. use the 24-month performance period

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from January 1, 2016 through December To calculate a Total HAC Score for hospitals without Domain 2 scores are 31, 2017 (CYs 2016 and 2017). each hospital, we multiply each domain potentially treated the same as low We believe that using a 15-month score by a weighting and add together performers in the same decile. period and a 21-month performance the weighted domain scores to In addition, scoring using deciles can period for Domain 1 and a 24-month determine the Total HAC Score make it more difficult to distinguish top performance period for Domain 2 (§ 412.172(e)(3)). We use each hospital’s performers from low performers by balance the needs of the HAC Reduction Total HAC Score to determine the top creating a large number of ties on Program and allow sufficient time to quartile of subsection (d) hospitals that measure scores. For example, two process the claims data and calculate are subject to the payment adjustment hospitals with meaningfully different the measures. We will continue to test beginning with discharges on or after measure results may fall into the same ICD–10 data that are submitted in order October 1, 2014. decile bin and therefore be ultimately indistinguishable under the current to ensure the accuracy of measure (2) Program Evaluation Efforts calculations and to monitor and assess scoring methodology. Conversely, two the translation of measure specifications As part of our ongoing efforts to hospitals with performance that is not to ICD–10, potential coding variation, evaluate the HAC Reduction Program, statistically distinguishable may fall and impacts on measure performance we recently conducted a review of our into different decile bins. Furthermore, and payment incentive programs. scoring methodology and assessed ties at the penalty threshold complicate We are inviting public comment on opportunities to strengthen the program. the adjudication of payment the proposals to update the definition of As part of that review, our Hospital adjustments; in both the FY 2015 and ‘‘applicable period’’ codified at 42 CFR Quality Reporting Program Support FY 2016 programs, less than 25 percent 412.170 for FY 2017 and subsequent (HQRPS) contractors convened a of all hospitals had Total HAC Scores years and to use these updated technical expert panel (TEP) on October above the threshold for penalties. performance periods for calculation of 19–20, 2015, with a follow-up call on Specifically, only 21.9 percent of measure results for the FY 2018 and the December 11, 2015. The TEP examined hospitals in FY 2015 and 23.7 percent FY 2019 HAC Reduction Programs. multiple areas of the HAC Reduction of hospitals in FY 2016 were subject to Program and focused on identifying a a payment adjustment. c. Proposed Changes to the HAC scoring methodology that provides an To address stakeholder concerns Reduction Program Scoring incentive to hospitals to reduce HACs regarding the current scoring Methodology and distinguishes top performers from methodology, we evaluated a number of (1) Current Scoring Policy low performers. The TEP identified alternatives and recommendations from concerns with the current decile-based the TEP. We refer readers to the Project In the FY 2014 IPPS/LTCH PPS final scoring methodology that included: Ties Title: Hospital-Acquired Condition rule (78 FR 50721), we finalized a at the penalty threshold; hospitals with (HAC) Reduction Program Scoring scoring methodology that aligns with a limited amount of data being Methodology Reevaluation located at: the achievement scoring methodology identified as poor performers; and https://www.cms.gov/Medicare/Quality- currently used in the Hospital VBP situations in which hospitals with no Initiatives-Patient-Assessment- Program. Our intent was to reduce adverse events and no Domain 2 data Instruments/MMS/ confusion associated with multiple nonetheless become eligible for penalty. TechnicalExpertPanels.html for a scoring methodologies by aligning the During the FY 2016 HAC Reduction summary of the TEP’s discussion. These scoring for the Hospital VBP Program Program, a small subset of hospitals that alternatives included replacement of the and the HAC Reduction Program. We had zero adverse events in Domain 1 current decile-based scoring approach note that alignment benefits the hospital and no Domain 2 score were identified with the use of Winsorized 68 z-scores. stakeholders who have prior experience as part of the worst-performing quartile. with the Hospital VBP Program. These hospitals received Domain 1 (3) Winsorized Z-Score Method Accordingly, we implemented a scores of 7.0, meaning they were in the The Winsorized z-score method (z- methodology for assessing the top 7th decile of hospitals for the PSI 90 score) uses a continuous measure score quartile of applicable hospitals for measure despite being close to the PSI rather than forcing measure results into HACs based on performance standards. 90 measure mean value. As this subset deciles. Z-scores represent a hospital’s We indicated in the FY 2014 IPPS/ of hospitals had no Domain 2 scores, distance from the national mean for a LTCH PPS final rule (78 FR 50720 they received a Total HAC Score equal measure in units of standard deviations. through 50725) that points will be to their Domain 1 score of 7.0. This Under the z-score approach, poor- assigned to hospitals’ performance for Total HAC Score was greater than the performing hospitals earn a positive z- each measure. We finalized a decile- 75th percentile cutoff for penalty score, reflecting measure values above based methodology for assigning points, determination of 6.75. CMS waived the the national mean, and better- depending on the specific measures. penalty for these zero adverse event performing hospitals earn a negative z- • For Domain 1, point assignment is hospitals so they would not be treated score, reflecting measure values below based on a hospital’s score for the PSI as poor performers. These hospitals the national mean. For each measure, a 90 measure. were potentially disadvantaged because • For the Domain 1 score, 1 to 10 their Total HAC Scores were determined decile. Two points would be assigned to the points are assigned to the hospital. solely on their Domain 1 Score. Because remaining seven percent of hospitals that would fall • For the measures in Domain 2, in the second decile. This phenomenon does not Domain 2 scores tend to be lower on affect Domain 1 scores, since the reliability-adjusted point assignment for each measure is 67 average than Domain 1 scores, other PSI 90 measure result is not equal to zero in any based on the SIR for that measure. • hospital. For each SIR, 1 to 10 points are 67 This is because hospitals are assigned the 68 Winsorized measure results are truncated to the assigned to the hospital for each minimum of one point for any measure for which 5th and 95th percentiles, replacing values between measure. they have a measure result of zero. For example, for the minimum and the 5th percentile with the 5th • the CAUTI measure, if 13 percent of hospitals have percentile value and replacing values between the The Domain 2 score consists of the an SIR of zero, one point is assigned to each of these 95th percentile and the maximum with the 95th average of points assigned to each hospitals, even though the decile approach is percentile value. Z-scores are then calculated based measure. intended to assign 10 percent of hospitals to each on these values.

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hospital’s z-score is based on the hospital’s measure value minus the by the standard deviation of the following equation that expresses the average value for that measure, divided measure values across all hospitals:

To form the Total HAC Score, we and no Domain 2 score in either the health for populations, and lower costs would use the z-scores as hospitals’ actual results from FY 2016 or in the for health care. measure scores. In accordance with the results based on the FY 2016 data To the extent practicable, all HAC current scoring methodology, we would supplemented with MRSA Bacteremia Reduction Program measures should be then average the z-scores across and CDI results. nationally endorsed by a multi- measures within Domain 2 and assign Among the 184 hospitals with fewer stakeholder organization. Measures the z-score for PSI 90 for Domain 1 to than 25 beds, the proportion of hospitals should be aligned with best practices determine the domain scores. We would penalized would fall from 33 percent to among other payers and the needs of the then multiply each domain score by the 18 percent. Among the 213 hospitals end users of the measures. Measures appropriate weighting and add together with more than 500 beds, the proportion should take into account widely the weighted domain scores to of hospitals penalized would fall from accepted criteria established in medical determine the Total HAC Score. We 50 percent to 42 percent. The approach literature. We note that all measures would use each hospital’s Total HAC leaves the proportion of teaching, urban, proposed for the HAC Reduction Score to determine the top quartile of and high-DSH hospitals penalized Program should follow the criteria subsection (d) hospitals that are subject largely unchanged, with one exception. established by the DRA of 2005 in that to the payment adjustment. The z-score approach slightly increases they consist of high-volume or high-cost (4) Impact and Implementation the penalization rate among moderately conditions that could be prevented by high (50 to 64 percent) DSH hospitals, the use of evidence-based guidelines. This z-score approach is from 28 percent to 35 percent. Only 172 We welcome public comment and straightforward to implement, easily hospitals fall into this group; therefore, suggestions for additional HAC adapted as measures are added or the increase reflects only 11 additional Reduction Program measures that will removed from the HAC Reduction hospitals in that group being penalized. help achieve the Program goals in these Program, transparent, and familiar to a We believe that differences in or other measurement areas. wide range of stakeholders. Continuous performance scores must reflect true 7. Maintenance of Technical values address the limitations of decile differences in performance. In addition, Specifications for Quality Measures scoring and preserve the magnitude of hospitals must be able to clearly differences among hospitals’ measure understand performance scoring Technical specifications for AHRQ’s results. Thus, hospitals that differ methods and performance expectations PSI–90 measure in Domain 1 can be meaningfully on their measure results to maximize their quality improvement found at AHRQ’s Web site at: http:// will also differ meaningfully on their efforts. Therefore, we are inviting public qualityindicators.ahrq.gov/Modules/ Total HAC Scores. Unlike the decile comments on our proposal to adopt the PSI_TechSpec.aspx. Technical approach, continuous measure scores z-score method for calculating measure specifications for the CDC NHSN HAI would substantially reduce ties of Total results beginning in the FY 2018 HAC measures in Domain 2 can be found at HAC Scores, which have prevented Reduction Program. CDC’s NHSN Web site at: http:// CMS from penalizing exactly 25 percent www.cdc.gov/nhsn/acute-care-hospital/ of hospitals in previous program years. 6. Request for Comments on Additional index.html. Both Web sites provide The use of z-scores also improves Measures for Potential Future Adoption measure updates and other information alignment between Domains 1 and 2 We view the addition of other quality necessary to guide hospitals and creates a more level playing field measures as a critical component of participating in the collection of HAC for hospitals with data in only Domain value-based purchasing, and we are Reduction Program data. 1. seeking public comments on what In the FY 2015 IPPS/LTCH PPS final Based on FY 2016 data supplemented additional measures we should consider rule (79 FR 50100), we described a with MRSA Bacteremia and CDI adopting in the future. We believe that policy under which we use a 69 results, the z-score approach affects our continued efforts to reduce HACs subregulatory process to make the penalty status of slightly more than are vital to improving patients’ quality nonsubstantive updates to measures 200 hospitals, relative to the decile of care and reducing complications and used for the HAC Reduction Program. approach. This approach brings 114 mortality, while simultaneously We are not proposing any changes to hospitals into the penalty zone and 103 decreasing costs. The reduction of HACs this policy at this time. hospitals out of the penalty zone and is an important marker of quality of care 8. Extraordinary Circumstance reduces the HAC Reduction Program’s and has a positive impact on both Exception Policy for the HAC Reduction impact on the largest and smallest patient outcomes and cost of care. Our Program Beginning in FY 2016 and for hospitals. Most importantly, because of goal for the HAC Reduction Program is Subsequent Years the improvements in precision and to heighten the awareness of HACs and standardization gained by implementing reduce the number of incidences that We refer readers to the FY 2016 IPPS/ this approach, there is no penalization occur. We seek to adopt measures for LTCH PPS final rule (80 FR 49579 of hospitals that had zero adverse events the HAC Reduction Program that through 49581) for a detailed discussion promote better, safer, and more efficient of the exception policy for hospitals 69 Results are a based on actual FY 2016 measure located in areas that experience data with the addition of MRSA Bacteremia and care. Our overarching purpose is to CDI data for the reporting period spanning October support the NQS’ three-part aim of disasters or other extraordinary 2012 through December 2014. better health care for individuals, better circumstances for the HAC Reduction

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Program. We are not proposing any to end the implicit incentive for IPPS/LTCH PPS final rule (77 FR 53434 changes to this policy for FY 2017. hospitals to increase the number of FTE through 53448). residents, Congress, through the J. Payment for Graduate Medical 2. Change in New Program Growth From Balanced Budget Act of 1997 (Pub. L. Education (GME) and Indirect Medical 3 Years to 5 Years 105–33), established a limit on the Education (IME) Costs (§§ 412.105, number of allopathic and osteopathic a. Urban and Rural Hospitals 413.75 Through 413.83) residents that a hospital may include in Section 1886(h)(4)(H)(i) of the Act 1. Background its FTE resident count for direct GME requires CMS to establish rules for Section 1886(h) of the Act, as added and IME payment purposes. Under calculating the direct GME caps of by section 9202 of the Consolidated section 1886(h)(4)(F) of the Act, for cost teaching hospitals training residents in Omnibus Budget Reconciliation Act reporting periods beginning on or after new programs established on or after (COBRA) of 1985 (Pub. L. 99–272) and October 1, 1997, a hospital’s January 1, 1995. Under section unweighted FTE count of residents for as currently implemented in the 1886(d)(5)(B)(viii) of the Act, these rules purposes of direct GME may not exceed regulations at 42 CFR 413.75 through also apply to the establishment of a the hospital’s unweighted FTE count for 413.83, establishes a methodology for hospital’s IME cap. CMS implemented direct GME in its most recent cost determining payments to hospitals for these statutory requirements in the reporting period ending on or before the direct costs of approved graduate August 29, 1997 Federal Register (62 FR December 31, 1996. Under section medical education (GME) programs. 46005) and in the May 12, 1998 Federal 1886(d)(5)(B)(v) of the Act, a similar Section 1886(h)(2) of the Act sets forth Register (63 FR 26333). Generally, when limit based on the FTE count for IME a methodology for the determination of CMS (then HCFA) implemented the during that cost reporting period is a hospital-specific base-period per regulations at 42 CFR 413.79(e)(1) and applied, effective for discharges 42 CFR 412.105(f)(1)(vii), these resident amount (PRA) that is calculated occurring on or after October 1, 1997. regulations provided that if a hospital by dividing a hospital’s allowable direct Dental and podiatric residents are not did not train any allopathic or costs of GME in a base period by its included in this statutorily mandated osteopathic residents in its most recent number of full-time equivalent (FTE) cap. residents in the base period. The base The Affordable Care Act made a cost reporting period ending on or period is, for most hospitals, the number of statutory changes relating to before December 31, 1996, and it begins hospital’s cost reporting period the determination of a hospital’s FTE to participate in training residents in a beginning in FY 1984 (that is, October resident limit for direct GME and IME new residency program (allopathic or 1, 1983 through September 30, 1984). payment purposes and the manner in osteopathic) on or after January 1, 1995, The base year PRA is updated annually which FTE resident limits are calculated the hospital’s unweighted FTE resident for inflation. In general, Medicare direct and applied to hospitals under certain cap (which would otherwise be zero) GME payments are calculated by circumstances. may be adjusted based on the sum of the multiplying the hospital’s updated PRA Section 5503(a)(4) of the Affordable product of the highest number of FTE by the weighted number of FTE Care Act added a new section 1886(h)(8) residents in any program year during residents working in all areas of the to the Act to provide for the reduction the third year of the first new program, hospital complex (and at nonprovider in FTE resident caps for direct GME for each new residency training program sites, when applicable), and the under Medicare for certain hospitals established during that 3-year period, hospital’s Medicare share of total training fewer residents than their caps, and the minimum accredited length for inpatient days. and to authorize the redistribution of each type of program. This 3-year Section 1886(d)(5)(B) of the Act the estimated number of excess FTE period, which we will refer to as the ‘‘3- provides for a payment adjustment resident slots to other qualified year window’’ for ease of reference in known as the indirect medical hospitals. In addition, section 5503(b) this proposed rule, started when a new education (IME) adjustment under the amended section 1886(d)(5)(B)(v) of the program began, and the teaching IPPS for hospitals that have residents in Act to require the application of the hospital first began to train residents for an approved GME program, in order to section 1886(h)(8) of the Act provisions the first time in that new program, account for the higher indirect patient in the same manner to the IME FTE typically on July 1, and ending when care costs of teaching hospitals relative resident caps. The policy implementing the third program year of that first new to nonteaching hospitals. The section 5503 of the Affordable Care Act program ends. regulations regarding the calculation of was included in the November 24, 2010 Prior to development of the FY 2013 this additional payment are located at final rule with comment period (75 FR IPPS/LTCH PPS proposed rule, the 42 CFR 412.105. The hospital’s IME 72147 through 72212) and the FY 2013 teaching hospital community expressed adjustment applied to the DRG IPPS/LTCH PPS final rule (77 FR 53424 concerns that 3 years do not provide for payments is calculated based on the through 53434). Section 5506(a) of the a sufficient amount of time for a ratio of the hospital’s number of FTE Affordable Care Act amended section hospital to ‘‘grow’’ its new residency residents training in either the inpatient 1886(h)(4)(H) of the Act to add a new programs and to establish FTE resident or outpatient departments of the IPPS clause (vi) that instructs the Secretary to caps that are properly reflective of the hospital to the number of inpatient establish a process by regulation under number of FTE residents that it will hospital beds. which, in the event a teaching hospital actually train, once the programs are The calculation of both direct GME closes, the Secretary will permanently fully grown. Hospitals explained that 3 payments and the IME payment increase the FTE resident caps for years is an insufficient amount of time adjustment is affected by the number of hospitals that meet certain criteria up to primarily because a period of 3 years is FTE residents that a hospital is allowed the number of the closed hospital’s FTE not compatible with program to count. Generally, the greater the resident caps. The policy implementing accreditation requirements, particularly number of FTE residents a hospital section 5506 of the Affordable Care Act in instances where the qualifying counts, the greater the amount of was included in the November 24, 2010 teaching hospital wishes to start more Medicare direct GME and IME payments final rule with comment period (75 FR than one new program. Therefore, in the the hospital will receive. In an attempt 72212 through 72238) and the FY 2013 FY 2013 IPPS/LTCH PPS proposed rule

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and final rule, we proposed and applicable hospital’s cost reporting FTE residents in the rural track that are finalized changes to the regulations at period that coincides with or follows counted by the urban hospital are 42 CFR 413.79(e) for direct GME and at the start of the sixth program year of included in the hospital’s rolling 42 CFR 412.105(f)(1)(vii) for IME that each individual new program started for average calculation immediately. This revised the ‘‘3-year window’’ to a ‘‘5- rural hospitals for which the FTE cap policy is reflected in the regulation at year window,’’ for a new teaching may be adjusted in accordance with § 412.105(f)(1)(v)(F) for IME and hospital to establish and grow a new § 413.79(e)(3), FTE residents § 413.79(d)(7) for direct GME, and program, and thus begin training participating in new medical residency applies for IME and direct GME to cost residents for the first time in new training programs are included in the reporting periods beginning on or after programs that are started on or after hospital’s IRB ratio cap and the 3-year April 1, 2000. October 1, 2012. Thus, for urban rolling average. We received questions asking whether the change in the 3-year window to the hospitals that begin to train residents in b. Proposed Policy Changes Relating to a new medical residency training 5-year window for new programs also Rural Training Tracks at Urban applies to the establishment of rural program for the first time on or after Hospitals October 1, 2012, the cap will not be training tracks. In the FY 2013 IPPS/ adjusted for new programs established To encourage the training of residents LTCH PPS final rule, when we amended more than 5 years after residents begin in rural areas, section 407(c) of the the regulations to provide for a 5-year training in the first new program. Medicare, Medicaid, and SCHIP new program growth window at However, rural hospitals are permitted Balanced Budget Refinement Act of § 413.79(e) for direct GME and at to receive new cap adjustments for 1999 (Pub. L. 106–113) amended section § 412.105(f)(1)(vii) for IME, and in the participating in training residents in 1886(h)(4)(H) of the Act to add a FY 2015 IPPS/LTCH PPS final rule new medical residency training provision (subsection (iv)) that, in the when we made the FTE resident caps of programs at any time, and therefore, case of a hospital that is not located in new programs to be effective with the under § 413.79(e)(3), if a rural hospital a rural area (an urban hospital) that applicable hospital’s cost reporting participates in new medical residency establishes separately accredited period that coincides with or follows training programs on or after October 1, approved medical residency training the start of the sixth program year, we 2012, the hospital’s cap is adjusted for programs (or rural tracks) in a rural area inadvertently did not also change the each new program based on a 5-year or has an accredited training program growth window and effective date of with an integrated rural track, the growth window. We refer readers to the FTE limitations for rural training tracks, Secretary shall adjust the urban FY 2013 IPPS/LTCH PPS final rule for which, under existing § 413.79(k) for hospital’s cap on the number of FTE more details on this change in the direct GME and § 412.105(f)(1)(x) for residents under subsection (F), in an regulations regarding the 5-year window IME, is 3 program years, and is effective appropriate manner in order to for urban hospitals training residents in after 3 program years, respectively. encourage training of physicians in rural In this FY 2017 IPPS/LTCH PPS new medical residency training areas. Section 407(c) of Public Law 106– proposed rule, we are proposing to programs for the first time and for rural 113 was made effective for direct GME revise the regulations at § 413.79(k) (and hospitals participating in new medical payments to hospitals for cost reporting which, in turn, would affect IME residency training programs (77 FR periods beginning on or after April 1, adjustments under § 412.105(f)(1)(x)) to 53416 through 53424). 2000, and for IME payments applicable permit that, in the first 5 program years In the FY 2015 IPPS/LTCH PPS final to discharges occurring on or after April (rather than the first 3 program years) of rule (79 FR 50111), we changed our 1, 2000. We refer readers to the August the rural track’s existence, the rural policy regarding implementation of the 1, 2000 interim final rule with comment track FTE limitation for each urban FTE resident caps for new programs to period (65 FR 47033 through 47037) and hospital will be the actual number of be effective with the beginning of the the FY 2002 IPPS final rule (66 FR FTE residents training in the rural applicable hospital’s cost reporting 39902 through 39909) where we training track at the urban hospital, and period that coincides with or follows implemented section 407(c) of Public beginning with the urban hospital’s cost the start of the sixth program year of the Law 106–113. The regulations for reporting period that coincides with or first new program started for hospitals establishing rural track FTE limitations follows the start of the sixth program for which the FTE cap may be adjusted are located at 42 CFR 413.79(k) for year of the rural training track’s in accordance with § 413.79(e)(1), and direct GME and at 42 CFR existence, the rural track FTE limitation beginning with the applicable hospital’s 412.105(f)(1)(x) for IME. would take effect. This proposed change cost reporting period that coincides In the August 1, 2003 IPPS final rule addresses concerns expressed by the with or follows the start of the sixth (68 FR 45456 through 45457), we hospital community that rural training program year of each individual new clarified our existing policy that tracks, like any program, should have a program started for rural hospitals for although the rural track provision sufficient amount of time for a hospital which the FTE cap may be adjusted in allows an increase to the urban to ‘‘grow’’ and to establish a rural track accordance with § 413.79(e)(3). In the hospital’s FTE cap, sections FTE limitation that reflects the number same final rule, we also made the 1886(h)(4)(H)(iv) and 1886(d)(5)(B) of of FTE residents that it will actually effective dates of the 3-year rolling the Act do not provide for an exclusion train, once the program is fully grown. average and IME IRB ratio cap from the rolling average for the urban However, as stated above, due to the consistent with the effective date of the hospital for those FTE residents training statutory language at sections new program FTE resident caps. That is, in a rural track. These provisions are 1886(d)(5)(B) and 1886(h)(4)(H)(iv) of beginning with the applicable hospital’s interpreted to mean that, except for new the Act as implemented in our cost reporting period that coincides rural track programs begun by urban regulations at §§ 412.105(f)(1)(v)(F) and with or follows the start of the sixth teaching hospitals that are establishing 413.79(d)(7), except for new rural track program year of the first new program an FTE cap for the first time, when an programs begun by urban teaching started for hospitals for which the FTE urban hospital with an FTE resident cap hospitals that are establishing an FTE cap may be adjusted in accordance with establishes a new rural track program or cap for the first time, FTE residents in § 413.79(e)(1), and beginning with the expands an existing rural track program, a rural track training program at the

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urban hospital are subject immediately become urban statistical areas due to hospitals after 3 program years. Instead, to the 3-year rolling average for direct updates in the OMB standards for the rural track FTE limitations for these GME and IME. In addition, under the delineating urban and rural statistical hospitals would be the actual number of regulations at § 412.105(a)(1)(i), no areas, because the existing paragraphs FTE residents training in the rural track exception to the IME intern- and under § 413.79(k)(7) discuss the ‘‘3- (subject to the rolling average at resident-to-bed (IRB) ratio cap is year’’ growth period. Consequently, we § 413.79(d)(7) and the IME IRB ratio cap provided for residents in a rural track need to make conforming changes by at § 412.105(a)(1)(i), if applicable) for an training program (except for new rural revising paragraphs (k)(7)(ii) and (iii) to additional 2 years (from July 1, 2016 track programs begun by urban teaching account for rural track training programs through June 30, 2018), and the rural hospitals that are establishing an FTE started prior to October 1, 2012. (For track FTE limitations would become cap for the first time). Accordingly, more information regarding the effect on effective with the cost reporting period while we are proposing that the urban rural track FTE limitations when OMB that coincides with or follows the start hospital’s rural track FTE limitation makes changes to its standards for of the sixth program year, which in this would first be effective beginning with delineating statistical areas, we refer example would be July 1, 2018. the urban hospital’s cost reporting readers to the FY 2015 IPPS/LTCH PPS In summary, we are proposing to period that coincides with or follows final rule (79 FR 50113 through 50117).) revise the direct GME regulations at the start of the sixth program year of the c. Proposed Effective Date § 413.79(k) (and which, in turn, would rural track training program’s existence, affect IME adjustments under In the FY 2015 IPPS/LTCH PPS final the rural track training program’s FTEs § 412.105(f)(1)(x)) to permit that, rule (79 FR 50111), when we provided are included in the 3-year rolling effective with rural track training that the policy regarding the effective average and are subject to the IME IRB programs started on or after October 1, dates of the FTE residency caps, the 3- ratio cap for hospitals with established 2012, in the first 5 program years of the year rolling average, and the IRB ratio FTE caps, even within the first 5 rural track’s existence, the rural track cap for FTE residents in new medical program years prior to the beginning of FTE limitation for each urban hospital residency training programs would be the urban hospital’s cost reporting will be the actual number of FTE period that coincides with or follows effective with the applicable hospital’s cost reporting period that coincides residents (subject to the rolling average the start of the sixth program year of the at § 413.79(d)(7) and the IME IRB ratio rural track training program’s existence. with or follows the start of the sixth program year of the first new program cap at § 412.105(a)(1)(i), if applicable), We note that, for programs with cost started, we stated that this policy would training in the rural track training reporting periods beginning on or after be effective for urban hospitals that first program at the urban hospital, and the October 1, 2003, our regulations at begin to participate in training residents rural track FTE limitation would take §§ 413.79(k)(1) through (k)(4) are in their first new medical residency effect beginning with the urban divided between rural track FTE training program, and for rural hospital’s cost reporting period that limitation adjustments for urban hospitals, on or after October 1, 2012. coincides with or follows the start of the hospitals where the residents rotate to a We finalized this as the effective date sixth program year of the rural track rural area for more than one half of the because the policy providing a 5-year training program’s existence. duration of the program (§§ 413.79(k)(1) growth period for establishing the FTE We are inviting public comment on and (k)(2)), and where the residents resident caps (§§ 413.79(e)(1) and (e)(3)) this proposal. rotate to a rural area for less than one- was also effective for new programs half of the duration of the program K. Rural Community Hospital started on or after October 1, 2012. Demonstration Program (§§ 413.79(k)(3) and (k)(4)). As we Because we inadvertently did not also explained in the August 1, 2003 IPPS amend the separate regulations at 1. Background final rule (68 FR 45456 through 45458), § 412.105(f)(1)(x) and § 413.79(k) Section 410A(a) of Public Law 108– ‘‘duration of the program’’ refers to the regarding the growth window and minimum accredited length of the 173 required the Secretary to establish effective date of FTE limitations for a demonstration program to test the particular specialty of the rural track rural track training programs when we training program. We are clarifying feasibility and advisability of amended the regulations regarding the establishing ‘‘rural community’’ under this proposal that, although the 5-year growth window in the FY 2013 hospitals to furnish covered inpatient urban hospital’s rural track FTE IPPS/LTCH PPS final rule and regarding hospital services to Medicare limitation would not be effective until the additional changes we made in the beneficiaries. The demonstration pays the beginning of the urban hospital’s FY 2015 IPPS/LTCH PPS final rule, we rural community hospitals under a cost reporting period that coincides are proposing that the effective date reasonable cost-based methodology for with or follows the start of the sixth regarding the change in the growth Medicare payment purposes for covered program year of the rural track training window for rural track training inpatient hospital services furnished to program’s existence, the rural track FTE programs from 3 years to 5 years also be Medicare beneficiaries. A rural limitation that would be provided, if effective for rural track training community hospital, as defined in any, is still subject to whether or not the programs started on or after October 1, urban hospital rotates the residents in 2012. We acknowledge that there could section 410A(f)(1), is a hospital that— • the rural track training program to a be urban hospitals that started a rural Is located in a rural area (as defined rural area(s) for more than one-half of track training program after October 1, in section 1886(d)(2)(D) of the Act) or is the ‘‘duration of the program,’’ and 2012 (likely on July 1, 2013) for which treated as being located in a rural area whether or not the urban hospital rural track FTE limitations would under section 1886(d)(8)(E) of the Act; complies with existing §§ 413.79(k)(5) become effective under current policy • Has fewer than 51 beds (excluding and (k)(6), and the proposed revised after 3 years (likely on July 1, 2016). We beds in a distinct part psychiatric or § 413.79(k)(7). We are proposing to are proposing that, if our proposal is rehabilitation unit) as reported in its revise § 413.79(k)(7), which specifies the finalized, we would not actually apply most recent cost report; effect on rural track FTE limitations the rural track FTE limitations that • Provides 24-hour emergency care when previously rural statistical areas would have become effective for these services; and

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• Is not designated or eligible for amended section 410A of Public Law relative financial advantage to returning designation as a CAH under section 108–173, changing the rural community to the customary SCH payment 1820 of the Act. hospital demonstration program in methodology, which left 22 hospitals Section 410A(a)(4) of Public Law 108– several ways. First, the Secretary is participating in the demonstration, 173 specified that the Secretary was to required to conduct the demonstration effective July 1, 2013. In October 2015, select for participation no more than 15 program for an additional 5-year period, another hospital among those selected rural community hospitals in rural areas to begin on the date immediately in 2011 closed, leaving 14 among this of States that the Secretary identified as following the last day of the initial 5- cohort still participating. (By this date, having low population densities. Using year period. Further, the Affordable as described below, the 7 hospitals that 2002 data from the U.S Census Bureau, Care Act requires, in the case of a rural were selected in either 2004 or 2008 had we identified the 10 States with the community hospital that is participating completed the 5-year extension period lowest population density in which in the demonstration program as of the mandated by the Affordable Care Act). rural community hospitals were to be last day of the initial 5-year period, the Section 410A(c)(2) of Public Law 108– located in order to participate in the Secretary to provide for the continued 173 required that, in conducting the demonstration: Alaska, Idaho, Montana, participation of such rural hospital in demonstration program under this Nebraska, Nevada, New Mexico, North the demonstration program during the section, the Secretary shall ensure that Dakota, South Dakota, Utah, and 5-year extension period, unless the the aggregate payments made by the Wyoming. (Source: U.S. Census Bureau, hospital makes an election to Secretary do not exceed the amount Statistical Abstract of the United States: discontinue participation. which the Secretary would have paid if 2003.) In addition, the Affordable Care Act the demonstration program under this CMS originally solicited applicants provides that, during the 5-year section was not implemented. This for the demonstration in May 2004; 13 extension period, the Secretary shall requirement is commonly referred to as hospitals began participation with cost expand the number of States with low ‘‘budget neutrality.’’ Generally, when reporting periods beginning on or after population densities determined by the we implement a demonstration program October 1, 2004. In 2005, 4 of these 13 Secretary to 20. Further, the Secretary is on a budget neutral basis, the hospitals withdrew from the program required to use the same criteria and demonstration program is budget and converted to CAH status. This left data that the Secretary used to neutral in its own terms; in other words, 9 hospitals participating at that time. In determine the States for purposes of the the aggregate payments to the 2008, we announced a solicitation for initial 5-year period. The Affordable participating hospitals do not exceed up to 6 additional hospitals to Care Act also allows not more than 30 the amount that would be paid to those participate in the demonstration rural community hospitals in such same hospitals in the absence of the program. Four additional hospitals were States to participate in the demonstration program. Typically, this selected to participate under this demonstration program during the 5- form of budget neutrality is viable solicitation. These 4 additional year extension period. when, by changing payments or aligning hospitals began under the We published a solicitation for incentives to improve overall efficiency, demonstration payment methodology applications for additional participants or both, a demonstration program may with the hospital’s first cost reporting in the rural community hospital reduce the use of some services or period starting on or after July 1, 2008. demonstration program in the Federal eliminate the need for others, resulting At that time, 13 hospitals were Register on August 30, 2010 (75 FR in reduced expenditures for the participating in the demonstration. 52960). Applications were due on demonstration program’s participants. Five hospitals (3 of the hospitals were October 14, 2010. The 20 States with the These reduced expenditures offset among the 13 hospitals that were lowest population density that were increased payments elsewhere under original participants in the eligible for the demonstration program the demonstration program, thus demonstration program and 2 of the are: Alaska, Arizona, Arkansas, ensuring that the demonstration hospitals were among the 4 hospitals Colorado, Idaho, Iowa, Kansas, Maine, program as a whole is budget neutral or that began the demonstration program Minnesota, Mississippi, Montana, yields savings. However, the small scale in 2008) withdrew from the Nebraska, Nevada, New Mexico, North of this demonstration program, in demonstration program during CYs Dakota, Oklahoma, Oregon, South conjunction with the payment 2009 and 2010. (Three of these hospitals Dakota, Utah, and Wyoming (Source: methodology, makes it extremely indicated that they would be paid more U.S. Census Bureau, Statistical Abstract unlikely that this demonstration for Medicare inpatient hospital services of the United States: 2003). We program could be viable under the usual under the rebasing option allowed approved 19 new hospitals for form of budget neutrality. under the SCH methodology provided participation in the demonstration Specifically, cost-based payments to for under section 122 of the Medicare program. We determined that each of participating small rural hospitals are Improvements for Patients and these new hospitals would begin likely to increase Medicare outlays Providers Act of 2008 (Pub. L. 110–275). participating in the demonstration with without producing any offsetting One hospital restructured to become a its first cost reporting period beginning reduction in Medicare expenditures CAH, and one hospital closed.) In CY on or after April 1, 2011. elsewhere. Therefore, a rural 2011, one hospital that was among the Three of these 19 hospitals declined community hospital’s participation in original set of hospitals that participated participation prior to the start of the cost this demonstration program is unlikely in the demonstration withdrew from the reporting periods for which they would to yield benefits to the participant if demonstration. These actions left seven have begun the demonstration. In budget neutrality were to be of the originally participating hospitals addition to the 7 hospitals that were implemented by reducing other (that is, hospitals that were selected to selected in either 2004 or 2008, the new payments for these same hospitals. In participate in either 2004 or 2008) selection led to a total of 23 hospitals in the past 12 IPPS final rules, spanning participating in the demonstration the demonstration. During CY 2013, one the period for which the demonstration program as of June 1, 2011. additional hospital among the set program has been implemented, we Sections 3123 and 10313 of the selected in 2011 withdrew from the have adjusted the national inpatient PPS Affordable Care Act (Pub. L. 111–148) demonstration, similarly citing a rates by an amount sufficient to account

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for the added costs of this services was also applied to update the neutrality adjustment. In the FY 2010 demonstration program, thus applying estimated costs. For the budget IPPS/RY 2010 LTCH PPS final rule, we budget neutrality across the payment neutrality calculations in the IPPS final included an additional amount in the system as a whole rather than merely rules for FYs 2005 through 2011, the budget neutrality offset amount in that across the participants in the annual volume adjustment applied was fiscal year. This additional amount was demonstration program. As we 2 percent; for the IPPS final rules for based on the amount that the costs of discussed in the FYs 2005 through 2016 FYs 2012 through 2016, it was 3 the demonstration for FYs 2005 and IPPS final rules (69 FR 49183; 70 FR percent. For a detailed discussion of our 2006 exceeded the budget neutrality 47462; 71 FR 48100; 72 FR 47392; 73 FR budget neutrality offset calculations, we offset amounts finalized in the IPPS 48670; 74 FR 43922, 75 FR 50343, 76 FR refer readers to the IPPS final rule rules applicable for those years. 51698, 77 FR 53449, 78 FR 50740, 77 FR applicable to the fiscal year involved. In the final rules for FYs 2011 through 50145, and 80 FR 49585, respectively), In general, for FYs 2005 through 2013, 2013, we continued to use a we believe that the language of the we based the budget neutrality offset methodology for calculating the budget statutory budget neutrality requirements estimate on the estimated cost of the neutrality offset amount consisting of permits the agency to implement the demonstration in an earlier given year. two components: (1) The estimated budget neutrality provision in this For these periods, we derived that demonstration costs in the upcoming manner. estimated cost by subtracting the fiscal year; and (2) the amount by which estimated amount that would otherwise the actual demonstration costs 2. Budget Neutrality Offset Adjustments: be paid without the demonstration in an corresponding to an earlier, given year Fiscal Years 2005 Through 2016 earlier given year from the estimated (which would be known once finalized a. Fiscal Years 2005 Through 2013 amount for the same year that would be cost reports became available for that paid under the demonstration under the year) exceeded the budget neutrality In general terms, in each of these reasonable cost-based methodology offset amount finalized in the previous years from FYs 2005 through authorized by section 410A of Public corresponding year’s IPPS final rule. 2016, we used available cost reports for Law 108–173. (We ascertained the However, we noted in the FYs 2011, the participating hospitals to derive an estimated amount that would be paid in 2012, and 2013 IPPS final rules that, estimate of the additional costs an earlier given year under the because of a delay affecting the attributable for the demonstration. For reasonable cost methodology and the settlement process for cost reports for FYs 2005 through 2012, we used estimated amount that would otherwise IPPS hospitals occurring on a larger finalized, or settled, cost reports, as be paid without the demonstration in an scale than merely for the demonstration, available, and ‘‘as submitted’’ cost earlier given year from finalized or ‘‘as we were unable to finalize this reports for hospitals for which finalized submitted’’ cost reports as discussed component of the budget neutrality cost reports were not available to derive earlier.) For FYs 2005 through 2012, we offset amount accounting for the amount this estimate of the additional costs then updated the estimated costs by which the actual demonstration costs attributable to the demonstration. described earlier to the upcoming year in an earlier given year exceeded the Annual market basket percentage by multiplying them by the market budget neutrality offset amount increase amounts provided by the CMS basket percentage increases applicable finalized in the corresponding year’s Office of the Actuary reflecting the to the years involved and the applicable IPPS final rule for cost reports of growth in the prices of inputs for annual volume adjustment. Beginning demonstration hospitals dating to those inpatient hospitals were applied to cost in FY 2013, as discussed earlier, we beginning in FY 2007. amounts obtained from these cost began incorporating different update b. Fiscal Years 2014 and 2015 reports. In the FY 2013 IPPS/LTCH PPS factors—we used the IPPS market basket final rule (77 FR 53452), we initiated percentage increases applicable to the In the final rules for FYs 2014 and two general changes to the methodology years involved to update the estimated 2015, we continued to apply the general for estimating the costs of the amount that would be paid under the methodology discussed earlier (with the demonstration (which we have demonstration under the reasonable modifications initiated in FY 2013) in continued to apply through FY 2016). cost-based methodology, and the estimating the costs of the First, we used ‘‘as submitted’’ cost applicable percentage increases demonstration for the specific fiscal reports for each hospital participating in applicable to the years involved to year, using the set of ‘‘as submitted’’ the demonstration in estimating the update the amounts that would cost reports from the most recent costs of the demonstration (for FY 2013, otherwise be paid without the calendar year for which they are we used cost reports for cost reporting demonstration. We continued to apply available (cost reporting periods ending periods ending in CY 2010). Second, in the annual volume adjustment as in 2011 and 2012, respectively), and FY 2013, we incorporated different discussed earlier. updating the cost amounts according to update factors (the market basket For the FY 2010 IPPS/RY 2010 LTCH the factors discussed earlier. In percentage increase and the applicable PPS final rule, data from finalized cost addition, in these final rules, because percentage increase, as applicable, to reports reflecting the participating finalized cost reports for FYs 2007 and several years of data as opposed to hospitals’ experience under the 2008 had become available, we were solely using the market basket demonstration were available. able to include in the budget neutrality percentage increase) for the calculation Specifically, the finalized cost reports offset adjustment the amount by which of the budget neutrality offset amount. for the first 2 years of the the actual demonstration costs in each We refer readers to the FY 2013 IPPS/ demonstration, that is, cost reports for of those years exceeded the budget LTCH PPS final rule (77 FR 53449 cost reporting years beginning in FYs neutrality offset amounts finalized in through 53453) for a detailed discussion 2005 and 2006 (CYs 2004, 2005, and the IPPS final rules for these years. of the methodology initiated in FY 2013. 2006) were available. These data In the FY 2014 IPPS/LTCH PPS final In each of these fiscal years, an annual showed that the actual costs of the rule (78 FR through 50744), we update factor provided by the CMS demonstration for these years exceeded determined the final budget neutrality Office of the Actuary reflecting growth the amounts originally estimated in the offset amount to be applied to the FY in the volume of inpatient operating respective final rules for the budget 2014 IPPS rates to be $52,589,741. This

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amount was comprised of the two phase out prior to the beginning of FY exceeded the actual cost of the distinct components identified earlier: 2016, appropriate changes to the demonstration for FY 2009 by (1) The final resulting difference calculations were made. The 7 $8,457,452. between the total estimated FY 2014 ‘‘originally participating hospitals,’’ that We included the amount by which the reasonable cost amount to be paid under is, those hospitals that were selected for actual costs of the demonstration for FY the demonstration to the 22 the demonstration in either 2005 or 2010 (as shown in the finalized cost participating hospitals for covered 2008, were scheduled to end their reports for the nine hospitals that inpatient hospital services, and the total participation in the 5-year extension completed a cost reporting period estimated amount that would otherwise period authorized by the Affordable beginning in FY 2010) ($16,817,922) be paid to such hospitals without the Care Act prior to the start of FY 2016. differed from the amount that was demonstration (this amount was Therefore, we did not include the finalized as the costs of the $46,549, 861); and (2) the amount by financial experience of these hospitals demonstration for FY 2010 as set forth which the actual costs for the in the calculation of either the estimated in the FY 2010 IPPS/RY 2010 LTCH PPS demonstration for FY 2007 (as shown in reasonable cost amount or the estimated final rule and the FY 2011 IPPS/LTCH the finalized cost reports for cost amount that otherwise would be paid PPS final rule ($21,569,472). Analysis of reporting periods beginning in FY 2007 without the demonstration for FY 2016. this set of cost reports showed that the for the nine hospitals that participated In addition, 8 hospitals that entered the budget neutrality offset amount that was in the demonstration during FY 2007) demonstration in 2011 and 2012 finalized to account for the exceeded the budget neutrality offset through the solicitation that followed demonstration costs in FY 2010 (as set amount that was finalized in the FY the Affordable Care Act amendments forth in the FY 2010 IPPS/RY 2010 2007 IPPS final rule (this amount was expanding the demonstration, and that LTCH PPS final rule and the FY 2011 $6,039,880). were still participating in the IPPS/LTCH PPS final rule) exceeded the In the FY 2015 IPPS/LTCH PPS final demonstration at the time of the FY actual cost of the demonstration for FY rule (79 FR 50141 through 50145), we 2016 IPPS/LTCH PPS final rule, were 2010 by $4,751,550. determined the final budget neutrality scheduled to end their participation on Unlike in previous years, because the offset amount to be applied to the FY a rolling basis before September 30, budget neutrality offset amount 2015 IPPS rates to be $64,566,915. This 2016. As discussed in the FY 2016 IPPS/ identified in the corresponding final amount was also comprised of the two LTCH PPS final rule, for these 8 rules for each of FYs 2009 and 2010 earlier referenced components: (1) The hospitals, the estimated reasonable cost exceeded the actual costs of the final resulting difference between the amount and the estimated amount that demonstration, we subtracted the total estimated FY 2015 reasonable cost would otherwise be paid without the differences between these amounts for amount to be paid under the demonstration were prorated according each fiscal year (that is, $8,457,452 demonstration to the 22 participating to the ratio of the number of months applicable to FY 2009 and $4,751,550 hospitals for covered inpatient hospital between October 1, 2015, and the end of applicable to FY 2010) from the services, and the total estimated amount the hospital’s cost reporting period in estimated amount of the costs of the that would otherwise be paid to such relation to the entire 12-month period. demonstration for FY 2016 (that is, hospitals in FY 2015 without the We refer readers to the FY 2016 IPPS/ $26,044,620). Thus, the final budget demonstration (this amount was LTCH PPS final rule (80 FR 49586 neutrality offset amount for which the $54,177,144); and (2) the amount by through 49588) for a discussion of these adjustment to the national IPPS rates which the actual costs of the additional calculations. was calculated was $12,835,618. demonstration for FY 2008 (as shown in The resulting estimate of costs of the 3. Proposed Budget Neutrality the finalized cost reports for the demonstration for FY 2016 for the 15 Methodology for FY 2017 hospitals that participated in the hospitals participating in the demonstration during FY 2008) demonstration for FY 2016 was As described earlier, we have exceeded the budget neutrality offset $26,044,620. generally incorporated two components amount that was finalized in the FY In addition, in the FY 2016 IPPS/ into the budget neutrality offset 2008 IPPS final rule (this amount was LTCH PPS final rule, we were able to amounts identified in the final IPPS $10,389,771). finalize the amounts by which the rules in previous years. First, we have actual demonstration costs for FYs 2009 estimated the costs of the demonstration c. Fiscal Year 2016 and 2010 differed from the budget for the upcoming fiscal year, generally In the FY 2016 IPPS/LTCH PPS final neutrality offset amount finalized in the determined from historical, ‘‘as rule (80 FR 49586 through 49591), we corresponding final rules for these years submitted’’ cost reports for the hospitals continued to apply the general using the following approach: participating in that year. Update factors methodology discussed earlier for FYs We identified the difference between representing nationwide trends in cost 2014 and 2015 in estimating the costs of the actual cost of the demonstration for and volume increases have been the demonstration for FY 2016, with FY 2009 as indicated in the finalized incorporated into these estimates, as some modifications. For FY 2016, we cost reports for hospitals that specified in the methodology described used the set of ‘‘as submitted’’ cost participated in FY 2009 and that had in the final rule for each fiscal year. reports from the most recent calendar cost reporting periods beginning in FY Second, as finalized cost reports have year for which they were available (cost 2009 (this amount was $14,332,936), become available, we have determined reporting periods ending in CY 2013), and the budget neutrality offset amount the amount by which the actual costs of and updated the cost amounts using the that was identified in the FY 2009 IPPS the demonstration for an earlier, given IPPS market basket percentage increase final rule (73 FR 48671) (this amount year differed from the estimated costs and applicable percentage increase was $22,790,388). Analysis of this set of for the demonstration set forth in the applicable to the years involved as cost reports showed that the budget final IPPS rule for the corresponding discussed earlier. Although the neutrality offset amount that was fiscal year, and we incorporated that methodology for FY 2016 was similar to finalized to account for the amount into the budget neutrality offset that for the previous several rules, demonstration costs in FY 2009 (as set amount for the upcoming fiscal year. If because the demonstration began to forth in the FY 2009 IPPS final rule) the actual costs for the demonstration

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for the earlier fiscal year exceeded the as described earlier, as well as considering the fact that the estimated costs of the demonstration application of update factors to project demonstration will end December 31, identified in the final rule for that year, increases in cost. We further note that, 2016. We believe it would be this difference was added to the for the 4 hospitals that will end their appropriate to conduct this analysis for estimated costs of the demonstration for participation in the demonstration FYs 2011 through 2016 at one time, the upcoming fiscal year when effective December 31, 2016, the when all of the finalized cost reports for determining the budget neutrality financial experience of the last 3 months cost reporting periods beginning in FYs adjustment for the upcoming fiscal year. of the calendar year (that is, the first 3 2011 through 2016 are available. Such Conversely, if the estimated costs of the months of FY 2017) will be included in an aggregate analysis encompassing the demonstration set forth in the final rule the finalized cost reports for FY 2016. cost experience through the end of the for a prior fiscal year exceeded the (Consistent with the methodology used period of performance of the actual costs of the demonstration for for the final rules for previous years, a demonstration represents an that year, this difference was subtracted hospital’s cost report is included in the administratively streamlined method, from the estimated cost of the analysis of a given fiscal year if the cost allowing for the determination of any demonstration for the upcoming fiscal reporting period begins in that fiscal appropriate adjustment to the IPPS rates year when determining the budget year). We believe that examining the and obviating the need for multiple neutrality adjustment for the upcoming finalized cost reports for FY 2016 for fiscal-year-specific calculations and fiscal year. We note that we have these hospitals would lead to a more regulatory actions. Given the general lag calculated this difference between the accurate and administratively feasible of 3 years in finalizing cost reports, we actual costs of the demonstration for calculation of budget neutrality for the expect any such analysis to be FYs 2005 through 2010, as determined demonstration in FY 2017 than conducted in FY 2020. from finalized cost reports once conducting an estimate of the costs of We also note that, in the FY 2016 available, and estimated costs of the the demonstration for this 3-month IPPS/LTCH PPS final rule (80 FR demonstration as identified in the period based on ‘‘as submitted cost 49591), we indicated that we were applicable IPPS final rules for these reports’’ (as would occur according to considering whether to propose in years. the budget neutrality methodology future rulemaking that the calculation of In this FY 2017 proposed rule, we are currently in effect). the final costs of the demonstration for proposing a different methodology as In addition, given that the extent of a fiscal year reflect that some of the compared to previous years for covered services for FY 2017 subject to analyzing the costs attributable to the the payment methodology under the participating hospitals would otherwise demonstration for FY 2017. We note demonstration is a small fraction of that have been eligible for the payment that the demonstration will have in previous fiscal years, we believe that adjustment for low-volume hospitals in substantially phased out by the it is appropriate to forego the process of that fiscal year if they had not beginning of FY 2017. The 7 ‘‘originally estimating the costs attributable to the participated in the demonstration. Our participating hospitals,’’ that is, those demonstration for 2017 and to instead policy under the demonstration is that that were selected for the demonstration analyze the set of finalized cost reports hospitals participating in the in 2004 and 2008, ended their for cost reporting periods beginning in demonstration are not able to receive participation in the 5-year extension FY 2016, which will reflect the actual the low-volume adjustment in addition period authorized by the Affordable cost of the demonstration, when they to the reasonable cost-based payment Care Act prior to the start of FY 2016. become available. Such an approach authorized by section 410A of Public In addition, the participation period for also would eliminate the need to Law 108–173. We refer readers to the 14 hospitals that entered the perform for FY 2017 the second Change Request 7505 dated July 22, demonstration following upon the component of the budget neutrality 2011, available on the CMS Web site at: mandate of the Affordable Care Act and methodology discussed earlier (that is, http://www.cms.gov. Section that are still participating will end on a determining the amount by which the 1886(d)(12) of the Act provides for a rolling basis according to the end dates actual costs of the demonstration for the payment adjustment to account for the of the hospitals’ cost report periods, fiscal year, as determined in finalized higher costs per discharge for low- respectively, from April 30, 2016 cost reports once available, differed volume hospitals under the IPPS, through December 31, 2016. (As noted from the estimated costs for the effective FY 2005 (69 FR 49099 through earlier, 1 hospital among this cohort demonstration set forth in the final IPPS 49102). We note that sections 3125 and closed in October 2015). Of these 14 rule for the corresponding fiscal year). 10314 of the Affordable Care Act hospitals, 10 will end participation on Thus, for the reasons discussed earlier, provided for temporary changes in the or before September 30, 2016, leaving 4 we are proposing to calculate the costs qualifying criteria and payment hospitals participating for the last 3 of the demonstration and the resulting adjustment for low-volume hospitals for months of CY 2016 (that is, the first 3 budget neutrality adjustment factor for FYs 2011 and 2012, which have been months of FY 2017). We believe that, the demonstration for FY 2017 once the extended through subsequent given the small number of participating finalized cost reports for cost reporting legislation: Through FY 2013, by the hospitals and the limited time of periods beginning in FY 2016 become American Taxpayer Relief Act of 2012 participation for such hospitals during available. We are inviting public (ATRA) (Pub. L. 112–240) (78 FR 50610 FY 2017, a revised methodology is comments on this proposal. through 50613), through March 31, appropriate for determining the costs of In the FY 2016 IPPS/LTCH PPS final 2014, by the Pathway for SGR Reform the demonstration during this period as rule (80 FR 49591), we stated that we Act (Pub. L. 113–67) (79 FR 15022 discussed below. intended to discuss in this FY 2017 through 15025); through March 21, We note that estimating the costs of IPPS/LTCH PPS proposed rule how we 2015, by the Protecting Access to the demonstration for these 4 hospitals would reconcile the budget neutrality Medicare Act of 2014 (Pub. L. 113–93) for their extent of participation in the offset amounts identified in the IPPS (79 FR 49998 through 50001); and most demonstration in FY 2017 would entail final rules for FYs 2011 through 2016 recently through September 30, 2017, by a prorating calculation if we followed with the actual costs of the section 204 of the Medicare Access and the methodology we used for FY 2016 demonstration for those years, CHIP Reauthorization Act of 2015 (Pub.

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L. 114–110). These temporary changes language as the Secretary prescribes the NOTICE Act. In addition, CMS have increased the number of hospitals consistent with the statutory provision, announced a December 21, 2015 that are eligible to receive the low- and an oral explanation of the written listening session to provide individuals volume hospital payment adjustment. notification and documentation of the further opportunity to provide comment We further stated in the FY 2016 provision of the explanation, as the on the NOTICE Act. We thank those IPPS/LTCH PPS final rule that taking Secretary determines to be appropriate. individuals who shared their input. The the low-volume hospital payment Notification to each individual who agency reviewed all comments adjustment into account in determining receives observation services as an submitted by email as well as those the costs of the demonstration would outpatient for more than 24 hours must comments provided during the public require detailed consideration of the be provided no later than 36 hours after listening session in developing the data sources and methodology that observation services are initiated (or provisions of this proposed rule. would be used to determine which sooner, if upon release from the hospital among the demonstration hospitals or CAH). Section 1866(a)(1)(Y)(ii) of the 2. Proposed Implementation of the would have otherwise been eligible for Act provides that the written notice NOTICE Act Provisions the low-volume payment adjustment must explain that the individual is an a. Proposed Notice Process and to estimate the amount of the outpatient receiving observation In this proposed rule, we are adjustment. In the FY 2016 IPPS/LTCH services, and is not an inpatient of a proposing to implement section PPS final rule (80 FR 24521), we invited hospital or CAH. In addition, the 1866(a)(1)(Y) of the Act by revising the public comments on this issue. written notice must include the requirements that providers agree to as We are continuing to examine this reason(s) the individual is an outpatient part of participating in Medicare under issue and are considering whether to receiving observation services and must a provider agreement by establishing incorporate the low-volume payment explain the implications of being an regulations (at proposed 42 CFR adjustment amounts that would have outpatient receiving observation 489.20(y)) that would specify a process otherwise been made into the services, such as cost-sharing for hospitals and CAHs to notify an calculation of the difference between requirements and post-hospitalization individual, orally and in writing, the actual costs of the demonstration eligibility for coverage of skilled nursing and budget neutrality offset amounts for facility (SNF) services under Medicare. regarding the individual’s receipt of FYs 2011 through 2016. We note that The written notification also must observation services as an outpatient applying such a methodology may lower include any additional information as and the implications of receiving such the calculated amounts of the actual deemed appropriate by the Secretary. services as set forth below. Under this costs of the demonstration compared to Moreover, the written notification must proposed process, hospitals and CAHs not applying such a methodology, either be signed by the individual would be required to furnish notice to making it more likely that the actual receiving observation services as an such an individual entitled to Medicare costs of the demonstration for a year outpatient, or a person acting on the benefits if the individual receives will not exceed the estimated costs of individual’s behalf, to acknowledge observation services as an outpatient for the demonstration identified in the final receipt of the notification. In cases more than 24 hours. We are proposing rule for that year. We again are inviting where a signature by the individual or the use of a standardized notice, public comments on this issue. the person acting on the individual’s referred to as the Medicare Outpatient behalf is refused, section Observation Notice (MOON), to be used L. Proposed Hospital and CAH 1866(a)(1)(Y)(ii)(IV)(bb) of the Act by all applicable hospitals and CAHs. Notification Procedures for Outpatients stipulates that the notification be signed The MOON would include all of the Receiving Observation Services by the staff member of the hospital or informational elements required by 1. Background CAH who presented the written section 1866(a)(1)(Y)(ii) of the Act to fulfill the written notice requirement of a. Statutory Authority notification and include the name and title of the staff member, a certification the NOTICE Act. On August 6, 2015, the Notice of statement that the notification was b. Proposed Notification Recipients Observation Treatment and Implication presented, and the date and time that for Care Eligibility Act (the NOTICE the notification was presented. Finally, Section 1866(a)(1)(Y) of the Act Act), Public Law 114–42 was enacted. section 1866(a)(1)(Y)(ii)(V) of the Act requires hospitals or CAHs to furnish Section 2 of the NOTICE Act amended provides that the notification be written notice to each individual who receives section 1866(a)(1) of the Act by adding and formatted using plain language and observation services as an outpatient at new subparagraph (Y) that requires is made available in appropriate such hospital or CAH for more than 24 hospitals and critical access hospitals languages as determined by the hours. Throughout section 1866 of the (CAHs) to provide written notification Secretary. Act, ‘‘individual’’ generally refers to a and an oral explanation of such person entitled to have payment made notification to individuals receiving b. Proposed Effective Date for services under Title XVIII of the Act, observation services as outpatients for Section 2 of the NOTICE ACT or a person not entitled to have payment more than 24 hours at the hospitals or provides the effective date for this made for services under Title XVIII if CAHs. Section 1866(a)(1) of the Act lists notification requirement as effective certain conditions are met. The requirements for providers of services to beginning 12 months after the date of provisions of the NOTICE Act specify participate in the Medicare program and enactment of the NOTICE Act; that is, that notice must be provided to be eligible for payments under Medicare effective on August 6, 2016. Since the individuals receiving observation pursuant to provider agreements. date the NOTICE Act was enacted, CMS services as an outpatient for more than Section 1866(a)(1)(Y) of the Act, as has been working to implement the 24 hours; the provisions do not specify added by section 2 of the NOTICE Act, statutory requirement in a timely qualifications related to payment for specifies that the notification process manner. On December 14, 2015, CMS such services as a condition of notice. must consist of a written notification as released an electronic mailbox address Accordingly, we are proposing under specified by the Secretary through for individuals who wished to submit the new § 489.20(y) that the notification rulemaking and containing such email comments on the provisions of required by section 1866(a)(1)(Y) of the

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Act must be provided to individuals (Pub. 100–04), Chapter 1, Section 50.3.1, 36-hour time limit for delivery because entitled to benefits under Title XVIII of means ‘‘a person who has not been the MOON must be delivered before the the Act, whether or not the services admitted as an inpatient but who is individual is discharged, transferred, or furnished are payable under Title XVIII, registered on the hospital or critical admitted. When there are no plans to when individuals receive observation access hospital (CAH) records as an transfer, discharge, or admit an services as an outpatient for more than outpatient and receives services (rather individual who receives observation 24 hours. For example, an individual than supplies alone) directly from the services for more than 24 hours, we are receiving Medicare Part A benefits who hospital or CAH.’’ We are proposing that proposing that the MOON must be has not enrolled in Part B would still the provisions in this proposed rule provided within 36 hours of the receive notice even though the would apply to the subset of individuals initiation of observation services. observation services the individual entitled to benefits under Title XVIII of In rare circumstances where a receives as an outpatient would not be the Act who are receiving treatment as physician initially orders inpatient covered under Medicare for him or her, outpatients and are receiving services, but following internal as such observation services received as observation services for more than 24 utilization review (UR) performed while an outpatient would fall under the Part hours. For outpatients who are not the patient is hospitalized, the hospital B benefit and would be subject to receiving observation services, or who determines that the services do not meet payment under Medicare Part B. are receiving observation services but its inpatient criteria and the physician A beneficiary enrolled in a Medicare not for more than 24 hours, hospitals concurs with UR, orders the Advantage or other Medicare health and CAHs would not be required to discontinuation of inpatient services plan would receive the required notice deliver notice. and initiation of outpatient observation under the existing rules that apply to services (that is, a Condition Code 44 hospitals and CAHs under a provider c. Proposed Timing of Notice Delivery situation), the MOON would be agreement governed by the provisions of As provided at section 1866(a)(1)(Y) delivered as required by the NOTICE section 1866(a)(1)(Y) of the Act. The of the Act, we are proposing under Act (when outpatient observation Medicare Advantage regulations related proposed new § 489.20(y) that hospitals services have been ordered and to selection and credentialing of and CAHs must provide notice to an furnished for more than 24 hours). If contract providers at 42 CFR individual who receives observation observation services are ordered when 422.204(b)(3) require that, with respect services as an outpatient for more than Condition Code 44 applies, the 24-hour to providers that meet the definition of 24 hours and that such notice must be time period for observation notification ‘‘provider of services’’ as defined in furnished no later than 36 hours after commences at the same time that section 1861(u) of the Act, basic benefits observation services are initiated, or observation services are initiated under may only be provided by these sooner if the individual is transferred, a physician’s order, consistent with providers if they have a provider discharged, or admitted as an inpatient. existing policy for observation services agreement with CMS permitting them to For purposes of this proposed rule, furnished to outpatients. (We refer provide services under original consistent with existing billing rules, readers to the Medicare Claims Medicare. Under section 1861(u) of the observation services are initiated when Processing Manual, (Pub. 100–04), Act, the term ‘‘provider of services’’ a physician orders such services. Chapter 1, Section 50.3.) means a hospital, critical access According to the Medicare Claims As stated in the notice announcing hospital, skilled nursing facility, Processing Manual (Pub. 100–04), CMS Ruling CMS–1455–R (78 FR comprehensive outpatient rehabilitation Chapter 4, Section 290.2.2, hospital 16614), the Part B Inpatient Billing facility, home health agency, hospice reporting for observation services Ruling, in cases where CMS reviewers program, or, for purposes of section ‘‘begins at the clock time documented in find that an inpatient admission was not 1814(g) and section 1835(e) of the Act, the patient’s medical record, which medically reasonable and necessary a fund. coincides with the time that observation after the beneficiary is discharged, and Observation services are always services are initiated in accordance with thus, not appropriate for payment under provided under a physician’s order that a physician’s order.’’ Because valid Medicare Part A, the beneficiary’s specifies the initiation of observation medical documentation for observation patient status remains ‘‘inpatient’’ as of services. As a general matter, hospital services will always contain the time the time of the inpatient admission. The observation services are defined in the when observation services are initiated, patient’s status is not changed to Medicare Benefits Policy Manual (Pub. we believe hospitals and CAHs will be outpatient because the beneficiary was 100–02), Chapter 6, Section 20.6, as able to readily determine the timeframe formally admitted as an inpatient, and services that are medically reasonable within which the notice must be there is no provision to change a and necessary, specifically ordered by a delivered. We expect that there will be beneficiary’s status after he or she is physician or other nonphysician cases where an individual receives more discharged from the hospital. Where practitioner authorized by State than 24 hours of observation services CMS denies a claim after the beneficiary licensure law and hospital staff bylaws and has not yet received the MOON, but has been discharged because the to admit patients to the hospital or to there are imminent plans for discharge inpatient admission was not medically order outpatient services, and meet to home or another facility, transfer to reasonable and necessary, there would other published Medicare criteria for another unit or facility to receive care be no need to issue the MOON because payment. The term ‘‘physician’’ will that does not include observation the individual’s status remains encompass these authorized qualified services, or admission to the hospital or inpatient, despite the fact that the nonphysician practitioners for the another facility as an inpatient. In these inpatient admission was improper. purposes of this proposed rule. cases, pursuant to section 1866(a)(1)(Y) Similarly, where a hospital determines Individuals receiving observation of the Act, which provides that notice through UR after a beneficiary is services will always be registered as be provided not later than 36 hours after discharged that his or her inpatient outpatients; however, not all outpatients the time such an individual begins admission was not reasonable and receive observation services. receiving such services (or, if sooner, necessary and the hospital bills the ‘‘Outpatient,’’ as defined in the upon release), we are proposing that the services that were provided on a Medicare Claims Processing Manual MOON must be given sooner than the Medicare Part B claim, the NOTICE Act

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notification requirements would not information in plain language written cost of self-administered drugs that are apply for these individuals because for beneficiary comprehension. not covered under Part B, and the cost their status would also remain inpatient. of post-hospital SNF care because e. Outpatient Observation Services and section 1861(i) of the Act requires a d. Proposed Requirements for Written Beneficiary Financial Liability Notice prior 3-day hospital inpatient Section 20.6, Chapter 6, of the consecutive stay to be eligible for We are proposing to implement Medicare Benefit Policy Manual (Pub. coverage of post-hospital SNF care section 1866(a)(1)(Y)(ii) of the Act, the 100–2) specifies that observation under Medicare Part A. In contrast, as requirement for written notification, services furnished by hospitals and a hospital inpatient under Medicare Part under proposed new § 489.20(y)(1) by CAHs are ‘‘a well-defined set of specific, A, a beneficiary pays an annual proposing the basic requirements for the clinically appropriate services, which deductible ($1,288 in CY 2016) for all written notice that hospitals and CAHs include ongoing short-term treatment, inpatient services provided during the must use to notify individuals receiving assessment, and reassessment before a first 60 days in the hospital of each outpatient observation services. decision can be made regarding whether benefit period for the year. Cost-sharing Specifically, we are proposing that patients will require further treatment as requirements for individuals enrolled in hospitals and CAHs would be required hospital inpatients or if they are able to Medicare Part C, known as Medicare to use a proposed standardized notice be discharged from the hospital.’’ Advantage, health plans are dependent (the MOON) for written notification to Typically, observation services are on the particular plan’s policies. In an individual who receives observation ordered for individuals who present to addition, Medicare beneficiaries services as an outpatient under the the emergency department (ED) and qualified through their State Medicaid appropriate circumstances. By requiring who then require a significant period of program (QMBs) have different cost- use of a standardized notice, hospitals treatment and monitoring to determine sharing rules. For example, QMBs and CAHs would be assured that they whether or not their condition warrants cannot be billed for Medicare Part A or are providing all of the statutorily inpatient admission or discharge. Part B deductibles, coinsurance, and required elements in a manner that is Individuals also may receive outpatient copayments and may have different understandable to individuals receiving observation services in other areas of a rules regarding qualifying for SNF the notice. As provided at section hospital or CAH when necessary. For services. CMS has produced 1866(a)(1)(Y)(ii)(I) of the Act, we are example, a patient who receives a drug informational publications for proposing at § 489.20(y)(1)(i) that the infusion in a hospital’s outpatient beneficiaries that advise Medicare proposed MOON would explain to infusion center and then experiences Advantage enrollees to check with their individuals that they are outpatients post-infusion hypertension may require plans for information on coverage of receiving observation services and not observation services. In the majority of observation services furnished to an inpatients of the hospital or CAH, and cases, the decision whether to discharge outpatient. the reason(s) for such status as an a patient from the hospital following As mentioned earlier, a beneficiary’s outpatient receiving observation resolution of the reason for the liability for medication costs also is services. By definition (as specified in observation care or to admit the patient likely affected by whether the the Medicare Benefits Policy Manual, as an inpatient can be made in less than individual is hospitalized as an (Pub. 100–02), Chapter 6, Section 20.6), 48 hours, usually in less than 24 hours. inpatient or receiving care as an the reason for ordering observation In only rare and exceptional cases do outpatient. When an individual is services will always be the result of a reasonable and necessary outpatient physician’s decision that the individual hospitalized under a covered Medicare observation services span more than 48 Part A inpatient stay, payment for does not currently require inpatient hours. All hospital observation services, services and observation services are medically reasonable and necessary regardless of duration of care, that are medications that are provided by the needed for the physician to make a medically reasonable and necessary are decision regarding whether the hospital are covered under Medicare covered by Medicare. Part A. Generally, Medicare Part B individual needs further treatment as a In some cases, Medicare beneficiaries hospital inpatient or if the individual is covers drugs that are usually not self- receiving observation services while in administered. Based on the statutory able to be discharged from the hospital. a hospital or CAH may not be aware of We are proposing at § 489.20(y)(1)(ii) prohibition at section 1861(s)(2) of the their status as an inpatient or an Act and its implementing regulation at that the proposed MOON also would outpatient, and thus may not be aware provide an explanation of the 42 CFR 410.29(a), Medicare Part B that there are significant differences in generally does not cover or pay for any implications of receiving observation financial liability between inpatient services furnished by a hospital or CAH drug or biological that can be self- status and outpatient status. CMS has administered. ‘‘Self-administered as an outpatient, including services published educational materials for furnished on an inpatient basis, such as drugs’’ are considered prescription and Medicare beneficiaries to help inform over-the-counter medications that those related to cost-sharing them of financial and coverage requirements for the patient under beneficiaries routinely take on their liabilities associated with inpatient and own. For safety reasons, many hospitals Medicare, and post-hospitalization outpatient services.70 As an outpatient eligibility for Medicare-covered SNF do not allow patients to take receiving observation services, a medications brought from home. care, in standardized language to ensure beneficiary may incur financial liability that all Medicare eligible individuals for Medicare Part B copayments,71 the receive accurate information. We are outpatient CAH service is based on 20 percent of charges. In most cases, the cost-sharing for each proposing the inclusion of a blank 70 ‘‘Are You a Hospital Inpatient or Outpatient? If individual outpatient service should not be more ‘‘Additional Information’’ section on the You Have Medicare—Ask!’’ CMS Product No. than the inpatient deductible. However, Medicare MOON so that hospitals and CAHs may 11435. May 2014. beneficiaries who receive several outpatient include additional information. Finally, 71 A beneficiary who receives hospital outpatient services, or are treated for extended periods of time services typically pays 20 percent of the Medicare as hospital outpatients, may have greater cost- as required by section payment amount for outpatient items and services sharing liabilities as an outpatient under 1866(a)(1)(Y)(ii)(V) of the Act, the after paying the annual Part B deductible ($166 in observation than they may have if they were proposed MOON would include this CY 2016). The coinsurance amount for an admitted as an inpatient to the hospital.

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Medicare prescription drug plans (Part g. Proposed Oral Notice i. No Appeal Rights Under the NOTICE D) may help pay for drugs provided by Pursuant to the statutory requirement Act the hospital. Individuals with Medicare at section 1866(a)(1)(Y)(i) of the Act, we Section 1866(a)(1)(Y) of the Act, as Part D will likely need to pay out-of- are proposing under proposed new added by the NOTICE Act, does not pocket costs to the hospital for these § 489.20(y)(2) that hospitals and CAHs afford appeal rights to beneficiaries drugs and request reimbursement from provide an oral explanation of the regarding the notice provided pursuant their Part D plan. written notice furnished to individuals to that statutory provision. To provide In addition, whether an individual is who receive observation services as clarity to this point, we are proposing to receiving treatment or care as an outpatients. We will provide guidance amend the regulations at 42 CFR inpatient admitted to the hospital or is for oral notification in our forthcoming 405.926 relating to actions that are not receiving observation services as an Medicare manual provisions. Hospitals initial determinations, by adding new outpatient pursuant to a doctor’s orders and CAHs are familiar with providing paragraph (u) to explain that issuance of may impact Medicare coverage for post- oral explanations of written notices (for the MOON by a hospital or CAH does hospital SNF services. Section 1861(i) of example, surgical and procedural not constitute an initial determination the Act requires a beneficiary to be an consent notices and the Important and therefore does not trigger appeal inpatient of a hospital for not less than Message from Medicare), and we expect rights under 42 CFR part 405, subpart I. 3 consecutive days before discharge that oral notification will occur in conjunction with delivery of the MOON. M. Proposed Technical Changes and from the hospital in order to be eligible Again, hospitals and CAHs are Correction of Typographical Errors in for coverage of post-hospital extended reminded that recipients of Federal Certain Regulations Under 42 CFR Part care services in a SNF under Medicare. financial assistance have an 413 Relating to Costs to Related For purposes of Medicare SNF coverage, independent obligation to provide Organizations and Medicare Cost the time spent receiving observation language assistance services to Reports services as an outpatient does not count individuals with LEP consistent with 1. General Background towards the requirement of a 3-day section 1557 of the Affordable Care Act hospital inpatient stay because these and Title VI of the Civil Rights Act of As part of our ongoing review of the services are outpatient. 1964. In addition, recipients of Federal Medicare regulations, we have financial assistance have an identified a number of technical f. Delivering the Medicare Outpatient changes or corrections of typographical Observation Notice independent obligation to provide auxiliary aids and services to errors in 42 CFR part 413 relating to An English language version of the individuals with disabilities free of costs to related organizations and proposed MOON was submitted to OMB charge, subject to section 1557 of the Medicare cost reports that need to be for approval. Once we receive OMB Affordable Care Act and section 504 of made. Below we are summarizing these approval, a Spanish language version of the Rehabilitation Act of 1973. proposed changes or corrections. the MOON will be made available. If the h. Proposed Signature Requirements 2. Proposed Technical Change to individual receiving the notice is unable Regulations at 42 CFR 413.17(d)(1) on to read its written contents and/or As set forth at section Cost to Related Organizations comprehend the required oral 1866(a)(1)(Y)(ii)(IV) of the Act, the Prior to the enactment of section explanation, we expect hospitals and written notification must be either signed by the individual receiving 911(b) of the Medicare Prescription CAHs to employ their usual procedures observation services as an outpatient or Drug, Improvement, and Modernization to ensure notice comprehension. (We a person acting on such individual’s Act of 2003 (Pub. L. 108–173), a refer readers, for example, to the behalf to acknowledge receipt of provider had the right to nominate a Medicare Claims Processing Manual notification. Moreover, the statute fiscal intermediary (currently known as (Pub. 100–4), Chapter 30, Section provides that if such individual or a Medicare Administrative Contractor 40.3.4.3., for similar existing procedures person refuses to provide a signature, (MAC) and referred to in this section as related to notice comprehension for the the written notification is to be signed a ‘‘contractor’’) of its choice. Public Law Advance Beneficiary Notice of by the staff member of the hospital or 108–173 repealed the nomination Noncoverage (ABN).) Usual procedures CAH who presented the written provisions formerly found in section may include, but are not limited to, the notification and certain information 1816 of the Act and added section use of translators, interpreters, and needs to be included with such 1874A (Contracts with Medicare assistive technologies. Hospitals and signature. Accordingly, we are Administrative Contractors). Currently, CAHs are reminded that recipients of proposing under proposed new a provider will be assigned to the Federal financial assistance have an § 489.20(y)(3), that the written notice be contractor that covers the geographic independent obligation to provide signed, as described above, in order to locale where the provider is located, as language assistance services to acknowledge receipt and understanding specified in the regulations at 42 CFR individuals with limited English of the notice. The MOON would include 421.404(b). proficiency (LEP) consistent with a dedicated signature area for this Because a provider is no longer section 1557 of the Affordable Care Act purpose. In cases where the individual permitted to select a contractor of its and Title VI of the Civil Rights Act of receiving the MOON refuses to sign the choice, and a contractor is now assigned 1964. In addition, recipients of Federal notice, we are proposing that the MOON to a provider, the parenthetical language financial assistance have an must be signed by the staff member who of the regulation text at 42 CFR independent obligation to provide presents the notice to the individual. 413.17(d)(1) referring to a provider’s auxiliary aids and services to The staff signature would include the nomination of a contractor is obsolete. individuals with disabilities free of staff member’s name and title, a Therefore, we are proposing to revise charge, subject to section 1557 of the certification statement that the notice § 413.17(d)(1) to remove the Affordable Care Act and section 504 of was presented, and the date and time parenthetical reference to a provider’s the Rehabilitation Act of 1973. that the notice was presented. nomination of a contractor.

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3. Proposed Changes to 42 CFR Agencies,’’ published in Federal the Medicare cost report since the 413.24(f)(4)(i) Relating to Electronic Register at 62 FR 26 through 31. Worksheet S was first used in 1993. The Submission of Cost Reports For the same reasons articulated in Medicare cost report certification section IV.M.3. of the preamble of this statement was later incorporated into In § 413.24(f)(4)(i), we incorrectly proposed rule, we also are proposing to § 413.24(f)(4)(iv) in a final rule with refer to a ‘‘Federally qualified health revise § 413.24(f)(4)(ii) by adding comment period (59 FR 26964 through clinic.’’ The correct entity title under histocompatibility laboratories to the 26965) issued in response to public section 1861(aa) of the Act is ‘‘Federally list of providers required to file comments received following the qualified health center.’’ In this electronic cost reports. To correct a Uniform Electronic Cost Reporting proposed rule, we are proposing to typographic error, we are proposing to System for Hospitals proposed rule (56 correct this error. remove the duplicate word ‘‘contractor’’ FR 41110). A typographical error In addition, § 413.200(c)(1)(i) requires from the second sentence of this excluding the word ‘‘and’’ occurred a histocompatibility laboratory to file a paragraph. during the incorporation of the Medicare cost report in accordance with 5. Proposed Technical Changes to 42 certification statement into the the regulations at § 413.24(f). For cost CFR 413.24(f)(4)(iv) Relating to regulations text at § 413.24(f)(4)(iv). reporting periods ending on or after Reporting Entities, Cost Report 6. Proposed Technical Correction to 42 March 31, 2005, organ procurement Certification Statement, Electronic CFR 413.200(c)(1)(i) Relating to organizations (OPOs) and Submission and Cost Reports Due Dates Medicare Cost Report Due Dates for histocompatibility laboratories are Organ Procurement Organizations and required to submit Medicare cost reports In this proposed rule, we are Histocompatibility Laboratories in a standardized electronic format, but proposing to revise § 413.24(f)(4)(iv) to make a technical correction to the histocompatibility laboratories were In this proposed rule, we are effective date for SNFs and HHAs to inadvertently omitted from the list of proposing to make a technical submit hard copies of a settlement providers in the regulations text at correction to the reference in summary, a statement of certain § 413.24(f). As evidenced by the § 413.200(c)(1)(i) to the due date for the worksheet totals found within the reference in the August 22, 2003 Medicare cost report for organ electronic file, and a certifying Federal Register document (68 FR procurement organizations (OPOs) and statement signed by its administrator or 50720) to the Office of Management and histocompatibility laboratories from chief financial officer, from cost Budget (OMB) approval number 0938– ‘‘three months’’ to ‘‘5 months’’ after the reporting periods ending on or after 0102 of the Paperwork Reduction Act end of the fiscal year. Section December 31, 1996, to cost reporting 413.200(c)(1)(i) requires independent request for the cost reporting form periods ending on or after February 1, entitled ‘‘Organ Procurement Agency/ OPOs and histocompatibility 1997, to accurately reflect the regulation laboratories to file a cost report in Laboratory Statement of Reimbursable text finalized in the January 2, 1997 Costs,’’ histocompatibility laboratories accordance with § 413.24(f). In the 1995 final rule (62 FR 26 through 31). final rule (60 FR 33137), we revised were intended to be included in the We are proposing to revise § 413.24(f) to extend the Medicare cost regulation text. Both OPOs and § 413.24(f)(4)(iv) by adding report due date for all providers histocompatibility laboratories have histocompatibility laboratories to the required to file a cost report from 3 used that Medicare cost report form to list of providers required to file months to 5 months after the end of a report their statements of reimbursable electronic cost reports for the same costs since its approval by OMB for use reasons provided in section IV.M.3. of provider’s fiscal year end, but for cost reporting periods ending on or the preamble of this proposed rule. In inadvertently neglected to make a after March 31, 2005. To correct this addition, we are proposing to add conforming change to § 413.200(c)(1)(i), omission, we are proposing a technical histocompatibility laboratories to the which we are proposing to correct in change to § 413.24(f)(4)(i) to add list of providers required to submit hard this proposed rule. ‘‘histocompatibility laboratories’’ to the copies of a settlement summary, a N. Clarification Regarding the Medicare list of providers required to submit cost statement of certain worksheet totals Utilization Requirement for Medicare- reports in a standardized electronic found within the electronic file, and a Dependent, Small Rural Hospitals format. certifying statement signed by its (MDHs) (§ 412.108) administrator or chief financial officer, 4. Proposed Technical Changes to 42 1. Background CFR 413.24(f)(4)(ii) Relating to for cost reporting periods ending on or Electronic Submission of Cost Reports after March 31, 2005, for the same Section 1886(d)(5)(G) of the Act and Due Dates reasons. provides special payment protections We also are proposing to correct a under the IPPS to Medicare-dependent, In this proposed rule, we are typographical error that occurred in the small rural hospitals (MDHs). (For proposing a technical correction in Medicare cost report certification additional information on the MDH § 413.24(f)(4)(ii) to the effective date for statement set forth in § 413.24(f)(4)(iv) program and the payment methodology, the submission of Medicare cost reports by adding the word ‘‘and’’ between the we refer readers to the FY 2012 IPPS/ in a standardized electronic format for words ‘‘Sheet’’ and ‘‘Statement’’ to LTCH PPS final rule (76 FR 51683 skilled nursing facilities (SNFs) and denote the two separate financial through 51684).) As we discussed in the home health agencies (HHAs) from cost documents required to be submitted FY 2011 IPPS/LTCH PPS final rule (75 reporting periods ending on or after with the cost report; that is, the Balance FR 50287) and in the FY 2012 IPPS/ December 31, 1996 to cost reporting Sheet and the Statement of Revenue and LTCH PPS final rule (76 FR 51683 periods ending on or after February 1, Expenses. The cost report certification through 51684), section 3124 of the 1997 to accurately reflect the regulation statement historically correctly denoted Affordable Care Act extended the text finalized in the January 2, 1997 the two separate and distinct financial expiration of the MDH program from the final rule, ‘‘Medicare Program: forms, the Balance Sheet and the end of FY 2011 (that is, for discharges Electronic Cost Reporting for Skilled Statement of Revenue and Expenses on occurring before October 1, 2011) to the Nursing Facilities and Home Health Worksheet S (Form CMS–2552–92) of end of FY 2012 (that is, for discharges

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occurring before October 1, 2012). 412.108(a)(1)(iii). Consistent with the by the properly and timely submitted Under prior law, as specified in section policy noted in the FY 1991 IPPS final claims for the services furnished to 5003(a) of Public Law 109–171 (DRA rule (55 FR 35995) and further individuals enrolled in a MA plan 2005), the MDH program was to be in discussed in the FY 2011 IPPS/LTCH under Medicare Part C associated with effect through the end of FY 2011 only. PPS final rule (75 FR 50287), in order those days or discharges in calculating Since the extension of the MDH to not disadvantage hospitals that Medicare utilization for MDH purposes. program through FY 2012 provided by receive payment from a Medicare CMS verifies the accuracy of the MA section 3124 of the Affordable Care Act, Advantage (MA) organization under days and discharges reported on the cost the MDH program has been further Medicare Part C for inpatient care report using claims data; once verified, extended multiple times. First, section provided to Medicare beneficiaries the cost report data can then be properly 606 of the ATRA (Public L. 112–240) enrolled in Medicare Part C plans, we applied in the Medicare utilization extended the MDH program through FY count the days and discharges for those calculation. 2013 (that is, for discharges occurring stays toward the 60-percent Medicare For a hospital that is not eligible for before October 1, 2013). Second, section utilization requirement for MDH IME, direct GME, or DSH payments and 1106 of the Pathway for SGR Reform Act classification. is not required to submit bills for of 2013 (Public L. 113–67) extended the In accordance with the regulations at services furnished to individuals MDH program through the first half of § 412.108(b)(5), Medicare contractors enrolled in a MA plan under Medicare FY 2014 (that is, for discharges (MACs) evaluate, on an ongoing basis, Part C, we are clarifying that CMS will occurring before April 1, 2014). Third, whether or not a hospital continues to include the MA days or discharges section 106 of the PAMA (Public L. qualify for MDH status. For hospitals associated with those services in the 113–93) extended the MDH program that qualify for MDH status under Medicare utilization calculation, through the first half of FY 2015 (that is, § 412.108(a)(1)(iii)(C) and in accordance regardless of whether the hospital for discharges occurring before April 1, with the regulations at § 412.108(b)(5), submitted claims for services associated 2015). Fourth and most recently, section at each cost report settlement, the MAC with those days or discharges provided 205 of the MACRA (Public L. 114–10) will determine whether the hospital has that the hospital submits proper extended the MDH program through FY a Medicare utilization of at least 60 documentation, such as provider logs, 2017 (that is, for discharges occurring percent in at least two of the last three that allow the MAC to verify the MA before October 1, 2017). For additional most recent audited cost reports for days or discharges as reported on the information on the extensions of the which the Secretary has a settled cost hospital’s cost report. However, we note MDH program after FY 2012, we refer report by including the newly settled that, while not required, timely readers to the following Federal cost report in the evaluation. submission of claims for the services Register documents: The FY 2013 IPPS/ Medicare policy requires hospitals furnished to individuals enrolled in a LTCH PPS final rule (77 FR 53404 that receive certain additional payments MA plan under Medicare Part C allows through 53405 and 53413 through such as IME, direct GME, and DSH, to CMS to establish whether the hospital 53414); the FY 2013 IPPS notice (78 FR submit claims for services furnished to meets the MDH classification criteria in 14689); the FY 2014 IPPS/LTCH PPS individuals enrolled in a MA plan an expeditious and timely manner. final rule (78 FR 50647 through 50649); under Medicare Part C. Specifically, O. Adjustment to IPPS Rates Resulting the FY 2014 IPPS interim final rule with teaching hospitals that provide services From 2-Midnight Policy comment period (79 FR 15025 through to individuals enrolled in a MA plan 15027); the FY 2014 IPPS notice (79 FR under Medicare Part C must submit In the FY 2014 IPPS/LTCH PPS final 34446 through 34449); the FY 2015 timely claims in order to receive the rule (78 FR 50906 through 50954), we IPPS/LTCH PPS final rule (79 FR 50022 supplemental IME and direct GME adopted the 2-midnight policy, effective through 50024); and the FY 2016 payments for services provided to these for dates of admission on or after interim final rule with comment period individuals. Likewise, hospitals that October 1, 2013. Under the 2-midnight (80 FR 49596 through 49597). operate nursing or allied health policy, an inpatient admission is education programs and incur costs generally appropriate for Medicare Part 2. Clarification of Medicare Utilization associated with individuals enrolled in A payment if the physician (or other Criterion for MDH Classification a MA plan under Medicare Part C also qualified practitioner) admits the Section 1886(d)(5)(G)(iv) of the Act must submit timely claims in order to patient as an inpatient based upon the defines an MDH as a hospital that is receive the additional payment amount reasonable expectation that the patient located in a rural area, has not more for those MA enrollees. In addition, will need hospital care that crosses at than 100 beds, is not an SCH, and has hospitals that are eligible for DSH least 2 midnights. In assessing the a high percentage of Medicare payments are required to submit claims expected duration of necessary care, the discharges (that is, not less than 60 in a timely manner for individuals physician (or other qualified percent of its inpatient days or enrolled in a MA plan under Medicare practitioner) may take into account discharges during the cost reporting Part C in order for these days to be outpatient hospital care received prior period beginning in FY 1987 or two of captured in the DSH calculation. We to inpatient admission. If the patient is the three most recently audited cost refer readers to the FY 2013 IPPS/LTCH expected to need less than 2 midnights reporting periods for which the PPS final rule (77 FR 53409) for more of care in the hospital, the services Secretary has a settled cost report were information and background on the furnished should generally be billed as attributable to inpatients entitled to requirements for filing no pay bills for outpatient services. We note that benefits under Part A). The regulations services furnished to individuals revisions were made to this policy in at 42 CFR 412.108 set forth the criteria enrolled in a MA plan under Medicare the CY 2016 OPPS/ASC final rule with that a hospital must meet to be Part C. comment period (80 FR 70545). Our classified as an MDH. Consistent with this policy, for a actuaries estimated that the 2-midnight The Medicare utilization requirement hospital that is eligible for IME, direct policy would increase expenditures by is set forth at section GME, or DSH payments, CMS only approximately $220 million in FY 2014 1886(d)(5)(G)(iv)(IV) of the Act and includes MA days or discharges as due to an expected net increase in implemented by regulation at 42 CFR reported on the cost report and verified inpatient encounters. We used our

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authority under section 1886(d)(5)(I)(i) hospital inpatient claims, requests to As we indicated in the CY 2016 of the Act to make a reduction of 0.2 provide additional guidance regarding OPPS/ASC final rule with comment percent to the standardized amount, the the proper billing of those services, and period, throughout the Probe and Puerto Rico standardized amount, and concerns about increasingly long stays Educate process, we saw positive effects the hospital-specific payment rates, and of Medicare beneficiaries as outpatients and improved provider understanding we used our authority under section due to hospital uncertainties about of the 2-midnight policy. We also 1886(g) of the Act to make a reduction payment. (For further discussion of this discussed in the CY 2016 OPPS/ASC of 0.2 percent to the national capital history, we refer readers to the FY 2014 final rule with comment period (80 FR Federal rate and the Puerto Rico-specific IPPS/LTCH PPS proposed and final 70545 through 70549) a number of capital rate, in order to offset this rules (78 FR 27644 through 27649 and additional changes we had made and estimated $220 million in additional 78 FR 50906 through 50954, were continuing to make to the IPPS expenditures in FY 2014. We respectively).) Recovery Audit Program and changes to indicated that although our exceptions The 2-midnight policy itself and our the medical review responsibilities for and adjustments authority should not be implementation and enforcement of it Quality Improvement Organizations routinely used in the IPPS system, we have also evolved over time as a result (QIOs) in regard to short hospital stay believed that the systemic and of a combination of statutory, claims. widespread nature of this issue justified regulatory, and operational changes. For With respect to the 2-midnight policy an overall adjustment to the IPPS rates example, as part of our efforts to provide itself, in light of stakeholder concerns and such an adjustment is authorized education to stakeholders on the new 2- and in our continued effort to develop under section 1886(d)(5)(I)(i) of the Act. midnight policy, CMS hosted numerous the most appropriate and applicable In Shands Jacksonville Medical ‘‘Open Door Forums,’’ conducted framework for determining when Center, Inc. v. Burwell, No. 14–263 national provider calls, and shared payment under Medicare Part A is (D.D.C.) and consolidated cases, information and answers to frequently appropriate for inpatient admissions, in hospitals challenged the 0.2 percent asked questions on the CMS Web site. the CY 2016 OPPS/ASC final rule with reduction in IPPS rates to account for In addition, we instructed MACs to comment period (80 FR 70545), we the estimated $220 million in additional conduct a ‘‘Probe and Educate’’ process modified the original ‘‘rare and FY 2014 expenditures resulting from the for inpatient claims with dates of unusual’’ exceptions policy under the 2- 2-midnight policy. In its Memorandum admission on or after October 1, 2013 midnight policy to allow for Medicare Opinion, issued September 21, 2015, the through September 30, 2014, to assess Part A payment on a case-by-case basis Court found that the ‘‘Secretary’s provider understanding and compliance for inpatient admissions that do not interpretation of the exceptions and with the new 2-midnight policy. We satisfy the 2-midnight benchmark, if the adjustments provision is a reasonable also prohibited Recovery Auditor’s post- documentation in the medical record one’’ for this purpose. However, the payment medical reviews of inpatient supports the admitting physician’s Court also ordered the 0.2 percent hospital patient status for claims with determination that the patient requires reduction remanded back to the dates of admission between October 1, inpatient hospital care despite an Secretary, without vacating the rule, to 2013 and September 30, 2014. expected length of stay that is less than correct certain procedural deficiencies On April 1, 2014, the Protecting 2 midnights. in the promulgation of the 0.2 percent Access to Medicare Act of 2014 (Pub. L. We also recognized in reviewing the reduction and reconsider the 113–93) was enacted. Section 111 of public comments we received on the 0.2 adjustment. The Court did not believe it Public Law 113–93 permitted CMS to percent reduction in response to the would be appropriate to vacate the rule continue medical review activities December 1, 2015 notice with comment because such action would, in effect, under the Inpatient Probe and Educate period and the CY 2016 OPPS/ASC dictate a substantive outcome based on process through March 31, 2015. The proposed rule that, in addition to the a procedural error and concluded that same law also extended the prohibition long history of the question of patient the disruptive consequences would be on Recovery Auditor reviews of status underlying the 2-midnight policy considerable. inpatient hospital patient status for and the statutory, regulatory, and In accordance with the Court’s order, claims with dates of admission through operational changes that have occurred we published a notice with comment March 31, 2015, absent evidence of since its initial implementation, the period that appeared in the December 1, systematic gaming, fraud, abuse, or original estimate for the 0.2 percent 2015 Federal Register (80 FR 75107), delays in the provision of care by a reduction had a much greater degree of which discussed the basis for the 0.2 provider of services. On April 16, 2015, uncertainty than usual. As indicated in percent reduction and its underlying the Medicare Access and CHIP the Office of the Actuary’s August 19, assumptions and invited comments on Reauthorization Act of 2015 (Pub. L. 2013 memorandum (which was the same in order to facilitate our 114–10) was enacted. Section 521 of included as Appendix A of the further consideration of the FY 2014 Public Law 114–10 permitted CMS to December 1, 2015 notice with comment reduction. We received numerous further extend the medical review period (80 FR 75112 through 75114)), public comments on the notice with activities under the Inpatient Probe and the estimate depended critically on the comment period. Educate process for inpatient claims assumed utilization changes in the In considering these public through September 30, 2015, and inpatient and outpatient hospital comments, and those on the same topic extended the prohibition of Recovery settings, relatively small changes would received in response to the CY 2016 Auditor reviews of inpatient hospital have a disproportionate effect on the OPPS/ASC proposed rule, we continue patient status for claims with dates of estimated net costs, the estimate was to recognize that the 0.2 percent admission through September 30, 2015. subject to a much greater degree of reduction issue is unique in many ways. CMS then announced in August 2015 uncertainty than usual, and the actual The underlying question of patient that it would not approve Recovery results could differ significantly from status, which resulted in the creation of Auditors to conduct patient status the estimate. the 2-midnight policy, is a complex one reviews for dates of admission of Lastly, in reviewing the public with a long history, including large October 1, 2015 through December 31, comments we received on the December improper payment rates in short-stay 2015. 1, 2015 notice with comment period, we

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also considered the fact that our remove this temporary one-time exception payments and certain new actuaries’ most recent estimate of the prospective increase by including a hospitals). (We refer readers to the FY impact of the 2-midnight policy varies factor of (1/1.006) in the calculation of 2002 IPPS final rule (66 FR 39910 between a savings and a cost over the the rates for FY 2018. While we through 39914) for additional FY 2014 to FY 2015 time period. The generally do not believe it is appropriate information on the methodology used to memorandum describing this new in a prospective system to determine capital IPPS payments to analysis is available on the CMS Web retrospectively adjust rates even where hospitals both during and after the site at: https://www.cms.gov/Medicare/ we believe a prospective change in transition period.) Medicare-Fee-for-Service-Payment/ policy is warranted, we take this action The basic methodology for AcuteInpatientPPS/index.html. in the specific context of this unique determining capital prospective We still believe the assumptions situation, in which we have been payments using the Federal rate is set underlying the 0.2 percent reduction to ordered by a Federal court to further forth in the regulations at 42 CFR the rates put in place beginning in FY explain the basis of an adjustment we 412.312. For the purpose of calculating 2014 were reasonable at the time we have imposed for past years. capital payments for each discharge, the made them in 2013. Nevertheless, taking In summary, for the reasons described standard Federal rate is adjusted as all the foregoing factors into account, in above, we are proposing to include a follows: the context of this case, we believe it permanent factor of (1/0.998) and a (Standard Federal Rate) × (DRG would be appropriate to use our temporary one-time factor of (1.006) in Weight) × (Geographic Adjustment authority under sections 1886(d)(5)(I)(i) the calculation of the FY 2017 Factor (GAF)) × (COLA for hospitals and 1886(g) of the Act to prospectively standardized amount, the hospital- located in Alaska and Hawaii) × (1 + remove, beginning in FY 2017, the 0.2 specific payment rates, and the national Capital DSH Adjustment Factor + percent reduction to the rates put in capital Federal rate. We also are Capital IME Adjustment Factor, if place beginning in FY 2014. The 0.2 proposing to include a factor of (1/ applicable). percent reduction was implemented by 1.006) in the calculation of the FY 2018 In addition, under § 412.312(c), including a factor of 0.988 in the standardized amount, the hospital- hospitals also may receive outlier calculation of the FY 2014 standardized specific payment rates, and the national payments under the capital IPPS for amount, the hospital-specific payment capital Federal rate to remove the extraordinarily high-cost cases that rates, and the national capital Federal temporary one-time factor of 1.006. qualify under the thresholds established rate, permanently reducing the rates for We are inviting public comments on for each fiscal year. FY 2014 and future years until the 0.988 all aspects these proposals. The B. Additional Provisions is removed. We are proposing to foregoing discussion and proposals permanently remove the 0.988 constitute the final notice required by 1. Exception Payments reduction beginning in FY 2017 by the Court in the Shands Jacksonville including a factor of (1/0.998) in the The regulations at 42 CFR 412.348 Medical Center, Inc. v. Burwell, No. 14– provide for certain exception payments calculation of the FY 2017 standardized 263 (D.D.C.) and consolidated cases. amount, the hospital-specific payment under the capital IPPS. The regular rates, and the national capital Federal V. Proposed Changes to the IPPS for exception payments provided under rate. Capital-Related Costs §§ 412.348(b) through (e) were available only during the 10-year transition In addition, taking all the foregoing A. Overview factors into account, and given the period. For a certain period after the unique nature of this situation in which Section 1886(g) of the Act requires the transition period, eligible hospitals may the court has ordered us to further Secretary to pay for the capital-related have received additional payments explain the assumptions underlying an costs of inpatient acute hospital services under the special exceptions provisions adjustment applicable to past years, we in accordance with a prospective at § 412.348(g). However, FY 2012 was believe it would be appropriate to use payment system established by the the final year hospitals could receive our authority under sections Secretary. Under the statute, the special exceptions payments. For 1886(d)(5)(I)(i) and 1886(g) of the Act to Secretary has broad authority in additional details regarding these temporarily increase the rates, only for establishing and implementing the IPPS exceptions policies, we refer readers to FY 2017, to address the effect of the 0.2 for acute care hospital inpatient capital- the FY 2012 IPPS/LTCH PPS final rule percent reduction to the rates in effect related costs. We initially implemented (76 FR 51725). for FY 2014, the 0.2 reduction to the the IPPS for capital-related costs in the Under § 412.348(f), a hospital may rates in effect for FY 2015 (recall the Federal fiscal year (FY) 1992 IPPS final request an additional payment if the 0.988 factor included in the calculation rule (56 FR 43358). In that final rule, we hospital incurs unanticipated capital of the FY 2014 rates permanently established a 10-year transition period expenditures in excess of $5 million due reduced the rates for FY 2014 and future to change the payment methodology for to extraordinary circumstances beyond years until it is removed), and the 0.2 Medicare hospital inpatient capital- the hospital’s control. Additional reduction to the rates in effect for FY related costs from a reasonable cost- information on the exception payment 2016. We believe that the most based payment methodology to a for extraordinary circumstances in transparent, expedient, and prospective payment methodology § 412.348(f) can be found in the FY 2005 administratively feasible method to (based fully on the Federal rate). IPPS final rule (69 FR 49185 and 49186). accomplish this is a temporary one-time FY 2001 was the last year of the 10- prospective increase to the FY 2017 year transition period that was 2. New Hospitals rates of 0.6 percent (= 0.2 percent + 0.2 established to phase in the IPPS for Under the capital IPPS, the percent + 0.2 percent). Specifically, we hospital inpatient capital-related costs. regulations at 42 CFR 412.300(b) define are proposing to include a factor of For cost reporting periods beginning in a new hospital as a hospital that has 1.006 in the calculation of the FY 2002, capital IPPS payments are operated (under previous or current standardized amount, the hospital- based solely on the Federal rate for ownership) for less than 2 years and specific payment rates, and the national almost all acute care hospitals (other lists examples of hospitals that are not capital Federal rate in FY 2017 and then than hospitals receiving certain considered new hospitals. In accordance

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with § 412.304(c)(2), under the capital Secretary granted under section 1886(g) actuaries estimated that the 2-midnight IPPS, a new hospital is paid 85 percent of the Act, we are proposing to revise policy would increase expenditures by of its allowable Medicare inpatient the calculation of capital IPPS payments approximately $220 million in FY 2014 hospital capital-related costs through its to hospitals located in Puerto Rico to due to an expected net increase in first 2 years of operation, unless the new parallel the change in the statutory inpatient encounters. In that same final hospital elects to receive full calculation of operating IPPS payments rule, consistent with the approach taken prospective payment based on 100 to hospitals located in Puerto Rico, for the operating IPPS standardized percent of the Federal rate. We refer beginning in FY 2017. Accordingly, we amount, the Puerto Rico-specific readers to the FY 2012 IPPS/LTCH PPS are proposing to revise § 412.374 of the standardized amount, and the hospital- final rule (76 FR 51725) for additional regulations to provide that, for specific payment rates, and using our information on payments to new discharges occurring on or after October authority under section 1886(g) of the hospitals under the capital IPPS. 1, 2016, capital IPPS payments to Act, we made a reduction of 0.2 percent hospitals located in Puerto Rico would (an adjustment factor of 0.998) to the 3. Proposed Changes in Payments for be based on 100 percent of the capital national capital Federal rate and the Hospitals Located in Puerto Rico Federal rate; that is, payments would no Puerto Rico-specific capital rate to offset The regulations at 42 CFR 412.374 longer be derived from a blend of the the estimated increase in capital IPPS provide for the use of a blended capital Puerto Rico rate and the capital expenditures associated with the payment amount for prospective Federal rate. As discussed in section I.I. projected increase in inpatient payments for capital-related costs to of Appendix A (Economic Analyses) of encounters that was expected to result hospitals located in Puerto Rico. this proposed rule, this proposed from the new inpatient admission Accordingly, under the capital IPPS, we change would result in a slight increase guidelines (78 FR 50746 through 50747). currently compute a separate payment in capital IPPS payments to hospitals As discussed in section IV.O. of the rate specific to Puerto Rico hospitals located in Puerto Rico because adjusted preamble of this proposed rule, in using the same methodology used to capital IPPS payments based on the Shands Jacksonville Medical Center, compute the national Federal rate for capital Federal rate are generally higher Inc. v. Burwell, No. 14–263 (D.D.C.) and capital-related costs. The capital-related than capital IPPS payments based on the consolidated cases, hospitals challenged payment rate for hospitals located in capital Puerto Rico rate. In addition, we the 0.2 percent reduction in IPPS rates Puerto Rico is derived using only the note that this proposed change is similar to account for the estimated $220 costs of hospitals located in Puerto Rico, to the changes in capital IPPS payments million in additional FY 2014 while the national Federal rate for to hospitals located in Puerto Rico expenditures resulting from the 2- capital-related costs is derived using the beginning in FY 1998 and FY 2005 that midnight policy. In accordance with the costs of all acute care hospitals paralleled the corresponding statutory Court’s order, we published a notice participating in the IPPS (including changes in the blended payment amount with comment period that appeared in hospitals located in Puerto Rico). In calculation required for operating IPPS the December 1, 2015 Federal Register general, hospitals located in Puerto Rico payments to hospitals located in Puerto (80 FR 75107), which discussed the are paid a blend of the applicable Rico, as provided by section 4406 of basis for the 0.2 percent reduction and capital IPPS Puerto Rico rate and the Public Law 105–33 (62 FR 46048) and its underlying assumptions and invited applicable capital IPPS Federal rate. section 504 of Public Law 108–173 (69 comments on the same in order to Historically, we have established a FR 49185), respectively. facilitate our further consideration of capital IPPS blended payment rate the FY 2014 reduction. In section IV.O. structure for hospitals located in Puerto C. Proposed Annual Update for FY 2017 of the preamble of this proposed rule, Rico that parallels the statutory The proposed annual update to the we discuss that, in considering the calculation of operating IPPS payments capital PPS Federal rate, as provided for public comments we received on that to hospitals located in Puerto Rico. at § 412.308(c), for FY 2017 is discussed notice with comment period and those Capital IPPS payments to hospitals in section III. of the Addendum to this on the same topic we received in located in Puerto Rico are currently proposed rule. Consistent with our response to the CY 2016 OPPS/ASC computed based on a blend of 25 proposal to revise the calculation of proposed rule, we continue to recognize percent of the capital IPPS Puerto Rico capital IPPS payments to hospitals that the 0.2 percent reduction issue is rate and 75 percent of the capital IPPS located in Puerto Rico to be based on unique in many ways. As we discuss in Federal rate. (For additional details on 100 percent of the capital Federal rate that section, the 2-midnight policy itself capital IPPS payments to hospitals (and no longer based on a blend of the and our implementation and located in Puerto Rico, we refer readers capital Puerto Rico rate and the capital enforcement of it have also evolved over to the FY 2012 IPPS/LTCH PPS final Federal rate), we would discontinue use time as a result of a combination of rule (76 FR 51725).) of the Puerto Rico capital rate in the statutory, regulatory, and operational As noted in section IV.A. of the calculation of capital IPPS payments to changes. Finally, in reviewing the preamble of this proposed rule, section hospitals located in Puerto Rico. public comments received on the 601 of the Consolidated Appropriations In the FY 2014 IPPS/LTCH PPS final December 1, 2015 notice with comment Act, 2016 (Public L. 114–113) increased rule (78 FR 50906 through 50954), we period, we also considered the fact that the applicable Federal percentage of the adopted the 2-midnight policy effective our actuaries’ most recent estimate of operating IPPS payment for hospitals for dates of admission on or after the impact of the 2-midnight policy located in Puerto Rico from 75 percent October 1, 2013, under which an varies between a savings and a cost over to 100 percent and decreased the inpatient admission is generally the FY 2014 to FY 2015 time period. applicable Puerto Rico percentage of the appropriate for Medicare Part A (For additional details, we refer readers operating IPPS payments for hospitals payment if the physician (or other to section IV.O. of the preamble of this located in Puerto Rico from 25 percent qualified practitioner) admits the proposed rule.) to zero percent, applicable to discharges patient as an inpatient based upon the We still believe the assumptions occurring on or after January 1, 2016. reasonable expectation that the patient underlying the 0.2 percent reduction to Consistent with historical practice, will need hospital care that crosses at the rates put in place beginning in FY under the broad authority of the least 2 midnights. At that time, our 2014 were reasonable at the time we

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made them in 2013. Nevertheless, taking operating IPPS hospital-specific rates). Islands, Guam, the Northern Mariana all of these factors into account and in This approach is consistent with our Islands, and American Samoa. the context of this case, as we discuss historical approach regarding the Accordingly, for FY 2017, the rate-of- in more detail in section IV.O. of the application of the recoupment increase percentage to be applied to the preamble of this proposed rule, adjustment authorized by section target amount for these children’s consistent with the approach proposed 7(b)(1)(B) of Public Law 110–90. hospitals, cancer hospitals, RNHCIs, and for the operating IPPS rates, we believe short-term acute care hospitals located VI. Proposed Changes for Hospitals it would be appropriate to use our in the U.S. Virgin Islands, Guam, the Excluded From the IPPS authority under section 1886(g) of the Northern Mariana Islands, and Act to permanently remove the 0.2 A. Proposed Rate-of-Increase in American Samoa is the FY 2017 percent reduction to the capital IPPS Payments to Excluded Hospitals for FY percentage increase in the FY 2010- rate beginning in FY 2017. (As 2017 based IPPS operating market basket. explained previously, we are proposing Certain hospitals excluded from a For this FY 2017 proposed rule, based to discontinue use of the Puerto Rico prospective payment system, including on IHS Global Insight, Inc.’s 2016 first capital rate in the calculation of capital children’s hospitals, 11 cancer quarter forecast, we estimate that the FY IPPS payments to hospitals located in hospitals, and hospitals located outside 2010-based IPPS operating market Puerto Rico beginning in FY 2017.) the 50 States, the District of Columbia, basket update for FY 2017 is 2.8 percent Specifically, we are proposing to make and Puerto Rico (that is, hospitals (that is, the estimate of the market an adjustment of (1/0.998) to the located in the U.S. Virgin Islands, basket rate-of-increase). Therefore, the national capital Federal rate to remove Guam, the Northern Mariana Islands, FY 2017 rate-of-increase percentage that the 0.2 percent reduction, consistent and American Samoa) receive payment would be applied to the FY 2016 target with the proposed adjustment to the for inpatient hospital services they amounts in order to calculate the FY operating IPPS standardized amount furnish on the basis of reasonable costs, 2017 target amounts for children’s and the hospital-specific payment rates. subject to a rate-of-increase ceiling. A hospitals, cancer hospitals, RNHCIs, and In addition, consistent with the per discharge limit (the target amount as short-term acute care hospitals located approach proposed for the operating defined in § 413.40(a) of the regulations) in the U.S. Virgin Islands, Guam, the IPPS standardized amount and hospital- is set for each hospital based on the Northern Mariana Islands, and specific payment rates and for the hospital’s own cost experience in its American Samoa is 2.8 percent, in reasons discussed in section IV.O. of the base year, and updated annually by a accordance with the applicable preamble of this proposed rule, we rate-of-increase percentage. For each regulations at 42 CFR 413.40. We are believe it would be appropriate to use cost reporting period, the updated target proposing that if more recent data our authority under section 1886(g) of amount is multiplied by total Medicare become available for the final rule, we the Act to adjust the FY 2017 capital discharges during that period and would use them to calculate the IPPS IPPS rate to address the effects of the 0.2 applies as an aggregate upper limit (the operating market basket update for FY percent reduction to the national capital ceiling as defined in § 413.40(a)) of 2017. Federal rates in effect for FY 2014, FY Medicare reimbursement for total B. Critical Access Hospitals (CAHs) 2015, and FY 2016 by proposing a one- inpatient operating costs for a hospital’s time prospective adjustment of 1.006 in cost reporting period. In accordance 1. Background FY 2017 to the national capital Federal with § 403.752(a) of the regulations, Section 1820 of the Act provides for rate. For FY 2018, we also are proposing RNHCIs also are subject to the rate-of- the establishment of Medicare Rural to remove the effects of this one-time increase limits established under Hospital Flexibility Programs prospective adjustment through an § 413.40 of the regulations discussed (MRHFPs), under which individual adjustment of (1/1.006) to the national previously. States may designate certain facilities as capital Federal rate, consistent with the As explained in the FY 2006 IPPS critical access hospitals (CAHs). approach proposed for the operating final rule (70 FR 47396 through 47398), Facilities that are so designated and IPPS standardized amount and hospital- beginning with FY 2006, we have used meet the CAH conditions of specific payment rates (as discussed in the percentage increase in the IPPS participation under 42 CFR part 485, section IV.O. of the preamble of this operating market basket to update the subpart F, will be certified as CAHs by proposed rule). We are inviting public target amounts for children’s hospitals, CMS. Regulations governing payments comments on these proposals. cancer hospitals, and RNHCIs. to CAHs for services to Medicare We also note that, in section II.D. of Consistent with §§ 412.23(g), beneficiaries are located in 42 CFR part the preamble of this proposed rule, we 413.40(a)(2)(ii)(A), and 413. present a discussion of the MS–DRG 413.40(c)(3)(viii), we also have used the documentation and coding adjustment, percentage increase in the IPPS 2. Frontier Community Health including previously finalized policies operating market basket to update the Integration Project (FCHIP) and historical adjustments, as well as target amounts for short–term acute care Demonstration the recoupment adjustment to the hospitals located in the U.S. Virgin Section 123 of the Medicare standardized amounts under section Islands, Guam, the Northern Mariana Improvements for Patients and 1886(d) of the Act that we are proposing Islands, and American Samoa. As we Providers Act of 2008 (Pub. L. 110–275), for FY 2017 in accordance with the finalized in the FY 2015 IPPS/LTCH as amended by section 3126 of the amendments made to section 7(b)(1)(B) PPS final rule (79 FR 50156 through Affordable Care Act of 2010, authorizes of Public Law 110–90 by section 631 of 50157), for FY 2017, we will continue a demonstration project to allow eligible the ATRA. Because section 631 of the to use the percentage increase in the FY entities to develop and test new models ATRA requires us to make a recoupment 2010-based IPPS operating market for the delivery of health care services adjustment only to the operating IPPS basket to update the target amounts for in eligible counties in order to improve standardized amount, we are not children’s hospitals, cancer hospitals, access to and better integrate the proposing to make a similar adjustment RNHCIs, and short-term acute care delivery of acute care, extended care to the capital IPPS rate (or to the hospitals located in the U.S. Virgin and other health care services to

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Medicare beneficiaries. The health-related services that would comply with the budget neutrality demonstration is titled ‘‘Demonstration complement those currently provided requirement by reducing payments to all Project on Community Health by the CAH and better serve the CAHs, not just those participating in the Integration Models in Certain Rural community’s needs. In addition, in the demonstration. We believe it is Counties,’’ and is commonly known as RFA, CMS interpreted the eligible entity appropriate to make any payment the Frontier Community Health definition in the statute as meaning a reductions across all CAHs because the Integration Project (FCHIP) CAH that receives funding through the FCHIP demonstration is specifically demonstration. Rural Hospital Flexibility Program. The designed to test innovations that affect The authorizing statute states the RFA identified four intervention prongs, delivery of services by the CAH eligibility criteria for entities to be able under which specific waivers of provider category. We believe that the to participate in the demonstration. An Medicare payment rules would allow language of the statutory budget eligible entity, as defined in section for enhanced payment for telemedicine, 123(d)(1)(B) of Public Law 110–275, as nursing facility, ambulance, and home neutrality requirement at section amended, is an MRHFP grantee under health services, respectively. These 123(g)(1)(B) of Public. L. 110–275 section 1820(g) of the Act (that is, a waivers were formulated with the goal permits the agency to implement the CAH); and is located in a State in which of increasing access to care with no net budget neutrality provision in this at least 65 percent of the counties in the increase in costs. manner. The statutory language merely State are counties that have 6 or less Since the due date for applications on refers to ensuring that aggregate residents per square mile. May 5, 2014, we have assessed the payments made by the Secretary do not The authorizing statute stipulates feasibility of the applying CAHs’ service exceed the amount which the Secretary several other requirements for the delivery proposals, as well as the estimates would have been paid if the demonstration. Section 123(d)(2)(B) of potential impacts of the payment demonstration project was not Public. L. 110–275, as amended, limits enhancement interventions on the implemented, and does not identify the participation in the demonstration to overall expenditures for Medicare range across which aggregate payments eligible entities in not more than 4 services. We are selecting CAHs to must be held equal. States. Section 123(f)(1) of Public. L. participate in the demonstration, with 110–275 requires the demonstration the period of performance for each CAH Based on actuarial analysis using cost project to be conducted for a 3-year expected to start August 1, 2016. report settlements for FYs 2013 and period. In addition, section 123(g)(1)(B) We have specified the payment 2014, the demonstration is projected to of Public. L. 110–275 requires that the enhancements for the demonstration, satisfy the budget neutrality demonstration be budget neutral. and are basing our selection of CAHs for requirement and likely yield a total net Specifically, this provision states that in participation, with the goal of savings. We estimate that the total conducting the demonstration project, maintaining the budget neutrality of the impact of the payment recoupment the Secretary shall ensure that the demonstration on its own terms (that is, would be no greater than 0.03 percent aggregate payments made by the the demonstration will produce savings of CAHs’ total Medicare payments Secretary do not exceed the amount from reduced transfers and admissions within 1 fiscal year (that is, Medicare which the Secretary estimates would to other health care providers, thus Part A and Part B). For the FCHIP have been paid if the demonstration offsetting any increase in payments demonstration, the final budget project under the section were not resulting from the demonstration). neutrality estimates will be based on the implemented. Furthermore, section However, because of the small size of demonstration period, which is August 123(i) of Public. L. 110–275 states that this demonstration and uncertainty 1, 2016 through July 31, 2019. The the Secretary may waive such associated with projected Medicare demonstration is projected to impact requirements of titles XVIII and XIX of utilization and costs, we are proposing payments to participating CAHs under the Act as may be necessary and a contingency plan to ensure that the both Medicare Part A and Part B. Thus, appropriate for the purpose of carrying budget neutrality requirement in section out the demonstration project, thus 123 of Public. L 110–275 is met. in the event that we determine that allowing the waiver of Medicare Accordingly, if analysis of claims data aggregate payments under the payment rules encompassed in the for Medicare beneficiaries receiving demonstration exceed the payments that demonstration. services at each of the participating would otherwise have been made, we In January 2014, CMS released a CAHs, as well as of other data sources, are proposing that CMS would recoup request for applications (RFA) for the including cost reports for these CAHs, payments through reductions of FCHIP demonstration. We refer readers shows that increases in Medicare Medicare payments to all CAHs under to the RFA on the CMS Web site at: payments under the demonstration both Medicare Part A and Part B. https://innovation.cms.gov/initiatives/ during the 3-year period are not Given the 3-year period of Frontier-Community-Health-Integration- sufficiently offset by reductions performance of the FCHIP Project-Demonstration/. Using 2013 data elsewhere, we will recoup the demonstration and the time needed to from the U.S. Census Bureau, CMS additional expenditures attributable to conduct the budget neutrality analysis, identified Alaska, Montana, Nevada, the demonstration through a reduction we anticipate that, in the event the North Dakota, and Wyoming as meeting in payments to all CAHs nationwide. demonstration is found not to have been the statutory eligibility requirement for Because of the small scale of the participation in the demonstration. The demonstration, we do not believe it budget neutral, any excess costs would RFA solicited CAHs in these five States would be feasible to implement budget be recouped over a period of 3 cost to participate in the demonstration, neutrality by reducing payments to only reporting years, beginning in CY 2020. stating that participation would be the participating CAHs. Therefore, in We are proposing a 3-year period for limited to CAHs in four of the States. To the event that this demonstration is recoupment to allow for a reasonable apply, CAHs were required to meet the found to result in aggregate payments in timeframe for the payment reduction eligibility requirements in the excess of the amount that would have and to minimize any impact on CAHs’ authorizing legislation, and, in addition, been paid if this demonstration were not operations. to describe a proposal to enhance implemented, we are proposing to

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VII. Proposed Changes to the Long- LTCH patient records to classify discussion of the LTCH PPS, including Term Care Hospital Prospective patients into distinct long-term care the patient classification system, Payment System (LTCH PPS) for FY diagnosis-related groups (LTC–DRGs) relative weights, payment rates, 2017 based on clinical characteristics and additional payments, and the budget expected resource needs. Beginning in neutrality requirements mandated by A. Background of the LTCH PPS FY 2008, we adopted the Medicare section 123 of the BBRA. The same final 1. Legislative and Regulatory Authority severity long-term care diagnosis-related rule that established regulations for the Section 123 of the Medicare, groups (MS–LTC–DRGs) as the patient LTCH PPS under 42 CFR part 412, Medicaid, and SCHIP (State Children’s classification system used under the subpart O, also contained LTCH LTCH PPS. Payments are calculated for Health Insurance Program) Balanced provisions related to covered inpatient each MS–LTC–DRG and provisions are Budget Refinement Act of 1999 (BBRA) services, limitation on charges to made for appropriate payment (Pub. L. 106–113) as amended by beneficiaries, medical review adjustments. Payment rates under the section 307(b) of the Medicare, requirements, furnishing of inpatient LTCH PPS are updated annually and Medicaid, and SCHIP Benefits hospital services directly or under published in the Federal Register. arrangement, and reporting and Improvement and Protection Act of The LTCH PPS replaced the 2000 (BIPA) (Pub. L. 106–554) provides recordkeeping requirements. We refer reasonable cost-based payment system readers to the August 30, 2002 final rule for payment for both the operating and under the Tax Equity and Fiscal capital-related costs of hospital for a comprehensive discussion of the Responsibility Act of 1982 (TEFRA) research and data that supported the inpatient stays in long-term care (Pub. L. 97–248) for payments for hospitals (LTCHs) under Medicare Part establishment of the LTCH PPS (67 FR inpatient services provided by an LTCH 55954). A based on prospectively set rates. The with a cost reporting period beginning Medicare prospective payment system In the FY 2016 IPPS/LTCH PPS final on or after October 1, 2002. (The rule (80 FR 49601 through 49623), we (PPS) for LTCHs applies to hospitals regulations implementing the TEFRA that are described in section implemented the provisions of the reasonable cost-based payment Pathway for Sustainable Growth Rate 1886(d)(1)(B)(iv) of the Act, effective for provisions are located at 42 CFR part cost reporting periods beginning on or (SGR) Reform Act of 2013 (Pub. L. 113– 413.) With the implementation of the 67), which mandated the application of after October 1, 2002. PPS for acute care hospitals authorized Section 1886(d)(1)(B)(iv)(I) of the Act the ‘‘site neutral’’ payment rate under by the Social Security Amendments of the LTCH PPS for discharges that do not defines an LTCH as a hospital which 1983 (Pub. L. 98–21), which added has an average inpatient length of stay meet the statutory criteria for exclusion section 1886(d) to the Act, certain beginning in FY 2016. For cost reporting (as determined by the Secretary) of hospitals, including LTCHs, were greater than 25 days. Section periods beginning on or after October 1, excluded from the PPS for acute care 2015, discharges that do not meet 1886(d)(1)(B)(iv)(II) of the Act also hospitals and were paid their reasonable provides an alternative definition of certain statutory criteria for exclusion costs for inpatient services subject to a are paid based on the site neutral LTCHs: specifically, a hospital that first per discharge limitation or target received payment under section 1886(d) payment rate. Discharges that do meet amount under the TEFRA system. For the statutory criteria continue to receive of the Act in 1986 and has an average each cost reporting period, a hospital- inpatient length of stay (as determined payment based on the LTCH PPS specific ceiling on payments was standard Federal payment rate. For by the Secretary of Health and Human determined by multiplying the Services (the Secretary)) of greater than more information on the statutory hospital’s updated target amount by the requirements of the Pathway for SGR 20 days and has 80 percent or more of number of total current year Medicare its annual Medicare inpatient discharges Reform Act of 2013, we refer readers to discharges. (Generally, in this section of the FY 2016 IPPS/LTCH PPS final rule with a principal diagnosis that reflects the preamble of this proposed rule, (80 FR 49601 through 49623). a finding of neoplastic disease in the 12- when we refer to discharges, we month cost reporting period ending in Section 231 of Consolidated describe Medicare discharges.) The Appropriations Act, 2016 (Pub. L. 114– FY 1997. August 30, 2002 final rule further 113), enacted December 18, 2015, Section 123 of the BBRA requires the details the payment policy under the provides for a temporary exception to PPS for LTCHs to be a ‘‘per discharge’’ TEFRA system (67 FR 55954). system with a diagnosis-related group In the August 30, 2002 final rule, we the application of the site neutral (DRG) based patient classification provided for a 5-year transition period payment rate for certain discharges system that reflects the differences in from payments under the TEFRA system representing severe wound care cases patient resources and costs in LTCHs. to payments under the LTCH PPS. from specific LTCHs. We will address Section 307(b)(1) of the BIPA, among During this 5-year transition period, an this statutory provision in a separate other things, mandates that the LTCH’s total payment under the PPS rulemaking. Secretary shall examine, and may was based on an increasing percentage 2. Criteria for Classification as an LTCH provide for, adjustments to payments of the Federal rate with a corresponding a. Classification as an LTCH under the LTCH PPS, including decrease in the percentage of the LTCH adjustments to DRG weights, area wage PPS payment that is based on Under the regulations at adjustments, geographic reclassification, reasonable cost concepts, unless an § 412.23(e)(1), to qualify to be paid outliers, updates, and a disproportionate LTCH made a one-time election to be under the LTCH PPS, a hospital must share adjustment. paid based on 100 percent of the Federal have a provider agreement with In the August 30, 2002 Federal rate. Beginning with LTCHs’ cost Medicare. Furthermore, § 412.23(e)(2)(i), Register, we issued a final rule that reporting periods beginning on or after which implements section implemented the LTCH PPS authorized October 1, 2006, total LTCH PPS 1886(d)(1)(B)(iv)(I) of the Act, requires under the BBRA and BIPA (67 FR payments are based on 100 percent of that a hospital have an average Medicare 55954). For the initial implementation the Federal rate. inpatient length of stay of greater than of the LTCH PPS (FYs 2003 through FY In addition, in the August 30, 2002 25 days to be paid under the LTCH PPS. 2007), the system used information from final rule, we presented an in-depth Alternatively, § 412.23(e)(2)(ii) states

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that, for cost reporting periods charge the beneficiary for services nationwide health information exchange beginning on or after August 5, 1997, a delivered on those uncovered days to improve health care. The Office of the hospital that was first excluded from the (§ 412.507). In the FY 2016 IPPS/LTCH National Coordinator for Health PPS in 1986 and can demonstrate that PPS final rule (80 FR 49623), we Information Technology (ONC) leads at least 80 percent of its annual amended our regulations to limit the these efforts in collaboration with other Medicare inpatient discharges in the 12- charges that may be imposed on agencies, including CMS and the Office month cost reporting period ending in beneficiaries whose discharges are paid of the Assistant Secretary for Planning FY 1997 have a principal diagnosis that at the site neutral payment rate under and Evaluation (ASPE). Through a reflects a finding of neoplastic disease the LTCH PPS. In section VII.G. of the number of activities, including several must have an average inpatient length of preamble of this proposed rule, we are open government initiatives, HHS is stay for all patients, including both proposing to amend the existing promoting the adoption of electronic Medicare and non-Medicare inpatients, regulations relating to the limitation on health record (EHR) technology certified of greater than 20 days (referred to as charges to address beneficiary charges under the ONC Health Information ‘‘subclause (II)’’ LTCHs). for LTCH services provided by Technology (HIT) Certification Program subclause (II) LTCHs as part of our (https://www.healthit.gov/policy- b. Hospitals Excluded From the LTCH proposed refinement of the payment PPS researchers-implementers/2015-edition- adjustment for subclause II LTCHs final-rule) developed to support secure, The following hospitals are paid under § 412.526. We also are proposing interoperable, health information under special payment provisions, as to amend the regulations under exchange. We believe that the use of described in § 412.22(c) and, therefore, § 412.507 to clarify our existing policy certified EHRs by LTCHs (and other are not subject to the LTCH PPS rules: that blended payments made to an types of providers that are ineligible for • Veterans Administration hospitals. LTCH during its transitional period (that the Medicare and Medicaid EHR • Hospitals that are reimbursed under is, payment for discharges occurring in State cost control systems approved Incentive Programs) can effectively and cost reporting periods beginning in FY efficiently help providers improve under 42 CFR part 403. 2016 or 2017) are considered to be a site • internal care delivery practices, support Hospitals that are reimbursed in neutral payment rate payment. accordance with demonstration projects the exchange of important information authorized under section 402(a) of the 4. Administrative Simplification across care partners and during Social Security Amendments of 1967 Compliance Act (ASCA) and Health transitions of care, and enable the (Pub. L. 90–248) (42 U.S.C. 1395b–1) or Insurance Portability and reporting of electronically specified section 222(a) of the Social Security Accountability Act (HIPAA) clinical quality measures (eCQMs) (as Amendments of 1972 (Pub. L. 92–603) Compliance described elsewhere in this proposed (42 U.S.C. 1395b–1 (note)) (Statewide Claims submitted to Medicare must rule). In 2015, ONC released a document all-payer systems, subject to the rate-of- comply with both the Administrative entitled ‘‘Connecting Health and Care increase test at section 1814(b) of the Simplification Compliance Act (ASCA) for the Nation: A Shared Nationwide Act). (Pub. L. 107–105), and the Health Interoperability Roadmap’’ (available at: • Nonparticipating hospitals Insurance Portability and https://www.healthit.gov/sites/default/ furnishing emergency services to Accountability Act of 1996 (HIPAA) files/hie-interoperability/nationwide- Medicare beneficiaries. (Pub. L. 104–191). Section 3 of the interoperability-roadmap-final-version- 1.0.pdf). In the near term, the Roadmap 3. Limitation on Charges to Beneficiaries ASCA requires that the Medicare Program deny payment under Part A or focuses on actions that will enable In the August 30, 2002 final rule, we Part B for any expenses incurred for individuals and providers across the presented an in-depth discussion of items or services for which a claim is care continuum to send, receive, find beneficiary liability under the LTCH submitted other than in an electronic and use a common set of electronic PPS (67 FR 55974 through 55975). This form specified by the Secretary. Section clinical information at the nationwide discussion was further clarified in the 1862(h) of the Act (as added by section level by the end of 2017. The Roadmap’s RY 2005 LTCH PPS final rule (69 FR 3(a) of the ASCA) provides that the goals also align with the Improving 25676). In keeping with those Secretary shall waive such denial in two Medicare Post-Acute Care discussions, if the Medicare payment to specific types of cases and may also Transformation Act of 2014 (Pub. L. the LTCH is the full LTC–DRG payment waive such denial in such unusual cases 113–185) (IMPACT Act), which requires amount, consistent with other as the Secretary finds appropriate (68 assessment data to be standardized and established hospital prospective FR 48805). Section 3 of the ASCA interoperable to allow for exchange of payment systems, § 412.507 currently operates in the context of the HIPAA the data. Moreover, the vision described provides that an LTCH may not bill a regulations, which include, among other in the Roadmap significantly expands Medicare beneficiary for more than the provisions, the transactions and code the types of electronic health deductible and coinsurance amounts as sets standards requirements codified information, information sources, and specified under §§ 409.82, 409.83, and under 45 CFR parts 160 and 162 information users well beyond clinical 409.87 and for items and services (generally known as the Transactions information derived from EHRs. The specified under § 489.30(a). However, Rule). The Transactions Rule requires Roadmap identifies four critical under the LTCH PPS, Medicare will covered entities, including covered pathways that health IT stakeholders only pay for days for which the health care providers, to conduct certain should focus on now in order to create beneficiary has coverage until the short- electronic health care transactions a foundation for long-term success: (1) stay outlier (SSO) threshold is exceeded. according to the applicable transactions Improve technical standards and If the Medicare payment was for a SSO and code sets standards. implementation guidance for priority case (§ 412.529), and that payment was The Department of Health and Human data domains and associated elements; less than the full LTC–DRG payment Services (HHS) has a number of (2) rapidly shift and align Federal, State, amount because the beneficiary had initiatives designed to encourage and and commercial payment policies from insufficient remaining Medicare days, support the adoption of health fee-for-service to value-based models to the LTCH is currently also permitted to information technology and promote stimulate the demand for

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interoperability; (3) clarify and align 3 days in an intensive care unit (ICU) payment) (80 FR 49767). That is, Federal and State privacy and security (referred to as the ICU criterion) or the currently § 412.503 specifies that a requirements that enable discharge from the LTCH is assigned to subsection (d) hospital means ‘‘for interoperability; and (4) align and a MS–LTC–DRG based on the patient’s purposes of § 412.526,’’ when the promote the use of consistent policies receipt of ventilator services of at least language should have read ‘‘for and business practices that support 96 hours (referred to as the ventilator purposes of § 412.522’’. Therefore, we interoperability and address those that criterion). (We note that, for the are proposing to revise § 412.503 to impede interoperability, in coordination remainder of this section VII. of this correct this cross-reference error. with stakeholders. To support of the preamble, the phrase ‘‘LTCH PPS goals of the Roadmap, ONC released the standard Federal payment rate case’’ C. Proposed Medicare Severity Long- 2016 Interoperability Standards refers to an LTCH PPS case that meets Term Care Diagnosis-Related Group Advisory (available at: https:// the criteria for exclusion from the site (MS–LTC–DRG) Classifications and www.healthit.gov/standards-advisory/ neutral payment rate as specified under Relative Weights for FY 2017 2016), which suggests some of the best § 412.522(a)(2), and the phrase ‘‘site 1. Background neutral payment rate case’’ refers to an available standards, terminology, and Section 123 of the BBRA required that LTCH PPS case that does not meet the implementation guides as well as the Secretary implement a PPS for statutory patient-level criteria as emerging standards to enable priority LTCHs to replace the cost-based specified under § 412.522(a)(1) and, health information exchange functions. payment system under TEFRA. Section therefore, is paid the applicable site Providers, payers, and vendors are 307(b)(1) of the BIPA modified the neutral payment rate.) encouraged to take these ‘‘best available requirements of section 123 of the BBRA standards’’ into account as they 2. Technical Correction of Definition of by requiring that the Secretary examine implement interoperable health ‘‘Subsection (d) Hospital’’ for the Site the feasibility and the impact of basing information exchange across the Neutral Payment Rate (§ 412.503) payment under the LTCH PPS on the continuum of care. In the FY 2016 IPPS/LTCH PPS final use of existing (or refined) hospital B. Proposed Modifications to the rule, we implemented section 1206(a) of DRGs that have been modified to Application of the Site Neutral Payment Public Law 113–67, which established account for different resource use of Rate (§ 412.522) the new dual payment rate structure LTCH patients. When the LTCH PPS was 1. Background under the LTCH PPS that began with LTCH discharges occurring in cost implemented for cost reporting periods Section 1206 of Pathway for SGR reporting periods beginning on or after beginning on or after October 1, 2002, Reform Act (Pub. L. 113–67) mandated October 1, 2015. Section 1206(a) we adopted the same DRG patient significant changes to the LTCH PPS required the establishment of a site classification system utilized at that beginning with LTCH discharges neutral payment rate (as an alternate to time under the IPPS. As a component of occurring in cost reporting periods the LTCH PPS standard Federal the LTCH PPS, we refer to this patient beginning on or after October 1, 2015. payment rate) under the LTCH PPS for classification system as the ‘‘long-term Specifically, section 1206 required the Medicare inpatient LTCH discharges care diagnosis-related groups (LTC– establishment of a site neutral payment that fail to meet certain statutorily DRGs).’’ Although the patient rate (as an alternative to the LTCH PPS defined criteria for exclusion. classification system used under both standard Federal payment rate) for Discharges that meet the statutory the LTCH PPS and the IPPS are the Medicare inpatient discharges from an criteria for exclusion from the site same, the relative weights are different. LTCH that fail to meet certain statutorily neutral payment rate continue to be The established relative weight defined criteria. Discharges that meet paid based on the LTCH PPS standard methodology and data used under the the statutory criteria for exclusion from Federal payment rate. Discharges that LTCH PPS result in relative weights the site neutral payment rate continue to do not meet the statutory criteria for under the LTCH PPS that reflect the be paid based on the LTCH PPS exclusion are paid based on the new site differences in patient resource use of standard Federal payment rate. neutral payment rate. In the FY 2016 LTCH patients, consistent with section Discharges that do not meet the IPPS/LTCH PPS final rule (80 FR 49601 123(a)(1) of the BBRA (Pub. L. 106–113). statutory criteria for exclusion are paid through 49623), we codified the As part of our efforts to better based on the site neutral payment rate. requirements for the application of the recognize severity of illness among We implemented the application of the site neutral payment rate under the patients, in the FY 2008 IPPS final rule site neutral payment rate in the FY 2016 LTCH PPS under the regulations at with comment period (72 FR 47130), the IPPS/LTCH PPS final rule (80 FR 49601 § 412.522. The statutory criteria for MS–DRGs and the Medicare severity through 49623) and codified the exclusion from the site neutral payment long-term care diagnosis-related groups requirements in the regulations at 42 rate include a criterion that requires that (MS–LTC–DRGs) were adopted under CFR 412.522. The criteria for exclusion the admission to the LTCH was the IPPS and the LTCH PPS, from the site neutral payment rate immediately preceded by discharge respectively, effective beginning specified under section from a ‘‘subsection (d) hospital.’’ To October 1, 2007 (FY 2008). For a full 1886(m)(6)(A)(ii) of the Act and as implement this criterion for purposes of description of the development, implemented at § 412.522(b) are as the application of the site neutral implementation, and rationale for the follows: (1) The discharge from the payment rate under § 412.522, we added use of the MS–DRGs and MS–LTC– LTCH does not have a principal a definition of a ‘‘subsection (d) DRGs, we refer readers to the FY 2008 diagnosis relating to a psychiatric hospital’’ under § 412.503 of the IPPS final rule with comment period (72 diagnosis or to rehabilitation; (2) regulations. However, we made an FR 47141 through 47175 and 47277 admission to the LTCH was inadvertent cross-reference error under through 47299). (We note that, in that immediately preceded by discharge § 412.503 by referencing ‘‘§ 412.526’’ same final rule, we revised the from a subsection (d) hospital; and (3) (payment provisions to a subclause II regulations at § 412.503 to specify that the immediately preceding stay in a LTCH) instead of referencing for LTCH discharges occurring on or subsection (d) hospital included at least ‘‘§ 412.522’’ (application of site neutral after October 1, 2007, when applying

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the provisions of 42 CFR part 412, the relative weights (80 FR 49624). That (We discuss each of these components subpart O applicable to LTCHs for is, under our current methodology, the of our MS–LTC–DRG relative weight policy descriptions and payment MS–LTC–DRG relative weights are not methodology in greater detail in section calculations, all references to LTC– used to determine the LTCH PPS VII.C.3.g. of the preamble of this DRGs would be considered a reference payment for cases paid at the site proposed rule.) to MS–LTC–DRGs. For the remainder of neutral payment rate under 2. Patient Classifications Into MS–LTC– this section, we present the discussion § 412.522(c)(1) and data from cases paid DRGs in terms of the current MS–LTC–DRG at the site neutral payment rate or that patient classification system unless would have been paid at the site neutral a. Background specifically referring to the previous payment rate if the dual rate LTCH PPS The MS–DRGs (used under the IPPS) LTC–DRG patient classification system payment structure had been in effect are and the MS–LTC–DRGs (used under the that was in effect before October 1, not used to develop the relative weights. LTCH PPS) are based on the CMS DRG 2007.) For the remainder of this discussion, we structure. As noted previously in this The MS–DRGs adopted in FY 2008 use the phrase ‘‘applicable LTCH cases’’ section, we refer to the DRGs under the represent an increase in the number of or ‘‘applicable LTCH data’’ when LTCH PPS as MS–LTC–DRGs although DRGs by 207 (that is, from 538 to 745) referring to the resulting claims data set they are structurally identical to the (72 FR 47171). The MS–DRG used to calculate the relative weights (as MS–DRGs used under the IPPS. classifications are updated annually. described later in greater detail in The MS–DRGs are organized into 25 There are currently 758 MS–DRG section VII.C.3.c. of the preamble of this major diagnostic categories (MDCs), groupings. For FY 2017, there are 757 proposed rule). In addition, we are most of which are based on a particular MS–DRG groupings that we are proposing to continue to exclude the organ system of the body; the remainder proposing in conjunction with all of the data from all-inclusive rate providers involve multiple organ systems (such as changes discussed in section II.F. of the and LTCHs paid in accordance with MDC 22, Burns). Within most MDCs, preamble of this proposed rule. demonstration projects, as well as any cases are then divided into surgical Consistent with section 123 of the Medicare Advantage claims from the DRGs and medical DRGs. Surgical DRGs BBRA, as amended by section 307(b)(1) MS–LTC–DRG relative weight are assigned based on a surgical of the BIPA, and § 412.515 of the calculations for the reasons discussed in hierarchy that orders operating room regulations, we use information derived section VII.C.3.c. of the preamble of this (O.R.) procedures or groups of O.R. from LTCH PPS patient records to proposed rule. procedures by resource intensity. The classify LTCH discharges into distinct GROUPER software program does not MS–LTC–DRGs based on clinical Furthermore, for FY 2017, in using data from applicable LTCH cases to recognize all ICD–10–PCS procedure characteristics and estimated resource codes as procedures affecting DRG needs. We then assign an appropriate establish proposed MS–LTC–DRG relative weights, we are proposing to assignment. That is, procedures that are weight to the MS–LTC–DRGs to account not surgical (for example, EKGs), or for the difference in resource use by continue to establish low-volume MS– LTC–DRGs (that is, MS–LTC–DRGs with minor surgical procedures (for example, patients exhibiting the case complexity a biopsy of skin and subcutaneous and multiple medical problems less than 25 cases) using our quintile methodology in determining the tissue (procedure code 86.11)) do not characteristic of LTCHs. In this section affect the MS–LTC–DRG assignment of the proposed rule, we provide a proposed MS–LTC–DRG relative weights because LTCHs do not typically based on their presence on the claim. general summary of our existing Generally, under the LTCH PPS, a methodology for determining the treat the full range of diagnoses as do acute care hospitals. Therefore, for Medicare payment is made at a proposed FY 2017 MS–LTC–DRG predetermined specific rate for each relative weights under the LTCH PPS. purposes of determining the proposed relative weights for the large number of discharge and that payment varies by In this proposed rule, in general, for the MS–LTC–DRG to which a FY 2017, we are using our existing low-volume MS–LTC–DRGs, we are proposing to group all of the low- beneficiary’s stay is assigned. Cases are methodology to determine the MS– classified into MS–LTC–DRGs for LTC–DRG relative weights (as discussed volume MS–LTC–DRGs into five quintiles based on average charges per payment based on the following six data in greater detail in section VII.C.3. of the elements: preamble of this proposed rule). As we discharge. Then, under our existing • methodology, we are proposing to Principal diagnosis; established when we implemented the • Additional or secondary diagnoses; dual rate LTCH PPS payment structure account for adjustments made to LTCH • Surgical procedures; codified under § 412.522, beginning PPS standard Federal payments for • Age; with FY 2016, the annual recalibration short-stay outlier (SSO) cases (that is, • Sex; and of the MS–LTC–DRG relative weights cases where the covered length of stay • Discharge status of the patient. are determined: (1) Using only data from at the LTCH is less than or equal to five- Currently, for claims submitted on the available LTCH PPS claims that would sixths of the geometric average length of 5010 format, up to 25 diagnosis codes have qualified for payment under the stay for the MS–LTC–DRG), and we are and 25 procedure codes are considered new LTCH PPS standard Federal proposing to make adjustments to for an MS–DRG assignment. This payment rate if that rate were in effect account for nonmonotonically includes one principal diagnosis and up when claims data from time periods increasing weights, when necessary. to 24 secondary diagnoses for severity of before the dual rate LTCH PPS payment The methodology is premised on more illness determinations. (For additional structure applies were used to calculate severe cases under the MS–LTC–DRG information on the processing of up to the relative weights; and (2) using only system requiring greater expenditure of 25 diagnosis codes and 25 procedure data from available LTCH PPS claims medical care resources and higher codes on hospital inpatient claims, we that qualify for payment under the new average charges such that, in the refer readers to section II.G.11.c. of the LTCH PPS standard Federal payment severity levels within a base MS–LTC– preamble of the FY 2011 IPPS/LTCH rate when claims data from time periods DRG, the relative weights should PPS final rule (75 FR 50127).) after the dual rate LTCH PPS payment increase monotonically with severity Under HIPAA transactions and code structure applies are used to calculate from the lowest to highest severity level. sets regulations at 45 CFR parts 160 and

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162, covered entities must comply with MS–LTC–DRG can be made. During this proposed MS–LTC–DRG) assignments the adopted transaction standards and process, certain cases are selected for under GROUPER Version 34.0 as operating rules specified in Subparts I further development (74 FR 43949). discussed in section II.G. of the through S of Part 162. Among other After screening through the MCE, preamble of this proposed rule, requirements, by January 1, 2012, each claim is classified into the including the proposed changes to the covered entities were required to use the appropriate MS–LTC–DRG by the MCE software and the ICD–10–CM/PCS ASC X12 Standards for Electronic Data Medicare LTCH GROUPER software on coding system, also would be applicable Interchange Technical Report Type 3— the basis of diagnosis and procedure under the LTCH PPS for FY 2017. (We Health Care Claim: Institutional (837), codes and other demographic note the GROUPER Version 34 is based May 2006, ASC X12N/005010X223, and information (age, sex, and discharge on ICD–10–CM/PCS diagnoses and Type 1 Errata to Health Care Claim: status). The GROUPER software used procedure codes, consistent with the Institutional (837) ASC X12 Standards under the LTCH PPS is the same requirement to use ICD–10 beginning for Electronic Data Interchange GROUPER software program used under October 1, 2015.) Technical Report Type 3, October 2007, the IPPS. Following the MS–LTC–DRG ASC X12N/005010X233A1 for the assignment, the Medicare contractor 3. Development of the Proposed FY health care claims or equivalent determines the prospective payment 2017 MS–LTC–DRG Relative Weights encounter information transaction (45 amount by using the Medicare PRICER a. General Overview of the Development CFR 162.1102(c)). program, which accounts for hospital- of the MS–LTC–DRG Relative Weights HIPAA requires covered entities to specific adjustments. Under the LTCH One of the primary goals for the use the applicable medical data code set PPS, we provide an opportunity for implementation of the LTCH PPS is to requirements when conducting HIPAA LTCHs to review the MS–LTC–DRG pay each LTCH an appropriate amount transactions (45 CFR 162.1000). assignments made by the Medicare for the efficient delivery of medical care Currently, upon the discharge of the contractor and to submit additional to Medicare patients. The system must patient, the LTCH must assign information within a specified appropriate diagnosis and procedure timeframe as provided in § 412.513(c). be able to account adequately for each codes from the most current version of The GROUPER software is used both LTCH’s case-mix in order to ensure both the Internal Classification of Diseases, to classify past cases to measure relative fair distribution of Medicare payments 10th Revision, Clinical Modification hospital resource consumption to and access to adequate care for those (ICD–10–CM) for diagnosis coding and establish the MS–LTC–DRG relative Medicare patients whose care is more the International Classification of weights and to classify current cases for costly (67 FR 55984). To accomplish Diseases, 10th Revision, Procedure purposes of determining payment. The these goals, we have annually adjusted Coding System (ICD–10–PCS) for records for all Medicare hospital the LTCH PPS standard Federal inpatient hospital procedure coding, inpatient discharges are maintained in prospective payment system rate by the both of which became effective October the MedPAR file. The data in this file applicable relative weight in 1, 2015 (45 CFR 162.1002(c)(2) and (3)). are used to evaluate possible MS–DRG determining payment to LTCHs for each For additional information on the and MS–LTC–DRG classification case. In order to make these annual implementation of the ICD–10 coding changes and to recalibrate the MS–DRG adjustments under the dual rate LTCH system, we refer readers to section and MS–LTC–DRG relative weights PPS payment structure, beginning with II.F.1. of the preamble of this proposed during our annual update under both FY 2016, we recalibrate the MS–LTC– rule. Additional coding instructions and the IPPS (§ 412.60(e)) and the LTCH PPS DRG relative weighting factors annually examples are published in the AHA’s (§ 412.517), respectively. using data from applicable LTCH cases (80 FR 49614 through 49617). Under Coding Clinic for ICD–10–CM/PCS. b. Proposed Changes to the MS–LTC– To create the MS–DRGs (and by this policy, the resulting MS–LTC–DRG DRGs for FY 2017 extension, the MS–LTC–DRGs), base relative weights would continue to be DRGs were subdivided according to the As specified by our regulations at used to adjust the LTCH PPS standard presence of specific secondary § 412.517(a), which require that the MS– Federal payment rate when calculating diagnoses designated as complications LTC–DRG classifications and relative the payment for LTCH PPS standard or comorbidities (CCs) into one, two, or weights be updated annually, and Federal payment rate cases. three levels of severity, depending on consistent with our historical practice of The established methodology to the impact of the CCs on resources used using the same patient classification develop the proposed MS–LTC–DRG for those cases. Specifically, there are system under the LTCH PPS as is used relative weights is generally consistent sets of MS–DRGs that are split into 2 or under the IPPS, we are proposing to with the methodology established when 3 subgroups based on the presence or update the MS–LTC–DRG classifications the LTCH PPS was implemented in the absence of a CC or a major complication effective October 1, 2016, through August 30, 2002 LTCH PPS final rule or comorbidity (MCC). We refer readers September 30, 2017 (FY 2017), (67 FR 55989 through 55991). However, to section II.D. of the FY 2008 IPPS final consistent with the proposed changes to there have been some modifications of rule with comment period for a detailed specific MS–DRG classifications our historical procedures for assigning discussion about the creation of MS– presented in section II.F. of the relative weights in cases of zero volume DRGs based on severity of illness levels preamble of this proposed rule. and/or nonmonotonicity resulting from (72 FR 47141 through 47175). Accordingly, the proposed MS–LTC– the adoption of the MS–LTC–DRGs, MACs enter the clinical and DRGs for FY 2017 presented in this along with the change made in demographic information submitted by proposed rule are the same as the conjunction with the implementation of LTCHs into their claims processing proposed MS–DRGs that would be used the dual rate LTCH PPS payment systems and subject this information to under the IPPS for FY 2017. In addition, structure beginning in FY 21016 to use a series of automated screening because the proposed MS–LTC–DRGs LTCH claims data from only LTCH PPS processes called the Medicare Code for FY 2017 are the same as the standard Federal payment rate cases (or Editor (MCE). These screens are proposed MS–DRGs for FY 2017, the LTCH PPS cases that would have designed to identify cases that require other proposed changes that affect qualified for payment under the LTCH further review before assignment into a proposed MS–DRG (and by extension PPS standard Federal payment rate if

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the dual rate LTCH PPS payment the proposed MS–LTC–DRG relative MedPAR file that reported ICD–9–CM structure were in effect at the time of the weights for FY 2017, and we discuss the procedure code 96.72 were used to discharge) that began in FY 2016. (For effects of our proposed policies identify cases involving at least 96 details on the modifications to our concerning the data used to determine hours of ventilator services in historical procedures for assigning the proposed FY 2017 MS–LTC–DRG accordance with the ventilator criterion relative weights in cases of zero volume relative weights on the various (as FY 2015 discharges occurred prior to and/or nonmonotonicity, we refer components of our existing the adoption of ICD–10–CM/PCS). (We readers to the FY 2008 IPPS final rule methodology in the discussion that note that the corresponding ICD–10– with comment period (72 FR 47289 follows. PCS code for cases involving at least 94 through 47295) and the FY 2009 IPPS hours of ventilation services is c. Data final rule (73 FR 48542 through 48550). 5A1955Z, effective October 1, 2016) (80 For details on the change in our For this proposed rule, to calculate FR 49626 through 49627). We note that, historical methodology to use LTCH the proposed MS–LTC–DRG relative for purposes of developing the proposed claims data only from LTCH PPS weights for FY 2017, we obtained total FY 2017 MS–LTC–DRG relative weights standard Federal payment rate cases to charges from FY 2015 Medicare LTCH using our current methodology, we did determine the MS–LTC–DRG relative claims data from the December 2015 not identify any cases that would have weights, we refer readers to the FY 2016 update of the FY 2015 MedPAR file, been excluded from the site neutral IPPS/LTCH PPS final rule (80 FR 49614 which are the best available data at this payment rate under the temporary through 49617). Under the LTCH PPS, time, and we are proposing to use statutory provision for certain wound relative weights for each MS–LTC–DRG Version 34 of the GROUPER to classify care discharges from certain LTCHs are a primary element used to account LTCH cases. Consistent with our provided by Public Law 114–113 had for the variations in cost per discharge historical practice, we use those data the dual rate LTCH PPS payment and resource utilization among the and the proposed Version 34 of the MS– structure been in effect at the time of the payment groups (§ 412.515). To ensure LTC–DRGs in establishing the proposed discharge. At this time, it is uncertain that Medicare patients classified to each FY 2017 MS–LTC–DRG relative weights how many LTCHs and how many cases MS–LTC–DRG have access to an in this proposed rule. To calculate the in the claims data we are using for this appropriate level of services and to proposed FY 2017 MS–LTC–DRG proposed rule would have met the encourage efficiency, we calculate a relative weights under the dual rate statutory criteria to be excluded from relative weight for each MS–LTC–DRG LTCH PPS payment structure, we are the site neutral payment rate under that that represents the resources needed by proposing to continue to use applicable statutory provision (had the dual rate an average inpatient LTCH case in that LTCH data, which includes our policy LTCH PPS payment structure been in MS–LTC–DRG. For example, cases in an of only using cases that meet the criteria effect at the time of the discharge). MS–LTC–DRG with a relative weight of for exclusion from the site neutral Therefore, for the remainder of this 2 would, on average, cost twice as much payment rate (or would have met the section, when we refer to LTCH claims to treat as cases in an MS–LTC–DRG criteria had they been in effect at the only from cases that meet the criteria for with a relative weight of 1. time of the discharge) (80 FR 49624). exclusion from the site neutral payment Specifically, we are proposing to begin rate (or would meet the criteria had they b. Development of the Proposed MS– by first evaluating the LTCH claims data been in effect at the time of the LTC–DRG Relative Weights for FY 2017 in the December 2015 update of the FY discharge), such data do not include any In the FY 2016 IPPS/LTCH PPS final 2015 MedPAR file to determine which cases that would have been paid based rule (80 FR 49625 through 49634), we LTCH cases would meet the criteria for on the LTCH PPS standard Federal presented our policies for the exclusion from the site neutral payment payment rate under the provisions of development of the MS–LTC–DRG rate under § 412.522(b) had the dual rate section 231 of Public Law 114–113, had relative weights for FY 2016. LTCH PPS payment structure been in the dual rate LTCH PPS payment In this proposed rule, we are effect at the time of discharge. We structure been in effect at the time of the proposing to continue to use our current identified the FY 2015 LTCH cases that discharge. methodology to determine the MS– were not assigned to proposed MS– Then, consistent with our historical LTC–DRG relative weights for FY 2017, LTC–DRGs 876, 880, 881, 882, 883, 884, methodology, we are proposing to including the application of established 885, 886, 887, 894, 895, 896, 897, 945 exclude any claims in the resulting data policies related to, the hospital-specific and 946, which identify LTCH cases set that were submitted by LTCHs that relative value methodology, the that do not have a principal diagnosis are all-inclusive rate providers and treatment of severity levels in the MS– relating to a psychiatric diagnosis or to LTCHs that are reimbursed in LTC–DRGs, low-volume and no-volume rehabilitation; and that either— accordance with demonstration projects MS–LTC–DRGs, adjustments for • The admission to the LTCH was authorized under section 402(a) of nonmonotonicity, the steps for ‘‘immediately preceded’’ by discharge Public Law 90–248 or section 222(a) of calculating the MS–LTC–DRG relative from a subsection (d) hospital and the Public Law 92–603. In addition, weights with a budget neutrality factor, immediately preceding stay in that consistent with our historical practice, and only using data from applicable subsection (d) hospital included at least we would exclude the Medicare LTCH cases (which includes our policy 3 days in an ICU, as we define under the Advantage (Part C) claims that were in of only using cases that would meet the ICU criterion; or the resulting data set based on the criteria for exclusion from the site • The admission to the LTCH was presence of a GHO Paid indicator value neutral payment rate (or, for discharges ‘‘immediately preceded’’ by discharge of ‘‘1’’ in the MedPAR files. The claims occurring prior to the implementation of from a subsection (d) hospital and the that remained after these three trims the dual rate LTCH PPS payment claim for the LTCH discharge includes (that is, the applicable LTCH data) were structure, would have met the criteria the applicable procedure code that then used to calculate the proposed for exclusion had those criteria been in indicates at least 96 hours of ventilator MS–LTC–DRG relative weights for FY effect at the time of the discharge)). services were provided during the LTCH 2017. In this section, we present our stay, as we define under the ventilator In summary, in general, in identifying proposed methodology for determining criterion. Claims data from the FY 2015 the claims data for the development of

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the proposed FY 2017 MS–LTC–DRG The average relative weight for a LTCH e. Treatment of Severity Levels in relative weights in this proposed rule, is its case-mix; therefore, it is reasonable Developing the Proposed MS–LTC–DRG we are proposing to use claims data to scale each LTCH’s average relative Relative Weights after we trim the claims data of 10 all- charge value by its case-mix. In this For purposes of determining the inclusive rate providers reported in the way, each LTCH’s relative charge value proposed MS–LTC–DRG relative December 2015 update of the FY 2015 is adjusted by its case-mix to an average weights, under our historical MedPAR file, as well as any Medicare that reflects the complexity of the methodology, there are three different Advantage claims data for cases that applicable LTCH cases it treats relative categories of MS–DRGs based on would meet the criteria for exclusion to the complexity of the applicable volume of cases within specific MS– from the site neutral payment rate under LTCH cases treated by all other LTCHs LTC–DRGs: (1) MS–LTC–DRGs with at § 412.522(b) if the dual rate LTCH PPS (the average LTCH PPS case-mix of all least 25 applicable LTCH cases in the payment structure were in effect at the data used to calculate the relative time of discharge. (We note that there applicable LTCH cases across all weight, which are each assigned a were no data from any LTCHs that are LTCHs). unique relative weight; (2) low-volume paid in accordance with a In accordance with our established MS–LTC–DRGs (that is, MS–LTC–DRGs demonstration project reported in the methodology, for FY 2017, we are that contain between 1 and 24 December 2015 update of the FY 2015 proposing to continue to standardize applicable LTCH cases that are grouped MedPAR file. However, had there been charges for each applicable LTCH case into quintiles (as described later in this we would trim the claims data from by first dividing the adjusted charge for those LTCHs as well, in accordance section of the proposed rule) and the case (adjusted for SSOs under assigned the relative weight of the with our established policy.) We would § 412.529 as described in section use the remaining data (that is, the quintile; and (3) no-volume MS–LTC– VII.C.3.g. (Step 3) of the preamble of this DRGs that are cross-walked to other applicable LTCH data) to calculate the proposed rule) by the average adjusted proposed relative weights for FY 2017. MS–LTC–DRGs based on the clinical charge for all applicable LTCH cases at similarities and assigned the relative d. Hospital-Specific Relative Value the LTCH in which the case was treated. weight of the cross-walked MS–LTC– (HSRV) Methodology SSO cases are cases with a length of stay DRG (as described in greater detail By nature, LTCHs often specialize in that is less than or equal to five-sixths below). For FY 2017, we are proposing certain areas, such as ventilator- the average length of stay of the MS– to continue to use applicable LTCH dependent patients. Some case types LTC–DRG (§ 412.529 and § 412.503). cases to establish the same volume- (MS–LTC–DRGs) may be treated, to a The average adjusted charge reflects the based categories to calculate the large extent, in hospitals that have, from average intensity of the health care proposed FY 2017 MS–LTC–DRG a perspective of charges, relatively high services delivered by a particular LTCH relative weights. (or low) charges. This nonrandom and the average cost level of that LTCH. In determining the proposed FY 2017 distribution of cases with relatively high The resulting ratio would be multiplied MS–LTC–DRG relative weights, when (or low) charges in specific MS–LTC– by that LTCH’s case-mix index to necessary, we are proposing to make DRGs has the potential to determine the standardized charge for adjustments to account for inappropriately distort the measure of the case. nonmonotonicity, as discussed in average charges. To account for the fact greater detail later in Step 6 of section that cases may not be randomly Multiplying the resulting ratio by the VII.C.3.g. of the preamble of this distributed across LTCHs, consistent LTCH’s case-mix index accounts for the proposed rule. We refer readers to the with the methodology we have used fact that the same relative charges are discussion in the FY 2010 IPPS/RY 2010 since the implementation of the LTCH given greater weight at a LTCH with LTCH PPS final rule for our rationale for PPS, we are proposing to continue to higher average costs than they would at including an adjustment for use a hospital-specific relative value a LTCH with low average costs, which nonmonotonicity (74 FR 43953 through (HSRV) methodology to calculate the is needed to adjust each LTCH’s relative 43954). proposed MS–LTC–DRG relative charge value to reflect its case-mix f. Proposed Low-Volume MS–LTC– weights for FY 2017. We believe that relative to the average case-mix for all DRGs this method removes this hospital- LTCHs. By standardizing charges in this specific source of bias in measuring manner, we count charges for a In order to account for MS–LTC– LTCH average charges (67 FR 55985). Medicare patient at a LTCH with high DRGs with low-volume (that is, with Specifically, under this methodology, average charges as less resource fewer than 25 applicable LTCH cases), we are reducing the impact of the intensive than they would be at a LTCH consistent with our existing variation in charges across providers on with low average charges. For example, methodology, we are proposing to any particular MS–LTC–DRG relative a $10,000 charge for a case at a LTCH continue to employ the quintile weight by converting each LTCH’s with an average adjusted charge of methodology for proposed low-volume MS–LTC–DRGs, such that we grouped charge for an applicable LTCH case to $17,500 reflects a higher level of relative a relative value based on that LTCH’s the ‘‘low-volume MS–LTC–DRGs’’ (that resource use than a $10,000 charge for average charge for such cases. is, proposed MS–LTC–DRGs that Under the HSRV methodology, we a case at a LTCH with the same case- contained between 1 and 24 applicable standardize charges for each LTCH by mix, but an average adjusted charge of LTCH cases into one of five categories converting its charges for each $35,000. We believe that the adjusted (quintiles) based on average charges (67 applicable LTCH case to hospital- charge of an individual case more FR 55984 through 55995; 72 FR 47283 specific relative charge values and then accurately reflects actual resource use through 47288; and 80 FR 49628). In adjusting those values for the LTCH’s for an individual LTCH because the cases where the initial assignment of a case-mix. The adjustment for case-mix variation in charges due to systematic low-volume MS–LTC–DRG to a quintile is needed to rescale the hospital-specific differences in the markup of charges resulted in nonmonotonicity within a relative charge values (which, by among LTCHs is taken into account. base-DRG, we are proposing to make definition, average 1.0 for each LTCH). adjustments to the resulting low-volume

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MS–LTC–DRGs to preserve weight and (geometric) average length of cases with a length of stay of 7 days or monotonicity, as discussed in detail in stay for each of the five proposed low- less. The MS–LTC–DRG relative weights section VII.C.3.g. (Step 6) of the volume quintiles using the methodology reflect the average of resources used on preamble of this proposed rule. described in section VII.C.3.g. of the representative cases of a specific type. In this proposed rule, based on the preamble of this proposed rule. We are Generally, cases with a length of stay of best available data (that is, the proposing to assign the same proposed 7 days or less do not belong in a LTCH December 2015 update of the FY 2015 relative weight and average length of because these stays do not fully receive MedPAR files), we identified 259 stay to each of the proposed low-volume or benefit from treatment that is typical proposed MS–LTC–DRGs that contained MS–LTC–DRGs that make up an in a LTCH stay, and full resources are between 1 and 24 applicable LTCH individual low-volume quintile. We often not used in the earlier stages of cases. This list of proposed MS–LTC– note that, as this system is dynamic, it admission to a LTCH. If we were to DRGs was then divided into one of the is possible that the number and specific include stays of 7 days or less in the 5 low-volume quintiles, each containing type of MS–LTC–DRGs with a low- computation of the proposed FY 2017 51 proposed MS–LTC–DRGs (259/5 = volume of applicable LTCH cases would MS–LTC–DRG relative weights, the 51, with a remainder of 4). We assigned vary in the future. Furthermore, we note value of many relative weights would the proposed low-volume MS–LTC– that we continue to monitor the volume decrease and, therefore, payments DRGs to specific low-volume quintiles (that is, the number of applicable LTCH would decrease to a level that may no by sorting the proposed low-volume cases) in the low-volume quintiles to longer be appropriate. We do not believe MS–LTC–DRGs in ascending order by ensure that our quintile assignments that it would be appropriate to average charge in accordance with our used in determining the MS–LTC–DRG compromise the integrity of the established methodology. Based on the relative weights result in appropriate payment determination for those LTCH data available for the proposed rule, the payment for LTCH cases grouped to cases that actually benefit from and number of proposed MS–LTC–DRGs low-volume MS–LTC–DRGs and do not receive a full course of treatment at a with less than 25 applicable LTCH cases result in an unintended financial LTCH by including data from these very is not evenly divisible by 5. Therefore, incentive for LTCHs to inappropriately short stays. Therefore, consistent with we are proposing to employ our admit these types of cases. our existing relative weight historical methodology for determining methodology, in determining the g. Steps for Determining the Proposed which of the low-volume quintiles proposed FY 2017 MS–LTC–DRG FY 2017 MS–LTC–DRG Relative contain the additional proposed low- relative weights, we are proposing to Weights volume MS–LTC–DRG. Specifically for remove LTCH cases with a length of stay this proposed rule, after organizing the In this proposed rule, we are of 7 days or less from applicable LTCH proposed MS–LTC–DRGs by ascending proposing to continue to use our current cases. (For additional information on order by average charge, we assigned the methodology to determine the proposed what is removed in this step of the first 51st (1st through 51st) of proposed FY 2017 MS–LTC–DRG relative weights. relative weight methodology, we refer low-volume MS–LTC–DRGs (with the In summary, to determine the readers to 67 FR 55989 and 74 FR lowest average charge) into Quintile 1. proposed FY 2017 MS–LTC–DRG 43959.) The 51 proposed MS–LTC–DRGs with relative weights, we are proposing to Step 2—Remove statistical outliers. the highest average charge cases were group applicable LTCH cases to the The next step in our calculation of the assigned into Quintile 5. Because the appropriate proposed MS–LTC–DRG, proposed FY 2017 MS–LTC–DRG average charge of the 52nd proposed while taking into account the proposed relative weights would be to remove low-volume MS–LTC–DRG in the sorted low-volume quintiles (as described statistical outlier cases from the LTCH list was closer to the average charge of above) and proposed cross-walked no- cases with a length of stay of at least 8 the 51st proposed low-volume MS– volume MS–LTC–DRGs (as described days. Consistent with our existing LTC–DRG (assigned to Quintile 1) than later in this section). After establishing relative weight methodology, we are to the average charge of the 53rd the appropriate proposed MS–LTC–DRG proposing to continue to define proposed low-volume MS–LTC–DRG (or proposed low-volume quintile), we statistical outliers as cases that are (assigned to Quintile 2), we assigned it calculate the proposed FY 2017 relative outside of 3.0 standard deviations from to Quintile 1 (such that Quintile 1 weights by first removing cases with a the mean of the log distribution of both contains 52 proposed low-volume MS– length of stay of 7 days or less and charges per case and the charges per day LTC–DRGs before any adjustments for statistical outliers (Steps 1 and 2 below). for each MS–LTC–DRG. These statistical nonmonotonicity, as discussed below). Next, we adjust the number of outliers are removed prior to calculating This results in 4 of the 5 proposed low- applicable LTCH cases in each proposed the relative weights because we believe volume quintiles containing 52 MS–LTC–DRG (or proposed low-volume that they may represent aberrations in proposed MS–LTC–DRGs (Quintiles 1, quintile) for the effect of SSO cases the data that distort the measure of 2, 3 and 4) and one proposed low- (Step 3 below). After removing average resource use. Including those volume quintile containing 51 proposed applicable LTCH cases with a length of LTCH cases in the calculation of the MS–LTC–DRGs (Quintile 5). Table 13A, stay of 7 days or less (Step 1 below) and relative weights could result in an listed in section VI. of the Addendum to statistical outliers (Step 2 below), which inaccurate relative weight that does not this proposed rule and available via the are the SSO-adjusted applicable LTCH truly reflect relative resource use among Internet on the CMS Web site, lists the cases and corresponding charges (step 3 those MS–LTC–DRGs. (For additional composition of the proposed low- below), we calculate ‘‘relative adjusted information on what is removed in this volume quintiles for MS–LTC–DRGs for weights’’ for each proposed MS–LTC– step of the relative weight methodology, FY 2017. DRG (or low-volume quintile) using the we refer readers to 67 FR 55989 and 74 In order to determine the proposed FY HSRV method. FR 43959.) After removing cases with a 2017 relative weights for the proposed Step 1—Remove cases with a length length of stay of 7 days or less and low-volume MS–LTC–DRGs, we are of stay of 7 days or less. statistical outliers, we are left with proposing to use the five proposed low- The first step in our calculation of the applicable LTCH cases that have a volume quintiles described previously. proposed FY 2017 MS–LTC–DRG length of stay greater than or equal to 8 We determined a proposed relative relative weights would be to remove days. In this proposed rule, we refer to

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these cases as ‘‘trimmed applicable then would be multiplied by the LTCH’s diagnosis related to a psychiatric LTCH cases.’’ case-mix index to produce an adjusted diagnosis or rehabilitation (referred to as Step 3—Adjust charges for the effects hospital-specific relative charge value the ‘‘psychiatric or rehabilitation’’ MS– of SSOs. for the case. We use an initial case-mix LTC–DRGs), as discussed later in this As the next step in the calculation of index value of 1.0 for each LTCH. section of the proposed rule). (For the proposed FY 2017 MS–LTC–DRG For each proposed MS–LTC–DRG, we additional information on this step of relative weights, consistent with our would calculate the proposed FY 2017 the relative weight methodology, we historical approach, we are proposing to relative weight by dividing the SSO- refer readers to 67 FR 55991 and 74 FR adjust each LTCH’s charges per adjusted average of the hospital-specific 43959 through 43960.) discharge for those remaining cases (that relative charge values for applicable We are proposing to cross-walk each is, trimmed applicable LTCH cases) for LTCH cases for the proposed MS–LTC– no-volume proposed MS–LTC–DRG to the effects of SSOs (as defined in DRG (that is, the sum of the hospital- another proposed MS–LTC–DRG for § 412.529(a) in conjunction with specific relative charge value from which we would calculate a proposed § 412.503). Specifically, we are above divided by the sum of equivalent relative weight (determined in proposing to make this adjustment by cases from Step 3 for each proposed accordance with the methodology counting an SSO case as a fraction of a MS–LTC–DRG) by the overall SSO- described above). Then, the ‘‘no- discharge based on the ratio of the adjusted average hospital-specific volume’’ proposed MS–LTC–DRG length of stay of the case to the average relative charge value across all would be assigned the same proposed length of stay for the MS–LTC–DRG for applicable LTCH cases for all LTCHs relative weight (and average length of non-SSO cases. This has the effect of (that is, the sum of the hospital-specific stay) of the proposed MS–LTC–DRG to proportionately reducing the impact of relative charge value from above which it was cross-walked (as described the lower charges for the SSO cases in divided by the sum of equivalent in greater detail in this section of the calculating the average charge for the applicable LTCH cases from Step 3 for proposed rule). MS–LTC–DRG. This process produces each proposed MS–LTC–DRG). Using Of the 757 proposed MS–LTC–DRGs the same result as if the actual charges these recalculated MS–LTC–DRG for FY 2017, we identified 358 proposed per discharge of an SSO case were relative weights, each LTCH’s average MS–LTC–DRGs for which there are no adjusted to what they would have been relative weight for all of its SSO- trimmed applicable LTCH cases (the had the patient’s length of stay been adjusted trimmed applicable LTCH number identified includes the 8 equal to the average length of stay of the cases (that is, its case-mix) would be ‘‘transplant’’ proposed MS–LTC–DRGs, MS–LTC–DRG. calculated by dividing the sum of all the the 2 ‘‘error’’ proposed MS–LTC–DRGs, Counting SSO cases as full LTCH LTCH’s MS–LTC–DRG relative weights and the 15 ‘‘psychiatric or cases with no adjustment in by its total number of SSO-adjusted rehabilitation’’ proposed MS–LTC– determining the proposed FY 2017 MS– trimmed applicable LTCH cases. The DRGs, which are discussed below). We LTC–DRG relative weights would lower LTCHs’ hospital-specific relative charge are proposing to assign proposed the proposed FY 2017 MS–LTC–DRG values (from previous) were then relative weights to each of the 333 no- relative weight for affected proposed multiplied by the hospital-specific case- volume proposed MS–LTC–DRGs that MS–LTC–DRGs because the relatively mix indexes. The hospital-specific case- contained trimmed applicable LTCH lower charges of the SSO cases would mix adjusted relative charge values cases based on clinical similarity and bring down the average charge for all would then be used to calculate a new relative costliness to one of the cases within a proposed MS–LTC–DRG. set of MS–LTC–DRG relative weights remaining 399 (757¥358 = 399) This would result in an across all LTCHs. This iterative process proposed MS–LTC–DRGs for which we ‘‘underpayment’’ for non-SSO cases and continues until there is convergence would calculate proposed relative an ‘‘overpayment’’ for SSO cases. between the relative weights produced weights based on the trimmed Therefore, we are proposing to continue at adjacent steps, for example, when the applicable LTCH cases in the FY 2015 to adjust for SSO cases under § 412.529 maximum difference was less than MedPAR file data using the steps in this manner because it would results 0.0001. described previously. (For the in more appropriate payments for all Step 5—Determine a proposed FY remainder of this discussion, we refer to LTCH PPS standard Federal payment 2017 relative weight for MS–LTC–DRGs the ‘‘cross-walked’’ proposed MS–LTC– rate cases. (For additional information with no applicable LTCH cases. DRGs as the proposed MS–LTC–DRGs to on this step of the relative weight Using the trimmed applicable LTCH which we cross-walked one of the 333 methodology, we refer readers to 67 FR cases, we are proposing to identify the ‘‘no volume’’ proposed MS–LTC–DRGs.) 55989 and 74 FR 43959.) proposed MS–LTC–DRGs for which Then, we generally assigned the 333 no- Step 4—Calculate the proposed FY there were no claims in the December volume proposed MS–LTC–DRG the 2017 MS–LTC–DRG relative weights on 2015 update of the FY 2015 MedPAR proposed relative weight of the cross- an iterative basis. file and, therefore, for which no charge walked proposed MS–LTC–DRG. (As Consistent with our historical relative data was available for these proposed explained below in Step 6, when weight methodology, we are proposing MS–LTC–DRGs. Because patients with a necessary, we made adjustments to to calculate the proposed FY 2017 MS– number of the diagnoses under those account for nonmonotonicity.) LTC–DRG relative weights using the proposed MS–LTC–DRGs may be We are proposing to cross-walk the HSRV methodology, which is an treated at LTCHs, consistent with our no-volume proposed MS–LTC–DRG to a iterative process. First, for each SSO- historical methodology, we would proposed MS–LTC–DRG for which we adjusted trimmed applicable LTCH case, generally assign a proposed relative would calculate proposed relative we would calculate a hospital-specific weight to each of the no-volume weights based on the December 2015 relative charge value by dividing the proposed MS–LTC–DRGs based on update of the FY 2015 MedPAR file, and charge per discharge after adjusting for clinical similarity and relative costliness to which it is similar clinically in SSOs of the LTCH case (from Step 3) by (with the exception of ‘‘transplant’’ intensity of use of resources and relative the average charge per SSO-adjusted proposed MS–LTC–DRGs, ‘‘error’’ costliness as determined by criteria such discharge for the LTCH in which the proposed MS–LTC–DRGs, and proposed as care provided during the period of case occurred. The resulting ratio was MS–LTC–DRGs that indicate a principal time surrounding surgery, surgical

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approach (if applicable), length of time available via the Internet on the CMS proposed MS–LTC–DRGs would be of surgical procedure, postoperative Web site. administratively burdensome. (For care, and length of stay. (For more To illustrate this methodology for additional information regarding our details on our process for evaluating determining the proposed relative treatment of transplant MS–LTC–DRGs, relative costliness, we refer readers to weights for the FY 2017 proposed MS– we refer readers to the RY 2010 LTCH the FY 2010 IPPS/RY 2010 LTCH PPS LTC–DRGs with no applicable LTCH PPS final rule (74 FR 43964).) In final rule (73 FR 48543).) We believe in cases, we are providing the following addition, consistent with our historical the rare event that there would be a few example, which refers to the no-volume policy and we are proposing to establish LTCH cases grouped to one of the no- proposed MS–LTC–DRGs crosswalk a relative weight of 0.0000 for the 2 volume proposed MS–LTC–DRGs in FY information for FY 2017 provided in ‘‘error’’ proposed MS–LTC–DRGs (that 2017, the proposed relative weights Table 13B. is, MS–LTC–DRG 998 (Principal assigned based on the cross-walked MS– Example: There were no trimmed Diagnosis Invalid as Discharge LTC–DRGs would result in an applicable LTCH cases in the FY 2015 Diagnosis) and MS–LTC–DRG 999 appropriate LTCH PPS payment because MedPAR file that we are using for this (Ungroupable)) because applicable the crosswalks, which are based on proposed rule for proposed MS–LTC– LTCH cases grouped to these proposed clinical similarity and relative DRG 61 (Acute Ischemic Stroke with MS–LTC–DRGs cannot be properly costliness, would be expected to Use of Thrombolytic Agent with MCC). assigned to an MS–LTC–DRG according generally require equivalent relative We determined that proposed MS–LTC– to the grouping logic. DRG 70 (Nonspecific Cerebrovascular resource use. In this proposed rule, for FY 2017, we We are proposing to then assign the Disorders with MCC) is similar are proposing to establish a proposed proposed relative weight of the cross- clinically and based on resource use to relative weight equal to the respective walked proposed MS–LTC–DRG as the proposed MS–LTC–DRG 61. Therefore, FY 2015 relative weight of the MS– proposed relative weight for the no- we assigned the same proposed relative LTC–DRGs for the following volume proposed MS–LTC–DRG such weight (and average length of stay) of ‘‘psychiatric or rehabilitation’’ proposed that both of these proposed MS–LTC– proposed MS–LTC–DRG 70 of 0.9156 MS–LTC–DRGs: MS–LTC–DRG 876 DRGs (that is, the no-volume proposed for FY 2017 to proposed MS–LTC–DRG (O.R. Procedure with Principal MS–LTC–DRG and the cross-walked 61 (refer to Table 11, which is listed in Diagnoses of Mental Illness); MS–LTC– proposed MS–LTC–DRG) have the same section VI. of the Addendum to this DRG 880 (Acute Adjustment Reaction & proposed relative weight (and average final rule and is available via the length of stay) for FY 2017. We note Internet on the CMS Web site). Psychosocial Dysfunction); MS–LTC– that, if the cross-walked proposed MS– Again, we note that, as this system is DRG 881 (Depressive Neuroses); MS– LTC–DRG had 25 applicable LTCH dynamic, it is entirely possible that the LTC–DRG 882 (Neuroses Except cases or more, its proposed relative number of MS–LTC–DRGs with no Depressive); MS–LTC–DRG 883 weight (calculated using the volume would vary in the future. (Disorders of Personality & Impulse methodology described in Steps 1 Consistent with our historical practice, Control); MS–LTC–DRG 884 (Organic through 4 above) was assigned to the no- we used the most recent available Disturbances & Mental Retardation); volume proposed MS–LTC–DRG as claims data to identify the trimmed MS–LTC–DRG 885 (Psychoses); MS– well. Similarly, if the proposed MS– applicable LTCH cases from which we LTC–DRG 886 (Behavioral & LTC–DRG to which the no-volume determined the proposed relative Developmental Disorders); MS–LTC– proposed MS–LTC–DRG was cross- weights in this proposed rule. DRG 887 (Other Mental Disorder walked had 24 or less cases and, For FY 2017, consistent with our Diagnoses); MS–LTC–DRG 894 therefore, was designated to one of the historical relative weight methodology, (Alcohol/Drug Abuse or Dependence, proposed low-volume quintiles for we are proposing to establish a relative Left Ama); MS–LTC–DRG 895 (Alcohol/ purposes of determining the proposed weight of 0.0000 for the following Drug Abuse or Dependence, with relative weights, we assigned the transplant proposed MS–LTC–DRGs: Rehabilitation Therapy); MS–LTC–DRG proposed relative weight of the Heart Transplant or Implant of Heart 896 (Alcohol/Drug Abuse or applicable proposed low-volume Assist System with MCC (MS–LTC–DRG Dependence, without Rehabilitation quintile to the no-volume proposed MS– 1); Heart Transplant or Implant of Heart Therapy with MCC); MS–LTC–DRG 897 LTC–DRG such that both of these Assist System without MCC (MS–LTC– (Alcohol/Drug Abuse or Dependence, proposed MS–LTC–DRGs (that is, the DRG 2); Liver Transplant with MCC or without Rehabilitation Therapy without no-volume proposed MS–LTC–DRG and Intestinal Transplant (MS–LTC–DRG 5); MCC); MS–LTC–DRG 945 the proposed cross-walked MS–LTC– Liver Transplant without MCC (MS– (Rehabilitation with CC/MCC); and MS– DRG) have the same proposed relative LTC–DRG 6); Lung Transplant (MS– LTC–DRG 946 (Rehabilitation without weight for FY 2017. (As we noted LTC–DRG 7); Simultaneous Pancreas/ CC/MCC). As we discussed when we previously, in the infrequent case where Kidney Transplant (MS–LTC–DRG 8); implemented the dual rate LTCH PPS nonmonotonicity involving a no-volume Pancreas Transplant (MS–LTC–DRG 10); payment structure, LTCH discharges proposed MS–LTC–DRG resulted, and Kidney Transplant (MS–LTC–DRG that are grouped to these 15 ‘‘psychiatric additional adjustments as described in 652). This is because Medicare only and rehabilitation’’ MS–LTC–DRGs do Step 6 are required in order to maintain covers these procedures if they are not meet the criteria for exclusion from monotonically increasing relative performed at a hospital that has been the site neutral payment rate. As such, weights.) certified for the specific procedures by under the criterion for a principal For this proposed rule, a list of the no- Medicare and presently no LTCH has diagnosis relating to a psychiatric volume proposed MS–LTC–DRGs and been so certified. At the present time, diagnosis or to rehabilitation, there are the proposed MS–LTC–DRGs to which we include these eight transplant no applicable LTCH cases to use in each would cross-walk (that is, the proposed MS–LTC–DRGs in the calculating a relative weight for the cross-walked proposed MS–LTC–DRGs) GROUPER program for administrative ‘‘psychiatric and rehabilitation’’ for FY 2017 is shown in Table 13B, purposes only. Because we use the same proposed MS–LTC–DRGs. In other which is listed in section VI. of the GROUPER program for LTCHs as is used words, any LTCH PPS discharges Addendum to this proposed rule and is under the IPPS, removing these grouped to any of the 15 ‘‘psychiatric

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and rehabilitation’’ proposed MS–LTC– FY 2015 relative weight of the proposed (which are generally expected to have DRGs will always be paid at the site MS–LTC–DRGs for the 15 ‘‘psychiatric higher resource use and costs) would be neutral payment rate, and, therefore, or rehabilitation’’ proposed MS–LTC– lower than the payment for cases in a those proposed MS–LTC–DRGs will DRGs listed previously (that is, MS– lower severity level within the same never include any LTCH cases that meet LTC–DRGs 876, 880, 881, 882, 883, 884, base MS–LTC–DRG (which are generally the criteria for exclusion from the site 885, 886, 887, 894, 895, 896, 897, 945, expected to have lower resource use and neutral payment rate. However, section and 946). Table 11, which is listed in costs). Therefore, in determining the 1886(m)(6)(B) of the Act establishes a section VI. of the Addendum to this proposed FY 2017 MS–LTC–DRG transitional payment method for cases proposed rule and is available via the relative weights, consistent with our that would be paid at the site neutral Internet on the CMS Web site, reflects historical methodology, we are payment rate for LTCH discharges this proposal. proposing to continue to combine MS– occurring in cost reporting periods Step 6—Adjust the proposed FY 2017 LTC–DRG severity levels within a base beginning during FY 2016 or FY 2017. MS–LTC–DRG relative weights to MS–LTC–DRG for the purpose of Under the transitional payment method account for nonmonotonically computing a proposed relative weight for site neutral payment rate cases, for increasing relative weights. when necessary to ensure that LTCH discharges occurring in cost The MS–DRGs contain base DRGs that monotonicity is maintained. For a reporting periods beginning on or after have been subdivided into one, two, or comprehensive description of our October 1, 2016, and on or before three severity of illness levels. Where existing methodology to adjust for September 30, 2017, site neutral there are three severity levels, the most nonmonotonicity, we refer readers to payment rate cases are paid a blended severe level has at least one secondary the FY 2010 IPPS/RY 2010 LTCH PPS payment rate, calculated as 50 percent diagnosis code that is referred to as an final rule (74 FR 43964 through 43966). of the applicable site neutral payment MCC (that is, major complication or Any adjustments for nonmonotonicity rate amount for the discharge and 50 comorbidity). The next lower severity that were made in determining the percent of the applicable LTCH PPS level contains cases with at least one proposed FY 2017 MS–LTC–DRG standard Federal payment rate. Because secondary diagnosis code that is a CC relative weights in this proposed rule by the LTCH PPS standard Federal (that is, complication or comorbidity). applying this methodology are denoted payment rate is based on the relative Those cases without an MCC or a CC are in Table 11, which is listed in section weight of the MS–LTC–DRG, in order to referred to as ‘‘without CC/MCC.’’ When VI. of the Addendum to this proposed determine the transitional blended data do not support the creation of three rule and is available via the Internet on payment for site neutral payment rate severity levels, the base MS–DRG is the CMS Web site. cases grouped to one of the ‘‘psychiatric subdivided into either two levels or the Step 7—Calculate the proposed FY base MS–DRG is not subdivided. The or rehabilitation’’ proposed MS–LTC– 2017 MS–LTC–DRG reclassification and two-level subdivisions could consist of DRGs in FY 2017, we are proposing to recalibration budget neutrality factor. the MS–DRG with CC/MCC and the In accordance with the regulations at assign a proposed relative weight to MS–DRG without CC/MCC. § 412.517(b) (in conjunction with these proposed MS–LTC–DRGs for FY Alternatively, the other type of two- § 412.503), the annual update to the 2017, that would be the same as the FY level subdivision may consist of the MS–LTC–DRG classifications and 2015 relative weight (which is also the MS–DRG with MCC and the MS–DRG relative weights is done in a budget same as the FY 2016 relative weight). without MCC. neutral manner such that estimated We believe that using the respective FY In those base MS–LTC–DRGs that are aggregate LTCH PPS payments would be 2015 relative weight for each of the split into either two or three severity unaffected, that is, would be neither ‘‘psychiatric or rehabilitation’’ proposed levels, cases classified into the ‘‘without greater than nor less than the estimated MS–LTC–DRGs results in appropriate CC/MCC’’ MS–LTC–DRG are expected aggregate LTCH PPS payments that payments for LTCH cases that are paid to have a lower resource use (and lower would have been made without the MS– at the site neutral payment rate under costs) than the ‘‘with CC/MCC’’ MS– LTC–DRG classification and relative the transition policy provided by the LTC–DRG (in the case of a two-level weight changes. (For a detailed statute because there are no clinically split) or both the ‘‘with CC’’ and the discussion on the establishment of the similar MS–LTC–DRGs for which we ‘‘with MCC’’ MS–LTC–DRGs (in the budget neutrality requirement for the were able to determine relative weights case of a three-level split). That is, annual update of the MS–LTC–DRG based on applicable LTCH cases in the theoretically, cases that are more severe classifications and relative weights, we FY 2015 MedPAR file data using the typically require greater expenditure of refer readers to the RY 2008 LTCH PPS steps described above. Furthermore, we medical care resources and would result final rule (72 FR 26881 and 26882).) believe that it would be administratively in higher average charges. Therefore, in The MS–LTC–DRG classifications and burdensome and introduce unnecessary the three severity levels, relative relative weights are updated annually complexity to the MS–LTC–DRG weights should increase by severity, based on the most recent available relative weight calculation to use the from lowest to highest. If the relative LTCH claims data to reflect changes in LTCH discharges in the MedPAR file weights decrease as severity increases relative LTCH resource use (§ 412.517(a) data to calculate a relative weight for (that is, if within a base MS–LTC–DRG, in conjunction with § 412.503). To those 15 ‘‘psychiatric and an MS–LTC–DRG with CC has a higher achieve the budget neutrality rehabilitation’’ proposed MS–LTC– relative weight than one with MCC, or requirement at § 412.517(b), under our DRGs to be used for the sole purpose of the MS–LTC–DRG ‘‘without CC/MCC’’ established methodology, for each determining half of the transitional has a higher relative weight than either annual update, the MS–LTC–DRG blended payment for site neutral of the others), they are nonmonotonic. relative weights are uniformly adjusted payment rate cases during the transition We continue to believe that utilizing to ensure that estimated aggregate period. (80 FR 49631 through 49632) nonmonotonic relative weights to adjust payments under the LTCH PPS would In summary, for FY 2017, we are Medicare payments would result in not be affected (that is, decreased or proposing to establish a proposed inappropriate payments because the increased). Consistent with that relative weight (and average length of payment for the cases in the higher provision, we are proposing to update stay thresholds) equal to the respective severity level in a base MS–LTC–DRG the MS–LTC–DRG classifications and

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relative weights for FY 2017 based on LTCH PPS standard Federal payment D. Proposed Rebasing of the LTCH the most recent available LTCH data for rate payments for applicable LTCH Market Basket applicable LTCH cases, and to continue cases (the sum of all calculations under 1. Background to apply a budget neutrality adjustment Step 1.a. mentioned previously) after in determining the FY 2017 MS–LTC– reclassification and recalibration to The input price index (that is, the DRG relative weights. estimated aggregate payments for FY market basket) that was used to develop To ensure budget neutrality in the 2017 LTCH PPS standard Federal the LTCH PPS for FY 2003 was the ‘‘excluded hospital with capital’’ market update to the MS–LTC–DRG payment rate payments for applicable basket. That market basket was based on classifications and relative weights LTCH cases before reclassification and 1997 Medicare cost report data and under § 412.517(b), we are proposing to recalibration (that is, the sum of all continuing to use our established two- included data for Medicare-participating calculations under Step 1.b. mentioned step budget neutrality methodology. IRFs, IPFs, LTCHs, cancer hospitals, and previously). Therefore, in this proposed rule, in the children’s hospitals. Although the term first step of our MS–LTC–DRG budget That is, for this proposed rule, for FY ‘‘market basket’’ technically describes neutrality methodology, for FY 2017, we 2017, under the second step of the the mix of goods and services used in are proposing to calculate and apply a budget neutrality methodology, we providing hospital care, this term is also normalization factor to the recalibrated determined the budget neutrality commonly used to denote the input relative weights (the result of Steps 1 adjustment factor using the following price index (that is, cost category through 6 discussed previously) to three steps: (2.a.) Simulate estimated weights and price proxies combined) ensure that estimated payments are not total FY 2017 LTCH PPS standard derived from that mix. Accordingly, the affected by changes in the composition Federal payment rate payments for term ‘‘market basket,’’ as used in this of case types or the changes to the applicable LTCH cases using the section, refers to an input price index. classification system. That is, the normalized relative weights for FY 2017 Beginning with RY 2007, LTCH PPS proposed normalization adjustment is and proposed GROUPER Version 34 (as payments were updated using a 2002- based market basket reflecting the intended to ensure that the recalibration described above); (2.b.) simulate operating and capital cost structures for of the MS–LTC–DRG relative weights estimated total FY 2016 LTCH PPS IRFs, IPFs, and LTCHs (hereafter (that is, the process itself) neither standard Federal payment rate increases nor decreases the average referred to as the rehabilitation, payments for applicable LTCH cases psychiatric, and long-term care (RPL) case-mix index. using the FY 2016 GROUPER (Version To calculate the proposed market basket). We excluded cancer and normalization factor for FY 2017 (the 33) and the FY 2016 MS–LTC–DRG children’s hospitals from the RPL first step of our budget neutrality relative weights in Table 11 of the FY market basket because their payments methodology), we used the following 2016 IPPS/LTCH PPS final rule are based entirely on reasonable costs three steps: (1.a.) Use the most recent available on the Internet, as described in subject to rate-of-increase limits available applicable LTCH cases from section VI. of the Addendum of that established under the authority of the most recent available data (that is, final rule; and (2.c.) calculate the ratio section 1886(b) of the Act, which are LTCH discharges from the FY 2015 of these estimated total payments by implemented in regulations at 42 CFR MedPAR file) and grouped them using dividing the value determined in Step 413.40. Those types of hospitals are not the proposed FY 2017 GROUPER (that 2.b. by the value determined in Step 2.a. paid under a PPS. Also, the 2002 cost is, proposed Version 34 for FY 2017) In determining the proposed FY 2017 structures for cancer and children’s and the recalibrated FY 2017 MS–LTC– MS–LTC–DRG relative weights, each hospitals are noticeably different from DRG relative weights (determined in proposed normalized relative weight the cost structures for freestanding IRFs, Steps 1 through 6 above) to calculate the was then multiplied by a proposed freestanding IPFs, and LTCHs. A average case-mix index; (1.b.) group the budget neutrality factor of 0.998723 (the complete discussion of the 2002-based same applicable LTCH cases (as are value determined in Step 2.c.) in the RPL market basket can be found in the used in Step 1.a.) using the FY 2016 second step of the budget neutrality RY 2007 LTCH PPS final rule (71 FR GROUPER (Version 33) and FY 2016 methodology to achieve the budget 27810 through 27817). MS–LTC–DRG relative weights and neutrality requirement at § 412.517(b). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51756), we finalized the calculated the average case-mix index; Accordingly, in determining the and (1.c.) compute the ratio of these rebasing and revising of the 2002-based proposed FY 2017 MS–LTC–DRG average case-mix indexes by dividing RPL market basket by creating and relative weights in this proposed rule, the average CMI for FY 2016 implementing a 2008-based RPL market consistent with our existing (determined in Step 1.b.) by the average basket. We also discussed the creation case-mix index for FY 2017 (determined methodology, we are proposing to apply of a stand-alone LTCH market basket in Step 1.a.). As a result, in determining a proposed normalization factor of and received several public comments, the proposed MS–LTC–DRG relative 1.28094 and a proposed budget all of which supported deriving a stand- weights for FY 2017, each recalibrated neutrality factor of 0.998723. Table 11, alone LTCH market basket (76 FR 51756 MS–LTC–DRG relative weight is which is listed in section VI. of the through 51757). In the FY 2013 IPPS/ multiplied by the proposed Addendum to this proposed rule and is LTCH PPS final rule, we finalized the normalization factor of 1.28094 available via the Internet on the CMS adoption of a stand-alone 2009-based (determined in Step 1.c.) in the first step Web site, lists the proposed MS–LTC– LTCH-specific market basket that of the budget neutrality methodology, DRGs and their respective proposed reflects the cost structures of LTCHs which produces ‘‘normalized relative relative weights, geometric mean length only (77 FR 53467 through 53479). weights.’’ of stay, five-sixths of the geometric For this FY 2017 proposed rule, we In the second step of our MS–LTC– mean length of stay (used to identify are proposing to rebase and revise the DRG budget neutrality methodology, we SSO cases under § 412.529(a)), and the 2009-based LTCH-specific market are proposing to calculate a second ‘‘IPPS Comparable Thresholds’’ (used in basket. The proposed LTCH market budget neutrality factor consisting of the determining SSO payments under basket is primarily based on Medicare ratio of estimated aggregate FY 2017 § 412.529(c)(3)), for FY 2017. cost report data for LTCHs for 2013,

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which are for cost reporting periods effects on total expenditures resulting comparable range of their total facility beginning on and after October 1, 2012, from changes in the mix of goods and average LOS. We define the Medicare and before October 1, 2013. We are services purchased subsequent to the average LOS based on data reported on proposing to use data from cost reports base period are not measured. For the Medicare cost report (CMS Form beginning in FY 2013 because these data example, a hospital hiring more nurses 2552–10) Worksheet S–3, Part I, Line 14. are the latest available complete data for to accommodate the needs of patients We believe that applying the LOS edit purposes of calculating cost weights for would increase the volume of goods and results in a more accurate reflection of the market basket. In the following services purchased by the hospital, but the structure of costs for Medicare discussion, we provide an overview of would not be factored into the price covered days. For the 2009-based LTCH- the proposed LTCH market basket and change measured by a fixed-weight specific market basket, we used the cost describe the methodologies we are hospital market basket. Only when the reports submitted by LTCHs with proposing to use for determining the index is rebased would changes in the Medicare average LOS within 15 operating and capital portions of the quantity and intensity be captured, with percent (that is, 15 percent higher or proposed 2013-based LTCH market those changes being reflected in the cost lower) of the total facility average LOS basket. weights. Therefore, we rebase the for the hospital. market basket periodically so that the Based on our analysis of the 2013 2. Overview of the Proposed 2013-Based cost weights reflect a recent mix of Medicare cost reports, for the proposed LTCH Market Basket goods and services that hospitals 2013-based LTCH market basket, we are Similar to the 2009-based LTCH- purchase (hospital inputs) to furnish proposing to use the cost reports specific market basket, the proposed inpatient care. submitted by LTCHs with Medicare 2013-based LTCH market basket is a average LOS within 25 percent (that is, fixed-weight, Laspeyres-type price 3. Development of the Proposed 2013- 25 percent higher or lower) of the total index. A Laspeyres price index Based LTCH Market Basket Cost facility average LOS for the hospital measures the change in price, over time, Categories and Weights (this edit excludes 6 percent of LTCH of the same mix of goods and services We are inviting public comments on providers). Applying the proposed trim purchased in the base period. Any our proposed methodology, discussed results in a subset of LTCH Medicare changes in the quantity or mix (that is, below, for deriving the proposed 2013- cost reports with an average Medicare intensity) of goods and services based LTCH market basket. LOS of 27 days, average facility LOS of purchased over time are not measured. a. Use of Medicare Cost Report Data 28 days, and aggregate Medicare The index itself is constructed using utilization (as measured by Medicare three steps. First, a base period is The proposed 2013-based LTCH inpatient LTCH days as a percentage of selected (in this proposed rule, we are market basket consists of six major cost total facility inpatient LTCH days) of 66 proposing to use 2013 as the base categories derived from the 2013 LTCH percent. If we were to apply the same period) and total base period Medicare cost reports (CMS Form 2552– trim as was applied for the 2009-based expenditures are estimated for a set of 10), including wages and salaries, LTCH-specific market basket, we would mutually exclusive and exhaustive employee benefits, contract labor, exclude 11 percent of LTCH providers, spending categories, with the proportion pharmaceuticals, professional liability but the results would be very similar of total costs that each category insurance, and capital. After we with an average Medicare LOS of 27 represents being calculated. These calculate these cost categories, we are days, average facility LOS of 27 days, proportions are called ‘‘cost weights’’ or left with a residual cost category, which and aggregate Medicare utilization of 66 ‘‘expenditure weights.’’ Second, each reflects all other input costs other than percent. The 6 percent of providers that expenditure category is matched to an those captured in the six cost categories are excluded from the proposed 2013- appropriate price or wage variable, above. This is the same number of cost based LTCH market basket have an referred to as a ‘‘price proxy.’’ In almost categories derived for the 2009-based average Medicare LOS of 29 days, every instance, these price proxies are LTCH-specific market basket using the average facility LOS of 77 days, and derived from publicly available 2009 Medicare cost report data (CMS aggregate Medicare utilization of 12 statistical series that are published on a Form 2552–96). These 2013 Medicare percent. We believe that the use of this consistent schedule (preferably at least cost reports include data for cost proposed trim, instead of the trim used on a quarterly basis). Finally, the reporting periods beginning on and after to develop the 2009-based LTCH- expenditure weight for each cost October 1, 2012, and before October 1, specific market basket, is a technical category is multiplied by the level of its 2013. We are proposing to use 2013 as improvement because data from more respective price proxy. The sum of these the base year because we believe that LTCHs are used while still being products (that is, the expenditure the 2013 Medicare cost reports represent reflective of case-mix and practice weights multiplied by their price levels) the most recent, complete set of patterns associated with providing for all cost categories yields the Medicare cost report data available to services to Medicare beneficiaries. composite index level of the market develop cost weights for an LTCH Using the resulting set of Medicare basket in a given period. Repeating this market basket. Medicare cost report data cost reports, we are proposing to step for other periods produces a series include costs for all patients, including calculate cost weights for seven major of market basket levels over time. Medicare, Medicaid, and private payer. cost categories of the proposed 2013- Dividing an index level for a given Because our goal is to measure cost based LTCH market basket (wages and period by an index level for an earlier shares for facilities that serve Medicare salaries, employee benefits, contract period produces a rate of growth in the beneficiaries, and are reflective of case- labor, professional liability insurance, input price index over that timeframe. mix and practice patterns associated pharmaceuticals, capital, and an ‘‘all As noted above, the market basket is with providing services to Medicare other’’ residual cost category). The described as a fixed-weight index beneficiaries in LTCHs, we are methodology used to develop the because it represents the change in price proposing to limit our selection of proposed 2013-based LTCH market over time of a constant mix (quantity Medicare cost reports to those from basket cost weights is generally the and intensity) of goods and services LTCHs that have a Medicare average same methodology used to develop the needed to furnish hospital services. The length of stay (LOS) that is within a 2009-based LTCH-specific market basket

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cost weights. We describe the detailed We note that, effective with the referred to as malpractice costs) be equal methodology for obtaining costs for each implementation of CMS Form 2552–10 to premiums, paid losses and self- of these seven cost categories below. for cost reporting periods beginning on insurance costs reported on Worksheet or after May 1, 2010, CMS began (1) Wages and Salaries Costs S2, Part I, Line 118, Columns 1 through collecting employee benefits and 3. A similar methodology was used for We are proposing to derive wages and contract labor data on Worksheet S–3, the 2009-based LTCH-specific market salaries costs as the sum of inpatient Part V, which is applicable to LTCHs. basket using the CMS Form 2552–96. salaries, ancillary salaries, and a Only a few LTCHs reported these data proportion of overhead (or general and, therefore, we were unable to use (6) Capital Costs service cost center) salaries as reported such a small sample to accurately reflect We are proposing that capital costs be on Worksheet A, Column 1. Because these costs. Therefore, we encourage all equal to Medicare allowable capital overhead salary costs are attributable to LTCHs to report employee benefit and costs as reported on Worksheet B, Part the entire LTCH, we are proposing to contract labor costs on Worksheet S–3, II, Column 26. We are proposing to only include the proportion attributable Part V. define Medicare allowable costs as cost to the Medicare allowable cost centers. (3) Contract Labor Costs Similar to the 2009-based LTCH-specific centers: 30 through 35, 50 through 76 market basket major cost weights, we Contract labor costs are primarily (excluding 52, 61, and 75), 90 through define Medicare allowable total costs associated with direct patient care 91 and 93. A similar methodology was (routine, ancillary and capital) as costs services. Contract labor costs for used for the 2009-based LTCH-specific that are eligible for payment through the services such as accounting, billing, and market basket using the CMS Form LTCH PPS. We are proposing to legal are estimated using other 2552–96. estimate the proportion of overhead government data sources as described below. As was done for the 2009-based b. Final Major Cost Category salaries that are attributed to Medicare Computation allowable costs centers by multiplying LTCH-specific market basket, we are the ratio of Medicare allowable cost proposing to derive the contract labor In addition to our proposals to derive centers’ salaries to total salaries cost weight for the proposed 2013-based costs for the major cost categories for (Worksheet A, Column 1, Line 200) by LTCH market basket using voluntarily each provider using the Medicare cost total overhead salaries. A similar reported data from Worksheet S–3, Part report data as previously described, we II. Approximately 48 percent of LTCHs methodology was used to derive wages are proposing to address outlier cases voluntarily reported contract labor cost and salaries costs in the 2009-based using the following steps. First, for each on the Worksheet S–3, Part II. Our LTCH-specific market basket. provider, we are proposing to divide the analysis of these data indicates that we (2) Employee Benefit Costs have a large enough sample to enable us costs for each of the six categories by the to produce a reasonable contract labor total Medicare allowable costs to obtain Similar to the 2009-based LTCH- cost weights for the universe of LTCH specific market basket, we are proposing cost weight. Specifically, we found that when we recalculated the cost weight providers. We are proposing to define to calculate employee benefit costs total Medicare allowable costs reported using Worksheet S3, Part II. The after weighting to reflect the characteristics of the universe of LTCHs on Worksheet B, Part I, Column 26 for completion of Worksheet S–3, Part II is cost centers: 30 Through 35, 50 through only required for IPPS hospitals. (type of control (nonprofit, for-profit, and government) and by region), the 76 (excluding 52, 61, and 75), 90 However, for 2013, we found that through 91 and 93. roughly 35 percent of all LTCHs recalculation did not have a material voluntarily reported these data (similar effect on the resulting cost weight. We then are proposing to remove Therefore, as was done for the 2009- to prior years). We note that this those providers whose derived cost based LTCH-specific market basket, we worksheet is only required to be weights fall in the top and bottom 5 are proposing to use Worksheet S–3, completed by IPPS hospitals. Our percent of provider-specific derived cost Part II to calculate the contract labor analysis of the Worksheet S–3, Part II weights to ensure the removal of costs cost weight in the proposed 2013-based data submitted by these LTCHs for outlier cases. After the costs for LTCH market basket. indicates that we had a large enough outlier cases have been removed in this sample to enable us to produce a (4) Pharmaceutical Costs manner, we are proposing to sum the costs for each category across all reasonable employee benefits cost We are proposing to calculate weight. Specifically, we found that pharmaceutical costs using nonsalary remaining providers, and then divide when we recalculated the cost weight costs reported on Worksheet A, Column this by the sum of total Medicare after weighting to reflect the 7, minus the amount on Worksheet A, allowable costs across all remaining characteristics of the universe of LTCHs Column 1, for the pharmacy cost center providers to obtain a cost weight for the (type of control (nonprofit, for-profit, (Line 15) and drugs charged to patients proposed 2013-based LTCH market and government) and by region), the cost center (Line 73). A similar basket for the given category. Finally, recalculation did not have a material methodology was used for the 2009- we are proposing to calculate a seventh effect on the resulting cost weight. based LTCH-specific market basket major cost weight—the residual ‘‘All Therefore, we are proposing to use using the CMS Form 2552–96. Other’’ cost weight to reflect all Worksheet S–3, Part II data (as was done remaining costs that are not captured in for the 2009-based LTCH-specific (5) Professional Liability Insurance the previous six cost categories listed. market basket) to calculate the employee Costs We refer readers to Table VII–1 below benefit cost weight in the proposed We are proposing that professional for the resulting proposed cost weights 2013-based LTCH market basket. liability insurance (PLI) costs (often for these major cost categories.

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TABLE VII–1—MAJOR COST CATEGORIES AND THEIR RESPECTIVE COST WEIGHTS AS CALCULATED FROM MEDICARE COST REPORTS

Proposed 2013- 2009-based based LTCH LTCH-specific market basket market basket Major cost categories cost weight cost weight (percent of total (percent of total costs) costs)

Wages and Salaries ...... 41.5 40.4 Employee Benefits ...... 6.5 7.0 Contract Labor ...... 5.9 6.9 Professional Liability Insurance (Malpractice) ...... 0.9 0.8 Pharmaceuticals ...... 7.6 8.9 Capital ...... 9.7 9.8 All Other ...... 27.8 26.1

The wages and salaries cost weight As we did for the 2009-based LTCH weight. This rounded percentage is 86 calculated from the Medicare cost market basket, we are proposing to percent. Therefore, we are proposing to reports for the proposed 2013-based allocate the contract labor cost weight to allocate 86 percent of the contract labor LTCH market basket is approximately 1 the wages and salaries and employee cost weight to the wages and salaries percentage point higher than the wages benefits cost weights based on their cost weight and 14 percent to the and salaries cost weight for the 2009- relative proportions under the employee benefits cost weight. We refer based LTCH-specific market basket, assumption that contract labor costs are readers to Table VII–2 below that shows while the contract labor cost weight is comprised of both wages and salaries the proposed wages and salaries and approximately 1 percentage point lower. and employee benefits. The contract employee benefit cost weights after The proposed 2013-based labor allocation proportion for wages contract labor cost weight allocation for pharmaceuticals cost weight also is and salaries is equal to the wages and both the proposed 2013-based LTCH roughly 1 percentage point lower than salaries cost weight as a percent of the market basket and the 2009-based the cost weight for the 2009-based sum of the wages and salaries cost LTCH-specific market basket. weight and the employee benefits cost LTCH-specific market basket.

TABLE VII–2—WAGES AND SALARIES AND EMPLOYEE BENEFITS COST WEIGHTS AFTER CONTRACT LABOR ALLOCATION

Proposed 2013- 2009-based based LTCH cost LTCH-specific Major cost categories weight cost weight (percent of total (percent of total costs) costs)

Wages and Salaries ...... 46.6 46.3 Employee Benefits ...... 7.3 8.0 Compensation ...... 53.9 54.3

After the allocation of the contract NAICS 622000, Hospitals, published by revision when benchmark data becomes labor cost weight, the proposed 2013- the Bureau of Economic Analysis (BEA). available. Instead of using the less based wages and salaries cost weight is These data are publicly available at the detailed Annual I–O data, we are 0.3 percentage point higher, while the following Web site: http://www.bea.gov/ proposing to inflate the 2007 employee benefit cost weight is 0.7 industry/io_annual.htm. Benchmark I–O data forward to 2013 by percentage point lower, relative to the The BEA Benchmark I–O data are applying the annual price changes from respective cost weights for the 2009- scheduled for publication every 5 years the respective price proxies to the based LTCH-specific market basket. As with the most recent data available for appropriate market basket cost a result, in the proposed 2013-based 2007. The 2007 Benchmark I–O data are categories that are obtained from the LTCH market basket, the compensation derived from the 2007 Economic Census 2007 Benchmark I–O data. We repeated cost weight is 0.4 percentage point and are the building blocks for BEA’s this practice for each year. We then lower than the compensation cost economic accounts. Therefore, they calculated the cost shares that each cost weight for the 2009-based LTCH- represent the most comprehensive and category represents of the 2007 data specific market basket. complete set of data on the economic inflated to 2013. These resulting 2013 cost shares were applied to the ‘‘All c. Derivation of the Detailed Operating processes or mechanisms by which 72 Other’’ residual cost weight to obtain Cost Weights output is produced and distributed. BEA also produces Annual I–O the detailed cost weights for the To further divide the ‘‘All Other’’ estimates. However, while based on a proposed 2013-based LTCH market residual cost weight estimated from the similar methodology, these estimates basket. For example, the cost for Food: 2013 Medicare cost report data into reflect less comprehensive and less Direct Purchases represents 6.5 percent more detailed cost categories, we are detailed data sources and are subject to of the sum of the ‘‘All Other’’ 2007 proposing to use the 2007 Benchmark Benchmark I–O Hospital Expenditures Input-Output (I–O) ‘‘Use Tables/Before 72 http://www.bea.gov/papers/pdf/ inflated to 2013. Therefore, the Food: Redefinitions/Purchaser Value’’ for IOmanual_092906.pdf. Direct Purchases cost weight represents

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6.5 percent of the proposed 2013-based proposed 2013-based LTCH market and fixed equipment, which we LTCH market basket’s ‘‘All Other’’ cost basket. Rather, we are proposing to hereafter refer to as the ‘‘fixed category (27.8 percent), yielding a proportionally distribute these costs percentage.’’ We are proposing to use ‘‘final’’ Food: Direct Purchases proposed among the cost categories of depreciation and lease data from cost weight of 1.8 percent in the Depreciation, Interest, and Other Worksheet A–7 of the 2013 Medicare proposed 2013-based LTCH market Capital-Related, reflecting the cost reports, which is the same basket (0.065 × 27.8 percent = 1.8 assumption that the underlying cost methodology used for the 2009-based percent). structure of leases is similar to that of LTCH-specific market basket. Based on Using this methodology, we are capital-related costs in general. As was the 2013 LTCH Medicare cost report proposing to derive 18 detailed LTCH done for the 2009-based LTCH-specific data, we have determined that market basket cost category weights market basket, we are proposing to depreciation costs for building and fixed from the proposed 2013-based LTCH assume that 10 percent of the lease costs equipment account for 39 percent of market basket residual cost weight (27.8 as a proportion of total capital-related total depreciation costs, while percent). These categories are: (1) costs (62.3 percent) represents overhead depreciation costs for movable Electricity; (2) Fuel, Oil, and Gasoline; and to assign those costs to the Other equipment account for 61 percent of (3) Water and Sewerage; (4) Food: Direct Capital-Related cost category total depreciation costs. As mentioned Purchases; (5) Food: Contract Services; accordingly. Therefore, we are assuming above, we are proposing to allocate lease (6) Chemicals; (7) Medical Instruments; that approximately 6.2 percent (62.3 × expenses among the Depreciation, (8) Rubber and Plastics; (9) Paper and percent 0.1) of total capital-related Interest, and Other Capital cost Printing Products; (10) Miscellaneous costs represent lease costs attributable to categories. We determined that leasing Products; (11) Professional Fees: Labor- overhead, and we are proposing to add building and fixed equipment expenses Related; (12) Administrative and this 6.2 percent to the 5.9 percent Other account for 86 percent of total leasing Facilities Support Services; (13) Capital-Related cost category weight. expenses, while leasing movable Installation, Maintenance, and Repair We are then proposing to distribute the equipment expenses account for 14 Services; (14) All Other Labor-Related remaining lease costs (56.1 percent, or percent of total leasing expenses. We are Services; (15) Professional Fees: 62.3 percent–6.2 percent) proportionally proposing to sum the depreciation and Nonlabor-Related; (16) Financial across the three cost categories Services; (17) Telephone Services; and (Depreciation, Interest, and Other leasing expenses for building and fixed (18) All Other Nonlabor-Related Capital-Related) based on the proportion equipment, as well as sum the Services. that these categories comprise of the depreciation and leasing expenses for movable equipment. This results in the d. Derivation of the Detailed Capital sum of the Depreciation, Interest, and Other Capital-Related cost categories proposed building and fixed equipment Cost Weights (excluding lease expenses). For depreciation cost weight (after leasing As described in section VII.D.3.b. of example, the Other Capital-Related costs are included) representing 73 the preamble of this proposed rule, we capital cost category represented 15.5 percent of total depreciation costs and are proposing a capital-related cost percent of all three cost categories the movable equipment depreciation weight of 9.7 percent as calculated from (Depreciation, Interest, and Other cost weight (after leasing costs are the 2013 Medicare cost reports for Capital-Related) prior to any lease included) representing 27 percent of LTCHs after applying the proposed expenses being allocated. This 15.5 total depreciation costs. trims described above. We are proposing percent is applied to the 56.1 percent of To disaggregate the interest cost to then separate this total capital-related remaining lease expenses so that weight, we needed to determine the cost weight into more detailed cost another 8.7 percent of lease expenses as percent of total interest costs for LTCHs categories. a percent of total capital-related costs is that are attributable to government and Using 2013 Medicare cost reports, we allocated to the Other Capital-Related nonprofit facilities, which we hereafter are able to group capital-related costs cost category. Therefore, the resulting refer to as the ‘‘nonprofit percentage,’’ into the following categories: proposed Other Capital-Related cost because price pressures associated with Depreciation, Interest, Lease, and Other weight is 20.8 percent (5.9 percent + 6.2 these types of interest costs tend to Capital-Related costs. For each of these percent + 8.7 percent). This is the same differ from those for for-profit facilities. categories, we are proposing to methodology used for the 2009-based We are proposing to use interest costs determine what proportion of total LTCH-specific market basket. The data from Worksheet A–7 of the 2013 capital-related costs the category proposed allocation of these lease Medicare cost reports for LTCHs, which represents using the data reported by expenses are shown in Table VII–3. is the same methodology used for the the LTCH on Worksheet A–7, which is Finally, we are proposing to further 2009-based LTCH-specific market the same methodology used for the divide the Depreciation and Interest cost basket. The nonprofit percentage 2009-based LTCH-specific market categories. We are proposing to separate determined using this method is 23 basket. Depreciation cost category into the percent. We also are proposing to allocate following two categories: (1) Building lease costs across each of the remaining and Fixed Equipment and (2) Movable Table VII–3 below provides the detailed capital-related cost categories Equipment. We also are proposing to proposed detailed capital cost shares as was done in the 2009-based LTCH- separate the Interest cost category into obtained from the Medicare cost reports. specific market basket. This would the following two categories: (1) Ultimately, if finalized, these detailed result in three primary capital-related Government/Nonprofit; and (2) For- capital cost shares would be applied to cost categories in the proposed 2013- profit. the total capital-related cost weight based LTCH market basket: To disaggregate the depreciation cost determined in section VII.D.3.b. of the Depreciation, Interest, and Other weight, we needed to determine the preamble of this proposed rule to Capital-Related costs. Lease costs are percent of total depreciation costs for separate the total capital-related cost unique in that they are not broken out LTCHs (after the allocation of lease weight of 9.7 percent into more detailed as a separate cost category in the costs) that are attributable to building cost categories and weights.

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TABLE VII–3—DETAILED CAPITAL COST WEIGHTS FOR THE PROPOSED 2013-BASED LTCH MARKET BASKET

Proposed cost Proposed detailed shares obtained capital cost shares from Medicare after allocation of Cost categories cost reports lease expenses (percent of total (percent of total costs) costs)

Depreciation ...... 22.0 54.8 Building and Fixed Equipment ...... 16.1 40.1 Movable Equipment ...... 5.9 14.7 Interest ...... 9.8 24.4 Government/Nonprofit ...... 2.2 5.6 For-profit ...... 7.6 18.8 Lease ...... 62.3 ...... Other ...... 5.9 20.8 Note: Total may not add to 100 due to rounding.

e. Proposed 2013-Based LTCH Market the proposed 2013-based LTCH market Basket Cost Categories and Weights basket compared to the 2009-based Table VII–4 below shows the LTCH-specific market basket. proposed cost categories and weights for

TABLE VII–4—PROPOSED 2013-BASED LTCH COST WEIGHTS COMPARED TO 2009-BASED LTCH COST WEIGHTS

Proposed 2013- Cost category based LTCH cost 2009-based LTCH weight cost weight

Total ...... 100.0 100.0 Compensation ...... 53.9 54.3 Wages and Salaries ...... 46.6 46.3 Employee Benefits ...... 7.3 8.0 Utilities ...... 2.2 1.8 Electricity ...... 1.0 1.4 Fuel, Oil, and Gasoline ...... 1.1 0.3 Water & Sewerage ...... 0.1 0.1 Professional Liability Insurance ...... 0.9 0.8 All Other Products and Services ...... 33.2 33.3 All Other Products ...... 16.3 19.5 Pharmaceuticals ...... 7.6 8.9 Food: Direct Purchases ...... 1.8 3.4 Food: Contract Services ...... 1.1 0.5 Chemicals ...... 0.7 1.3 Medical Instruments ...... 2.4 2.1 Rubber & Plastics ...... 0.6 1.3 Paper and Printing Products ...... 1.2 1.2 Apparel ...... 0.3 Machinery and Equipment ...... 0.1 Miscellaneous Products ...... 0.8 0.4 All Other Services ...... 16.9 13.7 Labor-Related Services ...... 8.3 5.3 Professional Fees: Labor-related ...... 3.5 2.3 Administrative and Facilities Support Services ...... 0.9 0.5 Installation, Maintenance, and Repair Services ...... 2.0 ...... All Other: Labor-related Services ...... 1.9 2.6 Nonlabor-Related Services ...... 8.6 8.4 Professional Fees: Nonlabor-related ...... 3.6 5.3 Financial services ...... 2.9 1.0 Telephone Services ...... 0.7 0.5 Postage ...... 0.8 All Other: Nonlabor-related Services ...... 1.4 0.7 Capital-Related Costs ...... 9.7 9.8 Depreciation ...... 5.3 5.7 Fixed Assets ...... 3.9 3.8 Movable Equipment ...... 1.4 1.9 Interest Costs ...... 2.4 2.4 Government/Nonprofit ...... 0.5 0.7 For Profit ...... 1.8 1.7 Other Capital-Related Costs ...... 2.0 1.7 Note: Detail may not add to total due to rounding.

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Similar to the 2012-based IRF and only if an appropriate PPI is not of this cost category. This ECI is 2012-based IPF market baskets, the available, or if the expenditures are calculated using the ECI for Total proposed 2013-based LTCH market more like those faced by retail Compensation for All Civilian Workers basket does not include separate cost consumers in general rather than by in Hospitals (BLS series code categories for Apparel, Machinery and purchasers of goods at the wholesale CIU1016220000000I) and the relative Equipment, and Postage. Due to the level. For example, the CPI for food importance of wages and salaries within small weights associated with these purchased away from home is proposed total compensation. This is the same detailed categories and relatively stable to be used as a proxy for contracted food price proxy used in the 2009-based price growth in the applicable price services. LTCH-specific market basket. proxy, we are proposing to include D Employment Cost Indexes— (3) Electricity Apparel and Machinery and Equipment Employment Cost Indexes (ECIs) in the Miscellaneous Products cost measure the rate of change in employee We are proposing to use the PPI category and Postage in the All-Other wage rates and employer costs for Commodity for Commercial Electric Nonlabor-Related Services cost category. employee benefits per hour worked. Power (BLS series code WPU0542) to We note that the machinery and These indexes are fixed-weight indexes measure the price growth of this cost equipment expenses are for equipment and strictly measure the change in wage category. This is the same price proxy that is paid for in a given year and not rates and employee benefits per hour. used in the 2009-based LTCH-specific depreciated over the asset’s useful life. Appropriately, they are not affected by market basket. Depreciation expenses for movable shifts in employment mix. (4) Fuel, Oil, and Gasoline equipment are reflected in the capital- We evaluated the price proxies using related cost weight of the proposed the criteria of reliability, timeliness, We are proposing to change the proxy 2013-based LTCH market basket. For the availability, and relevance. Reliability used for the Fuel, Oil, and Gasoline cost proposed 2013-based LTCH market indicates that the index is based on category. The 2009-based LTCH-specific basket, we also are proposing to include valid statistical methods and has low market basket uses the PPI Industry for a separate cost category for Installation, sampling variability. Timeliness implies Petroleum Refineries (BLS series code Maintenance, and Repair Services in that the proxy is published regularly, PCU32411–32411) to proxy these order to proxy these costs by a price preferably at least once a quarter. expenses. index that better reflects the price Availability means that the proxy is For the proposed 2013-based LTCH changes of labor associated with publicly available. Finally, relevance market basket, we are proposing to use maintenance-related services. means that the proxy is applicable and a blend of the PPI Industry for Petroleum Refineries (BLS series code 4. Selection of Proposed Price Proxies representative of the cost category weight to which it is applied. We PCU32411–32411) and the PPI After computing the cost weights for believe that the proposed PPIs, CPIs, Commodity for Natural Gas (BLS series the proposed 2013-based LTCH market and ECIs selected meet these criteria. code WPU0531). Our analysis of the basket, it was necessary to select Table VII–7 lists the price proxies that Bureau of Economic Analysis’ 2007 appropriate wage and price proxies to we are proposing to use for the Benchmark Input-Output data (use table reflect the rate of price change for each proposed 2013-based LTCH market before redefinitions, purchaser’s value expenditure category. With the basket. Below we present a detailed for NAICS 622000 [Hospitals]), shows exception of the proxy for Professional that petroleum refineries expenses Liability Insurance, all of the proposed explanation of the price proxies that we are proposing for each cost category accounts for approximately 70 percent proxies for the operating portion of the and natural gas accounts for proposed 2013-based LTCH market weight. We note that many of the proxies that we are proposing to use for approximately 30 percent of the fuel, basket are based on Bureau of Labor oil, and gasoline expenses. Therefore, Statistics (BLS) data and are grouped the proposed 2013-based LTCH market basket are the same as those used for the we are proposing a blended proxy of 70 into one of the following BLS categories: percent of the PPI Industry for D Producer Price Indexes—Producer 2009-based LTCH-specific market basket. For further discussion on the Petroleum Refineries (BLS series code Price Indexes (PPIs) measure price PCU32411–32411) and 30 percent of the changes for goods sold in markets other 2009-based LTCH market basket, we refer readers to the FY 2013 IPPS/LTCH PPI Commodity for Natural Gas (BLS than the retail market. PPIs are series code WPU0531). We believe that preferable price proxies for goods and PPS final rule (77 FR 53467 through 53479). these two price proxies are the most services that hospitals purchase as technically appropriate indices inputs because PPIs better reflect the a. Price Proxies for the Operating available to measure the price growth of actual price changes encountered by Portion of the Proposed 2013-Based the Fuel, Oil, and Gasoline cost category hospitals. For example, we are LTCH Market Basket in the proposed 2013-based LTCH proposing to use a PPI for prescription market basket. drugs, rather than the Consumer Price (1) Wages and Salaries Index (CPI) for prescription drugs, We are proposing to use the ECI for (5) Water and Sewage because hospitals generally purchase Wages and Salaries for All Civilian We are proposing to use the CPI for drugs directly from a wholesaler. The Workers in Hospitals (BLS series code Water and Sewerage Maintenance (All PPIs that we are proposing to use CIU1026220000000I) to measure the Urban Consumers) (BLS series code measure price changes at the final stage price growth of this cost category. This CUUR0000SEHG01) to measure the of production. is the same price proxy used in the price growth of this cost category. This D Consumer Price Indexes— 2009-based LTCH-specific market is the same price proxy used in the Consumer Price Indexes (CPIs) measure basket. 2009-based LTCH-specific market change in the prices of final goods and basket. services bought by the typical (2) Employee Benefits consumer. Because they may not We are proposing to use the ECI for (6) Professional Liability Insurance represent the price encountered by a Total Benefits for All Civilian Workers We are proposing to proxy price producer, we are proposing to use CPIs in Hospitals to measure the price growth changes in hospital professional liability

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insurance premiums (PLI) using Feeds (BLS series code WPU02) to Other Basic Organic Chemical percentage changes as estimated by the measure the price growth of this cost Manufacturing (BLS series code CMS Hospital Professional Liability category. This is the same price proxy PCU32519–32519), and the PPI Industry Index. To generate these estimates, we used in the 2009-based LTCH-specific for Soap and Cleaning Compound collected commercial insurance market basket. Manufacturing (BLS series code premiums for a fixed level of coverage (9) Food: Contract Services PCU32561–32561). We are proposing to while holding nonprice factors constant update the blended weights using 2007 (such as a change in the level of We are proposing to use the CPI for Benchmark I–O data, which we also are coverage). This is the same price proxy Food Away From Home (All Urban proposing to use for the proposed 2013- used in the 2009-based LTCH-specific Consumers) (BLS series code based LTCH market basket. The 2009- market basket. CUUR0000SEFV) to measure the price based LTCH-specific market basket growth of this cost category. This is the (7) Pharmaceuticals included the same blended chemical same price proxy used in the 2009- price proxy, but used the 2002 We are proposing to use the PPI based LTCH-specific market basket. Benchmark I–O data to determine the Commodity for Pharmaceuticals for (10) Chemicals weights of the blended chemical price Human Use, Prescription (BLS series We are proposing to continue to use index. The 2007 Benchmark I–O data code WPUSI07003) to measure the price shows more weight for organic chemical growth of this cost category. This is the a four-part blended PPI composed of the PPI Industry for Industrial Gas products and less weight for inorganic same price proxy used in the 2009- chemical products compared to the based LTCH-specific market basket. Manufacturing (BLS series code PCU325120325120P), the PPI Industry 2002 Benchmark I–O data. (8) Food: Direct Purchases for Other Basic Inorganic Chemical Table VII–5 below shows the We are proposing to use the PPI Manufacturing (BLS series code proposed weights for each of the four Commodity for Processed Foods and PCU32518–32518), the PPI Industry for PPIs used to create the blended PPI.

TABLE VII–5—BLENDED CHEMICAL PPI WEIGHTS

Proposed Name 2013-based LTCH 2009-based LTCH NAICS weights weights

PPI Industry for Industrial Gas Manufacturing ...... 32% 35% 325120 PPI Industry for Other Basic Inorganic Chemical Manufacturing ...... 17 25 325180 PPI Industry for Other Basic Organic Chemical Manufacturing ...... 45 30 325190 PPI Industry for Soap and Cleaning Compound Manufacturing ...... 6 10 325610

(11) Medical Instruments used in the 2009-based LTCH-specific (16) Administrative and Facilities market basket. Support Services We are proposing to use a blend for the Medical Instruments cost category. (13) Paper and Printing Products We are proposing to use the ECI for Total Compensation for Private Industry The 2007 Benchmark Input-Output data We are proposing to use the PPI shows an approximate 50/50 split Workers in Office and Administrative Commodity for Converted Paper and Support (BLS series code between Surgical and Medical Paperboard Products (BLS series code Instruments and Medical and Surgical CIU2010000220000I) to measure the WPU0915) to measure the price growth price growth of this category. This is the Appliances and Supplies for this cost of this cost category. This is the same category. Therefore, we are proposing a same price proxy used in the 2009- price proxy used in the 2009-based based LTCH-specific market basket. blend composed of 50 percent of the PPI LTCH-specific market basket. Commodity for Surgical and Medical (17) Installation, Maintenance, and Instruments (BLS code WPU1562) and (14) Miscellaneous Products Repair Services 50 percent of the PPI Commodity for We are proposing to use the PPI We are proposing to use the ECI for Medical and Surgical Appliances and Commodity for Finished Goods Less Total compensation for All Civilian Supplies (BLS code WPU1563). The Food and Energy (BLS series code Workers in Installation, Maintenance, 2009-based LTCH-specific market basket WPUFD4131) to measure the price and Repair (BLS series code used the single, higher level PPI growth of this cost category. This is the CIU1010000430000I) to measure the Commodity for Medical, Surgical, and same price proxy used in the 2009- price growth of this new cost category. Personal Aid Devices (BLS series code based LTCH-specific market basket. Previously these costs were included in WPU156). We believe that the proposed (15) Professional Fees: Labor-Related the All Other: Labor-Related Services price proxy better reflects the mix of category and were proxied by the ECI expenses for this cost category as We are proposing to use the ECI for for Total Compensation for Private obtained from the 2007 Benchmark I–O Total Compensation for Private Industry Industry Workers in Service data. Workers in Professional and Related Occupations (BLS series code (12) Rubber and Plastics (BLS series code CIU2010000120000I) to CIU2010000300000I). We believe that measure the price growth of this this index better reflects the price We are proposing to use the PPI category. It includes occupations such changes of labor associated with Commodity for Rubber and Plastic as legal, accounting, and engineering maintenance-related services and its Products (BLS series code WPU07) to services. This is the same price proxy incorporation represents a technical measure the price growth of this cost used in the 2009-based LTCH-specific improvement to the market basket. category. This is the same price proxy market basket. (18) All Other: Labor-Related Services

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We are proposing to use the ECI for vintage weighting method is the same capital-related component of the Total Compensation for Private Industry method that was used for the 2009- proposed 2013-based LTCH market Workers in Service Occupations (BLS based LTCH-specific market basket and basket reflects the underlying stability series code CIU2010000300000I) to is described in section VII.D.4.b.(2) of of the capital-related acquisition measure the price growth of this cost the preamble of this proposed rule. process. category. This is the same price proxy We are proposing to proxy the To calculate the vintage weights for used in the 2009-based LTCH-specific Depreciation: Building and Fixed depreciation and interest expenses, we market basket. Equipment cost category by BEA’s first needed a time series of capital- (19) Professional Fees: Nonlabor- Chained Price Index for Nonresidential related purchases for building and fixed Related Construction for Hospitals and Special equipment and movable equipment. We We are proposing to use the ECI for Care Facilities (BEA Table 5.4.4. Price found no single source that provides an Total Compensation for Private Industry Indexes for Private Fixed Investment in appropriate time series of capital-related Workers in Professional and Related Structures by Type); the Depreciation: purchases by hospitals for all of the (BLS series code CIU2010000120000I) to Movable Equipment cost category by the above components of capital purchases. measure the price growth of this PPI Commodity for Machinery and The early Medicare cost reports did not category. This is the same price proxy Equipment (BLS series code WPU11); have sufficient capital-related data to that we are proposing to use for the the Nonprofit Interest cost category by meet this need. Data we obtained from Professional Fees: Labor-related cost the average yield on domestic municipal the American Hospital Association category and the same price proxy used bonds (Bond Buyer 20-bond index); the (AHA) did not include annual capital- in the 2009-based LTCH-specific market For-Profit Interest cost category by the related purchases. However, we were basket. average yield on Moody’s Aaa bonds able to obtain data on total expenses (20) Financial Services (Federal Reserve); and the Other back to 1963 from the AHA. We are proposing to use the ECI for Capital-Related cost category by the Consequently, we are proposing to use Total Compensation for Private Industry CPI–U for Rent of Primary Residence data from the AHA Panel Survey and Workers in Financial Activities (BLS (BLS series code CUUS0000SEHA). We the AHA Annual Survey to obtain a series code CIU201520A000000I) to believe that these are the most time series of total expenses for measure the price growth of this cost appropriate proxies for LTCH capital- hospitals. We then are proposing to use category. This is the same price proxy related costs that meet our selection data from the AHA Panel Survey used in the 2009-based LTCH-specific criteria of relevance, timeliness, supplemented with the ratio of market basket. availability, and reliability. depreciation to total hospital expenses obtained from the Medicare cost reports (21) Telephone Services (2) Vintage Weights for Price Proxies to derive a trend of annual depreciation We are proposing to use the CPI for Because capital is acquired and paid Telephone Services (BLS series code expenses for 1963 through 2013. We are for over time, capital-related expenses proposing to separate these depreciation CUUR0000SEED) to measure the price in any given year are determined by growth of this cost category. This is the expenses into annual amounts of both past and present purchases of building and fixed equipment same price proxy used in the 2009- physical and financial capital. The based LTCH-specific market basket. depreciation and movable equipment vintage-weighted capital-related portion depreciation as determined earlier. (22) All Other: Nonlabor-Related of the proposed 2013-based LTCH From these annual depreciation Services market basket is intended to capture the amounts, we derived annual end-of-year long-term consumption of capital, using book values for building and fixed We are proposing to use the CPI for vintage weights for depreciation All Items Less Food and Energy (BLS equipment and movable equipment (physical capital) and interest (financial using the expected life for each type of series code CUUR0000SA0L1E) to capital). These vintage weights reflect measure the price growth of this cost asset category. While data are not the proportion of capital-related available that are specific to LTCHs, we category. We believe that using the CPI purchases attributable to each year of for All Items Less Food and Energy believe that this information for all the expected life of building and fixed hospitals serves as a reasonable avoids double counting of changes in equipment, movable equipment, and food and energy prices as they are alternative for the pattern of interest. We are proposing to use vintage depreciation for LTCHs. We used the already captured elsewhere in the weights to compute vintage-weighted AHA data and methodology to derive market basket. This is the same price price changes associated with the FY 2010-based IPPS capital market proxy used in the 2009-based LTCH- depreciation and interest expenses. basket (78 FR 50604), and the capital specific market basket. Capital-related costs are inherently components of the 2012-based IRF (80 b. Price Proxies for the Capital Portion complicated and are determined by FR 47062) and 2012-based IPF market of the Proposed 2013-Based LTCH complex capital-related purchasing baskets (80 FR 46672). Market Basket decisions, over time, based on such To continue to calculate the vintage factors as interest rates and debt weights for depreciation and interest (1) Capital Price Proxies Prior to Vintage financing. In addition, capital is expenses, we also needed to account for Weighting depreciated over time instead of being the expected lives for building and fixed We are proposing to apply the same consumed in the same period it is equipment, movable equipment, and price proxies to the detailed capital- purchased. By accounting for the interest for the proposed 2013-based related cost categories as were applied vintage nature of capital, we are able to LTCH market basket. We are proposing in the 2009-based LTCH-specific market provide an accurate and stable annual to calculate the expected lives using basket, which are described and measure of price changes. Annual non- Medicare cost report data for LTCHs. provided in Table VII–7. We also are vintage price changes for capital are The expected life of any asset can be proposing to continue to vintage weight unstable due to the volatility of interest determined by dividing the value of the the capital price proxies for rate changes and, therefore, do not asset (excluding fully depreciated Depreciation and Interest to capture the reflect the actual annual price changes assets) by its current year depreciation long-term consumption of capital. This for LTCH capital-related costs. The amount. This calculation yields the

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estimated expected life of an asset if the movable equipment. We then calculated interest, 18 years, and in the case of rates of depreciation were to continue at a time series, beginning in 1964, of movable equipment, 8 years). For each current year levels, assuming straight- annual capital purchases by subtracting asset type, we are proposing to use the line depreciation. Using this proposed the previous year’s asset costs from the time series of annual capital-related method, we determined the average current year’s asset costs. purchase amounts available from 2013 expected life of building and fixed For the building and fixed equipment back to 1964. These data allow us to equipment to be equal to 18 years, and and movable equipment vintage derive thirty-three 18-year periods of the average expected life of movable weights, we are proposing to use the capital-related purchases for building equipment to be equal to 8 years. For real annual capital-related purchase and fixed equipment and interest, and the expected life of interest, we believe amounts for each asset type to capture forty-three 8-year periods of capital- that vintage weights for interest should the actual amount of the physical related purchases for movable represent the average expected life of acquisition, net of the effect of price equipment. For each 18-year period for building and fixed equipment because, inflation. These real annual capital- building and fixed equipment and based on previous research described in related purchase amounts are produced interest, or 8-year period for movable the FY 1997 IPPS final rule (61 FR by deflating the nominal annual equipment, we are proposing to 46198), the expected life of hospital purchase amount by the associated price calculate annual vintage weights by debt instruments and the expected life proxy as provided earlier in this dividing the capital-related purchase proposed rule. For the interest vintage of buildings and fixed equipment are amount in any given year by the total weights, we are proposing to use the similar. We note that for the 2009-based amount of purchases over the entire 18- total nominal annual capital-related LTCH-specific market basket, we used year or 8-year period. This calculation 2009 Medicare cost reports for LTCHs to purchase amounts to capture the value was done for each year in the 18-year or determine the expected life of building of the debt instrument (including, but 8-year period and for each of the periods and fixed equipment and movable not limited to, mortgages and bonds). for which we have data. We then equipment (77 FR 53467 through Using these capital-related purchase calculated the average vintage weight 53479). The 2009-based LTCH-specific time series specific to each asset type, for a given year of the expected life by market basket was based on an expected we are proposing to calculate the taking the average of these vintage average life of building and fixed vintage weights for building and fixed weights across the multiple periods of equipment of 20 years and an expected equipment, for movable equipment, and average life of movable equipment of 8 for interest. data. years. The vintage weights for each asset The vintage weights for the capital- Multiplying these expected lives by type are deemed to represent the related portion of the proposed 2013- the annual depreciation amounts results average purchase pattern of the asset based LTCH market basket and the in annual year-end asset costs for over its expected life (in the case of 2009-based LTCH-specific market basket building and fixed equipment and building and fixed equipment and are presented in Table VII–6 below.

TABLE VII–6—PROPOSED 2013-BASED LTCH MARKET BASKET AND 2009-BASED LTCH-SPECIFIC MARKET BASKET VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES

Building and fixed equipment Movable equipment Interest 1 Year 2013-based 2009-based 2013-based 2009-based 2013-based 2009-based 18 years 20 years 8 years 8 years 18 years 20 years

1 ...... 0.044 0.034 0.104 0.102 0.029 0.021 2 ...... 0.046 0.037 0.110 0.108 0.031 0.024 3 ...... 0.048 0.039 0.117 0.114 0.034 0.026 4 ...... 0.050 0.042 0.124 0.123 0.037 0.029 5 ...... 0.051 0.043 0.128 0.129 0.039 0.032 6 ...... 0.051 0.045 0.132 0.134 0.042 0.035 7 ...... 0.051 0.046 0.140 0.142 0.043 0.037 8 ...... 0.052 0.047 0.145 0.149 0.046 0.040 9 ...... 0.053 0.049 ...... 0.049 0.043 10 ...... 0.056 0.051 ...... 0.054 0.047 11 ...... 0.058 0.053 ...... 0.059 0.050 12 ...... 0.059 0.053 ...... 0.063 0.053 13 ...... 0.061 0.053 ...... 0.068 0.055 14 ...... 0.062 0.054 ...... 0.072 0.059 15 ...... 0.062 0.055 ...... 0.076 0.062 16 ...... 0.063 0.057 ...... 0.080 0.068 17 ...... 0.066 0.059 ...... 0.086 0.073 18 ...... 0.067 0.059 ...... 0.091 0.077 19 ...... 0.061 ...... 0.082 20 ...... 0.062 ...... 0.086

Total ...... 1.000 1.000 1.000 1.000 1.000 1.000 Note: Numbers may not add to total due to rounding. 1 Vintage weight in the last year (for example, year 18 for the proposed 2013-based LTCH market basket) is applied to the most recent data point and prior vintage weights are applied going back in time. For example, year 18 vintage weight would be applied to the 2017q3 price proxy level, year 17 vintage weight would be applied to the 2016q3 price proxy level, etc.

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The process of creating vintage- price indices. The example can be found c. Summary of Price Proxies of the weighted price proxies requires under the following CMS Web site link: Proposed 2013-Based LTCH Market applying the vintage weights to the http://www.cms.gov/Research-Statistics- Basket price proxy index where the last applied Data-and-Systems/Statistics-Trends- vintage weight in Table VII–6 is applied and-Reports/MedicareProgramRates Table VII–7 below shows both the to the most recent data point. We have Stats/MarketBasketResearch.html in the operating and capital price proxies that provided on the CMS Web site an zip file titled ‘‘Weight Calculations as we are proposing to use for the example of how the vintage weighting described in the IPPS FY 2010 Proposed proposed 2013-based LTCH market price proxies are calculated, using Rule.’’ basket. example vintage weights and example

TABLE VII–7—PROPOSED PRICE PROXIES FOR THE PROPOSED 2013-BASED LTCH MARKET BASKET

Cost description Price proxies Weight

Total ...... 100.0 Compensation ...... 53.9 Wages and Salaries ...... ECI for Wages and Salaries for All Civilian Workers in Hos- 46.6 pitals. Employee Benefits ...... ECI for Total Benefits for All Civilian Workers in Hospitals ...... 7.3 Utilities ...... 2.2 Electricity ...... PPI Commodity for Commercial Electric Power ...... 1.0 Fuel, Oil, and Gasoline ...... Blend of the PPI Industry for Petroleum Refineries and PPI 1.1 Commodity for Natural Gas. Water & Sewerage ...... CPI–U for Water and Sewerage Maintenance ...... 0.1 Professional Liability Insurance ...... 0.9 Malpractice ...... CMS Hospital Professional Liability Insurance Premium Index 0.9 All Other Products and Services ...... 33.2 All Other Products ...... 16.3 Pharmaceuticals ...... PPI Commodity for Pharmaceuticals for human use, prescrip- 7.6 tion. Food: Direct Purchases ...... PPI Commodity for Processed Foods and Feeds ...... 1.8 Food: Contract Services ...... CPI–U for Food Away From Home ...... 1.1 Chemicals ...... Blend of Chemical PPIs ...... 0.7 Medical Instruments ...... Blend of the PPI Commodity for Surgical and Medical Instru- 2.4 ments and PPI Commodity for Medical and Surgical Appli- ances and Supplies. Rubber & Plastics ...... PPI Commodity for Rubber and Plastic Products ...... 0.6 Paper and Printing Products ...... PPI Commodity for Converted Paper and Paperboard Prod- 1.2 ucts. Miscellaneous Products ...... PPI Commodity for Finished Goods Less Food and Energy .... 0.8 All Other Services ...... 16.9 Labor-Related Services ...... 8.3 Professional Fees: Labor-related ...... ECI for Total Compensation for Private Industry Workers in 3.5 Professional and Related. Administrative and Facilities Support Services ...... ECI for Total Compensation for Private Industry Workers in 0.9 Office and Administrative Support. Installation, Maintenance & Repair Services ...... ECI for Total Compensation for Civilian Workers in Installa- 2.0 tion, Maintenance, and Repair. All Other: Labor-related Services ...... ECI for Total Compensation for Private Industry Workers in 1.9 Service Occupations. Nonlabor-Related Services ...... 8.6 Professional Fees: Nonlabor-related ...... ECI for Total Compensation for Private Industry Workers in 3.6 Professional and Related. Financial services ...... ECI for Total Compensation for Private Industry Workers in Fi- 2.9 nancial Activities. Telephone Services ...... CPI–U for Telephone Services ...... 0.7 All Other: Nonlabor-related Services ...... CPI–U for All Items Less Food and Energy ...... 1.4 Capital-Related Costs ...... 9.7 Depreciation ...... 5.3 Fixed Assets ...... BEA chained price index for nonresidential construction for 3.9 hospitals and special care facilities—vintage weighted (18 years). Movable Equipment...... PPI Commodity for machinery and equipment—vintage 1.4 weighted (8 years). Interest Costs ...... 2.4 Government/Nonprofit ...... Average yield on domestic municipal bonds (Bond Buyer 20 0.5 bonds)—vintage weighted (18 years). For Profit ...... Average yield on Moody’s Aaa bonds—vintage weighted (18 1.8 years). Other Capital-Related Costs ...... CPI–U for Rent of Primary Residence ...... 2.0 Note: Sum of the cost weights for the detailed categories may not add to total cost weight for subcategory or total market basket due to rounding.

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d. Proposed FY 2017 Market Basket basket increases based on the best basket components, the FY 2017 market Update for LTCHs available data, we are proposing a basket update would be 2.8 percent market basket update of 2.7 percent for (before taking into account any statutory For FY 2017 (that is, October 1, 2016, FY 2017. Furthermore, because the through September 30, 2017), we are adjustment). Therefore, the update proposed FY 2017 annual update is based on the proposed 2013-based proposing to use an estimate of the based on the most recent market basket proposed 2013-based LTCH market LTCH market basket is currently 0.1 estimate for the 12-month period percentage point lower. This lower basket to update payments to LTCHs (currently 2.7 percent), we also are based on the best available data. update is primarily due to the lower proposing that if more recent data pharmaceutical cost weight in the Consistent with historical practice, we become subsequently available (for estimate the LTCH market basket update proposed 2013-based market basket (7.6 example, a more recent estimate of the percent) compared to the 2009-based for the LTCH PPS based on IHS Global market basket), we would use such data, LTCH-specific market basket (8.9 Insight, Inc.’s (IGI’s) forecast using the if appropriate, to determine the FY 2017 percent). This is partially offset by the most recent available data. IGI is a annual update in the final rule. (As nationally recognized economic and discussed in greater detail in section higher cost weights associated with All financial forecasting firm that contracts V.A.2. of the Addendum to this Other Services (such as Professional with CMS to forecast the components of proposed rule, we are proposing an Fees and Installation, Maintenance, and the market baskets. annual update of 2.7 percent to the Repair Services) for the proposed 2013- Based on IGI’s first quarter 2016 LTCH PPS standard Federal payment based LTCH market basket relative to forecast with history through the fourth rate for FY 2017 under proposed the 2009-based LTCH-specific market quarter of 2015, the projected market § 412.523(c)(3)(xiii) of the regulations.) basket. Table VII–8 below compares the basket update for FY 2017 is 2.7 Using the current 2009-based LTCH- proposed 2013-based LTCH market percent. Therefore, consistent with our specific market basket and IGI’s first basket and the 2009-based LTCH- historical practice of estimating market quarter 2016 forecast for the market specific market basket percent changes.

TABLE VII–8—PROPOSED 2013-BASED LTCH MARKET BASKET AND 2009-BASED LTCH-PECIFIC MARKET BASKET PERCENTAGE CHANGES, FY 2011 THROUGH FY 2019

Proposed 2013-based LTCH Fiscal year (FY) market basket index percent 2009-based LTCH market change basket index percent change

Historical data: FY 2011 ...... 2.3 2.6 FY 2012 ...... 1.9 2.3 FY 2013 ...... 2.1 2.3 FY 2014 ...... 1.8 1.9 FY 2015 ...... 1.8 2.2 Average 2011–2015 ...... 2.0 2.3 Forecast: FY 2016 ...... 2.0 2.2 FY 2017 ...... 2.7 2.8 FY 2018 ...... 3.0 3.1 FY 2019 ...... 3.1 3.1 Average 2016–2019 ...... 2.7 2.8 Note that these market basket percent changes do not include any further adjustments as may be statutorily required. Source: IHS Global Insight, Inc. 1st quarter 2016 forecast.

Over the time period covering 2011 specific market basket are based on the proportion of total costs that are related through 2015, the average growth rate of 2013 and 2009 Medicare cost report data to, influenced by, or vary with the local the proposed 2013-based LTCH market for LTCHs, respectively. labor market. As discussed in more basket is roughly 0.3 percentage point e. Proposed FY 2017 Labor-Related detail below and similar to the 2009- lower than the 2009-based LTCH- Share based LTCH-specific market basket, we specific market basket. The lower classify a cost category as labor-related growth rate is primarily a result of the As discussed in section V.B. of the and include it in the labor-related share Addendum to this proposed rule, under lower pharmaceutical cost weight in the if the cost category is defined as being the authority of section 123 of the BBRA proposed 2013-based market basket labor-intensive and its cost varies with as amended by section 307(b) of the compared to the 2009-based LTCH- the local labor market. As stated in the BIPA, we established an adjustment to specific market basket. Historically, the the LTCH PPS payments to account for FY 2016 IPPS/LTCH PPS final rule (80 price growth of pharmaceutical costs differences in LTCH area wage levels FR 49798), the labor-related share for FY has exceeded the price growth rates for (§ 412.525(c)). The labor-related portion 2016 was defined as the sum of the FY most of the other market basket cost of the LTCH PPS standard Federal 2016 relative importance of Wages and categories. Therefore, a lower payment rate, hereafter referred to as the Salaries; Employee Benefits; pharmaceutical cost weight would, all labor-related share, is adjusted to Professional Fees: Labor-Related else equal, result in a lower market account for geographic differences in Services; Administrative and Facilities basket update. As stated above, the area wage levels by applying the Support Services (formerly referred to as pharmaceutical cost weights for the applicable LTCH PPS wage index. Administrative and Business Support proposed 2013-based LTCH market The labor-related share is determined Services); All Other: Labor-related basket and the 2009-based LTCH- by identifying the national average Services; and a portion of the Capital

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Costs from the 2009-based LTCH- final rule (76 FR 51766). For the Services’’ cost category. For a detailed specific market basket. proposed 2013-based LTCH market discussion of this analysis, we refer We proposed to continue to classify a basket, we are proposing to apply these readers to the FY 2013 IPPS/LTCH PPS cost category as labor-related if the costs survey results using this same final rule (77 FR 53478). are labor-intensive and vary with the methodology to separate the For the proposed 2013-based LTCH local labor market. Given this, based on Professional Fees cost category into market basket, we conducted a similar our definition of the labor-related share Professional Fees: Labor-related and analysis of home office data. For and the cost categories in the proposed Professional Fees: Nonlabor-related cost consistency, we believe that it is 2013-based LTCH market basket, we are categories. We believe that using the important for our analysis on home proposing to include in thelabor-related survey results serves as an appropriate office data to be conducted on the same share for FY 2017 the sum of the FY proxy for the purchasing patterns of LTCHs used to derive the proposed 2017 relative importance of Wages and professional services for LTCHs because 2013-based LTCH market basket cost Salaries; Employee Benefits; they also are providers of institutional weights. The Medicare cost report Professional Fees: Labor-Related; care. requires a hospital to report information Administrative and Facilities Support In addition to the professional regarding their home office provider. Services; Installation, Maintenance, and services listed above, we are proposing Approximately 56 percent of LTCHs Repair Services; All Other: Labor-related to classify expenses under NAICS 55, reported some type of home office Services; and a portion of the Capital- Management of Companies and information on their Medicare cost Related cost weight from the proposed Enterprises, into the Professional Fees: report for 2013 (for example, home 2013-based LTCH market basket. As Labor-related and Professional Fees: office number, city, state, zip code, or noted in section VII.D.3.e. of the Nonlabor-related cost categories, as was name). For those providers for which we preamble of this proposed rule, for the done for the 2009-based LTCH-specific were able to identify which MSA the proposed 2013-based LTCH market market basket. The NAICS 55 industry LTCH’s home office was located, we basket, we have proposed the creation of is mostly comprised of corporate, then compared the home office MSA a separate cost category for Installation, subsidiary, and regional managing with the LTCH facility’s MSA. Maintenance, and Repair services. offices (otherwise referred to as home We found that 7 percent of the LTCHs These expenses were previously offices). As stated above, we classify a with home offices had those home included in the ‘‘All Other’’ Labor- cost category as labor-related and offices located in the same MSA as their related Services cost category in the include it in the labor-related share if facilities. We then concluded that these 2009-based LTCH-specific market the cost category is labor-intensive and providers were located in the same local basket, along with other services, if its costs vary with the local labor labor market as their home office. As a including, but not limited to, janitorial, market. We believe that many of the result, we are proposing to apportion waste management, security, and dry costs associated with NAICS 55 are the NAICS 55 expense data by this cleaning/laundry services. Because labor-intensive and vary with the local percentage. Therefore, we are proposing these services tend to be labor-intensive labor market. However, data indicate to classify 7 percent of these costs into and are mostly performed at the facility that not all LTCHs with home offices the ‘‘Professional Fees: Labor-related (and, therefore, unlikely to be purchased have home offices located in their local Services’’ cost category and the in the national market), we continue to labor market. Therefore, we are remaining 93 percent of these costs into believe that they meet our definition of proposing to include in the labor-related the ‘‘Professional Fees: Nonlabor-related labor-related services. share only a proportion of the NAICS 55 Services’’ cost category. For the development of the 2009- expenses based on the methodology Using this proposed method and the based LTCH-specific market basket, in described below. IGI forecast for the first quarter 2016 of an effort to more accurately determine For the 2009-based LTCH-specific the proposed 2013-based LTCH market the share of professional fees for market basket, we used data primarily basket, the proposed LTCH labor-related services such as accounting and from the Medicare cost reports and a share for FY 2017 would be the sum of auditing services, engineering services, CMS database of Home Office Medicare the FY 2017 relative importance of each legal services, and management and Records (HOMER) (a database that labor-related cost category. Consistent consulting services that should be provides city and state information with our proposal to update the labor- included in the labor-related share, we (addresses) for home offices) and related share with the most recent used data from a survey of IPPS determined that 13 percent of the total available data, the labor-related share hospitals regarding the proportion of number of LTCHs that had home offices for this proposed rule reflects IGI’s first those fees that go to companies that are had those home offices located in their quarter 2016 forecast of the proposed located beyond their own local labor respective local labor markets—defined 2013-based LTCH market basket. Table market. The results from this survey as being in the same Metropolitan VII–9 below shows the proposed FY were then used to separate a portion of Statistical Area (MSA). Therefore, we 2017 relative importance labor-related the Professional Fees cost category into classified 13 percent of these costs into share using the proposed 2013-based labor-related and nonlabor-related costs. the ‘‘Professional Fees: Labor-related LTCH market basket and the FY 2016 These results and our allocation Services’’ cost category and the relative importance labor-related share methodology are discussed in more remaining 87 percent into the using the 2009-based LTCH-specific detail in the FY 2012 IPPS/LTCH PPS ‘‘Professional Fees: Nonlabor-related market basket.

TABLE VII–9—LTCH LABOR-RELATED SHARE

FY 2017 FY 2016 Final Proposed labor- labor related related share 1 share 2

Wages and Salaries ...... 46.6 44.6 Employee Benefits ...... 7.3 8.1

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TABLE VII–9—LTCH LABOR-RELATED SHARE—Continued

FY 2017 FY 2016 Final Proposed labor- labor related related share 1 share 2

Professional Fees: Labor-related ...... 3.5 2.2 Administrative and Facilities Support Services ...... 0.9 0.5 Installation, Maintenance, and Repair Services 3 ...... 2.1 — All Other: Labor-related Services ...... 1.9 2.5 Subtotal ...... 62.3 57.9 Labor-related portion of capital (46%) ...... 4.3 4.1

Total Labor-Related Share ...... 66.6 62.0 1 Based on the proposed 2013-based LTCH Market Basket, IHS Global Insight, Inc. 1st quarter 2016 forecast. 2 Federal Register, 80 FR 49478. 3 Installation, Maintenance, and Repair services costs were previously included in the All Other: Labor-related Services cost weight of the 2009-based LTCH-specific market basket.

The proposed labor-related share for LTCH market basket is 4.6 percentage Employee Benefits, Contract Labor, FY 2017 is the sum of the proposed FY points higher than the FY 2016 labor- Professional Liability Insurance, 2017 relative importance of each labor- related share using the 2009-based Pharmaceuticals, and Capital)) by the related cost category, and would reflect LTCH-specific market basket. The detailed cost weights calculated from the different rates of price change for primary reason for a higher labor-related the Benchmark I–O data. Therefore, the these cost categories between the base share, which we describe in more detail differences between the Labor-related year (2013) and FY 2017. The sum of the below, is a result of the change in the Services cost weights between the proposed relative importance for FY quantity of labor, particularly for proposed 2013-based LTCH market 2017 for operating costs (Wages and professional services, outpacing the basket and the 2009-based LTCH- Salaries, Employee Benefits, change in quantity of products (which specific market basket are a function of Professional Fees: Labor-Related, are not included in the labor-related the change in the ‘‘All Other’’ residual Administrative and Facilities Support share) between 2009 and 2013, which cost category weight and changes to the Services, Installation, Maintenance, and more than offsets the faster relative Benchmark I–O data. Approximately 0.6 Repair Services, All Other: Labor-related growth in prices for products. percentage point of the 3.0 percentage Services) would be 62.3 percent, as Roughly three-quarters of the 4.6 point difference is attributable to the shown in Table VII–9 above. We are percentage point difference is the result higher ‘‘All Other’’ residual cost proposing that the portion of capital- of higher base year cost weights for the category weight of the proposed 2013- related costs that is influenced by the Professional Fees: Labor-Related, based LTCH market basket compared to local labor market is estimated to be 46 Administrative and Facilities Support the 2009-based LTCH-specific market percent, which is the same percentage Services, All Other: Labor-Related basket, while the remaining 2.4 applied to the 2009-based LTCH- services, and Installation, Maintenance, percentage points is due to the changes specific market basket (77 FR 53478). and Repair services cost categories for in the Benchmark I–O cost weights Because the relative importance for the proposed 2013-based LTCH market derived from the 2007 data used in the capital-related costs under our basket compared to the 2009-based proposed 2013-based LTCH market proposals would be 9.4 percent of the LTCH-specific market basket. We refer basket and the 2002 data used in the proposed 2013-based LTCH market to these cost categories collectively as 2009-based LTCH-specific market basket in FY 2017, we are proposing to ‘‘Labor-Related Services.’’ As stated basket. take 46 percent of 9.4 percent to earlier, installation, maintenance and Roughly one-quarter of the 4.6 determine the proposed labor-related repair costs were previously classified percentage point difference between the share of capital-related costs for FY in the All Other: Labor-Related services proposed FY 2017 labor-related share 2017 (.46 × 9.4). The result would be 4.3 cost category of the 2009-based LTCH- using the proposed 2013-based LTCH percent, which we are proposing to add specific market basket. market basket and the FY 2016 labor- to 62.3 percent for the operating cost In aggregate, the base year cost related share using the 2009-based amount to determine the total proposed weights for the Labor-Related Services LTCH-specific market basket is a result labor-related share for FY 2017. cost categories in the proposed 2013- of the Compensation cost weight. There Therefore, the labor-related share that based LTCH market basket are 3.0 are two key factors causing this we are proposing to use for the LTCH percentage points higher than the 2009- differential. First, using the 2013 PPS in FY 2017 would be 66.6 percent. based LTCH-specific market basket cost Medicare cost reports, we calculated a This proposed labor-related share is weights. As described in section Compensation cost weight that is 53.9 determined using the same methodology VII.D.3.e. of the preamble of this percent for the proposed 2013-based as employed in calculating all previous proposed rule, the detailed cost LTCH market basket, which reflects LTCH labor-related shares. We also are categories of the LTCH market basket both the change in price and change in proposing that, if more recent data (including the Labor-Related Services quantity of compensation. This is 0.9 become available, (for example, an cost categories) are derived by percentage point higher than the FY updated estimate of the labor-related multiplying the ‘‘All Other’’ residual 2013 relative importance moving share) we would use such data to cost weight (which reflects all average using the 2009-based LTCH- determine the FY 2017 labor-related remaining costs that are not captured in specific market basket (53.0 percent), share for the final rule. the six major cost category weights which only reflects relative price The proposed FY 2017 labor-related calculated using the LTCH Medicare changes between 2009 and 2013. share using the proposed 2013-based Cost Report data (Wages and Salaries, Second, the relative price growth from

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FY 2013 to the payment year between IPPS/LTCH PPS final rule (80 FR 49601 V.A. of the Addendum to this proposed the 2009-based LTCH-specific market through 49623).) rule). basket and the proposed 2013-based For details on the development of the 2. Proposed FY 2017 LTCH PPS LTCH market basket also contributes to initial FY 2003 standard Federal rate, Standard Federal Payment Rate Annual the difference. For the 2009-based we refer readers to the August 30, 2002 Market Basket Update LTCH-specific market basket, the LTCH PPS final rule (67 FR 56027 relative importance for compensation through 56037). For subsequent updates a. Overview decreases from 53.0 percent in FY 2013 to the LTCH PPS standard Federal rate Historically, the Medicare program to 52.7 percent in FY 2016, a reduction as implemented under § 412.523(c)(3), has used a market basket to account for of 0.3 percentage point. For the we refer readers to the following final input price increases in the services proposed 2013-based LTCH market rules: RY 2004 LTCH PPS final rule (68 furnished by providers. The market basket, the base weight of 53.9 percent FR 34134 through 34140); RY 2005 basket used for the LTCH PPS includes in 2013 is the same as the relative LTCH PPS final rule (68 FR 25682 both operating and capital related costs importance in FY 2017. These two through 25684); RY 2006 LTCH PPS of LTCHs because the LTCH PPS uses a factors combined produce the 1.2 final rule (70 FR 24179 through 24180); single payment rate for both operating percentage point difference in the RY 2007 LTCH PPS final rule (71 FR and capital-related costs. We adopted relative importance for compensation in 27819 through 27827); RY 2008 LTCH the 2009-based LTCH-specific market FY 2016 and FY 2017 as shown in Table PPS final rule (72 FR 26870 through basket for use under the LTCH PPS VII–9. 27029); RY 2009 LTCH PPS final rule beginning in FY 2013. For additional As noted above, the market basket is (73 FR 26800 through 26804); FY 2010 details on the historical development of described as a fixed-weight index IPPS/RY 2010 LTCH PPS final rule (74 the market basket used under the LTCH because it represents the change in price FR 44021 through 44030); FY 2011 PPS, we refer readers to the FY 2013 over time of a constant mix (quantity IPPS/LTCH PPS final rule (75 FR 50443 IPPS/LTCH PPS final rule (77 FR 53467 and intensity) of goods and services through 50444); FY 2012 IPPS/LTCH through 53476). For FY 2017, we are needed to furnish hospital services. The PPS final rule (76 FR 51769 through proposing to rebase and revise the 2009- effects on total expenditures resulting 51773); FY 2013 IPPS/LTCH PPS final based LTCH-specific market basket. The from changes in the mix of goods and rule (77 FR 53479 through 53481); FY proposed LTCH market basket is services purchased subsequent to the 2014 IPPS/LTCH PPS final rule (78 FR primarily based on Medicare cost report base period are not measured. Only 50760 through 50765); FY 2015 IPPS/ data for LTCHs for 2013. We refer when the index is rebased would LTCH PPS final rule (79 FR 50176 readers to section VII.D. of this changes in the quantity and intensity be through 50180) and FY 2016 IPPS/LTCH preamble of this proposed rule for a captured, with those changes being PPS final rule (80 FR 49634 through complete discussion of the proposed reflected in the cost weights. Therefore, 49637). LTCH market basket and a description we rebase the market basket periodically In this FY 2017 proposed rule, we of the methodologies we are proposing so that the cost weights reflect recent present our proposed policies related to to use for determining the operating and mix of goods and services that hospitals the annual update to the LTCH PPS capital-related portions of the proposed purchase (hospital inputs) to furnish standard Federal payment rate for FY 2013-based LTCH market basket. inpatient care. 2017, which includes the annual market Section 3401(c) of the Affordable Care basket update. Consistent with our Act provides for certain adjustments to E. Proposed Changes to the LTCH PPS historical practice of using the best data any annual update to the LTCH PPS Payment Rates and Other Proposed available, we also are proposing to use standard Federal payment rate and Changes to the LTCH PPS for FY 2017 more recent data to determine the FY refers to the timeframes associated with 1. Overview of Development of the 2017 annual market basket update to the such adjustments as a ‘‘rate year’’ LTCH PPS Standard Federal Payment LTCH PPS standard Federal payment (which are discussed in more detail in Rates rate in the final rule. section VII.C.2.b. of the preamble of this The application of the proposed proposed rule.) We note that because The basic methodology for update to the LTCH PPS standard the annual update to the LTCH PPS determining LTCH PPS standard Federal payment rate for FY 2017 is policies, rates, and factors now occurs Federal prospective payment rates is presented in section V.A. of the on October 1, we adopted the term currently set forth at 42 CFR 412.515 Addendum to this proposed rule. The ‘‘fiscal year’’ (FY) rather than ‘‘rate through 412.536. In this section, we components of the proposed annual year’’ (RY) under the LTCH PPS discuss the factors that we are proposing market basket update to the LTCH PPS beginning October 1, 2010, to conform to use to update the LTCH PPS standard standard Federal payment rate for FY with the standard definition of the Federal payment rate for FY 2017, that 2017 are discussed below, including the Federal fiscal year (October 1 through is, effective for LTCH discharges reduction to the annual update for September 30) used by other PPSs, such occurring on or after October 1, 2016 LTCHs that fail to submit quality as the IPPS (75 FR 50396 through through September 30, 2017. Under the reporting data for FY 2017 as required 50397). Although the language of dual rate LTCH PPS payment structure by the statute (as discussed in section sections 3004(a), 3401(c), 10319, and required by statute, beginning with FY VII.E.2.c. of the preamble of this 1105(b) of the Affordable Care Act refers 2016, only LTCH discharges that meet proposed rule). In addition, we are to years 2010 and thereafter under the the criteria for exclusion from the site proposing to make an adjustment to the LTCH PPS as ‘‘rate year,’’ consistent neutral payment rate are paid based on LTCH PPS standard Federal payment with our change in the terminology used the LTCH PPS standard Federal rate to account for the estimated effect under the LTCH PPS from ‘‘rate year’’ to payment rate specified at § 412.523. (For of the proposed changes to the area ‘‘fiscal year,’’ for purposes of clarity, additional details on our finalized wage level adjustment for FY 2017 on when discussing the annual update for policies related to the dual rate LTCH estimated aggregate LTCH PPS the LTCH PPS standard Federal PPS payment structure required by payments, in accordance with payment rate, including the provisions statute, we refer readers to the FY 2016 § 412.523(d)(4) (as discussed in section of the Affordable Care Act, we use

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‘‘fiscal year’’ rather than ‘‘rate year’’ for Section 1886(b)(3)(B)(xi)(II) of the Act 1886(m)(5)(A)(ii) of the Act provides 2011 and subsequent years. defines the MFP adjustment as equal to that the application of the 2.0 the 10-year moving average of changes percentage points reduction may result b. Proposed Market Basket Under the in annual economy-wide, private in an annual update that is less than 0.0 LTCH PPS for FY 2017 nonfarm business multifactor for a year, and may result in LTCH PPS Under the authority of section 123 of productivity (as projected by the payment rates for a year being less than the BBRA as amended by section 307(b) Secretary for the 10-year period ending such LTCH PPS payment rates for the of the BIPA, we adopted a 2009-based with the applicable fiscal year, calendar preceding year (§ 412.523(c)(4)(iii)). LTCH-specific market basket for use year, cost reporting period, or other Furthermore, section 1886(m)(5)(B) of under the LTCH PPS beginning in FY annual period). Under our methodology, the Act specifies that the 2.0 percentage 2013. The 2009-based LTCH-specific the end of the 10-year moving average points reduction is applied in a market basket is based solely on the of changes in the MFP coincides with noncumulative manner, such that any Medicare cost report data submitted by the end of the appropriate fiscal year reduction made under section LTCHs and, therefore, specifically update period. In addition, the MFP 1886(m)(5)(A) of the Act shall apply reflects the cost structures of only adjustment that is applied in only with respect to the year involved, LTCHs. For additional details on the determining any annual update to the and shall not be taken into account in development of the 2009-based LTCH- LTCH PPS standard Federal payment computing the LTCH PPS payment specific market basket, we refer readers rate is the same adjustment that is amount for a subsequent year to the FY 2013 IPPS/LTCH PPS final required to be applied in determining (§ 412.523(c)(4)(ii)). We discuss the rule (77 FR 53467 through 53476). the applicable percentage increase application of the 2.0 percentage point For FY 2017, as noted earlier, we are under the IPPS under section reduction under § 412.523(c)(4)(i) in our proposing to rebase and revise the 2009- 1886(b)(3)(B)(i) of the Act, as they are discussion of the proposed annual based LTCH-specific market basket to both based on a fiscal year. (We refer market basket update to the LTCH PPS reflect a 2013 base year. We are readers to section IV.A.1. of the standard Federal payment rate for FY proposing to use 2013 cost reports preamble of FY 2016 IPPS/LTCH PPS 2017 in section VII.E.2.e. of the beginning in FY 2013 because these final rule for more information on the preamble of this proposed rule. (For represent the most recent, complete set current MFP adjustment.) additional information on the history of of Medicare cost report data for the LTCH QRP, including the statutory d. Proposed Adjustment to the LTCH purposes of calculating cost weights for authority and the selected measures, we PPS Standard Federal Payment Rate the LTCH market basket. refer readers to section VIII.C. of the Under the Long-Term Care Hospital We believe that the proposed 2013- preamble of this proposed rule.) Quality Reporting Program (LTCH QRP) based LTCH market basket e. Proposed Annual Market Basket appropriately reflects the cost structure In accordance with section 1886(m)(5) Update Under the LTCH PPS for FY of LTCHs, as discussed in greater detail of the Act, as added by section 3004(a) 2017 in section VII.D. of the preamble of this of the Affordable Care Act, the Secretary proposed rule. In this proposed rule, we established the Long-Term Care Consistent with our historical are proposing to use the proposed 2013- Hospital Quality Reporting Program practice, we estimate the market basket based LTCH market basket to update the (LTCH QRP). The reduction in the update and the MFP adjustment based LTCH PPS standard Federal payment annual update to the LTCH PPS on IGI’s forecast using the most recent rate for FY 2017. standard Federal payment rate for available data. Based on IGI’s first failure to report quality data under the quarter 2016 forecast, the FY 2017 full c. Revision of Certain Market Basket LTCH QRP for FY 2014 and subsequent market basket increase for the LTCH Updates as Required by the Affordable fiscal years is codified under PPS using the proposed 2013-based Care Act § 412.523(c)(4) of the regulations. (As LTCH market basket is 2.7 percent, as Section 1886(m)(3)(A) of the Act, as previously noted, although the language discussed in section VII.D.4.d. of the added by section 3401(c) of the of section 3004(a) of the Affordable Care preamble of this proposed rule. The Affordable Care Act, specifies that, for Act refers to years 2011 and thereafter current estimate of the MFP adjustment rate year 2010 and each subsequent rate under the LTCH PPS as ‘‘rate year,’’ for FY 2017 based on IGI’s first quarter year through 2019, any annual update to consistent with our change in the 2016 forecast is 0.5 percent, as the LTCH PPS standard Federal terminology used under the LTCH PPS discussed in section IV.B. of the payment rate shall be reduced: from ‘‘rate year’’ to ‘‘fiscal year,’’ for preamble of this proposed rule. In • For rate year 2010 through 2019, by purposes of clarity, when discussing the addition, consistent with our historical the ‘‘other adjustment’’ specified in annual update for the LTCH PPS, practice, we are proposing to use a more sections 1886(m)(3)(A)(ii) and (m)(4) of including the provisions of the recent estimate of the market basket the Act; and Affordable Care Act, we use ‘‘fiscal increase and the MFP adjustment to • For rate year 2012 and each year’’ rather than ‘‘rate year’’ for 2011 determine the FY 2017 market basket subsequent year, by the productivity and subsequent years.) The LTCH QRP, update and the MFP adjustment for FY adjustment (which we refer to as ‘‘the as required for FY 2014 and subsequent 2017 in the final rule. multifactor productivity (MFP) fiscal years by section 1886(m)(5)(A)(i) For FY 2017, section 1886(m)(3)(A)(i) adjustment’’) described in section of the Act, applies a 2.0 percentage of the Act requires that any annual 1886(b)(3)(B)(xi)(II) of the Act. point reduction to any update under update to the LTCH PPS standard Section 1886(m)(3)(B) of the Act § 412.523(c)(3) for an LTCH that does Federal payment rate be reduced by the provides that the application of not submit quality reporting data to the productivity adjustment (‘‘the MFP paragraph (3) of section 1886(m) of the Secretary in accordance with section adjustment’’) described in section Act may result in the annual update 1886(m)(5)(C) of the Act with respect to 1886(b)(3)(B)(xi)(II) of the Act. being less than zero for a rate year, and such a year (that is, in the form and Consistent with the statute, we are may result in payment rates for a rate manner and at the time specified by the proposing to reduce the full FY 2017 year being less than such payment rates Secretary under the LTCH QRP) market basket increase by the proposed for the preceding rate year. (§ 412.523(c)(4)(i)). Section FY 2017 MFP adjustment. To determine

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the proposed market basket update for under the authority of section 123 of the applicable annual rate-of-increase LTCHs for FY 2017, as reduced by the BBRA as amended by section 307(b) of percentage specified in § 413.40(c)(3) for MFP adjustment, consistent with our the BIPA, we are proposing an annual the subject cost reporting period (79 FR established methodology, we subtracted market basket update under to the LTCH 50197). For FY 2017, in accordance with the proposed FY 2017 MFP adjustment PPS standard Federal payment rate for § 412.526(c)(1)(ii) of the regulations, we from the proposed FY 2017 market FY 2017 of 1.45 percent (that is, the are proposing that, for cost reporting basket update. Furthermore, sections most recent estimate of the proposed periods beginning during FY 2017, the 1886(m)(3)(A)(ii) and 1886(m)(4)(F) of LTCH PPS market basket increase of 2.7 update to the target amount for the the Act requires that any annual update percent, less the proposed MFP payment adjustment for ‘‘subclause (II)’’ to the LTCH PPS standard Federal adjustment of 0.5 percentage point, and LTCHs would be 2.8 percent, which is payment rate for FY 2017 be reduced by less the 0.75 percentage point required the estimated market basket update for the ‘‘other adjustment’’ described in under section 1886(m)(4)(F) of the Act). FY 2017 to the rate-of-increase limits for paragraph (4), which is 0.75 percentage Accordingly, we are proposing to revise certain hospitals excluded from the point for FY 2017. Therefore, following § 412.523(c)(3) by adding a new IPPS that are paid on a reasonable cost application of the productivity paragraph (xiii), which would specify basis (that is, the applicable annual rate- adjustment, we are proposing to further that the LTCH PPS standard Federal of-increase percentage under reduce the proposed adjusted market payment rate for FY 2017 is the LTCH § 413.40(c)(3)), which is discussed in basket update (that is, the proposed full PPS standard Federal payment rate for section VI. of the preamble of this market basket increase less the proposed the previous LTCH PPS year updated by proposed rule, is the FY 2017 rate-of- MFP adjustment) by the ‘‘other 1.45 percent, and as further adjusted, as increase percentage estimate for adjustment’’ specified by sections appropriate, as described in updating the target amounts, and is 1886(m)(3)(A)(ii) and 1886(m)(4) of the § 412.523(d). For LTCHs that fail to equal to the estimated percentage Act. (For additional details on our submit quality reporting data under the increase in the FY 2010-based IPPS established methodology for adjusting LTCH QRP, under § 412.523(c)(3)(xiii) operating market basket, in accordance the market basket increase by the MFP in conjunction with § 412.523(c)(4), we with applicable regulations at § 413.40. and the ‘‘other adjustment’’ required by are proposing to further reduce the Based on IGI’s 2016 first quarter the statute, we refer readers to the FY proposed annual update to the LTCH forecast, with historical data through the 2012 IPPS/LTCH PPS final rule (76 FR PPS standard Federal payment rate by 2015 fourth quarter, we estimate that the 51771).) 2.0 percentage points in accordance FY 2010-based IPPS operating market For FY 2017, section 1886(m)(5) of the with section 1886(m)(5) of the Act. basket update for FY 2017 is 2.8 percent Act requires that, for LTCHs that do not Accordingly, we are proposing an (that is, the estimate of the market submit quality reporting data as annual update to the LTCH PPS basket rate-of-increase). Therefore, the required under the LTCH QRP, any standard Federal payment rate of -0.55 proposed rate-of-increase percentage annual update to an LTCH PPS standard percent (that is, 1.45 percent minus 2.0 that would be applied to the FY 2016 Federal payment rate, after application percentage points) for FY 2017 for target amounts in order to determine the of the adjustments required by section LTCHs that fail to submit quality FY 2017 target amounts for ‘‘subclause 1886(m)(3) of the Act, shall be further reporting data as required under the (II) LTCHs’’ under § 412.526(c)(1)(i) is reduced by 2.0 percentage points. LTCH QRP. As stated above, consistent 2.8 percent. This is the same applicable Therefore, the proposed update to the with our historical practice, we are annual rate-of-increase percentage that LTCH PPS standard Federal payment proposing to use more recent estimate of would be provided for FY 2017 under rate for FY 2017 for LTCHs that fail to the market basket and the MFP § 413.40(c)(3), as discussed in section submit quality reporting data under the adjustment to establish an annual VI. of the preamble of this proposed LTCH QRP, the full LTCH PPS market update to the LTCH PPS standard rule. Consistent with our historical basket increase, subject to an adjustment Federal payment rate for FY 2017 under practice of using the best available data, based on changes in economy-wide § 412.523(c)(3)(xiii) in the final rule. if more recent data become available (for productivity (‘‘the MFP adjustment’’) as (We note that, consistent with historical example, a more recent estimate of the required under section 1886(m)(3)(A)(i) practice, we also are proposing to market basket increase), we propose to of the Act and an additional reduction adjusted the proposed FY 2017 LTCH use such data, if appropriate, to required by sections 1886(m)(3)(A)(ii) PPS standard Federal payment rate by determine the FY 2017 rate-of-increase and 1886(m)(4) of the Act, will also be an area wage level budget neutrality percentage to determine the FY 2017 further reduced by 2.0 percentage factor in accordance with target amounts for ‘‘subclause (II) points. § 412.523(d)(4) (as discussed in section LTCHs’’ in the final rule. In this proposed rule, in accordance V.B.5. of the Addendum to this F. Proposed Modifications to the ‘‘25- with the statute, we are proposing to proposed rule).) reduce the proposed FY 2017 full Percent Threshold Policy’’ Payment market basket increase of 2.7 percent 3. Proposed Update Under the Payment Adjustments (§§ 412.534 and 412.536) (based on IGI’s first quarter 2016 Adjustment for ‘‘Subclause (II)’’ LTCHs The ‘‘25-percent threshold policy’’ is forecast of the proposed 2013-based Under the LTCH PPS payment a per discharge payment adjustment in LTCH market basket) by the proposed adjustment for ‘‘subclause (II) LTCHs’’ the LTCH PPS that is applied to FY 2017 MFP adjustment of 0.5 at § 412.526(c)(1)(ii), we established payments for Medicare patient percentage point (based on IGI’s first that, for cost reporting periods discharges from an LTCH when the quarter 2016 forecast). Following beginning during fiscal years after FY number of such patients originating application of the proposed productivity 2015, the target amount (used to from any single referring hospital is in adjustment, the proposed adjusted determine the adjusted payment for excess of the applicable threshold for a market basket update of 2.2 percent (2.7 Medicare inpatient operating costs given cost reporting period (such percent minus 0.5 percentage point) was under reasonable cost-based threshold is generally set at 25 percent, then reduced by 0.75 percentage point, reimbursement rules) will equal the with exceptions for rural and urban as required by sections 1886(m)(3)(A)(ii) hospital’s target amount for the previous single or MSA-dominant hospitals). If and 1886(m)(4)(F) of the Act. Therefore, cost reporting period updated by the an LTCH exceeds the applicable

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threshold during a cost reporting period, ultimately was generally set at a 25- reporting periods beginning on or after payment for the discharge that puts the percent threshold after specified phase- either July 1, 2016 (for LTCHs subject to LTCH over its threshold and all in periods. A full discussion of the 42 CFR 412.534) or October 1, 2016 (for discharges subsequent to that discharge original 25-percent threshold policy is LTCHs subject to 42 CFR 412.536). For in the cost reporting period from the contained in the FY 2005 IPPS final rule more details on the various laws that referring hospital are adjusted at cost (69 FR 49191 through 49214). delayed the full implementation of the report settlement (discharges not in While initially limited to co-located 25 percent threshold policy, we refer excess of the threshold are unaffected by facilities, in keeping with the readers to the FY 2015 IPPS/LTCH PPS the 25-percent threshold policy). Each suggestions of MedPAC and certain final rule (79 FR 50356 through 50357). cost reporting period begins a new other commenters, CMS noted that it With the impending expiration of the threshold determination, so subsequent would continue to monitor claims data most recent statutory delay of the full cost reporting periods are unaffected by for signs that common ownership implementation of the 25-percent failure to meet the applicable percentage between hospitals that did not share a threshold policy and the recent threshold requirements in a prior location also encouraged discharge and implementation of a dual rate payment period. admission decisions based on system for the revised LTCH PPS for The adjusted payment amount for reimbursement rather than clinical cost reporting periods beginning on or those discharges that are subject to the considerations (69 FR 49202 through after October 1, 2015, we have received current 25-percent threshold policy is 19203). This continued monitoring, many questions concerning the calculated as the lesser of the applicable including analysis of discharge patterns mechanics of the revised payment LTCH PPS payment amount or the IPPS from the FY 2005 MedPAR files, system, especially in relation to the equivalent amount. We note that the identified additional patterns of patient application of the 25-percent threshold IPPS equivalent amount under the 25- shifting and worrisome admission policy under § 412.534 and § 412.536, percent threshold policy differs practices between LTCHs and referring and how those sections will interact. somewhat from the IPPS comparable per hospitals that were not co-located that The questions generally involved how diem amount applicable under the site were similar to the patterns identified in CMS would implement the policy for neutral payment rate policy at the FY 2004 MedPAR files between co- LTCHs with multiple locations. Other § 412.522(c)(1)(i) and the short-stay located LTCHs and their host hospitals. questions included how site neutral outlier (SSO) policy at § 412.529(d)(4). In response to these findings, CMS payment rate discharges would be For a discussion of the calculation of the expanded the 25-percent threshold treated under the policy and how CMS IPPS comparable per diem amount policy in the RY 2008 LTCH PPS final would determine whether a hospital under § 412.529(d)(4) and the IPPS rule to include all LTCHs and LTCH was located in a rural or MSA-dominant equivalent amount under existing satellite facilities through the area. As a result of the confusion §§ 412.534(f) and 412.536(e), including amendment of § 412.534 (including reflected in those questions, we are details on the differences in the those certain LTCHs which had been proposing to revise our existing policies calculations, we refer readers to our grandfathered from the original policy in an effort to simplify the application response to comments in the FY 2014 established in the FY 2005 rule) and the of the 25-percent threshold policy. IPPS/LTCH PPS final rule (78 FR addition of § 412.536 (governing Specifically, we are proposing to 50772). patients admitted from hospitals not co- sunset both §§ 412.534 and 412.536 and The 25-percent threshold policy was located with the LTCH). A full adopt a unified 25-percent threshold originally established in the FY 2005 discussion of this policy can be found policy at new § 412.538. If finalized, this IPPS final rule for LTCH hospital- in the RY 2008 LTCH PPS final rule (72 provision would apply to payments for within-hospitals (HwHs) and satellites FR 26919 through 26944). discharges occurring on or after October (69 FR 49191 through 49214). It The resulting 25-percent threshold 1, 2016. The applicable percentage addressed patient shifting driven by policy was to have been phased in over thresholds would generally remain at 25 financial considerations, rather than 3 years, and, when fully implemented, percent. In keeping with our current patient benefit. Specifically, it the 25-percent threshold policy would policy at § 412.534(h) and addressed the negative incentives that have applied to nearly all LTCHs or § 412.536(a)(2), under proposed new result from the co-location of facilities LTCH satellites and remote locations § 412.538(a), the adjustment would not which created incentives for behaviors admitting patients from any hospital, be applicable to ‘‘subclause (II)’’ LTCHs which result in two hospital stays, and regardless of the location or ownership described at section 1886(d)(1)(B)(iv)(II) two Medicare payments, for what was of the referring hospital. (For the of the Act and § 412.23(e)(2)(ii) or, essentially one episode of patient care— remainder of this section, we refer to the consistent with the statute and as and a financial windfall for both policies under § 412.534 and § 412.536 codified in the regulations at providers, as compared to acute care collectively as the ‘‘25-percent threshold § 412.534(a) and § 412.536(a)(1)(ii), hospitals that were not co-located with policy’’ unless otherwise indicated.) those HwHs described in an LTCH. It also addressed statutory However, several laws mandated § 412.23(e)(2)(i) that meet the criteria in limits for LTCHs, namely concerns that delayed implementation of the policy, § 412.22(f) (‘‘grandfathered HwHs’’). these LTCHs were, in essence, behaving including, most recently, section 1206 (Section 1206(b)(1)(B) of the Pathway as long-term care ‘‘units’’ of the co- of the Pathway for Sustainable Growth for SGR Reform Act provides for a located hospitals (an arrangement Rate (SGR) Reform Act (Pub. L. 113–67). statutory exclusion from the 25-percent prohibited under section 1886(d)(1)(B) Section 1206(b)(1)(B) provides a threshold policy for ‘‘grandfathered of the Act). In order to discourage such permanent exemption from the HwHs,’’ which was codified in the activities, CMS initially established a application of the 25-percent threshold regulations at § 412.534(a) and payment adjustment at § 412.534 for policy for co-located LTCHs that were § 412.536(a)(1)(ii) in the FY 2015 IPPS/ discharges in which the patient was excluded from the original policy in the LTCH PPS final rule at (79 FR 50186)). admitted to the LTCH location from a FY 2005 IPPS final rule. Section In keeping with our current policy at co-located referring hospital in excess of 1206(b)(1)(A) extended prior moratoria § 412.534(c)(2) and § 412.536(h)(2), we an applicable percentage threshold. on the full implementation of the 25- are further proposing that LTCH Implementation was phased in, but percent threshold policy until cost discharges that reached high-cost outlier

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status at the referring hospital would Certification Number (CCN) on hospital and 30 discharges from the third not be subject to the 25-percent claims submitted to Medicare. location). Of those 60 Medicare threshold policy (that is, LTCH Specifically, we would determine discharges, 25 Medicare discharges (that discharges which had been high-cost whether the applicable percentage did not receive a high-cost outlier outlier cases at the referring hospital threshold was exceeded based on the payment) came directly from hospital would only be included in an LTCH’s Medicare discharges from the entire ‘‘900001’’ (10 discharges from the first total Medicare discharges and, therefore, LTCH that were admitted from each location, and 15 discharges from the would not count as having been referring hospital. The CCN is used on second location). LTCH ‘‘902000’s’’ admitted from that referring hospital. In Medicare claims to identify the hospital percentage of Medicare discharges from other words, LTCH discharges that were which discharged the patient, and thus referring hospital ‘‘900001’’ would be high-cost outlier cases at the referring we believe that using the CCN to calculated as 25 divided by 60, or 41.7 hospital would not be counted in the identify the discharging LTCH and percent. The location of the discharging numerator (but would be counted in the referring hospital is an appropriate and LTCH and the referring hospital is not denominator) when determining administratively straight-forward relevant, and only the aggregate whether the LTCH exceeded the process to implement this proposed Medicare discharge counts would be applicable percentage threshold from revision. We believe that this proposed used in the proposed calculation when that referring hospital). As we discussed approach would simplify the determining if a payment adjustment in the FY 2005 IPPS final rule, we application of the 25-percent threshold under proposed new § 412.538 is continue to believe that it is appropriate policy because it provides transparency applicable at cost report settlement. to treat high-cost outlier cases as though in identifying both the discharging Under proposed new §§ 412.538 (b) they had come from a different hospital LTCH and the referring hospital. Under and (c), we are proposing, in general, because a case which reaches high-cost this proposed approach, an LTCH’s that payment would be adjusted for outlier status has received a full percentage of Medicare discharges from LTCH Medicare discharges originating complement of services and, therefore, a given referring hospital would be from a single referring hospital during a any transfer from a hospital to an LTCH determined during settlement of a cost given cost reporting period when that cannot be said to be premature or report by dividing the LTCH’s total Medicare discharge results in a inappropriate. In addition, consistent number of Medicare discharges in the percentage of Medicare discharges (that with our current policy, under this cost reporting period (based on the CCN did not receive a high-cost outlier proposal, both the LTCH PPS standard on the claims) that were admitted payment) from that referring hospital Federal payment rate cases and the site directly from a given referring hospital that exceeds that LTCH’s applicable neutral payment rate cases would be (again determined by the CCN on the percentage threshold (that is, goes above subject to the 25-percent threshold referring hospital’s claims) that did not ‘‘25 percent’’ of that LTCH’s total policy at proposed new § 412.538 and, receive a high-cost outlier payment Medicare discharges). In other words, in therefore, would be included in the (based on the referring hospital’s claims) general, we would continue to calculate determination of whether an LTCH has by the LTCH’s total number of Medicare separate percentages for each hospital exceeded its threshold. In conjunction discharges in the cost reporting period. from which an LTCH admits patients, with this proposal, we are proposing In other words, at cost report settlement, and compare those referring hospitals’ conforming changes to § 412.522(c)(2) each LTCH’s Medicare discharges from percentage of Medicare discharges (adjustments for payments under the a given referring hospital (that did not (excluding those cases that received a site neutral payment rate) and receive a high-cost outlier payment) high-cost outlier payment) to the § 412.525(d)(5) (adjustments for during that cost reporting period would LTCH’s applicable percentage threshold, payments under the LTCH PPS standard be evaluated chronologically based on and the payment adjustment would then Federal payment rate) to include the the discharge date from the LTCH, such be applied to any of the Medicare proposed adjustment for the limitation that the Medicare discharge that results discharges that cause the LTCH to on LTCH admissions from referring in the LTCH exceeding or remaining in exceed or remain in excess of the hospitals (that is, the proposed revised excess of its applicable percentage applicable percentage threshold. 25-percent threshold policy) under new threshold would be subject to the Medicare discharges not in excess of the § 412.538. Lastly, we are also proposing payment adjustment at proposed new threshold (which includes those that that Medicare Advantage (MA) § 412.538(c). Attribution of the Medicare received a high-cost outlier payment at discharges would not be considered discharge from a specific LTCH and a the referring hospital) would continue under the revised 25-percent threshold specific referring hospital would be to be unaffected by the 25-percent policy at proposed new § 412.538, determined according to the CCN on the threshold policy. As adjusted, the net consistent with our current policy. Medicare claim submitted by the payment amount to an LTCH for each of (Consistent with these proposals, for the provider (that is, the LTCH’s CCN its Medicare discharges beyond the remainder of this section, when we refer would be determined from the LTCH’s applicable percentage threshold would to ‘‘Medicare discharges,’’ we mean a claim; the referring hospital’s CCN by its continue to be the lesser of the hospital’s Medicare discharges that were claim), which generally comprises all applicable LTCH PPS payment amount not paid under an MA plan (and in the locations of a single hospital (and for a or an IPPS equivalent amount. The IPPS case of an LTCH, all LTCH PPS single LTCH, includes satellite facilities equivalent amount under the current 25- discharges, that is, both the LTCH PPS and remote locations, as applicable). For percent threshold policy is set forth in standard Federal payment rate cases and example, the CCN of an LTCH with 3 existing regulations at § 412.534(f) and the site neutral payment rate cases).) locations is ‘‘902000’’ and the CCN of a § 412.536(e). As we are proposing to Under our proposed revised 25- specific referring hospital with 2 sunset these provisions, we are percent threshold policy at proposed locations is ‘‘900001.’’ During its cost proposing to codify the existing new § 412.538, we are proposing to reporting period, LTCH ‘‘902000’’ has a definition of ‘‘IPPS equivalent amount’’ calculate the numerator and total of 60 Medicare discharges (10 under our proposed revised 25-percent denominator for the ‘‘applicable discharges from the first location, 20 threshold policy at proposed new percentage threshold’’ by using the CMS discharges from the second location, § 412.538(f). (For a detailed description

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of the calculation of the IPPS equivalent MSA in which an MSA-dominant proposed single 25-percent threshold amount, we refer readers to the RY 2007 hospital is located) under § 412.103. policy, LTCH PPS payment for LTCH LTCH PPS proposed rule (71 FR 4698 (Information on OMB’s MSA discharges from a single referring through 4700), which was finalized in delineations based on the 2010 hospital in excess of the LTCH’s the corresponding final rule (71 FR standards can be found at: http://www. applicable percentage threshold for that 27875)). As noted previously, the IPPS whitehouse.gov/sites/default/files/omb/ referring hospital would be adjusted. equivalent amount under the 25-percent assets/fedreg_2010/06282010_metro_ We are proposing that the applicable threshold policy differs somewhat from standards-Complete.pdf.) percentage threshold would generally be the IPPS comparable amount applicable Under this proposed special treatment 25 percent (with proposed special under the site neutral payment rate and at §§ 412.538(e)(2) and (3) for LTCHs treatment for exclusively rural LTCHs the SSO policy (78 FR 50772). with multiple locations, we are further and LTCHs exclusively located in an In addition, consistent with our proposing that all locations of the LTCH MSA-dominant area). The proposed 25- existing policy at § 412.534(d) and paid under the LTCH PPS must be rural percent threshold policy would be § 412.536(c), under proposed new or located in an MSA-dominant area (as applicable to all LTCHs except § 412.538(f), we are proposing a 50- applicable); otherwise the special ‘‘subclause (II)’’ LTCHs and percent threshold for rural LTCHs (as treatment would not apply and the ‘‘grandfathered HwHs.’’ Under this defined under § 412.503) in lieu of the applicable percentage threshold would proposal, LTCH discharges which generally applicable 25-percent be 25 percent. Under our existing reached high-cost outlier status at the threshold. If finalized, payment to such regulations, the applicable percentage referring hospital from which the LTCHs would not be adjusted unless the threshold for each location is patient was discharged directly to the rural LTCH’s Medicare discharges from determined independently of any other LTCH would be treated as though they a single referring hospital (excluding location of the hospital (meaning that, if had come from a different referring those that received a high-cost outlier an LTCH had one rural and one urban hospital and, therefore, would not be payment), which exceeded 50 percent of location, the applicable percentage counted as a Medicare discharge from the LTCH’s total Medicare discharges threshold for the rural location would that referring hospital. We also are (that is, we would continue to apply an be 50 percent and the applicable proposing that MA discharges would applicable percentage threshold of 50 percentage threshold for the urban not be included in this proposed policy. percent from any single referring location would be 25 percent). However, In addition, the proposed revised 25- hospital to rural LTCHs). under our proposal, the applicable percent policy would apply to all LTCH We also are proposing to maintain at percentage threshold would apply to the PPS discharges (that is, both LTCH PPS proposed new § 412.538(e)(3) the LTCH as a whole entity (based on its standard Federal payment rate and site current special treatment of an LTCH CCN). Therefore, we believe that it neutral payment rate cases). located in an MSA with an MSA- would be appropriate to apply the rural dominant hospital at § 412.534(e) and and MSA-dominant ‘‘special’’ Under this proposal, we would § 412.536(d). As defined in those applicable percentage thresholds based evaluate the ‘‘applicable percentage regulations, an MSA-dominant hospital on the LTCH as a whole as well. threshold’’ based on the sum of the is a hospital that has discharged more Furthermore, we believe that LTCHs locations covered by the LTCH’s and than 25 percent of the total hospital’s with locations that do not fall in these referring hospitals’ Medicare provider Medicare discharges in the MSA in special treatment categories would have agreement, and would implement this which it is located. For LTCHs located sufficient access across its locations to policy using the LTCH’s and the in an MSA-dominant area (that is admit patients from multiple hospitals referring hospitals’ CCN. We are located in an MSA with an MSA- such that, as a whole, the LTCH should proposing that an LTCH’s percentage of dominant hospital), the LTCH’s be able to draw from a diverse enough Medicare discharges from a given applicable percentage threshold would population to meet the proposed 25- hospital would be determined by continue to be the percentage of total percent threshold criteria. For these dividing the LTCH’s number of Medicare hospital discharges in the reasons, at this time we do not believe Medicare discharges in the cost MSA from the MSA-dominant hospital that it would be appropriate or reporting period (based on the LTCH’s during the LTCH’s applicable cost necessary to apply these special CCN) that were admitted directly from reporting period, but in no case is less percentages unless the LTCH is a given referring hospital (based on the than 25 percent or more than 50 exclusively rural or located exclusively hospital’s CCN) that did not receive a percent. (That is, as is the case under in an MSA-dominant area (as high-cost outlier payment during the our current policy, for an LTCH located applicable). Therefore, we are proposing stay at that referring hospital by the in an MSA-dominant area, it would to require all locations of an LTCH to be LTCH’s total number of Medicare have a single applicable percentage rural or located within an MSA- discharges in the cost reporting period threshold for all of that LTCH’s referring dominant area in order to qualify for (based on the LTCH’s CCN). Under hospitals under the special treatment special treatment under proposed new proposed new § 412.538, in general, the provided under proposed new §§ 412.538(e)(2) and (3) (that is, an LTCH PPS payment would be adjusted § 412.538(e)(3). We are proposing to use adjusted applicable percentage for LTCH Medicare discharges from a our existing definition of ‘‘MSA- threshold). single referring hospital (that did not dominant hospital’’ under both In summary, for discharges occurring receive a high cost-outlier payment) that § 412.534(e) and § 412.536(d) of the on or after October 1, 2016, we are exceed the applicable percentage regulations to also define the term under proposing to establish a single threshold (generally 25 percent). If an § 412.103. We are further proposing to consolidated admission threshold LTCH exceeds its applicable threshold codify definitions for the terms ‘‘MSA’’ policy (generally a 25-percent threshold during a cost reporting period, which (which we are proposing to define as an policy) at proposed new § 412.538, in would be determined at cost report Metropolitan Statistical Area, as defined conjunction with proposing to sunset settlement, we are proposing to adjust by the Executive Office of Management the existing 25-percent threshold payment for Medicare discharges in and Budget) and ‘‘MSA-dominant area’’ policies at §§ 412.534 and 412.536, excess of the applicable percentage (which we are proposing to define as an effective October 1, 2016. Under this threshold (including the Medicare

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discharge which causes the LTCH to subclause (II) LTCHs under § 412.526 is VIII. Quality Data Reporting exceed the applicable percentage considered the full LTCH PPS payment Requirements for Specific Providers threshold), and Medicare discharges not (that is, the LTCH PPS standard Federal and Suppliers in excess of the applicable percentage payment rate or site neutral payment We seek to promote higher quality threshold would continue to be rate, as applicable), and as such, under and more efficient healthcare for unaffected by the 25-percent threshold current policy that payment applies to Medicare beneficiaries. This effort is policy (that is, the payment for such the LTCH’s costs for services furnished supported by the adoption of widely discharges would not be adjusted). As until the high-cost outlier threshold is agreed-upon quality measures. We have adjusted, the payment amount for a met (existing § 412.507(a)). Under this worked with relevant stakeholders to LTCH Medicare discharge that is found proposal, for a subclause (II) LTCH, the define quality measures for most to be at or beyond the applicable Medicare payment would only apply to settings and to measure various aspects percentage threshold would continue to the LTCH’s costs incurred for the days of care for most Medicare beneficiaries. receive the lesser of the applicable used to calculate the Medicare payment These measures assess structural aspects LTCH PPS payment amount or an IPPS (that is, days for which the patient has of care, clinical processes, patient equivalent amount. a benefit day available). Furthermore, in experiences with care, care G. Proposed Refinement to the Payment addition to the applicable Medicare coordination, and improving patient Adjustment for ‘‘Subclause II’’ LTCHs deductible and coinsurance amounts outcomes. As part of our FY 2015 IPPS/LTCH (and for items and services as specified We have implemented quality PPS rulemaking cycle, under the under § 489.20(a)), we would specify reporting programs for multiple care authority provided by section 1206(d)(2) that the LTCH may only charge the settings, including: • of the Pathway to SGR Reform Act (Pub. beneficiary for services provided during Hospital inpatient services under L. 113–67), we adopted an adjustment to the stay that were not the basis for the the Hospital Inpatient Quality Reporting the LTCH PPS payment for LTCHs adjusted LTCH PPS payment amount (IQR) Program (formerly referred to as classified under section under § 412.526. If finalized, subclause the Reporting Hospital Quality Data for 1886(d)(1)(B)(iv)(II) of the Act (II) LTCHs would be treated the same as Annual Payment Update (RHQDAPU) (‘‘subclause (II) LTCHs’’), which are IPPS-excluded hospitals paid under the Program); • described in 42 CFR 412.23(e)(2)(ii). TEFRA payment system for purposes of Hospital outpatient services under Under this adjustment, subclause (II) the limitation on charges to the Hospital Outpatient Quality LTCHs receive payment under the beneficiaries and related billing Reporting (OQR) Program (formerly LTCH PPS that is generally equivalent requirements. referred to as the Hospital Outpatient Quality Data Reporting Program (HOP to an amount determined under the In this proposed rule, using the broad QDRP)); reasonable cost-based payment rules for authority conferred upon the Secretary both operating and capital-related costs • Care furnished by physicians and under section 123(a)(1) of the BBRA, as other eligible professionals under the under 42 CFR part 413 (that is, an amended by section 307(b) of the BIPA, amount generally equivalent to an Physician Quality Reporting System in conjunction with the authority (PQRS, formerly referred to as the amount determined under the TEFRA provided under section 1206(d)(2) of payment system methodology, which Physician Quality Reporting Program Public Law 113–67, we are proposing to Initiative (PQRI)); could be called a ‘‘TEFRA-like’’ revise § 412.507 to limit allowable methodology). For more information on • Inpatient rehabilitation facilities charges to beneficiaries treated at this adjustment, we refer readers to the under the Inpatient Rehabilitation subclause (II) LTCHs as is done under FY 2015 IPPS/LTCH PPS final rule (79 Facility Quality Reporting Program (IRF the TEFRA payment system in order to FR 50193 through 50197). As initially QRP); align our beneficiary charge policies adopted, this ‘‘TEFRA-like’’ payment • Long-term care hospitals under the adjustment for subclause (II) LTCHs did with the reasonable cost-based ‘‘TEFRA- Long-Term Care Hospital Quality not incorporate the limitation on like’’ payment adjustments under Reporting Program (LTCH QRP) (also charges to Medicare beneficiaries § 412.526. Specifically, we are referred to as the LTCHQR Program); policies under the TEFRA payment proposing to revise § 412.507 to specify • PPS-exempt cancer hospitals under system. Alignment of the limitation on that, for cost reporting periods the PPS-Exempt Cancer Hospital charges to beneficiaries and related beginning on or after October 1, 2016, Quality Reporting (PCHQR) Program; billing requirements would result in the Medicare payment made to • Ambulatory surgical centers under administrative simplification for the subclause (II) LTCHs (as defined at the Ambulatory Surgical Center Quality cost report submission and settlement § 412.23(e)(2)(ii)) only applies to the Reporting (ASCQR) Program; process under the payment adjustment hospital’s costs on the days used to • Inpatient psychiatric facilities for subclause (II) LTCHs specified at calculate the Medicare payment (that is, under the Inpatient Psychiatric § 412.526. days for which the patient has a benefit Facilities Quality Reporting (IPFQR) In this proposed rule, we are day available). Furthermore, proposed Program; proposing to revise the limitation on revised § 412.507 would specify that, for • Home health agencies under the charges to beneficiaries policy and cost reporting periods beginning on or home health quality reporting program related billing requirements for after October 1, 2016, the hospital may (HH QRP); and subclause (II) LTCHs like what is done only charge the Medicare beneficiary for • Hospice facilities under the Hospice in the TEFRA payment system context the applicable deductible and Quality Reporting Program. for cost reporting periods beginning on coinsurance amounts (under §§ 409.82, We have also implemented the End- or after October 1, 2016, which would 409.83 and 409.87) for items and Stage Renal Disease Quality Incentive align our beneficiary charge policies services as specified under § 489.20(a), Program, Hospital Readmissions (and related billing procedures) with the and for services provided during the Reduction Program, HAC Reduction reasonable cost-based ‘‘TEFRA-like’’ stay that were not the basis for the Program, and Hospital VBP Program payment adjustment under § 412.526. adjusted LTCH PPS payment amount (described further below) that link The adjusted LTCH PPS payment to under § 412.526. payment to performance.

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In implementing the Hospital IQR Program. Because measures adopted for b. Maintenance of Technical Program and other quality reporting the Hospital VBP Program must first Specifications for Quality Measures programs, we have focused on measures have been adopted and reported under We refer readers to the FY 2016 IPPS/ that have high impact and support CMS the Hospital IQR Program, these two LTCH PPS final rule (80 FR 49640 and HHS priorities for improved quality programs are linked and the reporting through 49641) for a discussion of the and efficiency of care for Medicare infrastructure for the programs overlap. maintenance of technical specifications beneficiaries. Our goal for the future is We view the Hospital VBP Program as for quality measures for the Hospital to align the clinical quality measure the next step in promoting higher IQR Program. We also refer readers to requirements of the Hospital IQR quality care for Medicare beneficiaries the FY 2015 IPPS/LTCH PPS final rule Program with various other Medicare by transforming Medicare from a (79 FR 50202 through 50203) for and Medicaid programs, including those passive payer of claims into an active additional detail on the measure authorized by the Health Information purchaser of quality healthcare for its maintenance process. Technology for Economic and Clinical beneficiaries. Value-based purchasing is In addition, we believe that it is Health (HITECH) Act, so that the an important step to revamping how important to have in place a reporting burden on providers will be care and services are paid for, moving subregulatory process to incorporate reduced. As appropriate, we will increasingly toward rewarding better nonsubstantive updates to the measure consider the adoption of clinical quality value, outcomes, and innovations. specifications for measures we have measures with electronic specifications We also view the HAC Reduction adopted for the Hospital IQR Program so so that the electronic collection of Program, authorized by section 1886(p) that these measures remain up-to-date. performance information is a seamless of the Act, as added by section 3008 of We refer readers to the FY 2013 IPPS/ component of care delivery. the Affordable Care Act, and the Establishing such a system will require LTCH PPS final rule (77 FR 53504 Hospital VBP Program, as related but through 53505) and the FY 2015 IPPS/ interoperability between EHRs and CMS separate efforts to reduce HACs. The data collection systems, additional LTCH PPS final rule (79 FR 50203) for Hospital VBP Program is an incentive our policy for using a subregulatory infrastructure development on the part program that awards payments to of hospitals and CMS, and adoption of process to make nonsubstantive updates hospitals based on quality performance to measures used for the Hospital IQR standards for capturing, formatting, and on a wide variety of measures, while the transmitting the data elements that Program. We recognize that some HAC Reduction Program creates a changes made to measures undergoing make up the measures. However, once payment adjustment resulting in these activities are accomplished, maintenance review are substantive in payment reductions for poorly nature and might not be appropriate for adoption of measures that rely on data performing hospitals based on their obtained directly from EHRs will enable adoption using a subregulatory process. rates of HACs. We will continue to use rulemaking to us to expand the Hospital IQR Program In the preamble of this proposed rule, adopt substantive updates made to measure set with less cost and reporting we are proposing changes to the measures we have adopted for the burden to hospitals. We believe that in following Medicare quality reporting Hospital IQR Program. the near future, collection and reporting systems: of data elements through EHRs will • In section VIII.A, the Hospital IQR In this proposed rule, we are not greatly simplify and streamline Program. proposing any changes to our policies reporting for various CMS quality • In section VIII.B., the PCHQR on the measures maintenance process or reporting programs, and that hospitals Program. for using the subregulatory process to will be able to switch primarily to EHR- • In section VIII.C., the LTCH QRP. make nonsubstantive updates to based data reporting for many measures • In section VIII.D., the IPFQR measures used for the Hospital IQR that are currently manually chart- Program. Program. abstracted and submitted to CMS for the In addition, in section VIII.E. of the c. Public Display of Quality Measures Hospital IQR Program. preamble of this proposed rule, we are We also have implemented a Hospital proposing changes to the Medicare and Section 1886(b)(3)(B)(viii)(VII) of the VBP Program under section 1886(o) of Medicaid EHR Incentive Programs for Act was amended by the Deficit the Act, described in the Hospital eligible hospitals and CAHs. Reduction Act (DRA) of 2005. Section Inpatient VBP Program final rule (76 FR 5001(a) of the DRA requires that the A. Hospital Inpatient Quality Reporting 26490 through 26547). We most recently Secretary establish procedures for (IQR) Program adopted additional policies for the making information regarding measures Hospital VBP Program in section IV.I. of 1. Background submitted available to the public after the FY 2016 IPPS/LTCH PPS final rule ensuring that a hospital has the a. History of the Hospital IQR Program (80 FR 49544 through 49570). Under the opportunity to review its data before Hospital VBP Program, hospitals receive We refer readers to the FY 2010 IPPS/ they are made public. We refer readers value-based incentive payments based LTCH PPS final rule (74 FR 43860 to the FY 2014 IPPS/LTCH PPS final on their performance with respect to through 43861) and the FY 2011 IPPS/ rule (78 FR 50776 through 50778) for a performance standards for a LTCH PPS final rule (75 FR 50180 more detailed discussion about public performance period for the fiscal year through 50181) for detailed discussions display of quality measures. involved. The measures under the of the history of the Hospital IQR The Hospital Compare Web site is an Hospital VBP Program must be selected Program, including the statutory history, interactive Web tool that assists from the measures (other than and to the FY 2015 IPPS/LTCH PPS beneficiaries by providing information readmission measures) specified under final rule (79 FR 50217 through 50249) on hospital quality of care to those who the Hospital IQR Program as required by and the FY 2016 IPPS/LTCH PPS final need to select a hospital. For more section 1886(o)(2)(A) of the Act. rule (80 FR 49660 through 49692) for information on measures reported to In selecting measures for the Hospital the measures we have adopted for the Hospital Compare, we refer readers to IQR Program, we are mindful of the Hospital IQR Program measure set the Web site at: http:// conceptual framework we have through the FY 2019 payment www.medicare.gov/hospitalcompare. developed for the Hospital VBP determination and subsequent years. Other information not reported to

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Hospital Compare may be made remove just in the electronic form as because hospitals are asked only available on other CMS Web sites, such discussed further below: whether they participate in registries. In as https://data.medicare.gov. • AMI–2: Aspirin Prescribed at the future, we will consider other more In this proposed rule, we are not Discharge for AMI (NQF #0142); effective measures to include in the proposing any changes to these policies. • AMI–7a: Fibrinolytic Therapy program. As a result, we believe that the Received Within 30 minutes of Hospital burden to retain these measures 2. Process for Retaining Previously Arrival; outweighs the benefits. Therefore, we Adopted Hospital IQR Program • AMI–10: Statin Prescribed at are proposing to remove these two Measures for Subsequent Payment Discharge; structural measures from the Hospital Determinations • HTN: Healthy Term Newborn (NQF IQR Program for the FY 2019 payment We refer readers to the FY 2013 IPPS/ #0716); determination and subsequent years. LTCH PPS final rule (77 FR 53512 • PN–6: Initial Antibiotic Selection for Community-Acquired Pneumonia (2) Proposed Removal of ‘‘Topped-Out’’ through 53513), for our finalized Chart-Abstracted Measures measure retention policy. Pursuant to (CAP) in Immunocompetent Patients this policy, when we adopt measures for (NQF #0147); We are proposing to remove two the Hospital IQR Program beginning • SCIP–Inf–1a: Prophylactic measures in their chart-abstracted with a particular payment Antibiotic Received Within One Hour forms: (1) STK–4: Thrombolytic determination, we automatically Prior to Surgical Incision (NQF #0527); Therapy (NQF #0437) and (2) VTE–5: • readopt these measures for all SCIP–Inf–2a: Prophylactic VTE Discharge Instructions, because subsequent payment determinations Antibiotic Selection for Surgical measure performance among hospitals unless we propose to remove, suspend, Patients (NQF #0528); is so high and unvarying that • or replace the measures. In this SCIP–Inf–9: Urinary Catheter meaningful distinctions and proposed rule, we are not proposing any Removed on Postoperative Day 1 improvements in performance can no changes to this policy. (POD1) or Postoperative Day 2 (POD2) longer be made (‘‘topped-out’’ with Day of Surgery Being Day Zero; measures)—removal factor 1 (80 FR 3. Removal and Suspension of Hospital • STK–4 Thrombolytic Therapy (NQF 49641). The chart-abstracted version of IQR Program Measures #0437); STK–4 was adopted into the program in • a. Considerations in Removing Quality VTE–3: Venous Thromboembolism the FY 2012 IPPS/LTCH PPS final rule Measures From the Hospital IQR Patients with Anticoagulation Overlap (76 FR 51634); and the chart-abstracted Program Therapy (NQF #0373); version of VTE–5 was adopted into the • VTE–4: Venous Thromboembolism program in the FY 2012 IPPS/LTCH PPS As discussed above, we generally Patients Receiving Unfractionated final rule (76 FR 51636). One factor we retain measures from the previous year’s Heparin (UFH) with Dosages/Platelet consider in determining whether a Hospital IQR Program measure set for Count Monitoring by Protocol (or measure should be retained or removed subsequent years’ measure sets except Nomogram); from the program is whether the when we specifically propose to • VTE–5: Venous Thromboembolism measure is ‘‘topped-out.’’ We have remove, suspend, or replace a measure. Discharge Instructions; previously adopted two criteria for We refer readers to the FY 2011 IPPS/ • VTE–6: Incidence of Potentially determining the ‘‘topped-out’’ status of LTCH PPS final rule (75 FR 50185) and Preventable Venous Thromboembolism; Hospital IQR Program measures: (1) the FY 2015 IPPS/LTCH PPS final rule • Participation in a Systematic Statistically indistinguishable (79 FR 50203 through 50204) for more Clinical Database Registry for Nursing performance at the 75th and 90th information on the criteria we consider Sensitive Care; and percentiles; and (2) truncated coefficient for removing quality measures. We refer • Participation in a Systematic of variation ≤0.10 (80 FR 49642). These readers to the FY 2016 IPPS/LTCH PPS Clinical Database Registry for General measures meet both of these criteria. We final rule (80 FR 49641 through 49643) Surgery. believe that the burdens of retaining for more information on the additional Removal of these measures is these measures outweigh the benefits, factors we consider in removing quality discussed in more detail below. and therefore, are proposing to remove measures and the factors we consider in the chart-abstracted versions of STK–4 order to retain measures. In the FY 2015 (1) Proposed Removal of Structural Measures and VTE–5 for the FY 2019 payment IPPS/LTCH PPS final rule (79 FR 50203 determination and subsequent years. through 50204), we also finalized our We are proposing to remove two proposal to clarify the criteria for structural measures for the FY 2019 (3) Proposed Removal of Certain eCQMs determining when a measure is payment determination and subsequent We are proposing to remove the ‘‘topped-out.’’ In this proposed rule, we years: (1) Participation in a Systematic electronic versions of AMI–7a, HTN, are not proposing any changes to these Clinical Database Registry for Nursing PN–6, SCIP–Inf–9, VTE–3, VTE–4, VTE– policies. Sensitive Care; and (2) Participation in 5, VTE–6, STK–4, AMI–2, AMI–10, a Systematic Clinical Database Registry b. Proposed Removal of Hospital IQR SCIP–Inf–1a, and SCIP–Inf–2a, for General Surgery, because beginning with the FY 2019 payment Program Measures for the FY 2019 performance on these measures does not Payment Determination and Subsequent determination. Each measure is result in better patient outcomes— discussed in more detail below. Years removal factor 4 (80 FR 49641). These We are proposing to remove the measures were originally adopted in the (a) Removal of eCQMs in Alignment following 15 measures for the FY 2019 RHQDAPU Program FY 2010 IPPS/RY With the Medicare and Medicaid EHR payment determination and subsequent 2010 LTCH PPS final rule (74 FR 43870 Incentive Programs years. Some of these measures we are through 43872) to monitor participation We are proposing to remove 13 proposing to remove in their entirety; in systematic clinical database registries eCQMs from both the Hospital IQR one of these measures, VTE–6 Incidence for the Hospital IQR Program. By design, Program and the Medicare and of Potentially Preventable Venous the measures do not provide Medicaid EHR Incentive Programs in Thromboembolism, we are proposing to information on patient outcomes, order for hospitals to focus on a smaller,

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more specific subset of eCQMs while IQR Program for the FY 2019 payment removed the chart-abstracted versions of keeping the programs aligned. determination and subsequent years. SCIP–Inf–1a and SCIP–Inf–2a, We refer readers to section VIII.A.8.a. previously referred to as SCIP–Inf–1 and (ii) STK–4, AMI–2, AMI–10, SCIP–Inf– and section VIII.A.10.d. of the preamble SCIP–Inf–2 respectively, due to their 1a, and SCIP–Inf–2a of this proposed rule for details on our ‘‘topped-out’’ status. However, as stated proposed changes to eCQM reporting We are proposing to remove the: (1) in that rule, we retained the electronic requirements for the Hospital IQR STK–4: Thrombolytic Therapy (NQF versions of these measures, because we Program to align with the Medicare and #0437); (2) AMI–2: Aspirin Prescribed at believed this provided CMS with an Medicaid EHR Incentive Programs. We Discharge for AMI (NQF #0142); (3) opportunity to monitor ‘‘topped-out’’ also refer readers to section AMI–10: Statin Prescribed at Discharge; measures for performance decline. It VIII.A.3.b.(3) of the preamble of this (4) SCIP–Inf–1a: Prophylactic Antibiotic also simplified alignment between the proposed rule for our proposals to Received Within One Hour Prior to Hospital IQR and Medicare EHR remove these 13 eCQMs from the Surgical Incision (NQF #0527); and (5) Incentive Program for eligible hospitals Medicare and Medicaid EHR Incentive SCIP–Inf–2a: Prophylactic Antibiotic and provided a more straight-forward Programs. We believe that a coordinated Selection for Surgical Patients (NQF approach to educate stakeholders on reduction in the overall number of #0528) eCQMs, because measure electronic reporting options (79 FR eCQMs in both programs would reduce performance among hospitals is so high 50208). burden on hospitals and improve the and unvarying that meaningful As discussed above, we are proposing quality of reported data by enabling distinctions and improvements in to focus on a smaller, more specific hospitals to focus on a smaller, more performance can no longer be made— subset of eCQMs for the Hospital IQR specific subset of eCQMs. We are removal factor 1 (80 FR 49641). We note Program and both the Medicare and proposing these changes in response to that the NQF has changed the Medicaid EHR Incentive Programs. public comments for the Hospital IQR endorsement designations of the AMI–2, Therefore, in light of their ‘‘topped out’’ Program in the FY 2016 IPPS/LTCH PPS AMI–10, SCIP–Inf–1a, and SCIP–Inf–2a status, the burden of retaining these final rule (80 FR 49694), which chart abstracted measures and eCQM measures outweighs the benefits. Thus, recommended that CMS adopt a lesser versions to either ‘‘reserve status’’ or we are proposing to remove the STK–4, number of eCQMs. ‘‘endorsement removed’’ (available at: AMI–2, AMI–10, SCIP–Inf–1a, and http://www.qualityforum.org/QPS/ SCIP–Inf–2a eCQMs from the Hospital (i) AMI–7a QPSTool.aspx), because there is no IQR Program for the FY 2019 payment We are proposing to remove the AMI– opportunity for improvement. determination and subsequent years. 7a: Fibrinolytic Therapy Received We refer readers to section Within 30 minutes of Hospital Arrival VIII.A.3.b.(2) of the preamble of this (b) HTN eCQM, because performance or proposed rule for our proposal also to We are proposing to remove the HTN: improvement on this measure does not remove the chart-abstracted form of the Healthy Term Newborn (NQF #0716) result in better patient outcomes— STK–4 measure due to ‘‘topped-out’’ eCQM, because it is no longer feasible removal factor 4 (80 FR 49641). In the status. The electronic version of the to implement the measure FY 2016 IPPS/LTCH PPS final rule, we STK–4 measure was adopted into the specifications—removal factor 7 (80 FR removed the chart-abstracted version of Hospital IQR Program in the FY 2014 49642). In the FY 2015 IPPS/LTCH PPS AMI–7a because the reporting burden IPPS/LTCH PPS final rule (78 FR 50784) final rule (79 FR 50249), we added HTN, outweighed the benefit of posting very to promote programmatic alignment, as only as an eCQM, not as a claims-based few hospitals’ measure rates. This it was a part of a measure set that was measure. Although the claims-based measure’s specifications resulted in very already included in the Medicare and version of the HTN measure has never high denominator exclusion rates. Medicaid EHR Incentive Programs’ been part of the Hospital IQR Program, Consequently, the vast majority of Electronic Reporting Pilot for Eligible the claims-based HTN measure concept abstracted AMI cases were excluded Hospitals and CAHs (75 FR 44418 and was used to develop the HTN eCQM. from AMI–7a measure rates. Most acute 76 FR 74489). The measure steward has made myocardial infarction (AMI) patients In the FY 2014 IPPS/LTCH PPS final substantial revisions to the claims-based receive percutaneous coronary rule (78 FR 50781), we removed the version of this measure such that the intervention (PCI) instead of fibrinolytic chart-abstracted versions of AMI–2 and focus is no longer on the number of therapy (80 FR 49647). We do not AMI–10 due to ‘‘topped-out’’ status. healthy term newborns, but the number believe that the mode of reporting However, as noted in FY 2015 IPPS/ of unexpected complications in term (eCQM versus chart-abstracted) would LTCH PPS final rule (79 FR 50245), we newborns. The numerator of the revised cause the number of cases reported to readopted these measures, though only measure has been restructured to assess differ since most AMI patients would in the electronic form, because we the presence of severe or moderate still receive PCI instead of fibrinolytic believed that we should continue complications after term birth, while the therapy. In the FY 2016 IPPS/LTCH PPS aligning the Hospital IQR Program and original measure looked for the absence final rule, we retained the electronic the Medicare EHR Incentive Program in of several types of complications after version of this measure for alignment order to minimize reporting burden and term birth. For the revised measure purposes with the Medicare and to facilitate the transition to reporting of specifications, we refer readers to: Medicaid EHR Incentive Programs (80 eCQMs. We believed that voluntary https://www.cmqcc.org/focus-areas/ FR 49644). As discussed above, we are reporting of these measures would quality-metrics/unexpected- proposing to focus on a smaller, more further that aim. In addition, we complications-term-newborns. In specific subset of eCQMs in both the believed that allowing hospitals the addition, the measure steward is no Hospital IQR and Medicare and option to electronically report ‘‘topped- longer maintaining the claims-based Medicaid EHR Incentive Programs. As a out’’ measures would provide them with version of HTN or supporting the result, the burdens related to retaining an opportunity to test the accuracy of maintenance of the original eCQM this measure outweigh the benefits. their EHR reporting systems. version of HTN that was developed by Therefore, we are proposing to remove Similarly, in the FY 2015 IPPS/LTCH CMS and adopted in the Hospital IQR the AMI–7a eCQM from the Hospital PPS final rule (79 FR 50208), we Program. Therefore, it is not feasible to

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continue to include a measure that is no particularly problematic, because of the VTE–5 was adopted in the FY 2014 longer supported by the steward. As a variety of patient locations encountered IPPS/LTCH PPS final rule (78 FR result, we are proposing to remove the before and after surgery, as well as 50784). Finally, the chart-abstracted HTN eCQM from the Program for the FY transfers among units. While these version of VTE–6, however, continues to 2019 payment determination and variations for both PN–6 and SCIP–Inf– be included in the Hospital IQR subsequent years. 9 can be accounted for through chart- Program measure set because chart (c) PN–6 and SCIP–Inf–9 based manual abstraction, we have had abstractors can manually find required great difficulties in translating and data elements in clinical notes and not We are proposing to remove the: (1) maintaining these options for electronic in structured data fields. PN–6: Initial Antibiotic Selection for reporting. Therefore, we are proposing Nonetheless, a majority of hospitals Community-Acquired Pneumonia (CAP) to remove both the PN–6 and SCIP–Inf– do not have the ability to capture in Immunocompetent Patients (NQF 9 eCQMs from the Hospital IQR Program required data elements, such as #0147) and (2) SCIP–Inf–9: Urinary for the FY 2019 payment determination diagnostic study results/reports and Catheter Removed on Postoperative Day and subsequent years. location of the specific vein in which 1 (POD1) or Postoperative Day 2 (d) VTE–3, VTE–4, VTE–5, and VTE–6 deep vein thrombosis was diagnosed, in ((POD2) with Day of Surgery Being Day discrete structured data fields to support Zero) eCQMs, because it is no longer these eCQMs, because they are often feasible to implement the measure We are proposing to remove the four found as free text in clinical notes specifications—removal factor 7 (80 FR VTE eCQMs: (1) VTE–3: Venous instead. It is exceedingly difficult for 49642). While the electronic versions Thromboembolism Patients with hospitals to implement the measure were retained, the chart-abstracted Anticoagulation Overlap Therapy (NQF specifications in the absence of these versions of PN–6 and SCIP–Inf–9 were #0373); (2) VTE–4: Venous functional requirements. Furthermore, determined to be ‘‘topped-out’’ and Thromboembolism Patients Receiving as discussed above, we are proposing to were removed from the Hospital IQR Unfractionated Heparin (UFH) with focus on a smaller, more specific subset Program measure set in the FY 2015 Dosages/Platelet Count Monitoring by of eCQMs in the Hospital IQR Program IPPS/LTCH PPS final rule (79 FR 50204 Protocol (or Nomogram); (3) VTE–5: and both the Medicare and Medicaid through 50208). Venous Thromboembolism Discharge These two eCQMs have undergone Instructions; and (4) VTE–6: Incidence EHR Incentive Programs. Therefore, in significant changes to their logic of Potentially Preventable Venous light of their ‘‘topped out’’ statuses and expression during the previous annual Thromboembolism, because it is no the infeasibility of implementing the update.73 There are a number of data longer feasible to implement the measure specifications, the burden of capture requirements that cannot be measures specifications—removal factor retaining these measures outweighs the represented adequately in the eCQM 7 (80 FR 49642). Many of the chart- benefits. As a result, we are proposing form due to their conceptual abstracted versions of these measures to remove the VTE–3, VTE–4, VTE–5, complexity. Specifically, for PN–6, were determined to be ‘‘topped-out’’. and VTE–6 eCQMs from the Hospital hospital feedback has indicated While the electronic versions of VTE–3 IQR Program for the FY 2019 payment difficulties with interpreting several and VTE–4 were retained, the chart- determination and subsequent years. critical timing requirements, such as for abstracted versions were determined to (4) Summary of Measures Proposed for intensive care unit populations, be ‘‘topped-out’’ and were removed Removal emergency department and inpatient from the Hospital IQR Program measure admission transitions, steroid therapy, set in the FY 2016 IPPS/LTCH PPS final The table below lists the measures we and pre-admission medications. In rule (80 FR 49643) and the FY 2015 are proposing for removal. We are addition, hospitals raised concern about IPPS/LTCH PPS final rule (79 FR inviting public comment on our the inability to account for variation in 50205), respectively. In addition, as proposals to remove these 15 measures recording of the interpretation of described above in section VIII.A.3.b.(2) (eCQMs, structural, and chart- laboratory results. For SCIP–Inf–9, of the preamble of this proposed rule, abstracted) from the Hospital IQR feedback from hospitals has indicated we are proposing to remove the chart- Program for the FY 2019 payment that it is difficult to interpret the abstracted version of VTE–5 for the FY determination and subsequent years. appropriate timing of elements 2019 payment determination and We note that STK–4 and VTE–5 are associated with both the insertion and subsequent years due to its ‘‘topped- listed twice—once as an eCQM and removal of a catheter. This is out’’ status. The electronic version of again as a chart-abstracted measure.

MEASURES PROPOSED FOR REMOVAL FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Electronic Clinical Quality Measures

• AMI–2: Aspirin Prescribed at Discharge for AMI (NQF #0142) • AMI–7a: Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival • AMI–10: Statin Prescribed at Discharge • HTN: Healthy Term Newborn (NQF #0716) • PN–6: Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patients (NQF #0147) • SCIP-Inf-1a: Prophylactic Antibiotic Received within 1 Hour Prior to Surgical Incision (NQF #0527) • SCIP-Inf-2a: Prophylactic Antibiotic Selection for Surgical Patients (NQF #0528) • SCIP-Inf-9: Urinary Catheter Removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) with Day of Surgery Being Day Zero • STK–4: Thrombolytic Therapy (NQF #0437) • VTE–3: Venous Thromboembolism Patients with Anticoagulation Overlap Therapy (NQF #0373) • VTE–4: Venous Thromboembolism Patients Receiving Unfractionated Heparin (UFH) with Dosages/Platelet Count Monitoring by Protocol (or Nomogram)

73 Technical Release Notes: 2015 Annual Update Electronic Clinical Quality Measures (eCQMs). Guidance/Legislation/EHRIncentivePrograms/ of 2014 Eligible Hospitals and Eligible Professionals Available at: https://www.cms.gov/Regulations-and- Downloads/EHandEPTRNs.pdf.

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MEASURES PROPOSED FOR REMOVAL FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS— Continued

Electronic Clinical Quality Measures

• VTE–5: Venous Thromboembolism Discharge Instructions • VTE–6: Incidence of Potentially Preventable VTE *

Structural Measures

• Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care • Participation in a Systematic Clinical Database Registry for General Surgery

Chart-Abstracted Measures

• STK–4: Thrombolytic Therapy (NQF #0437) • VTE–5: VTE Discharge Instructions * Retained in chart-abstracted form.

4. Previously Adopted Hospital IQR Program Measures for the FY 2018 and FY 2019 Payment Determination and Subsequent Years The Hospital IQR Program has previously finalized 68 measures as outlined in the table below:

PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Short name Measure name NQF #

NHSN

CAUTI ...... National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection 0138 (CAUTI) Outcome Measure. CDI ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium 1717 difficile Infection (CDI) Outcome Measure. CLABSI ...... National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection 0139 (CLABSI) Outcome Measure. Colon and Abdominal American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Har- 0753 Hysterectomy SSI. monized Procedure Specific Surgical Site Infection (SSI) Outcome Measure. HCP ...... Influenza Vaccination Coverage Among Healthcare Personnel ...... 0431 MRSA Bacteremia ...... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin- 1716 resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.

Chart-Abstracted

ED–1 * ...... Median Time from ED Arrival to ED Departure for patients Admitted ED Patients ...... 0495 ED–2 * ...... Admit Decision Time to ED Departure Time for Admitted Patients ...... 0497 Imm-2 ...... Influenza Immunization ...... 1659 PC–01 * ...... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical 0469 quality measure). Sepsis ...... Severe Sepsis and Septic Shock: Management Bundle (Composite Measure) ...... 0500 STK–04 * ...... Thrombolytic Therapy ...... 0437 VTE–5 * ...... Venous Thromboembolism Discharge Instructions ...... + VTE–6 * ...... Incidence of Potentially Preventable Venous Thromboembolism ...... +

Claims-Based Outcome

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PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued

Short name Measure name NQF #

READM–30–CABG ...... Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Fol- 2515 lowing Coronary Artery Bypass Graft (CABG) Surgery. READM–30–COPD ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Chronic 1891 Obstructive Pulmonary Disease (COPD) Hospitalization. READM–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Heart 0330 Failure (HF) Hospitalization. READM–30–HWR ...... Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) ...... 1789 READM–30–PN ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneu- 0506 monia Hospitalization. READM–30–STK ...... 30-Day Risk Standardized Readmission Rate Following Stroke Hospitalization ...... N/A READM–30–THA/TKA ...... Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following 1551 Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). AMI Excess Days ...... Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction ...... N/A HF Excess Days ...... Excess Days in Acute Care after Hospitalization for Heart Failure ...... N/A Hip/knee complications ...... Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total 1550 Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). PSI 04 ...... Death Rate among Surgical Inpatients with Serious Treatable Complications ...... 0351 PSI 90 ...... Patient Safety for Selected Indicators (Composite Measure) ...... 0531

Claims-Based Payment

AMI payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 2431 Acute Myocardial Infarction (AMI). HF Payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care For 2436 Heart Failure (HF). PN Payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-day Episode-of-Care For 2579 Pneumonia. THA/TKA Payment ...... Hospital-Level, Risk-Standardized Payment Associated with an Episode-of-Care for Primary N/A Elective Total Hip Arthroplasty and/or Total Knee Arthroplasty. MSPB ...... Payment-Standardized Medicare Spending Per Beneficiary (MSPB) ...... 2158

Electronic Clinical Quality Measures (eCQMs)

AMI–2 ...... Aspirin Prescribed at Discharge for AMI ...... 0142 AMI–7a ...... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ...... + AMI–8a ...... Primary PCI Received Within 90 Minutes of Hospital Arrival ...... 0163 AMI–10 ...... Statin Prescribed at Discharge ...... + CAC–3 ...... Home Management Plan of Care Document Given to Patient/Caregiver ...... + EHDI–1a ...... Hearing Screening Prior to Hospital Discharge ...... 1354 ED–1* ...... Median Time from ED Arrival to ED Departure for Admitted ED Patients ...... 0495 ED–2 * ...... Admit Decision Time to ED Departure Time for Admitted Patients ...... 0497 HTN ...... Healthy Term Newborn ...... 0716 PC–01 * ...... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical 0469 quality measure). PC–05 ...... Exclusive Breast Milk Feeding ** ...... 0480 PN–6 ...... Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Pa- 0147 tients. SCIP-Inf-1a ...... Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision ...... 0527 SCIP-Inf-2a ...... Prophylactic Antibiotic Selection for Surgical Patients ...... 0528 SCIP-Inf-9 ...... Urinary Catheter Removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2) + with Day of Surgery Being Day Zero. STK–02 ...... Discharged on Antithrombotic Therapy ...... 0435 STK–03 ...... Anticoagulation Therapy for Atrial Fibrillation/Flutter ...... 0436 STK–04 * ...... Thrombolytic Therapy ...... 0437 STK–05 ...... Antithrombotic Therapy by the End of Hospital Day Two ...... 0438 STK–06 ...... Discharged on Statin Medication ...... 0439 STK–08 ...... Stroke Education ...... + STK–10 ...... Assessed for Rehabilitation ...... 0441 VTE–1 ...... Venous Thromboembolism (VTE) Prophylaxis ...... 0371 VTE–2 ...... Intensive Care Unit Venous Thromboembolism (VTE) Prophylaxis ...... 0372 VTE–3 ...... Venous Thromboembolism Patients with Anticoagulation Overlap Therapy ...... 0373 VTE–4 ...... Venous Thromboembolism Patients Receiving Unfractionated Heparin with Dosages/Platelet + Count Monitoring by Protocol (or Nomogram). VTE–5 * ...... Venous Thromboembolism Discharge Instructions ...... + VTE–6 * ...... Incidence of Potentially Preventable Venous Thromboembolism ...... +

Patient Survey

HCAHPS ...... HCAHPS + 3-Item Care Transition Measure (CTM–3) ...... 0166 0228

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PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued

Short name Measure name NQF #

Structural

Registry for Nursing Sensitive Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care ...... N/A Care. Registry for General Surgery ..... Participation in a Systematic Clinical Database Registry for General Surgery ...... N/A Patient Safety Culture ...... Hospital Survey on Patient Safety Culture ...... N/A Safe Surgery Checklist ...... Safe Surgery Checklist Use ...... N/A * Measure listed twice, as both chart-abstracted and electronic clinical quality measure. ** Measure name has been shortened. Please refer to annually updated measure specifications on the CMS eCQI Resource Center Page for further information: https://www.healthit.gov/newsroom/ecqi-resource-center. + Endorsement removed.

PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Short name Measure name NQF #

Claims-Based Payment

Cellulitis Payment ...... Cellulitis Clinical Episode-Based Payment Measure ...... N/A GI Payment ...... Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure ...... N/A Kidney/UTI Payment ...... Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure ...... N/A

5. Expansion and Updating of Quality a refinement of the CMS hospital-level, Medicare beneficiary for a 30-day Measures risk-standardized payment associated episode-of-care. The cohort is the set of We refer readers to the FY 2013 IPPS/ with a 30-day episode-of-care for hospitalizations that meets all of the LTCH PPS final rule (77 FR 53510 pneumonia (NQF #2579) (PN Payment). inclusion and exclusion criteria. We are through 53512) for a discussion of the The proposed refinement expands the proposing an expansion to this set of considerations we use to expand and measure cohort to align with the hospitalizations. The previously adopted PN Payment update quality measures under the following Hospital IQR Program measure (79 FR 50227 through 50231) Hospital IQR Program. In this proposed measures: (1) Hospital 30-day, All- includes hospitalizations for patients rule, we are not proposing any changes Cause, Risk-Standardized Mortality Rate (RSMR) Following Pneumonia with a principal discharge diagnosis of to these policies. Hospitalization (NQF #0468) (MORT– pneumonia using the International 6. Proposed Refinements to Existing 30–PN); (2) Hospital 30-day, All-Cause, Classification of Diseases, 9th Edition, Measures in the Hospital IQR Program Risk-Standardized Readmission Rate Clinical Modification (ICD–9–CM), We are proposing refinements to two (RSRR) Following Pneumonia which includes viral and bacterial claims-based measures: (1) PN Payment: Hospitalization (NQF #0506) (READM– pneumonia. For more cohort details on the measure as currently implemented, Hospital-Level, Risk-Standardized 30- 30–PN); and (3) Excess Days in Acute we refer readers to the measure Day Episode-of-Care Payment Measure Care After Hospitalization for methodology report, with the measure for Pneumonia; and (2) PSI 90: Patient Pneumonia (an improved measure to the risk adjustment statistical model, in the Safety and Adverse Events Composite previously developed measure entitled AMI, HF, PN, and Hip/Knee (previously known as the Patient Safety ‘‘30-day Post-Hospital Pneumonia Arthroplasty Payment Updates zip file for Selected Indicators Composite Discharge Care Transition Composite’’ on our Web site at: https://www.cms. Measure). We discuss these proposed (NQF #0707) (PN Excess Days). The expansion of the measure cohort gov/Medicare/Quality-Initiatives- refinements in more detail below. In for the MORT–30–PN and the READM– Patient-Assessment-Instruments/ addition, we refer readers to section 30–PN was finalized in the FY 2016 HospitalQualityInits/Measure- VIII.A.9.a. of the preamble of this IPPS/LTCH PPS final rule (80 FR 49660) Methodology.html. proposed rule where we are inviting and is expected to be publicly reported This proposed measure refinement public comment on our intent to update beginning in July 2016. We refer readers would expand the measure cohort to the MORT–30–STK measure to include to section VIII.A.7.b. of the preamble of include hospitalizations for patients the NIH Stroke Scale as a measure of this proposed rule where we are with a: (1) Principal discharge diagnosis stroke severity in the risk-adjustment in proposing the PN Excess Days measure of pneumonia, including not only viral future rulemaking. for inclusion in the Hospital IQR or bacterial pneumonia, but also a. Proposed Expansion of the Cohort for Program for FY 2019 payment aspiration pneumonia; and (2) principal the PN Payment Measure: Hospital- determination and subsequent years. discharge diagnosis of sepsis (but not Level, Risk-Standardized Payment For the purposes of describing the severe sepsis) with a secondary Associated With a 30-Day Episode-of- refinement of this measure, we note that diagnosis of pneumonia (including viral Care for Pneumonia (NQF #2579) ‘‘cohort’’ is defined as the or bacterial pneumonia and aspiration hospitalizations, or ‘‘index admissions,’’ pneumonia) coded as present on (1) Background that are included in the measure and admission (POA). This refinement to the For FY 2018 payment determination evaluated to ascertain the total pneumonia cohort was proposed for and subsequent years, we are proposing payments made on behalf of the several reasons, which were previously

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discussed in the FY 2016 IPPS/LTCH on a publicly available document they apply to our quality programs at PPS final rule for the MORT–30–PN and entitled ‘‘2015 Measures Under such time as they are available. READM–30–PN measures (80 FR 49653 Consideration List’’ for December 1, The refined PN Payment measure will through 49660). We believe that refining 2015 (available at: http:// be submitted to NQF for reendorsement this measure is appropriate for the www.qualityforum.org/ as part of the next Cost and Resource following reasons. First, recent evidence ProjectMaterials.aspx?projectID=75367) Use project which is expected in the has shown an increase in the use of and has been reviewed by the NQF first quarter of 2017. We will work to sepsis as principal discharge diagnosis Measure Applications Partnership minimize any potential confusion when codes among patients hospitalized with (MAP) Hospital Workgroup. The revised publicly reporting the updated measure pneumonia.74 Pneumonia patients with measure was conditionally supported to ensure that the refined measure this principal diagnosis code were not pending the examination of would not be confused with the included in the original MORT–30–PN sociodemographic status (SDS) factors originally adopted measure. and READM–30–PN measure cohorts, and NQF review and endorsement of the and including them would better measure update, as referenced in the (2) Overview of Measure Change capture the complete patient population MAP 2016 Final Recommendations of a hospital with patients receiving Report (available at: http:// The proposed measure refinement clinical management and treatment for www.qualityforum.org/map/).76 expands the cohort. As the measure is pneumonia. In addition, because In regard to MAP stakeholder currently specified, the cohort includes patients with a principal diagnosis of concerns that the proposed PN Payment hospitalizations for patients with a sepsis are not included in the original measure may need to be adjusted for principal discharge diagnosis of MORT–30–PN and READM–30–PN SDS, we understand the important role pneumonia using the ICD–9–CM, which measure specifications, efforts to that sociodemographic status plays in includes viral and bacterial pneumonia evaluate changes over time in the care of patients. However, we (79 FR 50227 through 50231). This pneumonia outcomes could be biased as continue to have concerns about refinement would expand the cohort to coding practices change. Lastly, a also include hospitalizations for 75 holding hospitals to different standards published article also demonstrated for the outcomes of their patients of patients with a: (1) Principal discharge wide variation in the use of sepsis codes diverse sociodemographic status, diagnosis of pneumonia, including not as principal discharge diagnosis for because we do not want to mask only viral or bacterial pneumonia, but pneumonia patients across hospitals, potential disparities or minimize also aspiration pneumonia; and (2) which can potentially bias efforts to incentives to improve the outcomes of principal discharge diagnosis of sepsis compare hospital performance on the disadvantaged populations. We (but not severe sepsis) with a secondary MORT–30–PN and READM–30–PN routinely monitor the impact of diagnosis of pneumonia (including viral measures. sociodemographic status on hospitals’ or bacterial pneumonia and aspiration The proposal to align the PN Payment pneumonia) coded as POA. measure cohort with those of the results on our measures. For the ICD–9–CM and ICD–10–CM MORT–30–PN, READM–30–PN, and The NQF is currently undertaking a 2- codes that define the expanded PN proposed PN Excess Days measures year trial period in which new measures Payment cohort, we refer readers to the would address the changing coding and measures undergoing maintenance 2016 Reevaluation and Re-specifications patterns in which patients with review will be assessed to determine if Report of the Hospital-Level 30-Day pneumonia are increasingly given a risk-adjusting for sociodemographic Risk-Standardized Pneumonia Payment principal discharge diagnosis code of factors is appropriate. For 2 years, NQF Measure—Pneumonia Payment Version sepsis in combination with a secondary will conduct a trial of temporarily 3.1 in the AMI, HF, PN, and Hip/Knee discharge diagnosis of pneumonia that allowing inclusion of sociodemographic is POA. Moreover, expanding the PN factors in the risk-adjustment approach Arthroplasty Payment Updates zip file Payment measure cohort would ensure for some performance measures. At the on our Web site at: https://www.cms. that the measure captures the broader conclusion of the trial, NQF will issue gov/Medicare/Quality-Initiatives- population of patients admitted for recommendations on future permanent Patient-Assessment-Instruments/ pneumonia that may have been inclusion of sociodemographic factors. HospitalQualityInits/Measure- excluded from the previously adopted During the trial, measure developers are Methodology.html. measure. Finally, the expansion of the expected to submit information such as The data sources, exclusion criteria, cohort for the PN Payment measure analyses and interpretations as well as assessment of the total payment harmonizes the cohort of this measure performance scores with and without outcome, and 3 year reporting period all with the MORT–30–PN, the READM– sociodemographic factors in the risk remain unchanged. 30–PN, and the proposed PN Excess adjustment model. (3) Risk Adjustment Days measures. Furthermore, the Office of the The proposed PN Payment measure Assistant Secretary for Planning and The statistical modeling approach as (MUC15–378), which includes this Evaluation (ASPE) is conducting well as the measure calculation remains expanded measure cohort was included research to examine the impact of unchanged from the previously adopted sociodemographic status on quality measure. The risk adjustment approach 74 Lindenauer PK, Lagu T, Shieh MS, Pekow PS, measures, resource use, and other also remains unchanged; however, to Rothberg MB. Association of diagnostic coding with trends in hospitalizations and mortality of patients measures under the Medicare program maintain model performance, we with pneumonia, 2003–2009. Journal of the as directed by the IMPACT Act. We will conducted variable reselection, or American Medical Association. Apr 4 closely examine the findings of the reevaluation of the variables used, to 2012;307(13):1405–1413. ASPE reports and related Secretarial ensure the model risk variables are 75 Rothberg MB, Pekow PS, Priya A, Lindenauer recommendations and consider how PK. Variation in diagnostic coding of patients with appropriate for the discharge diagnoses pneumonia and its association with hospital risk- included in the expanded cohort. standardized mortality rates: a cross-sectional 76 Spreadsheet of MAP 2016 Final analysis. Annals of Internal Medicine. Mar 18 Recommendations Available at: http:// The previously adopted pneumonia 2014;160(6):380–388. www.qualityforum.org/map/. payment risk-adjustment model

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includes 48 variables.77 As a result of final rule (77 FR 53537), the FY 2014 adopted measure would change the variable reselection process, the IPPS/LTCH PPS final rule (78 FR categorization from greater than average revised risk-adjustment model includes 50819), and the FY 2016 IPPS/LTCH to average payment, 9.3 percent would a total of 57 variables—37 of the same PPS final rule (80 FR 24588) for details change from average to greater than variables that are in the previously on our sampling and case thresholds for average payment, and 8.5 percent would adopted model as well as 20 additional the FY 2016 payment determination and change from average to less than average variables. However, there are 11 subsequent years. Expanding the payment. Finally, 1.8 percent of variables from the previously adopted measure cohort to include a broader hospitals would change from less than model that are not included in the population of patients as proposed average to average payment. Therefore, revised model. For details on variable would add a large number of patients, there would be an increase in the reselection and the full measure as well as additional hospitals (which number of hospitals considered outliers specifications of the proposed change to would now meet the minimum and a shift in some hospitals’ outlier the measure, we refer readers to the threshold of 25 eligible cases for public status classification. We reiterate that 2016 Reevaluation and Re-specifications display), to the PN Payment measure these statistics are for illustrative Report of the Hospital-Level 30-Day (NQF #2579). The increase in the size of purposes only, and we are not Risk-Standardized Pneumonia Payment the measure cohort proposed in this rule proposing to revise measure Measure—Pneumonia Payment Version also is estimated to change results for calculations for the FY 2016 payment 3.1 in the AMI, HF, PN, and Hip/Knee some hospitals as detailed below. determination; our proposal would Arthroplasty Payment Updates zip file The previously adopted PN Payment affect the FY 2018 payment on our Web site at: https://www.cms. measure cohort includes 901,764 determination and subsequent years. gov/Medicare/Quality-Initiatives- patients and 4,685 hospitals for the FY A detailed description of the Patient-Assessment-Instruments/ 2016 payment determination refinements to the PN Payment measure HospitalQualityInits/Measure- (administrative claims from July 2011– (NQF #2579) and the estimated effects Methodology.html. June 2014). We noted the following of the change are available in the 2016 effects for the PN Payment measure if Reevaluation and Re-specifications (4) Estimated Effects of the Cohort the proposed expanded cohort is Expansion Report of the Hospital-Level 30-Day applied for FY 2016 payment Risk-Standardized Pneumonia Payment Using administrative claims data for determinations: (1) The cohort would Measure—Pneumonia Payment Version the FY 2016 payment determination increase to include an additional 3.1 in the AMI, HF, PN, and Hip/Knee (which included discharges between 386,143 patients across all hospitals Arthroplasty Payment Updates zip file July 2011 and June 2014), we simulated (creating a total measure cohort size of on our Web site at: https://www.cms. and analyzed the effects of the proposed 1,287,907 patients); (2) an additional 81 gov/Medicare/Quality-Initiatives- cohort refinements on the PN Payment hospitals would meet the minimum 25 Patient-Assessment-Instruments/ measure (NQF #2579) as if these patient case volume threshold over the HospitalQualityInits/Measure- changes had been applied for FY 2016 3-year reporting period and, as a result, Methodology.html. payment determination. We note that would be publicly reported for the We are inviting public comment on these statistics are for illustrative measure; and (3) 31.7 percent of the our proposal to refine the Hospital- purposes only, and we are not refined measure cohort would consist of Level, Risk-Standardized Payment proposing to revise measure patients who fall into the expanded set Associated with a 30-day Episode-of- calculations for the FY 2016 payment of hospitalizations. Care For Pneumonia (NQF #2579) (PN determination. The expansion of the cohort leads to Payment) measure for the FY 2018 In the FY 2010 IPPS/LTCH PPS final an overall increase in the mean national payment determination and subsequent rule (74 FR 43881), we established that payment of $16,116 when compared to years as described above. if a hospital has fewer than 25 eligible the mean national payment of $14,294 cases combined over a measure’s for the previously adopted cohort. This b. Proposed Adoption of Modified PSI reporting period, we would replace the leads to an increase in the RSP outcome 90: Patient Safety and Adverse Events hospital’s data with a footnote of $1,822 or 12.7 percent due to the Composite Measure (NQF #0531) indicating that the number of cases is higher mean payments for patients (1) Background too small to reliably determine how well added to the cohort. An individual the hospital is performing. These cases hospital’s average payment category or We are proposing to adopt are still used to calculate the measure; reclassification of outlier status of refinements to the Agency for however, for hospitals with fewer than ‘‘higher than the U.S. national Healthcare Research and Quality 25 eligible cases, the hospital’s Risk payment,’’ ‘‘no different than the U.S. (AHRQ) Patient Safety and Adverse Standardization Payment (RSP) and RSP national payment,’’ or ‘‘less than the Events Composite (NQF #0531) for the interval estimates are not publicly U.S. national payment’’ may change as Hospital IQR Program beginning with reported for the measure. We refer demonstrated in the 2016 Reevaluation the FY 2018 payment determination and readers to the FY 2011 IPPS/LTCH PPS and Re-specifications Report of the subsequent years. In summary, the PSI final rule (75 FR 50221), the FY 2012 Hospital-Level 30-Day Risk- 90 measure was refined to reflect the IPPS/LTCH PPS final rule (76 FR Standardized Pneumonia Payment relative importance and harm associated 51641), the FY 2013 IPPS/LTCH PPS measure—Pneumonia Payment Version with each component indicator to 3.1, which can be found in the AMI, HF, provide a more reliable and valid signal 77 Kim N, Ott L, Hsieh A, et al. 2015 Condition- PN, and Hip/Knee Arthroplasty of patient safety events. We believe Specific Measure Updates and Specifications refining the PSI 90 measure will provide Report, Hospital-Level 30-Day Risk-Standardized Payment Updates zip file on our Web Payment Measures—Acute Myocardial Infarction site at: https://www.cms.gov/Medicare/ strong incentives for hospitals to ensure (Version 4.0), Heart Failure (Version 2.0), Quality-Initiatives-Patient-Assessment- that patients are not harmed by the Pneumonia (Version 2.0). Available at: https://www. Instruments/HospitalQualityInits/ medical care they receive, a critical cms.gov/Medicare/Quality-Initiatives-Patient- Assessment-Instruments/HospitalQualityInits/ Measure-Methodology.html. consideration in quality improvement. Measure-Methodology.html. Accessed Date: March Overall, we estimate that 1.4 percent In the FY 2009 IPPS/LTCH PPS final 16, 2016. of hospitals included in the previously rule (73 FR 48607 through 48610), we

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adopted the Complication/Patient Safety Rate; (2) PSI 10 Physiologic and (2) Overview of the Measure Changes for Selected Indicators Composite Metabolic Derangement Rate; and (3) First, the name of the PSI 90 measure Measure (NQF #0531) in the Hospital PSI 11 Postoperative Respiratory Failure has changed from the ‘‘Patient Safety for IQR Program beginning with the FY Rate. Third, PSI 12, Perioperative Selected Indicators Composite Measure’’ 2010 payment determination as an Pulmonary Embolism (PE) or Deep Vein to the ‘‘Patient Safety and Adverse important measure of patient safety and Thrombosis (DVT) Rate, and PSI 15, Events Composite’’ (NQF #0531) to adverse events. In the FY 2015 IPPS/ Accidental Puncture or Laceration Rate, more accurately capture the indicators LTCH PPS final rule, we updated the have been respecified in the modified included in the measure. title of the measure to Patient Safety for PSI 90 measure. Fourth, PSI 07 Central Second, the PSI 90 measure has Selected Indicators Composite Measure Venous Catheter-Related Blood Stream expanded from eight to 10 component (NQF #0531), to be consistent with the Infection Rate has been removed in the indicators. The modified PSI 90 NQF (79 FR 50211). As previously modified PSI 90 measure. Fifth, the measure is a weighted average of the adopted, the PSI 90 measure consisted weighting of component indicators in following 10 risk-adjusted and of eight component indicators: (1) PSI 3 the modified PSI 90 measure is based reliability-adjusted individual Pressure Ulcer Rate; (2) PSI 6 Iatrogenic not only on the volume of each of the component PSI rates: Pneumothorax Rate; (3) PSI 7 Central patient safety and adverse events, but • PSI 03 Pressure Ulcer Rate; Venous Catheter-Related Blood Stream also the harms associated with the • PSI 06 Iatrogenic Pneumothorax Infections Rate; (4) PSI 8 Postoperative events. We consider these changes to Rate; Hip Fracture Rate; (5) PSI 12 the modified PSI 90 measure to be • PSI 08 Postoperative Hip Fracture Perioperative Pulmonary Embolism/ substantive changes to the measure. Rate; Deep Vein Thrombosis Rate; (6) PSI 13 Therefore, we are proposing to adopt • PSI 09 Postoperative Hemorrhage or Postoperative Sepsis Rate; (7) PSI 14 refinements to the PSI 90 measure for Hematoma Rate; * Postoperative Wound Dehiscence Rate; the Hospital IQR Program beginning • PSI 10 Physiologic and Metabolic and (8) PSI 15 Accidental Puncture and with the FY 2018 payment Derangement Rate; * Laceration Rate.78 determination and subsequent years. We • The currently adopted eight-indicator PSI 11 Postoperative Respiratory explain the modified PSI 90 measure Failure Rate; * version of the measure underwent an more fully below, and also refer readers • extended NQF maintenance PSI 12 Perioperative Pulmonary to the measure description on the NQF Embolism (PE) or Deep Vein reendorsement in the 2014 NQF Patient Web site at: https:// Safety Committee due to concerns with Thrombosis (DVT) Rate; www.qualityforum.org/QPS/ • PSI 13 Postoperative Sepsis Rate; the underlying component indicators MeasureDetails.aspx?standardID=321& • and their composite weights. In the PSI 14 Postoperative Wound print=0&entityTypeID=3. We are also Dehiscence Rate; and NQF-Endorsed Measures for Patient proposing to modify the reporting • Safety, Final Report,79 the NQF Patient PSI 15 Accidental Puncture or periods for FYs 2018 and 2019 payment 84 Safety Committee deferred their final Laceration Rate. determinations and subsequent years as (* Denotes new component for the decision for the PSI 90 measure until detailed further below. the following measure evaluation cycle. modified PSI 90 measure) We note that the proposed modified In the meantime, AHRQ worked to As stated above, the modified PSI 90 PSI 90 measure (MUC15–604) was address many of the NQF stakeholders’ measure also removed PSI 07 Central concerns about the PSI 90 measure, included on a publicly available Venous Catheter-Related Blood Stream which subsequently completed NQF document entitled 2015 Measures Infection Rate, because of potential Under Consideration for December 1, overlap with the CLABSI measure (NQF maintenance re-review and received 81 reendorsement on December 10, 2015. 2015 in compliance with section #0139), which has been included in the The PSI 90 measure’s extended NQF 1890A(a)(2) of the Act, and was Hospital IQR Program since the FY 2011 reendorsement led to several changes to reviewed by the MAP. The MAP IPPS/LTCH PPS final rule (75 FR 50201 the measure.80 First, the name of the PSI supported this measure stating that, through 50202), the HAC Reduction 90 measure has changed to ‘‘Patient ‘‘the PSI measures were developed to Program since the FY 2014 IPPS/LTCH Safety and Adverse Events Composite’’ identify harmful healthcare related PPS final rule (78 FR 50717), and the (NQF #0531) (herein referred to as the events that are potentially preventable. Hospital VBP Program since the FY ‘‘modified PSI 90’’). Second, the Three additional PSIs have been added 2013 IPPS/LTCH PPS final rule (77 FR modified PSI 90 measure includes the to this updated version of the measure. 53597 through 53598). addition of three indicators: (1) PSI 09 PSIs were better linked to important In response to stakeholder concerns, Perioperative Hemorrhage or Hematoma changes in clinical status with ‘harm highlighted in the NQF 2014 Patient weights’ that are based on diagnoses Safety Report,85 the modified PSI 90 78 NQF-Endorsed Measures for Patient Safety, that were assigned after the measure also respecified two Final Report. Available at: http:// complication. This is intended to allow component indicators, PSI 12 and PSI www.qualityforum.org/Publications/2015/01/NQF- the measure to more accurately reflect 15. Specifically, for PSI 12 Perioperative ______Endorsed Measures for Patient Safety, Final the impact of the events.’’ 82 The PE or DVT Rate, the NQF received Report.aspx. 79 NQF-Endorsed Measures for Patient Safety, measure received support for inclusion public comments concerning the Final Report available at: http:// in the Hospital IQR Program as inclusion of: (1) Extracorporeal www.qualityforum.org/Publications/2015/01/NQF- referenced in the MAP Final membrane oxygenation (ECMO) Endorsed_Measures_for_Patient_Safety,_Final_ Recommendations Report.83 procedures in the denominator; and (2) Report.aspx.http://www.qualityforum.org/ Publications/2015/01/NQF-Endorsed_Measures_ intra-hospital variability in the for_Patient_Safety,_Final_Report.aspx. 81 2015 Measures Under Consideration List 80 National Quality Forum QPS Measure Available at: http://www.qualityforum.org/ 84 http://www.qualityforum.org/QPS/0531. Description for ‘‘Patient Safety for Selected ProjectMaterials.aspx?projectID=75367. 85 NQF Endorsed Measures for Patient Safety, Indicators (modified version of PSI90) (Composite 82 MAP Final Recommendations. Available at: Final Report. Available at: http:// measure)’’ found at: https://www.qualityforum.org/ http://www.qualityforum.org/map/. www.qualityforum.org/Publications/2015/01/NQF- QPS/MeasureDetails.aspx?standardID=321& 83 MAP Final Recommendations. Available at: Endorsed_Measures_for_Patient_Safety,_Final_ print=0&entityTypeID=3. http://www.qualityforum.org/map/. Report.aspx.

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documentation of calf vein thrombosis Estimating Equation (GEE) hierarchical 2016 for the FY 2018 payment (which has uncertain clinical model (logistic regression with hospital determination year. At this time, a risk significance). As such, the modified PSI random effect) and covariates for adjusted ICD–10 version of the modified 12 component indicator no longer gender, age, Modified MS–DRG PSI 90 Patient Safety and Adverse includes ECMO procedures in the (MDRG), Major Diagnostic Category, Events Composite software is not denominator or isolated deep vein transfer in, point of origin not available, expected to be available until late CY thrombosis of the calf veins in the procedure days not available, and 2017. numerator. PSI 15 also was respecified AHRQ comorbidity (COMORB). To address the above issues, we are further to focus on the most serious The expected rate for each of the proposing to modify the reporting intraoperative injuries—those that were indicators is computed as the sum of the periods for the FYs 2018 and 2019 unrecognized until they required a predicted value for each case divided by payment determinations and beyond. subsequent reparative procedure. The the number of cases for the unit of For the FY 2018 payment modified denominator of PSI 15 now is analysis of interest (that is, the hospital). determination, we are proposing to use limited to discharges with an The risk-adjusted rate for each of the a 15-month reporting period spanning abdominal/pelvic operation, rather than indicators is computed using indirect July 1, 2014 through September 30, including all medical and surgical standardization as the observed rate 2015. The 15-month reporting period discharges. In addition, to identify divided by the expected rate, multiplied would only apply to the FY 2018 events that are more likely to be by the reference population rate. For payment determination and would only clinically significant and preventable, more details about risk adjustment, we use ICD–9 data. For the FY 2019 the PSI 15 numerator was modified to refer readers to: http:// payment determination, we are require both: (1) A diagnosis of an www.qualityindicators.ahrq.gov/ proposing to use a 21-month reporting accidental puncture and/or laceration; Downloads/Resources/Publications/ period spanning October 1, 2015 and (2) an abdominal/pelvic reoperation 2015/Empirical_Methods_2015.pdf. As through June 30, 2017. The 21-month one or more days after the index stated above, we are not proposing any reporting period would only apply to surgery. changes to the risk adjustment for this the FY 2019 payment determination and Finally, the NQF Patient Safety measure. would only use ICD–10 data. For all Review Committee raised concerns subsequent payment determinations (4) Proposed Reporting Periods about the weighting scheme of the after FY 2019, we are proposing to use component indicators. In prior versions The PSI 90 measure is a claims-based the standard 24-month reporting period, of the measure, the weights of each measure that has been calculated using which would only use ICD–10 data. In component PSI were based solely on 24-months of data. For the FY 2018 and order to align the modified PSI 90 volume (numerator rates). In the FY 2019 payment determinations, measure and the use of ICD–9 and ICD– modified PSI 90 measure, the rates of measure rates would be calculated using 10 data across CMS hospital quality each component PSI are weighted based reporting periods of July 1, 2014 programs, we are proposing similar on statistical and empirical analyses of through June 30, 2016 and July 1, 2015 modifications for FYs 2018 and 2019 volume, excess clinical harm associated through June 30, 2017, respectively. payment determinations and beyond in with the PSI, and disutility (individual However, because hospitals began ICD– the HAC Reduction Program, as set forth preference for a health state linked to a 10–CM/PCS implementation on October in section IV.I.5.b. of the preamble of harm, such as death or disability. The 1, 2015, these reporting periods for the this proposed rule, and similar final weight for each component FY 2018 and FY 2019 payment modifications to the performance period indicator is the product of harm weights determinations would require using for the Hospital VBP Program FY 2018 and volume weights (numerator both ICD–9 and ICD–10 claims data to program year, as set forth in section weights). Harm weights are calculated calculate measure performance. IV.H.2. of the preamble of this proposed by multiplying empirical estimates of Since the ICD–10 transition was rule. excess harms associated with the patient implemented on October 1, 2015, we Prior to deciding to propose safety event by the utility weights have been monitoring our systems, and abbreviated reporting periods for the FY linked to each of the harms. Excess so far, claims are processing normally. 2018 and FY 2019 payment harms are estimated using statistical The measure steward, AHRQ, has been determinations, we took several factors models comparing patients with a safety reviewing the measure for any potential into consideration, including the event to those without a safety event in issues related to the conversion of recommendations of the measure a Medicare fee-for-service sample. approximately 70,000 ICD–10 coded steward, the feasibility of using a Volume weights are calculated based on operating room procedures 86 (https:// combination of ICD–9 and ICD–10 data _ the number of safety events for the www.cms.gov/icd10manual/fullcode without the availability of the component indicators in an all-payer cms/P1616.html), which could directly appropriate measure software, reference population. For more affect the modified PSI 90 component minimizing provider burden, program information on the modified PSI 90 indicators. In addition, to meet program implementation timelines, and the measure and component indicators, we requirements and implementation reliability of using shortened reporting refer readers to Quality Indicator schedules, our system would require an periods, as well as the importance of Empirical Methods available online at: ICD–10 risk-adjusted version of the continuing to publicly report this 87 www.qualityindicators.ahrq.gov. AHRQ QI PSI software by December measure. We believe that using a 15- month reporting period for the FY 2018 (3) Risk Adjustment 86 International Classification of Diseases, (ICD– payment determination and a 21-month The risk adjustment and statistical 10–CM/PCS) Transition—Background. Available at: http://www.cdc.gov/nchs/icd/icd10cm_pcs_ reporting period for the FY 2019 modeling approaches of the models background.htm. payment determination best serves the remain unchanged in the modified PSI 87 The AHRQ QI Software is the software used to need to provide important information 90 measure. In summary, the predicted calculate PSIs and the composite measure. More on hospital patient safety and adverse value for each case is computed using information is available at: http:// events by allowing sufficient time to www.qualityindicators.ahrq.gov/Downloads/ a modeling approach that includes, but Resources/Publications/2015/Empirical_Methods_ process the claims data and calculate is not limited to, applying a Generalized 2015.pdf. the measures, while minimizing

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reporting burden and program We are inviting public comment on groupings of healthcare services that can disruption. We will continue to test our proposal to adopt the modified PSI be used to assess providers’ resource ICD–10 data that are submitted in order 90 measure (NQF #0531) for the use. Combined with other clinical to ensure the accuracy of measure Hospital IQR Program beginning with quality measures, they contribute to the calculations, to monitor and assess the the FY 2018 payment determination. We overall picture of providers’ clinical translation of measure specifications to will continue to use the currently effectiveness and efficiency. Episode- ICD–10 as well as potential coding adopted eight-indicator version of the based performance measurement allows variation, and to assess any impacts on PSI 90 measure in the Hospital IQR meaningful comparisons between measure performance. Program for FY 2017. We also are providers based on resource use for We note that a prior reliability inviting public comment on the certain clinical conditions or analysis of the PSI 90 measure (not the proposals to revise the reporting periods procedures, as noted in the NQF report modified PSI 90 measure) showed that for this measure as described above: (1) for the ‘‘Episode Grouper Evaluation the majority of hospitals attain a A 15-month reporting period using only Criteria’’ project available at: http:// moderate or high level of reliability after ICD–9 data for the FY 2018 payment www.qualityforum.org/Publications/ _ _ _ a 12-month reporting period.88 determination; (2) a 21-month reporting 2014/09/Evaluating Episode Groupers ______Although the modified PSI 90 measure period using only ICD–10 data for the A Report from the National Quality has undergone substantial changes since FY 2019 payment determination; and (3) Forum.aspx and in various peer- this analysis, we believe that measure a 24-month reporting period using only reviewed articles.93 We are proposing scores would continue to be reliable for ICD–10 data for the FY 2020 payment three clinical episode-based payment the above proposed reporting periods, determination and subsequent years. measures for inclusion in the Hospital IQR Program beginning with the FY because the NQF, which reendorsed the 7. Proposed Additional Hospital IQR 2019 payment determination: (1) Aortic modified version, found it to be reliable Program Measures for the FY 2019 using 12 months of data.89 In Aneurysm Procedure Clinical Episode- Payment Determination and Subsequent Based Payment (AA Payment) Measure; establishing the revised reporting Years periods for the modified PSI 90 (2) Cholecystectomy and Common Duct We are proposing to add four new measure, we also relied upon an Exploration Clinical Episode-Based measures to the Hospital IQR Program analysis by Mathematica Policy Payment (Chole and CDE Payment) for the FY 2019 payment determination Research, a CMS contractor, which Measure; and (3) Spinal Fusion Clinical and subsequent years. We are proposing found that the measure was most Episode-Based Payment (SFusion to adopt three clinical episode-based reliable with a 24-month reporting Payment) Measure. The proposed payment measures: period and unreliable with a reporting measures capture Medicare payment for • Aortic Aneurysm Procedure period of less than 12 months.90 services related to the episode Clinical Episode-Based Payment (AA Therefore, we believe that the proposed procedure and take into account Payment) Measure; beneficiaries’ clinical complexity as abbreviated reporting periods for the • Cholecystectomy and Common modified PSI 90 measure would well as geographic payment differences. Duct Exploration Clinical Episode- We are proposing these clinical produce reliable data because the Based Payment (Chole and CDE episode-based measures to supplement reporting periods are still greater than Payment) Measure; and the Hospital IQR Program’s Medicare 12 months. • Spinal Fusion Clinical Episode- Spending per Beneficiary (MSPB) (5) Proposed Adoption of the Modified Based Payment (SFusion Payment) Measure. The proposed measures also PSI 90 Measure Measure. support our mission to provide better In addition, we are proposing to adopt healthcare for individuals, better health In summary, the PSI 90 measure was one required outcome measure: Excess for populations, and lower costs for revised to reflect the relative importance Days in Acute Care After healthcare. We note that these measures and harm associated with each Hospitalization for Pneumonia. were reviewed by the MAP and did not component indicator to provide a more The proposed measures were receive support for adoption into the reliable and valid signal of patient safety included on a publicly available Hospital IQR Program, as discussed in events. We believe that adopting the document entitled ‘‘2015 Measures its MAP Pre-Rulemaking Report and 91 modified PSI 90 measure would Under Consideration’’ in compliance Spreadsheet of MAP 2016 Final continue to provide strong incentives with section 1890A(a)(2) of the Act, and Recommendations.94 The result of the for hospitals to ensure that patients are they were reviewed by the MAP as MAP vote for the proposed measures not harmed by the medical care they discussed in its MAP Pre-Rulemaking was as follows: (1) Aortic Aneurysm receive, which is a critical consideration Report and Spreadsheet of MAP 2016 Procedure Clinical Episode-Based in quality improvement. 92 Final Recommendations. Payment Measure: 8 percent support, 32 Below, we discuss each of the above percent conditional support, and 60 88 Mathematica Policy Research (November 2011). measures in more detail. percent do not support; (2) Reporting period and reliability of AHRQ, CMS 30- day and HAC Quality Measures—Revised. a. Proposed Adoption of Three Clinical Cholecystectomy and Common Duct Available at: http://www.cms.gov/Medicare/ Episode-Based Payment Measures Exploration Clinical Episode-Based Quality-Initiatives-Patient-Assessment-Instruments/ Payment Measure: 20 percent support, hospital-value-based-purchasing/Downloads/ (1) Background _ _ 28 percent conditional support, and 52 HVBP Measure Reliability-.pdf. Clinical episode-based payment 89 ‘‘Patient Safety 2015 Final Report’’ is available percent do not support; and (3) Spinal at: http://www.qualityforum.org/Publications/2016/ measures are clinically coherent 02/Patient_Safety_2015_Final_Report.aspx. 93 For example: Hussey, P. S., Sorbero, M. 90 Mathematica Policy Research (November 2011). 91 Measure Applications Partnership: List of E.,Mehrotra, A., Liu, H., & Damberg, S. L.: (2009). Reporting period and reliability of AHRQ, CMS 30- Measures Under Consideration (MUC) for December Episode-Based Performance Measurement and day and HAC Quality Measures—Revised. 1, 2015. Available at: http://www.qualityforum.org/ Payment: Making It a Reality. Health Affairs, 28(5), Available at: http://www.cms.gov/Medicare/ ProjectMaterials.aspx?projectID=75367. 1406–1417. Doi:10.1377/hlthaff.28.5.1406. Quality-Initiatives-Patient-AssessmentInstruments/ 92 Spreadsheet of MAP 2016 Final 94 Spreadsheet of MAP 2016 Final hospital-value-basedpurchasing/Downloads/HVBP_ Recommendations Available at: http:// Recommendations. Available at: http://www.quality Measure_Reliability-.pdf. www.qualityforum.org/map/. forum.org/map/.

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Fusion Clinical Episode-Based Payment adjusted for SDS, we refer readers to there was a high degree of agreement Measure: 16 percent support, 36 percent section VIII.A.6.a.(1) of the preamble of among clinical experts consulted for conditional support, and 48 percent do this proposed rule for a discussion of this project that standardized Medicare not support. MAP stakeholders our policy on SDS factors. Finally, payments for services provided during expressed concerns that the proposed regarding MAP stakeholder concerns this episode can be linked to the care measures: (1) Overlap with the Medicare that the clinical episode-based payment provided during the hospitalization; (3) Spending per Beneficiary (MSPB) measures fail to link outcomes to quality episodes of care for the condition are Measure; 95 (2) are not NQF-endorsed; because they do not reflect comprised of a substantial proportion of (3) may need to be adjusted for appropriateness of care, we believe that payments and potential savings for post- sociodemographic status (SDS); and (4) the proposed measures cover topics of acute care, indicating episode payment fail to link outcomes to quality because critical importance to quality in the differences are driven by utilization they do not reflect appropriateness of inpatient hospital setting. Hospitals outside of the MS–DRG payment; (4) care. have a significant influence on Medicare episodes of care for the condition reflect In response to MAP stakeholder spending during the episode high variation in post discharge concerns that the clinical episode-based surrounding a hospitalization, through payments, enabling differentiation payment measures overlap with the the provision of appropriate, high- among hospitals; and (5) the medical MSPB measure, we note that unlike the quality care before and during inpatient condition is managed by general overall MSPB measure, the clinical hospitalization and through proper medicine physicians or hospitalists and episode-based payment measures assess hospital discharge planning, care the surgical conditions are managed by payment variation at the procedure level coordination, and care transitions. surgical subspecialists, enabling and only include services that are While we recognize that high or low comparison between similar clinically related to the named episode payments to hospitals are difficult to practitioners. These selection criteria procedure (for example, the spinal interpret in isolation, high payments for were also used for the three clinical fusion measure includes inpatient services may implicitly be associated episode-based payment measures admissions for ‘‘medical back with poor quality of care (for example, finalized in the FY 2016 IPPS/LTCH problems’’ that occur following the preventable readmissions, procedure PPS final rule (80 FR 49664 through initial spinal fusion procedure since the complications, or emergency room 49665). admission is likely a result of usage). The measures follow the general complications from the initial Although the MAP did not support construction of episode-based measures procedure). inclusion of these clinical episode-based previously adopted in the Hospital IQR With respect to MAP stakeholder payment measures in the Hospital IQR Program: The NQF-endorsed MSPB concerns that the clinical episode-based Program,96 stakeholders have requested measure finalized in the FY 2012 IPPS/ payment measures are not NQF- to have more condition-specific and LTCH PPS final rule for the Hospital endorsed, section 1886(b)(3)(B)(IX)(bb) procedure-specific measures, similar to IQR Program (76 FR 51626 through of the Act provides that in the case of the MSPB measure included in the 74529); and the three clinical episode- a specified area or medical topic Hospital IQR Program, as described in based payment measures for kidney/ determined appropriate by the Secretary the FY 2012 IPPS/LTCH PPS final rule UTI, cellulitis, and gastrointestinal for which a feasible and practical (76 FR 51623). We believe that hemorrhage finalized in the FY 2016 measure has not been endorsed by the including condition- and procedure- IPPS/LTCH PPS final rule (80 FR entity with a contract under section specific payment measures will provide 49674). Similar to these previously 1890(a) of the Act, the Secretary may hospitals with actionable feedback that adopted measures, the proposed specify a measure that is not so will better equip them to implement measures include standardized endorsed as long as due consideration is targeted improvements in comparison to payments for Medicare Part A and Part given to measures that have been an overall payment measure alone. B services and are risk adjusted for endorsed or adopted by a consensus Further, we believe that supplementing individual patient characteristics and organization identified by the Secretary. the MSPB measure with condition- other factors (for example, the MS–DRG We considered other existing measures specific and procedure-specific of the index inpatient stay). However, related to payment that have been measures will provide both overall unlike the MSPB measure, the clinical endorsed by the NQF and other hospital-level and detailed information episode-based payment measures only consensus organizations, but we were on high-cost and high-prevalence include Medicare Part A and Part B unable to identify any NQF-endorsed (or conditions and procedures to better services that are clinically related to the other consensus organization endorsed) inform their future spending plans. named episode procedure. The clinical payment measures that assess the aortic Moreover, the payment measures will episode-based payment measures are aneurysm procedure, cholecystectomy help consumers and other payers and price-standardized, risk-adjusted ratios and common duct exploration, or spinal providers identify hospitals involved in that compare a provider’s resource use fusion. However, these proposed the provision of efficient care for certain against the resource use of other clinical episode-based payment procedures. providers within a reporting period (that measures will be submitted to NQF for The three procedures selected for the is, the measure calculation includes endorsement as part of the next Cost clinical episode-based payment eligible episodes occurring within a 1- and Resource Use project. measures were chosen based on the year timeframe). Similar to the MSPB In regard to MAP stakeholder following criteria: (1) The condition measure though, the ratio allows for concerns that the clinical episode-based constitutes a significant share of ease of comparison over time as it payment measures may need to be Medicare payments and potential obviates the need to adjust for inflation. savings for hospitalized patients during Each clinical episode-based payment 95 MSPB measure specifications can be found in and surrounding a hospital stay; (2) measure is calculated as the ratio of the the ‘‘Medicare Spending Per Beneficiary (MSPB) Episode Amount for each provider Measure Overview,’’ available at: http://www. qualitynet.org/dcs/ContentServer?c=Page& 96 Spreadsheet of MAP 2016 Final divided by the episode-weighted pagename=QnetPublic%2FPage%2FQnetTier3& Recommendations. Available at: http:// median Episode Amount across all cid=1228772053996. www.qualityforum.org/map/. providers. To calculate the Episode

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Amount for each provider, one episode payment level across all than 1 indicates that a given provider’s calculates the average of the ratio of the providers nationally. The denominator resource use is less than that of the observed episode payment over the for a provider’s measure is the episode national median provider during a expected episode payment (as predicted weighted national median 97 of Episode reporting period. Mathematically, this is in risk adjustment), and then multiplies Amounts across all providers. A clinical represented in equation (A) below. this quantity by the average observed episode-based payment measure of less

Where: percentile to approximately $62,000 at performed during the index hospital Oij = observed episode payment for episode the 95th percentile—that is partially stay. i in provider j, driven by variation in postdischarge (c) Data Sources Eij = expected episode payment for episode payment clinically-related to the i in provider j, 98 The proposed AA Payment measure is ∈ inpatient hospitalization. These Oi I = average observed episode payment a claims-based measure. It uses Part A across all episodes i nationally, and clinically-related postdischarge and Part B Medicare administrative nj = total number of episodes for provider j. payments may be an indicator of the quality of care provided during the claims data from Medicare FFS Each of the three measures we are hospitalization. Specifically, higher beneficiaries hospitalized for an aortic proposing is described further below, quality hospital treatment may yield aneurysm procedure. The reporting followed by explanations of payment lower postdischarge payment. period for the measure is 1 year (that is, standardization and risk adjustment. For the measure calculation includes detailed measure specifications, we (b) Overview of Measure eligible episodes occurring within a 1- refer readers to the clinical episode- year timeframe). For example, for the FY based payment measures report entitled, The proposed AA Payment measure 2019 payment determination, the ‘‘Measure Specifications: Hospital includes the set of medical services reporting period would be CY 2017. Clinical Episode-Based Payment related to a hospital admission for an Measures for Aortic Aneurysm aortic aneurysm procedure, including (d) Measure Calculation Procedure, Cholecystectomy and treatment, follow-up, and postacute The proposed AA Payment measure Common Duct Exploration, and Spinal care. The measure includes two clinical sums the Medicare payment amounts Fusion’’ available at: http:// subtypes: (1) Abdominal Aortic for clinically related Part A and Part B www.qualitynet.org > Hospital-Inpatient Aneurysm Procedure; and (2) Thoracic services provided during the episode > Claims-Based Measures > Episode- Aortic Aneurysm Procedure. Clinical window and attributes them to the Based Payment Measures. subtypes are included in the measure hospital at which the index hospital construction to distinguish relatively (2) Proposed Aortic Aneurysm stay occurred. Medicare payments homogeneous subpopulations of Procedure Clinical Episode-Based included in this episode-based measure patients whose health conditions Payment (AA Payment) Measure are standardized and risk-adjusted. significantly influence the form of Similar to the MSPB measure’s (a) Background treatment and the expected post- construction, this measure is expressed Inpatient hospital stays and discharge outcomes and risks. The risk as a risk-adjusted ratio, which allows for associated services assessed by the adjustment model is estimated ease of comparison over time, without proposed Aortic Aneurysm Procedure separately for each clinical subtype, the need to adjust for inflation. The Clinical Episode-Based Payment (AA such that the measure compares numerator is the Episode Amount, Payment) measure have high payments observed spending for an episode of a calculated as the average of the ratios of with substantial variation. In CY 2014, given clinical subtype only to expected the observed episode payment over the Medicare FFS beneficiaries experienced spending among episodes of that expected episode payment (as predicted more than 22,000 aortic aneurysm subtype. This measure, like the NQF- in risk adjustment), multiplied by the procedure episodes triggered by related endorsed MSPB measure (NQF #2158), average observed episode payment level inpatient stays. Payment-standardized, assesses the payment for services across all providers nationally. The risk-adjusted episode payment for these initiated during an episode that spans denominator for a provider’s measure is episodes (payment for the the period immediately prior to, during, the episode weighted national median hospitalization plus payment for and following a beneficiary’s hospital of Episode Amounts across all clinically related services in the episode stay (the ‘‘episode window’’, discussed providers. An aortic aneurysm window) totaled nearly $760 million in in more detail below). In contrast to the procedure episode begins 3 days prior to CY 2014, with a mean episode payment MSPB measure, however, this proposed the initial (index) admission and of over $33,000. There is substantial measure includes Medicare payments extends 30 days following the discharge variation in aortic aneurysm procedure for services during the episode window from the index hospital stay. For episode payment—ranging from only if they are clinically related to the detailed measure specifications, we approximately $21,000 at the 5th aortic aneurysm procedure that was refer readers to the clinical episode-

97 Example of episode weighted median: If there had 4 episodes and the second only 1, then the 98 Statistics based on Acumen’s testing of episode are 2 hospitals and one hospital had an measure episode-weighted median would be 1.5 (that is, 0.5, definition on Medicare FFS population using score of 1.5 and another had one of 0.5, but the first 1.5, 1.5, 1.5, 1.5). Medicare Parts A and B claims.

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based payment measures report entitled, quality hospital treatment may yield begins 3 days prior to the initial (index) ‘‘Measure Specifications: Hospital lower postdischarge payment. admission and extends 30 days Clinical Episode-Based Payment following the discharge from the index (b) Overview of Measure Measures for Aortic Aneurysm hospital stay. For detailed measure Procedure, Cholecystectomy and The proposed Chole and CDE specifications, we refer readers to the Common Duct Exploration, and Spinal Payment measure includes the set of clinical episode-based payment Fusion’’ and available at: http:// medical services related to a hospital measures report entitled, ‘‘Measure www.qualitynet.org > Hospital-Inpatient admission for a cholecystectomy and Specifications: Hospital Clinical > Claims-Based Measures > Episode- common duct exploration, including Episode-Based Payment Measures for Based Payment Measures. treatment, follow-up, and postacute Aortic Aneurysm Procedure, care. This measure, like the NQF- Cholecystectomy and Common Duct (e) Cohort endorsed MSPB measure (NQF #2158), Exploration, and Spinal Fusion’’ and The proposed AA Payment measure assesses the payment for services available at: http://www.qualitynet.org > cohort includes Medicare FFS initiated during an episode that spans Hospital-Inpatient > Claims-Based beneficiaries hospitalized for an aortic the period immediately prior to, during, Measures > Episode-Based Payment aneurysm procedure. Measure and following a beneficiary’s hospital Measures. stay (the ‘‘episode window’’, discussed exclusions are discussed in more detail (e) Cohort in section VIII.A.7.a.(5) of the preamble in more detail below). In contrast to the of this proposed rule. MSPB measure, however, this measure The proposed Chole and CDE includes Medicare payments for Payment measure cohort includes We are inviting public comment on services during the episode window Medicare FFS beneficiaries hospitalized our proposal to adopt the Aortic only if they are clinically related to the for cholecystectomy and common duct Aneurysm Procedure Clinical Episode- cholecystectomy and common duct exploration. Measure exclusions are Based Payment (AA Payment) measure exploration that was performed during discussed in more detail in section to the Hospital IQR Program measure set the index hospital stay. VIII.A.7.a.(5) of the preamble of this for the FY 2019 payment determination proposed rule below. and subsequent years as discussed in (c) Data Sources We are inviting public comment on this section. The proposed Chole and CDE our proposal to adopt the (3) Proposed Cholecystectomy and Payment measure is a claims-based Cholecystectomy and Common Duct Common Duct Exploration Clinical measure. It uses Part A and Part B Exploration Clinical Episode-Based Episode-Based Payment (Chole and CDE Medicare administrative claims data Payment (Chole and CDE Payment) Payment) Measure from Medicare FFS beneficiaries measure to the Hospital IQR Program hospitalized for a cholecystectomy and measure set for the FY 2019 payment (a) Background common duct exploration. The determination and subsequent years as Inpatient hospital stays and reporting period for the measure is 1 discussed in this section. year (that is, the measure calculation associated services assessed by the (4) Proposed Spinal Fusion Clinical includes eligible episodes occurring proposed Cholecystectomy and Episode-Based Payment (SFusion within a 1-year timeframe). For Common Duct Exploration Clinical Payment) Measure Episode-Based Payment (Chole and CDE example, for the FY 2019 payment Payment) measure have high payments determination, the reporting period (a) Background with substantial variation. In CY 2014, would be CY 2017. Inpatient hospital stays and Medicare FFS beneficiaries experienced (d) Measure Calculation associated services assessed by the more than 48,000 cholecystectomy and proposed Spinal Fusion Clinical common duct exploration episodes The proposed Chole and CDE Episode-Based Payment (SFusion triggered by related inpatient stays. Payment measure sums the Medicare Payment) measure have high payments Payment-standardized, risk-adjusted payment amounts for clinically related with substantial variation. In CY 2014, episode payment for these episodes Part A and Part B services provided Medicare FFS beneficiaries experienced (payment for the hospitalization plus during the episode window and nearly 60,000 spinal fusion episodes the payment for clinically related attributes them to the hospital at which triggered by related inpatient stays. services in the episode window) totaled the index hospital stay occurred. Payment-standardized, risk-adjusted nearly $690 million in CY 2014, with a Medicare payments included in this episode payment for these episodes mean episode payment of over $14,000. episode-based measure are standardized (payment for the hospitalization plus There is substantial variation in and risk-adjusted. Similar to the MSPB the payment for clinically related cholecystectomy and common duct measure’s construction, this measure is services in the episode window) totaled exploration episode payment—ranging expressed as a risk-adjusted ratio, which over $2 billion in CY 2014, with a mean from approximately $11,000 at the 5th allows for ease of comparison over time, episode payment of over $35,000. There percentile to approximately $22,000 at without need to adjust for inflation. The is substantial variation in spinal fusion the 95th percentile—that is partially numerator is the Episode Amount, episode payment—ranging from driven by variation in postdischarge calculated as the average of the ratios of approximately $27,000 at the 5th payment clinically-related to the the observed episode payment over the percentile to approximately $56,000 at inpatient hospitalization.99 These expected episode payment (as predicted the 95th percentile—that is partially clinically-related postdischarge in risk adjustment), multiplied by the driven by variation in postdischarge payments may be an indicator of the average observed episode payment level payment clinically-related to the across all providers nationally. The quality of care provided during the inpatient hospitalization.100 These denominator for a provider’s measure is hospitalization. Specifically, higher clinically-related postdischarge the episode weighted national median 99 Statistics based on Acumen’s testing of episode of Episode Amounts across all 100 Statistics based on Acumen’s testing of definition on Medicare FFS population using providers. A cholecystectomy and episode definition on Medicare FFS population Medicare Parts A and B claims. common duct exploration episode using Medicare Parts A and B claims.

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payments may be an indicator of the for spinal fusion. The reporting period (5) Exclusion Criteria quality of care provided during the for the measure is 1 year (that is, the For a full list of the MS–DRG, hospitalization. Specifically, higher measure calculation includes eligible procedure, and diagnosis codes used to quality hospital treatment may yield episodes occurring within a 1-year identify beneficiaries included in the lower postdischarge payment. timeframe). For example, for the FY final cohort for each of the proposed (b) Overview of Measure 2019 payment determination, the episode-based payment measures, we reporting period would be CY 2017. The proposed SFusion Payment refer readers to the report entitled, measure includes the set of medical (d) Measure Calculation ‘‘Measure Specifications: Hospital services related to a hospital admission Clinical Episode-Based Payment The proposed SFusion Payment for a spinal fusion, including treatment, Measures for Aortic Aneurysm follow-up, and postacute care. The measure sums the Medicare payment Procedure, Cholecystectomy and measure includes five clinical subtypes: amounts for clinically related Part A Common Duct Exploration, and Spinal (1) Anterior Fusion—Single; (2) Anterior and Part B services provided during the Fusion’’ available at: http:// Fusion—2 Levels; (3) Posterior/ episode window and attributes them to www.qualitynet.org > Hospital-Inpatient Posterior-Lateral Approach Fusion— the hospital at which the index hospital > Claims-Based Measures > Episode- Single; (4) Posterior/Posterior-Lateral stay occurred. Medicare payments Based Payment Measures. Approach Fusion—2 or 3 Levels; and (5) included in this episode-based measure Episodes for beneficiaries that meet Combined Fusions. The clinical are standardized and risk-adjusted. any of the following criteria are subtypes are included in the measure Similar to the MSPB measure’s excluded from all three measures: (1) construction to distinguish relatively construction, this measure is expressed Lack of continuous enrollment in homogeneous subpopulations of as a risk-adjusted ratio, which allows for Medicare Part A and Part B from 90 patients whose health conditions ease of comparison over time, without days prior to the episode through the significantly influence the form of need to adjust for inflation. The end of the episode with traditional treatment and the expected outcomes numerator is the Episode Amount, Medicare fee-for-service as the primary and risks. The risk adjustment model is calculated as the average of the ratios of payer; (2) Death date during episode estimated separately for each clinical the observed episode payment over the window; or (3) Enrollment in Medicare subtype, such that the measure expected episode payment (as predicted Advantage anytime from 90 days prior compares observed spending for an in risk adjustment), multiplied by the to the episode through the end of the episode of a given clinical subtype only average observed episode payment level episode. to expected spending among episodes of across all providers nationally. The In addition, claims that meet any of that subtype. A similar measure, the denominator for a provider’s measure is the following criteria do not trigger, or Lumbar Spinal Fusion/Refusion Clinical the episode weighted national median open, an episode for all three measures: Episode-Based Payment Measure, was of Episode Amounts across all (1) Claims with data coding errors, proposed for inclusion in the Hospital providers. A spinal fusion episode including missing date of birth or death IQR Program in the FY 2016 IPPS/LTCH begins 3 days prior to the initial (index) dates preceding the date of the trigger PPS proposed rule (80 FR 24570– admission and extends 30 days event; (2) Claims with standardized 24571). Based on public comment following the discharge from the index payment ≤ 0; (3) Admissions to regarding the heterogeneity of the spinal hospital stay. hospitals that Medicare does not fusion patient population, we decided For detailed measure specifications, reimburse through the IPPS system (for not to finalize the measure for the we refer readers to the clinical episode- example, cancer hospitals, critical Hospital IQR Program at that time (80 based payment measures report entitled, access hospitals, hospitals in Maryland); FR 49668 through 49674). We have ‘‘Measure Specifications: Hospital or (4) Transfers (by which a transfer is since refined the measure by including Clinical Episode-Based Payment defined based on the claim discharge more granular subtypes of fusions of the Measures for Aortic Aneurysm code) are not considered index lumbar spine to create more Procedure, Cholecystectomy and admissions. In other words, these cases homogenous patient cohorts. Common Duct Exploration, and Spinal do not generate new episodes; neither This proposed measure, like the NQF- Fusion’’ available at: http:// the hospital that transfers a patient to endorsed MSPB measure (NQF #2158), www.qualitynet.org > Hospital-Inpatient another hospital, nor the receiving assesses the payment for services > Claims-Based Measures > Episode- hospital will have an index admission initiated during an episode that spans Based Payment Measures. or associated admission attributed to the period immediately prior to, during, them. (e) Cohort and following a beneficiary’s hospital (6) Standardization stay (the ‘‘episode window’’, discussed The proposed SFusion Payment in more detail below). In contrast to the Standardization, or payment measure cohort includes Medicare FFS MSPB measure, however, this measure standardization, is the process of beneficiaries hospitalized for spinal includes Medicare payments for adjusting the allowed charge for a fusion. Measure exclusions are services during the episode window Medicare service to facilitate discussed in more detail in section only if they are clinically related to the comparisons of resource use across VIII.A.7.a.(5) of the preamble of this spinal fusion procedure that was geographic areas. Medicare payments proposed rule below. performed during the index hospital included in these proposed episode- stay. We are inviting public comment on based measures would be standardized our proposal to adopt the Spinal Fusion according to the standardization (c) Data Sources Clinical Episode-Based Payment methodology previously finalized for The proposed SFusion Payment (SFusion Payment) measure to the the MSPB measure in the FY 2012 IPPS/ measure is a claims-based measure. It Hospital IQR Program measure set for LTCH PPS final rule (76 FR 51627). The uses Part A and Part B Medicare the FY 2019 payment determination and methodology removes geographic administrative claims data from subsequent years as discussed in this payment differences, such as wage Medicare FFS beneficiaries hospitalized section. index and geographic practice cost

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index, incentive payment adjustments, utilization for post-discharge Thus, in the context of the previously and other add-on payments that support pneumonia patients in the form of adopted and publicly reported READM– broader Medicare program goals, such readmissions, observation stays, and 30–PN measure, the increasing use of as add-on payments for indirect emergency department (ED) visits. ED visits and observation stays has graduate medical education (IME) and Patients admitted for pneumonia have raised concerns that the READM–30–PN add-ons for serving a disproportionate disproportionately high readmission measure does not capture the full range share of uninsured patients.101 rates, and that readmission rates of unplanned acute care in the post- discharge period. In particular, some (7) Risk Adjustment following discharge for pneumonia are highly variable across hospitals in the policymakers and stakeholders have Risk adjustment uses patient claims United States.104 105 expressed concern that high use of history to account for case-mix variation For the previously adopted Hospital observation stays in some cases could and other factors. The steps used to IQR Program measure, Hospital 30-Day replace readmissions, and hospitals calculate risk-adjusted payments align All-Cause Risk-Standardized with high rates of observation stays in with the NQF-endorsed MSPB measure Readmission Rate (RSRR) following the post-discharge period may therefore (NQF #2158) method as specified in the Pneumonia Hospitalization (NQF have low readmission rates that do not FY 2012 IPPS/LTCH PPS final rule (76 #0506) (hereinafter referred to as more fully reflect the quality of care.110 FR 51624 through 51626). For more READM–30–PN) (80 FR 49654 through In response to these concerns, we details on the specifications for the risk 49660), publicly reported 30-day risk- improved on a previously developed adjustment employed in the proposed standardized readmission rates for measure, which is not currently part of episode-based payment measures, we pneumonia ranged from 12.9 percent to the Hospital IQR Program measure set, refer readers to the report entitled, 24.8 percent for the time period between titled, ‘‘30-Day Post-Hospital ‘‘Measure Specifications: Hospital July 2012 and June 2015.106 However, Pneumonia Discharge Care Transition Clinical Episode-Based Payment during the post-discharge period, Composite’’ (NQF #0707—NQF Measures for Aortic Aneurysm patients are not only at risk of requiring endorsement removed). The improved Procedure, Cholecystectomy and readmission. Emergency Department measure entitled Excess Days in Acute Common Duct Exploration, and Spinal (ED) visits represent a significant Care after Hospitalization for Fusion’’ available at: http:// proportion of post-discharge acute care Pneumonia (PN Excess Days) is a risk- www.qualitynet.org > Hospital-Inpatient utilization. Two recent studies adjusted outcome measure for > Claims-Based Measures > Episode- conducted in patients of all ages have pneumonia that incorporates the full Based Payment Measures. shown that 9.5 percent of patients range of acute care use that patients may We are inviting public comment on return to the ED within 30 days of experience post-discharge: Hospital our proposals to add three clinical hospital discharge and approximately readmissions, observation stays, and ED episode-based payment measures as 12 percent of these patients are visits. We are proposing this PN Excess stated above for the FY 2019 payment discharged from the ED, and thus are Days measure for inclusion in the determination and subsequent years. not captured by the READM–30–PN Hospital IQR Program for the FY 2019 b. Proposed Adoption of Excess Days in Measure.107 108 payment determination and subsequent Acute Care After Hospitalization for In addition, over the past decade, the years. Pneumonia (PN Excess Days) Measure use of observation stays has rapidly The proposed PN Excess Days measure assesses all-cause acute care (1) Background increased. Specifically, between 2001 and 2008, the use of observation utilization for post-discharge Pneumonia is a priority area for services increased nearly three-fold,109 pneumonia patients for several reasons. outcomes measurement because it is a and significant variation has been First, from the patient perspective, acute common condition associated with demonstrated in the use of observation care utilization for any cause is considerable morbidity, mortality, and services. undesirable. It is costly, exposes healthcare spending. Pneumonia was patients to additional risks of medical the third most common principal 104 Lindenauer PK, Bernheim SM, Grady JN, et al. care, interferes with work and family discharge diagnosis among patients with The performance of US hospitals as reflected in care, and imposes significant burden on Medicare in 2011.102 Pneumonia also risk-standardized 30-day mortality and readmission caregivers. Second, limiting the measure accounts for a large fraction of rates for medicare beneficiaries with pneumonia. J to inpatient utilization may make it hospitalization costs, and it was the Hosp Med. 2010;5(6):E12–18. susceptible to gaming. Finally, this 105 Dharmarajan K, Hsieh AF, Lin Z, et al. seventh most expensive condition billed Hospital readmission performance and patterns of measure includes all-cause acute care to Medicare, accounting for 3.7 percent readmission: retrospective cohort study of Medicare utilization because it is often hard to of the total national costs for all admissions. BMJ. 2013;347:f6571. exclude quality concerns and Medicare hospitalizations in 2011.103 106 Dorsey K, Grady J, Desai N, Lindenauer P, et accountability based on the documented Some of the costs for pneumonia can al. 2016 Condition-Specific Measures Updates and Specifications Report: Hospital-Level Risk- cause of a hospital visit. be attributed to high acute care Standardized Readmission Measures for Acute Although the original measure was Myocardial Infarction, Heart Failure, and NQF-endorsed, this improved measure 101 An overview of payment standardization can Pneumonia. 2016. has not yet been NQF-endorsed. Section be found in the ‘‘CMS Price (Payment) 107 Rising KL, White LF, Fernandez WG, Boutwell 1886(b)(3)(B)(IX)(bb) of the Act provides Standardization—Basics’’ document available at: AE.: Emergency Department Visits After Hospital http://www.qualitynet.org/dcs/ContentServer?c= Discharge: A Missing Part of the Equation. Annals that in the case of a specified area or Page&pagename=QnetPublic%2FPages of Emergency Medicine. 2013(0). medical topic determined appropriate %2FQnetTier4&cid=1228772057350. 108 Vashi AA, Fox JP, Carr BG, et al.: Use of by the Secretary for which a feasible and 102 Agency for Healthcare Research and Quality hospital-based acute care among patients recently practical measure has not been endorsed (AHRQ). Healthcare Cost and Utilization Project discharged from the hospital. JAMA: the journal of by the entity with a contract under (HCUP) http://hcupnet.ahrq.gov/. the American Medical Association. Jan 23 103 Torio CM, Andrews RM. National Inpatient 2013;309(4):364–371. section 1890(a) of the Act, the Secretary Hospital Costs: The Most Expensive Conditions by 109 Venkatesh AK GB, Gibson Chambers JJ, Baugh Payer, 2011. HCUP Statistical Brief #160. 2013; CW, Bohan JS, Schuur JD. Use of Observation Care 110 Carlson J. Readmissions are down, but http://hcup-us.ahrq.gov/reports/statbriefs/ in US Emergency Departments, 2001 to 2008. PLoS observational-status patients are up and that could sb160.jsp. One. September 2011;6(9):e24326. skew Medicare numbers. Modern Healthcare. 2013.

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may specify a measure that is not so captured whether they are billed as during the first 30 days after discharge endorsed as long as due consideration is inpatient or outpatient days (80 FR from the hospital, relative to the number given to measures that have been 49686 through 49687). spent by the same patients discharged endorsed or adopted by a consensus The proposed PN Excess Days from an average hospital. The measure organization identified by the Secretary. measure (MUC15–391) was included on defines days in acute care as days spent: While we considered other existing a publicly available document entitled (1) In an ED; (2) admitted to observation measures related to care transitions and ‘‘2015 Measures Under Consideration status; or (3) admitted as an unplanned post-discharge acute care utilization that List’’ for December 1, 2015 (available at: readmission for any cause within 30 have been endorsed by NQF or other http://www.qualityforum.org/ days from the date of discharge from the consensus organizations, but we were ProjectMaterials.aspx?projectID=75367) index pneumonia hospitalization. unable to identify any NQF-endorsed (or and has been reviewed by the NQF Readmission days are calculated as the other consensus organization endorsed) Measure Applications Partnership discharge date minus the admission measures that assess the full range of (MAP) Hospital Workgroup. The date. Admissions that extend beyond post-discharge acute care use that measure was conditionally supported the 30-day follow-up period are patients may experience. Existing pending the examination of truncated on day 30. Observation days process measures capture many sociodemographic status (SDS) factors are calculated by the hours in important domains of care transitions and NQF review and endorsement of the observation, rounded up to the nearest such as education, medication measure update, as referenced in the half day. Based on the recommendation reconciliation, and follow-up, but all MAP 2016 Final Recommendations of our technical expert panel convened require chart review and manual Report (available at: http:// as part of developing this measure, an abstraction. Existing outcome measures www.qualityforum.org/map/).111 We ED treat-and-release visit is counted as are focused entirely on readmissions or refer readers to section VIII.A.6.a.(1) of one half day. ED visits are not counted complications and do not include the preamble of this proposed rule for as a full day because the majority of observation stays or ED visits. We are a discussion of our policy on SDS treat-and-release visits last fewer than not aware of any other measures that factors. As stated above, we note that 12 hours. assess the quality of transitional care by this measure has been submitted to NQF ‘‘Planned’’ readmissions are those measuring 30-day risk-standardized for endorsement proceedings as part of planned by providers for anticipated days in acute care (hospital the All-Cause Admissions and medical treatment or procedures that readmissions, observation stays, and ED Readmissions project in January 2016. must be provided in the inpatient visits) following hospitalization for (2) Overview of Measure setting. This measure excludes planned pneumonia that have been endorsed or readmissions using the planned adopted by a consensus organization, The proposed PN Excess Days readmission algorithm previously and we have not found any other measure is a risk-standardized outcome developed for the READM–30–PN feasible and practical measures on this measure that compares the number of measure (78 FR 50786 through 50787). topic. However, we note that this days that patients, discharged from a The planned readmission algorithm is a measure has been submitted to NQF for hospital for pneumonia, are predicted to set of criteria for classifying admissions endorsement proceedings as part of the spend in acute care across the full as planned among the general Medicare All-Cause Admissions and spectrum of possible events (hospital population using Medicare Readmissions project in January 2016. readmissions, observation stays, and ED administrative claims data. The The proposed PN Excess Days visits) to the days that patients are measure was developed in conjunction algorithm identifies admissions that are expected to spend based on their degree typically planned and may occur within with the previously adopted Hospital of illness as defined using principal IQR Program measures, Excess Days in 30 days of discharge from the hospital. diagnosis and comorbidity data from The planned readmission algorithm has Acute Care after Hospitalization for administrative claims. Acute Myocardial Infarction (AMI three fundamental principles: (1) A few Excess Days) (80 FR 49690) and (3) Data Sources specific, limited types of care are always Hospital 30-Day Excess Days in Acute considered planned (transplant surgery, The proposed PN Excess Days maintenance chemotherapy/ Care after Hospitalization for Heart measure is claims-based. It uses Part A Failure (HF Excess Days) (80 FR 49690). immunotherapy, rehabilitation); (2) and Part B Medicare administrative otherwise, a planned readmission is All three measures assess the same claims data from Medicare FFS outcome and use the same risk- defined as a non-acute readmission for beneficiaries hospitalized for a scheduled procedure; and (3) adjustment methodology. They differ pneumonia. To determine eligibility for only in the target population and the admissions for acute illness or for inclusion in the measure, we also use complications of care are never planned. specific risk variables included. Medicare enrollment data. As proposed, When we finalized the AMI Excess A more detailed discussion of the measure would use 3 years of data. Days and HF Excess Days measures for exclusions follows in section For example, for the FY 2019 payment the FY 2018 payment determination and VIII.A.7.b.(6) of the preamble of this determination, the reporting period subsequent years, stakeholders proposed rule. would be July 2014 through June 2017. expressed concern about the interaction The measure counts all use of acute between Medicare payment policy (4) Outcome care occurring in the 30-day post- discharge period. For example, if a regarding admissions spanning two The outcome of the proposed PN patient returns to the ED three times, the midnights and the AMI Excess Days and Excess Days measure is the excess HF Excess Days measures (80 FR 49686 measure counts each ED visit as a half- number of days patients spend in acute through 49687). We continue to believe day. Similarly, if a patient has two care (hospital readmissions, observation that the ‘‘2-midnight’’ policy or any hospitalizations within 30 days, the stays, and ED visits) per 100 discharges changes to such policy will not days spent in each are counted. We take influence the outcome of Excess Days in 111 Spreadsheet of MAP 2016 Final this approach to capture the full patient Acute Care measures, as all Recommendations Available at: http:// experience of need for acute care in the postdischarge days in acute care are www.qualityforum.org/map/. post-discharge period.

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(5) Cohort prepare the patient for discharge; and explained by neither. This model is We defined the eligible cohort using (3) hospitalizations for patients with an used to calculate the predicted the same criteria as the previously index admission within 30 days of a (including random effects) and expected adopted Hospital IQR Program measure, previous index admission, because (assuming random effects are zero) READM–30–PN (80 FR 49654 through additional pneumonia admissions number of days for each patient. The 49660). The READM–30–PN cohort within 30 days are part of the outcome, average difference between the criteria are included in a report posted and we choose not to count a single predicted and expected number of days admission both as an index admission for each patient for each hospital is used on our Measure Methodology Web page, and a readmission for another index to construct the risk-standardized under the ‘‘Downloads’’ section in the admission. Excess Days in Acute Care. For more ‘‘AMI, HF, PN, COPD, and Stroke details about risk-adjustment for this Readmission Updates’’ zip file on our (7) Risk-Adjustment proposed measure, we refer readers to Web site at: http://www.cms.gov/ The proposed PN Excess Days the ‘‘Pneumonia Excess Days in Acute Medicare/Quality-Initiatives-Patient- measure adjusts for variables that are Care’’ zip file on our Web site at: http:// Assessment-Instruments/ clinically relevant and have strong www.cms.gov/Medicare/Quality- HospitalQualityInits/Measure- relationships with the outcome. The Initiatives-Patient-Assessment- Methodology.html. measure seeks to adjust for case-mix Instruments/HospitalQualityInits/ The cohort includes Medicare FFS differences among hospitals based on Measure-Methodology.html. patients aged 65 years or older: (1) With the clinical status of the patient at the a principal discharge diagnosis of time of the index admission. (8) Calculating Excess Acute Care Days pneumonia, a principal discharge Accordingly, only comorbidities that The proposed PN Excess Days diagnosis of aspiration pneumonia, or a convey information about the patient at measure is calculated as the difference principal discharge diagnosis of sepsis that time or in the 12 months prior, and between the average of the predicted (not including severe sepsis) who also not complications that arise during the number of days spent in acute care for have a secondary diagnosis of course of the index hospitalization, are patients discharged from each hospital pneumonia present on admission; (2) included in the risk adjustment. The and the average number of days that enrolled in Part A and Part B Medicare measure does not adjust for patients’ would have been expected if those for the 12 months prior to the date of admission source or their discharge patients had been cared for at an average admission, and enrolled in Part A disposition (for example, skilled nursing hospital, and then the difference is during the index admission; (3) who facility) because these factors are multiplied by 100 so that the measure were discharged from a non-Federal associated with the structure of the result represents PN Excess Days per acute care hospital; (4) who were not healthcare system, not solely patients’ 100 discharges. We multiply the final transferred to another acute care facility; clinical comorbidities. Patients’ measure by 100 to be consistent with and (5) who were alive at discharge. admission source and discharge the reporting of the previously adopted The measure cohort is also disposition may be influenced by READM–30–PN measure that is harmonized with the previously regional differences in the availability of reported as a rate (that is, a 25 percent adopted Hospital IQR Program measure, post-acute care providers and practice rate is equivalent to 25 out of 100 the MORT–30–PN measure (80 FR patterns. These regional differences discharges) (80 FR 49654 through 49837), and the proposed refined cohort might exert undue influence on results. 49660), as well as the AMI Excess Days for the PN Payment measure proposed In addition, patients’ admission source (80 FR 49690) and HF Excess Days (80 in section VIII.A.6.a. of the preamble of and discharge disposition are not FR 49685) measures. A positive result this proposed rule. audited and are not as reliable as indicates that patients spend more days For the ICD–9–CM and ICD–10–CM diagnosis codes. The proposed PN in acute care post-discharge than codes that define the measure Excess Days measure uses the same risk- expected if admitted to an average development cohort, we refer readers to adjustment variables as the READM–30– performing hospital with a similar case the ‘‘Excess Days in Acute Care after PN (73 FR 48614). mix; a negative result indicates that Hospitalization for Pneumonia Version The outcome is risk adjusted using a patients spend fewer days in acute care 1.0’’ in the Pneumonia Excess Days in two-part random effects model. This than expected if admitted to an average Acute Care zip file on our Web site at: statistical model, often referred to as a performing hospital with a similar case http://www.cms.gov/Medicare/Quality- ‘‘hurdle’’ model, accounts for the mix. A negative PN Excess Days Initiatives-Patient-Assessment- structure of the data (patients clustered measure score reflects better quality. Instruments/HospitalQualityInits/ within hospitals) and the observed We are inviting public comment on Measure-Methodology.html. distribution of the outcome. our proposal to adopt the PN Excess Specifically, it models the number of (6) Exclusion Criteria Days measure for the FY 2019 payment acute care days for each patient as: (1) determination and subsequent years as The proposed PN Excess Days a probability that they have a non-zero described above. measure excludes the following number of days; and (2) a number of admissions from the measure cohort: (1) days, given that this number is non- c. Summary of Previously Adopted and Hospitalizations without at least 30 days zero. The first part is specified as a logit Newly Proposed Hospital IQR Program of post-discharge enrollment in Part A model, and the second part is specified Measures for the FY 2019 Payment and Part B FFS Medicare, because the as a Poisson model, with both parts Determination and Subsequent Years 30-day outcome cannot be assessed in having the same risk-adjustment The table below outlines the proposed this group since claims data are used to variables and each part having a random Hospital IQR Program measure set for determine whether a patient was effect. This is an accepted statistical the FY 2019 payment determination and readmitted, was placed under method that explicitly estimates how subsequent years, and includes both observation, or visited the ED; (2) much of the variation in acute care days previously adopted measures and discharged against medical advice, is accounted for by patient risk factors, measures newly proposed in this because providers did not have the how much by the hospital where the proposed rule. Measures proposed for opportunity to deliver full care and patient is treated, and how much is removal in section VIII.A.3.b. of the

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preamble of this proposed rule are not included in this chart.

PROPOSED HOSPITAL IQR PROGRAM MEASURE SET FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Short name Measure name NQF No.

NHSN

Chart-abstracted

ED–1 * ...... Median Time from ED Arrival to ED Departure for Admitted ED Patients ...... 0495 ED–2 * ...... Admit Decision Time to ED Departure Time for Admitted Patients ...... 0497 Imm-2 ...... Influenza Immunization ...... 1659 PC–01 * ...... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical 0469 quality measure). Sepsis ...... Severe Sepsis and Septic Shock: Management Bundle (Composite Measure) ...... 0500 VTE–6 ...... Incidence of Potentially Preventable Venous Thromboembolism ...... +

Claims-based Outcome

MORT–30–AMI ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myocar- 0230 dial Infarction (AMI) Hospitalization. MORT–30–CABG ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Ar- 2558 tery Bypass Graft (CABG) Surgery. MORT–30–COPD ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Chronic Ob- 1893 structive Pulmonary Disease (COPD) Hospitalization. MORT–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Heart Failure 0229 (HF) Hospitalization. MORT–30–PN ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hos- 0468 pitalization. MORT–30–STK ...... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Ischemic Stroke N/A READM–30–AMI ...... Hospital 30-Day All-Cause Risk-Standardized Readmission Rate (RSRR) Following Acute Myo- 0505 cardial Infarction (AMI) Hospitalization. READM–30–CABG ...... Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Fol- 2515 lowing Coronary Artery Bypass Graft (CABG) Surgery. READM–30–COPD ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Chronic 1891 Obstructive Pulmonary Disease (COPD) Hospitalization. READM–30–HF ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Heart 0330 Failure (HF) Hospitalization. READM–30–HWR ...... Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) ...... 1789 READM–30–PN ...... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneu- 0506 monia Hospitalization. READM–30–STK ...... 30-Day Risk Standardized Readmission Rate Following Stroke Hospitalization ...... N/A READM–30–THA/TKA ...... Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following 1551 Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). AMI Excess Days ...... Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction ...... N/A HF Excess Days ...... Excess Days in Acute Care after Hospitalization for Heart Failure ...... N/A PN Excess Days ** ...... Excess Days in Acute Care after Hospitalization for Pneumonia ...... N/A Hip/knee complications ...... Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total 1550 Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). PSI 04 ...... Death Rate among Surgical Inpatients with Serious Treatable Complications ...... 0351 PSI 90 ...... Patient Safety for Selected Indicators Composite Measure, Modified PSI 90 (Updated Title: Pa- 0531 tient Safety and Adverse Events Composite).

Claims-based Payment

AMI Payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 2431 Acute Myocardial Infarction (AMI). HF Payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care For 2436 Heart Failure (HF). PN Payment ...... Hospital-Level, Risk-Standardized Payment Associated with a 30-day Episode-of-Care For 2579 Pneumonia.

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PROPOSED HOSPITAL IQR PROGRAM MEASURE SET FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued

Short name Measure name NQF No.

THA/TKA Payment ...... Hospital-Level, Risk-Standardized Payment Associated with an Episode-of-Care for Primary N/A Elective Total Hip Arthroplasty and/or Total Knee Arthroplasty. MSPB ...... Payment-Standardized Medicare Spending Per Beneficiary (MSPB) ...... 2158 Cellulitis Payment ...... Cellulitis Clinical Episode-Based Payment Measure ...... N/A GI Payment ...... Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure ...... N/A Kidney/UTI Payment ...... Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure ...... N/A AA Payment ** ...... Aortic Aneurysm Procedure Clinical Episode-Based Payment Measure ...... N/A Chole and CDE Payment ** ...... Cholecystectomy and Common Duct Exploration Clinical Episode-Based Payment Measure ..... N/A SFusion Payment ** ...... Spinal Fusion Clinical Episode-Based Payment Measure ...... N/A

Electronic Clinical Quality Measures (eCQMs)

AMI–8a ...... Primary PCI Received Within 90 Minutes of Hospital Arrival ...... 0163

CAC–3 ...... Home Management Plan of Care Document Given to Patient/Caregiver ...... + ED–1 * ...... Median Time from ED Arrival to ED Departure for Admitted ED Patients ...... 0495 ED–2 * ...... Admit Decision Time to ED Departure Time for Admitted Patients ...... 0497 EHDI–1a ...... Hearing Screening Prior to Hospital Discharge ...... 1354 PC–01 * ...... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical 0469 quality measure). PC–05 ...... Exclusive Breast Milk Feeding *** ...... 0480 STK–02 ...... Discharged on Antithrombotic Therapy ...... 0435 STK–03 ...... Anticoagulation Therapy for Atrial Fibrillation/Flutter ...... 0436 STK–05 ...... Antithrombotic Therapy by the End of Hospital Day Two ...... 0438 STK–06 ...... Discharged on Statin Medication ...... 0439 STK–08 ...... Stroke Education ...... + STK–10 ...... Assessed for Rehabilitation ...... 0441 VTE–1 ...... Venous Thromboembolism Prophylaxis ...... 0371 VTE–2 ...... Intensive Care Unit Venous Thromboembolism Prophylaxis ...... 0372

Patient Survey

HCAHPS ...... HCAHPS + 3-Item Care Transition Measure (CTM-3) ...... 0166 0228

Structural Measures

Patient Safety Culture ...... Hospital Survey on Patient Safety Culture ...... N/A

Safe Surgery Checklist ...... Safe Surgery Checklist Use ...... N/A * Measure listed twice, as both chart-abstracted and electronic clinical quality measure. ** Newly proposed measures for the FY 2019 payment determination and for subsequent years. *** Measure name has been shortened. Please refer to annually updated electronically clinical quality measure specifications on the CMS eCQI Resource Center Page for further information: https://www.healthit.gov/newsroom/ecqi-resource-center. + NQF endorsement has been removed.

8. Proposed Changes to Policies on the preamble of this proposed rule to a. Proposed Requirement That Hospitals Reporting of eCQMs remove 13 eCQMs from the Hospital Report on All eCQMs in the Hospital For a discussion of our previously IQR Program and proposals in sections IQR Program Measure Set for the CY finalized eCQMs and policies, we refer VIII.A.10.d. and VIII.E.2.b. of the 2017 Reporting Period/FY 2019 readers to the FY 2014 IPPS/LTCH PPS preamble of this proposed rule to align Payment Determination and Subsequent final rule (78 FR 50807 through 50810; requirements for the Hospital IQR and Years 50811 through 50819), the FY 2015 the Medicare and Medicaid EHR In the FY 2016 IPPS/LTCH PPS final IPPS/LTCH PPS final rule (79 FR 50241 Incentive Programs. rule (80 FR 49698), we finalized our through 50253; 50256 through 50259; In addition, we are clarifying that for policy to require hospitals to submit one and 50273 through 50276), and the FY three measures (ED–1, ED–2, and PC– quarter of data (either Q3 or Q4) for 4 2016 IPPS/LTCH PPS final rule (80 FR 01), our previously finalized policy that self-selected eCQMs for the CY 2016 49692 through 49698; and 49704 hospitals must submit a full year of reporting period/FY 2018 payment determination by February 28, 2017. through 49709). chart-abstracted data regardless of We are proposing two changes to our Furthermore, in that final rule (80 FR whether data also are submitted policies with respect to eCQMs 49694), we signaled our intent to electronically continues to apply. reporting to require that hospitals: (1) propose increasing the reporting Submit data for an increased number of requirement to 16 eCQMs in future eCQMs as further detailed below; and rulemaking. In this proposed rule, we (2) report a full year of data. These are proposing to require reporting of a proposals are made in conjunction with full calendar year of data for all eCQMs our proposals in section VIII.A.3.b.(3) of in the Hospital IQR Program measure set

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for the CY 2017 reporting period/FY on all eCQMs in the Hospital IQR submission deadlines for eCQMs 2019 payment determination and Program measure set would begin with applies only to the Hospital IQR subsequent years. the CY 2018 reporting period/FY 2020 Program and the Medicare EHR Requiring hospitals to electronically payment determination and subsequent Incentive Program and not to the report a greater number of eCQMs years. Medicaid EHR Incentive Program. For furthers our goal of expanding Ultimately we chose to propose to more details on Hospital IQR Program electronic reporting in the Hospital IQR require reporting on all the proposed reporting requirements and eCQM Program, which we believe will improve eCQMs for the CY 2017 reporting submission deadlines, we refer readers patient outcomes by providing more period/FY 2019 payment determination, to section VIII.A.10.d.(5) of the robust data to support quality because we believe that requiring preamble of this proposed rule. improvement efforts. As stated above, hospitals to report measures this proposal is made in conjunction electronically is in line with our goals c. Clarification Regarding Data with our proposals in section to move towards eCQM reporting and to Submission for ED–1, ED–2, PC–01, VIII.A.3.b.(3) of the preamble of this align with the Medicare and Medicaid STK–4, VTE–5, and VTE–6 proposed rule to remove thirteen EHR Incentive Programs. We believe In the FY 2016 IPPS/LTCH PPS final eCQMs from the Hospital IQR Program that the CY 2017/FY 2019 payment rule, we finalized our policy that and proposals in sections VIII.A.10.d. determination is the appropriate time to hospitals must continue to submit data and VIII.E.2.b. of the preamble of this require eCQM reporting because on ED–1, ED–2, PC–01, STK–4, VTE–5, proposed rule to align requirements for hospitals have had several years to and VTE–6 via chart abstraction as the Hospital IQR and the Medicare and report data electronically for the previously required and that the results Medicaid EHR Incentive Programs. In Medicare and Medicaid EHR Incentive would be publicly displayed (80 FR addition, as discussed in section Programs and Hospital IQR Program (3 49695–49698). We also finalized, VIII.A.3.b.(3) of the preamble of this years of voluntary reporting and 2 years however, that hospitals may choose to proposed rule, we believe that removing of reporting as part of a pilot). Based submit electronic data on any of these certain eCQMs for which the chart- upon data collected by CMS, currently, 6 measures in addition to the chart- abstracted versions have been 95 percent of hospitals attest to abstraction requirements to meet the determined to be ‘‘topped-out’’ will successful eCQM reporting under the requirement to report 4 of 28 eCQMs (80 reduce certification burden and Medicare and Medicaid EHR Incentive FR 49695–49698). As discussed in implementation hurdles, enabling Programs. section VIII.A.3.b.(3)(a)(ii) of the hospitals to focus efforts on successfully b. Proposed Requirement That Hospitals preamble of this proposed rule, we are implementing a smaller subset of Report a Full Year of eCQM Data proposing to remove the electronic eCQMs. If our proposals to remove 13 version of the STK–4 measure. As eCQMs in section VIII.A.3.b.(3) of the In the FY 2016 IPPS/LTCH PPS final rule, we finalized our policy to require discussed in section VIII.A.3.b.(3)(d) of preamble of this proposed rule is the preamble of this proposed rule, we finalized as proposed, hospitals would hospitals to submit one quarter of data are proposing to remove the electronic be required to report on a total 15 (either Q3 or Q4) for 4 self-selected version of the VTE–5 and VTE–6 eCQMs for the CY 2017 reporting eCQMs for the CY 2016 reporting measure. Lastly, in section VIII.A.3.b.(2) period/FY 2019 payment determination. period/FY 2018 payment determination of the preamble of this proposed rule, While the number of required eCQMs by February 28, 2017 (80 FR 49698). As we are proposing to remove the chart- would increase as compared to that previously stated, we believe that the abstracted versions of the STK–4 and required for the CY 2016 reporting CY 2017/FY 2019 payment VTE–5 measures. If these proposals are period/FY 2018 payment determination determination is the appropriate time to finalized as proposed, the STK–4 and (that is, from 4 to 15 eCQMs), we believe require eCQM reporting because VTE–5 measures will be completely that a coordinated reduction in the hospitals have had several years to overall number of eCQMs (from 28 to 15 report data electronically for the removed from the Hospital IQR Program eCQMs) in both the Hospital IQR and Medicare and Medicaid EHR Incentive measure set, but the VTE–6 measure Medicare and Medicaid EHR Incentive Programs and for the Hospital IQR would continue to be included in its Programs will reduce certification Program. As such, we are proposing that chart-abstracted form. burden on hospitals and improve the for the CY 2017 reporting period/FY For the FY 2019 payment quality of reported data by enabling 2019 payment determination and determination and subsequent years, we hospitals to focus on a smaller, more subsequent years, hospitals must submit are clarifying that requirements for the specific subset of eCQMs. one year’s worth of eCQM data for each chart-abstracted versions of ED–1, ED–2, In crafting this proposal, we also required eCQM. For example, for the PC–01, and VTE–6 remain the same as considered proposing to require a lesser ED–1 eCQM, hospitals would be previously finalized. Hospitals must number of eCQMs—that hospitals required to submit one year of data submit a full calendar year of data submit eight of the available eCQMs (covering Q1, Q2, Q3, and Q4), instead (covering Q1, Q2, Q3, and Q4) via chart- (that is, in other words, 8 of the of just one quarter of data (either Q3 or abstraction regardless of whether data proposed 15 eCQMs as discussed above) Q4) as previously required. also are submitted electronically in for the CY 2017 reporting period/FY We hope to address stakeholder accordance with the applicable 2019 payment determination. concerns associated with increasing the submission requirements. However, we Specifically, hospitals would submit a number of eCQMs for which reporting note that if our proposal that hospitals full calendar year of data on an annual will be required proactively by reducing submit a full calendar year of eCQM basis for eight of the available eCQMs burden on hospitals by aligning data data for each required eCQM is finalized whether reporting only for the Hospital submission deadlines between the as proposed above, data submission for IQR Program or if reporting for both the Hospital IQR Program and the Medicare the chart-abstracted version of these Medicare and Medicaid EHR Incentive EHR Incentive Program. We note that measures will differ from those Programs and the Hospital IQR Program deadlines for the Medicaid EHR submitted electronically (quarterly basis for the CY 2017 reporting period/FY Incentive Program differ by State, and for chart-abstracted measures versus 2019 payment determination. Reporting therefore our proposal to align data annual basis for electronic measures).

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We are inviting public comment on refining the previously adopted CMS and stakeholders, including AHA, ASA, our proposals to require that hospitals: Hospital 30-Day, All-Cause, Risk- and other professional organizations, (1) Submit data for all eCQMs included Standardized Mortality Rate (RSMR) highlight the importance of including an in the Hospital IQR Program measure following Acute Ischemic Stroke assessment of stroke severity in risk- set; and (2) report a full year of data for Hospitalization Measure (hereafter adjustment models of stroke mortality. the CY 2017 reporting period/FY 2019 referred to as the Stroke 30-day Therefore, the refined Stroke 30-day payment determination and subsequent Mortality Rate) (78 FR 50802) by Mortality Rate is responsive to years, as discussed above. changing the measure’s risk adjustment comments received from the feedback of to include stroke severity. We are measure developers during measure 9. Possible New Quality Measures and considering proposing this refinement development, the Technical Expert Measure Topics for Future Years to the measure in the future. Panel, and the NQF endorsement We are providing information about The previously adopted Stroke 30-day process (78 FR 50802). Fourth, in new quality measures and measure Mortality Rate (78 FR 50802) includes addition to a modestly higher c-statistic, topics under consideration for future 42 risk variables, but does not include which evaluates the measure’s ability to inclusion in the Hospital IQR Program. an assessment of stroke severity. For discriminate or differentiate between We are considering to propose in future more details on the measure as currently high and low performing hospitals, the rulemaking: (1) A refined version of the adopted and implemented, we refer refined Stroke 30-day Mortality Rate Stroke Scale for the Hospital 30-Day readers to its measure methodology includes a more parsimonious risk Mortality Following Acute Ischemic report and measure risk-adjustment model than the publicly reported stroke Stroke Hospitalization Measure; (2) a statistical model in the AMI, HF, PN, mortality measure, with a total of 20 risk new measure, the National Healthcare COPD, and Stroke Mortality Update zip adjustment variables including the NIH Safety Network (NHSN) Antimicrobial file on our Web site at: http://www.cms. Stroke Scale, compared to the current Use Measure (NQF #2720); and (3) one gov/Medicare/Quality-Initiatives- use of 42 risk adjustment variables. or more potential measures of Patient-Assessment-Instruments/ Initial stroke severity score, such as behavioral health for the inpatient HospitalQualityInits/Measure- the NIH Stroke Scale score, is one of the hospital setting, including measures Methodology.html. strongest predictors of mortality in previously adopted for the IPFQR In the future, we are considering ischemic stroke patients,120 121 122 and is Program (80 FR 46694), for adoption proposing a refinement to the Stroke 30- part of the national guidelines on stroke into the Hospital IQR Program measure day Mortality Rate for several reasons. care.123 The NIH Stroke Scale is a 15- set. Also, we are considering public First, the refined measure would allow item neurologic examination stroke reporting of Hospital IQR Program data for more rigorous risk adjustment by scale used to provide a quantitative stratified by race, ethnicity, sex, and incorporating the NIH Stroke Scale measure of stroke-related neurologic disability on Hospital Compare. These (discussed in more detail below) as an deficit. The NIH Stroke Scale evaluates 118 topics are further discussed below. assessment of stroke severity. the effect of acute ischemic stroke on a Second, the inclusion of the NIH Stroke patient’s level of consciousness, a. Potential Inclusion of the National Scale is aligned with and supportive of language, neglect, visual-field loss, Institutes of Health (NIH) Stroke Scale clinical guidelines, as use of the NIH extra-ocular movement, motor strength, for the Hospital 30-Day Mortality Stroke Scale to assess stroke severity ataxia (the loss of full control of bodily Following Acute Ischemic Stroke upon acute ischemic stroke patient movements), dysarthria (difficult or Hospitalization Measure Beginning as presentation is Class I recommended in unclear articulation of speech), and Early as the FY 2022 Payment the American Heart Association and sensory loss. The NIH Stroke Scale was Determination American Stroke Association (AHA/ designed to be a simple, valid, and (1) Background ASA) guidelines.119 Third, clinicians reliable tool that can be administered at Mortality following stroke is an the bedside consistently by neurologists, month outcomes in acute ischaemic stroke. physicians, nurses, or therapists. In important adverse outcome that can be European journal of neurology: the official journal measured reliably and objectively and is of the European Federation of Neurological October 2016, codes for the NIH Stroke influenced by the quality of care Societies. Dec 2008;15(12):1324–1331. Scale are expected to be added to the provided to patients during their initial 115 Lingsma HF, Dippel DW, Hoeks SE., et al. International Statistical Classification of Variation between hospitals in patient outcome hospitalization; therefore, mortality is Diseases and Related Health Problems after stroke is only partly explained by differences 10th Revision (ICD–10). The currently an appropriate measure of quality of in quality of care: results from the Netherlands care following stroke Stroke Survey.[Reprint in Ned Tijdschr Geneeskd. adopted measure covers 3 years of hospitalization.112 113 Specifically, post- 2008 Sep 27;152(39):2126–32; PMID: 18856030]. Journal of Neurology, Neurosurgery & Psychiatry. 120 Fonarow GC, Saver JL, Smith EE, et al. stroke mortality rates have been shown 2008;79(8):888–894. Relationship of national institutes of health stroke to be influenced by critical aspects of 116 Reeves MJ, Smith E, Fonarow G, Hernandez A, scale to 30-day mortality in medicare beneficiaries care such as response to complications, Pan W, Schwamm LH. Off-hour admission and in- with acute ischemic stroke. J Am Heart Assoc. Feb speediness of delivery of care, hospital stroke case fatality in the get with the 2012;1(1):42–50. guidelines-stroke program. Stroke. Feb 121 Nedeltchev K, Renz N, Karameshev A, et al. organization of care, and appropriate 2009;40(2):569–576. 114 115 116 117 Predictors of early mortality after acute ischaemic imaging. Therefore, we are 117 Smith MA, Liou JI, Frytak JR, Finch MD. 30- stroke. Swiss Medical Weekly. 2010;140(17– day survival and rehospitalization for stroke 18):254–259. 112 Weir NU, Sandercock PA, Lewis SC, Signorini patients according to physician specialty. 122 Smith EE, Shobha N, Dai D, et al. Risk score DF, Warlow CP. Variations between countries in Cerebrovascular diseases (Basel, Switzerland). for in-hospital ischemic stroke mortality derived outcome after stroke in the International Stroke 2006;22(1):21–26. and validated within the Get With the Guidelines- Trial (IST). Stroke. Jun 2001;32(6):1370–1377. 118 NIH Stroke Scale. Available at: http:// Stroke Program. Circulation. Oct 12 113 DesHarnais SI, Chesney JD, Wroblewski RT, www.nihstrokescale.org/. 2010;122(15):149615041496–1504. Fleming ST, McMahon LF, Jr. The Risk-Adjusted 119 Jauch EC, Saver JL, Adams HP, Jr., et al. 123 Jauch EC, Saver JL, Adams HP, Jr., et al. Mortality Index. A new measure of hospital Guidelines for the early management of patients Guidelines for the early management of patients performance. Med Care. Dec 1988;26(12):1129– with acute ischemic stroke: a guideline for with acute ischemic stroke: a guideline for 1148. healthcare professionals from the American Heart healthcare professionals from the American Heart 114 Hong KS, Kang DW, Koo JS, et al. Impact of Association/American Stroke Association. Stroke. Association/American Stroke Association. Stroke. neurological and medical complications on 3- Mar 2013;44(3):870–947. Mar 2013;44(3):870–947.

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claims data using administrative claims (3) Risk Adjustment makes recommendations to the from July 2011–June 2014. In order to The statistical modeling, measure Secretary regarding policies to support give hospitals time to adjust to reporting calculation, and risk-adjustment the implementation of the National the NIH Stroke Scale, we are calculation for this refined measure Strategy for Combating Antibiotic- 128 considering this measure refinement for would align with the currently adopted Resistant Bacteria and the National as early as the July 2017 through June Stroke 30-day Mortality Rate. However, Action Plan for Combating Antibiotic- 129 2020 reporting period (3 years of data), we reselected risk variables, resulting in Resistant Bacteria. Evidence is which would correspond to the FY 2022 a final model with 20 risk-adjustment accumulating that programs dedicated payment determination in the Hospital variables including the NIH Stroke Scale to optimizing inpatient antibiotic use, IQR Program. as an assessment of stroke severity. For known as antimicrobial stewardship programs (ASPs), may slow the The measure refinement was the full measure specifications of the emergence of antibiotic resistance and developed in collaboration with the refined measure, we refer readers to the improve appropriateness of AHA/ASA. We sought to update the AMI, HF, PN, COPD, and Stroke antimicrobial use and patient current publicly reported measure to Mortality Update zip file on our Web outcomes.130 131 132 Therefore, the CDC include an assessment of stroke severity site at: http://www.cms.gov/Medicare/ and several professional societies have at this time, because it has become Quality-Initiatives-Patient-Assessment- published guidelines and resources to feasible to do so due to both the Instruments/HospitalQualityInits/ support hospitals in implementing increased use of the NIH Stroke Scale Measure-Methodology.html. 133 In summary, we are considering antimicrobial stewardship programs. related to the AHA/ASA guidelines that In the future, we are considering recommend administering the NIH proposing in the future a refinement of the Stroke 30-day Mortality Rate, which proposing the NHSN Antimicrobial Use Stroke Scale on all stroke patients, as measure to advance national efforts to would change the risk adjustment to well as due to the upcoming availability reduce the emergence of antibiotic include an assessment of stroke severity, to obtain the scores through claims data resistance by enabling hospitals and in the Hospital IQR Program for as early (incorporation into ICD–10). CMS to assess national trends of as the July 2017–June 2020 reporting The Stroke 30-day Mortality Rate antibiotic use to facilitate improved period/FY 2022 payment determination (MUC15–294) with the refined risk stewardship by comparing antibiotic use and for subsequent years. adjustment was included on a publicly We are inviting comments on the that hospitals report to antibiotic use available document entitled ‘‘List of possibility of a future proposal of that is predicted based on nationally aggregated data. The measure was Measures under Consideration for refinements to the previously adopted included on a publicly available December 1, 2015’’ with identification Hospital 30-Day Mortality Following document entitled ‘‘List of Measures number MUC15–294, (available at: Acute Ischemic Stroke Hospitalization Under Consideration for December 1, http://www.qualityforum.org/ Measure to include the NIH Stroke Scale 2015,’’ 134 in compliance with section ProjectMaterials.aspx?projectID=75367) beginning as early as the FY 2022 1890A(a)(2) of the Act. The measure and has been reviewed by the MAP. The payment determination. MAP conditionally supported this received conditional support, pending measure pending NQF review and b. Potential Inclusion of National CDC recommendation that the measure endorsement and asked that CMS Healthcare Safety Network (NHSN) is ready for use in public reporting as consider a phased approach in regards Antimicrobial Use Measure (NQF referenced in the MAP 2016 Final to implementation to avoid multiple #2720) versions of the same measure.124 The (1) Background Antibiotic-Resistant Bacteria. Available from: MAP also noted that mortality is not the http://www.hhs.gov/ash/carb/index.html. 128 National Strategy for Combating Antibiotic- most meaningful outcome for stroke The emergence of antibiotic drug resistance is a clinical and public health Resistant Bacteria, 2014. Available from: https:// patients and to consider cognitive or www.whitehouse.gov/sites/default/files/docs/carb_ functional outcomes such as impaired problem that threatens the effective national_strategy.pdf. capacity.125 The Stroke 30-day Mortality prevention and treatment of bacterial 129 National Action Plan for Combating Rate with the refined risk adjustment infections. The CDC estimates that each Antibiotic-Resistant Bacteria, 2015. Available from: year at least two million people become https://www.whitehouse.gov/sites/default/files/ was submitted to NQF for endorsement docs/national_action_plan_for_combating_ in the neurology project on January 15, infected with bacteria that are resistant antibotic-resistant_bacteria.pdf. 2016. to antibiotics, and at least 23,000 people 130 Davey P, Brown E, Charani E, Fenelon L, die as a direct result of these drug- Gould IM, Holmes A, et al. Interventions to improve (2) Overview of Measure Change resistant bacterial infections. In antibiotic prescribing practices for hospital addition, antibiotic resistance inpatients. Cochrane Database Syst Rev. The measure cohort for the refined 2013;4:CD003543. contributes an estimated $20 billion in 131 Feazel LM, Malhotra A, Perencevich EN, measure would not be substantively excess direct healthcare costs.126 Kaboli P, Diekema DJ, Schweizer ML. Effect of different from the currently adopted, In order to promote the efficiency and antibiotic stewardship programmes on Clostridium publicly reported Stroke 30-day coordination of efforts to detect, difficile incidence: a systematic review and meta- Mortality Rate. In addition, the data analysis. J Antimicrob Chemother. 2014;69(7):1748– prevent, and control antibiotic 54. http://jac.oxfordjournals.org/content/69/7/ sources, three-year reporting period, resistance, HHS announced in 2015 the 1748.full.pdf. inclusion and exclusion criteria, as well establishment of the Presidential 132 Kaki R, Elligsen M, Walker S, Simor A, Palmay as the assessment of the outcome of Advisory Council on Combating L, Daneman N. Impact of antimicrobial stewardship mortality would all align with the in critical care: a systematic review. J Antimicrob Antibiotic-Resistant Bacteria (Advisory Chemother. 2011;66(6):1223–30. currently adopted measure. 127 Council). The Advisory Council 133 Centers for Disease Control and Prevention. Core Elements of Hospital Antibiotic Stewardship 124 Spreadsheet of MAP 2016 Final 126 Centers for Disease Control and Prevention. Programs. Available from: http://www.cdc.gov/ Recommendations Available at: http:// Antibiotic Resistance Threats in the United States, getsmart/healthcare/implementation/core- www.qualityforum.org/map/. 2013. Available from: http://www.cdc.gov/ elements.html. 125 Spreadsheet of MAP 2016 Final drugresistance/threat-report-2013/. 134 2015 Measures Under Consideration List Recommendations Available at: http:// 127 Centers for Disease Control and Prevention. Available at: http://www.qualityforum.org/ www.qualityforum.org/map/. Presidential Advisory Council on Combating ProjectMaterials.aspx?projectID=75367.

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Recommendations.135 The MAP to-predicted antibacterial use for one of HL7 Clinical Data Architecture (CDA) recognized the high importance of sixteen antibiotic agent-patient care Implementation Guide available at: antimicrobial stewardship and location combinations. The specific http://www.cdc.gov/nhsn/cdaportal/ conditionally supported the inclusion of antibiotic agent-location combinations toolkits/guidetocdaversions.html. this measure in the Hospital IQR were selected based on extensive (4) Measure Calculation Program while acknowledging that consultation with infectious disease additional testing may be necessary to physicians and pharmacists at the Each SAAR is an observed to address feasibility issues for public forefront of ASPs. The specified expected ratio and is calculated by reporting, quality implications of categories of antibiotic agents include: dividing the numerator, or total number measuring the amount of antibiotics • Broad spectrum agents of observed antimicrobial days (days of used versus appropriate use of predominantly used for hospital-onset/ therapy reported by a healthcare facility antibiotics, and risk-adjustment. multi-drug resistant bacteria; for a specified category of antimicrobial Further, MAP noted these issues should • Broad spectrum agents agents in a specified patient care be addressed before the measure is predominantly used for community- location or group of locations), by the reported on Hospital Compare.136 The acquired infection; denominator, or expected (predicted on measure received endorsement from • Anti-MRSA agents; and the basis of nationally aggregated AU NQF on December 10, 2015.137 • Agents predominantly used for data for a healthcare facility’s use of a surgical site infection prophylaxis. specified category of antimicrobial (2) Overview of Measure The SAARs are designed to serve as agents in a specified patient care The NHSN Antimicrobial Use high value targets or high-level location or group of locations) number measure assesses antibiotic use in indicators for hospital ASPs to assess of antimicrobial days, for each antibiotic hospitals based on medication hospital antimicrobial use. A SAAR that agent category-patient care location administration data that hospitals is not significantly different from 1.0 combination. The total number of collect electronically at the point of indicates ‘‘expected’’ antibiotic use. A observed antimicrobial days for each care. The measure compares antibiotic SAAR that is above 1.0 may indicate patient care location is defined as the use that hospitals report, via electronic excessive antibiotic use or a SAAR that aggregated sum of days for which any file submissions to the CDC’s NHSN, to is below 1.0 may indicate antibiotic amount of a specific antibiotic agent antibiotic use that is predicted based on underuse. We note that the SAARs do within an antibiotic agent category was nationally aggregated data. Data on not provide a definitive indication of administered as documented in the administered antibiotics are required to antibiotic appropriateness of use. eMAR or BCMA system. The predicted be extracted from an electronic Outlier SAAR values should prompt number of antimicrobial days for each medication administration record hospitals to do further analysis to assess patient care location is determined by (eMAR) 138 and/or bar coded medication overuse, underuse, or inappropriate use multiplying the observed days present administration (BCMA) system.139 The of antibacterial medications. In by the corresponding antimicrobial use antibiotic use data that are in scope for addition, the SAARS may be used by rate in the standard population obtained this measure include antibiotic agents hospital ASPs to identify opportunities from the relevant regression model. administered to adult and pediatric to improve antibiotic use and gauge the Hospital patient care locations other patients in a specified set of ward and impact of stewardship efforts. than adult and pediatric medical, intensive care unit (ICU) locations. (3) Data Sources medical/surgical, and surgical wards Locations include adult and pediatric and adult and pediatric medical, medical, medical/surgical, and surgical The data submission and reporting medical/surgical, and surgical ICUs are wards and adult and pediatric medical, standard procedures for the NHSN excluded from this measure. For more medical/surgical, and surgical ICUs as Antimicrobial Use measure have been information regarding the specifications defined by the NHSN at: http:// set forth by the CDC for NHSN for the Antimicrobial Use measure, we www.cdc.gov/nhsn/PDFs/pscManual/ participation, in general, and for refer readers to the NHSN Antimicrobial 15LocationsDescriptions_current.pdf. submission of measure data. We refer Use and Resistance Module (AUR): The measure is comprised of a readers to the CDC’s NHSN Web site http://www.cdc.gov/nhsn/PDFs/ discrete set of risk-adjusted summary (http://www.cdc.gov/nhsn) for detailed pscManual/11pscAURcurrent.pdf. ratios, known as Standardized data submission and reporting We are inviting public comment on Antimicrobial Administration Ratios procedures. Although the NHSN the possibility of future inclusion of the (SAARS), which summarize observed- Antimicrobial Use measure is not NHSN Antimicrobial Use Measure (NQF specified as an eCQM, manual data #2720). 135 Spreadsheet of MAP 2016 Final entry is not available. Data must be Recommendations Available at: http:// electronically extracted from an c. Potential Measures for Behavioral www.qualityforum.org/map/. eMAR 140 and/or BCMA system.141 The Health in the Hospital IQR Program 136 Spreadsheet of MAP 2016 Final Recommendations Available at: http:// format for data submission must adhere Although the IPFQR Program www.qualityforum.org/map/. to the data format prescribed by the CDC incorporates measures of inpatient 137 http://www.qualityforum.org/QPS/2720. psychiatric treatment (80 FR 46694), the 138 eMAR is defined as technology that 140 eMAR is defined as technology that Hospital IQR Program does not include automatically documents the administration of automatically documents the administration of any measures directly related to medication into CEHRT using electronic tracking medication into CEHRT using electronic tracking sensors (for example, radio frequency identification sensors (for example, radio frequency identification behavioral health. Based on MedPAC (RFID)) or electronically readable tagging such as (RFID)) or electronically readable tagging such as analyses, over a third of Medicare bar coding (77 FR 54034). bar coding (77 FR 54034). inpatient psychiatric admissions are 139 Barcode Medication Administration (BCMA) 141 Barcode Medication Administration (BCMA) treated ‘‘in acute care hospital beds not System is defined as a system that allows users to System is defined as a system that allows users to within distinct-part psychiatric electronically document medications at the bedside electronically document medications at the bedside 142 or other points-of-care using an electronically or other points-of-care using an electronically units.’’ Thus, there may be a gap in readable format. More information. Available at: readable format. More information available at: http://www.ahrq.gov/downloads/pub/advances/ http://www.ahrq.gov/downloads/pub/advances/ 142 Medicare Payment Advisory Commission vol3/wideman.pdf. vol3/wideman.pdf. (U.S.). (2010). MedPAC June 2010 Report to the

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understanding the quality of care given 10. Form, Manner, and Timing of with our proposal to modify our to inpatient psychiatric patients not Quality Data Submission validation processes beginning with the paid for under the IPFQR Program. a. Background FY 2020 payment determination. To address this gap, we are inviting Sections 1886(b)(3)(B)(viii)(I) and c. Data Submission Requirements for public comments on potential Chart-Abstracted Measures behavioral health quality measures (b)(3)(B)(viii)(II) of the Act state that the applicable percentage increase for FY appropriate to include in the Hospital We refer readers to the FY 2012 IPPS/ 2015 and each subsequent year shall be IQR Program in future years, including LTCH PPS final rule (76 FR 51640 reduced by one-quarter of such the possible use of one or more through 51641), the FY 2013 IPPS/LTCH applicable percentage increase measures previously adopted in the PPS final rule (77 FR 53536 through (determined without regard to sections IPFQR Program (80 FR 46417). 53537), and the FY 2014 IPPS/LTCH 1886(b)(3)(B)(ix), (xi), or (xii) of the Act) PPS final rule (78 FR 50811) for details d. Potential Public Reporting of Quality for any subsection (d) hospital that does on the Hospital IQR Program data Measures Data Stratified by Race, not submit data required to be submission requirements for chart- Ethnicity, Sex, and Disability and submitted on measures specified by the abstracted measures. In this proposed Future Hospital Quality Measures That Secretary in a form and manner, and at rule, we are not proposing any changes Incorporate Health Equity a time, specified by the Secretary. to the data submission requirements for Previously, the applicable percentage chart-abstracted measures. We are seeking comment on the increase for FY 2007 and each possibility of including Hospital IQR subsequent fiscal year until FY 2015 d. Proposed Alignment of the Hospital Program measure data stratified by race, was reduced by 2.0 percentage points IQR Program With the Medicare and ethnicity, sex, and disability on Hospital for subsection (d) hospitals failing to Medicaid EHR Incentive Programs for Compare, if feasible and appropriate submit data in accordance with the Eligible Hospitals and CAHs (that is, statistically appropriate, etc.) in description above. In accordance with (1) Background the future. By stratification, we mean the statute, the FY 2016 payment that we would report quality measures determination began the second year We refer readers to the FY 2015 IPPS/ for each group of a given category (age, that the Hospital IQR Program will LTCH PPS final rule (79 FR 50256 race, sex, and disability status). For reduce the applicable percentage through 50259) and the FY 2016 IPPS/ example, if we were to report the increase by one-quarter of such LTCH PPS final rule (80 FR 49705 Hospital-Wide All-Cause Unplanned applicable percentage increase. through 49709) for our policies aligning Readmission Measure (HWR) (NQF In order to participate in the Hospital eCQM data reporting and submission #1789) stratified by sex, we would IQR Program, hospitals must meet periods on a calendar year basis for both report a hospital’s measure result for specific procedural, data collection, the Medicare EHR Incentive Program for females and then again separately for submission, and validation eligible hospitals and CAHs and the males, in addition to reporting a requirements. For each Hospital IQR Hospital IQR Program for the FY 2017 hospital’s unstratified rate, as is Program payment determination, we payment determination and subsequent currently displayed. require that hospitals submit data on years for the Hospital IQR Program. In addition, we are also seeking each specified measure in accordance In this section, we are proposing the comment on potential hospital quality with the measure’s specifications for a following changes to the Hospital IQR measures, including composite particular period of time. The data Program to further align eCQM data measures, for inclusion in the Hospital submission requirements, Specifications reporting for the Hospital IQR Program IQR Program measure set and thus, Manual, and submission deadlines are with the Medicare and Medicaid EHR future postings on Hospital Compare, posted on the QualityNet Web site at: Incentive Programs: (1) Maintaining the that could help consumers and http://www.QualityNet.org/. Hospitals eCQM data certification process we stakeholders not only assess the must register and submit quality data previously adopted for the FY 2018 measurement of the quality of care through the secure portion of the payment determination, including furnished by hospitals in inpatient QualityNet Web site. There are requiring hospitals to report eCQM data settings, but also monitor trends in safeguards in place in accordance with using either the 2014 or 2015 Edition of health equity. the HIPAA Security Rule to protect the Office of the National Coordinator Any data pertaining to these areas that patient information submitted through for Health Information Technology’s are recommended for collection through this Web site. (ONC’s) certified electronic health measure reporting for the Hospital IQR record technology (CEHRT) for the CY Program and public disclosure on b. Procedural Requirements for the FY 2017 reporting period/FY 2019 payment Hospital Compare, would be addressed 2019 Payment Determination and determination; and (2) requiring the use through a separate and future notice- Subsequent Years of the 2015 Edition of CEHRT beginning and-comment rulemaking. The Hospital IQR Program’s with the CY 2018 reporting period/FY We are inviting public comment on procedural requirements are codified in 2020 payment determination and the possibility of future inclusion of regulation at 42 CFR 412.140. We refer subsequent years. stratified quality measures data on readers to these codified regulations for In addition, we are proposing to Hospital Compare and on stratification participation requirements, as further require eCQM data submission by the categories, including any categories not explained by the FY 2014 IPPS/LTCH end of 2 months following the close of specified in this preamble. We are also PPS final rule (78 FR 50810 through the reporting period calendar year for seeking comment on potential future 50811). In this proposed rule, we are not the CY 2017 reporting period/FY 2019 hospital quality measures that proposing any changes to these payment determination and subsequent incorporate health equity. procedural requirements. years to further align eCQM data However, as discussed below in reporting for the Hospital IQR Program section VIII.A.11. of the preamble of this with the Medicare EHR Incentive Congress: . Washington, DC: MedPAC, available at: http://www.medpac.gov/documents/reports/Jun10_ proposed rule, we are proposing to Program. These proposals are discussed Ch06.pdf?sfvrsn=0. amend § 412.140(d)(2) in connection in more detail below.

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(2) Proposed Continuation of eCQM help reduce submission errors related to 2016 IPPS/LTCH PPS final rule (80 FR Certification Processes for the FY 2019 improperly formatted QRDA I files. 49693 through 49698), for the FY 2018 Payment Determination and Proposals payment determination, we finalized a (3) Proposed Required Use of EHR for Subsequent Years policy that hospitals must submit one Technology Certified to the 2015 quarter of data (either Q3 or Q4 of CY In the FY 2016 IPPS/LTCH PPS final Edition for the FY 2020 Payment 2016) for at least 4 eCQMs by the rule (80 FR 49705 through 49708), we Determination and Subsequent Years finalized policies regarding eCQM submission deadline of February 28, certification for the FY 2018 payment As stated in the FY 2016 IPPS/LTCH 2017. determination. Specifically, we PPS final rule (80 FR 49705), some In this year’s proposed rule, in order finalized that: (1) Hospitals can report commenters requested that hospitals be to align the Hospital IQR Program eCQM using either the 2014 or 2015 Edition of given the opportunity to use the most data submission deadline with that of CEHRT for the CY 2016 reporting recent version of the CEHRT (2015 the Medicare EHR Incentive Program, period/FY 2018 payment determination Edition) for the CY 2016 reporting which requires eCQM data submission since certification to the 2015 Edition is period/FY 2018 payment determination by the end of two months following the expected to be available in 2016; and (2) if they are able. We believe this close of the reporting period calendar hospitals must submit eCQM data via requirement will mitigate the existing year (80 FR 62896 through 62897), we Quality Reporting Document vendor issue of system comparability are proposing to establish an eCQM Architecture (QRDA) Category I file (80 between hospitals and vendors and submission deadline for the Hospital FR 49707–49708). In addition, hospitals facilitate consistency regarding the IQR Program which requires eCQM data may use third parties to submit QRDA version of CEHRT to which vendors are submission by the end of two months I files on their behalf (80 FR 49706) and certified by establishing uniformity in following the close of the calendar year can either use abstraction or pull the the version of the product used. for the CY 2017 reporting period/FY data from non-certified sources in order Therefore, we are proposing to require 2019 payment determination and to then input these data into CEHRT for the use of EHR technology certified to subsequent years. For example, for the capture and reporting QRDA I (80 FR the 2015 Edition beginning with the CY CY 2017 reporting period/FY 2019 49706). 2018 reporting period for the FY 2020 payment determination, hospitals We are proposing to continue these payment determination and subsequent would be required to submit eCQM data eCQM certification policies. years. This would align the Hospital for the Hospital IQR Program by Specifically, for the CY 2017 reporting IQR Program with the Medicare EHR February 28, 2018, which is the end of period/FY 2019 payment determination Incentive Program. We refer readers to 2 months following the close of the (not subsequent years), we are section VIII.E.2.c. of the preamble of this calendar year (December 31, 2017). This proposing to require that hospitals proposed rule for discussion of the would align the Hospital IQR Program report using either the 2014 or 2015 proposed certification requirements for with the Medicare EHR Incentive Edition of CEHRT as previously the Medicare EHR Incentive Program. Program deadlines. We note that required. We note that we are proposing We are inviting public comment on deadlines for the Medicaid (not to change these policies, however, for our proposal to require the use of EHR Medicare) EHR Incentive Program differ the CY 2018 reporting period/FY 2020 technology certified to the 2015 Edition by State, and therefore our proposal to payment determination as discussed in for the CY 2018 reporting period/FY align data submission deadlines for the following section. 2020 payment determination and eCQMs applies only to the Hospital IQR In addition, for the CY 2017 reporting subsequent years as stated above. Program and the Medicare EHR period/FY 2019 payment determination (4) Proposed Electronic Submission Incentive Program and not to the and subsequent years, we are proposing Deadlines for the FY 2019 Payment Medicaid EHR Incentive Program. For that hospitals: (1) Must submit eCQM Determination and Subsequent Years more information about the Medicaid data via QRDA I files as previously We refer readers to the FY 2015 IPPS/ EHR Incentive Program for eligible required; (2) may continue to use a third hospitals and CAHs, we refer readers to: party to submit QRDA I files on their LTCH PPS final rule (79 FR 50256 https://www.cms.gov/Regulations-and- behalf; and (3) continue to either use through 50259) and the FY 2016 IPPS/ Guidance/Legislation/ abstraction or pull the data from non- LTCH PPS final rule (80 FR 49705 EHRIncentivePrograms/Eligible_ certified sources in order to then input through 49708) for our previously Hospital_Information.html. these data into CEHRT for capture and adopted policies to align eCQM data reporting QRDA I. This would align the reporting and submission periods for We are inviting public comment on Hospital IQR Program with the both the Medicare EHR Incentive our proposal to align the Hospital IQR Medicare EHR Incentive Program. We Program for eligible hospitals and CAHs Program eCQM submission deadline refer readers to section VIII.E.2.c. of the and the Hospital IQR Program for the FY with that of the Medicare EHR Incentive preamble of this proposed rule for 2018 payment determination. Program for the CY 2017 reporting discussion of the proposed certification In the FY 2015 IPPS/LTCH PPS final period/FY 2019 payment determination requirements for the Medicare EHR rule (79 FR 50249 through 50252), we and subsequent years as discussed Incentive Program. finalized our policy that hospitals may above. We are inviting comment on these voluntarily report 16 electronic (5) Summary of Alignment proposals. In addition, we refer readers measures by submitting one quarter of to section VIII.A.11.b.(4) of the preamble eCQM data from CY Q1 (January 1- We are proposing to align the Hospital of this proposed rule where we March 31, 2015), CY Q2 (April 1-June IQR Program with the Medicare and encourage hospitals to take advantage of 30, 2015), or CY Q3 (July 1-September Medicaid EHR Incentive Programs as eCQM pre-submission testing tools to 30) by November 30, 2015. In the FY summarized below:

Alignment of Hospital IQR Program with both the Medicare and Medicaid EHR Incentive Programs

• Proposed removal of 13 eCQMs • Proposed requirement for submission of all available eCQMs

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Alignment of Hospital IQR Program with both the Medicare and Medicaid EHR Incentive Programs

• Proposed requirement for annual submission of four quarters of eCQM data • Proposed continued use of 2014 or 2015 CEHRT for CY 2017 reporting period/FY2019 payment determination • Proposed use of 2015 CEHRT for CY 2018 reporting period/FY2020 payment determination

Alignment of Hospital IQR Program with only the Medicare EHR Incentive Program

• Proposed submission of eCQM data 2 months following the close of the calendar year

e. Sampling and Case Thresholds for the submission requirements for structural b. Proposed Modifications to the FY 2019 Payment Determination and measures. In this proposed rule, we are Existing Processes for Validation of Subsequent Years not proposing any changes to data Hospital IQR Program Data We refer readers to the FY 2011 IPPS/ submission requirements for structural (1) Background LTCH PPS final rule (75 FR 50221), the measures. In this proposed rule, we are FY 2012 IPPS/LTCH PPS final rule (76 h. Data Submission and Reporting proposing to update the existing process FR 51641), the FY 2013 IPPS/LTCH PPS Requirements for HAI Measures for validation of Hospital IQR Program final rule (77 FR 53537), and the FY Reported via NHSN data, which has previously included up 2014 IPPS/LTCH PPS final rule (78 FR For details on the data submission to 600 hospitals for chart-abstracted 50819) for details on our sampling and and reporting requirements for HAI validation, to also include eCQM case thresholds for the FY 2016 measures reported via the CDC’s NHSN validation of up to 200 hospitals, for a payment determination and subsequent Web site, we refer readers to the FY total of up to 800 hospitals for years. In the FY 2016 IPPS/LTCH PPS 2012 IPPS/LTCH PPS final rule (76 FR validation for the FY 2020 payment final rule (80 FR 24588), we revised our 51629 through 51633; 51644 through sampling and case thresholds policy so determination and subsequent years. 51645), the FY 2013 IPPS/LTCH PPS that, for the FY 2018 payment Specifically, 200 hospitals would be final rule (77 FR 53539), the FY 2014 determination and subsequent years, randomly selected for eCQM validation IPPS/LTCH PPS final rule (78 FR 50821 hospitals will be required to submit but among those hospitals some may be through 50822), and the FY 2015 IPPS/ population and sample size data only granted Extraordinary Circumstances LTCH PPS final rule (79 FR 50259 Exception (ECE) waivers or meet other for those measures that a hospital through 50262). The data submission submits as chart-abstracted measures exclusion criteria (discussed in deadlines are posted on the QualityNet additional detail below) potentially under the Hospital IQR Program. Web site at: http://www.QualityNet. We are not proposing any changes to resulting in a number totaling less than org/. In this proposed rule, we are not our sampling and case thresholds policy 200 hospitals that actually participate in proposing any changes to data in this proposed rule. eCQM validation. Furthermore, we are submission and reporting requirements proposing that hospitals would be f. HCAHPS Requirements for the FY for HAI measures reported via the required to submit timely and complete 2019 Payment Determination and NHSN. medical record information from the Subsequent Years 11. Proposed Modifications to the Electronic Health Records (EHR) for at We refer readers to the FY 2011 IPPS/ Existing Processes for Validation of least 75 percent of sampled records, but LTCH PPS final rule (75 FR 50220), the Hospital IQR Program Data would not be scored on the basis of FY 2012 IPPS/LTCH PPS final rule (76 measure accuracy for FY 2020 payment FR 51641 through 51643), the FY 2013 a. Background determinations. IPPS/LTCH PPS final rule (77 FR 53537 In the FY 2013 IPPS/LTCH PPS final As we stated in the FY 2013 IPPS/ through 53538), and the FY 2014 IPPS/ rule (77 FR 53539 through 53553), we LTCH PPS final rule (77 FR 53555), LTCH PPS final rule (78 FR 50819 finalized the processes and procedures determining the equivalence of eCQM through 50820) for details on for validation of chart-abstracted data and chart-abstracted measures data previously-adopted HCAHPS measures in the Hospital IQR Program requires extensive testing given that the requirements. We also refer hospitals for the FY 2015 payment determination data for the Hospital IQR Program and HCAHPS survey vendors to the and subsequent years; the FY 2013 support public reporting for both the official HCAHPS Web site at http:// IPPS/LTCH PPS final rule also contains Hospital IQR and the Hospital VBP www.hcahpsonline.org for new a comprehensive summary of all Programs; in addition, for the Hospital information and program updates procedures finalized in previous years VBP Program, the data are used to regarding the HCAHPS Survey, its that are still in effect. We refer readers calculate hospitals’ performance on a administration, oversight, and data to the FY 2014 IPPS/LTCH PPS final subset of measures which tie payment adjustments. In this proposed rule, we rule (78 FR 50822 through 50835), the directly to measure performance. As are not proposing any changes to the FY 2015 IPPS/LTCH PPS final rule (79 described in the Hospital IQR Program HCAHPS requirements. FR 50262 through 50273), and the FY discussion in the FY 2015 IPPS/LTCH 2016 IPPS/LTCH PPS final rule (80 FR PPS final rule (79 FR 50258), we have g. Data Submission Requirements for 49710 through 49712) for detailed received anecdotal comments about Structural Measures for the FY 2019 information on the modifications to performance level differences between Payment Determination and Subsequent these processes finalized for the FY chart-abstracted and eCQM data. We Years 2016, FY 2017, and FY 2018 payment stated that we did not have sufficient We refer readers to the FY 2012 IPPS/ determinations and subsequent years. data to be able to confirm or refute the LTCH PPS final rule (76 FR 51643 In this proposed rule, we are accuracy of those comments (79 FR through 51644) and the FY 2013 IPPS/ proposing to update the validation 50258). In order to substantiate or refute LTCH PPS final rule (77 FR 53538 process in order to incorporate a process the existence of performance-level through 53539) for details on the data for validating eCQM data. differences between eCQM data and

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chart-abstracted measure data, we and reporting difficulties were a result following hospitals be excluded from believe that we must collect more eCQM of a lack of targeted outreach and this random sample of 200 hospitals data and develop a process for education efforts at the time of the pilot selected for eCQM validation: validating the accuracy of that data. to adequately prepare participating • Any hospital selected for chart- As a result, we conducted a validation hospitals for the specific reporting abstracted measure validation; and pilot test for eCQMs (discussed below). mechanisms. In order to improve data Our findings from this pilot test have accuracy and diminish reporting • Any hospital that has been granted informed what we believe the initial difficulties, the CMS Outreach and a Hospital IQR Program ‘‘Extraordinary future direction of eCQM validation in Education contractor (EOC) as well as Circumstances Exemption’’ for the the Hospital IQR Program should be. In the Validation Support Contractor (VSC) applicable eCQM reporting period. this proposed rule, we are proposing to plan to continue to conduct provider We acknowledge that the burden adopt a validation process for eCQM education follow-up and refine the associated with both the chart- data submissions beginning in spring of validation process. We will work in abstracted and eCQM validation CY 2018, as further explained below. conjunction with the EOC and VSC to processes would be significant. We do enlarge the cohort of eligible hospitals (2) Validation Pilot Test not intend to impose an undue burden that are able to successfully submit In the FY 2015 IPPS/LTCH PPS final QRDA I files, as well as encourage on any hospital by requiring that it be rule (79 FR 50269 through 50273), we hospitals that were not able to subject to more than one of these finalized a proposal to conduct a successfully submit QRDA I files to processes in a program year. Thus, if a validation pilot test for eCQMs in FY participate in follow-up interviews. hospital is selected for chart-abstracted 2015. The results of the pilot test These follow-up interviews will inform targeted or random validation, we are yielded measure record matching rates the eCQM validation process moving proposing that hospital would be (that is, the rates of medical record forward, and allow us to derive ‘‘best excluded from the eCQM validation abstracted values as compared to the reporting practices’’ to consider once we sample. values reported in the QRDA I file) of begin scoring the measures. In addition, although our targeted less than 50 percent for all of the criteria permit that a hospital may be measures reported. For all measures, the (3) Proposal To Validate eCQMs inconsistencies between abstracted Beginning Spring CY 2018/FY 2020 selected for chart-abstracted validation values and values reported in the QRDA Payment Determination even if it has been granted an I files appear to be mainly due to In response to the findings of the pilot Extraordinary Circumstances Exemption missing data rather than actual test and in light of our proposal to with respect to one or more chart- differences in reported versus abstracted increase the number of eCQMs on abstracted measures for the applicable values. The highest rate of accuracy was which hospitals are required to submit data collection period (77 FR 53552 48 percent on both the STK–04 and data for the Hospital IQR Program in through 53553), if a hospital is granted VTE–1 eCQM measures. In addition, all section VIII.A.8.a. of the preamble of an Extraordinary Circumstances of the participating hospitals this proposed rule, we believe that it is Exemption with respect to eCQM demonstrated significant difficulty in increasingly important to validate reporting for the applicable eCQM reporting the ED–1 and ED–2 eCQM eCQM data to ensure the accuracy of reporting period, we are proposing that measures due to the ED Admit Date/ future information submitted by the hospital would be excluded from the Time data element, which contributed hospitals and reported to the public. eCQM validation sample due to its to the ED measure mismatch rates. Therefore, we are proposing to adopt a inability to supply data for validation. Specifically, hospitals systematically validation process for eCQM data We note that due to these proposed reported a later date and time for the submissions beginning in spring of CY exclusions, the total number of hospitals decision to admit a patient to the 2018, as further explained below. validated for eCQMs might be less than hospital in the QRDA I file than that 200. identified by the Clinical Data (a) Number and Selection of Hospitals Abstraction Center (CDAC) in the We are proposing to validate eCQM Adding the proposed eCQM review of the medical record. data submitted by up to 200 hospitals validation would result in a total of 800 Follow-up interviews conducted by selected via random sample. hospitals in the validation process, as CDAC revealed that low accuracy rates Furthermore, we are proposing that the described in the below tables.

Current Validation Process Number of Hospitals Proposed Validation Process Number of Hospitals

Chart-Abstracted Random ...... 400 Chart-Abstracted Random ...... 400 Chart-Abstracted Targeted ...... 200 Chart-Abstracted Targeted ...... 200 eCQM: random ...... 200

Total ...... 600 ...... 800

We believe that as we expand the first round of eCQM validation, we to 200 hospitals selected via random required reporting of eCQMs in the could better assess strategies to offset sample; and (2) to exclude any hospital Hospital IQR Program, we need to the resources required to conduct a selected for chart-abstracted measure validate eCQM data to ensure the scored method of eCQM validation for validation as well as any hospital that accuracy of information submitted by future rulemaking cycles. has been granted a Hospital IQR hospitals and reported to the public, as We are inviting public comment on Program ‘‘Extraordinary Circumstances well as for future consideration of our proposals for the FY 2020 payment Exemption’’ for the applicable eCQM eCQMs for potential use in the Hospital determination and subsequent years to: reporting period as discussed above. VBP Program. In addition, during the (1) Validate eCQM data submitted by up

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(b) Number of Cases Consistent with the Hospital IQR selected for chart-abstracted measure Program chart-abstracted and NHSN validation would not be eligible for We are proposing to randomly select validation submission deadline, which selection to participate in eCQM 32 cases (individual patient-level is 30 calendar days following the validation. For chart-abstracted measure reports) from the QRDA I file submitted medical records request date listed on validation, the CDAC contractor per hospital selected for eCQM the CDAC request form (76 FR 51645), requests hospitals to submit 8 randomly validation. Each randomly selected case we are proposing to require eCQM selected medical charts on a quarterly (individual patient-level report) 143 validation submission by 30 calendar basis from which data were abstracted contains eCQM data elements for one days following the medical records and submitted by the hospital to the patient for one or more eCQMs available request date listed on the CDAC request Clinical Data Warehouse (for a total of in the program’s eCQM measure set. The form for the FY 2020 payment 32 charts per year). Under the validation CDAC would then request that each of determination and subsequent years. methodology, once the CDAC contractor the selected hospitals submit patient Also, we are proposing to require receives the charts, it reabstracts the medical record data for each of their 32 sufficient patient level information same data submitted by the hospitals randomly selected cases (transmitted by (defined below) necessary to match the and calculates the percentage of the hospital to the Clinical Data requested medical record to the original matching Hospital IQR Program Warehouse) within 30 days of the Hospital IQR Program submitted eCQM measure numerators and denominators medical records request date. We refer measure data record for the FY 2020 for each measure within each chart readers to our discussion in section payment determination and subsequent submitted by the hospital. Each selected VIII.A.11.b.(3)(c) of the preamble of this years. Sufficient patient level case has multiple measures included in proposed rule, below, for more information is defined as the entire the validation score. Consistent with information on our proposed medical record that sufficiently previous years, each quarter and clinical submission requirements. documents the eCQM measure data topic is treated as a stratum for variance Based on the statistical properties of elements, which would include but estimation purposes (70 FR 47423). estimates as discussed below, we would not be limited to, patient arrival As in previous years, for the FY 2020 believe that a sample size of 32 cases is date and time, inpatient admission date, payment determination, the overall necessary to assess hospital and discharge date from inpatient validation score from the chart- performance on eCQMs. More episode of care. Lastly, we are proposing abstracted measure validation will be specifically, at the individual hospital that, if selected as part of the random used to determine a hospital’s overall level, if we assume the average sample for eCQM validation, a hospital annual payment update. Specifically, if agreement rate between the QRDA I file would be required to submit records in a hospital fails chart-abstracted data and data abstracted from the PDF file format through QualityNet validation, it would not receive the full patient medical record is around 90 using the Secure File Transfer (SFT) for annual payment update. If a hospital percent, and we want the hospital’s the FY 2020 payment determination and passes chart-abstracted validation, and confidence interval to vary by no more subsequent years. The data submission also meets the other Hospital IQR than plus or minus 10 percentage points deadlines and additional details about Program requirements, it would be (80 to 100 percent), then we need to the eCQM validation procedures would eligible to receive the full annual select at least 32 cases per year. Also, 32 be posted on the QualityNet Web site at: payment update. Consistent with cases aligns with the number of cases http://www.QualityNet.org/. previous years, a hospital must attain at currently selected for chart-abstracted We are inviting public comment on least a 75 percent validation score (the validation of clinical process of care our proposals regarding eCQM percentage of matching Hospital IQR measures. We currently select eight validation submission requirements for Program measure numerators and cases per quarter per hospital, which the FY 2020 payment determination and denominators for each measure within equates to 32 cases annually (79 FR subsequent years as discussed above. each chart submitted by the hospital) based upon chart-abstracted data 50264). (d) Scoring: Summary of Previously validation to pass the validation We are inviting public comment on Adopted Chart-Abstracted Measure requirement and to be eligible for a full our proposal to randomly select 32 cases Validation Scoring from the QRDA I file submitted per annual payment update, if all other hospital selected for eCQM validation We refer readers to the FY 2011 IPPS/ Hospital IQR Program requirements are for the FY 2020 payment determination LTCH PPS final rule (75 FR 50226 met. through 50227), the FY 2013 IPPS/LTCH and subsequent years as discussed (e) Scoring: Proposals for eCQM above. PPS final rule (77 FR 53539 through 53553), the FY 2014 IPPS/LTCH PPS Validation Scoring (c) Submission Requirements final rule (78 FR 50832 through 50833), For the FY 2020 payment determination, for hospitals selected for We are proposing to require hospitals and the FY 2015 IPPS/LTCH PPS final eCQM validation, we are proposing to selected for eCQM validation to submit rule (79 FR 50268 through 50269), for a require submission of at least 75 percent timely and complete medical record detailed description of our previously of sampled eCQM measure medical information to CMS on eCQMs selected adopted scoring methodology for chart- records in a timely and complete for the validation sample. These are abstracted measure data. We note that we are not proposing manner. However, unlike chart- defined below. any changes to our chart-abstracted abstracted validation, which requires a measures validation. We are providing hospital to attain at least a 75 percent 143 A data element is a representation of a clinical concept that represents a patient state or attribute. this information as background for our validation score, we are proposing that This may be a diagnosis, lab value, sex, etc., which discussion of eCQM validation scoring. the accuracy of eCQM data (the extent is encoded using standardized terminologies. The Under the current validation process for to which data abstracted for validation e-specifications for an eCQM include the data the Hospital IQR Program there are 600 matches the data submitted in the elements, logic, and definitions for that measure, available from: https://www.cms.gov/Regulations- hospitals (400 randomly sampled and QRDA I file) submitted for validation and-Guidance/Legislation/EHRIncentivePrograms/ 200 targeted) selected for validation on would not affect a hospital’s validation Electronic_Reporting_Spec.html. a yearly basis. As stated above, those score for the FY 2020 payment

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determination only. This is further Hospitals that pass either chart- correction.144 While the PSVA does not explained below. abstracted or eCQM validation guarantee the accuracy of data in a Public comments on the FY 2015 requirements would receive their full hospital’s QRDA I file, it helps to reduce IPPS/LTCH PPS final rule suggested annual payment update, assuming all submission errors related to improperly further refinements to the process for other Hospital IQR Program formatted QRDA I files. Pre-submission eCQM validation. Specifically, several requirements are met. Hospitals that fail testing would assist in proactively commenters urged CMS to implement to attain at least a 75-percent validation identifying inconsistencies in data the recommendations of a March 2014 score for chart-abstracted validation or mapping, a process used in data Government Accountability Office fail to submit timely and complete data warehousing by which different data (GAO) report to develop a for 75 percent of requested records for models are linked to each other using a comprehensive data collection strategy, eCQM validation, would not receive defined set of methods to characterize which includes testing for and their full annual payment update. the data in a specific definition.145 mitigation of reliability issues arising from variance in certified EHR systems In addition, we are proposing to 12. Data Accuracy and Completeness tested to different CQM specifications update our regulations at 42 CFR Acknowledgement (DACA) (79 FR 50272). Commenters in the FY 412.140(d)(2) to reflect the above Requirements for the FY 2019 Payment 2016 IPPS/LTCH PPS final rule (80 FR proposals and to specify that the 75 Determination and Subsequent Years 49711) expressed concern over the percent score would only apply to chart- We refer readers to the FY 2013 IPPS/ barriers hospitals encounter associated abstracted validation. LTCH PPS final rule (77 FR 53554) for with reporting eCQMs and encouraged We are inviting public comment on previously-adopted details on DACA CMS to ensure that a diverse group of our eCQM validation scoring proposals requirements. We are not proposing any hospitals and certified EHRs are for the FY 2020 payment determination changes to the DACA requirements in represented to inform an assessment of as discussed above. this proposed rule. the work required to make eCQM validation feasible, reliable, and valid. (4) Reimbursement for eCQM Validation 13. Public Display Requirements for the FY 2019 Payment Determination and In response to these concerns, in light To align with the chart-abstracted of operational capacity limitations, and Subsequent Years validation process, which reimburses due to the time necessary to analyze hospitals at a rate of $3.00 per chart (78 We refer readers to the FY 2008 IPPS/ eCQM validation results, we are LTCH PPS final rule (72 FR 47364), the FR 50956) for submitting charts proposing that eCQM data would be FY 2011 IPPS/LTCH PPS final rule (75 electronically via Secure File Transfer validated, but initially (meaning for the FR 50230), the FY 2012 IPPS/LTCH PPS (SFT), we are proposing to similarly FY 2020 payment determination only), final rule (76 FR 51650), the FY 2013 reimburse hospitals at a rate of $3.00 per the measure accuracy would not affect IPPS/LTCH PPS final rule (77 FR chart for submitting charts hospitals’ validation scores. 53554), the FY 2014 IPPS/LTCH PPS electronically via Secure File Transfer In other words, although hospitals final rule (78 FR 50836), the FY 2015 (SFT) for eCQM validation for the FY would be required to submit eCQM data IPPS/LTCH PPS final rule (79 FR 2020 payment determination and in a timely and complete manner, we 50277), and the FY 2016 final rule (80 subsequent years. We also refer readers are proposing that hospitals would not FR 49712 through 49713) for details on to section X.B.6. of the preamble of this be required to attain at least a 75 percent public display requirements. The validation score (the percentage of proposed rule for more information Hospital IQR Program quality measures matching Hospital IQR Program regarding the collection of information are typically reported on the Hospital measure numerators and denominators for eCQM validation. Compare Web site at: http:// for each measure within each chart We are inviting public comment on www.medicare.gov/hospitalcompare, submitted by the hospital) based upon our proposal to reimburse hospitals at a but on occasion are reported on other QRDA I validation to pass the validation rate of $3.00 per chart for eCQM CMS Web sites such as https:// requirement and to be eligible for a full validation for the FY 2020 payment data.medicare.gov. We are not annual payment update. Hospitals that determination and subsequent years as proposing any changes to our public submit at least 75 percent of sampled discussed above. display requirements in this proposed eCQM measure medical records (even if rule. those records do not produce a (5) eCQM Pre-Submission Testing validation score of at least 75 percent) 14. Reconsideration and Appeal in a timely manner (that is, within 30 We are encouraging hospitals to test Procedures for the FY 2019 Payment days of the date listed on the CDAC their eCQM submissions prior to annual Determination and Subsequent Years medical records request) would not be reporting using an available CMS pre- submission validation tool for electronic We refer readers to the FY 2012 IPPS/ subject to payment reduction. However, LTCH PPS final rule (76 FR 51650 hospitals that fail to submit timely and reporting—the Pre-submission Validation Application (PSVA), which through 51651), the FY 2014 IPPS/LTCH complete information for at least 75 PPS final rule (78 FR 50836), and 42 percent of requested records would not can be downloaded from the Secure File Transfer (SFT) section of the QualityNet CFR 412.140(e) for details on meet the eCQM validation requirement reconsideration and appeal procedures and would be subject to payment Secure Portal at https:// cportal.qualitynet.org/QNet/pgm_ for the FY 2017 payment determination reduction. For example, if a hospital and subsequent years. We are not submits timely and complete select.jsp. The PSVA is a downloadable tool that operates on a user’s system to information for at least 75 percent of 144 PSVA Demonstration and eCQM Question and requested records, but comparison of allow submitters to catch and correct Answer Session. Available at: http:// the QRDA I file and the abstracted data errors prior to data submission to CMS. www.qualityreportingcenter.com/wp-content/ results in a validation score of 28 It provides validation feedback within uploads/2016/03/3–10–16-eCQM_PSVA- the submitter’s system and allows valid Demonstration_FINAL508.pdf. percent, the hospital still would pass 145 Data Mapping Definition Available at: https: validation and be eligible for a full files to be separated and submitted //www.techopedia.com/definition/6750/data- annual payment update. while identifying invalid files for error mapping.

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proposing any changes to the the Hospital Readmissions Reduction 2. Proposed Criteria for Removal and reconsideration and appeals procedures Program (80 FR 49542 through 49543), Retention of PCHQR Program Measures in this proposed rule. all of which at least partially rely on the We have received public comments 15. Proposed Changes to the Hospital same data collection. on past proposed rules asking that we IQR Program Extraordinary b. Proposal To Establish a Separate clarify our policy for measure retention Circumstances Extensions or Submission Deadline for ECE Requests and removal. We generally retain Exemptions (ECE) Policy Related to eCQMs measures from the previous year’s We refer readers to the FY 2012 IPPS/ PCHQR Program measure set for LTCH PPS final rule (76 FR 51651 In addition, we are proposing to subsequent years’ measure sets, except through 51652), the FY 2014 IPPS/LTCH establish a separate submission deadline when we specifically propose to remove PPS final rule (78 FR 50836 through for ECE requests with respect to eCQM or replace a measure. With respect to 50837), the FY 2015 IPPS/LTCH PPS reporting, such that hospitals must measure removal, we believe it is final rule (79 FR 50277), the FY 2016 submit a request by April 1 following important to be transparent in IPPS/LTCH PPS final rule (80 FR the end of the reporting calendar year. identifying criteria that we would use to 49713), and 42 CFR 412.140(c)(2) for We are proposing that this deadline for evaluate a measure for potential removal details on the Hospital IQR Program ECE requests with respect to eCQM from the PCHQR Program. We also ECE policy. We also refer readers to the reporting would first apply with an believe that we should align these QualityNet Web site at http:// April 1, 2017 deadline and apply for criteria between our programs whenever www.QualityNet.org/ for our current subsequent eCQM reporting years. For possible. Therefore, we are proposing the requirements for submission of a request example, for data collected for the CY following measure removal criteria for for an extension or exemption. 2016 reporting period (through the PCHQR Program, which are based In this proposed rule, we are December 31, 2016), hospitals would on criteria established in the Hospital proposing to update our ECE policy by: have until April 1, 2017 to submit an (1) Extending the general ECE request IQR Program (80 FR 49641 through ECE request. This timeframe also aligns 49642): deadline for non-eCQM circumstances with the Medicare and Medicaid EHR from 30 to 90 calendar days following • Measure performance among PCHs Incentive Programs’ typical annual an extraordinary circumstance; and (2) is so high and unvarying that hardship request deadline (77 FR 54104 establishing a separate submission meaningful distinctions and deadline for ECE requests related to through 54109), which we believe improvements in performance can no eCQM reporting circumstances to be would help reduce burden for hospitals. longer be made (‘‘topped-out’’ April 1 following the end of the We are inviting public comment on measures); reporting calendar year. We are our proposals related to the Hospital • A measure does not align with proposing that these policies would IQR Program’s ECE policy beginning FY current clinical guidelines or practice; apply beginning in FY 2017 as related 2017 as described above. • The availability of a more broadly to extraordinary circumstance events applicable measure (across settings or that occur on or after October 1, 2016. B. PPS-Exempt Cancer Hospital Quality populations) or the availability of a Reporting (PCHQR) Program measure that is more proximal in time a. Proposal To Extend the General ECE 1. Background to desired patient outcomes for the Request Deadline for Non-eCQM particular topic; Circumstances Section 3005 of the Affordable Care • Performance or improvement on a In the past, we have allowed hospitals Act added new sections 1866(a)(1)(W) measure does not result in better patient to submit an ECE request form for non- and (k) to the Act. Section 1866(k) of the outcomes; • eCQM measures within 30 calendar Act establishes a quality reporting The availability of a measure that is days following an event that causes program for hospitals described in more strongly associated with desired hardship and prevents them from section 1886(d)(1)(B)(v) of the Act patient outcomes for the particular providing data for non-eCQM measures topic; (referred to as ‘‘PPS-Exempt Cancer • (76 FR 51652). In certain circumstances, Hospitals’’ or ‘‘PCHs’’) that specifically Collection or public reporting of a however, it may be difficult for applies to PCHs that meet the measure leads to negative unintended hospitals to timely evaluate the impact requirements under 42 CFR 412.23(f). consequences other than patient harm; of a certain extraordinary event within and Section 1866(k)(1) of the Act states that, 30 calendar days. We believe that • It is not feasible to implement the for FY 2014 and each subsequent fiscal extending the deadline to 90 calendar measure specifications. year, a PCH must submit data to the days would allow hospitals more time For the purposes of considering to determine whether it is necessary and Secretary in accordance with section measures for removal from the program, appropriate to submit an ECE request 1866(k)(2) of the Act with respect to we would consider ‘‘topped-out’’ to be and to provide a more comprehensive such fiscal year. For additional that there is statistically account of the ‘‘event’’ in their ECE background information, including indistinguishable performance at the request form to CMS. For example, if a previously finalized measures and other 75th and 90th percentiles and that the hospital has suffered damage due to a policies for the PCHQR Program, we truncated coefficient of variation is less hurricane on January 1, it would have refer readers to the following final rules: than or equal to 0.10. until March 31 to submit an ECE form FY 2013 IPPS/LTCH PPS final rule (77 However, we recognize that there are via the QualityNet Secure Portal, mail, FR 53556 through 53561); the FY 2014 times when measures may meet some of email, or secure fax as instructed on the IPPS/LTCH PPS final rule (78 FR 50838 the outlined criteria for removal from ECE form. This proposed timeframe (90 through 50846); the FY 2015 IPPS/LTCH the program, but continue to bring value calendar days) also aligns with the ECE PPS final rule (79 FR 50277 through to the program. Therefore, we are request deadlines for the Hospital VBP 50288); and the FY 2016 IPPS/LTCH proposing the following criteria for Program (78 FR 50706), the HAC PPS final rule (80 FR 49713 through consideration in determining whether to Reduction Program (80 FR 49580) and 49723). retain a measure in the PCHQR Program,

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which also are based on criteria FY 2014 IPPS/LTCH PPS final rule (78 concerns. We considered the input and established in the Hospital IQR Program FR 50841 through 50842). In November recommendations provided by the MAP, (80 FR 49641 through 49642): 2014, subsequent to our adoption of the and the importance of aligning with • Measure aligns with other CMS and measure in the PCHQR Program, NQF-endorsed specifications of HHS policy goals; updated specifications were endorsed measures whenever possible, in • Measure aligns with other CMS by the NQF. proposing this update for the PCHQR programs, including other quality The updated measure specifications Program. reporting programs; and expand the patient cohort to include We welcome public comments on this • Measure supports efforts to move patients receiving 3D conformal proposal for the Oncology: Radiation PCHs towards reporting electronic radiation therapy for breast or rectal Dose Limits to Normal Tissues measure measures. cancer in addition to patients receiving cohort expansion for the FY 2019 We welcome public comments on 3D conformal radiation therapy for lung program year and subsequent years. these proposed measure removal and or pancreatic cancers (the original 4. Proposed New Quality Measure retention criteria. cohort).146 For additional information Beginning With the FY 2019 Program about the original measure cohort, we 3. Retention and Proposed Update to Year refer readers to the FY 2014 IPPS/LTCH Previously Finalized Quality Measures PPS final rule (78 FR 50842), in which a. Considerations in the Selection of for PCHs Beginning With the FY 2019 we introduced the measure to the Quality Measures Program Year PCHQR Program. In 2012, breast cancer In the FY 2013 IPPS/LTCH PPS final a. Background was the most common cancer among rule (77 FR 53556), the FY 2014 IPPS/ In the FY 2013 IPPS/LTCH PPS final women, and the second most common LTCH PPS final rule (78 FR 50837 rule (77 FR 53556 through 53561), we cause of cancer related deaths for through 50838), and the FY 2015 IPPS/ 147 finalized five quality measures for the women. For 2016, the National LTCH PPS final rule (79 FR 50278), we FY 2014 program year and subsequent Institutes of Health estimates that there indicated that we have taken a number years. In the FY 2014 IPPS/LTCH PPS will be approximately 135,000 new of principles into consideration when final rule (78 FR 50837 through 50847), cases of colorectal cancer in the United developing and selecting measures for we finalized one new quality measure States, with approximately 39,000 of the PCHQR Program, and that many of 148 for the FY 2015 program year and these cases being rectal cancer. these principles are modeled on those subsequent years and 12 new quality As these cancer types are so we use for measure development and measures for the FY 2016 program year prevalent, we believe that the expansion selection under the Hospital IQR and subsequent years. In the FY 2015 of the measure cohort to include breast Program. In this proposed rule, we are IPPS/LTCH PPS final rule (79 FR 50278 and rectal cancer patients is important not proposing any changes to the through 50280), we finalized one new to ensuring the delivery of high quality principles we consider when quality measure for the FY 2017 care in the PCH setting. In compliance developing and selecting measures for program year and subsequent years. In with section 1890A(a)(2) of the Act, this the PCHQR Program. the FY 2016 IPPS/LTCH PPS final rule measure update was included in a Section 1866(k)(3)(A) of the Act (80 FR 49713 through 49719), we publicly available document, ‘‘List of requires that any measure specified by finalized three new CDC NHSN Measures under Consideration for the Secretary must have been endorsed 149 measures for the FY 2018 program year December 1, 2015.’’ The MAP, a by the entity with a contract under and subsequent years, and finalized the multi-stakeholder group convened by section 1890(a) of the Act (the NQF is removal of six previously finalized the NQF, reviews the measures under the entity that currently holds this measures for fourth quarter (Q4) 2015 consideration for the PCHQR Program, contract). Section 1866(k)(3)(B) of the discharges and subsequent years. We among other Federal programs, and Act provides an exception under which, refer readers to the final rules referenced provides input on those measures to the in the case of a specified area or medical in section VIII.B.1. of the preamble of Secretary. The MAP’s 2016 topic determined appropriate by the this proposed rule for more information recommendations for quality measures Secretary for which a feasible and regarding these previously finalized under consideration are captured in the practical measure has not been endorsed measures. following document: ‘‘Process and by the entity with a contract under We are not proposing for FY 2019 to Approach for MAP Pre-Rulemaking section 1890(a) of the Act, the Secretary remove any of the measures previously Deliberations 2015–2016’’ (http:// may specify a measure that is not so finalized for the FY 2018 program year www.qualityforum.org/WorkArea/ endorsed as long as due consideration is from the PCHQR measure set. However, linkit.aspx?LinkIdentifier=id&ItemID= given to measures that have been we are proposing to update the 81599). The MAP expressed conditional endorsed or adopted by a consensus Oncology: Radiation Dose Limits to support for the update of Oncology: organization. Normal Tissues (NQF #0382) measure, Radiation Dose Limits to Normal Using the principles for measure described below. Tissues. The MAP’s conditional support selection in the PCHQR Program, we are was solely pending annual NQF review, proposing one new measure, described b. Proposed Update of Oncology: and was not based on significant below. Radiation Dose Limits to Normal Tissues (NQF #0382) Measure for FY 146 Available at: http://www.qualityforum.org/ b. Proposed Adoption of the Admissions 2019 Program Year and Subsequent QPS/0382. and Emergency Department (ED) Visits Years 147 CDC Breast Cancer Statistics. Available at: for Patients Receiving Outpatient http://www.cdc.gov/cancer/breast/statistics/. Chemotherapy Measure Beginning with the FY 2019 program 148 NIH Colorectal Cancer Incidence and year, we are proposing to update the Mortality. Available at: http://www.cancer.gov/ We are proposing to adopt the specifications of the Oncology: types/colorectal/hp/rectal-treatment-pdq. Admissions and Emergency Department 149 CMS List of Measures under Consideration. Radiation Dose Limits to Normal Available at: http://www.qualityforum.org/ (ED) Visits for Patients Receiving Tissues (NQF #0382) measure. This WorkArea/linkit.aspx?LinkIdentifier=id&ItemID= Outpatient Chemotherapy measure for measure was originally finalized in the 81172. the FY 2019 program year and

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subsequent years. Cancer care is a Unmet patient needs resulting in professional societies recommend priority area for outcome measurement admissions and ED visits related to evidence-based interventions to prevent because cancer is an increasingly chemotherapy treatment pose a heavy and treat common side effects and prevalent condition associated with financial burden and affect patients’ complications of chemotherapy. considerable morbidity and mortality. In quality of life. Based on available Appropriate outpatient care should 2015, there were more than 1.6 million commercial claims data, in 2010 the reduce potentially avoidable hospital new cases of cancer in the United national average cost of a admissions and ED visits for these States.150 Each year, about 22 percent of chemotherapy-related admission was issues and improve cancer patients’ cancer patients receive $22,000, and the average cost of a quality of life. chemotherapy,151 with Medicare chemotherapy-related ED visit was This measure aims to assess the care payments for cancer treatment totaling $800.158 Furthermore, admissions and provided to cancer patients and $34.4 billion in 2011 or almost 10 ED visits can reduce patients’ quality of encourage quality improvement efforts percent of Medicare fee-for-service life by affecting their physical and to reduce the number of unplanned (FFS) spending.152 With an increasing emotional well-being, disrupting their inpatient admissions and ED visits number of cancer patients receiving schedules, decreasing their desire to among cancer patients receiving chemotherapy in a hospital outpatient engage in work and social activities, and chemotherapy in a PCH outpatient department,153 a growing body of peer- increasing the burden on their setting. Improved PCH management of reviewed literature identifies unmet family.159 160 these potentially preventable needs in the care provided to these Hospital admissions and ED visits symptoms—including anemia, patients. This gap in care may be due to among cancer patients are often caused dehydration, diarrhea, emesis, fever, reasons including: (1) Delayed onset of by manageable side effects. nausea, neutropenia, pain, pneumonia, side effects that patients must manage at Chemotherapy treatment can have or sepsis—could reduce unplanned home; (2) patients assuming that little severe, predictable side effects. Recent admissions and ED visits for these can be done and not seeking assistance; studies of cancer outpatients show the conditions. Measuring unplanned and (3) limited access to and most commonly cited symptoms and admissions and ED visits for cancer communication with providers who can reasons for unplanned hospital visits patients receiving outpatient tailor care to the individual.154 As a following chemotherapy treatment are chemotherapy would provide PCHs result, cancer patients that receive pain, anemia, fatigue, nausea and/or with an incentive to improve the quality chemotherapy in a hospital outpatient vomiting, fever and/or febrile of care for these patients by taking steps department require more frequent acute neutropenia, shortness of breath, to prevent and better manage side care in the hospital setting and dehydration, diarrhea, and anxiety/ effects and complications from experience more adverse events than depression.161 These hospital visits may treatment. In addition, this measure cancer patients that are not receiving be due to conditions related to the meets two National Quality Strategy chemotherapy.155 156 157 cancer itself or to side effects of priorities: (1) Promoting effective chemotherapy. However, treatment communication and coordination of 150 American Cancer Society. ‘‘Cancer Facts & plans and guidelines exist to support care; and (2) promoting the most Figures 2015.’’ Available at: http://www.cancer.org/ effective prevention and treatment acs/groups/content/@editorial/documents/ the management of these conditions. document/acspc-044552.pdf. PCHs that provide outpatient practices for the leading causes of 151 Klodziej, M., J.R. Hoverman, J.S. Garey, J. chemotherapy should implement mortality. Espirito, S. Sheth, A. Ginsburg, M.A. Neubauer, D. appropriate care to minimize the need We are proposing to adopt this Patt, B. Brooks, C. White, M. Sitarik, R. Anderson, for acute hospital care for these adverse measure under the exception authority and R. Beveridgel. ‘‘Benchmarks for Value in in section 1866(k)(3)(B) of the Act under Cancer Care: An Analysis of a Large Commercial events. Guidelines from the American Population.’’ Journal of Oncology Practice, Vol. 7, Society of Clinical Oncology, National which, in the case of a specified area or 2011, pp. 301–306. Comprehensive Cancer Network, medical topic determined appropriate 152 Sockdale, H., K. Guillory. ‘‘Lifeline: Why Oncology Nursing Society, Infectious by the Secretary for which a feasible and Cancer Patients Depend on Medicare for Critical practical measure has not been endorsed Coverage.’’ Available at: http://www.acscan.org/ Diseases Society of America, and other content/wp-content/uploads/2013/06/2013- by the entity with a contract under section 1890(a) of the Act, the Secretary Medicare-Chartbook-Online-Version.pdf. 157 Foltran, L., G. Aprile, F.E. Pisa, P. Ermacora, 153 Vandervelde, Aaron, Henry Miller, and N. Pella, E. Iaiza, E. Poletto, SE. Lutrino, M. Mazzer, may specify a measure that is not so JoAnna Younts. ‘‘Impact on Medicare Payments of M. Giovannoni, G.G. Cardellino, F. Puglisi, and G. endorsed as long as due consideration is Shift in Site of Care for Chemotherapy Fasola. ‘‘Risk of Unplanned Visits for Colorectal given to measures that have been Administration.’’ Washington, DC: Berkeley Cancer Outpatients Receiving Chemotherapy: A Research Group, June 2014. Available at: http:// endorsed or adopted by a consensus _ Case-Crossover Study.’’ Supportive Care in Cancer, www.communityoncology.org/UserFiles/BRG Vol. 22, No. 9, 2014, pp. 2527–2533. organization. Existing measures that the 340B_SiteofCare_ReportF_6–9–14.pdf. 158 NQF has endorsed focus on processes of 154 Fitch, K., and B. Pyenson. ‘‘Cancer Patients McKenzie, H., L. Hayes, K. White, K. Cox, J. Receiving Chemotherapy: Opportunities for Better care related to outpatient cancer care. Fethney, M. Boughton, and J. Dunn. Management.’’ Available at: http:// ‘‘Chemotherapy Outpatients’ Unplanned This proposed measure aligns with us.milliman.com/uploadedFiles/insight/research/ Presentations to Hospital: A Retrospective Study.’’ the intent of two process measures we health-rr/cancer-patients-receiving- Supportive Care in Cancer, Vol. 19, No. 7, 2011, pp. chemotherapy.pdf. adopted in the FY 2014 IPPS/LTCH PPS 963–969. 159 final rule (78 FR 50842 through 50843) 155 Sadik, M., K. Ozlem, M. Huseyin, B. McKenzie, H., L. Hayes, K. White, K. Cox, J. AliAyberk, S. Ahmet, and O. Ozgur. ‘‘Attributes of Fethney, M. Boughton, and J. Dunn. for FY 2016 and subsequent years: (1) Cancer Patients Admitted to the Emergency ‘‘Chemotherapy Outpatients’ Unplanned Clinical Process/Oncology Care—Plan of Department in One Year.’’ World Journal of Presentations to Hospital: A Retrospective Study.’’ Supportive Care in Cancer, Vol. 19, No. 7, 2011, pp. Care for Pain (NQF #0383); and (2) Emergency Medicine, Vol. 5, No. 2, 2014, pp. 85– Clinical Process/Oncology: Medical and 90. Available at: http://www.ncbi.nlm.nih.gov/pmc/ 963–969. articles/PMC4129880/#ref4. 160 Hassett, M.J., J. O’Malley, J.R. Pakes, J.P. Radiation—Pain Intensity Quantified 156 Hassett, M.J., J. O’Malley, J.R. Pakes, J.P. Newhouse, and C.C. Earle. ‘‘Frequency and Cost of (NQF #0384). Process measures NQF Newhouse, and C.C. Earle. ‘‘Frequency and Cost of Chemotherapy-Related Serious Adverse Effects in a #0383 and NQF #0384, which are not Population Sample of Women with Breast Cancer.’’ Chemotherapy-Related Serious Adverse Effects in a risk-adjusted, support the intent of the Population Sample of Women with Breast Cancer.’’ Journal of the National Cancer Institute, Vol. 98, Journal of the National Cancer Institute, Vol. 98, No. 16, 2006, pp. 1108–1117. proposed measure by reinforcing that No. 16, 2006, pp. 1108–1117. 161 Ibid. providers of outpatient care should

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screen for and manage symptoms such March 2016 and it is currently frame 163 164 165 and we also observed as pain. The proposed measure undergoing review. However, the this during testing. In addition, the improves upon these two measures in measure we are proposing to adopt at technical expert panel (TEP) supported two key ways: (1) It does not target a this time for the PCHQR Program does this time window because: (1) It helps specific symptom, but rather assesses not include this adjustment. link patients’ experiences to the the overall management of 10 important Furthermore, the Office of the facilities that provided their recent symptoms that studies have identified Assistant Secretary for Planning and treatment while accounting for as frequent reasons for ED visits and Evaluation (ASPE) is conducting variations in time between outpatient inpatient admissions in this population; research to examine the effect of treatment encounters; (2) it supports the and (2) it assesses the care outcomes socioeconomic, demographic, and other idea that the admission is related to the that matter to patients, rather than characteristics on quality measures, management of side effects of treatment measuring processes to detect and treat resource use, and other measures in the and ongoing care, as opposed to these conditions. Also, we are not aware Medicare program, as directed by the progression of the disease or other of any other measures a consensus IMPACT Act. We will closely examine unrelated events; and (3) clinically, 30 organization has endorsed or adopted the findings of the ASPE reports and days after each outpatient chemotherapy that assess the quality of outpatient related Secretarial recommendations treatment is a reasonable timeframe to cancer care by measuring unplanned and consider how they apply to our observe related side effects. inpatient admissions and ED visits. quality programs at such time as they The measure identifies outcomes The MAP supported this measure on are available. separately for the inpatient and ED the condition that it is reviewed and In addition, several MAP members measures. A patient can qualify only endorsed by NQF. We refer readers to noted the alignment of this measure once for one of the two outcomes in the Spreadsheet of MAP 2016 Final concept with other national priorities, each measurement period. If patients Recommendations available at: http:// such as improving patient experience, experience both an inpatient admission www.qualityforum.org/WorkArea/ and other national initiatives to improve and an ED visit after outpatient linkit.aspx?LinkIdentifier=id&ItemID= cancer care, as well as the importance chemotherapy during the measurement 81593. In particular, MAP members of this measure to raise awareness and period, the measure counts them toward recommended considering the measure create a feedback loop with providers. the inpatient admission outcome for sociodemographic status (SDS) This Admissions and Emergency because this outcome represents a more adjustment in the ongoing NQF trial Department (ED) Visits for Patients significant deterioration in patient period and reviewing it to ensure that Receiving Outpatient Chemotherapy quality of life, and is more costly. the detailed specifications meet the measure is a risk-standardized outcome Among those with no qualifying intent of the measure and align with measure for patients age 18 years or inpatient admissions, the measure current cancer care practice. older who are receiving PCH-based counts qualifying standalone ED visits. We understand the important role that outpatient chemotherapy treatment for As a result, the rates provide a SDS plays in the care of patients. all cancer types except leukemia; it comprehensive performance estimate of However, we continue to have concerns quality of care. We calculate the rates about holding hospitals to different measures inpatient admissions or ED visits within 30 days of each outpatient separately because the severity and cost standards for the outcomes of their of an inpatient admission differ from patients of diverse sociodemographic chemotherapy encounter for any of the following qualifying diagnoses: anemia, those of an ED visit, but both adverse status because we do not want to mask events are significant quality indicators potential disparities or minimize dehydration; diarrhea; emesis; fever; nausea; neutropenia; pain; pneumonia; and represent outcomes of care that are incentives to improve the outcomes of important to patients. disadvantaged populations. We or sepsis, as these are associated with commonly cited reasons for hospital The measure attributes the outcome to routinely monitor the impact of the PCH where the patient received sociodemographic status on hospitals’ visits among cancer patients receiving chemotherapy.162 chemotherapy treatment during the 30 results on our measures. days before the outcome. If a patient The NQF is currently undertaking a 2- The proposed measure uses 1 year of Medicare FFS Part A and Part B received outpatient chemotherapy year trial period in which new measures treatment from more than one PCH in and measures undergoing maintenance administrative claims data with respect to beneficiaries receiving chemotherapy the 30 days before the outcome, the review will be assessed to determine if measure would attribute the outcome to risk-adjusting for sociodemographic treatment in a PCH outpatient setting. The qualifying diagnosis on the all the PCHs that provided treatment. factors is appropriate. For 2 years, NQF For example, if a patient received an will conduct a trial of temporarily admission or ED visit claim must be (1) the primary diagnosis or (2) a secondary allowing inclusion of sociodemographic 163 Aprile, G., F.E. Pisa, A. Follador, L. Foltran, factors in the risk-adjustment approach diagnosis accompanied by a primary F. De Pauli, M. Mazzer, S. Lutrino, C.S. Sacco, M. for some performance measures. At the diagnosis of cancer. Mansutti, and G. Fasola. ‘‘Unplanned Presentations conclusion of the trial, NQF will issue We limited the window for of Cancer Outpatients: A Retrospective Cohort identifying the outcomes of admissions Study.’’ Supportive Care in Cancer, Vol. 21, No. 2, recommendations on future permanent 2013, pp. 397–404. inclusion of sociodemographic factors. and ED visits to 30 days after PCH 164 Foltran, L., G. Aprile, F.E. Pisa, P. Ermacora, During the trial, measure developers are outpatient chemotherapy treatment N. Pella, E. Iaiza, E. Poletto, SE. Lutrino, M. Mazzer, expected to submit information such as encounters, as existing literature M. Giovannoni, G.G. Cardellino, F. Puglisi, and G. analyses and interpretations as well as suggests the vast majority of adverse Fasola. ‘‘Risk of Unplanned Visits for Colorectal Cancer Outpatients Receiving Chemotherapy: A performance scores with and without events occur within that time Case-Crossover Study.’’ Supportive Care in Cancer, sociodemographic factors in the risk Vol. 22, No. 9, 2014, pp. 2527–2533. adjustment model. We submitted this 162 Hassett, M.J., J. O’Malley, J.R. Pakes, J.P. 165 McKenzie, H., L. Hayes, K. White, K. Cox, J. measure to NQF with appropriate Newhouse, and C.C. Earle. ‘‘Frequency and Cost of Fethney, M. Boughton, and J. Dunn. Chemotherapy-Related Serious Adverse Effects in a ‘‘Chemotherapy Outpatients’ Unplanned consideration for SDS for endorsement Population Sample of Women with Breast Cancer.’’ Presentations to Hospital: A Retrospective Study.’’ proceedings as part of the NQF Cancer Journal of the National Cancer Institute, Vol. 98, Supportive Care in Cancer, Vol. 19, No. 7, 2011, pp. Consensus Development Project in No. 16, 2006, pp. 1108–1117. 963–969.

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outpatient chemotherapy treatment at chemotherapy treatment, we refer do not have a qualifying inpatient PCH A on January 1, a second treatment readers to the Data Dictionary appendix admission, searches for a qualifying ED at PCH B on January 10, and then to the measure Technical Report at: visit. Therefore, the patient-mix and experienced a qualifying inpatient http://www.cms.gov/Medicare/Quality- predictive risk factors for each outcome admission on January 15, the measure Initiatives-Patient-Assessment- is slightly different. The statistical risk- would count this outcome for both PCH Instruments/HospitalQualityInits/ adjustment model for inpatient A and PCH B because both PCHs Measure-Methodology.html under admissions includes 20 clinically provided outpatient chemotherapy ‘‘Hospital Outpatient Chemotherapy.’’ relevant risk-adjustment variables that treatment to the patient within the 30- The measure excludes three groups of are strongly associated with the risk of day window. However, if a patient patients: (1) Patients with a diagnosis of one or more hospital admissions within received an outpatient chemotherapy leukemia at any time during the 30 days following an outpatient treatment from PCH A on January 1, and measurement period because of the high chemotherapy treatment encounter in a a second treatment from PCH B on toxicity of treatment and recurrence of hospital outpatient setting; the March 1, and then experienced a disease, and because inpatient statistical risk-adjustment model for ED qualifying inpatient admission on admissions and ED visits may reflect a visits includes 15 clinically relevant March 3, the measure would attribute relapse, rather than poorly managed risk-adjustment variables that are this outcome only to PCH B. In measure outpatient care; (2) patients who were strongly associated with risk of one or testing, using Medicare FFS claims data not enrolled in Medicare FFS Parts A more ED visits within 30 days following from July 1, 2012, to June 30, 2013, only and B in the year before the first an outpatient chemotherapy treatment 5 percent of patients in the cohort outpatient chemotherapy treatment encounter in a hospital outpatient received outpatient chemotherapy encounter during the measurement setting (3 comorbidities and 2 cancer treatment from more than one facility period (because the risk-adjustment types significant for inpatient during that year. model uses claims data for the year admissions are not significant for ED For additional methodology details, before the first chemotherapy treatment visits). including the code sets used to identify encounter during the period to identify The measure uses hierarchical logistic the qualifying outcomes, we refer comorbidities); and (3) patients who do modeling, similar to the approach used readers to the CMS Web site at: http:// not have at least one outpatient in the CMS inpatient hospital 30-day www.cms.gov/Medicare/Quality- chemotherapy treatment encounter risk-standardized mortality and Initiatives-Patient-Assessment- followed by continuous enrollment in readmission outcome measures, such as Instruments/HospitalQualityInits/ Medicare FFS Parts A and B in the 30 the Hospital 30-Day, All-Cause, Risk- Measure-Methodology.html under days after the encounter (because the Standardized Mortality Rate (RSMR) ‘‘Hospital Outpatient Chemotherapy.’’ measure cannot assess the 30-day Following Acute Myocardial Infarction This measure includes all adult outcome in this group since it uses (AMI) Hospitalization.166 This approach Medicare FFS patients because this claims data to determine whether a appropriately accounts for both would enable us to more broadly assess patient had an ED visit or a hospital differences in patient-mix and the the quality of care provided by the PCH. inpatient admission). clustering of observations within PCHs. This measure focuses on treatments in Risk adjustment takes into account The measure calculates the PCH-specific the PCH outpatient setting because of important demographic and clinically- risk-adjusted rate as the ratio of the the increase in hospital-based relevant patient characteristics that have PCH’s ‘‘predicted’’ number of outcomes chemotherapy, which presents an strong relationships with the outcome. It to ‘‘expected’’ number of outcomes opportunity to coordinate care. From seeks to adjust for differences in patient multiplied by the national observed 2008 to 2012, the proportion of demographics, clinical comorbidities, outcome rate. It estimates the expected Medicare patients receiving hospital- and treatment exposure, which vary number of outcomes for each PCH using based outpatient chemotherapy across patient populations and the PCH’s patient-mix and the average increased from 18 to 29 percent, and influence the outcome but do not relate PCH-specific intercept (that is, the this trend is likely to continue. As to quality. Specifically, the measure average intercept among all PCHs in the currently specified, the measure adjusts for: (1) The patient’s age at the sample). The measure estimates the identifies chemotherapy treatment using start of the measurement period; (2) sex; predicted number of outcomes for each ICD–9–CM procedure and encounter (3) comorbidities that convey PCH using the same patient-mix, but an codes and Current Procedural information about the patient in the 12 estimated PCH-specific intercept. Terminology (CPT)/Healthcare Common months before his or her first outpatient The measure calculates two rates, one Procedure Coding System (HCPCS) chemotherapy treatment encounter for each mutually exclusive outcome procedure and medication procedure during the measurement period; (4) (qualifying inpatient admissions and codes. It excludes procedure codes for cancer type; and (5) the number of qualifying ED visits). It derives the two oral chemotherapy because it is outpatient chemotherapy treatments the rates (also referred to as the PCH-level challenging to identify oral patient received at the reporting PCH risk-standardized admission rate (RSAR) chemotherapy without using pharmacy during the measurement period. and risk-standardized ED visit rate claims data and, according to our TEP, We developed two risk-adjustment (RSEDR)), from the ratio of the most oral chemotherapies have fewer models, one for each dependent variable numerator to the denominator adverse reactions that result in described above—qualifying inpatient multiplied by the national observed admissions. We have developed a admissions and qualifying ED visits. rate. The numerator is the number of ‘‘coding crosswalk’’ between the ICD–9– The separate models are necessary to predicted (meaning adjusted actual) CM codes and the ICD–10 codes that enable the use of the most parsimonious patients with the measured adverse became effective beginning on October model with variables tailored to those outcome. The denominator is the 1, 2015, and we will test this crosswalk that are most predictive for each of the prior to implementation. For detailed measure’s two mutually exclusive 166 Methodology reports for these measures are information on the cohort definition, outcomes. The measure algorithm first available at the following link: https://www.cms. gov/Medicare/Quality-Initiatives-Patient- including the ICD–9–CM, ICD–10, CPT, searches for a qualifying inpatient Assessment-Instruments/HospitalQualityInits/ and HCPCS codes that identify admission, and for those patients that Measure-Methodology.html.

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number of patients with the measured We would publicly report the RSAR prior to public reporting; (3) answer adverse outcome the PCH is expected to and RSEDR for all participating PCHs questions from PCHs and other have based on the national performance with 25 or more eligible patients per stakeholders; (4) test the production and with the PCH’s case mix. The national measurement period to maintain a reporting process; and (5) identify observed rate is the national unadjusted reliability of at least 0.4 (as measured by potential technical changes to the number of patients who have an adverse the interclass correlation coefficient, measure specifications that might be outcome among all the qualifying ICC). If a PCH does not meet the 25 needed. We have not yet determined the patients who had at least one eligible patient threshold, we would measurement period to use for the dry chemotherapy treatment encounter in a include a footnote on the Hospital run calculations, but acknowledge the PCH. If the ‘‘predicted’’ number of Compare Web site indicating that the importance of including some data outcomes is higher (or lower) than the number of cases is too small to reliably based on ICD–10 codes to evaluate the ‘‘expected’’ number of outcomes for a measure that PCH’s rate. These patients success of the ‘‘coding crosswalk.’’ given hospital, the risk-standardized and PCHs would still be included when We are inviting public comment on rate will be higher (or lower) than the calculating the national rates for both our proposal to adopt the Admissions national observed rate. the RSAR and RSEDR. and Emergency Department (ED) Visits For more detailed information on the To prepare PCHs for public reporting, for Patients Receiving Outpatient calculation methodology, we refer we would conduct a confidential Chemotherapy measure for the FY 2019 readers to the methodology report at: national reporting (dry run) of measure program year and subsequent years. http://www.cms.gov/Medicare/Quality- results prior to public reporting. The In summary, the previously finalized Initiatives-Patient-Assessment- objectives of the dry run are to: (1) and newly proposed measures for the Instruments/HospitalQualityInits/ Educate PCHs and other stakeholders PCHQR Program for the FY 2019 Measure-Methodology.html under about the measure; (2) allow PCHs to program year and subsequent years are ‘‘Hospital Outpatient Chemotherapy.’’ review their measure results and data listed in the table below.

PREVIOUSLY FINALIZED AND PROPOSED PCHQR MEASURES FOR THE FY 2019 PROGRAM YEAR AND SUBSEQUENT YEARS

Short name NQF No. Measure name

Safety and Healthcare-Associated Infection (HAI)

CLABSI ...... 0139 National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection Outcome Measure. CAUTI ...... 0138 National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract In- fections Outcome Measure. SSI ...... 0753 American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Out- come Measure [currently includes SSIs following Colon Surgery and Abdominal Hysterectomy Surgery]. CDI ...... 1717 National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure. MRSA ...... 1716 National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus Bacteremia Outcome Measure. HCP ...... 0431 Influenza Vaccination Coverage Among Healthcare Personnel.

Clinical Process/Cancer Specific Treatment

N/A ...... 0223 Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer. N/A ...... 0559 Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1cN0M0, or Stage IB—III Hormone Receptor Negative Breast Cancer. *** N/A ...... 0220 Adjuvant Hormonal Therapy.

Clinical Process/Oncology Care Measures

N/A ...... 0382 Oncology: Radiation Dose Limits to Normal Tissues. * N/A ...... 0383 Oncology: Plan of Care for Pain—Medical Oncology and Radiation Oncology. N/A ...... 0384 Oncology: Medical and Radiation—Pain Intensity Quantified. N/A ...... 0390 Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Prostate Cancer Pa- tients. N/A ...... 0389 Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low Risk Pros- tate Cancer Patients.

Patient Engagement/Experience of Care

HCAHPS ...... 0166 HCAHPS.

Clinical Effectiveness Measure

EBRT ...... 1822 External Beam Radiotherapy for Bone Metastases.

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PREVIOUSLY FINALIZED AND PROPOSED PCHQR MEASURES FOR THE FY 2019 PROGRAM YEAR AND SUBSEQUENT YEARS—Continued

Short name NQF No. Measure name

Claims Based Outcome Measure

N/A ...... N/A Admissions and Emergency Department (ED) Visits for Patients Receiving Out- patient Chemotherapy. ** * Proposed for update in FY 2019 program year. ** Newly proposed for FY 2019 program year. *** In previous final rules, this measure was titled ‘‘Combination Chemotherapy is Considered or Administered Within 4 months (120 days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormones Receptor Negative Breast Cancer. This name change is consistent with NQF updates to the measure name and reflects an update in the AJCC staging, does not reflect a change in the measure inclusion criteria, and is not considered substantive.

5. Possible New Quality Measure Topics 6. Maintenance of Technical 7. Public Display Requirements for Future Years Specifications for Quality Measures a. Background We discussed future quality measure We maintain technical specifications Under section 1866(k)(4) of the Act, topics and quality measure domain for the PCHQR Program measures, and we are required to establish procedures areas in the FY 2015 IPPS/LTCH PPS we periodically update those for making the data submitted under the final rule (79 FR 50280), and in the FY specifications. The specifications may PCHQR Program available to the public. 2016 IPPS/LTCH PPS final rule (80 be found on the QualityNet Web site at: Such procedures must ensure that a FR4979), we discussed public comment https://qualitynet.org/dcs/Content PCH has the opportunity to review the and specific suggestions for measure Server?c=Page&pagename=QnetPublic data that are to be made public with topics addressing the following CMS %2FPage%2FQnetTier2&cid= respect to the PCH prior to such data Quality Strategy domains: Making care 1228774479863. being made public. Section 1866(k)(4) of the Act also provides that the Secretary affordable; communication and In the FY 2015 IPPS/LTCH PPS final coordination; and working with must report quality measures of process, rule (79 FR 50281), we adopted a policy structure, outcome, patients’ perspective communities to promote best practices under which we use a subregulatory of healthy living. We welcome public on care, efficiency, and costs of care that process to make nonsubstantive updates relate to services furnished in such comment and specific suggestions for to measures used for the PCHQR hospitals on the CMS Web site. The measure topics that we should consider Program. We are not proposing any measures that we have finalized for for future rulemaking. changes to this policy in this proposed public display are shown in the table rule. below.

PREVIOUSLY FINALIZED MEASURES FOR PUBLIC DISPLAY

First year of public dis- Measure name play

• Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients Under 2014 the Age of 80 with AJCC III (lymph node positive) Colon Cancer (NQF #0223). • Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer (NQF #0559). • Adjuvant Hormonal Therapy (NQF #0220) ...... 2015 • Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382) ...... 2016 • Oncology: Oncology: Plan of Care for Pain—Medical Oncology and Radiation Oncology (NQF #0383). • Oncology: Oncology: Medical and Radiation—Pain Intensity Quantified (NQF #0384). • Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Prostate Cancer Patients (NQF #0390). • Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low Risk Prostate Cancer Patients (NQF #0389). • HCAHPS (NQF #0166). • CLABSI (NQF #0139) ...... No Later Than 2017. • CAUTI (NQF #0138).

b. Proposed Additional Public Display the year, starting with the first year for as soon as possible, and the timeframe Requirements which we are publishing data for each for this publication may change year-to- As we strive to publicly display data measure. We will continue to propose in year, we are not proposing to specify in as soon as possible on a CMS Web site, rulemaking the first year for which we rulemaking the exact dates for review. we are proposing the following update intend to publish data for each measure. However, we are proposing that the time to our public display polices. We We intend to make the data available on period for review would be believe it is best to not specify in at least a yearly basis. approximately 30 days in length. We are rulemaking the exact timeframe during As stated above, we are required to proposing to announce the exact the year for publication as doing so may give PCHs an opportunity to review timeframes on a CMS Web site and/or prevent earlier publication. We are their data before the data are made on our applicable listservs. proposing, then, to make these data public. Because we are proposing to available as soon as it is feasible during make the data for this program available

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We welcome public comments on beginning with the FY 2017 program e. Proposed Postponement of Public these updates to our public display and year data and for subsequent years. Display of Two Measures preview policies. d. Proposed Public Display of Updated In the FY 2015 IPPS/LTCH PPS final c. Proposed Public Display of Measure rule (79 FR 50281 through 50282), we Additional PCHQR Measure finalized public display of the CLABSI We are proposing to publicly display In the FY 2016 IPPS/LTCH PPS final and CAUTI measures beginning no later one additional PCHQR measure rule (80 FR 49720 through 49722), we than 2017 and subsequent years. beginning with FY 2017 program year finalized public display of the However, at this time, we are proposing data (which is data collected during CY Oncology: Radiation Dose Limits to to defer the public reporting of these 2015). This proposal would mean that Normal Tissues measure in 2016 and two measures’ data. At present, all PCHs we would display the measure data subsequent years. If our proposal to are reporting CLABSI and CAUTI data during CY 2017, and that we would use update this measure (described in to the NHSN under the PCHQR a CMS Web site and/or our applicable section VIII.B.3.b. of the preamble of Program; however, due to the low listservs to announce the exact this proposed rule) is finalized, we are volume of data produced and reported timeframe. This measure is External proposing to begin displaying on by this small number of facilities, we Beam Radiotherapy for Bone Metastases Hospital Compare data using the need additional time to work with CDC (NQF #1822), which we adopted in the updated measure cohort as soon as to identify an appropriate timeframe for FY 2015 IPPS/LTCH PPS final rule (79 feasible after the updated data is public reporting and collaborate on the analytic methods that will be used to FR 50278 through 50280). We believe collected in CY 2017. We intend to summarize the CLABSI and CAUTI data that it is important to share data denote the cohort expansion on Hospital for public reporting purposes. collected under the PCHQR Program Compare to ensure that consumers are We are inviting public comment on with healthcare consumers through informed about the expansion. publication on public Web sites to help our proposal to defer the public inform healthcare choices. We intend to We welcome public comment on our reporting of the CLABSI and the CAUTI make this data publicly available at the proposals regarding public display of measures. first opportunity. this updated measure. Our previously finalized and We welcome public comment on our proposed public display requirements proposal to display this measure are summarized in the table below.

PREVIOUSLY FINALIZED AND PROPOSED PUBLIC DISPLAY REQUIREMENTS

Measures Public reporting

Summary of Finalized and Proposed Public Display Requirements

• Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients Under 2014 and subsequent the Age of 80 with AJCC III (lymph node positive) Colon Cancer (NQF #0223). years. • Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women Under 70 with AJCC T1cN0M0, or Stage IB—III Hormone Receptor Negative Breast Cancer (NQF #0559). • Adjuvant Hormonal Therapy (NQF #0220) ...... 2015 and subsequent years. • Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382).* • Oncology: Plan of Care for Pain—Medical Oncology and Radiation Oncology (NQF #0383). • Oncology: Medical and Radiation—Pain Intensity Quantified (NQF #0384) ...... 2016 and subsequent years. • Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Prostate Cancer Patients (NQF #0390). • Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low Risk Prostate Cancer Patients (NQF #0389). • HCAHPS (NQF #0166). • CLABSI (NQF #0139).** • CAUTI (NQF #0138) ** ...... Deferred. • External Beam Radiotherapy for Bone Metastases (NQF #1822) *** ...... Beginning at the first opportunity in 2017 and for subsequent years. * Update proposed for display for the FY 2019 program year and subsequent years in this proposed rule—expanded cohort will be displayed as soon as feasible. ** Deferral proposed in this proposed rule. *** Measure newly proposed for public display in this proposed rule.

8. Form, Manner, and Timing of Data Data submission requirements and Receiving Outpatient Chemotherapy) is Submission deadlines for the PCHQR Program are a claims-based measure; therefore, there generally posted on the QualityNet Web are no additional data submission Section 1866(k)(2) of the Act requires site at: http://www.qualitynet.org/dcs/ requirements for this measure. As this that, beginning with the FY 2014 ContentServer?c=Page&pagename= measure uses 1 year of Medicare PCHQR program year, each PCH must QnetPublic%2FPage%2FQnet administrative claims data, we are submit to the Secretary data on quality measures specified under section Tier3&cid=1228772864228. proposing to calculate this measure on 1866(k)(3) of the Act in a form and The newly proposed measure for FY a yearly basis, beginning with data from manner, and at a time, as specified by 2019 (Admissions and Emergency July 1, 2016 through June 30, 2017, and the Secretary. Department (ED) Visits for Patients then to calculate the measure for

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subsequent years using data from July 1 The Improving Medicare Post-Acute one measure that we are specifying through June 30. Care Transformation Act of 2014 under section 1899B(c)(1) of the Act to We are not proposing any changes to (IMPACT Act) imposed new data meet the Medication Reconciliation previously finalized data submission reporting requirements for certain post- domain, that is, Drug Regimen Review requirements in this proposed rule. acute care (PAC) providers, including Conducted with Follow-Up for LTCHs. For information on the statutory Identified Issues-PAC LTCH QRP. 9. Exceptions From PCHQR Program background of the IMPACT Act, we Further, we are proposing for the LTCH Requirements refer readers to the FY 2016 IPPS/LTCH QRP to adopt three measures in order to In our experience with other quality PPS final rule (80 FR 49723 through meet the resource use and other reporting and performance programs, 49724). measure domains identified in section we have noted occasions when In the FY 2016 IPPS/LTCH PPS final 1899B(d)(1) of the Act. These measures providers have been unable to submit rule (80 FR 49723 through 49728), we consist of: (1) Total Estimated Medicare required quality data due to reviewed and finalized the activities Spending Per Beneficiary (MSPB): extraordinary circumstances that are not and the timeline and sequencing of such MSPB–PAC LTCH QRP; (2) Discharge to within their control (for example, activities that would occur under the Community: Discharge to Community- natural disasters). We do not wish to LTCH QRP. In addition, we established PAC LTCH QRP; and (3) Measures to increase their burden unduly during our approach for identifying cross- reflect all-condition risk-adjusted these times. Therefore, in the FY 2014 cutting measures and process for the potentially preventable hospital IPPS/LTCH PPS final rule (78 FR adoption of measures, including the readmission rates: Potentially 50848), we finalized our policy that, for application and purpose of the Preventable 30-Day Post-Discharge the FY 2014 program rear and Measures Application Partnership Readmission Measure for LTCH QRP. (MAP) and the notice-and-comment subsequent years, PCHs may request In our selection and specification of rulemaking process. For information on and we may grant exceptions (formerly measures, we employ a transparent these topics, we refer readers to the FY referred to as waivers) with respect to process in which we seek input from 2016 IPPS/LTCH PPS final rule (80 FR the reporting of required quality data stakeholders and national experts and 49723). when extraordinary circumstances engage in a process that allows for pre- beyond the control of the PCH warrant. 2. General Considerations Used for rulemaking input on each measure, as When exceptions are granted, we will Selection of Quality, Resource Use, and required by section 1890A of the Act. To notify the respective PCH. Other Measures for the LTCH QRP meet this requirement, we provided the We are not proposing any changes to For a detailed discussion of the following opportunities for stakeholder this PCHQR exception process in this input: Our measure development proposed rule. considerations we use for the selection of LTCH QRP quality measures, such as contractor convened technical expert C. Long-Term Care Hospital Quality alignment with the CMS Quality panels (TEPs) that included stakeholder Reporting Program (LTCH QRP) Strategy,167 which incorporates the experts and patient representatives on July 29, 2015, for the Drug Regimen 1. Background and Statutory Authority three broad aims of the National Quality Strategy,168 we refer readers to the FY Review Conducted with Follow-Up for We seek to promote higher quality 2015 IPPS/LTCH PPS final rule (79 FR Identified Issues measures; on August and more efficient health care for 50286 through 50287) and the FY 2016 25, 2015, September 25, 2015, and Medicare beneficiaries, and our efforts IPPS/LTCH PPS final rule (80 FR October 5, 2015, for the Discharge to are furthered by quality reporting 49728). Overall, we strive to promote Community measures; on August 12 and programs coupled with public reporting high quality and efficiency in the 13, 2015, and October 14, 2015 for the of that information. delivery of health care to the Potentially Preventable 30-Day Post- Section 3004(a) of the Affordable Care beneficiaries we serve. Performance Discharge Readmission Measures; and Act amended section 1886(m)(5) of the improvement leading to the highest on October 29 and 30, 2015, for the Act, requiring the Secretary to establish quality health care requires continuous Medicare Spending Per Beneficiary the Long-Term Care Hospital Quality evaluation to identify and address measures. In addition, we released draft Reporting Program (LTCH QRP). The performance gaps and reduce the quality measure specifications for LTCH QRP applies to all hospitals unintended consequences that may arise public comment for the Drug Regimen certified by Medicare as LTCHs. in treating a large, vulnerable, and aging Review Conducted with Follow-Up for Beginning with the FY 2014 payment population. Quality reporting programs, Identified Issues measures from determination and subsequent years, the coupled with public reporting of quality September 18, 2015, to October 6, 2015; Secretary is required to reduce any information, are critical to the for the Discharge to Community annual update to the LTCH PPS advancement of health care quality measures from November 9, 2015, to standard Federal rate for discharges improvement efforts. Valid, reliable, December 8, 2015; for the Potentially occurring during such fiscal year by 2 relevant quality measures are Preventable 30-Day Post-Discharge percentage points for any LTCH that fundamental to the effectiveness of our Readmission Measures from November does not comply with the requirements quality reporting programs. Therefore, 2, 2015 to December 1, 2015; and for the established by the Secretary. Section selection of quality measures is a Medicare Spending Per Beneficiary 1886(m)(5) of the Act requires that for priority for CMS in all of its quality measures from January 13, 2016 to the FY 2014 payment determination and reporting programs. February 5, 2016. We implemented a subsequent years, each LTCH submit In this proposed rule, we are public mailbox, PACQualityInitiative@ data on quality measures specified by proposing to adopt for the LTCH QRP cms.hhs.gov, for the submission of the Secretary in a form and manner, and public comments. This PAC mailbox is at a time, specified by the Secretary. For 167 http://www.cms.gov/Medicare/Quality- accessible on our post-acute care quality more information on the statutory Initiatives-Patient-Assessment-Instruments/ initiatives Web site at: https://www.cms. QualityInitiativesGenInfo/CMS-Quality- history of the LTCH QRP, we refer Strategy.html. gov/Medicare/Quality-Initiatives- readers to the FY 2015 IPPS/LTCH PPS 168 http://www.ahrq.gov/workingforquality/nqs/ Patient-Assessment-Instruments/Post- final rule (79 FR 50286). nqs2011annlrpt.htm. Acute-Care-Quality-Initiatives/IMPACT-

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Act-of-2014-and-Cross-Setting- www.ahrq.gov/workingforquality/) and adopted a subregulatory process to Measures.html. for which the MAP supports the incorporate NQF updates to LTCH In addition, we sought public input measure concept. Further, discussion as quality measure specifications that do from the MAP Post-Acute Care, Long- to the importance and high-priority not substantively change the nature of Term Care Workgroup during the status of these proposed measures in the the measure. Substantive changes will annual in-person meeting held LTCH setting is included under each be proposed and finalized through December 14 and 15, 2015. The MAP is quality measure proposal in this rulemaking. For further information on composed of multi-stakeholder groups proposed rule. what constitutes a substantive versus a convened by the NQF, our current 3. Policy for Retention of LTCH QRP nonsubstantive change and the contractor under section 1890(a) of the Measures Adopted for Previous subregulatory process for Act, tasked to provide input on the Payment Determinations nonsubstantive changes, we refer selection of quality and efficiency readers to the FY 2013 IPPS/LTCH PPS measures described in section In the FY 2013 IPPS/LTCH PPS final final rule (77 FR 53615 through 53616). 1890(b)(7)(B) of the Act. rule (77 FR 53614 through 53615), for We are not proposing any changes to the the purpose of streamlining the The MAP reviewed each IMPACT policy for adopting changes to LTCH rulemaking process, we adopted a Act-related measure proposed in this QRP measures. policy that, when we initially adopt a proposed rule for use in the LTCH QRP. measure for the LTCH QRP for a 5. Quality Measures Previously For more information on the MAP’s payment determination and all Finalized for and Currently Used in the recommendations, we refer readers to subsequent years, it would remain in LTCH QRP the MAP 2016 Final Recommendations effect until the measure was actively to HHS and CMS public report at: removed, suspended, or replaced. For A history of the LTCH QRP quality http://www.qualityforum.org/ measures adopted for the FY 2014 _ _ further information on how measures Publications/2016/02/MAP 2016 are considered for removal, suspension, payment determinations and subsequent Considerations_for_Implementing_ years is presented in the table below. _ _ _ _ _ or replacement, we refer readers to the Measures in Federal Programs - PAC- FY 2013 IPPS/LTCH PPS final rule (77 The year in which each quality measure LTC.aspx. FR 53614 through 53615). was first adopted and implemented, and For measures that do not have NQF We are not proposing any changes to then subsequently readopted or revised, endorsement, or which are not fully the policy for retaining LTCH QRP if applicable, is displayed. The initial supported by the MAP for use in the measures adopted for previous payment and subsequent annual payment LTCH QRP, we are proposing for the determinations. determination years are also shown in LTCH QRP for the purposes of satisfying this table. For more information on a the measure domains required under the 4. Policy for Adopting Changes to LTCH particular measure, we refer readers to IMPACT Act measures that closely align QRP Measures the IPPS/LTCH PPS final rule and with the national priorities identified in In the FY 2013 IPPS/LTCH PPS final associated page numbers referenced in the National Quality Strategy (http:// rule (77 FR 53615 through 53616), we this table.

QUALITY MEASURES PREVIOUSLY FINALIZED FOR AND CURRENTLY USED IN THE LTCH QRP

Annual payment determination: Measure title IPPS/LTCH PPS Final rule Data collection start initial and date subsequent APU Years

National Healthcare Safety Network (NHSN) Adopted an application of the measure in the October 1, 2012 ...... FY 2014 and subse- Catheter-Associated Urinary Tract Infection FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. (CAUTI) Outcome Measure (NQF #0138). 51745 through 51747). Adopted the NQF-endorsed version and ex- January 1, 2013 ...... FY 2015 and subse- panded measure (with standardized infec- quent years. tion ratio [SIR]) in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53616 through 53619). National Healthcare Safety Network (NHSN) Adopted an application of the measure in the October 1, 2012 ...... FY 2014 and subse- Central Line-Associated Bloodstream Infec- FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. tion (CLABSI) Outcome Measure (NQF 51747 through 51748). #0139). Adopted the NQF-endorsed and expanded January 1, 2013 ...... FY 2015 and subse- measure (with SIR) in the FY 2013 IPPS/ quent years. LTCH PPS final rule (77 FR 53616 through 53619). Percent of Residents or Patients with Pressure Adopted an application of the measure in the October 1, 2012 ...... FY 2014 and subse- Ulcers That Are New or Worsened (Short FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. Stay) (NQF #0678). 51748 through 51750). Adopted the NQF-endorsed version in the FY January 1, 2013 ...... FY 2015 and subse- 2014 IPPS/LTCH PPS final rule (78 FR quent years. 50861 through 50863). Adopted in the FY 2016 IPPS/LTCH PPS final January 1, 2016 ...... FY 2018 and subse- rule (80 FR 49731 through 49736) to fulfill quent years. IMPACT Act requirements.

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QUALITY MEASURES PREVIOUSLY FINALIZED FOR AND CURRENTLY USED IN THE LTCH QRP—Continued

Annual payment determination: Measure title IPPS/LTCH PPS Final rule Data collection start initial and date subsequent APU Years

Percent of Residents or Patients Who Were Adopted in the FY 2013 IPPS/LTCH PPS final January 1, 2014 ...... FY 2016 and subse- Assessed and Appropriately Given the Sea- rule (77 FR 53624 through 53627). quent years. sonal Influenza Vaccine (Short Stay) (NQF #0680). Revised data collection timeframe in the FY October 1, 2014 ...... FY 2016 and subse- 2014 IPPS/LTCH PPS final rule (78 FR quent years. 50858 through 50861). Revised data collection timeframe in the FY October 1, 2014 ...... FY 2016 and subse- 2015 IPPS/LTCH PPS final rule (79 FR quent years. 50289 through 50290). Influenza Vaccination Coverage among Adopted in the FY 2013 IPPS/LTCH PPS final October 1, 2014 ...... FY 2016 and subse- Healthcare Personnel (NQF #0431). rule (77 FR 53630 through 53631). quent years. Revised data collection timeframe in the FY October 1, 2014 ...... FY 2016 and subse- 2014 IPPS/LTCH PPS final rule (78 FR quent years. 50857 through 50858). All-Cause Unplanned Readmission Measure for Adopted in FY 2014 IPPS/LTCH PPS final N/A ...... FY 2017 and subse- 30-Days Post-Discharge from Long-Term rule (78 FR 50868 through 50874). quent years. Care Hospitals (NQF #2512). Adopted the NQF-endorsed version in the FY N/A ...... FY 2018 and subse- 2016 IPPS/LTCH PPS final rule (80 FR quent years. 49730 through 49731). National Healthcare Safety Network (NHSN) Adopted in the FY 2014 IPPS/LTCH PPS final January 1, 2015 ...... FY 2017 and subse- Facility-wide Inpatient Hospital-onset rule (78 FR 50863 through 50865). quent years. Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716). National Healthcare Safety Network (NHSN) Adopted in the FY 2014 IPPS/LTCH PPS final January 1, 2015 ...... FY 2017 and subse- Facility-wide Inpatient Hospital-onset Clos- rule (78 FR 50865 through 50868). quent years. tridium difficile Infection (CDI) Outcome Measure (NQF #1717). National Healthcare Safety Network (NHSN) Adopted in the FY 2015 IPPS/LTCH PPS final January 1, 2016 ...... FY 2018 and subse- Ventilator-Associated Event (VAE) Outcome rule (79 FR 50301 through 50305). quent years. Measure (NQF #N/A). Application of Percent of Residents Experi- Adopted in the FY 2014 IPPS/LTCH PPS final January 1, 2016 ...... FY 2018 and subse- encing One or More Falls with Major Injury rule (78 FR 50874 through 50877). quent years. (Long Stay) (NQF #0674). Revised data collection timeframe in the FY April 1, 2016 ...... FY 2018 and subse- 2015 IPPS/LTCH PPS final rule (79 FR quent years. 50290 through 50291). Adopted an application of the measure in the April 1, 2016 ...... FY 2018 and subse- FY 2016 IPPS/LTCH PPS final rule (80 FR quent years. 49736 through 49739) to fulfill IMPACT Act requirements. Percent of Long-Term Care Hospital Patients Adopted in the FY 2015 IPPS/LTCH PPS final April 1, 2016 ...... FY 2018 and subse- with an Admission and Discharge Functional rule (79 FR 50291 through 50298). quent years. Assessment and a Care Plan That Address- es Function (NQF #2631). Application of Percent of Long-Term Care Hos- Adopted an application of the measure in the April 1, 2016 ...... FY 2018 and subse- pital Patients with an Admission and Dis- FY 2016 IPPS/LTCH PPS final rule (80 FR quent years. charge Functional Assessment and a Care 49739 through 49747) to fulfill IMPACT Act Plan That Addresses Function (NQF #2631). requirements. Functional Outcome Measure: Change in Mo- Adopted in the FY 2015 IPPS/LTCH PPS final April 1, 2016 ...... FY 2018 and subse- bility among Long-Term Care Hospital Pa- rule (79 FR 50298 through 50301). quent years. tients Requiring Ventilator Support (NQF #2632).

6. LTCH QRP Quality, Resource Use and proposed rule, we are proposing three • Potentially Preventable 30-Day Other Measures Proposed for the FY new measures. These measures were Post-Discharge Readmission Measure for 2018 Payment Determination and developed to meet the requirements of LTCH QRP. Subsequent Years the IMPACT Act. They are: The measures are described in more For the FY 2018 payment • MSPB–PAC LTCH QRP; detail below. determinations and subsequent years, in • Discharge to Community-PAC For the risk-adjustment of the addition to the quality measures we are LTCH QRP, and resource use and other measures, we retaining under our policy described in understand the important role that section VIII.C.3. of the preamble of this sociodemographic status plays in the

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care of patients. However, we continue Rising Medicare expenditures for these MSPB–PAC LTCH QRP to have concerns about holding post-acute care as well as wide variation episodes—ranging from approximately providers to different standards for the in spending for these services $27,502 at the 5th percentile to outcomes of their patients of diverse underlines the importance of measuring approximately $115,291 at the 95th sociodemographic status because we do resource use for providers rendering percentile. This variation is partially not want to mask potential disparities or these services. Between 2001 and 2013, driven by variation in payments minimize incentives to improve the Medicare PAC spending grew at an occurring following LTCH treatment. outcomes of disadvantaged populations. annual rate of 6.1 percent and doubled Evaluating Medicare payments during We routinely monitor the impact of to $59.4 billion, while payments to an episode creates a continuum of sociodemographic status on providers’ inpatient hospitals grew at an annual accountability between providers and results on our measures. rate of 1.7 percent over this same has the potential to improve post- The NQF is currently undertaking a 2- period.169 A study commissioned by the treatment care planning and year trial period in which new measures Institute of Medicine found that coordination. While some stakeholders and measures undergoing maintenance variation in PAC spending explains 73 throughout the measure development review will be assessed to determine if percent of variation in total Medicare process supported the measures and risk-adjusting for sociodemographic spending across the United States.170 believed that measuring Medicare factors is appropriate. For 2 years, NQF We reviewed the NQF’s consensus- spending was critical for improving will conduct a trial of temporarily endorsed measures and were unable to efficiency, other stakeholders believed allowing inclusion of sociodemographic identify any NQF-endorsed resource use that resource use measures did not factors in the risk-adjustment approach measures for PAC settings. Therefore, reflect quality of care in that they do not for some performance measures. At the we are proposing this MSPB–PAC LTCH take into account patient outcomes or conclusion of the trial, NQF will issue QRP measure under the Secretary’s experience beyond those observable in recommendations on future permanent authority to specify non-NQF-endorsed claims data. However, LTCHs involved inclusion of sociodemographic factors. measures under section 1899B(e)(2)(B) in the provision of high quality PAC During the trial, measure developers are of the Act. Because of the current lack care as well as appropriate discharge expected to submit information such as of resource use measures for PAC planning and post-discharge care analyses and interpretations as well as settings, our proposed MSPB–PAC coordination would be expected to performance scores with and without LTCH QRP measure has the potential to perform well on this measure since sociodemographic factors in the risk provide valuable information to LTCHs beneficiaries would likely experience adjustment model. on their relative Medicare spending in fewer costly adverse events (for example, avoidable hospitalizations, Furthermore, the Office of the delivering services to approximately 171 infections, and emergency room usage). Assistant Secretary for Planning and 122,000 Medicare beneficiaries. The proposed MSPB–PAC LTCH QRP Further, it is important that the cost of Evaluation (ASPE) is conducting episode-based measure will provide care be explicitly measured so that, in research to examine the impact of actionable and transparent information conjunction with other quality sociodemographic status on quality to support LTCHs’ efforts to promote measures, we can recognize providers measures, resource use, and other care coordination and deliver high that are involved in the provision of measures under the Medicare program quality care at a lower cost to Medicare. high quality care at lower cost. as directed by the IMPACT Act. We will The MSPB–PAC LTCH QRP measure We have undertaken development of closely examine the findings of the holds LTCHs accountable for the MSPB–PAC measures for each of the ASPE reports and related Secretarial Medicare payments within an ‘‘episode four PAC settings. We intend to propose recommendations and consider how of care’’ (episode), which includes the IRF-, SNF-, and HHA-specific MSBP– they apply to our quality programs at period during which a patient is directly PAC measures through future notice- such time as they are available. under the LTCH’s care, as well as a and-comment rulemaking. The four We are inviting public comment on defined period after the end of the setting-specific MSPB–PAC measures how socioeconomic and demographic LTCH treatment, which may be are closely aligned in terms of episode factors should be used in risk reflective of and influenced by the construction and measure calculation. adjustment for the resource use services furnished by the LTCH. MSPB– Each of the MSPB–PAC measures assess measures. PAC LTCH QRP episodes, constructed Medicare Part A and Part B spending a. Proposal To Address the IMPACT Act according to the methodology described during an episode, and the numerator Domain of Resource Use and Other below, have high levels of Medicare and denominator are defined similarly Measures: Total Estimated MSPB–PAC spending with substantial variation. In for each of the MSPB–PAC measures. LTCH QRP FY 2013 and FY 2014, Medicare FFS However, developing setting-specific beneficiaries experienced 178,538 measures allows us to account for We are proposing an MSPB–PAC MSPB–PAC LTCH QRP episodes differences between settings in payment LTCH QRP measure for inclusion in the triggered by admission to an LTCH. The policy, the types of data available, and LTCH QRP for the FY 2018 payment mean payment-standardized, risk- the underlying health characteristics of determination and subsequent years. adjusted episode spending for these beneficiaries. For example, the MSPB– Section 1899B(d)(1)(A) of the Act episodes is $67,181. There is substantial PAC LTCH QRP measure reflects the requires the Secretary to specify variation in the Medicare payments for dual payment rate of the LTCH PPS by resource use measures, including total comparing episodes triggered by each estimated Medicare spending per 169 MedPAC, ‘‘A Data Book: Health Care Spending payment rate case only with episodes of beneficiary, on which PAC providers, and the Medicare Program,’’ (2015). 114. the same type, as detailed below. consisting of LTCHs, Inpatient 170 Institute of Medicine, ‘‘Variation in Health The MSPB–PAC measures mirror the Rehabilitation Facilities (IRFs), Skilled Care Spending: Target Decision Making, Not general construction of the Hospital IQR Nursing Facilities (SNFs), and Home Geography,’’ (Washington, DC: National Academies Program MSPB measure that was 2013). 2. Health Agencies (HHAs), are required to 171 Figures for 2013. MedPAC, ‘‘Medicare finalized in the FY 2012 IPPS/LTCH submit necessary data specified by the Payment Policy,’’ Report to the Congress (2015). PPS final rule (76 FR 51618 through Secretary. xvii-xviii. 51627). That measure was endorsed by

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the NQF on December 6, 2013, and has MSPB–PAC measures. We convened a Since the MAP’s review and been used in the Hospital VBP Program TEP consisting of 12 panelists with recommendation of continued (NQF #2158) since FY 2015.172 The combined expertise in all of the PAC development, CMS has continued to Hospital IQR Program MSPB measure settings on October 29 and 30, 2015, in refine risk adjustment models and was originally established under the Baltimore, Maryland. A follow-up email conduct measure testing for the authority of section 1886(o)(2)(B)(ii) of survey was sent to TEP members on IMPACT Act measures in compliance the Act. The hospital MSPB measure November 18, 2015, to which 7 with the MAP’s recommendations. The evaluates hospitals’ Medicare spending responses were received by December 8, proposed IMPACT Act measures are relative to the Medicare spending for the 2015. The MSPB–PAC TEP Summary both consistent with the information national median hospital during a Report is available at: https://www.cms. submitted to the MAP and support the hospital MSPB episode. It assesses gov/Medicare/Quality-Initiatives- scientific acceptability of these Medicare Part A and Part B payments Patient-Assessment-Instruments/Post- measures for use in quality reporting for services performed by hospitals and Acute-Care-Quality-Initiatives/ programs. other healthcare providers during a Downloads/Technical-Expert-Panel-on- In addition, a public comment period, hospital MSPB episode, which is Medicare-Spending-Per-Beneficiary.pdf. accompanied by draft measures comprised of the periods immediately The measures were also presented to the specifications, was originally open from prior to, during, and following a NQF MAP Post-Acute Care/Long-Term January 13 to 27, 2016 and twice patient’s hospital stay.173 174 Care (PAC/LTC) Workgroup on extended to January 29 and February 5. Similarly, the MSPB–PAC measures December 15, 2015. As the MSPB–PAC A total of 45 comments on the MSPB– assess all Medicare Part A and Part B measures were under development, PAC measures were received during this payments for FFS claims with a start there were three voting options for comment period. The comments date during the episode window (which, members: Encourage continued received also covered each of the MAP’s as discussed below, is the time period development, do not encourage further concerns as outlined in their Final during which Medicare FFS Part A and consideration, and insufficient Recommendations.181 The MSPB–PAC Part B services are counted towards the information.176 The MAP PAC/LTC Public Comment Summary Report is MSPB–PAC LTCH QRP episode). Workgroup voted to ‘‘encourage available at: https://www.cms.gov/ However, there are differences between continued development’’ for each of the Medicare/Quality-Initiatives-Patient- the MSPB–PAC measures, as proposed, MSPB–PAC measures.177 The MAP Assessment-Instruments/Post-Acute- and the hospital MSPB measure to PAC/LTC Workgroup’s vote of Care-Quality-Initiatives/IMPACT-Act-of- reflect differences in payment policies ‘‘encourage continued development’’ 2014/IMPACT-Act-Downloads-and- and the nature of care provided in each was affirmed by the MAP Coordinating Videos.html and contains the public PAC setting. For example, the MSPB– Committee on January 26, 2016.178 The comments (summarized and verbatim), PAC measures exclude a limited set of MAP’s concerns about the MSPB–PAC along with our responses including services (for example, for clinically measures, as outlined in their final statistical analyses. If finalized, the unrelated services) provided to a report, ‘‘MAP 2016 Considerations for proposed MSPB–PAC LTCH QRP beneficiary during the episode window Implementing Measures in Federal measure, along with the other MSPB– while the hospital MSPB measure does Programs: Post-Acute Care and Long- PAC measures, as applicable, will be not exclude any services.175 Term Care,’’ and Spreadsheet of Final submitted for NQF endorsement. MSPB–PAC episodes may begin Recommendations were taken into To calculate the MSPB–PAC LTCH within 30 days of discharge from an consideration during the measure QRP measure for each LTCH, we first inpatient hospital as part of a patient’s development process and are discussed define the construction of the MSPB– trajectory from an acute to a PAC as part of our responses to public PAC LTCH QRP episode, including the setting. An LTCH stay beginning within comments, described below.179 180 length of the episode window as well as 30 days of discharge from an inpatient the services included in the episode. hospital will therefore be included once 176 National Quality Forum, Measure Next, we apply the methodology for the in the hospital’s MSPB measure, and Applications Partnership, ‘‘Process and Approach measure calculation. The specifications once in the LTCH’s MSPB–PAC for MAP Pre-Rulemaking Deliberations, 2015–2016’’ are discussed further below. More (February 2016) http://www.qualityforum.org/ detailed specifications for the proposed measure. Aligning the hospital MSPB WorkArea/linkit.aspx?LinkIdentifier=id&ItemID= and MSPB–PAC measures in this way 81693. MSPB–PAC measures, including the creates continuous accountability and 177 National Quality Forum, Measure MSPB–PAC LTCH QRP measure in this aligns incentives to improve care Applications Partnership Post-Acute Care/Long- proposed rule, are available at: https:// Term Care Workgroup, ‘‘Meeting Transcript—Day 2 www.cms.gov/Medicare/Quality- planning and coordination across of 2’’ (December 15, 2015) 104–106 http:// inpatient and PAC settings. www.qualityforum.org/WorkArea/ Initiatives-Patient-Assessment- We have sought and considered the linkit.aspx?LinkIdentifier=id&ItemID=81470. Instruments/Post-Acute-Care-Quality- input of stakeholders throughout the 178 National Quality Forum, Measure Initiatives/IMPACT-Act-of-2014/ measure development process for the Applications Partnership, ‘‘Meeting Transcript— IMPACT-Act-Downloads-and- Day 1 of 2’’ (January 26, 2016) 231–232 http:// Videos.html. www.qualityforum.org/WorkArea/ 172 QualityNet, ‘‘Measure Methodology Reports: linkit.aspx?LinkIdentifier=id&ItemID=81637. (1) Episode Construction Medicare Spending Per Beneficiary (MSPB) 179 National Quality Forum, Measure Measure,’’ (2015). http://www.qualitynet.org/dcs/ Applications Partnership, ‘‘MAP 2016 An MSPB–PAC LTCH QRP episode ContentServer?pagename=QnetPublic%2FPage%2 Considerations for Implementing Measures in begins at the episode trigger, which is FQnetTier3&cid=1228772053996. Federal Programs: Post-Acute Care and Long-Term 173 defined as the patient’s admission to an QualityNet, ‘‘Measure Methodology Reports: Care’’ Final Report, (February 2016) http:// LTCH. This admitting facility is the Medicare Spending Per Beneficiary (MSPB) www.qualityforum.org/Publications/2016/02/MAP_ Measure,’’ (2015). http://www.qualitynet.org/dcs/ 2016_Considerations_for_Implementing_Measures_ attributed provider, for whom the ContentServer?pagename=QnetPublic% in_Federal_Programs_-_PAC-LTC.aspx. 2FPage%2FQnetTier3&cid=1228772053996. 180 National Quality Forum, Measure 181 National Quality Forum, Measure 174 FY 2012 IPPS/LTCH PPS final rule (76 FR Applications Partnership, ‘‘Spreadsheet of MAP Applications Partnership, ‘‘Spreadsheet of MAP 51619). 2016 Final Recommendations’’ (February 1, 2016) 2016 Final Recommendations’’ (February 1, 2016) 175 FY 2012 IPPS/LTCH PPS final rule (76 FR http://www.qualityforum.org/WorkArea/linkit.aspx? http://www.qualityforum.org/WorkArea/ 51620). LinkIdentifier=id&ItemID=81593. linkit.aspx?LinkIdentifier=id&ItemID=81593.

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MSPB–PAC LTCH QRP measure is Medicare spending to ensure that discussed further below, the measure calculated. The episode window is the beneficiaries with certain conditions takes the ratio of observed spending to time period during which Medicare FFS and complex care needs receive the expected spending for each episode and Part A and Part B services are counted necessary care. Certain services that then takes the average of those ratios towards the MSPB–PAC LTCH QRP have been determined by clinicians to across all of the attributed provider’s episode. Because Medicare FFS claims be outside of the control of an LTCH episodes. The measure is not a simple are already reported to the Medicare include planned hospital admissions, sum of all costs across a provider’s program for payment purposes, LTCHs management of certain preexisting episodes, thus mitigating concerns will not be required to report any chronic conditions (for example, about double counting. additional data to CMS for calculation dialysis for end-stage renal disease of this measure. Thus, there will be no (ESRD), and enzyme treatments for (2) Measure Calculation additional data collection burden from genetic conditions), treatment for Medicare payments for Part A and the implementation of this measure. preexisting cancers, organ transplants, Part B claims for services included in Our proposed MSPB–PAC LTCH QRP and preventive screenings (for example, MSPB–PAC LTCH episodes, defined episode construction methodology colonoscopy and mammograms). according to the methodology above, are differentiates between episodes Exclusion of such services from the used to calculate the MSPB–PAC LTCH triggered by standard payment rate cases MSPB–PAC LTCH QRP episode ensures QRP measure. Measure calculation and site neutral payment rate cases, that facilities do not have disincentives involves determination of the episode reflecting the LTCH dual-payment to treat patients with certain conditions exclusions, the approach for policy detailed in the FY 2016 IPPS/ or complex care needs. standardizing payments for geographic LTCH PPS final rule (80 FR 49601 An MSPB–PAC episode may begin payment differences, the methodology through 49623). Standard and site during the associated services period of for risk adjustment of episode spending neutral episodes would be compared an MSPB–PAC LTCH QRP episode in to account for differences in patient case only with standard and site neutral the 30 days post-treatment. One possible mix, and the specifications for the episodes respectively. Differences in scenario occurs where an LTCH measure numerator and denominator. episode construction between standard discharges a beneficiary who is then The measure calculation is performed and site neutral episodes are noted admitted to a HHA within 30 days. The separately for MSPB–PAC LTCH QRP below; they otherwise share the same HHA claim would be included once as standard and site neutral episodes to definition. an associated service for the attributed ensure that they are compared only to The episode window is comprised of provider of the first MSPB–PAC LTCH other standard and site neutral episodes, a treatment period and an associated QRP episode and once as a treatment respectively. The final MSPB–PAC services period. The treatment period service for the attributed provider of the LTCH QRP measure would combine the begins at the trigger (that is, on the day second MSPB–PAC HHA episode. As in two ratios to construct one LTCH score of admission to the LTCH) and ends on the case of overlap between hospital and as described below. the day of discharge from that LTCH. PAC episodes discussed earlier, this Readmissions to the same facility overlap is necessary to ensure (a) Exclusion Criteria occurring within 7 or fewer days do not continuous accountability between In addition to service-level exclusions trigger a new episode, and instead are providers throughout a beneficiary’s that remove some payments from included in the treatment period of the trajectory of care, as both providers individual episodes, we exclude certain original episode. When two sequential share incentives to deliver high quality episodes in their entirety from the stays at the same LTCH occur within 7 care at a lower cost to Medicare. MSPB–PAC LTCH QRP measure to or fewer days of one another, the Even within the LTCH setting, one ensure that the MSPB–PAC LTCH QRP treatment period ends on the day of MSPB–PAC LTCH QRP episode may measure accurately reflects resource use discharge for the latest LTCH stay. The begin in the associated services period and facilitates fair and meaningful treatment period includes those services of another MSPB–PAC LTCH QRP comparisons between LTCHs. The that are provided directly or reasonably episode in the 30 days post-treatment. proposed episode-level exclusions are managed by the LTCH that are directly The second LTCH claim would be as follows: related to the beneficiary’s care plan. included once as an associated service • Any episode that is triggered by an The associated services period is the for the attributed LTCH of the first LTCH claim outside the 50 States, DC, time during which Medicare Part A and MSPB–PAC LTCH QRP episode and Puerto Rico, and U.S. territories. Part B services (with certain exclusions) once as a treatment service for the • Any episode where the claim(s) are counted towards the episode. The attributed LTCH of the second MSPB– constituting the attributed LTCH’s associated services period begins at the PAC LTCH QRP episode. Again, this treatment have a standard allowed episode trigger and ends 30 days after ensures that LTCHs have the same amount of zero or where the standard the end of the treatment period. The incentives throughout both MSPB–PAC allowed amount cannot be calculated. distinction between the treatment LTCH QRP episodes to deliver quality • Any episode in which a beneficiary period and the associated services care and engage in patient-focused care is not enrolled in Medicare FFS for the period is important because clinical planning and coordination. If the entirety of a 90-day lookback period exclusions of services may differ for second MSPB–PAC LTCH QRP episode (that is, a 90-day period prior to the each period. were excluded from the second LTCH’s episode trigger) plus episode window Certain services are excluded from the MSPB–PAC LTCH QRP measure, that (including where a beneficiary dies), or MSPB–PAC LTCH QRP episodes LTCH would not share the same is enrolled in Part C for any part of the because they are clinically unrelated to incentives as the first LTCH of the first lookback period plus episode window. LTCH care, and/or because LTCHs may MSPB–PAC LTCH QRP episode. The • Any episode in which a beneficiary have limited influence over certain MSPB–PAC LTCH QRP measure is has a primary payer other than Medicare Medicare services delivered by other designed to benchmark the resource use for any part of the 90-day lookback providers during the episode window. of each attributed provider against what period plus episode window. These limited service-level exclusions their spending is expected to be as • Any episode where the claim(s) are not counted towards a given LTCH’s predicted through risk adjustment. As constituting the attributed LTCH’s

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treatment include at least one related sample size and predictive ability make they apply to our quality programs at condition code indicating that it is not them appropriate. We sought and such time as they are available. a prospective payment system bill. considered public comment regarding While we conducted analyses on the the treatment of hospice services (b) Standardization and Risk impact of age by sex on the performance occurring within the MSPB–PAC LTCH Adjustment of the MSPB–PAC LTCH QRP risk- QRP episode window. After adjustment model, we are not proposing Section 1899B(d)(2)(C) of the Act consideration of the comments received, to adjust the MSPB–PAC LTCH measure requires that the MSPB–PAC measures we are proposing to include the for socioeconomic and demographic are adjusted for the factors described Medicare spending for hospice services factors at this time. As this MSPB–PAC under section 1886(o)(2)(B)(ii) of the but risk adjust for them, so that MSPB– LTCH QRP measure will be submitted Act, which include adjustment for PAC LTCH QRP episodes with hospice for NQF endorsement, we prefer to factors such as age, sex, race, severity of are compared to a benchmark reflecting await the results of this trial and study illness, and other factors that the other MSPB–PAC LTCH QRP episodes before deciding whether to risk adjust Secretary determines appropriate. with hospice. We believe that this for socioeconomic and demographic Medicare payments included in the strikes a balance between the measure’s factors. We will monitor the results of proposed MSPB–PAC LTCH QRP intent of evaluating Medicare spending the trial, studies, and recommendations. measure are payment-standardized and and ensuring that providers do not have We are inviting public comment on how risk-adjusted. Payment standardization incentives against the appropriate use of socioeconomic and demographic factors removes sources of payment variation hospice services in a patient-centered should be used in risk adjustment for not directly related to clinical decisions continuum of care. the MSPB–PAC LTCH QRP measure. and facilitates comparisons of resource We understand the important role that use across geographic areas. We are (c) Measure Numerator and sociodemographic status, beyond age, proposing to use the same payment Denominator plays in the care of patients. However, standardization methodology as that we continue to have concerns about The MPSB–PAC LTCH measure is a used in the NQF-endorsed hospital holding hospitals to different standards MSPB measure. This methodology payment-standardized, risk-adjusted for the outcomes of their patients of removes geographic payment ratio that compares a given LTCH’s diverse sociodemographic status differences, such as wage index and Medicare spending against the Medicare because we do not want to mask geographic practice cost index (GPCI), spending of other LTCHs within a potential disparities or minimize incentive payment adjustments, and performance period. Similar to the other add-on payments that support incentives to improve the outcomes of hospital MSPB measure, the ratio allows broader Medicare program goals disadvantaged populations. We for ease of comparison over time as it including indirect graduate medical routinely monitor the impact of obviates the need to adjust for inflation education (IME) and hospitals serving a sociodemographic status on hospitals’ or policy changes. disproportionate share of uninsured results on our measures. The MSPB–PAC LTCH QRP measure patients (DSH).182 The NQF is currently undertaking a 2- is calculated as the ratio of the MSPB– Risk adjustment uses patient claims year trial period in which new measures PAC Amount for each LTCH divided by history to account for case-mix variation and measures undergoing maintenance the episode-weighted median MSPB– and other factors that affect resource use review will be assessed to determine if PAC Amount across all LTCHs. To but are beyond the influence of the risk-adjusting for sociodemographic calculate the MSPB–PAC Amount for attributed LTCH. To assist with risk factors is appropriate. For 2 years, NQF each LTCH, one calculates the average adjustment for MSPB–PAC LTCH QRP will conduct a trial of temporarily of the ratio of the standardized spending episodes, we create mutually exclusive allowing inclusion of sociodemographic for LTCH standard episodes over the and exhaustive clinical case-mix factors in the risk-adjustment approach expected spending (as predicted in risk categories using the most recent for some performance measures. At the adjustment) for LTCH standard institutional claim in the 60 days prior conclusion of the trial, NQF will issue episodes, and the average of the ratio of to the start of the MSPB–PAC LTCH recommendations on future permanent the standardized spending for LTCH site QRP episode. The beneficiaries in these inclusion of sociodemographic factors. neutral episodes over the expected clinical case-mix categories have a During the trial, measure developers are spending (as predicted in risk greater degree of clinical similarity than expected to submit information such as adjustment) for LTCH site neutral the overall LTCH patient population, analyses and interpretations as well as episodes. This quantity is then and allow us to more accurately performance scores with and without multiplied by the average episode estimate Medicare spending. Our sociodemographic factors in the risk spending level across all LTCHs proposed MSPB–PAC LTCH QRP adjustment model. nationally for standard and site neutral model, adapted for the LTCH setting Furthermore, the Office of the episodes. The denominator for an from the NQF-endorsed hospital MSPB Assistant Secretary for Planning and LTCH’s MSPB–PAC LTCH QRP measure measure, uses a regression framework Evaluation (ASPE) is conducting is the episode-weighted national median with a 90-day hierarchical condition research to examine the impact of of the MSPB–PAC Amounts across all category (HCC) lookback period and sociodemographic status on quality LTCHs. An MSPB–PAC LTCH QRP covariates including the clinical case measures, resource use, and other measure of less than 1 indicates that a mix categories, MS–LTC–DRGs, HCC measures under the Medicare program given LTCH’s Medicare spending is less indicators, age brackets, indicators for as directed by the IMPACT Act. We will than that of the national median LTCH originally disabled, ESRD enrollment, closely examine the findings of the during a performance period. and long-term care status, and selected ASPE reports and related Secretarial Mathematically, this is represented in interactions of these covariates where recommendations and consider how equation (A) below:

182 QualityNet, ‘‘CMS Price (Payment) 2015) https://qualitynet.org/dcs/ ContentServer?c=Page&pagename=QnetPublic%2 Standardization—Detailed Methods’’ (Revised May FPage%2FQnetTier4&cid=1228772057350.

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where address the domain of discharge to outcome for many patients who are not community by SNFs, LTCHs, and IRFs • Yij = attributed standardized spending expected to make functional for episode i and provider j by October 1, 2016, and HHAs by improvement during their LTCH stay, • Yˆ ij = expected standardized spending for January 1, 2017. We are proposing to and for patients who may be expected episode i and provider j, as predicted from adopt the measure, Discharge to to decline functionally due to their risk adjustment Community-PAC LTCH QRP, for the medical condition. The discharge to • nj = number of episodes for provider j • LTCH QRP for the FY 2018 payment community outcome offers a multi- n = total number of episodes nationally determination and subsequent years as dimensional view of preparation for • i ∈ {Ij} = all episodes i in the set of episodes attributed to provider j. a Medicare FFS claims-based measure to community life, including the cognitive, meet this requirement. physical, and psychosocial elements (3) Data Sources This proposed measure assesses involved in a discharge to the The MSPB–PAC LTCH QRP resource successful discharge to the community community.185 186 use measure is an administrative claims- from an LTCH setting, with successful In addition to being an important based measure. It uses Medicare Part A discharge to the community including outcome from a patient and family and Part B claims from FFS no unplanned rehospitalizations and no perspective, patients discharged to beneficiaries and Medicare eligibility death in the 31 days following discharge community settings, on average, incur files. from the LTCH. Specifically, this lower costs over the recovery episode, proposed measure reports an LTCH’s compared with those discharged to (4) Cohort risk-standardized rate of Medicare FFS institutional settings.187 188 Given the The measure cohort includes patients who are discharged to the high costs of care in institutional Medicare FFS beneficiaries with an community following an LTCH stay, settings, encouraging LTCHs to prepare LTCH treatment period ending during and do not have an unplanned patients for discharge to community, the data collection period. readmission to an acute care hospital or when clinically appropriate, may have LTCH in the 31 days following (5) Reporting cost-saving implications for the discharge to community, and who Medicare program.189 Also, providers If this proposed measure is finalized, remain alive during the 31 days have discovered that successful we intend to provide initial confidential following discharge to community. The discharge to community was a major feedback to providers, prior to public term ‘‘community,’’ for this measure, is driver of their ability to achieve savings, reporting of this measure, based on defined as home/self-care, with or where capitated payments for post-acute Medicare FFS claims data from without home health services, based on care were in place.190 For patients who discharges in CY 2015 and CY 2016. We Patient Discharge Status Codes 01, 06, require long-term care due to persistent intend to publicly report this measure 81, and 86 on the Medicare FFS 183 184 disability, discharge to community using claims data from discharges in CY claim. This measure is could result in lower long-term care 2016 and CY 2017. conceptualized uniformly across the We are proposing a minimum of 20 PAC settings, in terms of the definition 185 episodes for reporting and inclusion in El-Solh AA, Saltzman SK, Ramadan FH, of the discharge to community outcome, Naughton BJ. Validity of an artificial neural the LTCH QRP. For the reliability the approach to risk adjustment, and the network in predicting discharge destination from a calculation, as described in the measure measure calculation. postacute geriatric rehabilitation unit. Archives of specifications identified and for which Discharge to a community setting is physical medicine and rehabilitation. a link has been provided above, we used an important health care outcome for 2000;81(10):1388–1393. 186 Tanwir S, Montgomery K, Chari V, Nesathurai two years of data (FY 2013 and FY 2014) many patients for whom the overall S. Stroke rehabilitation: availability of a family to increase the statistical reliability of goals of post-acute care include member as caregiver and discharge destination. this measure. The reliability results optimizing functional improvement, European journal of physical and rehabilitation support the 20 episode case minimum, returning to a previous level of medicine. 2014;50(3):355–362. 187 and 98.83 percent of LTCHs had independence, and avoiding Dobrez D, Heinemann AW, Deutsch A, Manheim L, Mallinson T. Impact of Medicare’s moderate or high reliability (above 0.4). institutionalization. Returning to the prospective payment system for inpatient We are inviting public comment on community is also an important rehabilitation facilities on stroke patient outcomes. our proposal to adopt the MSPB–PAC American journal of physical medicine & LTCH QRP measure for the LTCH QRP. 183 Further description of patient discharge status rehabilitation/Association of Academic Physiatrists. codes can be found, for example, at the following 2010;89(3):198–204. b. Proposal To Address the IMPACT Act Web page: https://med.noridianmedicare.com/web/ 188 Gage B, Morley M, Spain P, Ingber M. Domain of Resource Use and Other jea/topics/claim-submission/patient-status-codes. Examining Post Acute Care Relationships in an Measures: Discharge to Community-Post 184 This definition is not intended to suggest that Integrated Hospital System. Final Report. RTI board and care homes, assisted living facilities, or International;2009. Acute Care (PAC) Long-Term Care other settings included in the definition of 189 Ibid. Hospital Quality Reporting Program ‘‘community’’ for the purpose of this measure are 190 Doran JP, Zabinski SJ. Bundled payment the most integrated setting for any particular initiatives for Medicare and non-Medicare total Sections 1899B(d)(1)(B) and individual or group of individuals under the joint arthroplasty patients at a community hospital: 1899B(a)(2)(E)(ii) of the Act require the Americans with Disabilities Act (ADA) and Section bundles in the real world. The journal of Secretary to specify a measure to 504. arthroplasty. 2015;30(3):353–355.

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costs for Medicaid and for patients’ out- community rates in the IRF setting have study of 23 LTCHs demonstrated that of-pocket expenditures.191 been reported to range from about 60 to 28.8 percent of 1,061 patients who were Analyses conducted for ASPE on PAC 80 percent.200 201 202 203 204 205 Longer- ventilator-dependent on admission were episodes, using a 5 percent sample of term studies show that rates of discharged to home.212 A single-center 2006 Medicare claims, revealed that discharge to community from IRFs have study revealed that 31 percent of LTCH relatively high average, unadjusted decreased over time as IRF length of hemodialysis patients were discharged Medicare payments are associated with stay has decreased.206 207 Greater to home.213 In the LTCH Medicare FFS discharge to institutional settings from variation in discharge to community population, using CY 2012–2013 IRFs, SNFs, LTCHs or HHAs, as rates is seen in the SNF setting, with national data, we found that compared with payments associated rates ranging from 31 to 65 approximately 25 percent of patients with discharge to community percent.208 209 210 211 A multi-center were discharged to the community. One settings.192 Average, unadjusted study noted that 64 percent of Medicare payments associated with destination among older patients with traumatic beneficiaries who were discharged from discharge to community settings ranged brain injury. Archives of physical medicine and the home health episode did not use any from $0 to $4,017 for IRF discharges, $0 rehabilitation. 2008;89(2):231–236. other acute or post-acute services paid 199 Berges IM, Kuo YF, Ostir GV, Granger CV, to $3,544 for SNF discharges, $0 to Graham JE, Ottenbacher KJ. Gender and ethnic by Medicare in the 30 days after $4,706 for LTCH discharges, and $0 to differences in rehabilitation outcomes after hip- discharge.214 However, significant $992 for HHA discharges. In contrast, replacement surgery. American journal of physical numbers of patients were admitted to payments associated with discharge to medicine & rehabilitation/Association of Academic Physiatrists. 2008;87(7):567–572. hospitals (29 percent) and lesser non-community settings were 200 Galloway RV, Granger CV, Karmarkar AM, et numbers to SNFs (7.6 percent), IRFs (1.5 considerably higher, ranging from al. The Uniform Data System for Medical percent), home health (7.2 percent) or $11,847 to $25,364 for IRF discharges, Rehabilitation: report of patients with debility hospice (3.3 percent).215 $9,305 to $29,118 for SNF discharges, discharged from inpatient rehabilitation programs Discharge to community is an in 2000–2010. American journal of physical $12,465 to $18,205 for LTCH discharges, medicine & rehabilitation/Association of Academic actionable health care outcome, as and $7,981 to $35,192 for HHA Physiatrists. 2013;92(1):14–27. targeted interventions have been shown discharges.193 201 Morley MA, Coots LA, Forgues AL, Gage BJ. to successfully increase discharge to Measuring and comparing facility- Inpatient rehabilitation utilization for Medicare community rates in a variety of post- beneficiaries with multiple sclerosis. Archives of 216 217 218 219 level discharge to community rates is physical medicine and rehabilitation. acute settings. Many of these expected to help differentiate among 2012;93(8):1377–1383. interventions involve discharge facilities with varying performance in 202 Reistetter TA, Graham JE, Deutsch A, Granger planning or specific rehabilitation this important domain, and to help CV, Markello S, Ottenbacher KJ. Utility of strategies, such as addressing discharge avoid disparities in care across patient functional status for classifying community versus institutional discharges after inpatient barriers and improving medical and groups. Variation in discharge to rehabilitation for stroke. Archives of physical community rates has been reported medicine and rehabilitation. 2010;91(3):345–350. patient outcomes in hospital-based versus within and across post-acute settings; 203 Gagnon D, Nadeau S, Tam V. Clinical and freestanding skilled-nursing facilities. Medical care across a variety of facility-level administrative outcomes during publicly-funded research and review: MCRR. 2006;63(5):599–622. inpatient stroke rehabilitation based on a case-mix 211 characteristics, such as geographic Wodchis WP, Teare GF, Naglie G, et al. Skilled group classification model. Journal of rehabilitation nursing facility rehabilitation and discharge to location (for example, regional location, medicine. 2005;37(1):45–52. home after stroke. Archives of physical medicine urban or rural location), ownership (for 204 DaVanzo J, El-Gamil A, Li J, Shimer M, and rehabilitation. 2005;86(3):442–448. example, for-profit or nonprofit), and Manolov N, Dobson A. Assessment of patient 212 Scheinhorn DJ, Hassenpflug MS, Votto JJ, et al. outcomes of rehabilitative care provided in Post-ICU mechanical ventilation at 23 long-term freestanding or hospital-based units; inpatient rehabilitation facilities (IRFs) and after care hospitals: a multicenter outcomes study. Chest. and across patient-level characteristics, discharge. Vienna, VA: Dobson DaVanzo & 2007;131(1):85–93. Associates, LLC;2014. such as race and 213 Thakar CV, Quate-Operacz M, Leonard AC, 194 195 196 197 198 199 205 Kushner DS, Peters KM, Johnson-Greene D. gender. Discharge to Eckman MH. Outcomes of hemodialysis patients in Evaluating Siebens Domain Management Model for a long-term care hospital setting: a single-center Inpatient Rehabilitation to Increase Functional 191 study. American journal of kidney diseases: the Newcomer RJ, Ko M, Kang T, Harrington C, Independence and Discharge Rate to Home in official journal of the National Kidney Foundation. Hulett D, Bindman AB. Health Care Expenditures Geriatric Patients. Archives of physical medicine 2010;55(2):300–306. After Initiating Long-term Services and Supports in and rehabilitation. 2015;96(7):1310–1318. 214 Wolff JL, Meadow A, Weiss CO, Boyd CM, Leff the Community Versus in a Nursing Facility. 206 Galloway RV, Granger CV, Karmarkar AM, et Medical Care. 2016;54(3):221–228. al. The Uniform Data System for Medical B. Medicare home health patients’ transitions 192 Gage B, Morley M, Spain P, Ingber M. Rehabilitation: report of patients with debility through acute and post-acute care settings. Medical Examining Post Acute Care Relationships in an discharged from inpatient rehabilitation programs care. 2008;46(11):1188–1193. Integrated Hospital System. Final Report. RTI in 2000–2010. American journal of physical 215 Ibid. International;2009. medicine & rehabilitation/Association of Academic 216 Kushner DS, Peters KM, Johnson-Greene D. 193 Ibid. Physiatrists. 2013;92(1):14–27. Evaluating Siebens Domain Management Model for 194 Reistetter TA, Karmarkar AM, Graham JE, et 207 Mallinson T, Deutsch A, Bateman J, et al. Inpatient Rehabilitation to Increase Functional al. Regional variation in stroke rehabilitation Comparison of discharge functional status after Independence and Discharge Rate to Home in outcomes. Archives of physical medicine and rehabilitation in skilled nursing, home health, and Geriatric Patients. Archives of physical medicine rehabilitation. 2014;95(1):29–38. medical rehabilitation settings for patients after hip and rehabilitation. 2015;96(7):1310–1318. 195 El-Solh AA, Saltzman SK, Ramadan FH, fracture repair. Archives of physical medicine and 217 Wodchis WP, Teare GF, Naglie G, et al. Skilled Naughton BJ. Validity of an artificial neural rehabilitation. 2014;95(2):209–217. nursing facility rehabilitation and discharge to network in predicting discharge destination from a 208 El-Solh AA, Saltzman SK, Ramadan FH, home after stroke. Archives of physical medicine postacute geriatric rehabilitation unit. Archives of Naughton BJ. Validity of an artificial neural and rehabilitation. 2005;86(3):442–448. physical medicine and rehabilitation. network in predicting discharge destination from a 218 Berkowitz RE, Jones RN, Rieder R, et al. 2000;81(10):1388–1393. postacute geriatric rehabilitation unit. Archives of Improving disposition outcomes for patients in a 196 March 2015 Report to the Congress: Medicare physical medicine and rehabilitation. geriatric skilled nursing facility. Journal of the Payment Policy. Medicare Payment Advisory 2000;81(10):1388–1393. American Geriatrics Society. 2011;59(6):1130–1136. Commission;2015. 209 Hall RK, Toles M, Massing M, et al. Utilization 219 Kushner DS, Peters KM, Johnson-Greene D. 197 Bhandari VK, Kushel M, Price L, Schillinger of acute care among patients with ESRD discharged Evaluating use of the Siebens Domain Management D. Racial disparities in outcomes of inpatient stroke home from skilled nursing facilities. Clinical Model during inpatient rehabilitation to increase rehabilitation. Archives of physical medicine and journal of the American Society of Nephrology: functional independence and discharge rate to rehabilitation. 2005;86(11):2081–2086. CJASN. 2015;10(3):428–434. home in stroke patients. PM & R: the journal of 198 Chang PF, Ostir GV, Kuo YF, Granger CV, 210 Stearns SC, Dalton K, Holmes GM, Seagrave injury, function, and rehabilitation. 2015;7(4):354– Ottenbacher KJ. Ethnic differences in discharge SM. Using propensity stratification to compare 364.

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functional status.220 221 222 223 The The MAP encouraged continued Discharge Location (item A2100) codes effectiveness of these interventions development of the proposed measure on the LTCH Continuity Assessment suggests that improvement in discharge to meet the mandate of the IMPACT Act. Record and Evaluation (CARE) Data Set to community rates among post-acute The MAP supported the alignment of Version 1.01. We further examined the care patients is possible through this proposed measure across PAC accuracy of the ‘‘Patient Discharge modifying provider-led processes and settings, using standardized claims data. Status Code’’ on the PAC claim by interventions. More information about the MAP’s assessing how frequently discharges to A TEP convened by our measure recommendations for this measure is an acute care hospital were confirmed development contractor was strongly available at: http:// by follow-up acute care claims. We supportive of the importance of www.qualityforum.org/Publications/ discovered that 88 percent to 91 percent _ _ _ measuring discharge to community 2016/02/MAP 2016 Considerations of IRF, LTCH, and SNF claims with outcomes, and implementing the for_Implementing_Measures_in_ _ _ _ acute care discharge status codes were proposed measure, Discharge to Federal Programs - PAC-LTC.aspx. followed by an acute care claim on the Since the MAP’s review and Community-PAC LTCH QRP in the day of, or day after, PAC discharge. We recommendation of continued LTCH QRP. The panel provided input believe these data support the use of the development, we have continued to on the technical specifications of this claims ‘‘Patient Discharge Status Code’’ proposed measure, including the refine risk-adjustment models and conduct measure testing for this for determining discharge to a feasibility of implementing the measure, community setting for this measure. In as well as the overall measure reliability measure, as recommended by the MAP. This proposed measure is consistent addition, this measure can feasibly be and validity. A summary of the TEP implemented in the LTCH QRP because proceedings is available on the PAC with the information submitted to the MAP and is scientifically acceptable for all data used for measure calculation are Quality Initiatives Downloads and derived from Medicare FFS claims and Videos Web site at: https://www.cms. current specification in the LTCH QRP. As discussed with the MAP, we fully eligibility files, which are already gov/Medicare/Quality-Initiatives- available to CMS. Patient-Assessment-Instruments/Post- anticipate that additional analyses will Acute-Care-Quality-Initiatives/IMPACT- continue as we submit this measure to Based on the evidence discussed Act-of-2014/IMPACT-Act-Downloads- the ongoing measure maintenance above, we are proposing to adopt the and-Videos.html. process. measure, Discharge to Community-PAC We also solicited stakeholder We reviewed the NQF’s consensus- LTCH QRP, for the LTCH QRP for FY feedback on the development of this endorsed measures and were unable to 2018 payment determination and measure through a public comment identify any NQF-endorsed resource use subsequent years. This proposed or other measures for post-acute care period held from November 9, 2015, measure is calculated using 2 years of focused on discharge to community. In through December 8, 2015. Several data. We are proposing a minimum of addition, we are unaware of any other stakeholders and organizations, 25 eligible stays in a given LTCH for post-acute care measures for discharge including the MedPAC, among others, public reporting of the proposed to community that have been endorsed supported this measure for measure for that LTCH. Since Medicare or adopted by other consensus implementation. The public comment FFS claims data are already reported to organizations. Therefore, we are summary report for the proposed the Medicare program for payment proposing the measure, Discharge to measure is available on the CMS Web purposes, and Medicare eligibility files Community-PAC LTCH QRP, under the site at: https://www.cms.gov/Medicare/ are also available, LTCHs will not be Secretary’s authority to specify non- required to report any additional data to Quality-Initiatives-Patient-Assessment- NQF-endorsed measures under section CMS for calculation of this measure. Instruments/Post-Acute-Care-Quality- 1899B(e)(2)(B) of the Act. Initiatives/IMPACT-Act-of-2014/ We are proposing to use data from the The proposed measure denominator is IMPACT-Act-Downloads-and- Medicare FFS claims and Medicare the risk-adjusted expected number of Videos.html. eligibility files to calculate this discharges to community. The proposed The NQF-convened MAP met on proposed measure. We are proposing to measure numerator is the risk-adjusted December 14 and 15, 2015, and use data from the ‘‘Patient Discharge estimate of the number of patients who provided input on the use of this Status Code’’ on Medicare FFS claims to are discharged to the community, do not proposed Discharge to Community-PAC determine whether a patient was have an unplanned readmission to an LTCH QRP measure in the LTCH QRP. discharged to a community setting for acute care hospital or LTCH in the 31- calculation of this proposed measure. In day post-discharge observation window, 220 Kushner DS, Peters KM, Johnson-Greene D. all PAC settings, we tested the accuracy and who remain alive during the post- Evaluating Siebens Domain Management Model for discharge observation window. The Inpatient Rehabilitation to Increase Functional of determining discharge to a Independence and Discharge Rate to Home in community setting using the ‘‘Patient measure is risk-adjusted for variables Geriatric Patients. Archives of physical medicine Discharge Status Code’’ on the PAC such as age and sex, principal diagnosis, and rehabilitation. 2015;96(7):1310–1318. claim by examining whether discharge comorbidities, ventilator status, ESRD 221 Wodchis WP, Teare GF, Naglie G, et al. Skilled status, and dialysis, among other nursing facility rehabilitation and discharge to to community coding based on PAC home after stroke. Archives of physical medicine claim data agreed with discharge to variables. For technical information and rehabilitation. 2005;86(3):442–448. community coding based on PAC about this proposed measure, including 222 Berkowitz RE, Jones RN, Rieder R, et al. assessment data. We found excellent information about the measure Improving disposition outcomes for patients in a agreement between the two data sources calculation, risk adjustment, and geriatric skilled nursing facility. Journal of the American Geriatrics Society. 2011;59(6):1130–1136. in all PAC settings, ranging from 94.6 denominator exclusions, we refer 223 Kushner DS, Peters KM, Johnson-Greene D. percent to 98.8 percent. Specifically, in readers to the document titled, Proposed Evaluating use of the Siebens Domain Management the LTCH setting, using 2013 data, we Measure Specifications for Measures Model during inpatient rehabilitation to increase found 95.6 percent agreement in coding Proposed in the FY 2017 LTCH QRP functional independence and discharge rate to NPRM, available at: https://www.cms. home in stroke patients. PM & R: the journal of of community and non-community injury, function, and rehabilitation. 2015;7(4):354– discharges when comparing discharge gov/Medicare/Quality-Initiatives- 364. status codes on claims and the Patient-Assessment-Instruments/LTCH-

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Quality-Reporting/LTCH-Quality- discharge. This measure is providers (NQF #2502 for IRFs and NQF Reporting-Measures-Information.html. conceptualized uniformly across the #2510 for SNFs).230 These measures are If this proposed measure is finalized, PAC settings, in terms of the measure endorsed by the NQF, and the NQF- we intend to provide initial confidential definition, the approach to risk endorsed LTCH measure (NQF #2512) feedback to LTCHs, prior to public adjustment, and the measure was adopted into the LTCH QRP in the reporting of this measure, based on calculation. Our approach for defining FY 2016 IPPS/LTCH PPS final rule (80 Medicare FFS claims data from potentially preventable hospital FR 49730 through 49731). Note that discharges in CY 2015 and 2016. We readmissions is described in more detail these NQF-endorsed measures assess intend to publicly report this measure below. all-cause unplanned readmissions. using claims data from discharges in CY Hospital readmissions among the Several general methods and 2016 and 2017. We plan to submit this Medicare population, including algorithms have been developed to proposed measure to the NQF for beneficiaries that utilize PAC, are assess potentially avoidable or consideration for endorsement. common, costly, and often preventable hospitalizations and We are inviting public comment on preventable.224 225 MedPAC and a study readmissions for the Medicare our proposal to adopt the measure, by Jencks et al. estimated that 17 to 20 population. These include the Agency Discharge to Community-PAC LTCH percent of Medicare beneficiaries for Healthcare Research and Quality’s QRP, for the LTCH QRP. discharged from the hospital were (AHRQ’s) Prevention Quality Indicators, c. Proposal To Address the IMPACT Act readmitted within 30 days. MedPAC approaches developed by MedPAC, and Domain of Resource Use and Other found that more than 75 percent of 30- proprietary approaches, such as the TM Measures: Potentially Preventable 30- day and 15-day readmissions and 84 3M algorithm for Potentially 231 232 233 Day Post-Discharge Readmission percent of 7-day readmissions were Preventable Readmissions. Measure for Long-Term Care Hospital considered ‘‘potentially Recent work led by Kramer et al. for 226 Quality Reporting Program preventable.’’ In addition, MedPAC MedPAC identified 13 conditions for calculated that annual Medicare which readmissions were deemed as Sections 1899B(a)(2)(E)(ii) and spending on potentially preventable potentially preventable among SNF and 1899B(d)(1)(C) of the Act require the readmissions would be $12 billion for IRF populations.234 235 Although much Secretary to specify measures to address 30-day, $8 billion for 15-day, and $5 of the existing literature addresses the domain of all-condition risk- billion for 7-day readmissions.227 For hospital readmissions more broadly and adjusted potentially preventable hospital readmissions from one post- potentially avoidable hospitalizations hospital readmission rates by SNFs, acute care setting, SNFs, MedPAC for specific settings like long-term care, LTCHs, and IRFs by October 1, 2016, deemed 76 percent of readmissions as these findings are relevant to the and HHAs by January 1, 2017. We are ‘‘potentially avoidable’’—associated development of potentially preventable proposing the measure Potentially with $12 billion in Medicare readmission measures for PAC.236 237 238 Preventable 30-Day Post-Discharge expenditures.228 Mor et al. analyzed Readmission Measure for LTCH QRP as 2006 Medicare claims and SNF 230 National Quality Forum: All-Cause a Medicare FFS claims-based measure to assessment data (Minimum Data Set), Admissions and Readmissions Measures. pp. 1– meet this requirement for the FY 2018 319, April 2015. Available from http:// and reported a 23.5 percent readmission payment determination and subsequent www.qualityforum.org/Publications/2015/04/All- rate from SNFs, associated with $4.3B in Cause_Admissions_and_Readmissions_Measures_-_ years. 229 Final_Report.aspx. The proposed measure assesses the expenditures. Fewer studies have investigated potentially preventable 231 Goldfield, N.I., McCullough, E.C., Hughes, J.S., facility-level risk-standardized rate of et al.: Identifying potentially preventable unplanned, potentially preventable readmission rates from the remaining readmissions. Health Care Finan. Rev. 30(1):75–91, hospital readmissions for Medicare FFS post-acute care settings. 2008. Available from http://www.ncbi.nlm.nih.gov/ beneficiaries in the 30 days post-LTCH We have addressed the high rates of pmc/articles/PMC4195042/. 232 National Quality Forum: Prevention Quality discharge. The LTCH admission must hospital readmissions in the acute care setting as well as in PAC. For example, Indicators Overview. 2008. have occurred within up to 30 days of 233 we developed the following measure: MedPAC: Online Appendix C: Medicare discharge from a prior proximal hospital Ambulatory Care Indicators for the Elderly. pp. 1– stay which is defined as an inpatient All-Cause Unplanned Readmission 12, prepared for Chapter 4, 2011. Available from: _ admission to an acute care hospital Measure for 30 Days Post-Discharge http://www.medpac.gov/documents/reports/Mar11 from LTCHs (NQF #2512), as well as Ch04_APPENDIX.pdf?sfvrsn=0. (including IPPS, CAH, or a psychiatric 234 similar measures for other PAC Kramer, A., Lin, M., Fish, R., et al.: hospital). Hospital readmissions include Development of Inpatient Rehabilitation Facility readmissions to a short-stay acute care Quality Measures: Potentially Avoidable 224 Friedman, B., and Basu, J.: The rate and cost hospital or an LTCH, with a diagnosis Readmissions, Community Discharge, and of hospital readmissions for preventable conditions. Functional Improvement. pp. 1–42, 2015. Available considered to be unplanned and Med. Care Res. Rev. 61(2):225–240, 2004. from http://www.medpac.gov/documents/ potentially preventable. This proposed doi:10.1177/1077558704263799. contractor-reports/development-of-inpatient- measure is claims-based, requiring no 225 Jencks, S.F., Williams, M.V., and Coleman, rehabilitation-facility-quality-measures-potentially- additional data collection or submission E.A.: Rehospitalizations among patients in the avoidable-readmissions-community-discharge-and- Medicare Fee-for-Service Program. N. Engl. J. Med. functional-improvement.pdf?sfvrsn=0. burden for LTCHs. Because the measure 360(14):1418–1428, 2009. doi:10.1016/ 235 Kramer, A., Lin, M., Fish, R., et al.: denominator is based on LTCH j.jvs.2009.05.045 Development of Potentially Avoidable Readmission admissions, each Medicare beneficiary 226 MedPAC: Payment policy for inpatient and Functional Outcome SNF Quality Measures. may be included in the measure readmissions, in Report to the Congress: Promoting pp. 1–75, 2014. Available from http:// Greater Efficiency in Medicare. Washington, DC, pp. www.medpac.gov/documents/contractor-reports/ multiple times within the measurement 103–120, 2007. Available from http:// mar14_snfqualitymeasures_contractor.pdf? period. Readmissions counted in this www.medpac.gov/documents/reports/Jun07_ sfvrsn=0. measure are identified by examining EntireReport.pdf. 236 Allaudeen, N., Vidyarthi, A., Maselli, J., et al.: Medicare FFS claims data for 227 Ibid. Redefining readmission risk factors for general readmissions to either acute care 228 Ibid. medicine patients. J. Hosp. Med. 6(2):54–60, 2011. 229 Mor, V., Intrator, O., Feng, Z., et al.: The doi:10.1002/jhm.805. hospitals (IPPS or CAH) or LTCHs that revolving door of rehospitalization from skilled 237 Gao, J., Moran, E., Li, Y.-F., et al.: Predicting occur during a 30-day window nursing facilities. Health Aff. 29(1):57–64, 2010. potentially avoidable hospitalizations. Med. Care beginning two days after LTCH doi:10.1377/hlthaff.2009.0629. Continued

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Potentially Preventable Readmission Algorithm, this proposed measure readmission. More specifically, the risk- Measure Definition: We conducted a incorporates procedures that are adjustment model for LTCHs account comprehensive environmental scan, considered planned in post-acute care for demographic characteristics (age, analyzed claims data, and obtained settings, as identified in consultation sex, original reason for Medicare input from a TEP to develop a definition with TEPs. Full details on the planned entitlement), principal diagnosis during and list of conditions for which hospital readmissions criteria used, including the prior proximal hospital stay, body readmissions are potentially the CMS Planned Readmission system specific surgical indicators, preventable. The Ambulatory Care Algorithm and additional procedures prolonged mechanical ventilation Sensitive Conditions and Prevention considered planned for post-acute care, indicator, comorbidities, length of stay Quality Indicators, developed by AHRQ, can be found in the document titled, during the patient’s prior proximal served as the starting point in this work. Proposed Measure Specifications for hospital stay, length of stay in the For patients in the 30-day post-PAC Measures Proposed in the FY 2017 intensive care and coronary care unit discharge period, a potentially LTCH QRP NPRM, available at: https:// (ICU and CCU), and number of acute preventable readmission (PPR) refers to www.cms.gov/Medicare/Quality- care hospitalizations in the preceding a readmission for which the probability Initiatives-Patient-Assessment- 365 days. of occurrence could be minimized with Instruments/LTCH-Quality-Reporting/ The proposed measure is calculated adequately planned, explained, and LTCH-Quality-Reporting-Measures- using 2 consecutive calendar years of implemented post-discharge Information.html. FFS claims data, to ensure the statistical instructions, including the The proposed measure, Potentially reliability of this measure for facilities. establishment of appropriate follow-up Preventable 30-Day Post-Discharge In addition, we are proposing a ambulatory care. Our list of PPR Readmission Measure for LTCH QRP, minimum of 25 eligible stays for public conditions is categorized by 3 clinical assesses potentially preventable reporting of the proposed measure. rationale groupings: readmission rates while accounting for A TEP convened by our measure • Inadequate management of chronic patient demographics, principal contractor provided recommendations conditions; diagnosis in the prior hospital stay, on the technical specifications of this • Inadequate management of comorbidities, and other patient factors. proposed measure, including the infections; and While estimating the predictive power development of an approach to define • Inadequate management of other of patient characteristics, the model also potentially preventable hospital unplanned events. estimates a facility-specific effect, readmission for PAC. Details from the Additional details regarding the common to patients treated in each TEP meetings, including TEP members’ definition for potentially preventable facility. This proposed measure is ratings of conditions proposed as being readmissions are available in the calculated for each LTCH based on the potentially preventable, are available in document titled, Proposed Measure ratio of the predicted number of risk- the TEP summary report available on Specifications for Measures Proposed in adjusted, unplanned, potentially the CMS Web site at: https://www.cms. the FY 2017 LTCH QRP NPRM, preventable hospital readmissions that gov/Medicare/Quality-Initiatives- available at: https://www.cms.gov/ occur within 30 days after an LTCH Patient-Assessment-Instruments/Post- Medicare/Quality-Initiatives-Patient- discharge, including the estimated Acute-Care-Quality-Initiatives/IMPACT- Assessment-Instruments/LTCH-Quality- facility effect, to the estimated predicted Act-of-2014/IMPACT-Act-Downloads- Reporting/LTCH-Quality-Reporting- number of risk-adjusted, unplanned and-Videos.html. We also solicited Measures-Information.html. inpatient hospital readmissions for the stakeholder feedback on the This proposed measure focuses on same patients treated at the average development of this measure through a readmissions that are potentially LTCH. A ratio above 1.0 indicates a public comment period held from preventable and also unplanned. higher than expected readmission rate November 2 through December 1, 2015. Similar to the All-Cause Unplanned (worse) while a ratio below 1.0 indicates Comments on the measure varied, with Readmission Measure for 30 Days Post- a lower than expected readmission rate some commenters supportive of the Discharge from LTCHs (NQF #2512), (better). This ratio is referred to as the proposed measure, while others either this proposed measure uses the current standardized risk ratio (SRR). The SRR were not in favor of the measure, or version of the CMS Planned is then multiplied by the overall suggested potential modifications to the Readmission Algorithm as the main national raw rate of potentially measure specifications, such as component for identifying planned preventable readmissions for all LTCH including standardized function data. A readmissions. A complete description of stays. The resulting rate is the risk- summary of the public comments is also the CMS Planned Readmission standardized readmission rate (RSRR) of available on the CMS Web site at: Algorithm, which includes lists of potentially preventable readmissions. https://www.cms.gov/Medicare/Quality- planned diagnoses and procedures, can An eligible LTCH stay is followed Initiatives-Patient-Assessment- be found on the CMS Web site at: until: (1) The 30-day post-discharge Instruments/Post-Acute-Care-Quality- http://www.cms.gov/Medicare/Quality- period ends; or (2) the patient is Initiatives/IMPACT-Act-of-2014/ readmitted to an acute care hospital IMPACT-Act-Downloads-and- Initiatives-Patient-Assessment- (IPPS or CAH) or LTCH. If the Videos.html. Instruments/HospitalQualityInits/ readmission is unplanned and The MAP encouraged continued Measure-Methodology.html. In addition potentially preventable, it is counted as development of the proposed measure. to the CMS Planned Readmission a readmission in the measure Specifically, the MAP stressed the need calculation. If the readmission is to promote shared accountability and 52(2):164–171, 2014. doi:10.1097/MLR.000000 0000000041. planned, the readmission is not counted ensure effective care transitions. More 238 Walsh, E.G., Wiener, J.M., Haber, S., et al.: in the measure rate. information about the MAP’s Potentially avoidable hospitalizations of dually This measure is risk adjusted. The recommendations for this measure is eligible Medicare and Medicaid beneficiaries from risk adjustment modeling estimates the available at: http://www.qualityforum. nursing facility and home-and community-based effects of patient characteristics, org/Publications/2016/02/MAP_2016_ services waiver programs. J. Am. Geriatr. Soc. _ _ _ 60(5):821–829, 2012. doi:10.1111/j.1532– comorbidities, and select health care Considerations for Implementing 5415.2012.03920.x. variables on the probability of Measures_in_Federal_Programs_-_PAC–

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LTC.aspx. At the time, the risk- determination and subsequent years. medication issues.239 This measure is adjustment model was still under The proposed measure, Drug Regimen applied uniformly across the PAC development. Following completion of Review Conducted with Follow-Up for settings. that development work, we were able to Identified Issues-Post-Acute Care (PAC) Medication reconciliation is a process test for measure validity and reliability LTCH QRP, addresses the IMPACT Act of reviewing an individual’s complete as identified in the measure quality domain of Medication and current medication list. Medication specifications document provided Reconciliation. reconciliation is a recognized process above. Testing results are within range for reducing the occurrence of b. Quality Measure Addressing the for similar outcome measures finalized medication discrepancies that may lead in public reporting and value-based IMPACT Act Domain of Medication to Adverse Drug Events (ADEs).240 purchasing programs, including the All- Reconciliation: Drug Regimen Review Medication discrepancies occur when Cause Unplanned Readmission Measure Conducted With Follow-up for there is conflicting information for 30 Days Post-Discharge from LTCHs Identified Issues-Post Acute Care LTCH documented in the medical records. The (NQF #2512) adopted into the LTCH QRP World Health Organization regards QRP. Sections 1899B(a)(2)(E)(i)(III) and medication reconciliation as a standard We reviewed the NQF’s consensus operating protocol necessary to reduce 1899B(c)(1)(C) of the Act require the endorsed measures and were unable to the potential for ADEs that cause harm Secretary to specify a quality measure to identify any NQF-endorsed measures to patients. Medication reconciliation is focused on potentially preventable address the domain of medication an important patient safety process that hospital readmissions. We are unaware reconciliation by October 1, 2018 for addresses medication accuracy during of any other measures for this IMPACT IRFs, LTCHs, and SNFs, and by January transitions in patient care and in Act domain that have been endorsed or 1, 2017 for HHAs. We are proposing to identifying preventable ADEs.241 The adopted by other consensus adopt the quality measure, Drug Joint Commission added medication organizations. Therefore, we are Regimen Review Conducted with reconciliation to its list of National proposing the Potentially Preventable Follow-Up for Identified Issues-PAC Patient Safety Goals (2005), suggesting 30-Day Post-Discharge Readmission LTCH QRP, for the LTCH QRP as a that medication reconciliation is an Measure for LTCH QRP, under the patient-assessment based, cross-setting integral component of medication Secretary’s authority to specify non- quality measure to meet the IMPACT safety.242 The Society of Hospital NQF-endorsed measures under section Act requirements with data collection Medicine published a statement in 1899B(e)(2)(B) of the Act, for the LTCH beginning April 1, 2018 for the FY 2020 agreement of the Joint Commission’s QRP for the FY 2018 payment payment determinations and subsequent emphasis and value of medication determination and subsequent years, years. reconciliation as a patient safety goal.243 given the evidence previously discussed There is universal agreement that above. This proposed measure assesses whether PAC providers were responsive medication reconciliation directly We plan to submit the proposed addresses patient safety issues that can to potential or actual clinically measure to the NQF for consideration of result from medication significant medication issue(s) when endorsement. If this proposed measure miscommunication and unavailable or such issues were identified. is finalized, we intend to provide initial incorrect information.244 245 246 confidential feedback to LTCHs, prior to Specifically, the proposed quality public reporting of this proposed measure reports the percentage of The performance of timely medication measure, based on 2 calendar years of patient stays in which a drug regimen reconciliation is valuable to the process data from discharges in CY 2015 and review was conducted at the time of of drug regimen review. Preventing and 2016. We intend to publicly report this admission and timely follow-up with a responding to ADEs is of critical proposed measure using data from CY physician occurred each time potential importance as ADEs account for 2016 and 2017. clinically significant medication issues significant increases in health services We are inviting public comment on were identified throughout that stay. our proposal to adopt the measure, 239 Institute of Medicine. Preventing Medication For this proposed quality measure, Potentially Preventable 30-Day Post- Errors. Washington DC: National Academies Press; drug regimen review is defined as the 2006. Discharge Readmission Measure for 240 review of all medications or drugs the Ibid LTCH QRP. 241 patient is taking to identify any Leotsakos A., et al. Standardization in patient safety: the WHO High 5s project. Int J Qual Health 7. LTCH QRP Quality Measure Proposed potentially clinically significant Care. 2014:26(2):109–116. for the FY 2020 Payment Determination medication issues. This proposed 242 The Joint Commission. 2016 Long Term Care: and Subsequent Years quality measure utilizes both the National Patient Safety Goals Medicare/Medicaid processes of medication reconciliation Certification-based Option. (NPSG.03.06.01). a. Background 243 Greenwald, J. L., Halasyamani, L., Greene, J., and a drug regimen review, in the event In addition to the measures we are LaCivita, C., et al. (2010). Making inpatient an actual or potential medication issue medication reconciliation patient centered, retaining as described in section occurred. The proposed measure clinically relevant and implementable: a consensus VIII.C.5. of the preamble of this informs whether the PAC facility statement on key principles and necessary first proposed rule under our policy steps. Journal of Hospital Medicine, 5(8), 477–485. described in section VIII.C.3. of the identified and addressed each clinically 244 Leotsakos A., et al. Standardization in patient significant medication issue and if the safety: the WHO High 5s project. Int J Qual Health preamble of this proposed rule and the Care. 2014:26(2):109–116. new quality measures proposed in facility responded or addressed the medication issue in a timely manner. Of 245 The Joint Commission. 2016 Long Term Care: section VIII.C.6. of the preamble of this National Patient Safety Goals Medicare/Medicaid proposed rule for the FY 2018 payment note, drug regimen review in PAC Certification-based Option. (NPSG.03.06.01). determinations and subsequent years, settings is generally considered to 246 IHI. Medication Reconciliation to Prevent we are also proposing one new quality include medication reconciliation and Adverse Drug Events [Internet]. Cambridge, MA: review of the patient’s drug regimen to Institute for Healthcare Improvement; [cited 2016 measure to meet the requirements of the Jan 11]. Available from: http://www.ihi.org/topics/ IMPACT Act for the FY 2020 payment identify potential clinically significant adesmedicationreconciliation/Pages/default.aspx.

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utilization and costs, 247 248 249 including occur when there is conflicting older patients, who may have multiple subsequent emergency room visits and information documented in the medical comorbid conditions and thus multiple re-hospitalizations.250 Annual health records. Almost one-third of medication medications, transitions between acute care costs in the United States are discrepancies have the potential to and post-acute care settings can be estimated at $3.5 billion, resulting in cause patient harm.260 An estimated 50 further complicated,272 and medication 7,000 deaths annually.251 252 percent of patients experienced a reconciliation and patient knowledge Medication errors include the clinically important medication error (medication literacy) can be inadequate duplication of medications, delivery of after hospital discharge in an analysis of post-discharge.273 The proposed quality an incorrect drug, inappropriate drug two tertiary care academic hospitals.261 measure, Drug Regimen Review omissions, or errors in the dosage, route, Medication reconciliation has been Conducted with Follow-Up for frequency, and duration of medications. identified as an area for improvement Identified Issues-PAC LTCH QRP, Medication errors are one of the most during transfer from the acute care provides an important component of common types of medical error and can facility to the receiving post-acute care care coordination for PAC settings and occur at any point in the process of facility. PAC facilities report gaps in would affect a large proportion of the ordering and delivering a medication. medication information between the Medicare population who transfer from Medication errors have the potential to acute care hospital and the receiving hospitals into PAC services each year. result in an ADE.253 254 255 256 257 258 post-acute care setting when performing For example, in 2013, 1.7 million Inappropriately prescribed medications medication reconciliation.262 263 Medicare FFS beneficiaries had SNF are also considered a major healthcare Hospital discharge has been identified stays, 338,000 beneficiaries had IRF concern in the United States for the as a particularly high risk time point, stays, and 122,000 beneficiaries had 274 elderly population, with costs of with evidence that medication LTCH stays. roughly $7.2 billion annually.259 reconciliation identifies high levels of A TEP convened by our measure There is strong evidence that discrepancy.264 265 266 267 268 269 Also, development contractor provided input medication discrepancies occur during there is evidence that medication on the technical specifications of this transfers from acute care facilities to reconciliation discrepancies occur proposed quality measure, Drug post-acute care facilities. Discrepancies throughout the patient stay.270 271 For Regimen Review Conducted with Follow-Up for Identified Issues-PAC 247 Institute of Medicine. Preventing Medication 260 Wong, Jacqueline D., et al. ‘‘Medication LTCH QRP, including components of Errors. Washington DC: National Academies Press; reconciliation at hospital discharge: evaluating reliability, validity and the feasibility of 2006. discrepancies.’’ Annals of Pharmacotherapy 42.10 implementing the measure across PAC 248 Jha AK, Kuperman GJ, Rittenberg E, et al. (2008): 1373–1379. settings. The TEP supported the Identifying hospital admissions due to adverse drug 261 Kripalani S, Roumie CL, Dalal AK, et al. Effect measure’s implementation across PAC events using a computer-based monitor. of a pharmacist intervention on clinically important Pharmacoepidemiol Drug Saf. 2001;10(2):113–119. medication errors after hospital discharge: A settings and was supportive of our plans 249 Hohl CM, Nosyk B, Kuramoto L, et al. randomized controlled trial. Ann Intern Med. to standardize this measure for cross- Outcomes of emergency department patients 2012:157(1):1–10. setting development. A summary of the presenting with adverse drug events. Ann Emerg 262 Gandara, Esteban, et al. ‘‘Communication and TEP proceedings is available on the PAC Med. 2011;58:270–279. information deficits in patients discharged to Quality Initiatives Downloads and 250 Kohn LT, Corrigan JM, Donaldson MS. To Err rehabilitation facilities: an evaluation of five acute Is Human: Building a Safer Health System care hospitals.’’ Journal of Hospital Medicine 4.8 Videos Web site at: https://www.cms. Washington, DC: National Academies Press; 1999. (2009): E28–E33. gov/Medicare/Quality-Initiatives- 251 Greenwald, J. L., Halasyamani, L., Greene, J., 263 Gandara, Esteban, et al. ‘‘Deficits in discharge Patient-Assessment-Instruments/Post- LaCivita, C., et al. (2010). Making inpatient documentation in patients transferred to Acute-Care-Quality-Initiatives/IMPACT- medication reconciliation patient centered, rehabilitation facilities on anticoagulation: results clinically relevant and implementable: a consensus of a system wide evaluation.’’ Joint Commission Act-of-2014/IMPACT-Act-Downloads- statement on key principles and necessary first Journal on Quality and Patient Safety 34.8 (2008): and-Videos.html. steps. Journal of Hospital Medicine, 5(8), 477–485. 460–463. We solicited stakeholder feedback on 252 Phillips, David P.; Christenfeld, Nicholas; and 264 Coleman EA, Smith JD, Raha D, Min SJ. Post the development of this measure by Glynn, Laura M. Increase in US Medication-Error hospital medication discrepancies: prevalence and means of a public comment period held Deaths between 1983 and 1993. The Lancet. contributing factors. Arch Intern Med. 2005 351:643–644, 1998. 165(16):1842–1847. from September 18 through October 6, 253 Institute of Medicine. To err is human: 265 Wong JD, Bajcar JM, Wong GG, et al. 2015. Through public comments building a safer health system. Washington, DC: Medication reconciliation at hospital discharge: submitted by several stakeholders and National Academies Press; 2000. evaluating discrepancies. Ann Pharmacother. 2008 organizations, we received support for 254 Lesar TS, Briceland L, Stein DS. Factors 42(10):1373–1379. implementation of this proposed related to errors in medication prescribing. JAMA. 266 Hawes EM, Maxwell WD, White SF, Mangun 1997:277(4): 312–317. J, Lin FC. Impact of an outpatient pharmacist measure. The public comment summary 255 Bond CA, Raehl CL, & Franke T. Clinical intervention on medication discrepancies and pharmacy services, hospital pharmacy staffing, and health care resource utilization in post and potential adverse drug events. Implications for medication errors in United States hospitals. hospitalization care transitions. Journal of Primary prevention. JAMA. 1995:274(1): 29–34. Pharmacotherapy. 2002:22(2): 134–147. Care & Community Health. 2014; 5(1):14–18. 271 Himmel, W., M. Tabache, and M. M. Kochen. 256 Bates DW, Cullen DJ, Laird N, Petersen LA, 267 Foust JB, Naylor MD, Bixby MB, Ratcliffe SJ. ‘‘What happens to long-term medication when Small SD, et al. Incidence of adverse drug events Medication problems occurring at hospital general practice patients are referred to and potential adverse drug events. Implications for discharge among older adults with heart failure. hospital?.’’European journal of clinical prevention. JAMA. 1995:274(1): 29–34. Research in Gerontological Nursing. 2012, 5(1): 25– pharmacology 50.4 (1996): 253–257. 257 Barker KN, Flynn EA, Pepper GA, Bates DW, 33. 272 Chhabra, P. T., et al. (2012). ‘‘Medication & Mikeal RL. Medication errors observed in 36 268 Pherson EC, Shermock KM, Efird LE, et al. reconciliation during the transition to and from health care facilities. JAMA. 2002: 162(16):1897– Development and implementation of a post long-term care settings: a systematic review.’’ Res 1903. discharge home-based medication management Social Adm Pharm 8(1): 60–75. 258 Bates DW, Boyle DL, Vander Vliet MB, service. Am J Health Syst Pharm. 2014; 71(18): 273 Kripalani S, Roumie CL, Dalal AK, et al. Effect Schneider J, & Leape L. Relationship between 1576–1583. of a pharmacist intervention on clinically important medication errors and adverse drug events. J Gen 269 Pronovosta P, Weasta B, Scwarza M, et al. medication errors after hospital discharge: A Intern Med. 1995:10(4): 199–205. Medication reconciliation: a practical tool to reduce randomized controlled trial. Ann Intern Med. 259 Fu, Alex Z., et al. ‘‘Potentially inappropriate the risk of medication errors. J Crit Care. 2003; 2012:157(1):1–10. medication use and healthcare expenditures in the 18(4): 201–205. 274 March 2015 Report to the Congress: Medicare US community-dwelling elderly.’’ Medical care 270 Bates DW, Cullen DJ, Laird N, Petersen LA, Payment Policy. Medicare Payment Advisory 45.5 (2007): 472–476. Small SD, et al. Incidence of adverse drug events Commission; 2015.

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report for the proposed measure is physician occurred each time one or monitoring and quality improvement in available on the CMS Web site at: more potential clinically significant areas such as patient safety, care https://www.cms.gov/Medicare/Quality- medication issues were identified coordination, and patient satisfaction; Initiatives-Patient-Assessment- throughout that stay. whereas the Care for Older Adults Instruments/Post-Acute-Care-Quality- After careful review of both quality (COA), (NQF #0553) quality measure Initiatives/IMPACT-Act-of-2014/ measures, we have decided to propose would not enable quarterly quality IMPACT-Act-Downloads-and- the quality measure, Drug Regimen updates, and thus data comparisons Videos.html. Review Conducted with Follow-Up for within and across PAC providers would The NQF-convened MAP met on Identified Issues-PAC LTCH QRP for the be difficult due to the limited data and December 14 and 15, 2015 and provided following reasons: scope of the data collected. input on the use of this proposed • The IMPACT Act requires the Therefore, based on the evidence measure, Drug Regimen Review implementation of quality measures, discussed above, we are proposing to Conducted with Follow-Up for using patient assessment data that are adopt the quality measure entitled, Drug Identified Issues-PAC LTCH QRP. The standardized and interoperable across Regimen Review Conducted with MAP encouraged continued PAC settings. The proposed quality Follow-Up for Identified Issues-PAC development of the proposed quality measure, Drug Regimen Review LTCH QRP, for the LTCH QRP for FY measure to meet the mandate added by Conducted with Follow-Up for 2020 payment determination and the IMPACT Act. The MAP agreed with Identified Issues-PAC LTCH QRP, subsequent years. We plan to submit the the measure gaps identified by CMS employs three standardized patient- quality measure to the NQF for including medication reconciliation, assessment data elements for each of the consideration for endorsement. and stressed that medication four PAC settings so that data are The calculation of the proposed reconciliation be present as an ongoing standardized, interoperable, and quality measure would be based on the process. More information about the comparable; whereas, the Care for Older data collection of three standardized MAP’s recommendations for this Adults (COA), (NQF #0553) quality items to be included in the LTCH CARE measure is available at: http:// measure does not contain data elements Data Set. The collection of data by www.qualityforum.org/Publications/ that are standardized across all four means of the standardized items would 2016/02/MAP_2016_Considerations_ PAC settings. be obtained at admission and discharge. for_Implementing_Measures_in_ • The proposed quality measure, For more information about the data Federal_Programs_-_PAC–LTC.aspx. Drug Regimen Review Conducted with submission required for this proposed Since the MAP’s review and Follow-Up for Identified Issues-PAC measure, we refer readers to section recommendation of continued LTCH QRP, requires the identification VIII.C.9. of the preamble of this development, we have continued to of potential clinically significant proposed rule. refine this proposed measure in medication issues at the beginning, The standardized items used to compliance with the MAP’s during, and at the end of the patient’s calculate this proposed quality measure recommendations. The proposed stay to capture data on each patient’s do not duplicate existing items measure is both consistent with the complete PAC stay; whereas, the Care currently used for data collection within information submitted to the MAP and for Older Adults (COA), (NQF #0553) the LTCH CARE Data Set. The proposed support its scientific acceptability for quality measure only requires annual measure denominator is the number of use in quality reporting programs. documentation in the form of a patient stays with a discharge or expired Therefore, we are proposing this medication list in the medical record of assessment during the reporting period. measure for implementation in the the target population. The proposed measure numerator is the LTCH QRP as required by the IMPACT • The proposed quality measure, number of stays in the denominator Act. Drug Regimen Review Conducted with where the medical record contains We reviewed the NQF’s endorsed Follow-Up for Identified Issues-PAC documentation of a drug regimen review measures and identified one NQF- LTCH QRP, includes identification of conducted at: (1) Admission; and (2) endorsed cross-setting and quality the potential clinically significant discharge with a lookback through the measure related to medication medication issues and communication entire patient stay with all potential reconciliation, which applies to the with the physician (or physician clinically significant medication issues SNF, LTCH, IRF, and HHA settings of designee) as well as resolution of the identified during the course of care and care: Care for Older Adults (COA), (NQF issue(s) within a rapid timeframe (by followed up with a physician or #0553). The quality measure, Care for midnight of the next calendar day); physician designee by midnight of the Older Adults (COA), (NQF #0553) whereas, the Care for Older Adults next calendar day. This measure is not assesses the percentage of adults 66 (COA), (NQF #0553) quality measure risk adjusted. For technical information years and older who had a medication does not include any follow-up or about this proposed measure, including review. The Care for Older Adults timeframe in which the follow-up information about the measure (COA), (NQF #0553) measure requires at would need to occur. calculation and discussion pertaining to least one medication review conducted • The proposed quality measure, the standardized items used to calculate by a prescribing practitioner or clinical Drug Regimen Review Conducted with this measure, we refer readers to the pharmacist during the measurement Follow-Up for Identified Issues-PAC document titled, Proposed Measure year and the presence of a medication LTCH QRP, does not have age Specifications for Measures Proposed in list in the medical record. This is in exclusions; whereas, the Care for Older the FY 2017 LTCH QRP NPRM available contrast to the proposed quality Adults (COA), (NQF #0553) quality at: http://www.cms.gov/Medicare/ measure, Drug Regimen Review measure limits the measure’s population Quality-Initiative-Patient-Assessment- Conducted with Follow-Up for to patients aged 66 and older. Instruments/LTCH-Quality-Reporting- Identified Issues-PAC LTCH QRP, • The proposed quality measure, Program-Measures-Information-.html. which reports the percentage of patient Drug Regimen Review Conducted with Data for the proposed quality stays in which a drug regimen review Follow-Up for Identified Issues-PAC measure, Drug Regimen Review was conducted at the time of admission LTCH QRP, would be reported to LTCHs Conducted with Follow-Up for and that timely follow-up with a quarterly to facilitate internal quality Identified Issues-PAC LTCH QRP,

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would be collected using the Long-Term future years in the LTCH QRP. We are with Care Received in Long-Term Care Care Hospital LTCH CARE Data Set with developing a measure related to the Hospitals’’ (80 FR 72722 through submission through the Quality IMPACT Act domain, ‘‘Accurately 72725). Improvement Evaluation System (QIES) communicating the existence of and Also, we are considering a measure providing for the transfer of health Assessment Submission and Processing focused on pain that relies on the (ASAP) system. information and care preferences of an collection of patient-reported pain data, We are inviting public comment on individual to the individual, family and another that documents whether a our proposal to adopt the quality caregiver of the individual, and measure, Drug Regimen Review providers of services furnishing items patient has an Advance Care Plan. Conducted with Follow-Up for and services to the individual, when the Finally, we are considering measures Identified Issues-PAC LTCH QRP for the individual transitions.’’ We are related to patient safety: Venous LTCH QRP. considering the possibility of adding Thromboembolism Prophylaxis, quality measures that rely on the Ventilator Weaning (Liberation) Rate, 8. LTCH QRP Quality Measures and patient’s perspective; that is, measures Compliance with Spontaneous Measure Concepts Under Consideration that include patient-reported experience Breathing Trial (SBT) (including for Future Years of care and health status data. We Tracheostomy Collar Trial (TCT) or We are inviting comment on the recently posted a ‘‘Request for Continuous Positive Airway Pressure importance, relevance, appropriateness, Information to Aid in the Design and (CPAP) Breathing Trial) by Day 2 of the and applicability of each of the quality Development of a Survey Regarding LTCH Stay, and Patients Who Received measures listed in the table below for Patient and Family Member Experiences an Antipsychotic Medication.

LTCH QRP QUALITY MEASURES UNDER CONSIDERATION FOR FUTURE YEARS

IMPACT Act Domain: Accurately communicating the existence of and providing for the transfer of health information and care preferences of an individual to the individual, family caregiver of the individual, and providers of services furnishing items and services to the individual, when the individual transitions IMPACT Act Measure Transfer of health information and care preferences when an individual transitions NQS Priority: Patient- and Caregiver-Centered Care Measures • Patient Experience of Care • Percent of Patients with Moderate to Severe Pain • Advance Care Plan NQS Priority: Patient Safety Measures • Ventilator Weaning (Liberation) Rate • Compliance with Spontaneous Breathing Trial (SBT) (including Tracheostomy Collar Trial (TCT) or Continuous Positive Airway Pressure (CPAP) Breathing Trial) by Day 2 of the LTCH Stay • Patients Who Received an Antipsychotic Medication • Venous Thromboembolism Prophylaxis

9. Proposed Form, Manner, and Timing 1886(m)(5)(C) and (F) of the Act must be quarter for quality data submission, of Quality Data Submission for the FY submitted in a form and manner, and at beginning with quarter 4 of 2015 2018 Payment Determination and a time, specified by the Secretary. As (October 2015 through December 2015). Subsequent Years required by section 1886(m)(5)(A)(i) of The new deadlines apply to all LTCH a. Background the Act, for any LTCH that does not QRP quality measures (except Influenza submit data in accordance with sections Vaccination Coverage Among Section 1886(m)(5)(C) of the Act 1886(m)(5)(C) and (F) of the Act for a Healthcare Personnel (NQF #0431)) for requires that, for the FY 2014 payment given fiscal year, the annual payment the FY 2017 and FY 2018 payment determination and subsequent years, for discharges occurring during the determinations and subsequent years. each LTCH submit to the Secretary data fiscal year must be reduced by 2 b. Timeline for Data Submission Under on quality measures specified by the percentage points. the LTCH QRP for the FY 2018 Payment Secretary. In addition, section In the FY 2016 IPPS/LTCH PPS final Determination and Subsequent Years 1886(m)(5)(F) of the Act requires that, rule (80 FR 49749 through 49752), we: for the fiscal year beginning on the • Adopted timing for new LTCHs to The table below presents the data specified application date, as defined in begin reporting quality data under the collection period, data submission (for section 1899B(a)(2)(E) of the Act, and LTCH QRP for the FY 2017 payment the LTCH CARE Data Set-assessment each subsequent year, each LTCH determination and subsequent years; based and CDC measures) and data submit to the Secretary data on and correction timelines for quality measures specified by the Secretary • Adopted new deadlines that allow measures affecting the FY 2018 and under section 1899B of the Act. The 4.5 months (approximately 135 days) subsequent years payment data required under sections after the end of each calendar year determination.

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SUMMARY DETAILS ON THE LTCH CARE DATA SET AND CDC NHSN DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR PREVIOUSLY ADOPTED QUALITY MEASURES AFFECTING THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS *

Quarterly review and correction Submission Data collection/submission period and data submission First APU Quality measure method quarterly reporting period(s) deadlines for payment determination determination affected

NQF #0678: Percent of Residents LTCH CARE 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. or Patients with Pressure Ul- Data Set/QIES 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- cers That Are New or Wors- ASAP. 31/16; Quarterly for each sub- proximately 135 days after the ened (Short Stay) (76 FR sequent calendar year. end of each quarter. 51748 through 51750). NQF #0138: NHSN Catheter-As- CDC NHSN ...... 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. sociated Urinary Tract Infection 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- (CAUTI) Outcome Measure (76 31/16; Quarterly for each sub- proximately 135 days after the FR 51745 through 51747). sequent calendar year. end of each quarter. NQF #0139: NHSN Central-Line CDC NHSN ...... 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. Associated Bloodstream Infec- 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- tion (CLABSI) Outcome Meas- 31/16; Quarterly for each sub- proximately 135 days after the ure (76 FR 51747 through sequent calendar year. end of each quarter. 51748). NQF #1716: NHSN Facility-wide CDC NHSN ...... 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. Inpatient Hospital-onset 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- Methicillin-resistant Staphy- 31/16; Quarterly for each sub- proximately 135 days after the lococcus aureus (MRSA) sequent calendar year. end of each quarter. Bacteremia Outcome Measure (78 FR 50863 through 50865). NQF #1717: NHSN Facility-wide CDC NHSN ...... 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. Inpatient Hospital-onset Clos- 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- tridium difficile Infection (CDI) 31/16; Quarterly for each sub- proximately 135 days after the Outcome Measure (78 FR sequent calendar year. end of each quarter. 50865 through 50868). NHSN Ventilator-Associated CDC NHSN ...... 1/1/16–3/31/16, 4/1/16–6/30/16, 8/15/16 (Q1), 11/15/16 (Q2), 2/ FY 2018. Event (VAE) Outcome Measure 7/1/16–9/30/16, 10/01/16–12/ 15/17 (Q3), 5/15/17 (Q4); Ap- (79 FR 50301 through 50305). 31/16; Quarterly for each sub- proximately 135 days after the sequent calendar year. end of each quarter. NQF #0680: Percent of Residents LTCH CARE 10/1/15–12/31/15, 1/1/16–3/31/ 5/15/16, 8/15/16 ** ...... FY 2018. or Patients Who Were As- Data Set/QIES 16 **. sessed and Appropriately Given ASAP. the Seasonal Influenza Vaccine (Short Stay) (77 FR 53624 through 53627). NQF #0431: Influenza Vaccination CDC NHSN...... 10/1/16–3/31/17, 10/1–3/31 for 5/15/17, 5/15 for subsequent FY 2018. Coverage Among Healthcare subsequent years. years. Personnel (77 FR 53630 through 53631). NQF #2512: All-Cause Unplanned Medicare FFS N/A ...... N/A ...... FY 2018. Readmission Measure for 30- Claims Data. Days Post-Discharge from Long-Term Care Hospitals (78 FR 50868 through 50874). NQF #0674: Application of Per- LTCH CARE 4/1/16–6/30/16, 7/1/16–9/30/16, 11/15/16 (Q2), 2/15/17 (Q3), 5/ FY 2018. cent of Residents Experiencing Data Set/QIES 10/1/16–12/31/16; Quarterly for 15/17 (Q4); Quarterly approxi- One or More Falls with Major ASAP. each subsequent calendar year. mately 135 days after the end Injury (Long Stay) (80 FR of each quarter for subsequent 49736 through 49739). years. NQF #2631: Percent of Long- LTCH CARE 4/1/16–6/30/16, 7/1/16–9/30/16, 11/15/16 (Q2), 2/15/17 (Q3), 5/ FY 2018. Term Care Hospital Patients Data Set/QIES 10/1/16–12/31/16; Quarterly for 15/17 (Q4); Quarterly approxi- with an Admission and Dis- ASAP. each subsequent calendar year. mately 135 days after the end charge Functional Assessment of each quarter for subsequent and a Care Plan That Address- years. es Function (79 FR 50298 through 50301). NQF #2631: Application of Per- LTCH CARE 4/1/16–6/30/16, 7/1/16–9/30/16, 11/15/16 (Q2), 2/15/17 (Q3), 5/ FY 2018. cent of Long-Term Care Hos- Data Set/QIES 10/1/16–12/31/16; Quarterly for 15/17 (Q4); Quarterly approxi- pital Patients with an Admission ASAP. each subsequent calendar year. mately 135 days after the end and Discharge Functional As- of each quarter for subsequent sessment and a Care Plan That years. Addresses Function (80 FR 49739 through 49747).

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NQF #2632: Functional Outcome LTCH CARE 4/1/16–6/30/16, 7/1/16–9/30/16, 11/15/16 (Q2), 2/15/17 (Q3), 5/ FY 2018. Measure: Change in Mobility Data Set/QIES 10/1/16–12/31/16; Quarterly for 15/17 (Q4); Quarterly approxi- Among Long-Term Care Hos- ASAP. each subsequent calendar year. mately 135 days after the end pital Patients Requiring Venti- of each quarter for subsequent lator Support (79 FR 50298 years. through 50301). * We refer readers to the table below for an illustration of the CY quarterly data collection/submission quarterly reporting periods and correction and submission deadlines for all APU years. ** For this measure, Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine, we refer readers to the proposals on data submission for this measure we are making in section VIII.C.9.d. of the preamble of this proposed rule. These proposals for the FY 2019 payment determination and for FY 2020 payment determination and subsequent years are illustrated in the tables in that section.

Further, in the FY 2016 IPPS/LTCH periods, followed by quarterly review QRP that use the LTCH CARE Data Set PPS final rule (80 FR 49749 through and correction periods and submission or CDC NHSN data sources, payment 49752), we established that the LTCH deadlines. This pattern is illustrated in determination would subsequently use CARE Data Set-based and CDC NHSN the table below and is in place for all the data collection and deadlines shown measures finalized for adoption into the APU years unless otherwise specified. below unless otherwise specified. LTCH QRP would follow a calendar We also wish to illustrate that for the year schedule with quarterly reporting measures finalized for use in the LTCH

ANNUAL CY LTCH CARE DATA SET AND CDC NHSN DATA COLLECTION/SUBMISSION REPORTING PERIODS AND DATA SUBMISSION/CORRECTION DEADLINES FOR PAYMENT DETERMINATIONS

Proposed CY data Data collection/submission quarterly Quarterly review and correction periods and data submission deadlines for pay- collection quarter reporting period ment determination

Quarter 1 ...... January 1–March 31 * ** ...... April 1–August 15 * ...... Deadline: August 15.* ** Quarter 2 ...... April 1–June 30 ...... July 1–November 15 ...... Deadline: November 15. Quarter 3 ...... July 1–September 30 ...... October 1–February 15 ...... Deadline: February 15. Quarter 4 ...... October 1–December 31 * ** ...... January 1–May 15 * ...... Deadline: May 15.* ** * The annual data submission time frame for the measure, Influenza Vaccination Coverage among Healthcare Personnel, is October 1 through March 31 of the subsequent year with a reporting deadline of May 15 in that subsequent year. ** For the measure, Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine, we refer readers to the proposals on data submission for this measure we are making in section VIII.C.9.d. of the preamble of this proposed rule. These proposals for the FY 2019 payment determination and for FY 2020 payment determination and subsequent years are illustrated in the tables in that section.

c. Proposed Timeline and Data claims-based data beginning with CY payment determination and subsequent Submission Mechanisms for the FY 2015 and CY 2016 claims to inform years. In the FY 2014 IPPS/LTCH PPS 2018 Payment Determination and confidential feedback reports for LTCHs, final rule (78 FR 50858 through 50861), Subsequent Years for Proposed New and CYs 2016 and 2017 claims data for we finalized the data submission LTCH QRP Resource Use and Other public reporting. timelines and submission deadlines for Measures—Claims-Based Measures We are inviting public comments on the measures for FY 2016 and FY 2017 this proposal. payment determinations. We refer The MSPB–PAC LTCH QRP measure; readers to the FY 2013 and FY 2014 Discharge to Community-PAC LTCH d. Proposal To Revise the Previously IPPS/LTCH PPS final rules for a more QRP measure and Potentially Adopted Data Collection Period and detailed discussion of the measure, Preventable 30-Day Post-Discharge Submission Deadlines for Percent of timelines and deadlines. Readmission Measure for LTCH QRP, Residents or Patients Who Were which we have proposed in this Assessed and Appropriately Given the In these previous rules, we finalized proposed rule, are Medicare FFS claims- Seasonal Influenza Vaccine (Short Stay) that LTCHs were required to perform based measures. Because claims-based (NQF #0680) for the FY 2019 Payment data collection in alignment with the measures can be calculated based on Determination and Subsequent Years influenza vaccination season (IVS); that data that are already reported to the In the FY 2013 IPPS/LTCH PPS final is, obtaining the vaccination status of Medicare program for payment rule (77 FR 53624 through 53627), we patients who are in an LTCH for one or purposes, no additional information adopted the Percent of Residents or more days between the dates of October collection would be required from Patients Who Were Assessed and 1 of a given year through March 31 of LTCHs. As discussed in section VIII.C.6. Appropriately Given the Seasonal the subsequent year, or what the CDC of the preamble of this proposed rule, Influenza Vaccine (Short Stay) (NQF terms the Influenza Vaccination Season these measures would use 2 years of #0680) measure for the FY 2016 (IVS), but for only those patients whose

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corresponding admissions and a subset of those who had both with data submission deadlines for discharges occurred during the IVS. admissions and discharges within the public reporting and payment Through analysis of the quality data IVS. determinations. However, rather than submitted for this measure, we Further, our proposal effectively using a standard CY timeframe, these discovered that only requiring LTCH changes the data collection and quarterly data collection/submission providers to submit patient Influenza submission timeline for this measure to periods and their subsequent quarterly vaccination data during the IVS include 4 calendar quarters, that is review and correction periods and (October 1 of a given year through based on the influenza season (July 1 of submission deadlines begin with CY March 31 of the subsequent year) any given year through June 30 of the quarter 3, July 1, of a given year and end inadvertently limits the data collection subsequent year), rather than on the CY quarter 2, June 30, of the following to only a subset of patients whose stays calendar year. For the purposes of APU year. determination and for public reporting, at an LTCH qualify for inclusion in the The proposed revisions to the data measure calculation. This measure is data calculation and analysis uses data collection period for the measure structured in such a way that all from an influenza vaccination season Percent of Residents or Patients Who patients in an LTCH for one or more which takes place within the influenza Were Assessed and Appropriately Given days during the IVS are included in the season itself. While the influenza the Seasonal Influenza Vaccine (Short measure. For those patients, an LTCH vaccination season is October 1 of a Stay) (NQF #0680), will ultimately have should have the opportunity to given year (or when the vaccine the effect of helping LTCHs capture demonstrate the Influenza vaccination becomes available) through March 31 of Influenza vaccination data on any LTCH status of these patients on either their the subsequent year, this timeframe patients that were in their hospital for LTCH CARE Data Set (LCDS) admission rests within a greater time period of the one or more days during the IVS, by assessment or on their discharge influenza season, which spans 12 assessment (planned, unplanned, or months—that is, July 1 of a given year ensuring that such patient’s admission expired). By limiting data collection to through June 30 of the subsequent year, and discharge assessments, regardless of only those assessments obtained during as defined by the CDC. Thus, for this the date of those assessments, capture the IVS, per our previously finalized measure, we utilize data from a potential influenza vaccination data, policy, CMS inadvertently excluded the timeframe of 12 months that mirrors the and allow the appropriate inclusion of collection of Influenza vaccination influenza season which is July 1 of a patients and thus the accurate status data on those patients who were given year through June 30 of the calculation of data for this measure. in an LTCH for at least one day during subsequent year. In addition, for the Lastly, this clarification will also the IVS, but for whom the associated APU determination, we review data remove any ambiguity and ensure that LCDS admission and/or discharge submitted beginning on July 1 of the LTCHs are receiving credit for recording assessments occurred outside of the IVS calendar year 2 years prior to the the vaccination status of all patients that (prior to October 1 or after March 31). calendar year of the APU effective date were in their hospital for at least one For these reasons, we are proposing and ending June 30 of the subsequent day during any given IVS, regardless of that beginning with the FY 2019 calendar year, one year prior to the the date(s) of their admission and/or payment determination and subsequent calendar year of the APU effective date. discharge. years, which includes the CY 2016/2017 For example, and as provided in the We would like to note that in order IVS, data collection and submission for below for the FY 2020 (October 1, 2019) to implement the newly proposed the measure Percent of Residents or APU determination, we review data revision to the data collection Patients Who Were Assessed and submission beginning July 1, 2017 timeframes and submission deadlines Appropriately Given the Seasonal through June 30, 2018 for the 2017/2018 for this measure, the FY 2019 payment Influenza Vaccine (Short Stay) (NQF influenza vaccination season (October 1, determination will only be based on #0680) will be required year-round, thus 2017 [or when the vaccine becomes three CY quarters, as this policy will not including all patients in the LTCH one available] through March 31, 2018), so go into effect until October 1, 2016, or more days during the IVS (October 1 as to capture all data that an LTCH will which is the start of the 2016/2017 IVS. of any given CY through March 31 of the have submitted with regard to the 2017/ Because of this, we are not requiring subsequent CY), regardless of the 2018 influenza vaccination season itself LTCHs to respond to the Influenza associated LCDS admission and which resides within the associated vaccination items on the LCDS discharge dates. This includes, for influenza season. We will use admission or discharge assessments that example, a patient that is admitted assessment data from the influenza take place during Q3 2016 (7/1/16–9/30/ September 15 of a given year, and season so as to ensure full capture of 16), as this quarter will occur prior to discharged April 1 of the subsequent vaccination status in the IVS that the effective date of this policy, if year (thus, in the LTCH during the IVS). resides within the influenza season finalized. This is illustrated in the table This proposal would enable the period, as well for public reporting. for the FY 2019 payment determination, important data collection necessary to Further, because we enable the below. All subsequent payment indicate that a patient who had an opportunity to review and correct data determinations will be based on four CY admission or a discharge outside of the for all assessment based LCDS measures quarters, as discussed above, beginning IVS, but was in the facility during the within the LTCH QRP, we continue to with Q3 of CY 2017 for the FY 2020 vaccination season, ensuring that the follow quarterly calendar data payment determination. This is data collected and submitted to CMS is collection/submission quarterly illustrated in table for the FY 2020 representative of the status of all reporting period(s) and their subsequent payment determination and subsequent patients within the IVS, rather than only quarterly review and correction periods years, below.

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FY 2019 PAYMENT DETERMINATION:* SUMMARY DETAILS ON DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR PREVIOUSLY ADOPTED QUALITY MEASURE, NQF #0680 PERCENT OF RESIDENTS OR PATIENTS WHO WERE AS- SESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE

Quarterly review and correction Submission method Data collection/submission periods data submission dead- APU determination affected quarterly reporting period(s) lines for payment determination *

Finalized Measure: NQF #0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (77 FR 53624 through 53627)

LTCH CARE Data Set/QIES ASAP CY 16 ...... 1/1/2017–5/15/17 deadline ...... FY 2019. System. 10/1/16–12/31/16 CY 17 Q1 ...... 4/1/2017–8/15/17 deadline. 1/1/17–3/31/17 CY 17 Q2 ...... 7/1/17–11/15/17 deadline. 4/1/17–6/30/17 * This table refers to the FY 2019 payment determination only. We refer readers to the table below for all subsequent FY payment determinations for this measure.

FY 2020 PAYMENT DETERMINATION AND SUBSEQUENT YEARS: SUMMARY DETAILS ON DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR PREVIOUSLY ADOPTED QUALITY MEASURE, NQF #0680 PERCENT OF RESIDENTS OR PATIENTS WHO WERE ASSESSED AND APPROPRIATELY GIVEN THE SEASONAL INFLUENZA VACCINE

Quarterly review and correction Submission method Data collection/submission periods data submission dead- APU determination affected quarterly reporting period(s) lines for payment determination *

Finalized Measure: NQF #0680 Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (77 FR 53624 through 53627)

LTCH CARE Data Set/QIES ASAP CY 17 Q3 ...... 10/1/17–2/15/18 deadline ...... FY 2020 System. 7/1/17–9/30/17 10/1–2/15 Q3 (7/1–9/30) Subsequent Years CY 17 Q4 ...... 1/1/2018–5/15/18 deadline 10/1/17–12/31/17 1/1–5/15 Q4 (10/1–12/31) CY 18 Q1 ...... 4/1/2018–8/15/18 deadline 1/1/18–3/31/18 4/1–8/15 Q1 (1/1–3/31) CY 18 Q2 ...... 7/1/18–11/15/18 deadline 4/1/18–6/30/18 7/1–11/15 Q2 (4/1–6/30)

We are inviting comment on our Follow-Up for Identified Issues-PAC with the usual April release schedule proposal to revise the data collection LTCH QRP, affecting the FY 2020 for the LTCH CARE Data Set, to give and submission timeframe for the payment determination and subsequent LTCHs sufficient time to update their measure Percent of Residents or Patients years be collected by completing data systems so that they can comply with Who Were Assessed and Appropriately elements that would be added to the the new data reporting requirements, Given the Seasonal Influenza Vaccine LTCH CARE Data Set with submission and to give CMS sufficient time to (Short Stay) (NQF #0680), beginning through the QIES ASAP system. Data determine compliance for the FY 2020 with the FY 2019 payment collection would begin on April 1, 2018. payment determination. The proposed determination and subsequent years. More information on LTCH reporting use of 3 quarters of data for the initial using the QIES ASAP system is located year of assessment data reporting in the e. Proposed Timeline and Data at: https://www.cms.gov/Medicare/ LTCH QRP is consistent with the Submission Mechanisms for the Quality-Initiatives-Patient-Assessment- approach we used previously for the Proposed LTCH QRP Quality Measure Instruments/LTCH-Quality-Reporting/ SNF, IRF, and Hospice QRPs. for the FY 2020 Payment Determination LTCH-Technical-Information.html. The table below presents the and Subsequent Years For the FY 2020 payment proposed data collection period and As discussed in section VIII.C.7. of determination, we are proposing to data submission timelines for the new the preamble of this proposed rule, we collect CY 2018 Q2 through Q4 data, proposed LTCH QRP quality measure are proposing that the data for the that is, beginning with admissions on for the FY 2020 payment determination. proposed quality measure, Drug April 1, 2018 through discharges on We are inviting public comments on Regimen Review Conducted with December 31, 2018, to remain consistent this proposal.

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DETAILS ON THE PROPOSED DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR RESOURCE USE AND OTHER MEASURES AFFECTING THE FY 2020 PAYMENT DETERMINATION

Quarterly review and correction Submission Data collection/submission periods and data submission APU Quality measure method quarterly reporting period deadlines for payment determination determination affected

Drug Regimen Review Conducted LTCH CARE 4/1/18–6/30/18 (Q2), 7/1/18–9/30/ 11/15/18 (Q2), 2/15/19 (Q3), 5/ FY 2020. with Follow-Up for Identified Data Set/QIES 18 (Q3), 10/1/18–12/31/18 (Q4). 15/19 (Q4). Issues-PAC LTCH QRP. ASAP.

Following the close of the reporting data for the FY 2020 payment year reporting cycle as described in quarters for the FY 2020 payment determination would be May 15, 2019 section VIII.C.9.c. of the preamble of determination, LTCHs would have the for these measures. We are also this proposed rule, and illustrated in the already established additional 4.5 proposing that for the FY 2021 payment table below. We are inviting public months to correct their quality data and determination and subsequent years, we comments on this proposal. that the final deadline for correcting would collect data using the calendar

PROPOSED DATA COLLECTION PERIOD AND DATA CORRECTION DEADLINES AFFECTING THE FY 2021 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Proposed quarterly review Submission Proposed CY data collection Proposed data collection/ and correction periods and Quality measure method quarter submission quarterly data submission deadlines for reporting period payment determination

Drug regimen review con- LTCH CARE Quarter 1 ...... January 1–March 31 ...... April 1–August 15. ducted with follow-up for Data Set/ Quarter 2 ...... April 1–June 30 ...... July 1–November 15. identified issues PAC LTCH QIES ASAP. Quarter 3 ...... July 1–September 30 ...... October 1–February 15. QRP. Quarter 4 ...... October 1–December 31 ...... January 1–May 15.

10. LTCH QRP Data Completion Further, we finalized the requirement propose any new policies related to data Thresholds for the FY 2016 Payment that an LTCH must meet or exceed both accuracy validation. In this proposed Determination and Subsequent Years thresholds to avoid receiving a 2 rule, we are not proposing a data In the FY 2015 IPPS/LTCH PPS final percentage point reduction to their validation policy because we are rule (79 FR 50311 through 50314), we annual payment update for a given developing a policy that could be finalized LTCH QRP thresholds for fiscal year, beginning with FY 2016 and applied to several PAC quality reporting completeness of LTCH data for all subsequent payment updates. For programs. We intend to propose a data submissions. To ensure that LTCHs are a detailed discussion of the finalized validation policy through future meeting an acceptable standard for LTCH QRP data completion rulemaking. requirements, we refer readers to the FY completeness of submitted data, we 12. Proposed Change to Previously 2015 IPPS/LTCH PPS final rule (79 FR finalized the policy that, beginning with Codified LTCH QRP Submission 50311 through 50314). We are not the FY 2016 payment determination and Exception and Extension Policies for each subsequent year, LTCHs must proposing any changes to these policies. We refer readers to § 412.560(c) for meet or exceed two separate data 11. LTCH QRP Data Validation Process requirements pertaining to submission completeness thresholds: One threshold for the FY 2016 Payment Determination exception and extension for the FY 2017 set at 80 percent for completion of and Subsequent Years quality measures data collected using payment determination and subsequent the LTCH CARE Data Set submitted Validation is intended to provide years. At this time, we are proposing to through the QIES and a second added assurance of the accuracy of the revise § 412.560(c) to change the timing threshold set at 100 percent for quality data that will be reported to the public for submission of these exception and measures data collected and submitted as required by sections 1886(m)(5)(E) extension requests from 30 days to 90 using the CDC’s NHSN. and 1899B(g) of the Act. In the FY 2015 days from the date of the qualifying In addition, we stated that we would IPPS/LTCH PPS proposed rule (79 FR event which is preventing an LTCH apply the same thresholds to all 28275 through 28276), we proposed, for from submitting their quality data for measures adopted as the LTCH QRP the FY 2016 payment determination and the LTCH QRP. We are proposing the expands and LTCHs begin reporting subsequent years, a process to validate increased time allotted for the data on previously finalized measure the data submitted for quality purposes. submission of the requests from 30 to 90 sets. That is, as we finalize new However, in the FY 2015 IPPS/LTCH days to be consistent with other quality measures through the regulatory PPS final rule (79 FR 50314 through reporting programs; for example, the process, LTCHs will be held 50316), we did not finalize the proposal; Hospital Inpatient Quality Reporting accountable for meeting the previously instead we decided to further explore (IQR) Program is also proposing to finalized data completion threshold suggestions from commenters before extend the deadline to 90 days in requirements for each measure until finalizing the LTCH data validation section VIII.C.15.a. of the preamble of such time that updated threshold process that we proposed. In the FY this proposed rule. We believe that this requirements are proposed and finalized 2016 IPPS/LTCH PPS final rule (80 FR increased time will assist providers through a subsequent regulatory cycle. 49752 through 49753), we did not experiencing an event in having the

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time needed to submit such a request. Also, in the FY 2016 IPPS/LTCH PPS #1716); (2) Facility-wide Inpatient With the exception of this one change, final rule (80 FR 49753 through 49755), Hospital-onset Clostridium difficile we are not proposing any additional we finalized that the display of Infection (CDI) Outcome Measure (NQF changes to the exception and extension information for fall 2016 contains #1717); and beginning with the 2015–16 policies for the LTCH QRP at this time. performance data on four quality influenza vaccination season these two We are inviting public comments on measures: measures; (3) Influenza Vaccination • Percent of Residents or Patients the proposal to revise § 412.560(c) to Coverage Among Healthcare Personnel with Pressure Ulcers That Are New or change the timing for submission of (NQF #0431); and (4) Percent of Worsened (Short Stay) (NQF #0678); Residents or Patients Who Were these exception and extension requests • NHSN CAUTI Outcome Measure from 30 days to 90 days from the date Assessed and Appropriately Given the (NQF #0138); Seasonal Influenza Vaccine (Short Stay) of the qualifying event which is • NHSN CLABSI Outcome Measure preventing an LTCH from submitting (NQF #0680). (NQF #0139); and Standardized infection ratios (SIRs) their quality data for the LTCH QRP. • All-Cause Unplanned Readmission for the Facility-wide Inpatient Hospital- 13. Previously Finalized LTCH QRP Measure for 30-Days Post-Discharge onset Methicillin-resistant Reconsideration and Appeals from LTCHs (NQF #2512). Staphylococcus aureus (MRSA) Procedures The measures Percent of Residents or Bacteremia Outcome Measure (NQF Patients with Pressure Ulcers That Are #1716) and Facility-wide Inpatient We refer readers to § 412.560(d) for a New or Worsened (Short Stay) (NQF Hospital-onset Clostridium difficile summary of our finalized #0678), NHSN CAUTI Outcome Infection (CDI) Outcome Measure (NQF reconsideration and appeals procedures Measure (NQF #0138), and NHSN #1717) would be displayed based on 4 for the LTCH QRP for FY 2017 payment CLABSI Outcome Measure (NQF #0139) rolling quarters of data and would determination and subsequent years. We are based on data collected beginning initially use MRSA Bacteremia and CDI are not proposing any changes to this with the first quarter of 2015 or events that occurred from January 1, policy. However, we wish to clarify that discharges beginning on January 1, 2015 through December 31, 2015 (CY in order to notify LTCHs found to be 2015. With the exception of the All- 2015), for calculations. We are non-compliant with the reporting Cause Unplanned Readmission Measure proposing that the display of these requirements set forth for a given for 30-Days Post-Discharge from LTCHs ratios would be updated quarterly. payment determination, we may include (NQF #2512), rates are displayed based Rates for the Influenza Vaccination the QIES mechanism in addition to U.S. on 4 rolling quarters of data and would Coverage Among Healthcare Personnel mail, and we may elect to utilize the initially use discharges from January 1, (NQF #0431) would be displayed for MACs to administer such notifications. 2015 through December 31, 2015 (CY personnel working in the reporting 2015) for Percent of Residents or facility October 1, 2015 through March 14. Proposals and Policies Regarding Patients with Pressure Ulcers That Are 31, 2016. Rates for the Percent of Public Display of Measure Data for the New or Worsened (Short Stay) (NQF Residents or Patients Who Were LTCH QRP and Procedures for the #0678) and data collected from January Assessed and Appropriately Given the Opportunity To Review and Correct 1, 2015 through December 31, 2015 for Seasonal Influenza Vaccine (Short Stay) Data and Information NHSN CAUTI Outcome Measure (NQF (NQF #0680) would be displayed for a. Public Display of Measures #0138) and NHSN CLABSI Outcome patients in the LTCH during the Measure (NQF #0139). For the influenza vaccination season, from Section 1886(m)(5)(E) of the Act readmissions measure, data will be October 1, 2015, through March 31, requires the Secretary to establish publicly reported beginning with data 2016. We are proposing that the display procedures for making the LTCH QRP collected for discharges beginning of these rates would be updated data available to the public. In the FY January 1, 2013, and rates would be annually for subsequent influenza 2016 IPPS/LTCH PPS final rule (80 FR displayed based on 2 consecutive years vaccination seasons. 49753 through 49755), we finalized our of data. For LTCHs with fewer than 25 Calculations for the MRSA Bacteremia proposals to display performance data eligible cases, we are proposing to and CDI Healthcare Associated Infection for the LTCH QRP quality measures by assign the LTCH to a separate category: (HAI) measures adjust for differences in fall 2016 on a CMS Web site, such as the ‘‘The number of cases is too small the characteristics of hospitals and Hospital Compare, after a 30-day (fewer than 25) to reliably tell how well patients using a Standardized Infection preview period, and to give providers an the LTCH is performing.’’ If an LTCH Ratio (SIR). The SIR is a summary opportunity to review and correct data has fewer than 25 eligible cases, the measure that takes into account submitted to the QIES ASAP system or LTCH’s readmission rates and interval differences in the types of patients that to the CDC NHSN. The procedures for estimates would not be publicly a hospital treats. For a more detailed the opportunity to review and correct reported for the measure. discussion about SIR, we refer readers to data are provided in the following Calculations for all four measures are the FY 2016 IPPS/LTCH PPS final rule section. In addition, we finalized the discussed in detail in the FY 2016 IPPS/ (80 FR 49753). The MRSA Bacteremia proposal to publish a list of LTCHs that LTCH PPS final rule (80 FR 49753 and CDI SIRs may take into account the successfully meet the reporting through 49755). laboratory methods, bed size of the requirements for the applicable payment Pending the availability of data, we hospital, and other facility-level factors. determination on the LTCH QRP Web are proposing to publicly report data in It compares the actual number of HAIs site at: https://www.cms.gov/medicare/ CY 2017 on 4 additional measures in a facility or State to a national quality-initiatives-patient-assessment- beginning with data collected on these benchmark based on previous years of instruments/ltch-quality-reporting/. In measures for the first quarter of 2015, or reported data and adjusts the data based the FY 2016 IPPS/LTCH PPS final rule, discharges beginning on January 1, on several factors. A confidence interval we also finalized that we would update 2015: (1) Facility-wide Inpatient with a lower and upper limit is the list after the reconsideration Hospital-onset Methicillin-resistant displayed around each SIR to indicate requests are processed on an annual Staphylococcus aureus (MRSA) that there is a high degree of confidence basis. Bacteremia Outcome Measure (NQF that the true value of the SIR lies within

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that interval. A SIR with a lower limit influenza vaccination within a CY. For (Short Stay) (NQF #0680) for CY 2017 that is greater than 1.0 means that there example, in 2017 we would display public display. were more HAIs in a facility or State rates for the patient vaccination measure b. Procedures for the Opportunity To than were predicted, and the facility is based on discharges starting on July 1, Review and Correct Data and classified as ‘‘Worse than the U.S. 2015, to June 30, 2016. We are Information National Benchmark.’’ If the SIR has an proposing this approach because it upper limit that is less than 1, the includes the entire influenza Section 1899B(g) of the Act requires facility had fewer HAIs than were vaccination season (October 1, 2015, to the Secretary to establish procedures for predicted and is classified as ‘‘Better March 31, 2016). public reporting of LTCHs’ performance, than the U.S. National Benchmark.’’ If Calculations for Percent of Residents including the performance of individual the confidence interval includes the or Patients Who Were Assessed and LTCHs, on quality measures specified value of 1, there is no statistical Appropriately Given the Seasonal under section 1899B(c)(1) of the Act and difference between the actual number of Influenza Vaccine (Short Stay) (NQF resource use and other measures HAIs and the number predicted, and the #0680) would be based on patients specified under section 1899B(d)(1) of facility is classified as ‘‘No Different meeting any one of the following the Act (collectively, IMPACT Act than U.S. National Benchmark.’’ If the criteria: Patients who received the measures) beginning not later than 2 number of predicted infections is less influenza vaccine during the influenza years after the applicable specified than 1.0, the SIR and confidence season; patients who were offered and application date under section interval are not calculated by CDC. declined the influenza vaccine; and 1899B(a)(2)(E) of the Act. Under section Calculations for the Influenza patients who were ineligible for the 1899B(g)(2) of the Act, the procedures Vaccination Coverage Among influenza vaccine due to must ensure, including through a process consistent with the process Healthcare Personnel (NQF #0431) are contraindication(s). The facility’s applied under section based on reported numbers of personnel summary observed score would be 1886(b)(3)(B)(viii)(VII) of the Act, which who received an influenza vaccine at calculated by combining the observed refers to public display and review the reporting facility or who provided counts of all the criteria. This is requirements in the Hospital IQR written documentation of influenza consistent with the publicly reported Program, that each LTCH has the vaccination outside the reporting patient influenza vaccination measure opportunity to review and submit facility. The sum of these two numbers for Nursing Home Compare. In addition, corrections to its data and information is divided by the total number of for the patient influenza measure, we that are to be made public prior to the personnel working at the facility for at would exclude LTCHs with fewer than least 1 day from October 1 through information being made public. 20 stays in the measure denominator. In the FY 2016 IPPS/LTCH PPS final March 31 of the following year, and the For additional information on the result is multiplied by 100 to produce rule (80 FR 49754), and as illustrated in specifications for this measure, we refer a compliance percentage (vaccination the second table in section VIII.C.9.e. of readers to the LTCH Quality Reporting coverage). No risk adjustment is the preamble of this proposed rule, we Measures Information Web page at: applicable to these calculations. More finalized that once the provider has an http://www.cms.gov/Medicare/Quality- information on these calculations and opportunity to review and correct Initiatives-Patient-Assessment- measure specifications is available at: quarterly data related to measures Instruments/LTCH-Quality-Reporting/ http://www.cdc.gov/nhsn/pdfs/hps- submitted via the QIES ASAP system or LTCH-Quality-Reporting-Measures- manual/vaccination/4-hcp-vaccination- CDC NHSN, we would consider the Information.html. module.pdf. We are proposing that this provider to have been given the data would be displayed on an annual We are inviting public comments on opportunity to review and correct this basis and would include data submitted our proposal to begin publicly reporting data. We wish to clarify that although by LTCHs for a specific, annual the Percent of Residents or Patients Who the correction of data (including claims) influenza vaccination season. A single Were Assessed and Appropriately Given can occur after the submission deadline, compliance (vaccination coverage) the Seasonal Influenza Vaccine (Short if such corrections are made after a percentage for all eligible healthcare Stay) (NQF #0680) measure on particular quarter’s submission and personnel would be displayed for each discharges from July 1 of the previous correction deadline, such corrections facility. calendar year to June 30 of the current will not be captured in the file that We are inviting public comment on calendar year. We are inviting contains data for calculation of our proposal to begin publicly reporting comments on the public display of the measures for public reporting purposes. in CY 2017 pending the availability of measure Percent of Residents or Patients To have publicly displayed performance data on Facility-wide Inpatient Who Were Assessed and Appropriately data that is based on accurate Hospital-onset Methicillin-resistant Given the Seasonal Influenza Vaccine underlying data, it will be necessary for Staphylococcus aureus (MRSA) (NQF #0680) in 2017 pending the LTCHs to review and correct this data Bacteremia Outcome Measure (NQF availability of data. before the quarterly submission and #1716); Facility-wide Inpatient In addition, we are requesting public correction deadline. Hospital-onset Clostridium difficile comments on whether to include in the In this proposed rule, we are restating Infection (CDI) Outcome Measure (NQF future, public display comparison rates and proposing additional details #1717); and Influenza Vaccination based on CMS regions or U.S. census surrounding procedures that would Coverage Among Healthcare Personnel regions for Percent of Residents or allow individual LTCHs to review and (NQF #0431). Patients with Pressure Ulcers That Are correct their data and information on For the Percent of Residents or New or Worsened (Short Stay) (NQF measures that are to be made public Patients Who Were Assessed and #0678); All-Cause Unplanned before those measure data are made Appropriately Given the Seasonal Readmission Measure for 30-Days Post- public. Influenza Vaccine (Short Stay) (NQF Discharge from LTCHs (NQF #2512); For assessment-based measures, we #0680) we are proposing to display rates and Percent of Residents or Patients are proposing a process by which we annually based on the influenza season Who Were Assessed and Appropriately would provide each LTCH with a to avoid reporting for more than one Given the Seasonal Influenza Vaccine confidential feedback report that would

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allow the LTCH to review its generated QM reports) and NHSN data report beginning from the date on which performance on such measures and, used to calculate the measures. During they can access the report. during a review and correction period, the time of data submission for a given As already finalized, corrections to to review and correct the data the LTCH quarterly reporting period and up until the underlying data would not be submitted to CMS via the CMS QIES the quarterly submission deadline, permitted during this time; however, ASAP system for each such measure. In LTCHs could review and perform LTCHs may ask for a correction to their addition, during the review and corrections to errors in the assessment measure calculations during the 30-day correction period, the LTCH would be data used to calculate the measures and preview period. We are proposing that able to request correction of any errors could request correction of measure if CMS determines that the measure, as in the assessment-based measure rate calculations. However, as already it is displayed in the preview report, calculations. established, once the quarterly contains a calculation error, we could We are proposing that these submission deadline occurs, the data is suppress the data on the public confidential feedback reports would be ‘‘frozen’’ and calculated for public reporting Web site, recalculate the available to each LTCH using the reporting and providers can no longer measure and publish it at the time of the CASPER system. We refer to these submit any corrections. We would next scheduled public display date. reports as the LTCH Quality Measure encourage LTCHs to submit timely This process would be consistent with (QM) Reports. We are proposing to assessment data during a given quarterly informal processes used in the Hospital provide monthly updates to the data reporting period and review their data IQR Program. If finalized, we intend to contained in these reports as data and information early during the review utilize a subregulatory mechanism, such become available. We are proposing to and correction period so that they can as our LTCH QRP Web site, to provide provide the reports so that providers identify errors and resubmit data before more information about the preview would be able to view their data and the data submission deadline. reports, such as when they will be made information at both the facility and As noted above, the assessment data available and explain the process for patient level for its quality measures. would be populated into the how and when providers may ask for a The CASPER facility level QM Reports confidential feedback reports and we correction to their measure calculations. may contain information such as the intend to update the reports monthly We are inviting public comment on numerator, denominator, facility rate, with all data that have been submitted these proposals to provide preview and national rate. The CASPER patient- and are available. We believe that the reports using the CASPER system, giving LTCHs 30 days review the level QM Reports may contain data collection/submission quarterly individual patient information which preview report and ask for a correction, reporting periods plus 4.5 months to would provide information related to and to use a subregulatory mechanism review and correct the data is sufficient which patients were included in the to explain the process for how and time for LTCHs to submit, review and, quality measures to identify any when providers may ask for a where necessary, correct their data and potential errors for those measures in correction. information. These timeframes and which we receive patient-level data. In addition to assessment-based deadlines for review and correction of Currently, we do not receive patient- measures and CDC measure data such measures and data satisfy the level data on the CDC measure data received via the NHSN system, we have statutory requirement that LTCHs be received via the NHSN system. In also proposed claims-based measures provided the opportunity to review and addition, we would make other reports for the LTCH QRP. The claims-based available in the CASPER system, such as correct their data and information and measures include those proposed to LTCH CARE Data Set assessment data are consistent with the informal process meet the requirements of the IMPACT submission reports and provider hospitals follow in the Hospital IQR Act as well as the All-Cause Unplanned validation reports, which would Program. Readmission Measure for 30 Days Post- disclose the LTCH’s data submission In the FY 2016 IPPS/LTCH PPS final Discharge from LTCHs (NQF #2512) status providing details on all items rule (80 FR 49753 through 49755) we which was finalized for public display submitted for a selected assessment and finalized the data submission/correction in the FY 2016 IPPS/LTCH PPS final the status of records submitted. and review period. Also, we afford rule (80 FR 49753 through 49755). As We refer providers to the CDC NHSN LTCHs a 30-day preview period prior to noted in above, section 1899B(g)(2) of system Web site for information on public display during which LTCHs the Act requires prepublication provider obtaining reports specific to NHSN may preview the performance review and correction procedures that submitted data at: http://www.cdc.gov/ information on their measures that will are consistent with those followed in nhsn/ltach/index.html. Additional be made public. We would like to the Hospital IQR Program. Under the information regarding the content and clarify that we will provide the preview Hospital IQR Program’s informal availability of these confidential report using the CASPER system, with procedures, for claims-based measures, feedback reports would be provided on which LTCHs are familiar. The CASPER we provide hospitals 30 days to preview an ongoing basis on our Web site at: preview reports inform providers of their claims-based measures and data in https://www.cms.gov/Medicare/Quality- their performance on each measure a preview report containing aggregate Initiatives-Patient-Assessment- which will be publicly reported. Please hospital-level data. We are proposing to Instruments/LTCH-Quality-Reporting/ note that the CASPER preview reports adopt a similar process for the LTCH index.html. for the reporting quarter will be QRP. As previously finalized in the FY available after the 4.5 month correction Prior to the public display of our 2016 IPPS/LTCH PPS final rule (80 FR period and the applicable data claims-based measures, in alignment 49750 through 49752) and illustrated in submission/correction deadline have with the Hospital IQR, HAC Reduction the second table in section VIII.C.9.c. of passed and are refreshed on a quarterly and Hospital VBP Programs, we are the preamble of this proposed rule, basis for those measures publicly proposing to make available through the LTCHs would have approximately 4.5 reported quarterly, and annually for CASPER system, a confidential preview months after the reporting quarter to those measure publicly reported report that will contain information correct any errors of their assessment- annually. We are proposing to give pertaining to claims-based measure rate based data (that appear on the CASPER- LTCHs 30 days to review the preview calculations, for example, facility and

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national rates. The data and information discharge date in the applicable period of factors in determining that the would be for feedback purposes only for a measure is December 31, 2017 for proposed at least 90 day run-out period and could not be corrected. This data collection January 1, 2016 through is appropriate to calculate the claims- information would be accompanied by December 31, 2017, we would create the based measures. After the data extract is additional confidential information data extract on approximately March 31, created, it takes several months to based on the most recent administrative 2018 at the earliest, and use that data to incorporate other data needed for the data available at the time we extract the calculate the claims-based measures for calculations (particularly in the case of claims data for purposes of calculating that applicable period. Since LTCHs risk-adjusted or episode-based the measures. Because the claims-based would not be able to submit corrections measures). We then need to generate measures are recalculated on an annual to the underlying claims snapshot nor and check the calculations. Because basis, these confidential CASPER QM add claims (for those measures that use several months lead time is necessary reports for claims-based measures will LTCH claims) to this data set at the after acquiring the data to generate the be refreshed annually. As previously conclusion of the at least 90-day period claims-based calculations, if we were to finalized in the FY 2016 IPPS/LTCH following the last date of discharge used delay our data extraction point to 12 PPS final rule (80 FR 49753 through in the applicable period, at that time we months after the last date of the last 49755), LTCHs will have 30 days from would consider LTCH claims data to be discharge in the applicable period, we the date the preview report is made complete for purposes of calculating the would not be able to deliver the available in which to review this claims-based measures. calculations to LTCHs sooner than 18 to information. We are proposing that beginning with 24 months after the last discharge. We The 30-day preview period is the only data that will be publicly displayed in believe this would create an time when LTCHs would be able to see 2018, claims-based measures will be unacceptably long delay both for LTCHs claims-based measures before they are calculated using claims data at least 90 and for us to deliver timely calculations publicly displayed. LTCHs would not be days after the last discharge date in the to LTCHs for quality improvement. able to make corrections to underlying applicable period, at which time we We are inviting public comment on claims data during this preview period, would create a data extract or snapshot these proposals. nor would they be able to add new of the available claims data to use for 15. Proposed Mechanism for Providing claims to the data extract. However, the measures calculation. This Feedback Reports to LTCHs LTCHs may request that we correct our timeframe allows us to balance the need measure calculation if the LTCH to provide timely program information Section 1899B(f) of the Act requires believes it is incorrect during the 30-day to LTCHs with the need to calculate the the Secretary to provide confidential preview period. We are proposing that claims-based measures using as feedback reports to PAC providers on if we agree that the measure, as it is complete a data set as possible. As their performance to the measures displayed in the preview report, noted, under this proposed procedure, specified under sections 1899B(c)(1) contains a calculation error, we could during the 30-day preview period, and (d)(1) of the Act, beginning 1 year suppress the data on the public LTCHs would not be able to submit after the specified application date that reporting Web site, recalculate the corrections to the underlying claims applies to such measures and PAC measure, and publish it at the time of data or to add new claims to the data providers. As discussed earlier, the the next scheduled public display date. extract. This is for two reasons: first, for reports we are proposing to provide for This process would be consistent with certain measures, the claims data used use by LTCHs to review their data and informal policies followed in the to calculate the measures may not be information would be confidential Hospital IQR Program. If finalized, we derived from the LTCH’s claims, but are feedback reports that would enable intend to utilize a subregulatory from the claims of another provider. For LTCHs to review their performance on mechanism, such as our LTCH QRP example, the proposed measure the measures required under the LTCH Web site, to explain the process for how Potentially Preventable 30-Day Post- QRP. We are proposing that these and when providers may contest their Discharge Readmission Measure for confidential feedback reports would be measure calculations. LTCH QRP uses claims data submitted available to each LTCH using the The proposed claims-based by the hospital to which the patient was CASPER system. Data contained within measures—The MSPB–PAC LTCH QRP; readmitted, which may not be the these CASPER reports would be Discharge to Community—PAC LTCH LTCH. For the claims that are not those updated as previously described, on a QRP and Potentially Preventable 30-Day of the LTCH, the LTCH could not make monthly basis as the data become Post-Discharge Readmission Measure for corrections to them. Second, even where available except for our claims-based LTCH QRP—use Medicare the claims used to calculate the measures which are only updated on an administrative data from measures are those of the LTCH, it annual basis. hospitalizations for Medicare FFS would not be not possible to correct the We intend to provide detailed beneficiaries. Public reporting of data data after it is extracted for the measures procedures to LTCHs on how to obtain would be based on 2 consecutive calculation. This is because it is their confidential feedback CASPER calendar years (CY) of data, which is necessary to take a static ‘‘snapshot’’ of reports on the LTCH QRP Web site at: consistent with the specifications of the the claims in order to perform the https://www.cms.gov/Medicare/Quality- proposed measures. We are proposing to necessary measure calculations. Initiatives-Patient-Assessment- create data extracts using claims data for We seek to have as complete a data set Instruments/LTCH-Quality-Reporting/ the proposed claims based measures— as possible. We recognize that the index.html. The MSPB–PAC LTCH measure; proposed at least 90 day ‘‘run-out’’ We are proposing to use the CMS Discharge to Community—PAC LTCH period when we would take the data QIES ASAP system to provide quality QRP and Potentially Preventable 30-Day extract to calculate the claims-based measure reports in a manner consistent Post-Discharge Readmission Measure for measures, is less than the Medicare with how providers obtain various LTCH QRP—at least 90 days after the program’s current timely claims filing reports to date. The QIES ASAP system last discharge date in the applicable policy under which providers have up is a confidential and secure system with period, which we will use for the to 1 year from the date of discharge to access granted to providers, or their calculations. For example, if the last submit claims. We considered a number designees.

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We seek public comment on this described in section 1886(s)(1) of the c. Considerations in Selecting Quality proposal to satisfy the requirement to Act for subsequent years. Measures provide confidential feedback reports to Section 1886(s)(4)(C) of the Act Our objective in selecting quality requires that, for FY 2014 (October 1, LTCHs. measures is to balance the need for 2013 through September 30, 2014) and information on the full spectrum of care D. Inpatient Psychiatric Facility Quality each subsequent year, each psychiatric delivery and the need to minimize the Reporting (IPFQR) Program hospital and psychiatric unit must burden of data collection and reporting. submit to the Secretary data on quality 1. Background We have focused on measures that measures as specified by the Secretary. evaluate critical processes of care that a. Statutory Authority The data must be submitted in a form have significant impact on patient Section 1886(s)(4) of the Act, as added and manner and at a time specified by outcomes and support CMS and HHS and amended by sections 3401(f) and the Secretary. Under section priorities for improved quality and 10322(a) of the Affordable Care Act, 1886(s)(4)(D)(i) of the Act, unless the requires the Secretary to implement a exception of subclause (ii) applies, efficiency of care provided by IPFs. We quality reporting program for inpatient measures selected for the quality refer readers to section VIII.F.4.a. of the psychiatric hospitals and psychiatric reporting program must have been FY 2013 IPPS/LTCH PPS final rule (77 units. endorsed by the entity with a contract FR 53645 through 53646) for a detailed Section 1886(s)(4)(A)(i) of the Act under section 1890(a) of the Act. The discussion of the considerations taken requires that, for FY 2014 275 and each National Quality Forum (NQF) currently into account in selecting quality subsequent fiscal year, the Secretary holds this contract. measures. Before being proposed for inclusion in must reduce any annual update to a Section 1886(s)(4)(D)(ii) of the Act the IPFQR Program, measures are placed standard federal rate for discharges provides an exception to the on a list of measures under occurring during the fiscal year by 2.0 requirement for NQF endorsement of consideration, which is published percentage points for any inpatient measures: in the case of a specified area annually by December 1 on behalf of psychiatric hospital or psychiatric unit or medical topic determined appropriate CMS by the NQF. In compliance with that does not comply with quality data by the Secretary for which a feasible and section 1890A(a)(2) of the Act, measures submission requirements with respect to practical measure has not been endorsed that we are proposing for the IPFQR an applicable fiscal year. by the entity with a contract under Program in this proposed rule were As provided in section section 1890(a) of the Act, the Secretary included in a publicly available 1886(s)(4)(A)(ii) of the Act, the may specify a measure that is not so document: ‘‘List of Measures under application of the reduction for failure endorsed as long as due consideration is Consideration for December 1, 2015’’ to report under section 1886(s)(4)(A)(i) given to measures that have been (http://www.qualityforum.org/ of the Act may result in an annual endorsed or adopted by a consensus WorkArea/linkit.aspx?LinkIdentifier=id update of less than 0.0 percent for a organization identified by the Secretary. &ItemID=81172). The Measure fiscal year, and may result in payment Section 1886(s)(4)(E) of the Act Applications Partnership (MAP), a rates under section 1886(s)(1) of the Act requires the Secretary to establish multi-stakeholder group convened by being less than the payment rates for the procedures for making public the data the NQF, reviews the measures under preceding year. In addition, section submitted by inpatient psychiatric consideration for the IPFQR Program, 1886(s)(4)(B) of the Act requires that the hospitals and psychiatric units under among other Federal programs, and application of the reduction to a the IPFQR Program. These procedures provides input on those measures to the standard Federal rate update be must ensure that a facility has the Secretary. The MAP’s 2016 noncumulative across fiscal years. Thus, opportunity to review its data prior to recommendations for quality measures any reduction applied under section the data being made public. The under consideration are captured in the 1886(s)(4)(A) of the Act will apply only Secretary must report quality measures following document: ‘‘Process and with respect to the fiscal year rate that relate to services furnished by the Approach for MAP Pre-Rulemaking involved and the Secretary may not take psychiatric hospitals and units on the Deliberations 2015–2016—Final Report, into account the reduction in computing CMS Web site. February 2016’’ (http:// the payment amount under the system b. Covered Entities www.qualityforum.org/WorkArea/ In the FY 2013 IPPS/LTCH PPS final linkit.aspx?LinkIdentifier=id& 275 The statute uses the term ‘‘rate year’’ (RY). However, beginning with the annual update of the rule (77 FR 53645), we established that ItemID=81599). We considered the inpatient psychiatric facility prospective payment the IPFQR Program’s quality reporting input and recommendations provided system (IPF PPS) that took effect on July 1, 2011 requirements cover those psychiatric by the MAP in selecting all measures for (RY 2012), we aligned the IPF PPS update with the hospitals and psychiatric units paid the IPFQR Program, including those annual update of the ICD–9–CM codes, effective on October 1 of each year. This change allowed for under Medicare’s IPF PPS (42 CFR discussed below. annual payment updates and the ICD–9–CM coding 412.404(b)). Generally, psychiatric update to occur on the same schedule and appear hospitals and psychiatric units within 2. Retention of IPFQR Program in the same Federal Register document, promoting acute care and critical access hospitals Measures Adopted in Previous Payment administrative efficiency. To reflect the change to Determinations the annual payment rate update cycle, we revised that treat Medicare patients are paid the regulations at 42 CFR 412.402 to specify that, under the IPF PPS. Consistent with The current IPFQR Program includes beginning October 1, 2012, the RY update period prior rules, we continue to use the term 16 mandatory measures. In the FY 2013 would be the 12-month period from October 1 ‘‘inpatient psychiatric facility’’ (IPF) to IPPS/LTCH PPS final rule (77 FR 53646 through September 30, which we refer to as a through 53652), we adopted 6 measures ‘‘fiscal year’’ (FY) (76 FR 26435). Therefore, with refer to both inpatient psychiatric respect to the IPFQR Program, the terms ‘‘rate year,’’ hospitals and psychiatric units. This for the FY 2014 payment determination as used in the statute, and ‘‘fiscal year’’ as used in usage follows the terminology in our IPF and subsequent years. In the FY 2014 the regulation, both refer to the period from October PPS regulations at 42 CFR 412.402. For IPPS/LTCH PPS final rule (78 FR 50889 1 through September 30. For more information through 50895), we added 2 measures regarding this terminology change, we refer readers more information on covered entities, to section III. of the RY 2012 IPF PPS final rule (76 we refer readers to the FY 2013 IPPS/ for the FY 2016 payment determination FR 26434 through 26435). LTCH PPS final rule (77 FR 53645). and subsequent years. In the FY 2015

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IPF PPS final rule (79 FR 45963 through 4. Proposed New Quality Measures for coronary heart disease, diabetes, 45974), we adopted another 2 measures the FY 2019 Payment Determination infections, and respiratory disease.281 282 for the FY 2016 payment determination and Subsequent Years Furthermore, individuals with and subsequent years, and finalized 4 We are proposing two new measures undetected, untreated or undertreated quality measures for the FY 2017 for the FY 2019 payment determination co-occurring disorders are more likely to payment determination and subsequent and subsequent years: experience homelessness, incarceration, years. In the FY 2016 IPF PPS final rule • SUB–3 Alcohol & Other Drug Use additional medical illness, suicide, and 283 (80 FR 46694 through 46714), we Disorder Treatment Provided or Offered early death. removed 1 measure beginning with the at Discharge and the subset measure Due to the prevalence of substance FY 2017 payment determination; we SUB–3a Alcohol & Other Drug Use abuse among individuals with mental also adopted 5 measures and removed 2 Disorder Treatment at Discharge (NQF illness, and the negative effects measures beginning with the FY 2018 #1664) (SUB3 and SUB–3a); and therefrom, we believe it is imperative to payment determination. We are • Thirty-day all-cause unplanned assess IPFs’ efforts to offer treatment retaining 15 of these previously adopted readmission following psychiatric options for patients who screen positive measures and proposing to update one hospitalization in an IPF. for drug and alcohol use. As described measure, as discussed below. The sections below outline our under the Measure Description section 3. Proposed Update to Previously rationale for proposing these measures. of the NQF Web page regarding this measure, the SUB–3 measure includes Finalized Measure: Screening for a. SUB–3 Alcohol & Other Drug Use Metabolic Disorders hospitalized patients age 18 years and Disorder Treatment Provided or Offered older ‘‘who are identified with an In the FY 2016 IPF PPS final rule (80 at Discharge and the Subset Measure alcohol or drug use disorder who FR 46709 through 46713), we finalized SUB–3a Alcohol & Other Drug Use receive or refuse at discharge a our proposal to include the Screening Disorder Treatment at Discharge (NQF prescription for FDA-approved for Metabolic Disorders measure in the #1664) (SUB–3 and SUB3a) medications for alcohol or drug use IPFQR Program for the FY 2018 Individuals with mental illness disorder, OR who receive or refuse a payment determination and subsequent experience substance use disorders referral for addictions treatment.’’ 284 years. In that final rule, we described (SUDs) at a much higher rate than the The SUB–3a subset measure includes the denominator as IPF patients general population.276 Nearly 18 percent hospitalized patients age 18 years and discharged with one or more routinely of the 43.6 million adults aged 18 years older ‘‘who receive a prescription for scheduled antipsychotic medications FDA-approved medications for alcohol during the measurement period. We also and older who had a mental illness in or drug use disorder OR a referral for listed the following denominator 2013 met the criteria for a SUD. Of those addictions treatment.’’ 285 The exclusions: (1) Patients for whom a who met the criteria for a SUD, 26.7 277 numerator of the SUB–3 measure screening could not be completed percent used illicit drugs. Illicit drug includes ‘‘patients who received or within the stay due to the patient’s use is particularly high among adults 278 refused at discharge a prescription for enduring unstable medical or with serious mental illnesses. Misuse medication for treatment of alcohol or psychological condition; and (2) and abuse of prescription drugs among drug use disorder OR received or patients with a length of stay equal to individuals with mental illnesses, in particular opioids, are also of growing refused a referral for addictions or greater than 365 days, or less than 3 286 days. concern. treatment.’’ The numerator of the In the FY 2016 IPF PPS final rule (80 Individuals with co-occurring mental SUB–3a subset measure includes FR 46717 through 46718), we finalized disorders and SUDs, the combination of ‘‘patients who received a prescription at the CMS global sample methodology for one or more mental disorders and one discharge for medication for treatment 10 IPFQR Program measures eligible for or more SUDs, experience far more of alcohol or drug use disorder OR a 287 sampling, including the Screening for physical illnesses and episodes of care referral for addictions treatment.’’ Metabolic Disorders measure. Seven of than individuals with a single The denominators of both the SUB–3 these 10 measures have denominator diagnosis.279 These co-occurring measure and SUB–3a subset measure exclusions for patients with short length disorders tend to go undetected and include ‘‘hospitalized inpatients 18 of stay within an IPF. Of these 7 untreated, especially among the elderly years of age and older identified with an measures, the Screening for Metabolic population, which experiences more alcohol or drug use disorder’’ subject to Disorders measure is the only one with adverse effects than the young adult a list of exclusions.288 Further an exclusion for less than 3 days; the population.280 Treatment of only one information on this measure, including other 6 all have denominator exclusions disorder for individuals who have two the denominator exclusions, can be for length of stay less than or equal to or more mental and SUDs often leads to found in the measure detail sheet on the 3 days. Therefore, we are proposing to poor functioning and poor treatment NQF’s Web site (http:// update the length of stay exclusion for compliance that inhibits full recovery, www.qualityforum.org/QPS/1664) or in the Screening for Metabolic Disorders increases the risk of relapse, and can the section of the Specifications Manual measure to exclude patients with a lead to other high-risk illnesses, such as 281 length of stay equal to or greater than SAMHSA. ‘‘Mental and Substance Use Disorders.’’ 365 days, or less than or equal to 3 days. 276 National Institute on Drug Abuse (NIDA). ‘‘Comorbidity: Addiction and Other Mental 282 Mental Health Foundation. ‘‘Physical Health We anticipate that this update would Illnesses.’’ and Mental Health.’’ reduce burden on IPFs, if it is finalized, 277 SAMHSA. Results from the 2014 National 283 SAMHSA. ‘‘Mental and Substance Use because it would support the intent of Survey on Drug Use and Health: Mental Health Disorders.’’ the global sample to allow IPFs to use Findings. 284 NQF SUB–3 and SUB–3a Measure the same sample for as many measures 278 Ibid. Specifications. Available at: http:// 279 SAMHSA. ‘‘Mental and Substance Use www.qualityforum.org/QPS/1664. as possible, by aligning the denominator 285 Disorders.’’ Ibid. exclusions. 280 Robert Drake. ‘‘Dual Diagnosis and Integrated 286 Ibid. We welcome public comments on this Treatment of Mental Illness and Substance Abuse 287 Ibid. proposed denominator exclusion. Disorder.’’ 288 Ibid.

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for National Hospital Inpatient Quality 3 and SUB–3a measure to the existing FY 2019 payment determination and Measures on Substance Use Measures measure set would encourage IPFs to subsequent years. We welcome public at: http://www.qualitynet.org/dcs/ offer and provide FDA-approved comment on this proposal. BlobServer?blobkey=id& medication OR a referral for addictions In the FY 2013 IPPS/LTCH PPS final blobnocache=true& treatment to patients with co-occurring rule (77 FR 53657 through 53658) and blobwhere=1228890516540 drug or alcohol use disorders at FY 2014 IPPS/LTCH PPS final rule (78 &blobheader=multipart%2Foctet- discharge. This measure would also FR 50901 through 50902), we finalized stream&blobheadername1=Content- provide information regarding the rate policies for population, sampling, and Disposition&blobheadervalue1= at which these treatment options are minimum case thresholds. In the FY attachment%3Bfilename%3D2.6.2_ accepted by patients. The SUB–3 and _ _ 2016 IPF PPS final rule, we made one SUB v5 1.pdf&blobcol=urldata& SUB–3a measure also provides a fuller change to these requirements (80 FR blobtable=MungoBlobs. picture of the entire episode of care. In 46717 through 46719) in finalizing a We previously adopted the SUB–1 addition, aggregated data from the SUB– policy in which IPFs may take one, measure (Alcohol Use Screening (NQF 1 measure, SUB–2 and SUB–2a global sample for all measures for which #1661)) (78 FR 50890 through 50892) measure, and the SUB–3 and SUB–3a sampling is permitted. This policy was and the SUB–2 (Alcohol Use Brief measure from each IPF would help adopted to decrease burden on IPFs and Intervention Provided or Offered) and provide patients with adequate streamline policies and procedures. We the subset measure SUB–2a (Alcohol consumer information to guide their are proposing to allow sampling for the Use Brief Intervention (NQF #1663) decision-making process in selecting a SUB–3 and SUB–3a measure. Therefore, (SUB–2 and SUB–2a)) measure (80 FR treatment facility, specifically for we are proposing to include the SUB3 46699 through 46701). While the SUB– patients that are diagnosed with a and SUB–3a measure in the list of 1 measure assesses ‘‘hospitalized substance use disorder. measures covered by the global sample. patients 18 years of age and older who Furthermore, we believe that this We welcome public comment on this are screened during the hospital stay measure set promotes the National proposal. using a validated screening Quality Strategy priority of Effective questionnaire for unhealthy alcohol Prevention and Treatment for leading b. Thirty-Day All-Cause Unplanned use,’’ 289 the SUB–2 and SUB–2a causes of mortality, starting with Readmission Following Psychiatric measure assesses ‘‘hospitalized patients cardiovascular disease. It is notable that Hospitalization in an IPF who screened positive for unhealthy the high prevalence of SUDs among alcohol use who received or refused a adults age 65 years and older The MAP, composed of national brief intervention during the hospital contributes to serious medical stakeholders, identified readmissions as stay’’ 290 and ‘‘hospitalized patients 18 conditions, including cardiovascular a key gap area in the IPFQR Program in years and older who received the brief disease and liver disease. The proposed a January 2015 report.294 A goal of the intervention during the hospital measure also supports HHS’ Opioid CMS Quality Strategy is to ‘‘promote stay,’’ 291 respectively. The SUB–1 Abuse Reduction Initiative to reduce effective communication and measure and the SUB–2 and SUB–2a prescription opioid and heroin related coordination of care’’ across different measure combined provide a greater overdose, death, and dependence.293 We care settings and providers. In addition, understanding of the rate at which also note that the addition of SUB–3 and readmission following discharge from patients are screened for potential SUB–3a in the measure set could IPFs is undesirable for patients because alcohol abuse and the rate at which encourage interventions and promote readmissions represent a deterioration those who screen positive accept the prevention of conditions that are in patients’ mental and/or physical offered interventions. associated with alcohol and drug use health status. Furthermore, an analysis Despite the value created by the disorders. of Medicare claims data for calendar inclusion of the SUB–1 measure and the For these reasons, we included the years 2012 and 2013 showed that among SUB–2 and SUB–2a measure in the SUB–3 and SUB–3a measure in our the 716,174 IPF admissions for IPFQR Program measure set, neither ‘‘List of Measures under Consideration Medicare beneficiaries, more than 20 fully captures hospitalized patients 18 for December 1, 2015’’ (http:// percent resulted in readmission to an years of age and older with other SUDs www.qualityforum.org/WorkArea/ IPF or a short-stay acute care hospital because these measures focus on alcohol linkit.aspx?LinkIdentifier=id& within 30 days of discharge.295 Risk- use only. In the past, commenters have ItemID=81172). The MAP provided standardized readmission rates ranged urged CMS to include illicit and opioid input on the measure and supported its from 11 percent to 35 percent, drug screening in our measure set (80 inclusion in the IPFQR Program in its indicating wide variation across IPFs FR 46701) stating that co-occurring report ‘‘Process and Approach for MAP and clear opportunity for improvement. substance use disorders are prevalent in Pre-Rulemaking Deliberations 2015– Finally, MedPAC estimates of Medicare many patients with psychiatric 2016—Final Report, February 2016’’ payments to IPFs in 2012 indicated that diagnoses and the SUB–3 and SUB–3a available at: http:// the average payment per discharge was measure will ensure that patients www.qualityforum.org/WorkArea/ continue to receive treatment after linkit.aspx?LinkIdentifier=id&ItemID= 294 Process and Approach for MAP Pre- discharge.292 While the SUB–3 and 81599. Moreover, this measure is NQF- Rulemaking Deliberations. Measure Applications Partnership. 2015. Available at: http:// SUB–3a measure does not guarantee endorsed for the IPF setting, in www.qualityforum.org/Setting_Priorities/ that patients would continue to receive conformity with the statutory criteria for Partnership/MAP_Final_Reports.aspx. treatment for substance use disorders measure selection under section 295 Inpatient Psychiatric Facility All-Cause after discharge, the addition of the SUB– 1886(s)(4)(D)(i) of the Act. Unplanned Readmission Measure: Draft Technical Therefore, we are proposing to adopt Report, November 23, 2015. Available at: https:// www.cms.gov/Medicare/Quality-Initiatives-Patient- 289 NQF SUB–1 Measure Specifications. the SUB–3 and SUB–3a measure for the Assessment-Instruments/MMS/ 290 NQF SUB–2 and SUB–2a Measure CallforPublicComment.html#17. (On this page, the Specifications. 293 ASPE. ‘‘Opioid Abuse in the U.S. and HHS file is listed as ‘‘Inpatient Psychiatric Facility (IPF) 291 Ibid. Actions to Address Opioid-Drug Related Overdoses Outcome and Process Measure Development and 292 80 FR 46701. and Deaths.’’ Maintenance’’ under downloads.)

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nearly $10,000.296 Therefore, reducing addition, the Hospital IQR Program to another inpatient facility on Day 0 or readmissions would substantially requires reporting on a Hospital-Wide 1 or billing procedures for interrupted reduce costs. For these reasons, we All-Cause Unplanned Readmissions stays, which do not allow for developed a facility-level outcome measure (READM–30–HWR) as identification of readmissions to the measure of all-cause, unplanned finalized in the FY 2013 IPPS/LTCH same IPF within 3 days; readmissions following discharge from a PPS final rule (77 FR 53521 through • Patient discharged against medical qualifying IPF admission. This measure 53528). The Hospital Readmissions advice (AMA) because the provider would provide an important indicator of Reduction Program, a pay-for- would not have an opportunity to the quality of care patients receive in performance program for subsection (d) provide optimal care; and • the IPF setting. hospitals or hospitals paid under Unreliable patient data (for Although not all readmissions are section 1814(b)(3) of the Act, also uses example, has a death date but also preventable, there is evidence that risk-standardized condition-specific admission afterwards). improvements in the quality of care for readmission measures (including AMI, The numerator for the IPF patients in the IPF setting can reduce HF, and Pneumonia, among others).300 readmission measure is defined as any readmission rates which, in turn, would The proposed IPF readmission admission to an IPF or acute care reduce costs to Medicare and the burden measure, 30-day all-cause unplanned hospital that occurs on or between days to patients and their caregivers. For readmission following psychiatric 3 and 30 post-discharge, except those example, a study of 30-day behavioral hospitalization in an IPF, estimates a considered planned by the CMS health readmissions using a multistate Planned Readmission Algorithm, facility-level, risk-standardized 302 Medicaid database found that readmission rate for unplanned, all- Version 3.0. The all-cause, connecting patients to services they will cause readmissions within 30 days of unplanned, 30-day readmission rate is need post-discharge can help prevent discharge from an IPF. Detailed harmonized with other readmission readmissions. A 1-percent increase in information about the development of measures that are endorsed by NQF and the percentage of patients receiving this measure as well as final measure in use by CMS programs. For the follow-up care within 7 days of specifications can be downloaded from timeframe for measurement, literature supports the connection between 30-day discharge was associated with a 5 the CMS Web site at: https://www.cms. readmissions and the quality of care percent reduction in the probability of gov/Medicare/Quality-Initiatives- 297 provided during the index being readmitted. Other studies have Patient-Assessment-Instruments/MMS/ admission.303 304 305 306 307 This also found that transitional CallforPublicComment.html#17 (on this timeframe also supports interventions interventions such as pre- and post- page, the file is listed as ‘‘Inpatient that have been developed on a wide discharge patient education, structured Psychiatric Facility (IPF) Outcome and range of patient populations that focus needs assessments, medication Process Measure Development and on reducing 30-day readmission reconciliation/education, transition Maintenance’’ under downloads.). The rates.308 309 310 311 312 Finally, a managers, and inpatient/outpatient denominator for this measure includes provider communication have been Medicare FFS beneficiaries aged 18 302 Horwitz LI, Grady JN, Zhang W, et al. 2015 effective in reducing early psychiatric years and older who are admitted to and readmissions. A systematic review of Measure Updates and Specifications Report: discharged alive from an IPF with a Hospital-Wide All-Cause Unplanned Readmission such interventions observed reductions principal diagnosis of a psychiatric Measure—Version 4.0. Centers for Medicare & of 13.6 percent to 37.0 percent of disorder. Admissions to IPFs for Medicaid Services; 2015. Available in the Hospital readmissions.298 Wide All Cause Readmission Updates folder at: nonpsychiatric disorders, which The proposed readmission measure https://www.cms.gov/Medicare/Quality-Initiatives- account for only 1.1 percent of Patient-Assessment-Instruments/HospitalQuality would complement the portfolio of admissions, were not included in the Inits/Measure-Methodology.html. facility-level, risk-standardized 303 Hyland M. National Mental Health readmission measures in the acute care measure cohort because IPFs are Benchmarking Project. In: Wendy Hoey, Whitecross setting that CMS quality reporting and expected to admit patients who need MFaF, eds. Reducing 28 Day Readmission. 301 Australian Mental Health Outcomes and pay-for-performance programs currently inpatient care for psychiatric causes. Therefore, nonpsychiatric admissions Classification Network 2008:38. use. These programs include, among 304 Boaz TL, Becker MA, Andel R, Van Dorn RA, others, the Hospital IQR Program, which could represent either admissions that Choi J, Sikirica M. Risk factors for early readmission requires facilities to report on condition- were initiated for presumed or to acute care for persons with schizophrenia taking antipsychotic medications. Psychiatric services specific risk-standardized readmission preliminary psychiatric diagnoses but later were changed to nonpsychiatric (Washington, DC). 2013; 64(12):1225–1229. measures (including Acute Myocardial 305 Zilber N, Hornik-Lurie T, Lerner Y. Predictors Infarction (AMI), Heart Failure (HF), primary diagnoses during the admission of early psychiatric rehospitalization: A national Pneumonia, and elective Hip/Knee or admissions with unreliable data. case register study. Isr J Psychiatry Relat Sci. 2011; replacements, among others).299 In Eligible index admissions require 48(1):49–53. enrollment in Medicare Parts A and B 306 Lutterman T, Ganju V, Schacht L, Shaw R, Monihan K, et.al. Sixteen State Study on Mental 296 Inpatient Psychiatric Facility Services for 12 months prior to the index Health Performance Measures. 2003. Payment System. MedPAC. 2014. Available at: admission, the month of admission, and 307 Carr VJ, Lewin TJ, Sly KA, et al. Adverse http://www.medpac.gov/documents/payment- at least 30 days post-discharge. incidents in acute psychiatric inpatient units: rates, basics/inpatient-psychiatric-facility-services- Admissions to IPFs are excluded from correlates and pressures. Aust N Z J Psychiatry. payment-system-14.pdf. 2008; 42(4):267–282. 297 Mark TL, Mark T, Tomic KS, et al. Hospital the denominator if any of the following 308 Naylor M, Brooten D, Jones R, Lavizzo-Mourey readmission among medicaid patients with an apply: R, Mezey M, Pauly M. Comprehensive discharge index hospitalization for mental and/or substance • Subsequent admission on day of planning for the hospitalized elderly. A randomized use disorder. J Behav Health Serv Res. 2013; discharge (Day 0) or within 2 days post- clinical trial. Annals of internal medicine. 1994; 40(2):207–221. 120(12):999–1006. 298 Vigod SN, Kurdyak PA, Dennis CL, et al. discharge (Day 1-Day 2) due to transfers 309 Naylor MD, Brooten D, Campbell R, et al. Transitional interventions to reduce early Comprehensive discharge planning and home psychiatric readmissions in adults: Systematic 300 76 FR 51660 through 51676. follow-up of hospitalized elders: A randomized review. Br J Psychiatry. 2013; 202(3):187–194. 301 Prospective Payment System for Inpatient clinical trial. JAMA. 1999; 281(7):613–620. 299 https://www.cms.gov/Medicare/Quality- Hospital Services. In: Services DoHaH, Ed. 42, Vol. 310 van Walraven C, Seth R, Austin PC, Laupacis Initiatives-Patient-Assessment-Instruments/ 412, U.S. Government Publishing Office 2011:535– A. Effect of discharge summary availability during HospitalQualityInits/OutcomeMeasures.html. 537. Continued

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workgroup of relevant clinical experts exception of complications of care, and Furthermore, the Office of the agreed that the 30-day time period several risk variables specific to the IPF Assistant Secretary for Planning and captures complications that may be patient population. Risk factors were Evaluation (ASPE) is conducting attributable to the IPF. selected for inclusion in the final risk research to examine the effect of An all-cause readmission rate was model if they were positively selected at sociodemographic status on quality selected because it promotes a holistic least 70 percent of the time in a measures, resource use, and other approach to the treatment of patients stepwise backward elimination process. measures under the Medicare program, with psychiatric disorders, who often The final risk model includes age, as directed by the IMPACT Act. We will have comorbid medical conditions. gender, 13 principal discharge diagnosis closely examine the findings of the From the patient and caregiver Agency for Healthcare Research and ASPE reports and related Secretarial perspective, these readmissions indicate Quality (AHRQ) Clinical Classification recommendations and consider how a deterioration in the patient’s Software (CCS) categories, 38 they apply to our quality programs at condition. In addition, the relationship comorbidity CMS Hierarchical such time as they are available. between principal discharge diagnosis Condition Categories (CC), history of As part of the measure development of the index admission and the discharge against medical advice, process for this measure, we solicited principal discharge diagnosis of the history of suicide or self-harm, history public comments on the measure via the readmission may be complex and of aggression, and the hospital as a CMS Public Comment Web page. As difficult to determine based only on random effect. For more information part of our comment solicitation, we principal diagnosis codes. For example, about factors used in calculating the provided the Measure Information Form a patient discharged with bipolar risk-standardized readmission rate, we (MIF), Data Dictionary, and the Measure disorder may be readmitted because of refer readers to the CMS Web site at: Technical Report to the public to inform a suicide attempt or self-harm due to https://www.cms.gov/Medicare/Quality- their review of the measure. We poorly controlled symptoms of bipolar Initiatives-Patient-Assessment- accepted public comments from disorder. A measure that looks only for Instruments/MMS/ November 25, 2015 through December readmissions with principal discharge CallforPublicComment.html#17. (On 11, 2015. The significant majority of diagnoses of bipolar disorder would this page, the file is listed as ‘‘Inpatient stakeholders who provided comments miss these readmissions. Psychiatric Facility (IPF) Outcome and on the measure design supported this The IPF readmission measure uses Process Measure Development and measure because of the importance of Medicare FFS claims and enrollment Maintenance’’ under downloads.) measuring readmissions in this data over a 24-month measurement We understand the importance of the population. Commenters who provided period to calculate the measure results. role that sociodemographic status plays input on the methodology agreed that it Twenty-four months was determined to in the care of patients. However, we appears to be scientifically acceptable, provide an adequate number of cases continue to have concerns about and those who provided input on the and reliable results. Because this holding hospitals to different standards feasibility agreed with our belief that the measure is not limited to a single for the outcomes of their patients of measure is feasible as designed. After diagnosis, a 24-month measurement diverse sociodemographic status review and evaluation of all the public period gives sufficient sample size. The because we do not want to mask comments received, we did not identify IPF measure had 4.2 percent of IPFs potential disparities or minimize any areas in which the measure needed with fewer than 25 cases in the 24- incentives to improve the outcomes of to be modified. For specific information month measurement period from disadvantaged populations. We regarding the comments we received, January 2012 to December 2013. For routinely monitor the impact of we refer readers to the CMS Web site at: comparison, the HWR measure had 3.8 sociodemographic status on hospitals’ https://www.cms.gov/Medicare/Quality- percent of hospitals with fewer than 25 results on our measures. Initiatives-Patient-Assessment- cases in the 12-month measurement The NQF is currently undertaking a 2- Instruments/MMS/ period from July 2013 to June 2014. year trial period in which new measures CallforPublicComment.html#17. (On We recognize that the risk of and measures undergoing maintenance this page, the file is listed as ‘‘Inpatient readmission is influenced by patient review will be assessed to determine if Psychiatric Facility (IPF) Outcome and factors, so the measure is risk-adjusted risk-adjusting for sociodemographic Process Measure Development and to account for differences in the patients factors is appropriate. For 2 years, NQF Maintenance’’ under downloads.) served across IPFs. Hierarchical logistic will conduct a trial of temporarily While section 1886(s)(4)(D)(ii) of the regression is used to estimate a risk allowing inclusion of sociodemographic Act authorizes the Secretary to specify standardized readmission rate for each factors in the risk-adjustment approach a measure that is not endorsed by NQF, facility. Factors considered in the risk- for some performance measures. At the the proposed IPF readmission measure adjustment model include patient conclusion of the trial, NQF will issue was submitted to NQF for endorsement demographics, principal discharge recommendations on future permanent on January 29, 2016, and we anticipate diagnoses of the index admission, inclusion of sociodemographic factors. the measure will receive endorsement comorbidities in claims during the 12 During the trial, measure developers are prior to the release of the final rule. months prior to the index admission or expected to submit information such as However, the exception to the during the index admission with the analyses and interpretations as well as requirement to specify an endorsed performance scores with and without measure states that in the case of a post-discharge visits on hospital readmission. J Gen sociodemographic factors in the risk specified area or medical topic Intern Med. 2002; 17(3):186–192. adjustment model. Measure developers determined appropriate by the Secretary 311 Zhang J, Harvey C, Andrew C. Factors associated with length of stay and the risk of must submit information such as for which a feasible and practical readmission in an acute psychiatric inpatient analyses and interpretations as well as measure has not been endorsed by the facility: a retrospective study. Aust N Z J performance scores with and without entity with a contract under section Psychiatry. 2011; 45(7):578–585. sociodemographic factors in the risk 1890(a) of the Act, the Secretary may 312 Silva NC, Bassani DG, Palazzo LS. A case- adjustment model. When this measure specify a measure that is not so control study of factors associated with multiple psychiatric readmissions. Psychiatric services was submitted to NQF on January 29, endorsed as long as due consideration is (Washington, DC). 2009; 60(6):786–791. 2016, this information was included. given to measures that have been

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endorsed or adopted by a consensus by a consensus organization is available 5. Summary of Proposed Measures for organization. We have reviewed NQF- for use in the IPFQR Program. the FY 2019 Payment Determination endorsed and other consensus-endorsed For the reasons stated above, we are and Subsequent Years measures related to all-cause unplanned proposing the IPF readmission measure The measures that we are proposing readmissions and believe that none are described in this section for the FY 2019 to adopt for the IPFQR Program for the appropriate to the inpatient psychiatric payment determination and subsequent FY 2019 payment determination and setting. Therefore, no equivalent years. We welcome public comment on subsequent years are set forth in the readmission measure that is endorsed this proposal. table below.

PROPOSED NEW IPFQR PROGRAM MEASURES FOR THE FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

National quality strategy priority NQF No. Measure ID Measure

Effective Treatment and 1664 ...... SUB–3 and SUB–3a ...... SUB–3 Alcohol & Other Drug Use Disorder Treatment Prevention. Provided or Offered at Discharge and SUB–3a Alco- hol & Other Drug Use Disorder Treatment at Dis- charge. Communication/Care Co- N/A (Under review for en- N/A ...... Thirty-Day All-Cause Unplanned Readmission Fol- ordination. dorsement). lowing Psychiatric Hospitalization in an IPF.

If these measures are adopted, the will total 18, as set forth in the table number of measures for the FY 2019 below. IPFQR Program and subsequent years

PROPOSED AND FINALIZED MEASURES FOR FY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

NQF No. Measure ID Measure

0640 ...... HBIPS–2 ...... Hours of physical restraint use. 0641 ...... HBIPS–3 ...... Hours of seclusion use. 0560 ...... HBIPS–5 ...... Patients discharged on multiple antipsychotic medications with appropriate justification. 0576 ...... FUH ...... Follow-Up After Hospitalization for Mental Illness. 1661 ...... SUB–1 ...... Alcohol Use Screening. 1663 ...... SUB–2 and SUB–2a ...... Alcohol Use Brief Intervention Provided or Offered and the subset measure Al- cohol Use Brief Intervention.* 1651 ...... TOB–1 ...... Tobacco Use Screening. 1654 ...... TOB–2 and TOB–2a ...... Tobacco Use Treatment Provided or Offered and the subset measure Tobacco Use Treatment. 1656 ...... TOB–3 and TOB–3a ...... Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use Treatment at Discharge. 1659 ...... IMM–2 ...... Influenza Immunization. 0647 ...... N/A ...... Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care). 0648 ...... N/A ...... Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care). N/A ...... N/A ...... Screening for Metabolic Disorders. N/A ...... N/A ...... Influenza Vaccination Coverage Among Healthcare Personnel. N/A ...... N/A ...... Assessment of Patient Experience of Care. N/A ...... N/A ...... Use of an Electronic Health Record. 1664 ...... SUB–3 and SUB–3a ...... Alcohol & Other Drug Use Disorder Treatment Provided or Offered at Dis- charge and the subset measure Alcohol & Other Drug Use Disorder Treat- ment at Discharge.* N/A (Under review N/A ...... Thirty-Day All-Cause Unplanned Readmission Following Psychiatric Hos- for endorsement). pitalization in an IPF.* * New measures proposed for the FY 2019 payment determination and future years.

6. Possible IPFQR Program Measures we intend to propose new measures for 7. Public Display and Review and Topics for Future Consideration adoption that will help further our goals Requirements of achieving better health care and We are proposing to change to how As we have indicated in prior improved health for Medicare we specify the timeframes for public rulemaking (79 FR 45974 through beneficiaries who obtain inpatient 45975), we seek to develop a display of data and the associated psychiatric services through the preview period for IPFs to review the comprehensive set of quality measures widespread dissemination and use of to be available for widespread use for data that will be made public. quality information. informed decision-making and quality Under section 1886(s)(4)(E) of the Act, improvement in the IPF setting. We welcome public comments on we are required to establish procedures Therefore, through future rulemaking, possible new measures. for making the data submitted under the

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IPFQR Program available to the public. publicly displaying the data. Instead, we 2016 IPF PPS final rule, we made one Such procedures must ensure that an are proposing to announce the exact change to these requirements (80 FR IPF has the opportunity to review its timeframes through subregulatory 46717 through 46719). We refer readers data that are to be made public prior to guidance, including on a CMS Web site to these rules for further information. such data being made public. Section and/or on our applicable listservs. We d. Data Accuracy and Completeness 1866(s)(4)(E) of the Act also provides also are proposing to continue our Acknowledgement (DACA) that the Secretary must report quality policy that the time period for review Requirements measures of process, structure, outcome, will be approximately 30 days in length. patients’ perspective on care, efficiency, As noted earlier, we wish to publicly We are not proposing any changes to and costs of care that relate to services display data as early as possible. For the the DACA requirements and we refer furnished in such hospitals on the CMS FY 2017 payment determination, it may readers to the FY 2013 IPPS/LTCH PPS Web site. be technically feasible for us to display final rule (77 FR 53658) for more In the FY 2014 IPPS/LTCH PPS final the data as early as December 2016. We information on these requirements. rule (78 FR 50897 through 50898), we previously finalized that the preview 9. Reconsideration and Appeals stated that we would publicly display period would be 30 days and would be Procedures the data submitted by IPFs for the approximately 12 weeks prior to the IPFQR Program on a CMS Web site in public display date. However, in this In the FY 2013 IPPS/LTCH PPS final April of each calendar year following case, 12 weeks prior to December 1, rule (77 FR 53658 through 53660), we the start of the respective payment 2016 is in mid-September, which is 2 adopted a reconsideration and appeals determination year. For example, we weeks before the usual effective date of process, later codified at 42 CFR publicly displayed the data for the FY the IPPS/LTCH PPS final rule. 412.434, by which an IPF can request a 2015 payment determination in April Therefore, for FY 2017 only, if it is reconsideration of its payment update 2015. We strive to publicly display data technically feasible to display the data reduction if an IPF believes that its as soon as possible on a CMS Web site, as early as December 2016, we are annual payment update has been as this provides consumers with proposing a 2-week preview period that incorrectly reduced for failure to meet healthcare information and furthers our would start on October 1, 2016. all IPFQR Program requirements and, if goal of transparency. Therefore, we However, as a courtesy, and to give IPFs dissatisfied with a decision made by believe it is best to not specify in 30 days for review if they so choose, we CMS on its reconsideration request, may rulemaking the exact timeframe for are proposing to provide IPFs with their file an appeal with the Provider publication, as doing so may prevent data in mid-September. We believe that Reimbursement Review Board. We are earlier publication. We are proposing, this proposal complies with prior not proposing any changes to the then, to make these data available as policies while still allowing us to Reconsideration and Appeals Procedure soon as it is feasible. We intend to make display data as soon as possible for the and refer readers to the FY 2013 IPPS/ the data available on Hospital Compare FY 2017 payment determination. LTCH PPS final rule (77 FR 53658 on at least a yearly basis. We are inviting public comment on through 53660) and the FY 2014 IPPS/ We also are required to give each IPF these proposals. LTCH PPS final rule (78 FR 50953) for an opportunity to review its data before further details on the reconsideration 8. Form, Manner, and Timing of Quality the data are made public. This purpose process. Data Submission of this preview period is to ensure that 10. Exceptions to Quality Reporting each IPF is informed of the IPF level a. Procedural and Submission Requirements data that the public will be able to see Requirements for its facility, and to submit measure We are not proposing any changes to We are not proposing any changes to the exceptions to quality reporting rate errors resulting from MS the procedural and submission calculations of IPF submitted patient requirements. For more information, we requirements for the FY 2019 payment refer readers to the FY 2013 IPPS/LTCH level claims and Web-based measure determination and subsequent years, numerator and denominator data. It is PPS final rule (77 FR 53659 through and we refer readers to the FY 2014 53660), where we initially finalized the not for the purpose of correcting an IPPS/LTCH PPS final rule (78 FR 50898 IPF’s possible submission errors. As policy as ‘‘Waivers from Quality through 50899) for more information on Reporting,’’ and the FY 2015 IPF PPS finalized in the 2015 IPF PPS final rule these previously finalized requirements. (79 FR 45976), IPFs have the entire data final rule (79 FR 45978), where we submission period to review and correct b. Proposed Change to the Reporting renamed the policy as ‘‘Exceptions to claims data element and Web-based Periods and Submission Timeframes Quality Reporting Requirements.’’ measure numerator and denominator In the FY 2014 IPPS/LTCH PPS final E. Clinical Quality Measurement for count data they have submitted to CMS. rule (78 FR 50901), we finalized Eligible Hospitals and Critical Access In the FY 2014 IPPS/LTCH PPS final requirements for reporting periods and Hospitals (CAHs) Participating in the rule (78 FR 50897 through 50898), we submission timeframes for the IPFQR EHR Incentive Programs in 2017 stated that the preview period would be Program measures. In the FY 2016 IPF 1. Background 30 days and would begin approximately PPS final rule, we made one change to 12 weeks prior to the public display of these requirements (80 FR 46715 and The HITECH Act (Title IV of Division the data. 46716). We refer readers to these rules B of the ARRA, together with Title XIII Because we are proposing to make the for further information. of Division A of the ARRA) authorizes data for the IPFQR Program available as incentive payments under Medicare and soon as possible, and the timeframe for c. Population and Sampling Medicaid for the adoption and publication may change from year-to- In the FY 2013 IPPS/LTCH PPS final meaningful use of certified electronic year, we are proposing to no longer rule (77 FR 53657 through 53658) and health record (EHR) technology specify the dates for review in FY 2014 IPPS/LTCH PPS final rule (78 (CEHRT). Eligible hospitals and CAHs rulemaking, nor to specify in FR 50901 through 50902), we finalized may qualify for these incentive rulemaking that the preview period will policies for population, sampling, and payments under Medicare (as begin approximately 12 weeks prior to minimum case thresholds. In the FY authorized under sections 1886(n) and

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1814(l) of the Act, respectively) if they would address certification policy multiplication. The QDM requires successfully demonstrate meaningful regarding the reporting of CQMs for multiple, often repetitious lines of logic use of CEHRT, which includes reporting eligible hospitals and CAHs in or in to compare relationships among on clinical quality measures (CQMs) conjunction with the annual IPPS different activities, usually by indicating using CEHRT. rulemaking to better align with the the time of one activity with the time of Sections 1886(b)(3)(B) and 1814(l) of reporting goals of other CMS programs. the other activity. Also, EHR software the Act also establish downward cannot easily interpret QDM logic to 2. CQM Reporting for the Medicare and payment adjustments under Medicare, perform calculations without significant Medicaid EHR Incentive Programs in beginning with FY 2015, for eligible human interaction and interpretation. In 2017 hospitals and CAHs that are not general, the CQL is a mathematical meaningful users of CEHRT for certain a. Background expression language that can be parsed associated reporting periods. Section In the EHR Incentive Program Stage 2 by software to calculate results. The 1903(a)(3)(F)(i) of the Act establishes final rule, we outlined the CQMs CQL includes basic math and allows 100 percent Federal financial available for use in the EHR Incentive description of relationship among participation (FFP) to States for Programs beginning in 2014 for eligible activities in a simple, direct manner, providing incentive payments to eligible hospitals and CAHs in Table 10 at 77 FR which significantly reduces the lines of Medicaid providers (described in 54083 through 54087. For the FY 2017 logic. With a modest effort, it represents section 1903(t)(2) of the Act) to adopt, IPPS/LTCH PPS proposed rule, we are a change that is straightforward to learn implement, upgrade and meaningfully proposing to maintain the existing and interpret compared to the existing use CEHRT. requirements established in earlier QDM logic statements. Under sections 1886(n)(3)(A) and rulemaking for the reporting of CQMs The CQL specification defines two 1814(l)(3)(A) of the Act and the under the EHR Incentive Programs in components: CQL—author-friendly definition of ‘‘meaningful EHR user’’ 2017, unless otherwise indicated in this domain specific language; and under 42 CFR 495.4, eligible hospitals proposed rule. These requirements expression logical model—computable and CAHs must report on CQMs include reporting on 16 CQMs covering extensible markup language (XML). The selected by CMS using CEHRT, as part at least 3 NQS domains for eligible CQL leverages best practices and lessons of being a meaningful EHR user under hospitals and CAHs (77 FR 54079). For learned from the quality data model, the Medicare EHR Incentive Program. this section of the preamble of this health e-decisions, and electronic CQM The set of CQMs from which eligible proposed rule, the following proposed and clinical decision support (CDS) hospitals and CAHs will report under policies regarding the EHR Incentive communities. The CQL is designed to the EHR Incentive Program beginning in Programs apply to both the Medicare work with any data model, more FY 2014 is listed in Table 10 of the EHR and Medicaid EHR Incentive Programs expressive and robust than the QDM Incentive Program Stage 2 final rule (77 with the exception of the submission logic, and is a HL7 draft standard for FR 54083). trial use (DSTU). The CQL includes: In order to further align CMS quality period proposed policy. As we expect to expand the current Datatypes; data retrieval and queries; reporting programs for eligible hospitals measures to align with the National timing phrases and operators; variable and CAHs and avoid redundant or Quality Strategy and the CMS Quality and function declaration; input duplicative reporting among hospital Strategy 314 and incorporate updated parameters with default values; programs, the Medicare and Medicaid standards and terminology in current conditional logic, Boolean logic, and Programs; Electronic Health Record CQMs, including updating the value comparison; simple arithmetic Incentive Program—Stage 3 and electronic specifications for these and aggregate functions; operations on Modifications to Meaningful Use in valuesets, lists, intervals, sets and dates/ 2015 Through 2017 (hereinafter referred CQMs, and creating de novo CQMs, we plan to expand the set of CQMs times; and shared libraries. We to as the 2015 EHR Incentive Programs anticipate the incorporation of the CQL Final Rule) 313 (80 FR 62890) indicated available for reporting under the EHR Incentive Programs in future years. We into the CQM electronic specifications our intent to address CQM reporting as we support the development and will continue to engage stakeholders to requirements for the Medicare and testing of this standard. We anticipate provide input on future proposals for Medicaid EHR Incentive Programs for starting this work effort in 2016 with the CQMs as well as request comment on eligible hospitals and CAHs for 2016, expectation that extensive development future electronic specifications for new 2017, and future years in the IPPS and testing will continue, at minimum, rulemaking. We believe that receiving and updated CQMs. In addition, we are transitioning from through the fall of 2017. We will not and reviewing public comments for implement CQL until the development various CMS quality programs at one the quality data model (QDM) expression language to the clinical and testing phases show success for time while simultaneously finalizing the utilization with the CQMs. We are quality language (CQL) specification, requirements for these programs would engaging the participation of hospitals which defines a representation for the provide us with an opportunity to better and other providers, health IT expression of clinical knowledge that align these programs for eligible developer, measure developer, and can be used within both the clinical hospitals and CAHs, allow more other stakeholder communities as we decision support (CDS) and CQM flexibility within the Medicare and undertake this effort at all stages of domains. The QDM logic is based on Medicaid EHR Incentive Programs, and development and testing. add overall value and consistency. To capabilities of the health level 7 (HL7) further achieve this goal, the 2015 reference information model (RIM), b. CQM Reporting Period for the Edition final rule (80 FR 62652) which does not have significant ability Medicare and Medicaid EHR Incentive published by ONC indicated that it to express mathematical logic such as Programs in CY 2017 addition, subtraction, division, and In the 2015 EHR Incentive Programs 313 Medicare and Medicaid Programs: Electronic Final Rule (80 FR 62892 through 62893), 314 Health Record Incentive Program—Stage 3 and Available at: http://www.cms.gov/Medicare/ beginning in CY 2017 and for Modifications to Meaningful Use in 2015 Through Quality-Initiatives-Patient-Assessment-Instruments/ 2017; final rule (80 FR 62761 through 62955) (‘‘2015 QualityInitiativesGenInfo/CMS-Quality- subsequent years, we established a CQM EHR Incentive Programs Final Rule’’). Strategy.html. reporting period of one full calendar

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year (consisting of four quarterly data submission period for reporting CQMs Quality Reporting (OQR) Program CQM reporting periods) for CQM reporting for electronically is the 2 months following (Emergency Department (ED)–3, NQF eligible hospitals and CAHs the close of the calendar year, ending 0496) among the 16 available CQMs is participating in the Medicare and February 28, 2018. not required to be reported on for Medicaid EHR Incentive Programs, with In regard to the Medicaid EHR electronic reporting, in which 15 of the a limited exception for providers Incentive Program, we provide States 16 available CQMs can be selected to demonstrating meaningful use for the with the flexibility to determine the meet this reporting requirement); or first time under the Medicaid EHR submission periods for reporting CQMs. ++ If participating in the EHR For the reporting period in CY 2017, Incentive Program, for whom the CQM Incentive Program and the Hospital IQR we are not proposing new CQMs. reporting period is any continuous 90- Program, report on all 15 available However, section 1886(n)(3)(B)(iii) of day period within the calendar year. We CQMs (the electronic reporting of the the Act requires that, in selecting believe that one full calendar year of Outpatient Quality Reporting (OQR) measures for eligible hospitals and data will result in more complete and Program CQM (ED–3, NQF 0496) is not CAHs for the Medicare EHR Incentive accurate data. Providers will be able to applicable when reporting on CQMs for Program, and establishing the form and submit one full calendar year of data for both programs, which results in the manner for reporting measures, the both the EHR Incentive Program and the reporting of 15 available CQMs). Hospital IQR Program, thereby reducing Secretary shall seek to avoid redundant the reporting burden. We continue to or duplicative reporting with reporting We also considered an alternative assess electronically submitted data for otherwise required, including reporting proposal to require eligible hospitals accuracy and reliability. If data are under section 1886(b)(3)(B)(viii) of the and CAHs to select and report determined to be flawed, such data will Act, the Hospital IQR Program. In the electronically on 8 CQMs for the be identified by CMS in order to interest of avoiding redundant or reporting periods in CY 2017 and all preserve the integrity of data used for duplicative reporting with the Hospital available CQMs beginning with the differentiating performance. IQR Program, we are proposing to reporting periods in CY 2018. Section We also established a reporting period remove 13 CQMs from the set of CQMs VIII.A.8.a. of the preamble of this for CQMs of any continuous 90-day available for eligible hospitals and proposed rule further outlines this period within CY 2017 for eligible CAHs to report for the EHR Incentive considered alternative proposal. Our hospitals and CAHs that are Programs, beginning with the reporting intent is to align, to the extent possible, demonstrating meaningful use for the periods in CY 2017. We are proposing the EHR Incentive Program reporting first time in either the Medicare or to remove such measures for both the requirements with the Hospital IQR Medicaid EHR Incentive Programs (80 Medicare and Medicaid EHR Incentive Program reporting requirements FR 62892 through 62893). In summary, Programs. established in the final rule. We believe the following CQM reporting periods We believe that a coordinated that the alignment of these programs apply for eligible hospitals and CAHs reduction in the overall number of will serve to reduce hospital reporting participating in the Medicare and CQMs reported electronically in both burden and encourage the adoption and Medicaid EHR Incentive Programs in CY the Hospital IQR and the Medicare and meaningful use of CEHRT by eligible 2017. We are proposing the following Medicaid EHR Incentive Programs hospitals and CAHs. We are inviting submission periods for the Medicare would reduce burdens and challenges public comment on these proposals. EHR Incentive Program, as well as associated with electronic reporting for c. CQM Reporting Form and Method for requirements for eligible hospitals and hospitals and improve the quality of the Medicare EHR Incentive Program in CAHs reporting CQMs electronically. reported data by enabling hospitals to • Eligible hospitals and CAHs focus on a smaller, more specific subset 2017 Reporting CQMs by Attestation: of electronic CQMs. For the list of As finalized in the FY 2016 IPPS/ ++ For eligible hospitals and CAHs measures we are proposing to remove LTCH PPS final rule (80 FR 49759 demonstrating meaningful use for the from the Hospital IQR Program and the through 40760), we removed the QRDA– first time in 2017, the reporting period Medicare and Medicaid EHR Incentive III as an option for reporting under the is any continuous 90-day period within Programs, as well as the rationale in Medicare EHR Incentive Program for CY 2017. The submission period for support of our proposals to remove eligible hospitals and CAHs. For the attestation is the 2 months following the these measures, we refer readers to reporting periods in 2016 and future close of the calendar year, ending section XVIII.A.3.b.(3) of the preamble years, we are requiring QRDA–I for February 28, 2018. of this proposed rule. All of the CQM electronic submissions for the ++ For eligible hospitals and CAHs remaining measures listed in Table 10 of Medicare EHR Incentive Program. As that demonstrated meaningful use in the EHR Incentive Program Stage 2 final noted in the FY 2016 IPPS/LTCH PPS any year prior to 2017, the reporting rule (77 FR 54083 through 54087) would final rule (80 FR 40760), States would period is the full CY 2017 (consisting of be available for eligible hospitals and continue to have the option, subject to four quarterly data reporting periods). CAHs to report for the Medicare and our prior approval, to allow or require The submission period for attestation is Medicaid EHR Incentive Programs. QRDA–III for CQM reporting. the 2 months following the close of the From that available set of measures, we In the FY 2016 IPPS/LTCH PPS final calendar year, ending February 28, are proposing the following reporting rule (80 FR 49578 through 49579), we 2018. criteria for eligible hospitals and CAHs • established the following options for Eligible hospitals and CAHs beginning with the reporting periods in CQM submission for eligible hospitals Reporting CQMs Electronically: For CY 2017: eligible hospitals and CAHs • For attestation: If only participating and CAHs in the Medicare EHR demonstrating meaningful use for the in the EHR Incentive Program, report on Incentive Program for the reporting first time in 2017 or that have all 16 available CQMs. periods in 2017: demonstrated meaningful use in any • For electronic reporting— • Eligible hospital and CAH options year prior to 2017, the reporting period ++ If only participating in the EHR for Medicare EHR Incentive Program is the full CY 2017 (consisting of four Incentive Program, report on 15 of the participation (single program quarterly data reporting periods). The 16 available CQMs (the Outpatient participation)—

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++ Option 1: Attest to CQMs through need to be recertified each time it is X. Other Required Information the EHR Registration & Attestation updated to a more recent version of the A. Requests for Data From the Public System; or CQMs. We are proposing to accept the ++ Option 2: Electronically report use of CEHRT certified to ONC’s 2014 In order to respond promptly to CQMs through QualityNet Portal. or 2015 Edition for CQM reporting in public requests for data related to the • Eligible hospital and CAH options 2017. Certification to the 2015 Edition is prospective payment system, we have for electronic reporting for multiple expected to be available in 2016. (For established a process under which programs (for example, EHR Incentive further information on CQM reporting, commenters can gain access to raw data Program plus Hospital IQR Program we refer readers to the EHR Incentive on an expedited basis. Generally, the participation)—electronically report Program Web site where guides and tip data are now available on compact disc through QualityNet Portal. sheets are available for each reporting (CD) format. However, many of the files As stated in the 2015 EHR Incentive option (http://www.cms.gov/ are available on the Internet at: http:// Programs Final Rule (80 FR 62894), in ehrincentiveprograms).) As noted in the www.cms.hhs.gov/Medicare/Medicare- 2017, eligible hospitals and CAHs have FY 2016 IPPS/LTCH PPS final rule (80 Fee-for-Service-Payment/AcuteInpatient two options to report CQM data, either FR 49759), we encourage health IT PPS/index.html. Data files and the cost through attestation or use of established developers to test any updates, for each file, if applicable, are listed methods for electronic reporting where including any updates to the CQMs and later in this section. Anyone wishing to feasible. However, starting in 2018, CMS reporting requirements based on purchase data tapes, cartridges, or eligible hospitals, and CAHs the CMS Implementation Guide for diskettes should submit a written participating in the Medicare EHR Quality Reporting Document request along with a company check or Incentive Program must electronically Architecture (QRDA) Category I and money order (payable to CMS–PUF) to report CQMs using CEHRT where Category III (CMS Implementation cover the cost to the following address: feasible; and attestation to CQMs will no Guide for QRDA) for Eligible Centers for Medicare & Medicaid longer be an option except in certain Professional Programs and Hospital Services, Public Use Files, Accounting circumstances where electronic Quality Reporting (HQR), on an annual Division, P.O. Box 7520, Baltimore, MD reporting is not feasible. Therefore, we basis. 21207–0520, (410) 786–3691. Files on encourage eligible hospitals and CAHs The form and method of electronic the Internet may be downloaded to begin electronically reporting CQMs submission are further explained in without charge. as soon as feasible. subregulatory guidance and the For the Medicaid EHR Incentive certification process. For example, the 1. CMS Wage Data Public Use File Program, States will continue to be following documents are updated This file contains the hospital hours responsible for determining whether annually to reflect the most recent CQM and salaries from Worksheet S–3, Parts and how electronic reporting of CQMs electronic specifications: The CMS II and III from FY 2013 Medicare cost would occur, or if they wish to allow Implementation Guide for QRDA; reports used to create the proposed FY reporting through attestation. Any program specific performance 2017 prospective payment system wage changes that States make to their CQM calculation guidance; and CQM index. Multiple versions of this file are reporting methods must be submitted electronic specifications and guidance created each year. For a complete through the State Medicaid Health IT documents. These documents are schedule on the release of different Plan (SMHP) process for CMS review located on the eCQI Resource Center versions of this file, we refer readers to and approval prior to being Web page: (https://ecqi.healthit.gov/). the wage index schedule in section implemented. We are inviting public comments on III.M. of the preamble of this proposed We are proposing to continue our these proposals. rule. policy that electronic submission of IX. MedPAC Recommendations CQMs will require the use of the most Wage PPS recent version of the CQM electronic Under section 1886(e)(4)(B) of the Processing year data year fiscal year specification for each CQM to which the Act, the Secretary must consider EHR is certified. In the event that an MedPAC’s recommendations regarding 2016 ...... 2013 2017 eligible hospital or CAH has certified hospital inpatient payments. Under 2015 ...... 2012 2016 EHR technology that is certified to the section 1886(e)(5) of the Act, the 2014 ...... 2011 2015 2014 Edition and not certified to all 16 Secretary must publish in the annual 2013 ...... 2010 2014 2012 ...... 2009 2013 CQMs that would be available for proposed and final IPPS rules the 2011 ...... 2008 2012 reporting in 2017 under our proposals, Secretary’s recommendations regarding 2010 ...... 2007 2011 we are proposing to require that an MedPAC’s recommendations. We have 2009 ...... 2006 2010 eligible hospital or CAH would need to reviewed MedPAC’s March 2016 2008 ...... 2005 2009 have its EHR technology certified to all ‘‘Report to the Congress: Medicare 2007 ...... 2004 2008 such CQMs in order to meet the Payment Policy’’ and have given the reporting requirements for 2017. For recommendations in the report Media: Internet at: https://www.cms. electronic reporting in 2017, this means consideration in conjunction with the gov/Medicare/Medicare-Fee-for-Service- eligible hospitals and CAHs would be proposed policies set forth in this Payment/AcuteInpatientPPS/Wage- required to use the Spring 2017 version proposed rule. MedPAC Index-Files.html. of the CQM electronic specifications recommendations for the IPPS for FY Periods Available: FY 2007 through available on the eCQI Resource Center 2017 are addressed in Appendix B to FY 2017 IPPS Update. Web page (https://ecqi.healthit.gov/). this proposed rule. 2. CMS Occupational Mix Data Public We are seeking public comment on this For further information relating Use File proposal. specifically to the MedPAC reports or to As noted in the FY 2016 IPPS/LTCH obtain a copy of the reports, contact This file contains the CY 2013 PPS final rule (80 FR 49759), an EHR MedPAC at (202) 653–7226, or visit occupational mix survey data to be used certified for CQMs under the 2014 MedPAC’s Web site at: http:// to compute the occupational mix Edition certification criteria does not www.medpac.gov. adjustment wage indexes. Multiple

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versions of this file are created each 7. Provider-Specific File of the changes to the prospective year. For a complete schedule on the This file is a component of the payment systems published in the release of different versions of this file, PRICER program used in the MAC’s Federal Register. Two versions of this we refer readers to the wage index system to compute DRG/MS–DRG file are created each year to support the schedule in section II.M. of the payments for individual bills. The file rulemaking. preamble of this proposed rule. contains records for all prospective Media: Internet at: https://www.cms. Media: Internet at: https://www.cms. payment system eligible hospitals, gov/Medicare/Medicare-Fee-for-Service- gov/Medicare-Fee-for-Service-Payment/ including hospitals in waiver States, Payment/AcuteInpatientPPS/Historical- AcuteInpatientPPS/Wage-Index- and data elements used in the Impact-Files-for-FY-1994-through- Files.html. prospective payment system Present.html. Period Available: FY 2017 IPPS recalibration processes and related Periods Available: FY 1994 through Update. activities. Beginning with December FY 2017 IPPS Update. 3. Provider Occupational Mix 1988, the individual records were 11. AOR/BOR Tables enlarged to include pass-through per Adjustment Factors for Each This file contains data used to diems and other elements. Occupational Category Public Use File develop the MS–DRG relative weights. It Media: Internet at: https://www.cms. contains mean, maximum, minimum, This file contains each hospital’s gov/Medicare/Medicare-Fee-for-Service- standard deviation, and coefficient of occupational mix adjustment factors by Payment/ProspMedicareFeeSvcPmtGen/ variation statistics by MS–DRG for occupational category. Two versions of Index.html. these files are created each year to Period Available: Quarterly Update. length of stay and standardized charges. support the rulemaking. The BOR tables are ‘‘Before Outliers 8. CMS Medicare Case-Mix Index File Media: Internet at: https://www.cms. Removed’’ and the AOR is ‘‘After gov/Medicare/Medicare-Fee-for- This file contains the Medicare case- Outliers Removed.’’ (Outliers refer to AService-Payment/AcuteInpatientPPS/ mix index by provider number as statistical outliers, not payment Wage-Index-Files.html. published in each year’s update of the outliers.) Period Available: FY 2017 IPPS Medicare hospital inpatient prospective Two versions of this file are created Update. payment system. The case-mix index is each year to support the rulemaking. a measure of the costliness of cases Media: Internet at: https://www.cms. 4. Other Wage Index Files treated by a hospital relative to the cost gov/Medicare/Medicare-Fee-for-Service- CMS releases other wage index of the national average of all Medicare Payment/AcuteInpatientPPS/Acute- analysis files after each proposed and hospital cases, using DRG/MS–DRG Inpatient-Files-for-Download.html. Periods Available: FY 2005 through final rule. weights as a measure of relative FY 2017 IPPS Update. Media: Internet at: https://www.cms. costliness of cases. Two versions of this gov/Medicare/Medicare-Fee-for-Service- file are created each year to support the 12. Prospective Payment System (PPS) Payment/AcuteInpatientPPS/Wage- rulemaking. Standardizing File Index-Files.html. Media: Internet at: https://www.cms. gov/Medicare/Medicare-Fee-for-Service- This file contains information that Periods Available: FY 2005 through standardizes the charges used to FY 2017 IPPS Update. Payment/AcuteInpatientPPS/Acute- Inpatient-Files-for-Download.html. calculate relative weights to determine 5. FY 2017 IPPS SSA/FIPS CBSA State Periods Available: FY 1985 through payments under the hospital inpatient and County Crosswalk FY 2017. operating and capital prospective payment systems. Variables include This file contains a crosswalk of State 9. MS–DRG Relative Weights (Also wage index, cost-of-living adjustment and county codes used by the Social Table 5—MS–DRGs) (COLA), case-mix index, indirect Security Administration (SSA) and the This file contains a listing of MS– medical education (IME) adjustment, Federal Information Processing DRGs, MS–DRG narrative descriptions, disproportionate share, and the Core- Standards (FIPS), county name, and a relative weights, and geometric and Based Statistical Area (CBSA). The file list of Core-Based Statistical Areas arithmetic mean lengths of stay for each supports the rulemaking. (CBSAs). fiscal year. Two versions of this file are Media: Internet at: https://www.cms. Media: Internet at: https://www.cms. created each year to support the gov/Medicare/Medicare-Fee-for-Service- gov/Medicare/Medicare-Fee-for-Service- rulemaking. Payment/AcuteInpatientPPS/Acute- Payment/AcuteInpatientPPS/Acute- Media: Internet at: https://www.cms. Inpatient-Files-for-Download.html. Inpatient-Files-for-Download.html. gov/Medicare/Medicare-Fee-for-Service- Period Available: FY 2017 IPPS Period Available: FY 2017 IPPS Payment/AcuteInpatientPPS/Acute- Update. Update. Inpatient-Files-for-Download.html. 13. Hospital Readmissions Reduction 6. HCRIS Cost Report Data Periods Available: FY 2005 through Program Supplemental File FY 2017 IPPS Update. The data included in this file contain This file contains information on the cost reports with fiscal years ending on 10. IPPS Payment Impact File calculation of the Hospital or after September 30, 1996. These data This file contains data used to Readmissions Reduction Program files contain the highest level of cost estimate payments under Medicare’s (HRRP) payment adjustment. Variables report status. hospital impatient prospective payment include the proxy excess readmission Media: Internet at: http://www.cms. systems for operating and capital-related ratios for acute myocardial infarction hhs.gov/CostReports/02_ costs. The data are taken from various (AMI), pneumonia (PN) and heart HospitalCostReport.asp. sources, including the Provider-Specific failure (HF), coronary obstruction (We note that data are no longer File, HCRIS Cost Report Data, MedPAR pulmonary disease (COPD), total hip offered on a CD. All of the data collected Limited Data Sets, and prior impact arthroplasty (THA)/total knee are now available free for download files. The data set is abstracted from an arthroplasty (TKA), and coronary artery from the cited Web site.) internal file used for the impact analysis bypass grafting (CABG) and the proxy

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readmissions payment adjustment for this document that contain information approved under OMB control number each provider included in the program. collection requirements (ICRs). 0938–0907. In addition, the file contains 2. ICRs for Add-On Payments for New 4. Hospital Applications for Geographic information on the number of cases for Services and Technologies Reclassifications by the MGCRB each of the applicable conditions excluded in the calculation of the Section II.H.1. of the preamble of this Section III.J.2. of the preamble of this readmission payment adjustment proposed rule discusses add-on proposed rule discusses proposed factors. It also contains MS–DRG payments for new services and changes to the wage index based on relative weight information to estimate technologies. Specifically, this section hospital reclassifications. As stated in the payment adjustment factors. The file states that applicants for add-on that section, under section 1886(d)(10) supports the rulemaking. payments for new medical services or of the Act, the MGCRB has the authority Media: Internet at: https://www.cms. technologies for FY 2018 must submit a to accept short-term IPPS hospital gov/Medicare/Medicare-Fee-for-Service- formal request. A formal request applications requesting geographic Payment/AcuteInpatientPPS/Acute- includes a full description of the reclassification for wage index and to Inpatient-Files-for-Download.html. clinical applications of the medical issue decisions on these requests by Period Available: FY 2017 IPPS service or technology and the results of hospitals for geographic reclassification Update. any clinical evaluations demonstrating for purposes of payment under the IPPS. that the new medical service or The burden associated with this 14. Medicare Disproportionate Share technology represents a substantial application process is the time and Hospital (DSH) Supplemental File clinical improvement. In addition, the effort necessary for an IPPS hospital to This file contains information on the request must contain a significant complete and submit an application for calculation of the uncompensated care sample of the data to demonstrate that reclassification to the MGCRB. The payments for FY 2017. Variables the medical service or technology meets burden associated with this requirement include a hospital’s SSI days and the high-cost threshold. is subject to the PRA. It is currently Medicaid days used to determine a We believe the burden associated approved under OMB control number hospital’s share of uncompensated care with this requirement is exempt from 0938–0573. payments, total uncompensated care the PRA under 5 CFR 1320.3(c), which 5. ICRs for the Notice of Observation payments and estimated per claim defines the agency collection of Treatment by Hospitals and CAHs uncompensated care payment amounts. information subject to the requirements In section IV.L. of the preamble of this The file supports the rulemaking. of the PRA as information collection proposed rule, we discuss our proposed Media: Internet at: https://www.cms. imposed on 10 or more persons within implementation of the NOTICE Act gov/Medicare/Medicare-Fee-for-Service- any 12-month period. This information (Pub. L. 114–42), which amended Payment/AcuteInpatientPPS/Acute- collection does not impact 10 or more section 1866(a)(1) of the Act to require Inpatient-Files-for-Download.html. entities in a 12-month period. For FYs hospitals and CAHs to provide written Period Available: FY 2017 IPPS 2008, 2009, 2010, 2011, 2012, 2013, and oral notification to Medicare Update. 2014, 2015, 2016, and 2017, we received beneficiaries receiving observation 1, 4, 5, 3, 3, 5, 5, 7, 9, and 9 B. Collection of Information services as outpatients for more than 24 applications, respectively. Requirements hours. We have developed a 1. Statutory Requirement for Solicitation 3. ICRs for the Occupational Mix standardized format for the notice (the of Comments Adjustment to the Proposed FY 2017 MOON), which would be disseminated Wage Index (Hospital Wage Index during the normal course of related Under the Paperwork Reduction Act Occupational Mix Survey) business activities. The proposed of 1995, we are required to provide 60- standardized notice discussed in this Section III.E. of the preamble of this day notice in the Federal Register and proposed rule is simultaneously being proposed rule discusses the solicit public comment before a subject to public review and comment occupational mix adjustment to the collection of information requirement is through the Office of Management and proposed FY 2017 wage index While the submitted to the Office of Management Budget (OMB) Paperwork Reduction Act preamble does not contain any new and Budget (OMB) for review and process before implementation. approval. In order to fairly evaluate ICRs, we note that there is an OMB We estimate that it will take hospitals whether an information collection approved information collection request and CAHs 5 minutes (0.0833 hour) to should be approved by OMB, section associated with the hospital wage index. complete and deliver each notice. In 3506(c)(2)(A) of the Paperwork Section 304(c) of Public Law 106–554 2014, there were approximately 977,000 Reduction Act of 1995 requires that we amended section 1886(d)(3)(E) of the claims for Medicare outpatient solicit comment on the following issues: Act to require us to collect data at least observation services lasting greater than • The need for the information once every 3 years on the occupational 24 hours furnished by 6,142 hospitals collection and its usefulness in carrying mix of employees for each short-term, and CAHs.315 The annual hour burden out the proper functions of our agency. acute care hospital participating in the is estimated to be 81,384 (977,000 • The accuracy of our estimate of the Medicare program in order to construct responses × 0.0833 hour). To derive information collection burden. an occupational mix adjustment to the average cost, we used data from the U.S. • The quality, utility, and clarity of wage index. We collect the data via the Bureau of Labor Statistics’ May 2014 the information to be collected. occupational mix survey. National Occupational Employment and • Recommendations to minimize the The burden associated with this Wage Estimates for all salary estimates information collection burden on the information collection requirement is (http://www.bls.gov/oes/current/oes_ affected public, including automated the time and effort required to collect nat.htm). In this regard, we used the collection techniques. and submit the data in the Hospital mean hourly wage of $33.55 and the In this proposed rule, we are Wage Index Occupational Mix Survey to soliciting public comment on each of CMS. The aforementioned burden is 315 Source: CMS Office of Enterprise and Data these issues for the following sections of subject to the PRA; it is currently Analytics.

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cost of fringe benefits, $33.55 requirements is currently approved measures proposed for removal are (calculated at 100 percent of salary), to under OMB control number 0938–1022. among the list of measures available, determine an adjusted hourly wage of In section VIII.A.3.b. of the preamble reducing the number of eCQMs from $67.10. This is necessarily a rough of this proposed rule, we are proposing which hospitals choose would decrease adjustment, both because fringe benefits to remove 13 eCQM versions of the burden associated with selecting and overhead costs vary significantly measures, 2 ‘‘topped out’’ chart- and reporting data for 4 eCQMs because from employer to employer and because abstracted measures, and 2 structural hospitals would have only 15 eCQMs methods of estimating these costs vary measures, beginning with the FY 2019 from which to select instead of 28 widely from study to study. payment determination. However, we eCQMs. However, if our proposal to Nonetheless, there is no practical note that the total number of measures require hospitals to submit data on all alternative and we believe that doubling proposed for removal is 15 because the of the available eCQMs included in the the hourly wage to estimate total cost is STK–4 and VTE–5 measures are being Hospital IQR Program measure set is a reasonable accurate estimation proposed for removal twice—once in finalized as proposed, this modest method. The cost per response is the chart-abstracted form and again in reduction in burden would be offset by approximately $5.59 based on an hourly electronic form. the increased burden associated with salary rate of $67.10 (U.S. Bureau of The 13 eCQM versions of measures submitting data on 15 eCQMs instead of Labor Statistics’ May 2013 National we are proposing to remove are: (1) 4 eCQMs. We discuss the burden Occupational Employment and Wage AMI–2: Aspirin Prescribed at Discharge associated with our proposal to require Estimates for nursing) and the 5-minute for AMI (NQF #0142); (2) AMI–7a: the submission of all available eCQMs response estimate. By multiplying the Fibrinolytic Therapy Received Within included in the Hospital IQR Program annual responses by $5.59, the annual 30 minutes of Hospital Arrival; (3) AMI– measure set below. 10: Statin Prescribed at Discharge; (4) cost burden estimate is $5,461,430 We believe that there would be a (977,000 responses × $5.59) or HTN: Healthy Term Newborn (NQF #0716); (5) PN–6: Initial Antibiotic reduction in burden for hospitals as a approximately $889.19 per hospital or result of the removal of the two chart- CAH ($5,461,430/6,142). Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent abstracted measures listed above (STK– 6. ICRs for the Hospital Inpatient Patients (NQF #0147); (6) SCIP-Inf-1a: 4 and VTE–5). Due to the burden Quality Reporting (IQR) Program Prophylactic Antibiotic Received within associated with the collection of chart- The Hospital IQR Program (formerly 1 Hour Prior to Surgical Incision (NQF abstracted data (based on updated referred to as the Reporting Hospital #0527); (7) SCIP-Inf-2a: Prophylactic measure record abstraction time Quality Data for Annual Payment Antibiotic Selection for Surgical estimates from the third quarter in 2014 (RHQDAPU) Program) was originally Patients (NQF #0528); (8) SCIP Inf-9: through the second quarter in 2015 established to implement section 501(b) Urinary Catheter Removed on provided by CDAC, the number of of the MMA, Public Law 108–173. This Postoperative Day 1 (POD1) or reporting periods in a calendar year, and program expanded our voluntary Postoperative Day 2 (POD2) with Day of the number of IPPS hospitals reporting), Hospital Quality Initiative. The Hospital Surgery Being Day Zero; (9) STK–4: we estimate that the removal of STK–4 IQR Program originally consisted of a Thrombolytic Therapy (NQF #0437); would result in a burden reduction of ‘‘starter set’’ of 10 quality measures. The (10) VTE–3: Venous Thromboembolism approximately 303,534 hours and collection of information associated Patients with Anticoagulation Overlap approximately $9.9 million across all with the original starter set of quality Therapy (NQF #0373); (11) VTE–4: 3,300 IPPS hospitals participating in the measures was previously approved Venous Thromboembolism Patients Hospital IQR Program for the FY 2019 under OMB control number 0938–0918. Receiving Unfractionated Heparin payment determination. In addition, we All of the information collection (UFH) with Dosages/Platelet Count estimate that the removal of VTE–5 requirements previously approved Monitoring by Protocol (or Nomogram); would result in a burden reduction of under OMB control number 0938–0918 (12) VTE–5: Venous Thromboembolism approximately 653,565 hours and have been combined with the Discharge Instructions; and (13) VTE–6: approximately $21.4 million across all information collection request currently Incidence of Potentially Preventable 3,300 IPPS hospitals participating in the approved under OMB control number Venous Thromboembolism. Hospital IQR Program for the FY 2019 0938–1022. We no longer use OMB The two chart-abstracted measures we payment determination. More control number 0938–0918. are proposing to remove are: (1) STK– specifically, for both the STK and VTE We added additional quality measures 4: Thrombolytic Therapy (NQF #0437); measure sets, we calculated the burden to the Hospital IQR Program and and (2) VTE–5: Venous hours by taking the difference in the submitted the information collection Thromboembolism Discharge burden estimates from this FY 2017 request to OMB for approval. This Instructions. The two structural IPPS/LTCH PPS proposed rule and the expansion of the Hospital IQR Program measures we are proposing to remove burden estimates from the FY 2016 measures was part of our are: (1) Participation in a Systematic IPPS/LTCH PPS final rule. With regard implementation of section 5001(a) of the Clinical Database Registry for Nursing to STK–4, because it is the only STK Deficit Reduction Act of 2005 (DRA). Sensitive Care; and (2) Participation in measure left in the Hospital IQR Section 1886(b)(3)(B)(viii)(III) of the Act, a Systematic Clinical Database Registry Program, and we are proposing in this added by section 5001(a) of the DRA, for General Surgery. FY 2017 IPPS/LTCH PPS proposed rule requires that the Secretary expand the We believe that removing 13 eCQMs to remove it, we calculated the total ‘‘starter set’’ of 10 quality measures that will reduce burden for hospitals, as they burden hours as follows: 0 hours (time were established by the Secretary as of would have a smaller number of eCQMs required to report in CY 2017)¥303,534 November 1, 2003, to include measures to select from. As finalized in the FY hours (time required to report in CY ‘‘that the Secretary determines to be 2016 IPPS/LTCH PPS final rule (80 FR 2016) = ¥303,534 hours for the STK appropriate for the measurement of the 49698), hospitals are required to select measure set. With regard to the VTE quality of care furnished by hospitals in 4 out of 28 available eCQMs on which measure set, we used an updated inpatient settings.’’ The burden to report data beginning with the FY estimate from CDAC that the time per associated with these reporting 2018 payment determination. Since the record (that is, to report all of the VTE

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measures in the Hospital IQR Program) proposing to add four claims-based (as compared to our previously finalized is 28 minutes, and in the FY 2016 IPPS/ measures to the Hospital IQR Program requirement to report data on 4 eCQMs LTCH PPS final rule, we estimated a measure set beginning with the FY 2019 for 1 quarter) would represent a burden burden reduction of 10 minutes for payment determination: (1) Aortic increase of 30,800 hours across all 3,300 removing 3 VTE measures (or Aneurysm Procedure Clinical Episode- IPPS hospitals participating in the approximately 3 minutes per measure). Based Payment Measure; (2) Hospital IQR Program. This figure was As such, we deducted 3 minutes from Cholecystectomy and Common Duct derived by calculating the difference the 28 minute estimate to account for Exploration Clinical Episode-Based between the FY 2017 burden estimate of the proposed removal of VTE–5, for a Payment Measure; (3) Spinal Fusion 33,000 hours (150 minutes per record/ total of 25 minutes to report on the Clinical Episode-Based Payment 60 minutes per hour × 4 reporting remaining VTE measure in the Hospital Measure; and (4) Excess Days in Acute quarters per year × 1 record per hospital IQR Program. We then calculated the Care after Hospitalization for per quarter × 3,300 hospitals) and the estimated total burden hours per Pneumonia. Because these claims-based FY 2016 burden estimate of 2,200 hours hospital for reporting the remaining measures can be calculated based on (20 minutes per record/60minutes per VTE measure as follows: 25 minutes per data that are already reported to the hour × 1 reporting quarter per year × 1 record/60 minutes per hour × 4 Medicare program for payment record per hospital per quarter × 3,300 reporting quarters per year × 198.05 purposes, we believe no additional hospitals) (80 FR 49763), for an records per hospital per quarter = 330 burden on hospitals will result from the incremental increase of 30,800 hours. burden hours per hospital. Because addition of these four proposed claims- Furthermore, we estimate that there are 3,300 IPPS hospitals, we then based measures. reporting these eCQMs can be × accomplished by staff with a mean multiplied 330 hours per hospital For the FY 2019 payment hourly wage of $16.42 per hour.316 3,300 hospitals to get a total annual determination and subsequent years, in However, obtaining data on other burden estimate of 1,089,275 hours to section VIII.A.8. of the preamble of this overhead costs is challenging. Overhead report the remaining measure in the proposed rule, we also are proposing to costs vary greatly across industries and VTE measure set. To demonstrate the require hospitals to submit data for all firm sizes. In addition, the precise cost reduction in the total burden hours for eCQMs included in the Hospital IQR VTE from this FY 2017 IPPS/LTCH PPS elements assigned as ‘‘indirect’’ or Program measure set in a manner that proposed rule and the FY 2016 IPPS/ ‘‘overhead’’ costs, as opposed to direct will permit eligible hospitals to align LTCH PPS final rule, we calculated as costs or employee wages, are subject to Hospital IQR Program requirements follows: 1,089,275 (FY 2017 total annual some interpretation at the firm level. with some requirements under the estimate)¥1,742,840 (FY 2016 total Therefore, we have chosen to calculate Medicare and Medicaid EHR Incentive annual estimate) = ¥653,565 hours for the cost of overhead at 100 percent of Programs. Specifically, hospitals would the VTE measure set. the mean hourly wage. This is be required to submit a full calendar We believe that there will be a necessarily a rough adjustment, both year of data on all eCQMs in the negligible burden reduction due to the because fringe benefits and overhead Hospital IQR Program measure set, on removal of two structural measures. costs vary significantly from employer an annual basis, beginning with CY Consistent with previous years (80 FR to employer and because methods of 2017 reporting. We believe that the total 49762), we estimate a burden of 15 estimating these costs vary widely from burden associated with the eCQM minutes per hospital to report all four study to study. Nonetheless, there is no reporting proposal would be similar to previously finalized structural measures practical alternative, and we believe that that previously outlined in the Medicare and to complete other forms (such as the doubling the hourly wage to estimate EHR Incentive Program Stage 2 final Extraordinary Circumstances Extension/ total cost is a reasonably accurate rule (77 FR 54126 through 54133). In Exemption Request Form). Therefore, estimation method. This is a change that final rule, the burden estimate for our burden estimate of 15 minutes per from how we have accounted for the a hospital to report all 16 eCQMs is 2 hospital remains unchanged because we cost of overhead in our previous rules hours and 40 minutes (160 total minutes believe the reduction in burden regarding the Hospital IQR Program. In or 10 minutes per measure) per associated with removing these two calculating labor cost, we estimate an submission for a 3-month period (77 FR structural measures will be sufficiently hourly labor cost of $32.84 ($16.42 base 54127). We believe that this estimate is minimal that it will not substantially salary + $16.42 fringe) and a cost accurate and appropriate to apply to the impact this estimate. increase of $1,011,472.00 (30,800 Hospital IQR Program because we are In addition, in section VIII.A.6. of the additional burden hours × $32.84 per proposing to align the eCQM reporting preamble of this proposed rule, we are hour) across approximately 3,300 requirements between both programs. proposing refinements to two previously hospitals participating in the Hospital As such, using the estimate of 10 adopted measures: (1) Expanding the IQR Program to report a full calendar minutes per measure, we anticipate that cohort for the Hospital-Level, Risk- year of data for 15 eCQMs, on an annual if our proposals to: (1) Require reporting standardized Payment Associated with a basis. on all of the available eCQMs (15 30-Day Episode-of-Care for Pneumonia We are not proposing any changes to eCQMs for the CY 2017 reporting (NQF #2579); and (2) adopting the our validation requirements related to period/FY 2019 payment modified Patient Safety and Adverse chart-abstracted measures, but are determination); and (2) submit one year Events Composite (NQF #0531). Because providing some background information of eCQM data (covering Q1, Q2, Q3, and these claims-based measures can be as basis for our eCQM validation Q4), both are finalized as proposed, it calculated based on data that are already proposals. As noted in the FY 2016 would take a hospital 150 minutes per reported to the Medicare program for IPPS/LTCH IPPS final rule (80 FR 49762 quarter to report one medical record payment purposes, we believe no and 49763), for validation of chart- containing information on all the additional burden on hospitals will abstracted data for the FY 2018 payment result from the proposed refinements to required eCQMs. In total, for the FY these two claims-based measures. 2019 payment determination, we expect 316 Occupational Outlook Handbook. Available at: Also, in section VIII.A.7. of the our proposal to require hospitals to http://www.bls.gov/ooh/healthcare/medical- preamble of this proposed rule, we are report data on 15 eCQMs for 4 quarters records-and-health-information-technicians.html.

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determination and subsequent years, we the (up to) 200 hospitals selected for FR 50957 through 50959), the FY 2015 require hospitals to provide 72 charts eCQM validation, on an annual basis. IPPS/LTCH PPS final rule (79 FR 50347 per hospital per year (with an average Consistent with the chart-abstraction through 50348), and the FY 2016 IPPS/ page length of 1,500), including 40 validation process, we will reimburse LTCH PPS final rule (80 FR 49764) for charts for HAI validation and 32 charts hospitals providing records via secure a detailed discussion of the burden for for clinical process of care validation, file transfer, at a rate of $3.00 per record. the program requirements that we have for a total of 108,000 pages per hospital Lastly, in section VIII.A.15. of the previously adopted. Below we discuss per year. We reimburse hospitals at 12 preamble of this proposed rule, we are only any changes in burden that would cents per photocopied page (79 FR proposing to update our Extraordinary result from the proposals in this 50346) for a total per hospital cost of Circumstances Extensions or proposed rule. $12,960. For hospitals providing charts Exemptions (ECE) policy by: (1) In section VIII.B.3.b. of the preamble digitally via a re-writable disc, such as Extending the general ECE request of this proposed rule, we are proposing encrypted CD–ROMs, DVDs, or flash deadline for non-eCQM circumstances that PCHs submit data on Oncology: drives, we will reimburse hospitals at a from 30 to 90 calendar days following Radiation Dose Limits to Normal rate of 40 cents per digital media (80 FR an extraordinary circumstance; and (2) Tissues (NQF #0382) measure for an 49837), and additionally hospitals will establishing a separate submission expanded cohort of patients. In the FY be reimbursed $3.00 per record (78 FR deadline for ECE requests with respect 2015 IPPS/LTCH PPS final rule (79 FR 50956). For hospitals providing charts to eCQM reporting circumstances of 50285) we finalized a sampling via secure file transfer, we will April 1 following the end of the methodology for Clinical Process/ reimburse hospitals at a rate of $3.00 per reporting calendar year. Consistent with Oncology Care Measures, which record (78 FR 50835). previous years, we estimate a burden of includes the Oncology: Radiation Dose In section VIII.A.11. of the preamble 15 minutes per hospital to report all Limits to Normal Tissues measure. of this proposed rule, beginning in forms (including the ECE request form) Because our previous burden estimates spring 2018 for the FY 2020 payment and structural measures. We believe that were based on the maximum sample for determination, we are proposing to the proposed updates to the ECE this measure, the expansion of the modify the existing validation process deadlines will have no effect on burden patient cohort would not raise the for the Hospital IQR Program data to for hospitals, because we are not making burden for this measure beyond that include a random sample of up to 200 any changes that will increase the which we described in the FY 2015 hospitals for validation of eCQMs in the amount of time necessary to complete IPPS/LTCH PPS final rule (79 FR 50347 Hospital IQR Program. In previous years the form. In addition, the burden through 50348). (79 FR 50347), we estimated a total associated with the completion of this In section VIII.B.4.b. of the preamble burden of 16 hours (960 minutes) for the form is included in the 15 minutes of this proposed rule, we are proposing submission of 12 records, which would allocated for all forms and structural to adopt the Admissions and Emergency equal 1 hour and 20 minutes per record measures. Department (ED) Visits for Patients (960 minutes/12 records). Applying the In summary, under OMB number Receiving Outpatient Chemotherapy time per individual submission of 1 0938–1022, we estimate a total burden measure beginning with the FY 2019 hour and 20 minutes (or 80 minutes) for decrease of approximately 917,766 program year. This is a claims-based the 32 records we are proposing hours, for a total cost decrease of measure, and therefore, does not require hospitals submit beginning with the FY approximately $30 million across PCHs to submit any new data. Thus, this 2020 payment determination, we approximately 3,300 hospitals measure would not pose any new estimate a total burden of approximately participating in the Hospital IQR burden on PCHs. 43 hours (1 hour and 20 minutes × 32 Program as a result of the policies In summary, as a result of our records) for each hospital selected for proposed in this proposed rule. proposals, we do not anticipate any participation in eCQM validation. We The estimate excludes the burden changes to previously finalized burden estimate that approximately 43 hours of associated with the NHSN and HCAHPS estimates. work for up to 200 hospitals would measures, both of which are submitted 8. ICRs for the Hospital Value-Based increase the eCQM validation burden under separate information collection Purchasing (VBP) Program hours from 0 hours (as this is the first requests and are approved under OMB In section IV.H. of the preamble of instance where eCQM validation is control numbers 0920–0666 and 0938– this proposed rule, we discuss proposed being proposed as a requirement) to 0981, respectively. The burden requirements for the Hospital VBP 8,533 labor hours. estimates in this proposed rule are the Program. Specifically, in this proposed As previously stated, with respect to estimates for which we are requesting rule, with respect to quality measures, eCQMs, the labor performed can be OMB approval. we are proposing to: Include selected accomplished by staff, with a mean 7. ICRs for PPS-Exempt Cancer Hospital ward non-Intensive Care Unit (ICU) hourly wage of $16.42.317 Further, in Quality Reporting (PCHQR) Program locations in certain NHSN measures calculating labor costs, we have chosen beginning with the FY 2019 program to calculate the cost of overhead at 100 As discussed in sections VIII.B. of the year; adopt the Hospital-Level, Risk- percent of the mean hourly wage. As preamble of this proposed rule, section Standardized Payment Associated with such, we estimate a fully burdened labor 1866(k)(1) of the Act requires, for a 30-Day Episode-of-Care for Acute rate of $32.84 ($16.42 base salary + purposes of FY 2014 and each Myocardial Infarction (AMI) and the $16.42 fringe) per hour. Therefore, using subsequent fiscal year, that a hospital Hospital-Level, Risk-Standardized these assumptions, we estimate an described in section 1886(d)(1)(B)(v) of Payment Associated with a 30-Day hourly labor cost of $32.84 and a cost the Act (a PPS-exempt cancer hospital, Episode-of-Care for Heart Failure (HF) increase of $280,224 (8,533 additional or a PCH) submit data in accordance measures for the FY 2021 program year; burden hours × $32.84 per hour) across with section 1866(k)(2) of the Act with respect to such fiscal year. update the Hospital 30-Day, All-Cause, 317 Occupational Outlook Handbook. Available at: We refer readers to the FY 2013 IPPS/ Risk-Standardized Mortality Rate http://www.bls.gov/ooh/healthcare/medical- LTCH PPS final rule (77 FR 28124), the (RSMR) Following Pneumonia (PN) records-and-health-information-technicians.html. FY 2014 IPPS/LTCH PPS final rule (78 Hospitalization (Updated Cohort)

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measure for the FY 2021 program year; and updated measures are required for 9. ICRs for the Long-Term Care Hospital and adopt the Hospital 30-Day, All- the Hospital IQR Program. Therefore, Quality Reporting Program (LTCH QRP) Cause, Risk-Standardized Mortality Rate their inclusion in the Hospital VBP (RSMR) Following Coronary Artery Program does not result in any As discussed in section VIII.C.5 of the Bypass Graft (CABG) Surgery measure additional burden because the Hospital preamble of this proposed rule, we are for the FY 2022 program year. VBP Program uses data that are required retaining the following 13 previously As required under section for the Hospital IQR Program. finalized quality measures for use in the 1886(o)(2)(A) of the Act, the additional LTCH QRP:

LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2014 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS

Annual payment determination: Measure title IPPS/LTCH PPS final rule Initial and subsequent APU years

National Healthcare Safety Network (NHSN) Adopted an application of the measure in the FY 2014 payment determination and subse- Catheter-Associated Urinary Tract Infection FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. (CAUTI) Outcome Measure (NQF #0138). 51745 through 51747); Adopted the NQF-endorsed version and expanded measure (with standardized infection ratio [SIR]) in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53616 through 53619) National Healthcare Safety Network (NHSN) Adopted an application of the measure in the FY 2014 payment determination and subse- Central Line-Associated Bloodstream Infec- FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. tion (CLABSI) Outcome Measure (NQF 51747 through 51748); #0139). Adopted the NQF-endorsed and expanded measure (with SIR) in the FY 2013 IPPS/ LTCH PPS final rule (77 FR 53616 through 53619). Percent of Residents or Patients with Pressure Adopted an application of the measure in the FY 2014 payment determination and subse- Ulcers That Are New or Worsened (Short FY 2012 IPPS/LTCH PPS final rule (76 FR quent years. Stay) (NQF #0678). 51748 through 51750); Adopted the NQF-endorsed version in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863); Adopted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49731 through 49736) to fulfill IMPACT Act requirements. Percent of Residents or Patients Who Were Adopted in the FY 2013 IPPS/LTCH PPS final FY 2016 payment determination and subse- Assessed and Appropriately Given the Sea- rule (77 FR 53624 through 53627); quent years. sonal Influenza Vaccine (Short Stay) (NQF Revised data collection timeframe in the FY #0680). 2014 IPPS/LTCH PPS final rule (78 FR 50858 through 50861); Revised data collection timeframe in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50289 through 50290). Influenza Vaccination Coverage among Adopted in the FY 2013 IPPS/LTCH PPS final FY 2016 payment determination and subse- Healthcare Personnel (NQF #0431). rule (77 FR 53630 through 53631); quent years. Revised data collection timeframe in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50858). National Healthcare Safety Network (NHSN) Adopted in the FY 2014 IPPS/LTCH PPS final FY 2017 payment determination and subse- Facility-wide Inpatient Hospital-onset rule (78 FR 50863 through 50865). quent years. Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716). National Healthcare Safety Network (NHSN) Adopted in the FY 2014 IPPS/LTCH PPS final FY 2017 payment determination and subse- Facility-wide Inpatient Hospital-onset Clos- rule (78 FR 50865 through 50868). quent years. tridium difficile Infection (CDI) Outcome Measure (NQF #1717). All-Cause Unplanned Readmission Measure Adopted in FY 2014 IPPS/LTCH PPS final FY 2017 payment determination and subse- for 30 Days Post-Discharge from Long-Term rule (78 FR 50868 through 50874); quent years. Care Hospitals (NQF #2512). Adopted the NQF-endorsed version in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49730 through 49731). National Healthcare Safety Network (NHSN) Adopted in the FY 2015 IPPS/LTCH PPS final FY 2018 payment determination and subse- Ventilator-Associated Event (VAE) Outcome rule (79 FR 50301 through 50305). quent years. Measure.

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LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2014 PAYMENT DETERMINATIONS AND SUBSEQUENT YEARS—Continued

Annual payment determination: Measure title IPPS/LTCH PPS final rule Initial and subsequent APU years

Application of Percent of Residents Experi- Adopted in the FY 2014 IPPS/LTCH PPS final FY 2018 payment determination and subse- encing One or More Falls with Major Injury rule (78 FR 50874 through 50877); quent years. (Long Stay) (NQF #0674). Revised data collection timeframe in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50290 through 50291); Adopted an application of the measure in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49736 through 49739) to fulfill IMPACT Act requirements. Percent of Long-Term Care Hospital Patients Adopted in the FY 2015 IPPS/LTCH PPS final FY 2018 payment determination and subse- with an Admission and Discharge Functional rule (79 FR 50291 through 50298). quent years. Assessment and a Care Plan That Address- es Function (NQF #2631). Functional Outcome Measure: Change in Mo- Adopted in the FY 2015 IPPS/LTCH PPS final FY 2018 payment determination and subse- bility among Long-Term Care Hospital Pa- rule (79 FR 50298 through 50301). quent years. tients Requiring Ventilator Support (NQF #2632). Application of Percent of Long-Term Care Hos- Adopted an application of the measure in the FY 2018 payment determination and subse- pital Patients with an Admission and Dis- FY 2016 IPPS/LTCH PPS final rule (80 FR quent years. charge Functional Assessment and a Care 49739 through 49747) to fulfill IMPACT Act Plan That Addresses Function (NQF #2631). requirements.

As discussed in section VIII.C.6 and rule, we are proposing the following VIII.C.7 of the preamble of this proposed four measures for use in the LTCH QRP:

LTCH QRP QUALITY MEASURES PROPOSED FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Annual payment determination: Measure title Initial and subsequent APU years

Potentially Preventable 30-Day Post-Discharge Readmission Measure for the LTCH FY 2018 payment determination and subsequent years. QRP *. Discharge to Community-PAC LTCH QRP * ...... FY 2018 payment determination and subsequent years. MSPB–PAC LTCH QRP * ...... FY 2018 payment determination and subsequent years. Drug Regimen Review Conducted with Follow-Up for Identified Issues- PAC LTCH FY 2020 payment determination and subsequent years. QRP **. * Proposed in this FY 2017 IPPS/LTCH PPS proposed rule for the FY 2018 payment determination and subsequent years. ** Proposed in this FY 2017 IPPS/LTCH PPS proposed rule for the FY 2020 payment determination and subsequent years.

Currently, LTCHs use two separate have retained in this proposed rule has believe no additional information data collection mechanisms to report been previously discussed in the FY collection would be required from the quality data to CMS. Six of the 13 2015 IPPS/LTCH PPS final rule (79 FR LTCHs. We are not proposing new measures being retained in this FY 2017 50443 through 50445) and FY 2016 assessment-based quality measures in IPPS/LTCH PPS proposed rule are IPPS/LTCH PPS final rule (80 FR 49766) the LTCH QRP in this proposed rule for currently collected via the CDC’s NHSN. and has been previously approved the FY 2018 payment determination and The NHSN is a secure, Internet-based under OMB control number 0920–0666, subsequent years. HAI tracking system maintained and with an expiration date of November, The remaining assessment-based managed by the CDC. The NHSN 31, 2016. quality measure data are reported to enables health care facilities to collect In addition to the previously finalized CMS by LTCHs using the LTCH CARE and use data about HAIs, adherence to All-Cause Unplanned Readmission Data Set. In section VIII.C.9.d. of the clinical practices known to prevent Measure for 30 Days Post-Discharge preamble of this of this proposed rule, HAIs, and other adverse events within From LTCHs (NQF #2512), we are we are proposing to expand the data their organizations. NHSN data proposing three additional Medicare collection timeframe for the measure collection occurs via a Web-based tool FFS claims-based measures in this NQF #0680 Percent of Residents or hosted by the CDC and is provided free proposed rule: Potentially Preventable Patients Who Were Assessed and of charge to facilities. In this proposed 30 Day Post-Discharge Readmission Appropriately Given the Seasonal rule, we are not proposing any new Measure for LTCH QRP; Discharge to Influenza Vaccine (77 FR 53624 through quality measures that would be Community—PAC LTCH QRP; and 53627), beginning with the FY 2019 collected via the CDC’s NHSN. MSBP–PAC LTCH QRP. Because these payment determination. The data Therefore, at this time, there would be proposed claims-based measures would collection time frame and associated no additional burden related to this be calculated based on data that are data submission deadlines are currently submission method. Any burden related already reported to the Medicare aligned with the Influenza Vaccination to NHSN-based quality measures we program for payment purposes, we Season (IVS) (October 1 of a given year

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through March 31 of the subsequent • Percent of Residents or Patients PRA provisions in 1899B(m) of the Act. year), and only require data collection with Pressure Ulcers That Are New or We believe that all additional data during the 2 calendar year quarters that Worsened (Short Stay) (NQF #0678); elements added to the LTCH CARE Data align with the IVS. We are proposing to • Percent of Residents or Patients Set Version 3.00 are for the purpose of expand the data collection timeframe Who Were Assessed and Appropriately standardizing patient assessment data, from just 2 quarters (covering the IVS) Given the Seasonal Influenza Vaccine as required under section 1899B(a)(2)(B) to a full four quarters or 12 months. We (Short Stay) (NQF #0680). of the Act. As noted above, the LTCH refer readers to section VIII.C.9.d. of the We have submitted a revision to the CARE Data Set Version 3.00 would be preamble of this this proposed rule for PRA package that addressed the changes updated to Version 4.0, effective April further details on the proposed from LTCH CARE Data Set Version 2.01 1, 2018, to include data elements for the expansion of data collection for this to Version 3.00. The LTCH CARE Data Drug Regimen Review Conducted with measures (NQF #0680), including data Set Version 3.00, which is to be Follow-Up for Identified Issues- PAC collection timeframes and associated implemented April 1, 2016, contains LTCH QRP proposed quality measure, if submission deadlines. We originally those data elements included in Version the measure is finalized. For the reasons finalized this measure for use in the FY 2.01, as well as additional data elements discussed above, we believe that the 2013 IPPS/LTCH PPS final rule (77 FR in order to allow for the collection of LTCH CARE Data Set Version 4.00 also data associated with the following 53624 through 53627). Although we falls under the PRA provisions in quality measures: section 1899B(m) of the Act. finalized data collection for this • Application of Percent of Residents measure to coincide with the IVS, we A comprehensive list of all data Experiencing One or More Falls with elements included in the LTCH CARE originally proposed year-round data Major Injury (Long Stay) (NQF #0674) Data Set Version 3.00 is available in the collection. The associated PRA package, (previously finalized in the FY 2016 LTCH QRP Manual which is accessible which was approved under OMB IPPS/LTCH PPS final rule); on the LTCH QRP Web site at: https:// control number 0938–1163, included • Percent of Long-Term Care Hospital www.cms.gov/Medicare/Quality- burden calculations that aligned with Patients with an Admission and Initiatives-Patient-Assessment- our original proposal for year-round Discharge Functional Assessment and a Instruments/LTCH-Quality-Reporting/ data collection. All subsequent PRA Care Plan That Addresses Function index.html. For a discussion of burden packages, and the PRA package that is (NQF #2631) (previously finalized in the related to LTCH CARE Data Set Version currently under review, included FY 2015 IPPS/LTCH PPS final rule); 3.00, we refer readers to section I.M. of burden calculations reflecting year- • Functional Outcome Measure: Appendix A of this proposed rule. round (12 month) data collection for Change in Mobility Among Long-Term this measure. Because of this, the Care Hospital Patients Requiring 10. ICRs for the Inpatient Psychiatric proposed change in the data collection Ventilator Support (NQF #2632) Facility Quality Reporting (IPFQR) timeframe for this measure, and any (previously finalized in the FY 2015 Program associated burden related to increased IPPS/LTCH PPS final rule); and Section 1886(s)(4) of the Act, as added data collection, has already been • Application of Percent of Long- and amended by sections 3401(f) and accounted for in the total burden figures Term Care Hospital Patients with an 10322(a) of the Affordable Care Act, included in this section of the preamble Admission and Discharge Functional requires the Secretary to implement a of this proposed rule. Assessment and a Care Plan That quality reporting program for inpatient For the FY 2020 payment Addresses Function (NQF #2631) psychiatric hospitals and psychiatric determination and subsequent years, we (previously finalized in the FY 2016 units. We refer to this program as the are proposing the use of one new IPPS/LTCH PPS final rule). Inpatient Psychiatric Facility Quality assessment based quality measure in the The LTCH CARE Data Set Version Reporting (IPFQR) Program. 4.00, effective April 1, 2018, will In section VIII.D. of the preamble of LTCH QRP: Drug Regimen Review contain those data elements included in this proposed rule, we are proposing the Conducted with Follow-Up for Version 3.00, as well as additional data following measure-related changes: To Identified Issues-PAC LTCH QRP. This elements in order to allow for the update a previously finalized measure is a cross-setting measure that satisfies collection of data associated with the (Screening for Metabolic Disorders); and the required addition of a quality proposed quality measure: Drug to adopt two new measures beginning measure under the domain of Regimen Review Conducted with with the FY 2019 payment medication reconciliation, as mandated Follow-Up for Identified Issues-PAC determination (SUB–3 Alcohol & Other by section 1899B of the Act, as added LTCH QRP, proposed in this proposed Drug Use Disorder Treatment Provided by the IMPACT Act. In addition to the rule. or Offered at Discharge and subset proposed Drug Regimen Review Each time we add new data elements measure SUB–3a Alcohol & Other Drug Conducted with Follow-Up for to the LTCH CARE Data Set related to Use Disorder Treatment at Discharge Identified Issues-PAC LTCH QRP newly proposed or finalized LTCH QRP (NQF #1664), and Thirty-day all-cause quality measure, the remaining six quality measures, we are required by the unplanned readmission following measures, outlined below, will continue PRA to submit the expanded data psychiatric hospitalization in an IPF). to be collected utilizing the LTCH CARE collection instrument to OMB for review We also are proposing to no longer Data Set. and approval. Section 1899B(m) of the specify in rulemaking when measure The LTCH CARE Data Set Version Act, as added by IMPACT Act, provides data will be publicly available, when 2.01 has been approved under OMB that the PRA requirements do not apply the preview period will occur or that the control number 0938–1163. The LTCH to section 1899B of the Act and the preview period will begin CARE Data Set Version 2.01 contains sections referenced in section approximately 12 weeks before the data elements related to patient 1899B(a)(2)(B) of the Act that require public display date, but rather to demographic data, various voluntary modifications in order to achieve the announce the timeframes using questions, as well as data elements standardization of patient assessment subregulatory guidance. related to the following quality data. We believe that the LTCH CARE We refer readers to the FY 2015 IPF measures: Data Set Version 3.00 falls under the PPS final rule (79 FR 45978 through

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45980) and the FY 2016 IPF PPS final believe that each IPF will submit In addition, the precise cost elements rule (80 FR 46720 through 46721) for a measure data on approximately 848 319 assigned as ‘‘indirect’’ or ‘‘overhead’’ detailed discussion of the burden for the cases per year. In prior rulemaking, we costs, as opposed to direct costs or IPFQR Program requirements that we estimated that the time required to employee wages, are subject to some have previously adopted. Below we chart-abstract data for chart-abstracted interpretation at the firm level. discuss only the changes in burden measures is 12 minutes per case per Therefore, we have chosen to calculate 320 resulting from the proposals in this measure. Based on the experience of the cost of overhead at 100 percent of proposed rule. Although we are other quality reporting programs, such the mean hourly wage. This is proposing provisions that impact as the Hospital IQR Program, we are necessarily a rough adjustment, both policies beginning in both the FY 2017 updating this estimate to 15 minutes per because fringe benefits and overhead and FY 2019 payment determinations, case per measure. We are only costs vary significantly from employer IPFs must take steps to comply with all proposing one chart-abstracted measure of these policies beginning in FY 2017. this year: SUB–3 and subset SUB–3a. to employer and because methods of For example, data collection for the The other measure that we are estimating these costs vary widely from measures begins in FY 2017, and the proposing, Thirty-day all-cause study to study. Nonetheless, there is no changes to the public display dates take unplanned readmission following practical alternative, and we believe that effect beginning in FY 2017. For Psychiatric hospitalization in an IPF, is doubling the hourly wage to estimate purposes of calculating burden, we will claims-based and, therefore, does not total cost is a reasonably accurate attribute the costs to the year in which require IPFs to report any additional estimation method. In calculating the these costs begin; for the purposes of all data. labor cost, we estimate an hourly labor of the proposals in this proposed rule, We estimate that reporting data for the cost of $32.84 ($16.42 base salary + that year is FY 2017. IPFQR Program measures can be $16.42 fringe). The following table We believe that approximately accomplished by staff with a mean presents the mean hourly wage, the cost 1,684 318 IPFs will participate in the hourly wage of $16.42.321 However, of fringe benefits (calculated at 100 IPFQR Program for requirements obtaining data on other overhead costs percent of salary), and the adjusted occurring in FY 2017 and subsequent is challenging. Overhead costs vary hourly wage. years. Based on program data, we greatly across industries and firm sizes.

OCCUPATIONAL EMPLOYMENT AND WAGE ESTIMATES

Mean hourly Adjusted Occupation title Occupation wage Fringe benefit hourly wage code ($/hr) (at 36.25% in $/hr) ($/hr)

Medical Records and Health Information Technician ...... 29–2071 16.42 16.42 32.84

We do not believe that our proposal 45979), we believe the estimated burden negligible change in burden associated to update a previously finalized for training personnel on the revised with nonmeasure data collection. measure will affect our previous burden data collection and submission In section VIII.D.7. of the preamble of estimate for that measure. As noted requirements would be 2 hours per IPF this proposed rule, we are proposing to above, one of our proposed measures is or 3,368 hours (2 hours/IPF × 1,684 no longer specify in rulemaking, but claims-based and would not result in IPFs) across all IPFs. Therefore, we rather in subregulatory guidance, when increased burden. Therefore, increased estimate the cost for this training would burden would occur primarily as a be $65.68 ($32.84/hour × 2 hours) for measure data will be publicly available, result of our proposed new chart- each IPF or $110,605 ($32.84/hour × when the preview period will occur, or abstracted measure. We estimate that 3,368 hours) for all IPFs. that the preview period will begin this proposal would result in an Finally, IPFs must submit to CMS approximately 12 weeks before the increase in burden of 212 hours per IPF aggregate population counts for public display date. We do not believe (1 measure × (848 cases/measure × 0.25 Medicare and non-Medicare discharges this proposal will result in any change hours/case)) or 357,008 hours across all by age group and diagnostic group, and in burden because it does not require IPFs (212 hours/IPF × 1,684 IPFs). The sample size counts for measures for IPFs to report any more or less data. increase in costs would be which sampling is performed. Because Rather, if finalized, the timeline for approximately $6,962 per IPF (212 the population for the SUB–3 and SUB– public display of that data is simply hours × $32.84/hour) or $11,724,143 3a measure is nearly identical to the shifting. × across all IPFs (357,008 hours 32.84/ population for both the SUB–1 measure In the table below, we set out a and the SUB–2 and SUB–2a measure, hour). summary of annual burden estimates. Consistent with our estimates in the we believe that the addition of 1 chart- FY 2015 IPF PPS final rule (79 FR abstracted measure would lead to a

318 In the FY 2016 IPF PPS final rule, we 319 In the FY 2016 IPF PPS final rule, we 320 80 FR 46720. estimated 1,617 IPFs and are adjusting that estimate estimated 431 cases per year and are adjusting that 321 http://www.bls.gov/ooh/healthcare/medical- by +67 to account for more recent data. estimate by +417 to account for more recent data. records-and-health-information-technicians.html.

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ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS UNDER OMB CONTROL NUMBER 0938–1171 (CMS–10432)

Responses Burden per Total annual Proposed action [preamble section] Respondents per response burden Labor cost Total cost respondent (hours) * (hours) ($/hr) ($)

Add NQF #1664 [VIII.D.4.a.] ...... 1,684 848 0.25 357,008 32.84 11,724,143 Add Readmissions Measure [VIII.D.4.b.] 1,684 0 0 0 32.84 0 Training ...... 1,684 1 2 3,368 32.84 110,605 Shift Public Display Timeline [VIII.D.7.] ... 1,684 0 0 0 32.84 0

1,684 ...... 360,376 32.84 11,834,748

11. ICRs for the Electronic Health C. Response to Public Comments § 405.926 Actions that are not initial determinations. Record (EHR) Incentive Program and Because of the large number of public Meaningful Use comments we normally receive on * * * * * (u) Issuance of notice to an individual In section VIII.E. of the preamble of Federal Register documents, we are not able to acknowledge or respond to them entitled to Medicare benefits under Title this proposed rule, we discuss our XVIII of the Act when such individual proposals to align the Medicare and individually. We will consider all public comments we receive by the date received observation services as an Medicaid EHR Incentive Programs outpatient for more than 24 hours, as reporting and submission timelines for and time specified in the DATES section of this preamble, and, when we proceed specified under § 489.20(y) of this electronically submitted clinical quality chapter. measures for eligible hospitals and with a subsequent document, we will CAHs with the Hospital IQR Program’s respond to the public comments in the PART 412—PROSPECTIVE PAYMENT reporting and submission timelines for preamble of that document. SYSTEMS FOR INPATIENT HOSPITAL the FY 2019 payment determination. List of Subjects SERVICES Because these proposals for data ■ collection in this proposed rule will 42 CFR Part 405 3. The authority citation for part 412 align with the reporting requirements in Administrative practice and is revised to read as follows: place for the Hospital IQR Program, and procedure, Health facilities, Health Authority: Secs. 1102 and 1871 of the eligible hospitals and CAHs still have professions, Kidney diseases, Medicare, Social Security Act (42 U.S.C. 1302 and the option to submit their clinical Reporting and recordkeeping, Rural 1395hh), sec. 124 of Pub. L. 106–113 (113 quality measures via attestation for the areas, X-rays. Stat. 1501A–332), sec. 1206 of Pub. L. 113– Medicare and Medicaid EHR Incentive 67, and sec. 112 of Pub. L. 113–93. Programs for CY 2017 reporting, we do 42 CFR Part 412 ■ 4. Section 412.64 is amended by not believe there is any additional Administrative practice and adding paragraph (d)(1)(vii) and revising burden for this collection of procedure, Health facilities, Medicare, paragraphs (h)(4) introductory text and information. However, starting with CY Puerto Rico, Reporting and (h)(4)(vi) introductory text to read as 2018 reporting, eligible hospitals and recordkeeping requirements. follows: CAHs participating in the Medicare EHR 42 CFR Part 413 § 412.64 Federal rates for inpatient Incentive Programs must electronically Health facilities, Kidney diseases, operating costs for Federal fiscal year 2005 report CQMs using CEHRT where and subsequent fiscal years. feasible; and attestation to CQMs will no Medicare, Puerto Rico, Reporting and recordkeeping requirements. * * * * * longer be an option except in certain (d) * * * circumstances where electronic 42 CFR Part 489 (1) * * * reporting is not feasible (80 FR 62894). Health facilities, Medicare, Reporting (vii) For fiscal year 2017, the We are requesting public comments and recordkeeping requirements. percentage increase in the market basket on these information collection and index (as defined in § 413.40(a)(3) of For the reasons stated in the preamble recordkeeping requirements. this chapter) for prospective payment of this proposed rule, the Centers for hospitals, subject to the provisions of If you comment on these information Medicare & Medicaid Services is paragraphs (d)(2) and (3) of this section, collection and recordkeeping proposing to amend 42 CFR Chapter IV less a multifactor productivity requirements, please do either of the as set forth below: following: adjustment (as determined by CMS) and 1. Submit your comments PART 405—FEDERAL HEALTH less 0.75 percentage point. electronically as specified in the INSURANCE FOR THE AGED AND * * * * * ADDRESSES section of this proposed rule; DISABLED (h) * * * or (4) For discharges on or after October ■ 1. The authority citation for part 405 1, 2004 and before October 1, 2017, 2. Submit your comments to the continues to read as follows: CMS establishes a minimum wage index Office of Information and Regulatory for each all-urban State, as defined in Affairs, Office of Management and Authority: Secs. 205(a), 1102, 1862(a), paragraph (h)(5) of this section. This Budget, 1869, 1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 1302, minimum wage index value is Attention: CMS Desk Officer, CMS– 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, computed using the following 1655–P 1395rr, and 1395ww(k)), and sec. 353 of the methodology: Fax: (202) 395–6974; or Public Health Service Act (42 U.S.C. 263a). * * * * * Email: OIRA_submission@ ■ 2. Section 405.926 is amended by (vi) For discharges on or after October omb.eop.gov. adding paragraph (u) to read as follows: 1, 2012 and before October 1, 2017, the

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minimum wage index value for the State utilization from 2011, 2012, and 2013 2021, FYs 2016, 2017, and 2018 cost is the higher of the value determined cost reports from the most recent HCRIS reports will be used). under paragraph (h)(4)(iv) of this section database extract, the 2011 and 2012 cost * * * * * or the value computed using the report data submitted to CMS by IHS ■ 7. Section 412.140 is amended by following alternative methodology: hospitals, and the most recent available revising paragraph (d)(2) to read as * * * * * 3 years of data on Medicare SSI follows: ■ 5. Section 412.103 is amended by utilization (or, for Puerto Rico hospitals, adding paragraph (b)(6) to read as a proxy for Medicare SSI utilization § 412.140 Participation, data submission, follows: data). and validation requirements under the Hospital Inpatient Quality Reporting (IQR) (4) For fiscal year 2018, CMS will base § 412.103 Special treatment: Hospitals Program. its estimates of the amount of hospital located in urban areas and that apply for * * * * * uncompensated care determined in part reclassification as rural. (d) * * * from utilization data for Medicaid and * * * * * Medicare SSI patients, as determined by (2) A hospital meets the chart- (b) * * * abstracted validation requirement with (6) Lock-in date for the wage index CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of this section, using respect to a fiscal year if it achieves a calculation and budget neutrality. In 75-percent score, as determined by order for a hospital to be treated as rural data on Medicaid utilization from 2012 and 2013 cost reports from the most CMS. in the wage index and budget neutrality * * * * * calculations under §§ 412.64(e)(1)(ii), recent HCRIS database extract, the 2012 ■ 8. Section 412.160 is amended by (e)(2) and (4), and (h) for the payment cost report data submitted to CMS by revising the definitions of rates for the next Federal fiscal year, the IHS hospitals, and the most recent ‘‘Achievement threshold (or hospital’s filing date must be no later available 2 years of data on Medicare achievement performance standard)’’, than 70 days prior to the second SSI utilization (or, for Puerto Rico ‘‘Benchmark’’, and ‘‘Cited for Monday in June of the current Federal hospitals, a proxy for Medicare SSI deficiencies that pose immediate fiscal year and the application must be utilization data), and determined in part jeopardy’’ to read as follows: approved by the CMS Regional Office in on uncompensated care costs, defined accordance with the requirements of as charity care costs plus non-Medicare § 412.160 Definitions for the Hospital this section. bad debt costs, from 2014 cost reports Value-Based Purchasing (VBP) Program. also from the most recent HCRIS * * * * * * * * * * database extract. ■ 6. Section 412.106 is amended by Achievement threshold (or revising paragraph (g)(1)(iii)(C) to read (5) For fiscal year 2019, CMS will base achievement performance standard) as follows: its estimates of the amount of hospital means the median (50th percentile) of uncompensated care determined in part hospital performance on a measure § 412.106 Special treatment: Hospitals that from utilization data for Medicaid and during a baseline period with respect to serve a disproportionate share of low- Medicare SSI patients, as determined by income patients. a fiscal year, for Hospital VBP Program CMS in accordance with paragraphs measures other than the measures in the * * * * * (b)(2)(i) and (b)(4) of this section, using Efficiency and Cost Reduction domain, (g) * * * data on Medicaid utilization from 2013 and the median (50th percentile) of (1) * * * cost reports from the most recent HCRIS hospital performance on a measure (iii) * * * database extract and the most recent (C)(1) For fiscal years 2014 and 2015, during the performance period with available year of data on Medicare SSI respect to a fiscal year, for the measures CMS will base its estimates of the utilization (or, for Puerto Rico hospitals, amount of hospital uncompensated care in the Efficiency and Cost Reduction a proxy for Medicare utilization data), domain. on the most recent available data on and determined in part on * * * * * utilization for Medicaid and Medicare uncompensated care costs, defined as SSI patients, as determined by CMS in charity care costs plus non-Medicare Benchmark means the arithmetic accordance with paragraphs (b)(2)(i) and bad debt costs, from 2014 and 2015 cost mean of the top decile of hospital (b)(4) of this section. reports also from the most recent HCRIS performance on a measure during the (2) For fiscal year 2016, CMS will base database extract. baseline period with respect to a fiscal its estimates of the amount of hospital year, for Hospital VBP Program uncompensated care on utilization data (6) For fiscal year 2020, CMS will base measures other than the measures in the for Medicaid and Medicare SSI patients, its estimates of the amount of hospital Efficiency and Cost Reduction domain, as determined by CMS in accordance uncompensated care on uncompensated and the arithmetic mean of the top with paragraphs (b)(2)(i) and (b)(4) of care costs, defined as charity care costs decile of hospital performance on a this section, using data on Medicaid plus non-Medicare bad debt costs, from measure during the performance period utilization from 2012 or 2011 cost 2014, 2015, and 2016 cost reports from with respect to a fiscal year, for the reports from the most recent HCRIS the most recent HCRIS database extract. measures in the Efficiency and Cost database extract, the 2012 cost report (7) For fiscal years 2021 and Reduction domain. data submitted to CMS by IHS hospitals, subsequent years, CMS will base its Cited for deficiencies that pose and the most recent available data on estimates of the amount of hospital immediate jeopardy means that, during Medicare SSI utilization. uncompensated care on uncompensated the applicable performance period, the (3) For fiscal year 2017, CMS will base care costs, defined as charity care costs Secretary cited the hospital for its estimates of the amount of hospital plus non-Medicare bad debt costs, using immediate jeopardy on at least three uncompensated care on utilization data three cost reporting periods from the surveys using the Form CMS–2567, for Medicaid and Medicare SSI patients, most recently available HCRIS database Statement of Deficiencies and Plan of as determined by CMS in accordance extract. For each fiscal year, the cost Correction. CMS assigns an immediate with paragraphs (b)(2)(i) and (b)(4) of reporting periods will be advanced jeopardy citation to a performance this section, using data on Medicaid forward by one year (for example, for FY period as follows:

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(1) If the Form CMS–2567 only electronic copy of the application sent 1886(d)(1)(B) of the Social Security Act contains one or more EMTALA-related to CMS. if it were located in one of the 50 States. immediate jeopardy citations, CMS uses * * * * * * * * * * the date that the Form CMS–2567 is ■ 12. Section 412.374 is amended by ■ 14. Section 412.507 is amended by issued to the hospital; revising paragraph (b) introductory text revising paragraph (a) and adding (2) If the Form CMS–2567 only and adding paragraph (e) to read as paragraph (b)(3) to read as follows: contains one or more Medicare follows: conditions of participation immediate § 412.507 Limitation on charges to jeopardy citations, CMS uses the survey § 412.374 Payments to hospitals located in beneficiaries. end date generated in ASPEN; and Puerto Rico. (a) Prohibited charges. Except as (3) If the Form CMS–2567 contains * * * * * provided in paragraph (b) of this both one or more EMTALA-related (b) FY 2005 through FY 2016. For section, a long-term care hospital may immediate jeopardy citations and one or discharges occurring on or after October not charge a beneficiary for any covered more Medicare conditions of 1, 2004 and on or before September 30, services for which payment is made by participation immediate jeopardy 2016, payments for capital-related costs Medicare, even if the hospital’s costs of citations, CMS uses the survey end date to hospitals located in Puerto Rico that furnishing services to that beneficiary generated in ASPEN. are paid under the prospective payment are greater than the amount the hospital * * * * * system are equal to the sum of the is paid under the prospective payment ■ 9. Section 412.170 is amended by following: system. revising the definition of ‘‘Applicable * * * * * period’’ to read as follows: (1) If Medicare has paid at the full (e) FY 2016 and FYs thereafter. For LTCH prospective payment system § 412.170 Definitions for the Hospital- discharges occurring on or after October standard Federal payment rate, that Acquired Condition Reduction Program. 1, 2016, payments for capital-related payment applies to the hospital’s costs * * * * * costs to hospitals located in Puerto Rico for services furnished until the high-cost Applicable period is, unless otherwise that are paid under the prospective outlier threshold is met. payment system are based on 100 specified by the Secretary, with respect (2) If Medicare pays less than the full percent of the Federal rate, as to a fiscal year, the 2-year period LTCH prospective payment system (specified by the Secretary) from which determined under § 412.308. ■ standard Federal payment rate and data are collected in order to calculate 13. Section 412.503 is amended by payment was not made at the site the total hospital-acquired condition adding in alphabetical order definitions neutral payment rate (including, when score under the Hospital-Acquired of ‘‘MSA’’, ‘‘MSA-dominant area’’, and applicable, the blended payment rate), Condition Reduction Program. ‘‘MSA-dominant hospital’’ and revising that payment only applies to the * * * * * the definitions of ‘‘Outlier payment’’ hospital’s costs for those costs or days ■ 10. Section 412.204 is amended by and ‘‘Subsection (d) hospital’’ to read as used to calculate the Medicare payment. follows: revising paragraph (d) introductory text (3) For cost reporting periods and adding paragraph (e) to read as § 412.503 Definitions. beginning on or after October 1, 2016, follows: * * * * * for Medicare payments to a long-term § 412.204 Payment to hospitals located in MSA means a Metropolitan Statistical care hospital described in Puerto Rico. Area, as defined by the Executive Office § 412.23(e)(2)(ii), that payment only * * * * * of Management and Budget. applies to the hospital’s costs for those (d) FY 2005 through December 31, MSA-dominant area means an MSA costs or days used to calculate the 2015. For discharges occurring on or in which an MSA-dominant hospital is Medicare payment. after October 1, 2004 and before January located. (4) If Medicare has paid at the full site 1, 2016, payments for inpatient MSA-dominant hospital means a neutral payment rate, that payment operating costs to hospitals located in hospital that has discharged more than applies to the hospital’s costs for Puerto Rico that are paid under the 25 percent of the total hospital Medicare services furnished until the high-cost prospective payment system are equal to discharges in the MSA (subject to the outlier is met. the sum of— provisions of § 412.538(d)(2)(ii)) in (b) * * * * * * * * which such subsection (d) hospital is (3) For cost reporting periods (e) January 1, 2016 and thereafter. For located. beginning on or after October 1, 2016, a discharges occurring on or after January * * * * * long-term care hospital described in 1, 2016, payments for inpatient Outlier payment means an additional § 412.23(e)(2)(ii) may only charge the operating costs to hospitals located in payment beyond the long-term care Medicare beneficiary for the applicable Puerto Rico that are paid under the hospital standard Federal payment rate deductible and coinsurance amounts prospective payment system are equal to or the site neutral payment rate under §§ 409.82, 409.83, and 409.87 of 100 percent of a national prospective (including, when applicable, the this chapter, for items and services as payment rate for inpatient operating blended payment rate), as applicable, specified under § 489.20(a) of this costs, as determined under § 412.212. for cases with unusually high costs. chapter, and for services provided ■ 11. Section 412.256 is amended by * * * * * during the stay for which benefit days revising paragraph (a)(1) to read as were not available and that were not the follows: Subsection (d) hospital means, for purposes of § 412.522, a hospital basis for adjusted LTCH prospective § 412.256 Application requirements. defined in section 1886(d)(1)(B) of the payment system payment amount under (a) * * * Social Security Act and includes any § 412.526. (1) An application must be submitted hospital that is located in Puerto Rico ■ 15. Section 412.522 is amended by to the MGCRB according to the method and that would be a subsection (d) adding paragraph (c)(2)(v) to read as prescribed by the MGCRB, with an hospital as defined in section follows:

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§ 412.522 Application of site neutral § 412.538 Limitation on long-term care defined in paragraph (e) of this section) payment rate. hospital admissions from referring in regard to admissions from a single * * * * * hospitals. referring hospital as identified by the (c) * * * (a) Scope. (1) The provisions of this CNN is made by comparing the section apply to all long-term care hospital’s percentage of Medicare (2) * * * hospitals excluded from the hospital discharges occurring on or after October (v) The limitation on long-term care inpatient prospective payment system 1, 2016 admitted to the long-term care hospital admissions from referring under § 412.23(e), effective for hospital (as calculated under paragraph hospitals specified in § 412.538. discharges occurring on or after October (d)(2) of this section) to the long-term * * * * * 1, 2016, except as specified in care hospital’s applicable percentage ■ 16. Section 412.523 is amended by paragraphs (a)(2) and (3) of this section. threshold in paragraph (e) of this (2) The provisions of this section do adding paragraph (c)(3)(xiii) to read as section. not apply to a long-term care hospital follows: (2) Percentage of Medicare discharges. described in § 412.23(e)(2)(ii). For each individual referring hospital, § 412.523 Methodology for calculating the (3) The provisions of this section do the percentage of Medicare discharges Federal prospective payment rates. not apply to a long-term care hospital admitted to the long-term care hospital * * * * * described in § 412.23(e)(2)(i) that meets is calculated by dividing the amount in the criteria in § 412.22(f). (c) * * * paragraph (d)(2)(i) of this section by the (b) Discharges at or below the amount in paragraph (d)(2)(ii) of this (3) * * * applicable percent threshold. For any paragraph. (xiii) For long-term care hospital cost reporting period which includes (i) The number of the long-term care prospective payment system fiscal year discharges occurring on or after October hospital’s Medicare discharges in the beginning October 1, 2016, and ending 1, 2016, in which a long-term care cost reporting period that were admitted September 30, 2017. The LTCH PPS hospital has a population of Medicare from a single referring hospital as standard Federal payment rate for the discharges occurring on or after October identified by the CNN on whose behalf long-term care hospital prospective 1, 2016 of whom no more than the an outlier payment was not made to that payment system beginning October 1, applicable percent threshold were hospital and for whom payment was not 2016, and ending September 30, 2017, is admitted to the long-term care hospital made by a Medicare Advantage plan. the standard Federal payment rate for from a single referring hospital as (ii) The long-term care hospital’s total the previous long-term care hospital identified by the CCN, payments are number of Medicare discharges in the prospective payment system fiscal year made under the rules at §§ 412.500 long-term care hospital’s cost reporting updated by 1.45 percent and further through 412.541 with no adjustment period for whom payment was not made adjusted, as appropriate, as described in under this section. by a Medicare Advantage plan. paragraph (d) of this section. (c) Discharges in excess of the (e) Applicable percentage threshold— * * * * * applicable percent threshold. For any (1) General. For the purposes of this cost reporting period which includes section, except as provided for in ■ 17. Section 412.525 is amended by discharges occurring on or after October paragraphs (f)(2) and (3) of this section, adding paragraph (d)(6) to read as 1, 2016, in which a long-term care ‘‘applicable percentage threshold’’ follows: hospital has a population of Medicare means 25 percent. § 412.525 Adjustments to the Federal discharges occurring on or after October (2) Special treatment of exclusively prospective payment. 1, 2016 of whom more than the rural long-term care hospitals. In the * * * * * applicable percentage threshold (as case of a long-term care hospital that is defined in paragraph (e) of this section) located in a rural area as defined in (d) * * * were admitted to the long-term care § 412.503, the applicable percentage (6) The limitation on long-term care hospital from a single referring hospital threshold means 50 percent. If an LTCH hospital admissions from referring as identified by the CNN, payments for has multiple locations, all locations of hospitals specified in § 412.538. the Medicare discharges who are the LTCH must be in a rural area (as ■ 18. The section heading of § 412.534 admitted from that referring hospital defined in § 412.503) in order to be is revised to read as follows: and who cause the long-term care treated as rural under this section. hospital to exceed the applicable (3) Special treatment for long-term § 412.534 Special payment provisions for percentage threshold (as defined in care hospitals located in an MSA with long-term care hospitals-within-hospitals paragraph (e) of this section) are to be an MSA-dominant hospital. In the case and satellites of long-term care hospitals, effective for discharges occurring on or paid at the lesser of the amount of a long-term care hospital that admits before September 30, 2016. otherwise payable under this subpart or Medicare patients from a referring MSA- the amount equivalent to the hospital dominant hospital (as defined in * * * * * inpatient prospective payment system paragraph (h)(3)(ii) of this section), the ■ 19. The section heading of § 412.536 amount as defined in paragraph (f) of applicable percentage threshold means is revised to read as follows: this section. Payments for discharges the percentage of total subsection (d) § 412.536 Special payment provisions for not in excess of the applicable hospital Medicare discharges in the long-term care hospitals and satellites of percentage threshold (as defined in MSA in which the long-term care long-term care hospitals that discharge paragraph (e) of this section) are made hospital is located for the cost reporting Medicare patients admitted from a hospital under the rules at §§ 412.500 through period for which the adjustment under not located in the same building or on the 412.541 with no adjustment under this this section is made, but in no case is same campus as the long-term care section. less than 25 percent or more than 50 hospital or satellite of the long-term care (d) Determination of exceeding the percent. The determination of the hospital, effective for discharges occurring applicable percentage threshold.—(1) applicable percentage threshold in this on or before September 30, 2016. General. The determination of whether paragraph is subject to the provisions of * * * * * a long-term care hospital has exceeded paragraph (d)(2) of this section. If an ■ 20. Add § 412.538 to read as follows: its applicable percentage threshold (as LTCH has multiple locations payable

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under this subpart, all locations of the 2354), sec. 217 of Pub. L. 113–93 (129 Stat. periods ending on or after March 31, LTCH must be in an MSA with an MSA- 1040), and sec. 204 of Pub L. 113–295 (128 2005 for organ procurement dominant hospital in order to be treated Stat. 4010). organizations, histocompatibility as such under this section. ■ 23. Section 413.17 is amended by laboratories, rural health clinics, (f) Determining the amount equivalent revising paragraph (d)(1) introductory Federally qualified health centers, and to the hospital inpatient prospective text to read as follows: community mental health centers, a payment system amount. (1) As provider must submit a hard copy of a specified in paragraphs (b) and (c) of § 413.17 Cost to related organizations. settlement summary, a statement of this section, CMS calculates an amount * * * * * certain worksheet totals found within payable under subpart O that is (d) * * * the electronic file, and a statement equivalent to an amount that would be (1) An exception is provided to this signed by its administrator or chief paid for the services provided if such general principle if the provider financial officer certifying the accuracy services had been provided in an demonstrates by convincing evidence to of the electronic file or the manually inpatient prospective payment system the satisfaction of the contractor, that— prepared cost report. During a transition hospital (that is, the amount that would * * * * * period (first two cost-reporting periods be determined under the rules at ■ 24. Section 413.24 is amended by on or after December 31, 2004 for § 412.1(a)). This amount is based on the revising paragraphs (f)(4)(i), (ii), and (iv) hospices and end-stage renal disease sum of the applicable hospital inpatient to read as follows: facilities, and the first two cost- reporting periods on or after March 31, prospective payment system operating § 413.24 Adequate cost data and cost standardized amount and capital finding. 2005 for organ procurement Federal rate in effect (as set forth in organizations, histocompatibility * * * * * section § 412.529(d)(4)) at the time of laboratories, rural health clinics, (f) * * * Federally qualified health centers, the long-term care hospital discharge. (4) * * * (2) In addition to the payment amount (i) As used in this paragraph, community mental health centers), under paragraph (f)(1) of this section, an ‘‘provider’’ means a hospital, skilled providers must submit a hard copy of additional payment for high-cost outlier nursing facility, home health agency, the completed cost report forms in cases is based on the applicable fixed- hospice, organ procurement addition to the electronic file. The loss amount established for the hospital organization, histocompatibility following statement must immediately precede the dated signature of the inpatient prospective payment system laboratory, rural health clinic, Federally provider’s administrator or chief in effect at the time of the long-term care qualified health center, community financial officer: hospital discharge. mental health center, or end-stage renal ■ 21. Section 412.560 is amended by disease facility. I hereby certify that I have read the revising paragraph (c)(1) to read as (ii) Effective for cost reporting periods above certification statement and that I follows: beginning on or after October 1, 1989 for have examined the accompanying hospitals, cost reporting periods ending electronically filed or manually § 412.560 Participation, data submission, submitted cost report and the Balance and other requirements under the Long- on or after February 1, 1997 for skilled nursing facilities and home health Sheet and Statement of Revenue and Term Care Hospital Quality Reporting ______(LTCHQR) Program. agencies, cost reporting periods ending Expenses prepared by (Provider on or after December 31, 2004 for Name(s) and Number(s)) for the cost * * * * * ___ hospices, and end-stage renal disease reporting period beginning and (c) * * * ___ (1) A long-term care hospital that facilities, and cost reporting periods ending and that to the best of my wishes to request an exception or ending on or after March 31, 2005 for knowledge and belief, this report and extension with respect to quality data organ procurement organizations, statement are true, correct, complete reporting requirements must submit its histocompatibility laboratories, rural and prepared from the books and request to CMS within 90 days of the health clinics, Federally qualified health records of the provider in accordance date that the extraordinary centers, and community mental health with applicable instructions, except as circumstances occurred. centers, a provider is required to submit noted. I further certify that I am familiar with the laws and regulations regarding * * * * * cost reports in a standardized electronic format. The provider’s electronic the provision of health care services, PART 413—PRINCIPLES OF program must be capable of producing and that the services identified in this REASONABLE COST the CMS standardized output file in a cost report were provided in compliance REIMBURSEMENT; PAYMENT FOR form that can be read by the contractor’s with such laws and regulations. END–STAGE RENAL DISEASE automated system. This electronic file, * * * * * SERVICES; OPTIONAL which must contain the input data ■ 25. Section 413.79 is amended by PROSPECTIVELY DETERMINED required to complete the cost report and revising paragraphs (k)(1)(i) and (ii), PAYMENT RATES FOR SKILLED to pass specified edits, must be (k)(2)(i) and (ii), (k)(3) and (4), and NURSING FACILITIES forwarded to the contractor for (k)(7)(ii) and (iii) to read as follows: processing through its system. ■ 22. The authority for part 413 is § 413.79 Direct GME payments: revised to read as follows: * * * * * Determination of the weighted number of (iv) Effective for cost reporting FTE residents. Authority: Secs. 1102, 1812(d), 1814(b), periods ending on or after September * * * * * 1815, 1833(a), (i), and (n), 1861(v), 1871, 30, 1994 for hospitals, cost reporting (k) * * * 1881, 1883 and 1886 of the Social Security periods ending on or after February 1, Act (42 U.S.C. 1302, 1395d(d), 1395f(b), (1) * * * 1395g, 1395l(a), (i), and (n), 1395x(v), 1997 for skilled nursing facilities and (i) For rural track programs started 1395hh, 1395rr, 1395tt, and 1395ww); and home health agencies, cost reporting prior to October 1, 2012, for the first 3 sec. 124 of Pub. L. 106–113 (113 Stat. 1501A– periods ending on or after December 31, years of the rural track’s existence, the 332), sec. 3201 of Pub. L. 112–96 (126 Stat. 2004 for hospices and end-stage renal rural track FTE limitation for each urban 156), sec. 632 of Pub. L. 112–240 (126 Stat. disease facilities, and cost reporting hospital will be the actual number of

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FTE residents, subject to the rolling sixth program year of the rural track’s residents in its FTE count (if the rural average at paragraph (d)(7) of this existence, the rural track FTE limitation track is not a new program under section, training in the rural track at the for each urban hospital will be the paragraph (e)(3) of this section, or if the urban hospital. For rural track programs actual number of FTE residents, subject rural hospital’s FTE count exceeds that started on or after October 1, 2012, prior to the rolling average specified in hospital’s FTE cap), nor may the urban to the start of the urban hospital’s cost paragraph (d)(7) of this section, training hospital include those residents when reporting period that coincides with or in the rural track at the urban hospital calculating its rural track FTE follows the start of the sixth program and the rural nonhospital site(s). limitation. For rural track programs year of the rural track’s existence, the (ii)(A) For rural track programs started started on or after October 1, 2012, if an rural track FTE limitation for each urban prior to October 1, 2012, beginning with urban hospital rotates residents in the hospital will be the actual number of the fourth year of the rural track’s rural track program to a rural hospital(s) FTE residents, subject to the rolling existence, the rural track FTE limitation for one-half or less than one-half of the average at paragraph (d)(7) of this is equal to the product of— duration of the program, the rural section, training in the rural track at the (1) The highest number of residents in hospital may not include those residents urban hospital. any program year who, during the third in its FTE count (if the rural track is not (ii) For rural track programs started year of the rural track’s existence, are a new program under paragraph (e)(3) of prior to October 1, 2012, beginning with training in the rural track at— this section, or if the rural hospital’s the fourth year of the rural track’s (i) The urban hospital and are FTE count exceeds that hospital’s FTE existence, the rural track FTE limitation designated at the beginning of their cap), nor may the urban hospital is equal to the product of the highest training to be rotated to a rural include those residents when number of residents, in any program nonhospital site(s) for at least two-thirds calculating its rural track FTE year, who during the third year of the of the duration of the program for cost limitation. rural track’s existence are training in the reporting periods beginning on or after (4)(i) For rural track programs started rural track at the urban hospital or the April 1, 2000 and before October 1, prior to October 1, 2012, if an urban rural hospital(s) and are designated at 2003, or for more than one-half of the hospital rotates residents in the rural the beginning of their training to be duration of the program for cost track program to a rural nonhospital rotated to the rural hospital(s) for at reporting periods beginning on or after site(s) for less than two-thirds of the least two-thirds of the duration of the October 1, 2003; and program for cost reporting periods (ii) The rural nonhospital site(s); and duration of the program for cost beginning on or after April 1, 2000, and (2) The number of years in which the reporting periods beginning on or after before October 1, 2002, or for more than residents are expected to complete each April 1, 2000 and before October 1, one-half of the duration of the program program based on the minimum 2003, or for one-half or less than one- effective for cost reporting periods accredited length for the type of half of the duration of the program for beginning on or after October 1, 2003, program. cost reporting periods beginning on or and the number of years those residents (B) For rural track programs started on after October 1, 2003, the urban hospital are training at the urban hospital. For or after to October 1, 2012, beginning may include those residents in its FTE rural track programs started on or after with the start of the urban hospital’s count, subject to the requirements under October 1, 2012, beginning with the cost reporting period that coincides § 413.78(d). The urban hospital may start of the urban hospital’s cost with or follows the start of the sixth include in its FTE count those residents reporting period that coincides with or program year of the rural track’s in the rural track, not to exceed its rural follows the start of the sixth program existence, the rural track FTE limitation track limitation, determined as follows: year of the rural track’s existence, the is equal to the product of— (A) For the first 3 years of the rural rural track FTE limitation is equal to the (1) The highest number of residents in track’s existence, the rural track FTE product of the highest number of any program year who, during the fifth limitation for the urban hospital will be residents, in any program year, who year of the rural track’s existence, are the actual number of FTE residents, during the fifth year of the rural track’s training in the rural track at— subject to the rolling average specified existence are training in the rural track (i) The urban hospital and are in paragraph (d)(7) of this section, at the urban hospital or the rural designated at the beginning of their training in the rural track at the rural hospital(s) and are designated at the training to be rotated to a rural nonhospital site(s). nonhospital site(s) for more than one- beginning of their training to be rotated (B) Beginning with the fourth year of to the rural hospital(s) for more than half of the duration of the program; and the rural track’s existence, the rural one-half of the duration of the program, (ii) The rural nonhospital site(s); and track FTE limitation is equal to the and the number of years those residents (2) The number of years in which the product of— are training at the urban hospital. residents are expected to complete each (2) * * * program based on the minimum (1) The highest number of residents in (i) For rural track programs started accredited length for the type of any program year who, during the third prior to October 1, 2012, for the first 3 program. year of the rural track’s existence, are years of the rural track’s existence, the (3) For rural track programs started training in the rural track at the rural rural track FTE limitation for each urban prior to October 1, 2012, if an urban nonhospital site(s) or are designated at hospital will be the actual number of hospital rotates residents in the rural the beginning of their training to be FTE residents, subject to the rolling track program to a rural hospital(s) for rotated to the rural nonhospital site(s) average specified in paragraph (d)(7) of less than two-thirds of the duration of for a period that is less than two-thirds this section, training in the rural track the program for cost reporting periods of the duration of the program for cost at the urban hospital and the rural beginning on or after April 1, 2000, and reporting periods beginning on or after nonhospital site(s). For rural track before October 1, 2003, or for one-half April 1, 2002, and before October 1, programs started on or after October 1, or less than one-half of the duration of 2003, or for one-half or less than one- 2012, prior to the start of the urban the program for cost reporting periods half of the duration of the program for hospital’s cost reporting period that beginning on or after October 1, 2003, cost reporting periods beginning on or coincides with or follows the start of the the rural hospital may not include those after October 1, 2003; and

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(2) The length of time in which the (B) For rural track programs started on adjustment to its FTE resident cap for an residents are training at the rural or after October 1, 2012, effective additional new rural track residency nonhospital site(s) only. October 1, 2014, if an urban hospital program, the urban hospital must (ii) For rural track programs started on started a rural track training program participate in a rural track program with or after October 1, 2012, if an urban under the provisions of this paragraph sites that are geographically rural based hospital rotates residents in the rural (k) with a hospital located in a rural area on the most recent geographical location track program to a rural nonhospital and, during the 5-year period that is delineations adopted by CMS. site(s) for one-half or less than one-half used to calculate the urban hospital’s (B) For rural track programs started on of the duration of the program, the rural track FTE limit, that rural area or after October 1, 2012, effective urban hospital may include those subsequently becomes an urban area residents in its FTE count, subject to the October 1, 2014, if an urban hospital due to the most recent OMB standards started a rural track training program requirements under § 413.78(d). The for delineating statistical areas adopted urban hospital may include in its FTE under the provisions of this paragraph by CMS and the most recent Census (k) with a hospital located in a rural area count those residents in the rural track, Bureau data, the urban hospital may not to exceed its rural track limitation, and that rural area subsequently continue to adjust its FTE resident limit becomes an urban area due to the most determined as follows: in accordance with this paragraph (k) recent OMB standards for delineating (A) Prior to the start of the urban and subject to paragraph (k)(7)(iii) of statistical areas adopted by CMS and the hospital’s cost reporting period that this section for the rural track programs most recent Census Bureau data, coincides with or follows the start of the started prior to the adoption of such regardless of whether the redesignation sixth program year of the rural track’s new OMB standards for delineating of the rural hospital occurs during the existence, the rural track FTE limitation statistical areas. for the urban hospital will be the actual 5-year period that is used to calculate number of FTE residents, subject to the (iii)(A) For rural track programs the urban hospital’s rural track FTE rolling average specified in paragraph started prior to October 1, 2012, limit, or after the 5-year period used to (d)(7) of this section, training in the effective October 1, 2014, if an urban calculate the urban hospital’s rural track rural track at the rural nonhospital hospital started a rural track training FTE limit, the urban hospital may site(s). program under the provisions of this continue to adjust its FTE resident limit (B) Beginning with the start of the paragraph (k) with a hospital located in in accordance with this paragraph (k) urban hospital’s cost reporting period a rural area and that rural area based on the rural track programs that coincides with or follows the start subsequently becomes an urban area started prior to the change in the of the sixth program year of the rural due to the most recent OMB standards hospital’s geographic designation. In track’s existence, the rural track FTE for delineating statistical areas adopted order for the urban hospital to receive limitation is equal to the product of— by CMS and the most recent Census or use the adjustment to its FTE resident (1) The highest number of residents in Bureau data, regardless of whether the cap for training FTE residents in the any program year who, during the fifth redesignation of the rural hospital rural track residency program that was year of the rural track’s existence, are occurs during the 3-year period that is started prior to the most recent OMB training in the rural track at the rural used to calculate the urban hospital’s standards for delineating statistical rural track FTE limit, or after the 3-year nonhospital site(s) or are designated at areas adopted by CMS, one of the period used to calculate the urban the beginning of their training to be following two conditions must be met hospital’s rural track FTE limit, the rotated to the rural nonhospital site(s) by the end of a period that begins when urban hospital may continue to adjust for a period that is for one-half or less the most recent OMB standards for its FTE resident limit in accordance than one-half of the duration of the delineating statistical areas are adopted with this paragraph (k) based on the program; and by CMS and continues through the end (2) The length of time in which the rural track programs started prior to the of the second residency training year residents are training at the rural change in the hospital’s geographic following the date the most recent OMB nonhospital site(s) only. designation. In order for the urban delineations are adopted by CMS: The hospital to receive or use the adjustment * * * * * hospital that has been redesignated from to its FTE resident cap for training FTE (7) * * * rural to urban must reclassify as rural (ii)(A) For rural track programs started residents in the rural track residency under § 412.103 of this chapter, for prior to October 1, 2012, effective program that was started prior to the purposes of IME only; or the urban October 1, 2014, if an urban hospital most recent OMB standards for hospital must find a new site that is started a rural track training program delineating statistical areas adopted by geographically rural consistent with the under the provisions of this paragraph CMS, one of the following two most recent geographical location (k) with a hospital located in a rural area conditions must be met by the end of a delineations adopted by CMS. In order and, during the 3-year period that is period that begins when the most recent to receive an adjustment to its FTE used to calculate the urban hospital’s OMB standards for delineating resident cap for an additional new rural rural track FTE limit, that rural area statistical areas are adopted by CMS and track residency program, the urban subsequently becomes an urban area continues through the end of the second hospital must participate in a rural track due to the most recent OMB standards residency training year following the program with sites that are for delineating statistical areas adopted date the most recent OMB delineations geographically rural based on the most by CMS and the most recent Census are adopted by CMS: the hospital that recent geographical location Bureau data, the urban hospital may has been redesignated from rural to delineations adopted by CMS. continue to adjust its FTE resident limit urban must reclassify as rural under in accordance with this paragraph (k) § 412.103 of this chapter, for purposes of * * * * * and subject to paragraph (k)(7)(iii) of IME only; or the urban hospital must § 413.200 [Amended] this section for the rural track programs find a new site that is geographically started prior to the adoption of such rural consistent with the most recent ■ 26. In § 413.200, paragraph (c)(1)(i), new OMB standards for delineating geographical location delineations remove the phrase ‘‘three months’’ and statistical areas. adopted by CMS. In order to receive an add in its place the phrase ‘‘5 months’’.

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PART 489—PROVIDER AGREEMENTS that the notification was presented, and hospital-specific rate based on FY 2006 costs AND SUPPLIER APPROVAL the date and time the notification was per discharge. presented. We note that section 205 of the Medicare ■ 27. The authority citation for part 489 Access and CHIP Reauthorization Act of 2015 is revised to read as follows: Dated: April 1, 2016. (MACRA) (Pub. L. 114–10, enacted on April Andrew M. Slavitt, 16, 2015) extended the MDH program Authority: Secs. 1102 1819, 1820(E), 1861, (which, under previous law, was to be in 1864(M), 1866, 1869, and 1871 of the Social Administrator, Centers for Medicare & Medicaid Services. effect for discharges on or before March 31, Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 2015 only) for discharges occurring on or Dated: April 14, 2016. 1395aa(m), 1395cc, 1395ff, and 1395(hh)). after April 1, 2015, through FY 2017 (that is, ■ 28. Section 489.20 is amended by Sylvia M. Burwell, for discharges occurring on or before adding paragraph (y) to read as follows: Secretary, Department of Health and Human September 30, 2017). Services. Under section 1886(d)(5)(G) of the Act, § 489.20 Basic commitments. MDHs historically were paid based on the Note: The following Addendum and Federal national rate or, if higher, the Federal * * * * * Appendixes will not appear in the Code of national rate plus 50 percent of the difference (y) In the case of a hospital or critical Federal Regulations. between the Federal national rate and the access hospital, to provide notice, as updated hospital-specific rate based on FY specified in paragraphs (y)(1) and (2) of Addendum—Proposed Schedule of 1982 or FY 1987 costs per discharge, this section, to each individual entitled Standardized Amounts, Update whichever was higher. However, section to Medicare benefits under Title XVIII of Factors, Rate-of-Increase Percentages 5003(a)(1) of Public Law 109–171 extended the Act when such individual receives Effective With Cost Reporting Periods and modified the MDH special payment observation services as an outpatient for Beginning on or After October 1, 2016, provision that was previously set to expire on more than 24 hours. Notice must be and Payment Rates for LTCHs Effective October 1, 2006, to include discharges for Discharges Occurring on or After occurring on or after October 1, 2006, but provided to the individual not later than before October 1, 2011. Under section 36 hours after observation services are October 1, 2016 5003(b) of Public Law 109–171, if the change initiated or sooner if the individual is I. Summary and Background results in an increase to an MDH’s target transferred, discharged, or admitted. amount, we must rebase an MDH’s hospital- (1) Written notice. Hospitals and In this Addendum, we are setting forth a description of the methods and data we used specific rates based on its FY 2002 cost critical access hospitals must use a to determine the proposed prospective report. Section 5003(c) of Public Law 109– standardized written notice, as specified payment rates for Medicare hospital inpatient 171 further required that MDHs be paid by the Secretary, which includes the operating costs and Medicare hospital based on the Federal national rate or, if following information: inpatient capital-related costs for FY 2017 for higher, the Federal national rate plus 75 (i) An explanation of the status of the acute care hospitals. We also are setting forth percent of the difference between the Federal individual as an outpatient receiving the rate-of-increase percentage for updating national rate and the updated hospital- specific rate. Further, based on the provisions observation services and not as an the target amounts for certain hospitals excluded from the IPPS for FY 2017. We note of section 5003(d) of Public Law 109–171, inpatient of the hospital or critical MDHs are no longer subject to the 12-percent access hospital and the reason for status that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis cap on their DSH payment adjustment factor. as an outpatient receiving observation subject to a rate-of-increase ceiling (and not As discussed in section IV.A. of the services; and by the IPPS), these hospitals are not affected preamble of this proposed rule, prior to (ii) An explanation of the implications by the proposed figures for the standardized January 1, 2016, Puerto Rico hospitals were of such status as an outpatient on amounts, offsets, and budget neutrality paid based on 75 percent of the national services furnished by the hospital or factors. Therefore, in this proposed rule, we standardized amount and 25 percent of the critical access hospital (including are setting forth the rate-of-increase Puerto Rico-specific standardized amount. As services furnished on an inpatient percentage for updating the target amounts a result, CMS calculated the Puerto Rico- for certain hospitals excluded from the IPPS specific standardized amount. Section 601 of basis), such as Medicare cost-sharing the Consolidated Appropriations Act, 2016 requirements, and subsequent eligibility that will be effective for cost reporting periods beginning on or after October 1, (Pub. L. 114–113) amended section for Medicare coverage for skilled 2016. 1886(d)(9)(E) of the Act to specify that the nursing facility services. In addition, we are setting forth a payment calculation with respect to (2) Oral notice. The hospital must give description of the methods and data we used operating costs of inpatient hospital services an oral explanation of the written to determine the proposed standard Federal of a subsection (d) Puerto Rico hospital for notification described in paragraph payment rate that would be applicable to inpatient hospital discharges on or after (y)(1) of this section. Medicare LTCHs for FY 2017. January 1, 2016, shall use 100 percent of the (3) Signature requirements. The In general, except for SCHs and MDHs, for national standardized amount. Because written notice specified in paragraph FY 2017, each hospital’s payment per Puerto Rico hospitals are no longer paid with discharge under the IPPS is based on 100 a Puerto Rico-specific standardized amount (y)(1) of this section must either— under the amendments to section (i) Be signed by the individual who percent of the Federal national rate, also known as the national adjusted standardized 1886(d)(9)(E) of the Act, there is no longer a receives observation services as an amount. This amount reflects the national need for us to calculate a Puerto Rico-specific outpatient or a person acting on the average hospital cost per case from a base standardized amount. For operating costs for individual’s behalf to acknowledge year, updated for inflation. inpatient hospital discharges occurring in FY receipt of such notification; or SCHs are paid based on whichever of the 2017 and subsequent fiscal years, consistent (ii) If the individual who receives following rates yields the greatest aggregate with the provisions of section 1886(d)(9)(E) observation services as an outpatient or payment: the Federal national rate of the Act as amended by section 601 of the person acting on behalf of the (including, as discussed in section IV.F. of Public Law 114–113, subsection (d) Puerto individual refuses to provide the the preamble of this proposed rule, Rico hospitals will continue to be paid based signature described in paragraph (y)(1) uncompensated care payments under section on 100 percent of the national standardized 1886(r)(2) of the Act); the updated hospital- amount. Because Puerto Rico hospitals are of this section, is signed by the staff specific rate based on FY 1982 costs per now paid 100 percent of the national member of the hospital or critical access discharge; the updated hospital-specific rate standardized amount and are subject to the hospital who presented the written based on FY 1987 costs per discharge; the same national standardized amount as notification and includes the name and updated hospital-specific rate based on FY subsection (d) hospitals that receive the full title of the staff member, a certification 1996 costs per discharge; or the updated update, our discussion below does not

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include references to the Puerto Rico II. Proposed Changes to Prospective Payment level computed for large urban hospitals standardized amount or the Puerto Rico- Rates for Hospital Inpatient Operating Costs during FY 2004 and onward, as provided for specific wage index. for Acute Care Hospitals for FY 2017 under section 1886(d)(3)(A)(iv)(II) of the Act. As discussed in section II. of this The basic methodology for determining • The labor-related share that is applied to Addendum, we are proposing to make prospective payment rates for hospital the standardized amounts to give the hospital changes in the determination of the inpatient operating costs for acute care the highest payment, as provided for under prospective payment rates for Medicare hospitals for FY 2005 and subsequent fiscal inpatient operating costs for acute care sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) hospitals for FY 2017. In section III. of this years is set forth under § 412.64. The basic of the Act. For FY 2017, depending on Addendum, we discuss our proposed policy methodology for determining the prospective whether a hospital submits quality data changes for determining the prospective payment rates for hospital inpatient under the rules established in accordance payment rates for Medicare inpatient capital- operating costs for hospitals located in Puerto with section 1886(b)(3)(B)(viii) of the Act related costs for FY 2017. In section IV. of Rico for FY 2005 and subsequent fiscal years (hereafter referred to as a hospital that this Addendum, we are setting forth the rate- is set forth under §§ 412.211 and 412.212. submits quality data) and is a meaningful of-increase percentage for determining the Below we discuss the factors we are EHR user under section 1886(b)(3)(B)(ix) of proposing to use for determining the rate-of-increase limits for certain hospitals the Act (hereafter referred to as a hospital proposed prospective payment rates for FY excluded from the IPPS for FY 2017. In that is a meaningful EHR user), there are four section V. of this Addendum, we discuss 2017. possible applicable percentage increases that proposed policy changes for determining the In summary, the proposed standardized standard Federal rate for LTCHs paid under amounts set forth in Tables 1A, 1B, and 1C can be applied to the national standardized the LTCH PPS for FY 2017. The tables to that are listed and published in section VI. amount. We refer readers to section IV.B. of which we refer in the preamble of this of this Addendum (and available via the the preamble of this proposed rule for a proposed rule are listed in section VI. of this Internet on the CMS Web site) reflect— complete discussion on the proposed FY Addendum and are available via the Internet • Equalization of the standardized 2017 inpatient hospital update. Below is a on the CMS Web site. amounts for urban and other areas at the table with these four options:

Hospital Hospital submitted Hospital did Hospital did submitted quality NOT submit NOT submit FY 2017 quality data and is quality data quality data data and is a NOT a and is a and is NOT a meaningful meaningful meaningful meaningful EHR user EHR user EHR user EHR user

Proposed Market Basket Rate-of-Increase ...... 2.8 2.8 2.8 2.8 Proposed Adjustment for Failure to Submit Quality Data under Section 1886(b)(3)(B)(viii) of the Act ...... 0.0 0.0 ¥0.7 ¥0.7 Proposed Adjustment for Failure to be a Meaningful EHR User under Sec- tion 1886(b)(3)(B)(ix) of the Act ...... 0.0 ¥2.1 0.0 ¥2.1 Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act ...... ¥0.6 ¥0.5 ¥0.5 ¥0.5 Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ...... ¥0.75 ¥0.75 ¥0.75 ¥0.75 Proposed Applicable Percentage Increase Applied to Standardized Amount 1.55 ¥0.55 0.85 ¥1.25

We note that section 1886(b)(3)(B)(viii) of section 1886(d)(3)(E)(ii) of the Act (requiring proposing a (1/0.998) adjustment to the the Act, which specifies the adjustment to a 62-percent labor-related share in certain standardized amount using our authority the applicable percentage increase for circumstances) had not been enacted. under sections 1886(d)(5)(I)(i) and 1886(g) of ‘‘subsection (d)’’ hospitals that do not submit • An adjustment to ensure the effects of the Act to permanently prospectively remove quality data under the rules established by geographic reclassification are budget the 0.2 percent reduction to the rate put in the Secretary, is not applicable to hospitals neutral, as provided for under section place in FY 2014 to offset the estimated located in Puerto Rico. 1886(d)(8)(D) of the Act, by removing the FY increase in IPPS expenditures associated In addition, section 602 of Public Law 114– 2016 budget neutrality factor and applying a with the projected increase in inpatient 113 amended section 1886(n)(6)(B) of the Act revised factor. encounters that was expected to result from to specify that Puerto Rico hospitals are • As discussed below and in section III.G. the new inpatient admission guidelines eligible for incentive payments for the of the preamble of this proposed rule, an under the 2-midnight policy. meaningful use of certified EHR technology, adjustment to offset the cost of the 3-year • As discussed below and in section IV.O. effective beginning FY 2016, and also to hold harmless transitional wage index of the preamble of this proposed rule, we are apply the adjustments to the applicable provisions provided by CMS as a result of the proposing a temporary one-time prospective percentage increase under section implementation of the new OMB labor increase to the FY 2017 rates of 0.6 percent 1886(b)(3)(B)(ix) of the Act to Puerto Rico market area delineations (beginning with FY or a factor of 1.006 using our authority under hospitals that are not meaningful EHR users, 2015). sections 1886(d)(5)(I)(i) and 1886(g) of the effective FY 2022. Accordingly, because the • An adjustment to remove the FY 2016 Act to address the effects of the 0.2 percent provisions of section 1886(b)(3)(B)(ix) of the outlier offset and apply an offset for FY 2017, reduction to the rate for the 2-midnight Act are not applicable to hospitals located in as provided for under section 1886(d)(3)(B) of policy in effect for FY 2014, FY 2015, and FY Puerto Rico until FY 2022, the adjustments the Act. 2016. under this provision are not applicable for • As discussed below and in section II.D. For FY 2017, consistent with current law, FY 2017. of the preamble of this proposed rule, a we are applying the rural floor budget • An adjustment to the standardized recoupment to meet the requirements of neutrality adjustment to hospital wage amount to ensure budget neutrality for DRG section 631 of ATRA to adjust the indexes. Also, consistent with section 3141 recalibration and reclassification, as provided standardized amount to offset the estimated of the Affordable Care Act, instead of for under section 1886(d)(4)(C)(iii) of the Act. amount of the increase in aggregate payments applying a State-level rural floor budget • An adjustment to ensure the wage index as a result of not completing the prospective neutrality adjustment to the wage index, we changes are budget neutral, as provided for adjustment authorized under section are applying a uniform, national budget under section 1886(d)(3)(E)(i) of the Act. We 7(b)(1)(A) of Public Law 110–90 until FY neutrality adjustment to the FY 2017 wage note that section 1886(d)(3)(E)(i) of the Act 2013. index for the rural floor. We note that, in requires that when we compute such budget • As discussed below and in section IV.O. section III.H.2.b. of the preamble to this neutrality, we assume that the provisions of of the preamble of this proposed rule, we are proposed rule, we are proposing to extend

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the imputed floor policy (both the original hospitals in the initial development of rule, in accordance with section 1886(b)(3)(B) methodology and alternative methodology) standardized amounts for the IPPS. of the Act, as amended by section 3401(a) of for FY 2017. Therefore, for FY 2017, in this Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Affordable Care Act, we are proposing to proposed rule, we are proposing to continue the Act requires us to update base-year per reduce the FY 2017 applicable percentage to include the imputed floor (calculated discharge costs for FY 1984 and then increase (which is based on IHS Global under the original and alternative standardize the cost data in order to remove Insight, Inc.’s (IGI’s) first quarter 2016 methodologies) in calculating the uniform, the effects of certain sources of cost forecast of the FY 2010-based IPPS market national rural floor budget neutrality variations among hospitals. These effects basket) by the MFP adjustment (the 10-year adjustment, which would be reflected in the include case-mix, differences in area wage moving average of MFP for the period ending FY 2017 wage index. levels, cost-of-living adjustments for Alaska FY 2017) of 0.5 percentage point, which is In prior fiscal years, CMS made an and Hawaii, IME costs, and costs to hospitals calculated based on IGI’s first quarter 2016 adjustment to ensure the effects of the rural serving a disproportionate share of low- forecast. community hospital demonstration program income patients. In addition, in accordance with section required under section 410A of Public Law For FY 2017, we are proposing to continue 1886(b)(3)(B)(i) of the Act, as amended by 108–173, as amended by sections 3123 and to use the national labor-related and sections 3401(a) and 10319(a) of the 10313 of Public Law 111–148, which nonlabor-related shares (which are based on Affordable Care Act, we are proposing to extended the demonstration program for an the FY 2010-based hospital market basket) further update the standardized amount for additional 5 years (FYs 2011 through 2016), that was used in FY 2016. Specifically, under FY 2017 by the estimated market basket were budget neutral as required under section 1886(d)(3)(E) of the Act, the Secretary percentage increase less 0.75 percentage section 410A(c)(2) of Public Law 108–173. As estimates, from time to time, the proportion point for hospitals in all areas. Sections discussed in section IV.K.3. of the preamble of payments that are labor-related and adjusts 1886(b)(3)(B)(xi) and (xii) of the Act, as to this proposed rule, given the small number the proportion (as estimated by the Secretary added and amended by sections 3401(a) and of participating hospitals and the limited from time to time) of hospitals’ costs which 10319(a) of the Affordable Care Act, further time of participation during FY 2017, we are are attributable to wages and wage-related state that these adjustments may result in the proposing to forego the process of estimating costs of the DRG prospective payment rates. applicable percentage increase being less the costs attributable to the demonstration for We refer to the proportion of hospitals’ costs than zero. The percentage increase in the FY 2017 and to instead analyze the set of that are attributable to wages and wage- market basket reflects the average change in finalized cost reports for reporting periods related costs as the ‘‘labor-related share.’’ For the price of goods and services comprising beginning in FY 2016 when they become FY 2017, as discussed in section III. of the routine, ancillary, and special care unit available. In addition, we discuss how we preamble of this proposed rule, we are hospital inpatient services. would reconcile the budget neutrality offset proposing to continue to use a labor-related Based on IGI’s 2016 first quarter forecast of amounts identified in the IPPS final rules for share of 69.6 percent for the national the hospital market basket increase (as FYs 2011 through 2016 with the actual costs standardized amounts for all IPPS hospitals discussed in Appendix B of this proposed of the demonstration for those years, (including hospitals in Puerto Rico) that have rule), the most recent forecast of the hospital considering the fact that the demonstration a wage index value that is greater than market basket increase for FY 2017 is 2.8 will end December 31, 2016. We stated that 1.0000. Consistent with section 1886(d)(3)(E) percent. As discussed earlier, for FY 2017, we believe it would be appropriate to of the Act, we are proposing to apply the depending on whether a hospital submits conduct this analysis for FYs 2011 through wage index to a labor-related share of 62 quality data under the rules established in 2016 at one time, when all of the finalized percent of the national standardized amount accordance with section 1886(b)(3)(B)(viii) of cost reports for cost reporting periods for all IPPS hospitals (including hospitals in the Act and is a meaningful EHR user under beginning in FYs 2011 through 2016 are Puerto Rico) whose wage index values are section 1886(b)(3)(B)(ix) of the Act, there are available. Such an aggregate analysis less than or equal to 1.0000 four possible applicable percentage increases encompassing the cost experience through The proposed standardized amounts for that could be applied to the standardized the end of the period of performance of the operating costs appear in Tables 1A, 1B, and amount. We refer readers to section IV.B. of demonstration represents an administratively 1C that are listed and published in section the preamble of this proposed rule for a streamlined method, allowing for the VI. of the Addendum to this proposed rule complete discussion on the proposed FY determination of any appropriate final and are available via the Internet on the CMS 2017 inpatient hospital update to the adjustment to the IPPS rates and obviating Web site. standardized amount. We also refer readers the need for multiple fiscal-year-specific 2. Computing the National Average to the table above for the four possible calculations and regulatory actions. Given Standardized Amount applicable percentage increases that would the general lag of 3 years in finalizing cost be applied to update the national Section 1886(d)(3)(A)(iv)(II) of the Act reports, we expect any such analysis to be standardized amount. The proposed requires that, beginning with FY 2004 and conducted in FY 2020. Therefore, for FY standardized amounts shown in Tables 1A thereafter, an equal standardized amount be 2017 we are not proposing to make any through 1C that are published in section VI. computed for all hospitals at the level adjustment to the standardized amounts for of this Addendum and that are available via computed for large urban hospitals during FY the rural community hospital demonstration the Internet on the CMS Web site reflect 2003, updated by the applicable percentage program. We refer the reader to section IV.K. these differential amounts. update. Accordingly, we are proposing to of the preamble of this proposed rule for a Although the update factors for FY 2017 calculate the FY 2017 national average complete discussion on the rural community are set by law, we are required by section standardized amount irrespective of whether hospital demonstration program. 1886(e)(4) of the Act to recommend, taking a hospital is located in an urban or rural into account MedPAC’s recommendations, A. Calculation of the Proposed Adjusted location. appropriate update factors for FY 2017 for Standardized Amount 3. Updating the National Average both IPPS hospitals and hospitals and 1. Standardization of Base-Year Costs or Standardized Amount hospital units excluded from the IPPS. Target Amounts Section 1886(e)(5)(A) of the Act requires that Section 1886(b)(3)(B) of the Act specifies we publish our proposed recommendations In general, the national standardized the applicable percentage increase used to in the Federal Register for public comment. amount is based on per discharge averages of update the standardized amount for payment Our recommendation on the update factors is adjusted hospital costs from a base period for inpatient hospital operating costs. We set forth in Appendix B of this proposed rule. (section 1886(d)(2)(A) of the Act), updated note that, in compliance with section 404 of and otherwise adjusted in accordance with the MMA, in this proposed rule, we are 4. Methodology for Calculation of the the provisions of section 1886(d) of the Act. proposing to use the revised and rebased FY Average Standardized Amount The September 1, 1983 interim final rule (48 2010-based IPPS operating and capital The methodology we used to calculate the FR 39763) contained a detailed explanation market baskets for FY 2017 (which replaced proposed FY 2017 standardized amount is as of how base-year cost data (from cost the FY 2006-based IPPS operating and capital follows: reporting periods ending during FY 1981) market baskets in FY 2014). As discussed in • To ensure we are only including were established for urban and rural section IV.B. of the preamble of this proposed hospitals paid under the IPPS in the

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calculation of the standardized amount, we • In order to further ensure that we capture overall sum of aggregate payments on each apply the following inclusion and exclusion only FFS claims, we are proposing to exclude side of the comparison within the budget criteria: include hospitals whose last four claims with a ‘‘GHOPAID’’ indicator of 1 neutrality calculations. digits fall between 0001 and 0879 (section (which is a field on the MedPAR file that In order to properly determine aggregate 2779A1 of Chapter 2 of the State Operations indicates a claim is not an FFS claim and is payments on each side of the comparison, as Manual on the CMS Web site at: https://www. paid by a Group Health Organization). we have done for the last 3 fiscal years, for cms.gov/Regulations-and-Guidance/ • Consistent with our methodology FY 2017 and subsequent years, we are Guidance/Manuals/Downloads/ established in the FY 2011 IPPS/LTCH PPS proposing to continue to apply the hospital som107c02.pdf); exclude critical access final rule (75 FR 50422 through 50423), we readmissions payment adjustment and the hospitals at the time of this proposed rule; examine the MedPAR file and remove hospital VBP payment adjustment on each exclude hospitals in Maryland (because these pharmacy charges for anti-hemophilic blood side of the comparison, consistent with the hospitals are paid under an all payer model factor (which are paid separately under the methodology that we adopted in the FY 2013 under section 1115A of the Act); and remove IPPS) with an indicator of ‘‘3’’ for blood IPPS/LTCH PPS final rule (77 FR 53687 PPS-excluded cancer hospitals that have a clotting with a revenue code of ‘‘0636’’ from through 53688). That is, we are proposing to ‘‘V’’ in the fifth position of their provider the covered charge field for the budget apply the proposed readmissions payment number or a ‘‘E’’ or ‘‘F’’ in the sixth position. neutrality adjustments. We also remove organ adjustment factor and the proposed hospital • As in the past, we are proposing to adjust acquisition charges from the covered charge VBP payment adjustment factor on both sides the FY 2017 standardized amount to remove field for the budget neutrality adjustments of our comparison of aggregate payments the effects of the FY 2016 geographic because organ acquisition is a pass-through when determining all budget neutrality reclassifications and outlier payments before payment not paid under the IPPS. factors described in section II.A.4. of this applying the FY 2017 updates. We then • The Bundled Payments for Care Addendum. apply budget neutrality offsets for outliers Improvement (BPCI) initiative, developed For the purpose of calculating the and geographic reclassifications to the under the authority of section 3021 of the proposed FY 2017 readmissions payment standardized amount based on proposed FY Affordable Care Act (codified at section adjustment factors, we are proposing to use 2017 payment policies. 1115A of the Act), is comprised of four excess readmission ratios and aggregate • We do not remove the prior year’s budget broadly defined models of care, which link payments for excess readmissions based on neutrality adjustments for reclassification payments for multiple services beneficiaries admissions from the prior fiscal year’s and recalibration of the DRG relative weights receive during an episode of care. Under the applicable period because hospitals have had and for updated wage data because, in BPCI initiative, organizations enter into the opportunity to review and correct these accordance with sections 1886(d)(4)(C)(iii) payment arrangements that include financial data before the data were made public under the policy we adopted regarding the and 1886(d)(3)(E) of the Act, estimated and performance accountability for episodes reporting of hospital-specific readmission aggregate payments after updates in the DRG of care. On January 31, 2013, CMS rates, consistent with section 1886(q)(6) of relative weights and wage index should equal announced the first set of health care the Act. For FY 2017, in this proposed rule, estimated aggregate payments prior to the organizations selected to participate in the we are proposing to calculate the changes. If we removed the prior year’s BPCI initiative. Additional organizations readmissions payment adjustment factors adjustment, we would not satisfy these were selected in 2014. For additional using excess readmission ratios and aggregate conditions. information on the BPCI initiative, we refer payments for excess readmissions based on Budget neutrality is determined by readers to the CMS Center for Medicare and admissions from the finalized applicable comparing aggregate IPPS payments before Medicaid Innovation’s Web site at: http:// period for FY 2017 as hospitals have had the and after making changes that are required to innovation.cms.gov/initiatives/Bundled- opportunity to review and correct these data be budget neutral (for example, changes to Payments/index.html. under our policy regarding the reporting of MS–DRG classifications, recalibration of the In the FY 2013 IPPS/LTCH PPS final rule hospital-specific readmission rates consistent MS–DRG relative weights, updates to the (77 FR 53341 through 53343), for FY 2013 with section 1886(q)(6) of the Act. We wage index, and different geographic and subsequent fiscal years, we finalized a discuss our proposed policy regarding the reclassifications). We include outlier methodology to treat hospitals that reporting of hospital-specific readmission payments in the simulations because they participate in the BPCI initiative the same as rates for FY 2017 in section IV.G.3.f of the may be affected by changes in these prior fiscal years for the IPPS payment preamble of this proposed rule. (For parameters. modeling and ratesetting process (which additional information on our general policy • Consistent with our methodology includes recalibration of the MS–DRG for the reporting of hospital-specific established in the FY 2011 IPPS/LTCH PPS relative weights, ratesetting, calculation of readmission rates, consistent with section final rule (75 FR 50422 through 50433), the budget neutrality factors, and the impact 1886(q)(6) of the Act, we refer readers to the because IME Medicare Advantage payments analysis) without regard to a hospital’s FY 2013 IPPS/LTCH PPS final rule (77 FR are made to IPPS hospitals under section participation within these bundled payment 53399 through 53400).) 1886(d) of the Act, we believe these models (that is, as if they are not In addition, for FY 2017, in this proposed payments must be part of these budget participating in those models under the BPCI rule, for the purpose of modeling aggregate neutrality calculations. However, we note initiative). For FY 2017, we are proposing to payments when determining all budget that it is not necessary to include Medicare continue to include all applicable data from neutrality factors, we are proposing to use Advantage IME payments in the outlier subsection (d) hospitals participating in BPCI proxy hospital VBP payment adjustment threshold calculation or the outlier offset to Models 1, 2, and 4 in our IPPS payment factors for FY 2017 that are based on data the standardized amount because the statute modeling and ratesetting calculations. from a historical period because hospitals requires that outlier payments be not less • Consistent with our methodology have not yet had an opportunity to review than 5 percent nor more than 6 percent of established in the FY 2013 IPPS/LTCH PPS and submit corrections for their data from the total ‘‘operating DRG payments,’’ which does final rule (77 FR 53687 through 53688), we FY 2017 performance period. (For additional not include IME and DSH payments. We refer believe that it is appropriate to include information on our policy regarding the readers to the FY 2011 IPPS/LTCH PPS final adjustments for the Hospital Readmissions review and correction of hospital-specific rule for a complete discussion on our Reduction Program and the Hospital VBP measure rates under the Hospital VBP methodology of identifying and adding the Program (established under the Affordable Program, consistent with section total Medicare Advantage IME payment Care Act) within our budget neutrality 1886(o)(10)(A)(ii) of the Act, we refer readers amount to the budget neutrality adjustments. calculations. to the FY 2013 IPPS/LTCH PPS final rule (77 • Consistent with the methodology in the Both the hospital readmissions payment FR 53578 through 53581), the CY 2012 FY 2012 IPPS/LTCH PPS final rule, in order adjustment (reduction) and the hospital VBP OPPS/ASC final rule with comment period to ensure that we capture only fee-for-service payment adjustment (redistribution) are (76 FR 74544 through 74547), and the claims, we are only including claims with a applied on a claim-by-claim basis by Hospital Inpatient VBP final rule (76 FR ‘‘Claim Type’’ of 60 (which is a field on the adjusting, as applicable, the base-operating 26534 through 26536).) MedPAR file that indicates a claim is an FFS DRG payment amount for individual • The Affordable Care Act also established claim). subsection (d) hospitals, which affects the section 1886(r) of the Act, which modifies

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the methodology for computing the Medicare computation of payments under the Federal annual basis beginning October 1, 1993. This DSH payment adjustment beginning in FY rate and the hospital-specific rate for MDHs. provision also requires us to make any 2014. Beginning in FY 2014, IPPS hospitals • We are proposing to include an updates or adjustments to the wage index in receiving Medicare DSH payment adjustment to the standardized amount for a manner that ensures that aggregate adjustments will receive an empirically those hospitals that are not meaningful EHR payments to hospitals are not affected by the justified Medicare DSH payment equal to 25 users in our modeling of aggregate payments change in the wage index. Section percent of the amount that would previously for budget neutrality for FY 2017. Similar to 1886(d)(3)(E)(i) of the Act requires that we have been received under the statutory FY 2016, we are including this adjustment implement the wage index adjustment in a formula set forth under section 1886(d)(5)(F) based on data on the prior year’s budget neutral manner. However, section of the Act governing the Medicare DSH performance. Payments for hospitals would 1886(d)(3)(E)(ii) of the Act sets the labor- payment adjustment. In accordance with be estimated based on the proposed related share at 62 percent for hospitals with section 1886(r)(2) of the Act, the remaining applicable standardized amount in Tables 1A a wage index less than or equal to 1.0000, amount, equal to an estimate of 75 percent and 1B for discharges occurring in FY 2017. and section 1886(d)(3)(E)(i) of the Act of what otherwise would have been paid as a. Proposed Recalibration of MS–DRG provides that the Secretary shall calculate the Medicare DSH payments, reduced to reflect Relative Weights budget neutrality adjustment for the changes in the percentage of individuals adjustments or updates made under that Section 1886(d)(4)(C)(iii) of the Act under age 65 who are uninsured and an provision as if section 1886(d)(3)(E)(ii) of the specifies that, beginning in FY 1991, the additional statutory adjustment, will be Act had not been enacted. In other words, annual DRG reclassification and recalibration available to make additional payments to this section of the statute requires that we of the relative weights must be made in a Medicare DSH hospitals based on their share implement the updates to the wage index in manner that ensures that aggregate payments of the total amount of uncompensated care a budget neutral manner, but that our budget to hospitals are not affected. As discussed in reported by Medicare DSH hospitals for a neutrality adjustment should not take into section II.G. of the preamble of this proposed given time period. In order to properly rule, we normalized the recalibrated MS– account the requirement that we set the determine aggregate payments on each side DRG relative weights by an adjustment factor labor-related share for hospitals with wage of the comparison for budget neutrality, prior so that the average case relative weight after indexes less than or equal to 1.0000 at the to FY 2014, we included estimated Medicare recalibration is equal to the average case more advantageous level of 62 percent. DSH payments on both sides of our relative weight prior to recalibration. Therefore, for purposes of this budget comparison of aggregate payments when However, equating the average case relative neutrality adjustment, section 1886(d)(3)(E)(i) determining all budget neutrality factors weight after recalibration to the average case of the Act prohibits us from taking into described in section II.A.4. of this relative weight before recalibration does not account the fact that hospitals with a wage Addendum. necessarily achieve budget neutrality with index less than or equal to 1.0000 are paid To do this for FY 2017 (as we did for the respect to aggregate payments to hospitals using a labor-related share of 62 percent. last 3 fiscal years), we are proposing to because payments to hospitals are affected by Consistent with current policy, for FY 2017, include estimated empirically justified factors other than average case relative we are proposing to adjust 100 percent of the Medicare DSH payments that will be paid in weight. Therefore, as we have done in past wage index factor for occupational mix. We accordance with section 1886(r)(1) of the Act years, we are proposing to make a budget describe the occupational mix adjustment in and estimates of the additional neutrality adjustment to ensure that the section III.E. of the preamble of this proposed uncompensated care payments made to requirement of section 1886(d)(4)(C)(iii) of rule. hospitals receiving Medicare DSH payment the Act is met. To compute a proposed budget neutrality adjustments as described by section For FY 2017, to comply with the adjustment factor for wage index and labor- 1886(r)(2) of the Act. That is, we are requirement that MS–DRG reclassification related share percentage changes, we used FY proposing to consider estimated empirically and recalibration of the relative weights be 2015 discharge data to simulate payments justified Medicare DSH payments at 25 budget neutral for the standardized amount and compared the following: percent of what would otherwise have been and the hospital-specific rates, we used FY • Aggregate payments using the proposed paid, and also the estimated additional 2015 discharge data to simulate payments FY 2017 relative weights and the FY 2016 uncompensated care payments for hospitals and compared the following: pre-reclassified wage indexes, applied the FY receiving Medicare DSH payment • Aggregate payments using the FY 2016 2016 labor-related share of 69.6 percent to all adjustments on both sides of our comparison labor-related share percentages, the FY 2016 hospitals (regardless of whether the of aggregate payments when determining all relative weights, and the FY 2016 pre- hospital’s wage index was above or below budget neutrality factors described in section reclassified wage data, and applied the 1.0000), and applied the proposed FY 2017 II.A.4. of this Addendum. proposed FY 2017 hospital readmissions hospital readmissions payment adjustment • When calculating total payments for payment adjustments and estimated FY 2017 and the estimated FY 2017 hospital VBP budget neutrality, to determine total hospital VBP payment adjustments; and payment adjustment; and • payments for SCHs, we model total hospital- Aggregate payments using the FY 2016 • Aggregate payments using the proposed specific rate payments and total Federal rate labor-related share percentages, the proposed FY 2017 relative weights and the proposed payments and then include whichever one of FY 2017 relative weights, and the FY 2016 FY 2017 pre-reclassified wage indexes, the total payments is greater. As discussed in pre-reclassified wage data, and applied the applied the proposed labor-related share for section IV.F. of the preamble to this proposed same proposed FY 2017 hospital FY 2017 of 69.6 percent to all hospitals rule and below, we are proposing to continue readmissions payment adjustments and (regardless of whether the hospital’s wage the FY 2014 finalized methodology under estimated FY 2017 hospital VBP payment index was above or below 1.0000), and which we would take into consideration adjustments applied above. applied the same proposed FY 2017 hospital uncompensated care payments in the Based on this comparison, we computed a readmissions payment adjustments and proposed budget neutrality adjustment factor comparison of payments under the Federal estimated FY 2017 hospital VBP payment equal to 0.999006 and applied this factor to rate and the hospital-specific rate for SCHs. adjustments applied above. the standardized amount. As discussed in Therefore, we are proposing to include In addition, we applied the proposed MS– section IV. of this Addendum, we also are estimated uncompensated care payments in DRG reclassification and recalibration budget proposing to apply the MS–DRG this comparison. reclassification and recalibration budget neutrality adjustment factor (derived in the Similarly, for MDHs, as discussed in neutrality factor of 0.999006 to the hospital- first step) to the payment rates that were used section IV. of the preamble to this proposed specific rates that are effective for cost to simulate payments for this comparison of rule, when computing payments under the reporting periods beginning on or after aggregate payments from FY 2016 to FY Federal national rate plus 75 percent of the October 1, 2016. 2017. By applying this methodology, we difference between the payments under the determined a proposed budget neutrality Federal national rate and the payments under b. Updated Wage Index—Budget Neutrality adjustment factor of 0.999785 for proposed the updated hospital-specific rate, we are Adjustment changes to the wage index. continuing to take into consideration Section 1886(d)(3)(E)(i) of the Act requires We note that, in prior fiscal years, we used uncompensated care payments in the us to update the hospital wage index on an a three-step process and combined the

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recalibration and wage index budget for FY 2017, and apply the proposed policies To calculate the national rural floor and neutrality factors into one factor by explained in section III. of the preamble to imputed floor budget neutrality adjustment multiplying the recalibration adjustment this proposed rule. Based on these factor, we are proposing to use FY 2015 factor by the wage index adjustment factor. simulations, we calculated a proposed budget discharge data to simulate payments and the Because these two adjustments are required neutrality adjustment factor of 0.988816 to proposed post-reclassified national wage under two different sections of the Act ensure that the effects of these provisions are indexes and compared the following: (sections 1886(d)(4)(C)(iii) and budget neutral, consistent with the statute. • National simulated payments without 1886(d)(3)(E)(i) of the Act) and the law The proposed FY 2017 budget neutrality the proposed national rural floor and requires that the wage index budget adjustment factor was applied to the imputed floor; and neutrality adjustment not take into account standardized amount after removing the • National simulated payments with the the requirement that we set the labor-related effects of the FY 2016 budget neutrality proposed national rural floor and imputed share for hospitals with wage indexes less adjustment factor. We note that the proposed floor. than or equal to 1.0000 at the more FY 2017 budget neutrality adjustment reflects Based on this comparison, we determined advantageous level of 62 percent for FY 2017, FY 2017 wage index reclassifications a proposed national rural floor and imputed we are proposing to separate these two approved by the MGCRB or the floor budget neutrality adjustment factor of adjustments and apply them individually to Administrator at the time of development of 0.993806. The national adjustment was the standardized amount. Applying these the proposed rule. applied to the national wage indexes to factors individually rather than as a d. Proposed Rural Floor Budget Neutrality produce a proposed national rural floor and combined factor has no effect mathematically Adjustment imputed floor budget neutral wage index. on adjusting the standardized amount. Under § 412.64(e)(4), we make an e. Wage Index Transition Budget Neutrality c. Reclassified Hospitals—Proposed Budget adjustment to the wage index to ensure that As discussed in section III.G. of the Neutrality Adjustment aggregate payments after implementation of preamble of this proposed rule, in the past, Section 1886(d)(8)(B) of the Act provides the rural floor under section 4410 of the BBA we have provided for transition periods that certain rural hospitals are deemed urban. (Pub. L. 105–33) and the imputed floor under when adopting changes that have significant In addition, section 1886(d)(10) of the Act § 412.64(h)(4) are equal to the aggregate payment implications, particularly large provides for the reclassification of hospitals prospective payments that would have been negative impacts. based on determinations by the MGCRB. made in the absence of such provisions. Similar to FY 2005, for FY 2015, we Under section 1886(d)(10) of the Act, a Consistent with section 3141 of the determined that the transition to using the hospital may be reclassified for purposes of Affordable Care Act and as discussed in new OMB labor market area delineations the wage index. section III.H. of the preamble of this would have the largest impact on hospitals Under section 1886(d)(8)(D) of the Act, the proposed rule and codified at that were located in an urban county that Secretary is required to adjust the § 412.64(e)(4)(ii), the budget neutrality became rural under the new OMB standardized amount to ensure that aggregate adjustment for the rural floor and the delineations or hospitals deemed urban payments under the IPPS after imputed floor is a national adjustment to the where the urban area became rural under the implementation of the provisions of sections wage index. new OMB delineations. To alleviate the 1886(d)(8)(B) and (C) and 1886(d)(10) of the As noted above and as discussed in section decreased payments associated with having a Act are equal to the aggregate prospective III.H.2. of the preamble of this proposed rule, rural wage index, in calculating the area payments that would have been made absent we are proposing to extend the imputed floor wage index, similar to the transition these provisions. We note that the wage policy (both the original methodology and provided in the FY 2005 IPPS final rule, we index adjustments provided for under section alternative methodology) for FY 2017. finalized a policy to generally assign the 1886(d)(13) of the Act are not budget neutral. Therefore, in order to ensure that aggregate hospitals in these counties the urban wage Section 1886(d)(13)(H) of the Act provides payments to hospitals are not affected, index value of the CBSA where they are that any increase in a wage index under similar to prior years, for FY 2017, we would physically located in for FY 2014 for FYs section 1886(d)(13) shall not be taken into follow our policy of including the proposed 2015, 2016, and 2017. FY 2017 will be the account in applying any budget neutrality imputed floor (calculated under the original final year of this 3-year transition policy. We adjustment with respect to such index under and alternative methodologies) in the note that the 1-year blended wage index section 1886(d)(8)(D) of the Act. To calculate proposed national rural floor budget transitional policy for all hospitals that the proposed budget neutrality adjustment neutrality adjustment to the wage index. would experience any decrease in their wage factor for FY 2017, we used FY 2015 Similar to our calculation in the FY 2015 index value expired in FY 2015. discharge data to simulate payments and IPPS/LTCH PPS final rule (79 FR 50369 As discussed in the FY 2015 IPPS/LTCH compared the following: through 50370), for FY 2017, we are PPS final rule (79 FR 50372 through 50373), • Aggregate payments using the proposed proposing to calculate a national rural Puerto in the past, CMS has budget neutralized FY 2017 labor-related share percentages, Rico wage index. Because there are no rural transitional wage indexes. We stated that proposed FY 2017 relative weights and Puerto Rico hospitals with established wage because we established a policy that allows proposed FY 2017 wage data prior to any data, our calculation of the proposed FY 2017 for the application of a transitional wage reclassifications under sections 1886(d)(8)(B) rural Puerto Rico wage index is based on the index only when it benefits the hospital, we and (C) and 1886(d)(10) of the Act, and policy adopted in the FY 2008 IPPS final rule believe that it would be appropriate to ensure applied the proposed FY 2017 hospital with comment period (72 FR 47323). That is, that such a transitional policy does not readmissions payment adjustments and the we will use the unweighted average of the increase aggregate Medicare payments estimated FY 2017 hospital VBP payment wage indexes from all CBSAs (urban areas) beyond the payments that would be made adjustments; and that are contiguous (share a border with) to had we simply adopted the OMB • Aggregate payments using the proposed the rural counties to compute the rural floor delineations without any transitional FY 2017 labor-related share percentages, (72 FR 47323; 76 FR 51594). Under the new provisions. Therefore, as we did for FYs 2015 proposed FY 2017 relative weights, and OMB labor market area delineations, except and 2016, for FY 2017, we are proposing to proposed FY 2017 wage data after such for Arecibo, Puerto Rico (CBSA 11640), all use our exceptions and adjustments authority reclassifications, and applied the same other Puerto Rico urban areas are contiguous under section 1886(d)(5)(I)(i) of the Act to proposed FY 2017 hospital readmissions to a rural area. Therefore, based on our make an adjustment to the national payment adjustments and the estimated FY existing policy, the proposed FY 2017 rural standardized amounts to ensure that total 2017 hospital VBP payment adjustments Puerto Rico wage index is calculated based payments for the effect of the 3-year applied above. on the average of the proposed FY 2017 wage transitional wage index provisions would We note that the reclassifications applied indexes for the following urban areas: equal what payments would have been if we under the second simulation and comparison Aguadilla-Isabela, PR (CBSA 10380); had fully adopted the new OMB delineations are those listed in Table 2 associated with Guayama, PR (CBSA 25020); Mayaguez, PR without providing these transitional this proposed rule, which is available via the (CBSA 32420); Ponce, PR (CBSA 38660), San provisions. To calculate the proposed Internet on the CMS Web site. This table German, PR (CBSA 41900) and San Juan- transitional wage index budget neutrality reflects reclassification crosswalks proposed Carolina-Caguas, PR (CBSA 41980). factor for FY 2017, we used FY 2015

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discharge data to simulate payments and (2) Recoupment or Repayment Adjustment to facilitate our further consideration of the compared the following: Authorized by Section 631 of the American FY 2014 reduction. • Aggregate payments using the OMB Taxpayer Relief Act of 2012 (ATRA) to the We still believe the assumptions delineations for FY 2017, the proposed FY National Standardized Amount underlying the 0.2 percent reduction to the 2017 relative weights, proposed FY 2017 Section 631 of the ATRA amended section rates put in place beginning in FY 2014 were wage data after such reclassifications under 7(b)(1)(B) of Public Law 110–90 to require the reasonable at the time we made them in sections 1886(d)(8)(B) and (C) and Secretary to make a recoupment adjustment 2013. Nevertheless, taking all the factors 1886(d)(10) of the Act, application of the totaling $11 billion by FY 2017. Our actuaries discussed in section IV. O of the preamble to proposed rural floor budget neutrality estimated that if CMS were to fully account this proposed rule into account and in the adjustment factor to the wage index, and for the $11 billion recoupment required by context of the litigation, we believe it would application of the proposed FY 2017 hospital section 631 of ATRA in FY 2014, a one-time be appropriate to use our authority under readmissions payment adjustments and the ¥9.3 percent adjustment to the standardized section 1886(d)(5)(I)(i) to prospectively estimated FY 2017 hospital VBP payment amount would be necessary. It is often our remove, beginning in FY 2017, the 0.2 adjustments; and practice to delay or phase-in payment rate percent reduction to the standardized • Aggregate payments using the OMB adjustments over more than 1 year, in order amount and hospital-specific rates put in delineations for FY 2017, the proposed FY to moderate the effect on payment rates in place beginning in FY 2014. The 0.2 percent 2017 relative weights, proposed FY 2017 any 1 year. Therefore, consistent with the reduction was implemented by including a wage data after such reclassifications under factor of 0.998 in the calculation of the FY sections 1886(d)(8)(B) and (C) and policies that we have adopted in many similar cases, for FY 2014, FY 2015 and FY 2014 standardized amount and hospital- 1886(d)(10) of the Act, application of the ¥ specific rates, permanently reducing the proposed rural floor budget neutrality 2016, we applied a 0.8 percent adjustment to the standardized amount. For FY 2017, we standardized amount and hospital-specific adjustment factor to the wage index, ¥ rates for FY 2014 and future years until the application of the 3-year transitional wage are proposing to apply a 1.5 percent adjustment to the standardized amount. We 0.998 is removed. We are proposing to indexes, and application of the same permanently remove the 0.998 reduction proposed FY 2017 hospital readmissions refer the reader to section II. D. 6 of the preamble to this proposed rule for a complete beginning in FY 2017 by including a factor payment adjustments and the estimated FY of (1/0.998) in the calculation of the FY 2017 discussion on this adjustment. We note that, 2017 hospital VBP payment adjustments standardized amount and hospital specific as section 631 of the ATRA instructs the applied above. rate. Secretary to make a recoupment adjustment Based on these simulations, we calculated In addition, for the reasons discussed in only to the standardized amount, this a proposed budget neutrality adjustment section IV.O. of the preamble of this adjustment would not apply to the hospital- factor of 0.999999. Therefore, for FY 2017, proposed rule, we believe it would be specific payment rates. we are proposing to apply a transitional wage appropriate to use our authority under index budget neutrality adjustment factor of g. Proposed Adjustment to IPPS Rates section 1886(d)(5)(I)(i) to temporarily 0.999999 to the national average Resulting From 2-Midnight Policy increase the standardized amount and standardized amounts to ensure that the As discussed in section IV. O of the hospital-specific rates, only for FY 2017, to effects of these proposed transitional wage preamble to this proposed rule, in the FY address the effect of the 0.2 percent reduction indexes are budget neutral. to the standardized amount and hospital- We note that the proposed budget 2014 IPPS/LTCH PPS final rule (78 FR 50906 through 50954), we adopted the 2-midnight specific rates in effect for FY 2014, the 0.2 neutrality adjustment factor calculated above percent reduction to the standardized is based on the increase in payments in FY policy effective for dates of admission on or after October 1, 2013. We used our authority amount and hospital-specific rates in effect 2017 that would result from the final year of for FY 2015 (recall the 0.998 factor included the 3-year transitional wage index policies. under section 1886(d)(5)(I)(i) of the Act to make a reduction of 0.2 percent to the in the calculation of the FY 2014 rates Therefore, we are proposing to apply this permanently reduced the rates for FY 2014 proposed budget neutrality adjustment factor standardized amount, the Puerto Rico standardized amount, and the hospital- and future years until it is removed), and the as a one-time adjustment to the FY 2017 0.2 percent reduction to the standardized national standardized amounts in order to specific payment rate, and we used our authority under section 1886(g) of the Act to amount and hospital-specific rates in effect offset the increase in payments in FY 2017 for FY 2016. We believe that the most as a result of this final year of the 3-year make a reduction of 0.2 percent to the national capital Federal rate and the Puerto transparent, expedient, and administratively transitional wage index. For FY 2017, we did feasible method to accomplish this is a not take into consideration the adjustment Rico-specific capital rate, in order to offset temporary one-time prospective increase to factor applied to the national standardized the estimated increase of $220 million in the FY 2017 standardized amount and amounts in the previous fiscal year’s update IPPS expenditures in FY 2014 as a result of hospital-specific rates of 0.6 percent (= 0.2 when calculating the current fiscal year the 2-midnight policy. percent + 0.2 percent + 0.2 percent). transitional wage index budget neutrality In Shands Jacksonville Medical Center, Inc. Specifically, we are proposing to include a adjustment factor (that is, this adjustment is v. Burwell, No. 14–263 (D.D.C.) and factor of 1.006 in the calculation of the not applied cumulatively). consolidated cases, hospitals challenged the standardized amount and the hospital- 0.2 percent reduction in IPPS rates to account f. Proposed Case-Mix Budget Neutrality specific rates in FY 2017 and then remove for the estimated $220 million in additional Adjustment this temporary one-time prospective increase FY 2014 expenditures resulting from the 2- by including a factor of (1/1.006) in the (1) Background midnight policy. In its Memorandum calculation of the standardized amount and Opinion, issued September 21, 2015, the Below we summarize the proposed hospital-specific rates for FY 2018. Court found that the ‘‘Secretary’s recoupment adjustment to the FY 2017 We refer the reader to section IV.O. of the interpretation of the exceptions and payment rates, as required by section 631 of preamble to this proposed rule for a complete ATRA, to account for the increase in adjustments provision is a reasonable one’’ discussion. aggregate payments as a result of not for this purpose. However, the Court also completing the prospective adjustment ordered the 0.2 percent reduction remanded h. Proposed Outlier Payments authorized under section 7(b)(1)(A) of Public back to the Secretary, without vacating the Section 1886(d)(5)(A) of the Act provides Law 110–90 until FY 2013. We refer readers rule, to correct certain procedural for payments in addition to the basic to section II.D. of the preamble of this deficiencies in the promulgation of the 0.2 prospective payments for ‘‘outlier’’ cases proposed rule for a complete discussion percent reduction and reconsider the involving extraordinarily high costs. To regarding our proposed policies for FY 2017 adjustment. In accordance with the Court’s qualify for outlier payments, a case must in this proposed rule and previously order, we published a notice with comment have costs greater than the sum of the finalized policies (including our historical period that appeared in the December 1, 2015 prospective payment rate for the MS–DRG, adjustments to the payment rates) relating to Federal Register (80 FR 75107), which any IME and DSH payments, uncompensated the effect of changes in documentation and discussed the basis for the 0.2 percent care payments, any new technology add-on coding that do not reflect real changes in reduction and its underlying assumptions payments, and the ‘‘outlier threshold’’ or case-mix. and invited comments on the same in order ‘‘fixed-loss’’ amount (a dollar amount by

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which the costs of a case must exceed PPS proposed rule, we made changes to our ‘‘Claim Type’’ of 60 (which is a field on the payments in order to qualify for an outlier methodology for projecting the outlier fixed- MedPAR file that indicates a claim is an FFS payment). We refer to the sum of the loss cost threshold for FY 2014. We refer claim). prospective payment rate for the MS–DRG, readers to the FY 2014 IPPS/LTCH PPS final • In order to further ensure that we capture any IME and DSH payments, uncompensated rule for detailed discussion of the changes. only FFS claims, we excluded claims with a care payments, any new technology add-on As we have done in the past, to calculate ‘‘GHOPAID’’ indicator of 1 (which is a field payments, and the outlier threshold as the the proposed FY 2017 outlier threshold, we on the MedPAR file that indicates a claim is outlier ‘‘fixed-loss cost threshold.’’ To simulated payments by applying proposed not an FFS claim and is paid by a Group determine whether the costs of a case exceed FY 2017 payment rates and policies using Health Organization). the fixed-loss cost threshold, a hospital’s CCR cases from the FY 2015 MedPAR file. • We examined the MedPAR file and is applied to the total covered charges for the Therefore, in order to determine the removed pharmacy charges for anti- case to convert the charges to estimated costs. proposed FY 2017 outlier threshold, we hemophilic blood factor (which are paid Payments for eligible cases are then made inflated the charges on the MedPAR claims separately under the IPPS) with an indicator based on a marginal cost factor, which is a by 2 years, from FY 2015 to FY 2017. As of ‘‘3’’ for blood clotting with a revenue code percentage of the estimated costs above the discussed in the FY 2015 IPPS/LTCH PPS of ‘‘0636’’ from the covered charge field. We fixed-loss cost threshold. The marginal cost final rule, we believe a methodology that is also removed organ acquisition charges from factor for FY 2017 is 80 percent, or 90 based on 1-year of charge data will provide the covered charge field because organ percent for burn MS–DRGs 927, 928, 929, a more stable measure to project the average acquisition is a pass-through payment not 933, 934 and 935. We have used a marginal charge per case because our prior paid under the IPPS. cost factor of 90 percent since FY 1989 (54 methodology used a 6-month measure, which In the FY 2016 IPPS/LTCH final rule (80 FR 36479 through 36480) for designated burn inherently uses fewer claims than a 1-year FR 49779–49780), we stated that commenters measure and makes it more susceptible to DRGs as well as a marginal cost factor of 80 were concerned that they were unable to fluctuations in the average charge per case as percent for all other DRGs since FY 1995 (59 replicate the calculation of the charge a result of any significant charge increases or FR 45367). inflation factor that CMS used in the decreases by hospitals. The methodology we In accordance with section proposed rule. In response to those are proposing to calculate the charge 1886(d)(5)(A)(iv) of the Act, outlier payments comments, we stated that we continue to inflation factor for FY 2017 and subsequent for any year are projected to be not less than believe that it is optimal to use the most 5 percent nor more than 6 percent of total fiscal years is as follows: • To produce the most stable measure of recent period of charge data available to operating DRG payments (which does not measure charge inflation. In response to include IME and DSH payments) plus outlier charge inflation, we applied the following inclusion and exclusion criteria of hospitals those comments, similar to FY 2016, for FY payments. When setting the outlier 2017 we grouped claims data by quarter in threshold, we compute the 5.1 percent target claims in our measure of charge inflation: include hospitals whose last four digits fall the table below in order that the public by dividing the total operating outlier would be able to replicate the claims payments by the total operating DRG between 0001 and 0899 (section 2779A1 of summary for the claims with discharge dates payments plus outlier payments. We do not Chapter 2 of the State Operations Manual on through September 30, 2015, that are include any other payments such as IME and the CMS Web site at https://www.cms.gov/ available under the current LDS structure. In DSH within the outlier target amount. Regulations-and-Guidance/Guidance/ order to provide even more information in Therefore, it is not necessary to include Manuals/Downloads/som107c02.pdf); response to the commenters’ request, similar Medicare Advantage IME payments in the include CAHs that were IPPS hospitals for to FY 2016, for FY 2017 we have made outlier threshold calculation. Section the time period of the MedPAR data being available on the CMS Web site at: https:// 1886(d)(3)(B) of the Act requires the used to calculate the charge inflation factor; www.cms.gov/Medicare/Medicare-Fee-for- Secretary to reduce the average standardized include hospitals in Maryland; and remove Service-Payment/AcuteInpatientPPS/ amount by a factor to account for the PPS excluded cancer hospitals who have a index.html (click on the link on the left titled estimated proportion of total DRG payments ‘‘V’’ in the fifth position of their provider number or a ‘‘E’’ or ‘‘F’’ in the sixth position. ‘‘FY 2017 IPPS Proposed Rule Home Page’’’ made to outlier cases. More information on • outlier payments may be found on the CMS We excluded Medicare Advantage IME and then click the link ‘‘FY 2017 Proposed Web site at: http://www.cms.gov/Medicare/ claims for the reasons described in section Rule Data Files’’’) a more detailed summary Medicare-Fee-for-Service-Payment/Acute I.A.4. of this Addendum. We refer readers to table by provider with the monthly charges InpatientPPS/outlier.htm. the FY 2011 IPPS/LTCH PPS final rule for a that were used to compute the charge complete discussion on our methodology of inflation factor. We continue to work with (1) Proposed FY 2017 Outlier Fixed-Loss Cost identifying and adding the total Medicare our systems teams and privacy office to Threshold Advantage IME payment amount to the explore expanding the information available In the FY 2014 IPPS/LTCH PPS final rule budget neutrality adjustments. in the current LDS, perhaps through the (78 FR 50977 through 50983), in response to • In order to ensure that we capture only provision of a supplemental data file for public comments on the FY 2013 IPPS/LTCH FFS claims, we included claims with a future rulemaking.

Covered charges Cases Covered charges Cases Quarter (January 1, 2014, through (January 1, 2014, through (January 1, 2015, through (January 1, 2015, through December 31, 2014) December 31, 2014) December 31, 2015) December 31, 2015)

1 ...... $126,156,195,005 2,479,295 $134,250,323,661 2,546,078 2 ...... 122,171,248,575 2,445,370 126,880,227,174 2,416,569 3 ...... 119,364,629,662 2,364,553 122,165,668,615 2,308,537 4 ...... 124,733,843,923 2,436,787 90,677,073,204 1,696,180

Total 492,425,917,165 9,726,005 473,973,292,654 8,967,364

Under this methodology, to compute the 1- December 31, 2014) to the average covered are obtained from the claim from the year average annualized rate-of-change in charge per case of $52,855 MedPAR file and inflated by the inflation charges per case for FY 2017, we are ($473,973,292,654/8,967,364) from the factor specified above. proposing to compare the average covered second quarter of FY 2015 through the first As we have done in the past, in this charge per case of $50,360 quarter of FY 2016 (January 1, 2015, through proposed rule, we are proposing to establish ($492,425,917,165/9,726,005) from the December 31, 2015). This rate-of-change is the proposed FY 2017 outlier threshold using second quarter of FY 2014 through the first 4.4 percent (1.043957) or 9.8 percent hospital CCRs from the December 2015 quarter of FY 2015 (January 1, 2014, through (1.089846) over 2 years. The billed charges update to the Provider-Specific File (PSF)—

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the most recent available data at the time of national average case-weighted CCR of the total outlier payments for the hospital the development of this proposed rule. As 0.024615 and a December 2015 capital exceeded $500,000.00 for that period. Our stated in the FY 2014 IPPS/LTCH PPS final national average case-weighted CCR of simulations assume that CCRs accurately rule (78 FR 50979), we apply the following 0.024008. We then calculated the percentage measure hospital costs based on information edits to providers’ CCRs in the PSF. We change between the two national capital available to us at the time we set the outlier believe these edits are appropriate in order to case-weighted CCRs by subtracting the threshold. For these reasons, we are accurately model the outlier threshold. We December 2014 capital national average case- proposing not to make any assumptions first search for Indian Health Service weighted CCR from the December 2015 regarding the effects of reconciliation on the providers and those providers assigned the capital national average case-weighted CCR outlier threshold calculation. statewide average CCR from the current fiscal and then dividing the result by the December As described in sections IV.G. and IV.H. year. We then replace these CCRs with the 2014 capital national average case-weighted respectively, of the preamble of this proposed statewide average CCR for the upcoming CCR. This resulted in a proposed national rule, sections 1886(q) and 1886(o) of the Act fiscal year. We also assign the statewide capital CCR adjustment factor of 0.975335. establish the Hospital Readmissions average CCR (for the upcoming fiscal year) to As discussed above, for FY 2017, we are Reduction Program and the Hospital VBP those providers that have no value in the proposing to apply the final year of the 3-year Program, respectively. We do not believe that CCR field in the PSF. We do not apply the transitional wage index because of the it is appropriate to include the hospital VBP adjustment factors described below to adoption of the new OMB labor market area payment adjustments and the hospital hospitals assigned the statewide average delineations. Also, as discussed in section readmissions payment adjustments in the CCR. III.B.3. of the preamble to the FY 2011 IPPS/ proposed outlier threshold calculation or the For FY 2017, we also are proposing to LTCH PPS final rule (75 FR 50160 and proposed outlier offset to the standardized continue to apply an adjustment factor to the 50161) and in section III.H.3. of the preamble amount. Specifically, consistent with our CCRs to account for cost and charge inflation of this proposed rule, in accordance with definition of the base operating DRG payment (as explained below). We are proposing that, section 10324(a) of the Affordable Care Act, amount for the Hospital Readmissions if more recent data become available, we we created a wage index floor of 1.0000 for Reduction Program under § 412.152 and the would use that data to calculate the final FY all hospitals located in States determined to Hospital VBP Program under § 412.160, 2017 outlier threshold. be frontier States. We note that the frontier outlier payments under section 1886(d)(5)(A) In the FY 2014 IPPS/LTCH PPS final rule State floor adjustments would be calculated of the Act are not affected by these payment (78 FR 50979), we adopted a new and applied after rural and imputed floor adjustments. Therefore, outlier payments methodology to adjust the CCRs. Specifically, budget neutrality adjustments are calculated would continue to be calculated based on the we finalized a policy to compare the national for all labor market areas, in order to ensure unadjusted base DRG payment amount (as average case-weighted operating and capital that no hospital in a frontier State would opposed to using the base-operating DRG CCR from the most recent update of the PSF receive a wage index less than 1.0000 due to payment amount adjusted by the hospital to the national average case-weighted the proposed rural and imputed floor readmissions payment adjustment and the operating and capital CCR from the same adjustment. In accordance with section hospital VBP payment adjustment). period of the prior year. 10324(a) of the Affordable Care Act, the Consequently, we are proposing to exclude Therefore, as we did for the last 3 fiscal frontier State adjustment will not be subject the hospital VBP payment adjustments and years, we are proposing to adjust the CCRs to budget neutrality, and will only be the hospital readmissions payment from the December 2015 update of the PSF extended to hospitals geographically located adjustments from the calculation of the by comparing the percentage change in the within a frontier State. However, for proposed outlier fixed-loss cost threshold. national average case-weighted operating purposes of estimating the proposed outlier We note that, to the extent section 1886(r) CCR and capital CCR from the December threshold for FY 2017, it was necessary to of the Act modifies the DSH payment 2014 update of the PSF to the national apply the proposed 3-year transitional wage methodology under section 1886(d)(5)(F) of average case-weighted operating CCR and indexes and adjust the proposed wage index the Act, the new uncompensated care capital CCR from the December 2015 update of those eligible hospitals in a frontier State payment under section 1886(r)(2) of the Act, of the PSF. We note that we used total when calculating the proposed outlier like the empirically justified Medicare DSH transfer-adjusted cases from FY 2015 to threshold that results in outlier payments payment under section 1886(r)(1) of the Act, determine the national average case-weighted being 5.1 percent of total payments for FY may be considered an amount payable under CCRs for both sides of the comparison. As 2017. If we did not take the above into section 1886(d)(5)(F) of the Act such that it stated in the FY 2014 IPPS/LTCH PPS final account, our estimate of total FY 2017 would be reasonable to include the payment rule (78 FR 50979), we believe that it is payments would be too low, and, as a result, in the outlier determination under section appropriate to use the same case count on our proposed outlier threshold would be too 1886(d)(5)(A) of the Act. As we have done both sides of the comparison because this high, such that estimated outlier payments since the implementation of uncompensated will produce the true percentage change in would be less than our projected 5.1 percent care payments in FY 2014, we also are the average case-weighted operating and of total payments. proposing for FY 2017 to allocate an capital CCR from one year to the next As we did in establishing the FY 2009 estimated per-discharge uncompensated care without any effect from a change in case outlier threshold (73 FR 57891), in our payment amount to all cases for the hospitals count on different sides of the comparison. projection of FY 2017 outlier payments, we eligible to receive the uncompensated care Using the proposed methodology above, are proposing not to make any adjustments payment amount in the calculation of the we calculated a proposed December 2014 for the possibility that hospitals’ CCRs and outlier fixed-loss cost threshold operating national average case-weighted outlier payments may be reconciled upon methodology. We continue to believe that CCR of 0.280907 and a proposed December cost report settlement. We continue to allocating an eligible hospital’s estimated 2015 operating national average case- believe that, due to the policy implemented uncompensated care payment to all cases weighted CCR of 0.272363. We then in the June 9, 2003 Outlier Final Rule (68 FR equally in the calculation of the outlier fixed- calculated the percentage change between the 34494), CCRs will no longer fluctuate loss cost threshold would best approximate two national operating case-weighted CCRs significantly and, therefore, few hospitals the amount we would pay in uncompensated by subtracting the December 2014 operating will actually have these ratios reconciled care payments during the year because, when national average case-weighted CCR from the upon cost report settlement. In addition, it is we make claim payments to a hospital December 2015 operating national average difficult to predict the specific hospitals that eligible for such payments, we would be case-weighted CCR and then dividing the will have CCRs and outlier payments making estimated per-discharge result by the December 2014 national reconciled in any given year. We note that we uncompensated care payments to all cases operating average case-weighted CCR. This have instructed MACs to identify for CMS equally. Furthermore, we continue to believe resulted in a proposed national operating any instances where (1) a hospital’s actual that using the estimated per-claim CCR adjustment factor of 0.969585. CCR for the cost reporting period fluctuates uncompensated care payment amount to We used the same methodology proposed plus or minus 10 percentage points compared determine outlier estimates provides above to adjust the capital CCRs. Specifically, to the interim CCR used to calculate outlier predictability as to the amount of we calculated a December 2014 capital payments when a bill is processed; and (2) uncompensated care payments included in

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the calculation of outlier payments. applying separate operating and capital reconciliation process for hospitals and Therefore, consistent with the methodology CCRs. These costs are then combined and Medicare contractors. To download and view used since FY 2014 to calculate the outlier compared with the outlier fixed-loss cost the manual instructions on outlier fixed-loss cost threshold, for FY 2017, we are threshold. reconciliation, we refer readers to the CMS proposing to include estimated FY 2017 Under our current policy at § 412.84, we Web site: http://www.cms.hhs.gov/manuals/ uncompensated care payments in the calculate operating and capital CCR ceilings downloads/clm104c03.pdf. computation of the proposed outlier fixed- and assign a statewide average CCR for (3) FY 2015 Outlier Payments loss cost threshold. Specifically, we are hospitals whose CCRs exceed 3.0 standard proposing to use the estimated per-discharge deviations from the mean of the log Our current estimate, using available FY uncompensated care payments to hospitals distribution of CCRs for all hospitals. Based 2015 claims data, is that actual outlier eligible for the uncompensated care payment on this calculation, for hospitals for which payments for FY 2015 were approximately for all cases in the calculation of the the MAC computes operating CCRs greater 4.68 percent of actual total MS–DRG proposed outlier fixed-loss cost threshold than 1.19 or capital CCRs greater than 0.171, payments. Therefore, the data indicate that, methodology. or hospitals for which the MAC is unable to for FY 2015, the percentage of actual outlier Using this methodology, we used the calculate a CCR (as described under payments relative to actual total payments is formula described in section I.C.1 of this § 412.84(i)(3) of our regulations), statewide lower than we projected for FY 2015. Addendum to simulate and calculate the average CCRs are used to determine whether Consistent with the policy and statutory Federal payment rate and outlier payments a hospital qualifies for outlier payments. interpretation we have maintained since the for all claims. We used a threshold of $23,681 Table 8A listed in section VI. of this inception of the IPPS, we do not make and calculated total operating Federal Addendum (and available only via the retroactive adjustments to outlier payments payments of $82,727,323,366 and total Internet on the CMS Web site) contains the to ensure that total outlier payments for FY outlier payments of $4,445,892,903. We then proposed statewide average operating CCRs 2015 are equal to 5.1 percent of total MS– divided total outlier payments by total for urban hospitals and for rural hospitals for DRG payments. As explained in the FY 2003 operating Federal payments plus total outlier which the MAC is unable to compute a Outlier Final Rule (68 FR 34502), if we were payments and determined that this threshold hospital-specific CCR within the above range. to make retroactive adjustments to all outlier met the 5.1 percent target. As a result, we are Effective for discharges occurring on or after payments to ensure total payments are 5.1 proposing an outlier fixed-loss cost threshold October 1, 2016, these statewide average percent of MS–DRG payments (by for FY 2017 equal to the prospective payment ratios would replace the ratios posted on our retroactively adjusting outlier payments), we rate for the MS–DRG, plus any IME, Web site at: http://www.cms.gov/Medicare/ would be removing the important aspect of empirically justified Medicare DSH Medicare-Fee-for-Service-Payment/Acute the prospective nature of the IPPS. Because such an across-the-board adjustment would payments, estimated uncompensated care InpatientPPS/FY-2014-IPPS-Final-Rule- either lead to more or less outlier payments payment, and any add-on payments for new Home-Page-Items/FY-2014-IPPS-Final-Rule- for all hospitals, hospitals would no longer technology, plus $23,681. CMS-1599-F-Tables.html. Table 8B listed in be able to reliably approximate their payment section VI. of this Addendum (and available (2) Other Proposed Changes Concerning for a patient while the patient is still via the Internet on the CMS Web site) Outliers hospitalized. We believe it would be neither contains the comparable proposed statewide As stated in the FY 1994 IPPS final rule (58 necessary nor appropriate to make such an average capital CCRs. As previously stated, FR 46348), we establish an outlier threshold aggregate retroactive adjustment. the proposed CCRs in Tables 8A and 8B that is applicable to both hospital inpatient Furthermore, we believe it is consistent with would be used during FY 2017 when operating costs and hospital inpatient the intent of the language at section hospital-specific CCRs based on the latest capital-related costs. When we modeled the 1886(d)(5)(A)(iv) of the Act not to make settled cost report either are not available or combined operating and capital outlier retroactive adjustments to outlier payments. payments, we found that using a common are outside the range noted above. Table 8C This section calls for the Secretary to ensure threshold resulted in a lower percentage of listed in section VI. of this Addendum (and that outlier payments are equal to or greater outlier payments for capital-related costs available via the Internet on the CMS Web than 5 percent and less than or equal to 6 than for operating costs. We project that the site) contains the proposed statewide average percent of projected or estimated (not actual) thresholds for FY 2017 will result in outlier total CCRs used under the LTCH PPS as MS–DRG payments. We believe this language payments that will equal 5.1 percent of discussed in section V. of this Addendum. reflects the intent of Congress regarding the operating DRG payments and 6.26 percent of We finally note that we published a prospectivity of the IPPS. We believe that an capital payments based on the Federal rate. manual update (Change Request 3966) to our important goal of a PPS is predictability. In accordance with section 1886(d)(3)(B) of outlier policy on October 12, 2005, which Therefore, we believe that the fixed-loss the Act, we are proposing to reduce the FY updated Chapter 3, Section 20.1.2 of the outlier threshold should be projected based 2017 standardized amount by the same Medicare Claims Processing Manual. The on the best available historical data and percentage to account for the projected manual update covered an array of topics, should not be adjusted retroactively. A proportion of payments paid as outliers. including CCRs, reconciliation, and the time retroactive change to the fixed-loss outlier The proposed outlier adjustment factors value of money. We encourage hospitals that threshold would affect all hospitals subject to that would be applied to the standardized are assigned the statewide average operating the IPPS, thereby undercutting the amount based on the proposed FY 2017 and/or capital CCRs to work with their MAC predictability of the system as a whole. outlier threshold are as follows: on a possible alternative operating and/or We note that because the MedPAR claims capital CCR as explained in Change Request data for the entire FY 2016 will not be 3966. Use of an alternative CCR developed by Operating Capital available until after September 30, 2016, we standard- the hospital in conjunction with the MAC are unable to provide an estimate of actual Federal can avoid possible overpayments or ized rate outlier payments for FY 2016 based on FY amounts underpayments at cost report settlement, 2016 claims data in this proposed rule. We thereby ensuring better accuracy when will provide an estimate of actual FY 2016 National ...... 0.948999 0.937400 making outlier payments and negating the outlier payments in the FY 2018 IPPS/LTCH need for outlier reconciliation. We also note PPS proposed rule. We are proposing to apply the outlier that a hospital may request an alternative adjustment factors to the proposed FY 2017 operating or capital CCR ratio at any time as 5. Proposed FY 2017 Standardized Amount payment rates after removing the effects of long as the guidelines of Change Request The adjusted standardized amount is the FY 2016 outlier adjustment factors on the 3966 are followed. In addition, as mentioned divided into labor-related and nonlabor- standardized amount. above, we published an additional manual related portions. Tables 1A and 1B listed and To determine whether a case qualifies for update (Change Request 7192) to our outlier published in section VI. of this Addendum outlier payments, we apply hospital-specific policy on December 3, 2010, which also (and available via the Internet on the CMS CCRs to the total covered charges for the updated Chapter 3, Section 20.1.2 of the Web site) contain the national standardized case. Estimated operating and capital costs Medicare Claims Processing Manual. The amounts that we are proposing to apply to all for the case are calculated separately by manual update outlines the outlier hospitals, except hospitals located in Puerto

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Rico, for FY 2017. The proposed the proposed applicable percentage increases amount. The first row of the table shows the standardized amount for hospitals in Puerto for FY 2017. updated (through FY 2016) average Rico is shown in Table 1C listed and The proposed labor-related and nonlabor- standardized amount after restoring the FY published in section VI. of this Addendum related portions of the national average 2016 offsets for outlier payments, (and available via the Internet on the CMS standardized amounts for Puerto Rico demonstration budget neutrality, geographic Web site). The proposed amounts shown in hospitals for FY 2017 are set forth in Table reclassification budget neutrality, new labor Tables 1A and 1B differ only in that the 1C listed and published in section VI. of this market delineation wage index transition labor-related share applied to the Addendum (and available via the Internet on budget neutrality, retrospective standardized amounts in Table 1A is 69.6 the CMS Web site). Similar to above, section documentation and coding adjustment under 1886(d)(9)(C)(iv) of the Act, as amended by percent, and the labor-related share applied section 7(b)(1)(B) of Public Law 110–90 and to the standardized amounts in Table 1B is section 403(b) of Public Law 108–173, an adjustment to the standardized amount 62 percent. In accordance with sections provides that the labor-related share for using our authority under section 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, hospitals located in Puerto Rico be 62 we are proposing to apply a labor-related percent, unless the application of that 1886(d)(5)(I)(i) of the Act to permanently share of 62 percent, unless application of that percentage would result in lower payments prospectively remove the 0.2 percent percentage would result in lower payments to the hospital. reduction to the rate put in place in FY 2014 to a hospital than would otherwise be made. The following table illustrates the changes to offset the estimated increase in IPPS In effect, the statutory provision means that from the FY 2016 national standardized expenditures as a result of the 2-midnight we will apply a labor-related share of 62 amount to the proposed FY 2017 national policy . The MS–DRG reclassification and percent for all hospitals whose wage indexes standardized amount. The second through recalibration and wage index budget are less than or equal to 1.0000. fifth columns display the proposed changes neutrality adjustment factors are cumulative. In addition, Tables 1A and 1B include the from the FY 2016 standardized amounts for Therefore, those FY 2016 adjustment factors proposed standardized amounts reflecting each applicable FY 2017 standardized are not removed from this table.

COMPARISON OF FY 2016 STANDARDIZED AMOUNTS TO THE PROPOSED FY 2017 STANDARDIZED AMOUNTS

Hospital submitted Hospital did NOT sub- Hospital did NOT sub- Hospital submitted quality data and is mit quality data and is mit quality data and is quality data and is a NOT a meaningful a meaningful EHR NOT a meaningful meaningful EHR user EHR user user EHR user

FY 2016 Base Rate after removing: If Wage Index is If Wage Index is If Wage Index is If Wage Index is Greater Than Greater Than Greater Than Greater Than 1.0000: 1.0000: 1.0000: 1.0000: Labor (69.6%): Labor (69.6%): Labor (69.6%): Labor (69.6%): $4,394.09. $4,394.09. $4,394.09. $4,394.09 Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%): Nonlabor (30.4%): $1,919.26. $1,919.26. $1,919.26. $1,919.26 If Wage Index is less If Wage Index is less If Wage Index is less If Wage Index is less Than or Equal to Than or Equal to Than or Equal to Than or Equal to 1.0000: Labor 1.0000: Labor 1.0000: Labor 1.0000: Labor (62%): $3,914.28. (62%): $3,914.28. (62%): $3,914.28. (62%): $3,914.28 Nonlabor (38%): Nonlabor (38%): Nonlabor (38%): Nonlabor (38%): $2,399.07. $2,399.07. $2,399.07. $2,399.07 1. FY 2016 Geographic Reclassification Budget Neutrality (0.988169). 2. FY 2016 Rural Community Hospital Demonstration Program Budget Neu- trality (0.999837). 3. Cumulative FY 2008, FY 2009, FY 2012, FY 2013, FY 2014, FY 2015 and FY 2016 Documentation and Coding Adjustments as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Pub. L. 110–90 and Doc- umentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 2012 (0.9255). 4. FY 2016 Operating Outlier Offset (0.948998). 5. FY 2016 New Labor Market Delinea- tion Wage Index Transition Budget Neutrality Factor (0.999998). 6. FY 2017 Proposed 2-Midnight Rule Permanent Adjustment (1/0.998). Proposed FY 2017 Update Factor ...... 1.0155 ...... 0.9945 ...... 1.0085 ...... 0.9875 Proposed FY 2017 MS–DRG Recalibration 0.999006 ...... 0.999006 ...... 0.999006 ...... 0.999006 Budget Neutrality Factor. Proposed FY 2017 Wage Index Budget Neu- 0.999785 ...... 0.999785 ...... 0.999785 ...... 0.999785 trality Factor. Proposed FY 2017 Reclassification Budget 0.988816 ...... 0.988816 ...... 0.988816 ...... 0.988816 Neutrality Factor. Proposed FY 2017 Operating Outlier Factor 0.948999 ...... 0.948999 ...... 0.948999 ...... 0.98999

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COMPARISON OF FY 2016 STANDARDIZED AMOUNTS TO THE PROPOSED FY 2017 STANDARDIZED AMOUNTS—Continued

Cumulative Factor: FY 2008, FY 2009, FY 0.9118 ...... 0.9118 ...... 0.9118 ...... 0.9118 2012, FY 2013, FY 2014, FY 2015, FY 2016 and FY 2017 Documentation and Coding Adjustment as Required under Sections 7(b)(1)(A) and 7(b)(1)(B) of Pub. L. 110–90 and Documentation and Coding Recoupment Adjustment as required under Section 631 of the American Taxpayer Re- lief Act of 2012. Proposed FY 2017 New Labor Market Delin- 0.999999 ...... 0.999999 ...... 0.999999 ...... 0.999999 eation Wage Index 3-Year Hold Harmless Transition Budget Neutrality Factor. Proposed FY 2017 2-Midnight Rule One- 1.006 ...... 1.006 ...... 1.006 ...... 1.006 Time Prospective Increase. Proposed National Standardized Amount for Labor: $3,836.20 ...... Labor: $3,756.87 ...... Labor: $3,809.76 ...... Labor: $3,730.43 FY 2017 if Wage Index is Greater Than Nonlabor: $1,675.59 .. Nonlabor: $1,640.94 .. Nonlabor: $1,664.04 .. Nonlabor: $1,629.39 1.0000; Labor/Non-Labor Share Percent- age (69.6/30.4). Proposed National Standardized Amount for Labor: $3,417.31 ...... Labor: $3,346.64 ...... Labor: $3,393.76 ...... Labor: $3,323.09 FY 2017 if Wage Index is less Than or Nonlabor: $2,094.48 .. Nonlabor: $2,051.17 .. Nonlabor: $2,080.04 .. Nonlabor: $2,036.73 Equal to 1.0000; Labor/Non-Labor Share Percentage (62/38).

B. Proposed Adjustments for Area Wage portion of the adjusted standardized amounts Personnel Management (OPM) every 4 years Levels and Cost-of-Living by the appropriate wage index for the area in (at the same time as the update to the labor- Tables 1A through 1C, as published in which the hospital is located. In section III. related share of the IPPS market basket), of the preamble of this proposed rule, we section VI. of this Addendum (and available beginning in FY 2014. We refer readers to the discuss the data and methodology for the via the Internet on the CMS Web site), FY 2013 IPPS/LTCH PPS proposed and final proposed FY 2017 wage index. contain the proposed labor-related and rules for additional background and a nonlabor-related shares that we are proposing 2. Adjustment for Cost-of-Living in Alaska detailed description of this methodology (77 to use to calculate the prospective payment and Hawaii FR 28145 through 28146 and 77 FR 53700 rates for hospitals located in the 50 States, Section 1886(d)(5)(H) of the Act provides through 53701, respectively). the District of Columbia, and Puerto Rico for discretionary authority to the Secretary to For FY 2014, in the FY 2014 IPPS/LTCH FY 2017. This section addresses two types of make such adjustments as the Secretary PPS final rule (78 FR 50985 through 50987), adjustments to the standardized amounts that deems appropriate to take into account the we updated the COLA factors published by are made in determining the proposed unique circumstances of hospitals located in OPM for 2009 (as these are the last COLA prospective payment rates as described in Alaska and Hawaii. Higher labor-related costs factors OPM published prior to transitioning this Addendum. for these two States are taken into account in from COLAs to locality pay) using the the adjustment for area wages described methodology that we finalized in the FY 1. Proposed Adjustment for Area Wage above. To account for higher nonlabor-related 2013 IPPS/LTCH PPS final rule. Levels costs for these two States, we multiply the Based on the policy finalized in the FY Sections 1886(d)(3)(E) and nonlabor-related portion of the standardized 2013 IPPS/LTCH PPS final rule, we are 1886(d)(9)(C)(iv) of the Act require that we amount for hospitals located in Alaska and proposing to continue to use the same COLA make an adjustment to the labor-related Hawaii by an adjustment factor. factors in FY 2017 that were used in FY 2016 portion of the national prospective payment In the FY 2013 IPPS/LTCH PPS final rule, to adjust the nonlabor-related portion of the rate to account for area differences in we established a methodology to update the standardized amount for hospitals located in hospital wage levels. This adjustment is COLA factors for Alaska and Hawaii that Alaska and Hawaii. Below is a table listing made by multiplying the labor-related were published by the U.S. Office of the proposed COLA factors for FY 2017.

PROPOSED FY 2017 COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS

Cost of living Area adjustment factor

Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ...... 1.23 City of Fairbanks and 80-kilometer (50-mile) radius by road ...... 1.23 City of Juneau and 80-kilometer (50-mile) radius by road ...... 1.23 Rest of Alaska ...... 1.25 Hawaii: City and County of Honolulu ...... 1.25 County of Hawaii ...... 1.19 County of Kauai ...... 1.25 County of Maui and County of Kalawao ...... 1.25

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Based on the policy finalized in the FY —Federal Payment Rate for Operating Costs in accordance with section 1886(d)(5)(K) and 2013 IPPS/LTCH PPS final rule, the next = MS–DRG Relative Weight × [(Labor- (L) of the Act. Finally, we add the update to the COLA factors for Alaska and Related Applicable Standardized uncompensated care payment to the total Hawaii would occur in FY 2018. Amount × Applicable CBSA Wage Index) claim payment amount. As noted in the + (Nonlabor-Related Applicable C. Calculation of the Proposed Prospective formula above, we take uncompensated care Standardized Amount × Cost of Living payments and new technology add-on Payment Rates × Adjustment)] (1 + IME + (DSH * 0.25)) payments into consideration when General Formula for Calculation of the —Federal Payment for Capital Costs = MS– calculating outlier payments. Prospective Payment Rates for FY 2017 DRG Relative Weight × Federal Capital 2. Hospital-Specific Rate (Applicable Only to In general, the operating prospective Rate × Geographic Adjustment Fact × (l SCHs and MDHs) payment rate for all hospitals (including + IME + DSH) hospitals in Puerto Rico) paid under the Step 4—Determine operating and capital a. Calculation of Hospital-Specific Rate IPPS, except SCHs and MDHs, for FY 2017 costs: Section 1886(b)(3)(C) of the Act provides equals the Federal rate (which includes —Operating Costs = (Billed Charges × uncompensated care payments). that SCHs are paid based on whichever of the Operating cost-to-charge ratio) following rates yields the greatest aggregate SCHs are paid based on whichever of the —Capital Costs = (Billed Charges × Capital following rates yields the greatest aggregate payment: The Federal rate; the updated cost-to-charge ratio). payment: The Federal national rate (which, hospital-specific rate based on FY 1982 costs as discussed in section IV.F. of the preamble Step 5—Compute operating and capital per discharge; the updated hospital-specific of this proposed rule, includes outlier threshold (CMS applies a geographic rate based on FY 1987 costs per discharge; uncompensated care payments); the updated adjustment to the operating and capital the updated hospital-specific rate based on hospital-specific rate based on FY 1982 costs outlier threshold to account for local cost FY 1996 costs per discharge; or the updated per discharge; the updated hospital-specific variation): hospital-specific rate based on FY 2006 costs rate based on FY 1987 costs per discharge; —Operating Cost-to-Charge Ratio to Total per discharge to determine the rate that the updated hospital-specific rate based on Cost-to-Charge Ratio = (Operating Cost- yields the greatest aggregate payment. FY 1996 costs per discharge; or the updated to-Charge Ratio)/(Operating Cost-to- As noted above, section 205 of the hospital-specific rate based on FY 2006 costs Charge Ratio + Capital Cost-to-Charge Medicare Access and CHIP Reauthorization per discharge to determine the rate that Ratio) Act of 2015 (MACRA) (Pub. L. 114–10) yields the greatest aggregate payment. —Operating Outlier Threshold = [Fixed Loss extended the MDH program through FY 2017 × × The prospective payment rate for SCHs for Threshold ((Labor-Related Portion (that is, for discharges occurring on or before FY 2017 equals the higher of the applicable CBSA Wage Index) + Nonlabor-Related September 30, 2017). Currently MDHs are Federal rate, or the hospital-specific rate as × portion)] Operating Cost-to-Charge paid based on the Federal national rate or, if described below. The prospective payment Ratio to Total Cost-to-Charge Ratio + higher, the Federal national rate plus 75 rate for MDHs for FY 2017 equals the higher Federal Payment with IME, DSH + of the Federal rate, or the Federal rate plus percent of the difference between the Federal Uncompensated Care Payment + New national rate and the greater of the updated 75 percent of the difference between the Technology Add-On Payment Amount Federal rate and the hospital-specific rate as hospital-specific rates based on either FY —Capital Cost-to-Charge Ratio to Total Cost- 1982, FY 1987 or FY 2002 costs per described below. For MDHs, the updated to-Charge Ratio = (Capital Cost-to-Charge hospital-specific rate is based on FY 1982, FY discharge. Ratio)/(Operating Cost-to-Charge Ratio + For a more detailed discussion of the 1987 or FY 2002 costs per discharge, Capital Cost-to-Charge Ratio) calculation of the hospital-specific rates, we whichever yields the greatest aggregate —Capital Outlier Threshold = (Fixed Loss payment. refer readers to the FY 1984 IPPS interim Threshold × Geographic Adjustment final rule (48 FR 39772); the April 20, 1990 1. Operating and Capital Federal Payment Factor × Capital CCR to Total CCR) + final rule with comment period (55 FR Rate and Outlier Payment Calculation Federal Payment with IME and DSH 15150); the FY 1991 IPPS final rule (55 FR Note: The formula below is used for actual Step 6: Compute operating and capital 35994); and the FY 2001 IPPS final rule (65 claim payment and is also used by CMS to outlier payments: FR 47082). project the outlier threshold for the —Marginal Cost Factor = 0.80 or 0.90 b. Updating the FY 1982, FY 1987, FY 1996, upcoming FY. The difference is the source of (depending on the MS–DRG) FY 2002 and FY 2006 Hospital-Specific Rate some of the variables in the formula. For —Operating Outlier Payment = (Operating for FY 2017 example, operating and capital CCRs for Costs—Operating Outlier Threshold) × actual claim payment are from the PSF while Marginal Cost Factor Section 1886(b)(3)(B)(iv) of the Act CMS uses an adjusted CCR (as described —Capital Outlier Payment = (Capital Costs— provides that the applicable percentage above) to project the threshold for the Capital Outlier Threshold) × Marginal increase applicable to the hospital-specific upcoming FY. In addition, charges for a Cost Factor rates for SCHs and MDHs equals the claim payment are from the bill while applicable percentage increase set forth in charges to project the threshold are from the The payment rate may then be further section 1886(b)(3)(B)(i) of the Act (that is, the MedPAR data with an inflation factor applied adjusted for hospitals that qualify for a low- to the charges (as described above). volume payment adjustment under section same update factor as for all other hospitals Step 1—Determine the MS–DRG and MS– 1886(d)(12) of the Act and 42 CFR subject to the IPPS). Because the Act sets the DRG relative weight for each claim based on 412.101(b). The base-operating DRG payment update factor for SCHs and MDHs equal to the ICD–10–CM procedure and diagnosis amount may be further adjusted by the the update factor for all other IPPS hospitals, codes on the claim. hospital readmissions payment adjustment the update to the hospital-specific rates for Step 2—Select the applicable average and the hospital VBP payment adjustment as SCHs and MDHs is subject to the standardized amount depending on whether described under sections 1886(q) and 1886(o) amendments to section 1886(b)(3)(B) of the the hospital submitted qualifying quality data of the Act, respectively. Payments also may Act made by sections 3401(a) and 10319(a) of and is a meaningful EHR user, as described be reduced by the 1-percent adjustment the Affordable Care Act. Accordingly, the above. under the HAC Reduction Program as proposed applicable percentage increases to Step 3—Compute the operating and capital described in section 1886(p) of the Act. We the hospital-specific rates applicable to SCHs Federal payment rate: also make new technology add-on payments and MDHs are the following:

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Hospital sub- Hospital did Hospital did Hospital submitted quality NOT submit NOT submit mitted quality data and is quality data quality data FY 2017 data and is a NOT a and is a and is NOT a meaningful meaningful meaningful meaningful EHR user EHR user EHR user EHR user

For a complete discussion of the applicable III. Proposed Changes to Payment Rates for such payments are made. Section percentage increase applied to the hospital- Acute Care Hospital Inpatient Capital- 412.308(c)(4)(ii) requires that the capital specific rates for SCHs and MDHs, we refer Related Costs for FY 2017 standard Federal rate be adjusted so that the readers to section IV.B. of the preamble of The PPS for acute care hospital inpatient effects of the annual DRG reclassification and this proposed rule. capital-related costs was implemented for the recalibration of DRG weights and changes In addition, because SCHs and MDHs use cost reporting periods beginning on or after in the geographic adjustment factor (GAF) are budget neutral. the same MS–DRGs as other hospitals when October 1, 1991. Effective with that cost Section 412.374 provides for blended they are paid based in whole or in part on reporting period, over a 10-year transition period (which extended through FY 2001) payments to hospitals located in Puerto Rico the hospital-specific rate, the hospital- under the IPPS for acute care hospital specific rate is adjusted by a budget the payment methodology for Medicare acute care hospital inpatient capital-related costs inpatient capital-related costs. Accordingly, neutrality factor to ensure that changes to the changed from a reasonable cost-based historically, under the capital PPS, we have MS–DRG classifications and the recalibration methodology to a prospective methodology computed a separate payment rate specific to of the MS–DRG relative weights are made in (based fully on the Federal rate). hospitals located in Puerto Rico using the a manner so that aggregate IPPS payments are The basic methodology for determining same methodology used to compute the unaffected. Therefore, the hospital-specific Federal capital prospective rates is set forth national Federal rate for capital-related costs. rate for an SCH or an MDH is adjusted by the in the regulations at §§ 412.308 through Effective with discharges occurring on or proposed MS–DRG reclassification and 412.352. In this section, we discuss the after October 1, 2004, in conjunction with the recalibration budget neutrality factor of factors that we used to determine the change to the operating payment 0.999006, as discussed in section III. of this proposed capital Federal rate for FY 2017, methodology, we adopted a methodology for computing capital payments made to Addendum. The resulting rate is used in which would be effective for discharges hospitals located in Puerto Rico based on a determining the payment rate that an SCH or occurring on or after October 1, 2016. The 10-year transition period ended with blend of 25 percent of the Puerto Rico capital MDH will receive for its discharges beginning hospital cost reporting periods beginning on rate and 75 percent of the national capital on or after October 1, 2016. We note that, in or after October 1, 2001 (FY 2002). Therefore, Federal rate (69 FR 49185). Effective with this proposed rule, for FY 2017, we are not for cost reporting periods beginning in FY discharges on or after January 1, 2016, proposing to make a documentation and 2002, all hospitals (except ‘‘new’’ hospitals operating IPPS payments to hospitals located coding adjustment to the hospital-specific under § 412.304(c)(2)) are paid based on the in Puerto Rico are now based on 100 percent rate. We refer readers to section II.D. of the capital Federal rate. For FY 1992, we of the Federal rate—the operating payment preamble of this proposed rule for a complete computed the standard Federal payment rate methodology is no longer a blend of 75 discussion regarding our proposed policies for capital-related costs under the IPPS by percent of the Federal rate and 25 percent of and previously finalized policies (including updating the FY 1989 Medicare inpatient the Puerto Rico rate. Consistent with our historical adjustments to the payment capital cost per case by an actuarial estimate historical practice and under the authority of section 1886(g) of the Act, as discussed in rates) relating to the effect of changes in of the increase in Medicare inpatient capital section V.B.3. of the preamble of this documentation and coding that do not reflect costs per case. Each year after FY 1992, we proposed rule, we are proposing that the real changes in case-mix. Also, as discussed update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital IPPS payments to hospitals located in above and in section IV.O. of the preamble capital input price increases and other Puerto Rico would be based on 100 percent of this proposed rule, we are proposing an factors. The regulations at § 412.308(c)(2) also of the capital Federal rate, effective with adjustment to the hospital-specific rates provide that the capital Federal rate be discharges on or after October 1, 2016, and using our authority under section adjusted annually by a factor equal to the would no longer be based on the current 75/ 1886(d)(5)(I)(i) of the Act to permanently estimated proportion of outlier payments 25 blended rate. prospectively remove the 0.2 percent under the capital Federal rate to total capital A. Determination of the Proposed Federal reduction to the rates put in place in FY 2014 payments under the capital Federal rate. In Hospital Inpatient Capital-Related addition, § 412.308(c)(3) requires that the to offset the estimated increase in IPPS Prospective Payment Rate Update expenditures as a result of the 2-midnight capital Federal rate be reduced by an policy. In addition, as discussed above and adjustment factor equal to the estimated In the discussion that follows, we explain in section IV.O. of the preamble of this proportion of payments for exceptions under the factors that we used to determine the proposed capital Federal rate for FY 2017. In proposed rule, we are proposing a temporary § 412.348. (We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR particular, we explain why the proposed FY one-time prospective increase to the FY 2017 53705), there is generally no longer a need for 2017 capital Federal rate increases hospital-specific rates of 0.6 percent by an exceptions payment adjustment factor.) approximately 1.7 percent, compared to the including a temporary one-time factor of However, in limited circumstances, an FY 2016 capital Federal rate. As discussed in 1.006 in the calculation of the hospital- additional payment exception for the impact analysis in Appendix A to this specific rates, using our authority under extraordinary circumstances is provided for proposed rule, we estimate that capital section 1886(d)(5)(I)(i) of the Act, to address under § 412.348(f) for qualifying hospitals. payments per discharge will increase the effects of the 0.2 percent reduction to the Therefore, in accordance with approximately 2.0 percent during that same rates for the 2-midnight policy in effect for § 412.308(c)(3), an exceptions payment period. Because capital payments constitute FY 2014, FY 2015, and FY 2016. adjustment factor may need to be applied if approximately 10 percent of hospital

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payments, a percent change in the capital We estimated that the real case-mix increase factor for the operating update framework Federal rate yields only approximately a 0.1 will equal 0.5 percent for FY 2017. The net reflected how hospital services are utilized to percent change in actual payments to adjustment for change in case-mix is the produce the final product, that is, the hospitals. difference between the projected real discharge. This component accounts for 1. Projected Capital Standard Federal Rate increase in case-mix and the projected total changes in the use of quality-enhancing Update increase in case-mix. Therefore, we are services, for changes within DRG severity, proposing the net adjustment for case-mix and for expected modification of practice a. Description of the Update Framework change in FY 2017 of 0.0 percentage point. patterns to remove noncost-effective services. Under § 412.308(c)(1), the capital standard The capital update framework also Our intensity measure is based on a 5-year Federal rate is updated on the basis of an contains an adjustment for the effects of DRG average. analytical framework that takes into account reclassification and recalibration. This We calculate case-mix constant intensity as changes in a capital input price index (CIPI) adjustment is intended to remove the effect the change in total cost per discharge, and several other policy adjustment factors. on total payments of prior year’s changes to adjusted for price level changes (the CPI for Specifically, we adjust the projected CIPI the DRG classifications and relative weights, hospital and related services) and changes in rate-of-increase as appropriate each year for in order to retain budget neutrality for all real case-mix. Without reliable estimates of case-mix index-related changes, for intensity, case-mix index-related changes other than the proportions of the overall annual and for errors in previous CIPI forecasts. The those due to patient severity of illness. Due intensity increases that are due, respectively, proposed update factor for FY 2017 under to the lag time in the availability of data, to ineffective practice patterns and the that framework is 0.9 percent based on the there is a 2-year lag in data used to determine combination of quality-enhancing new best data available at the time of the adjustment for the effects of DRG technologies and complexity within the DRG development of this proposed rule. The reclassification and recalibration. For system, we assume that one-half of the proposed update factor under that framework example, we have data available to evaluate annual increase is due to each of these is based on a projected 1.2 percent increase the effects of the FY 2015 DRG factors. The capital update framework thus in the FY 2010-based CIPI, a 0.0 percentage reclassification and recalibration as part of provides an add-on to the input price index point adjustment for intensity, a 0.0 our update for FY 2017. We estimate that FY rate of increase of one-half of the estimated percentage point adjustment for case-mix, a 2015 DRG reclassification and recalibration annual increase in intensity, to allow for 0.0 percentage point adjustment for the DRG resulted in no change in the case-mix when increases within DRG severity and the reclassification and recalibration, and a compared with the case-mix index that adoption of quality-enhancing technology. forecast error correction of -0.3 percentage would have resulted if we had not made the In this proposed rule, we are continuing to point. As discussed in section III.C. of this reclassification and recalibration changes to use a Medicare-specific intensity measure Addendum, we continue to believe that the the DRGs. Therefore, we are proposing a 0.0 that is based on a 5-year adjusted average of CIPI is the most appropriate input price percentage point adjustment for cost per discharge for FY 2017 (we refer index for capital costs to measure capital reclassification and recalibration in the readers to the FY 2011 IPPS/LTCH PPS final price changes in a given year. We also update framework for FY 2017. rule (75 FR 50436) for a full description of explain the basis for the FY 2017 CIPI The capital update framework also our Medicare-specific intensity measure). projection in that same section of this contains an adjustment for forecast error. The Specifically, for FY 2017, we are using an Addendum. Below we describe the policy input price index forecast is based on intensity measure that is based on an average adjustments that we are proposing to apply historical trends and relationships of cost per discharge data from the 5-year in the update framework for FY 2017. ascertainable at the time the update factor is period beginning with FY 2010 and The case-mix index is the measure of the established for the upcoming year. In any extending through FY 2014. Based on these average DRG weight for cases paid under the given year, there may be unanticipated price data, we estimated that case-mix constant IPPS. Because the DRG weight determines fluctuations that may result in differences intensity declined during FYs 2010 through the prospective payment for each case, any between the actual increase in prices and the 2014. In the past, when we found intensity percentage increase in the case-mix index forecast used in calculating the update to be declining, we believed a zero (rather corresponds to an equal percentage increase factors. In setting a prospective payment rate than a negative) intensity adjustment was in hospital payments. under the framework, we make an appropriate. Consistent with this approach, The case-mix index can change for any of adjustment for forecast error only if our because we estimate that intensity declined several reasons: estimate of the change in the capital input during that 5-year period, we believe it is • The average resource use of Medicare price index for any year is off by 0.25 appropriate to continue to apply a zero patient changes (‘‘real’’ case-mix change); percentage point or more. There is a 2-year intensity adjustment for FY 2017. Therefore, • Changes in hospital documentation and lag between the forecast and the availability we are proposing to make a 0.0 percentage coding of patient records result in higher- of data to develop a measurement of the point adjustment for intensity in the update weighted DRG assignments (‘‘coding forecast error. Historically, when a forecast for FY 2017. effects’’); and error of the CIPI is greater than 0.25 Above, we described the basis of the • The annual DRG reclassification and percentage point in absolute terms, it is components used to develop the proposed recalibration changes may not be budget reflected in the update recommended under 0.9 percent capital update factor under the neutral (‘‘reclassification effect’’). this framework. A forecast error of ¥0.3 capital update framework for FY 2017 as We define real case-mix change as actual percentage point was calculated for the FY shown in the following table. changes in the mix (and resource 2015 update, for which there are historical requirements) of Medicare patients as data. That is, current historical data indicate PROPOSED CMS FY 2017 UPDATE that the forecasted FY 2015 CIPI (1.5 percent) opposed to changes in documentation and FACTOR TO THE CAPITAL FEDERAL coding behavior that result in assignment of used in calculating the FY 2015 update factor cases to higher-weighted DRGs, but do not was 0.3 percentage points higher than actual RATE reflect higher resource requirements. The realized price increases (1.2 percent). This capital update framework includes the same over-prediction was primarily due to prices Capital Input Price Index * ...... 1.2 Intensity: ...... 0.0 case-mix index adjustment used in the from municipal bond yields declining in Case-Mix Adjustment Factors: former operating IPPS update framework (as 2015 whereas the forecast projected an Real Across DRG Change ...... 0.5 discussed in the May 18, 2004 IPPS proposed increase. Therefore, we are proposing to Projected Case-Mix Change .... 0.5 rule for FY 2005 (69 FR 28816)). (We no make a ¥0.3 percentage point adjustment for Subtotal ...... 1.2 longer use an update framework to make a forecast error in the update for FY 2017. Effect of FY 2015 Reclassification recommendation for updating the operating Under the capital IPPS update framework, and Recalibration ...... 0.0 IPPS standardized amounts as discussed in we also make an adjustment for changes in Forecast Error Correction ...... ¥0.3 section II. of Appendix B to the FY 2006 IPPS intensity. Historically, we calculated this Total Update ...... 0.9 final rule (70 FR 47707).) adjustment using the same methodology and For FY 2017, we are projecting a 0.5 data that were used in the past under the * The capital input price index represents the percent total increase in the case-mix index. framework for operating IPPS. The intensity FY 2010-based CIPI.

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b. Comparison of CMS and MedPAC Update adjustment for the Puerto Rico GAF. incremental DRG budget neutrality Recommendation Similarly, the budget neutrality factor for adjustment factor of 0.9996) accounts for the In its March 2016 Report to Congress, DRG reclassifications and recalibration MS–DRG reclassifications and recalibration MedPAC did not make a specific update nationally is applied in determining the and for changes in the GAFs. It also recommendation for capital IPPS payments capital IPPS Federal rate, and is applicable incorporates the effects on the GAFs of FY for FY 2017. (We refer readers to MedPAC’s for all hospitals, including those hospitals 2017 geographic reclassification decisions Report to the Congress: Medicare Payment located in Puerto Rico. made by the MGCRB compared to FY 2016 Policy, March 2016, Chapter 3, available on To determine the proposed national capital decisions. However, it does not account for the Web site at: http://www.medpac.gov.) rate factors for FY 2017, we compared changes in payments due to changes in the estimated aggregate capital Federal rate DSH and IME adjustment factors. 2. Proposed Outlier Payment Adjustment payments based on the FY 2016 MS–DRG Factor As discussed in section V.C. of the classifications and relative weights and the preamble of this proposed rule, we are Section 412.312(c) establishes a unified FY 2016 GAF to estimated aggregate capital proposing to make an adjustment of (1/0.998) outlier payment methodology for inpatient Federal rate payments based on the FY 2016 to the proposed national capital Federal rate operating and inpatient capital-related costs. MS–DRG classifications and relative weights to remove the 0.2 percent reduction (an A single set of thresholds is used to identify and the proposed FY 2017 GAFs. To achieve adjustment factor of 0.998) to the national outlier cases for both inpatient operating and budget neutrality for the changes in the capital Federal rate to offset the estimated inpatient capital-related payments. Section national GAFs, based on calculations using 412.308(c)(2) provides that the standard updated data, we are proposing to apply an increase in capital IPPS expenditures Federal rate for inpatient capital-related costs incremental budget neutrality adjustment associated with the 2-midnight policy. This be reduced by an adjustment factor equal to factor of 0.9997 for FY 2017 to the previous is consistent with the proposed adjustment to the estimated proportion of capital-related cumulative FY 2016 adjustment factor of the operating IPPS standardized amount and outlier payments to total inpatient capital- 0.9860, yielding an adjustment factor of the hospital-specific payment rates. In related PPS payments. The outlier thresholds 0.9857 through FY 2017. addition, consistent with the approach are set so that operating outlier payments are We then compared estimated aggregate proposed for the operating IPPS standardized projected to be 5.1 percent of total operating capital Federal rate payments based on the amount and hospital-specific payment rates IPPS DRG payments. FY 2016 MS–DRG relative weights and the and for the reasons discussed in sections For FY 2016, we estimated that outlier proposed FY 2017 GAFs to estimated IV.O. and V.C. of the preamble of this payments for capital would equal 6.35 aggregate capital Federal rate payments based proposed rule, we are proposing a one-time percent of inpatient capital-related payments on the cumulative effects of the proposed FY prospective adjustment of 1.006 in FY 2017 based on the capital Federal rate in FY 2016. 2017 MS–DRG classifications and relative to the proposed national capital Federal rate Based on the proposed thresholds as set forth weights and the proposed FY 2017 GAFs. to address the effect of the 0.2 percent in section II.A. of this Addendum, we The proposed incremental adjustment factor reduction to the national capital Federal rates estimate that outlier payments for capital- for DRG classifications and changes in in effect for FY 2014, FY 2015, and FY 2016. related costs will equal 6.26 percent for relative weights is 0.9996. The proposed We also are proposing to remove this one- inpatient capital-related payments based on cumulative adjustment factor for MS–DRG time prospective adjustment through an the proposed capital Federal rate in FY 2017. classifications and proposed changes in adjustment of (1/1.006) to the national capital Therefore, we are proposing to apply an relative weights and for proposed changes in Federal rate in FY 2018, consistent with the outlier adjustment factor of 0.9374 in the GAFs through FY 2017 is 0.9853. (We approach proposed for the operating IPPS determining the capital Federal rate for FY note that all the values are calculated with standardized amount and hospital-specific 2017. Thus, we estimate that the percentage unrounded numbers.) payment rates (as discussed in section IV.O. of capital outlier payments to total capital The GAF/DRG budget neutrality of the preamble of this proposed rule). We Federal rate payments for FY 2017 will be adjustment factors are built permanently into refer readers to sections IV.O. and V.C. of the lower than the percentage for FY 2016. the capital rates; that is, they are applied preamble of this proposed rule for a complete The outlier reduction factors are not built cumulatively in determining the capital discussion of these proposals. permanently into the capital rates; that is, Federal rate. This follows the requirement 4. Proposed Capital Federal Rate for FY 2017 they are not applied cumulatively in under § 412.308(c)(4)(ii) that estimated determining the capital Federal rate. The aggregate payments each year be no more or For FY 2016, we established a capital proposed FY 2017 outlier adjustment of less than they would have been in the Federal rate of $438.75 (as revised, in the FY 0.9374 is a 0.10 percent change from the FY absence of the annual DRG reclassification 2016 IPPS/LTCH PPS correction notice CMS– 2016 outlier adjustment of 0.9365. Therefore, and recalibration and changes in the GAFs. 1632–CN2 (80 FR 60060 and 60061)). We are the net change in the outlier adjustment to The methodology used to determine the proposing to establish an update of 0.9 the proposed capital Federal rate for FY 2017 recalibration and geographic adjustment percent in determining the FY 2017 capital is 1.0010 (0.9374/0.9365). Thus, the proposed factor (GAF/DRG) budget neutrality Federal rate for all hospitals. As a result of outlier adjustment will increase the FY 2017 adjustment is similar to the methodology this proposed update, the proposed budget capital Federal rate by 0.10 percent compared used in establishing budget neutrality neutrality factors discussed earlier, and the to the FY 2016 outlier adjustment. adjustments under the IPPS for operating proposed adjustments to remove the 0.2 3. Proposed Budget Neutrality Adjustment costs. One difference is that, under the percent reductions (both the (1/0.998) Factor for Changes in DRG Classifications operating IPPS, the budget neutrality adjustment to permanently remove the 0.2 and Weights and the GAF adjustments for the effect of geographic percent reduction and the one-time 0.6 Section 412.308(c)(4)(ii) requires that the reclassifications are determined separately percent adjustment) resulting from the 2- capital Federal rate be adjusted so that from the effects of other changes in the midnight policy, we are proposing to aggregate payments for the fiscal year based hospital wage index and the MS–DRG establish a national capital Federal rate of on the capital Federal rate after any changes relative weights. Under the capital IPPS, $446.35 for FY 2017. The proposed national resulting from the annual DRG there is a single GAF/DRG budget neutrality capital Federal rate for FY 2017 was reclassification and recalibration and changes adjustment factor for changes in the GAF calculated as follows: • in the GAF are projected to equal aggregate (including geographic reclassification) and The proposed FY 2017 update factor is payments that would have been made on the the MS–DRG relative weights. In addition, 1.009, that is, the proposed update is 0.9 basis of the capital Federal rate without such there is no adjustment for the effects that percent. changes. Because we are proposing to geographic reclassification has on the other • The proposed FY 2017 budget neutrality determine capital IPPS payments to hospitals payment parameters, such as the payments adjustment factor that is applied to the located in Puerto Rico based on 100 percent for DSH or IME. capital Federal rate for changes in the MS– of the capital Federal rate beginning in FY The proposed cumulative adjustment DRG classifications and relative weights and 2017, we have not calculated a separate GAF factor of 0.9993 (the product of the proposed changes in the GAFs is 0.9993. for Puerto Rico, and therefore, we are not incremental national GAF budget neutrality • The proposed FY 2017 outlier applying a separate budget neutrality adjustment factor of 0.9997 and the proposed adjustment factor is 0.9374.

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• The proposed 2-midnight policy patients, we are not proposing to make decreasing the proposed capital Federal rate adjustment to permanently remove the 0.2 additional adjustments in the capital Federal by 0.07 percent. The proposed FY 2017 percent reduction is (1/0.998). rate for these factors, other than the budget outlier adjustment factor has the effect of • The proposed 2-midnight one-time neutrality factor for changes in the MS–DRG increasing the proposed capital Federal rate policy adjustment is 1.006. classifications and relative weights and for by 0.10 percent compared to the FY 2016 (We note that, as discussed in section V.C. changes in the GAFs. capital Federal rate. The proposed permanent of the preamble of this proposed rule, we are We are providing the following chart that 2-midnight policy adjustment has the effect not making an additional MS–DRG shows how each of the proposed factors and of increasing the proposed capital Federal documentation and coding adjustment to the adjustments for FY 2017 affects the rate by 0.2 percent and the proposed proposed capital IPPS Federal rate for FY computation of the proposed FY 2017 temporary 2-midnight policy adjustment has 2017.) national capital Federal rate in comparison to the effect of increasing the proposed capital Because the proposed FY 2017 capital the FY 2016 national capital Federal rate. Federal rate by 0.6 percent. The combined Federal rate has already been adjusted for The proposed FY 2017 update factor has the effect of all the proposed changes would differences in case-mix, wages, cost-of-living, effect of increasing the capital Federal rate by increase the proposed national capital indirect medical education costs, and 0.9 percent compared to the FY 2016 capital Federal rate by approximately 1.7 percent payments to hospitals serving a Federal rate. The proposed GAF/DRG budget compared to the FY 2016 national capital disproportionate share of low-income neutrality adjustment factor has the effect of Federal rate.

COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2016 CAPITAL FEDERAL RATE AND PROPOSED FY 2017 CAPITAL FEDERAL RATE

Proposed FY Percent FY 2016 2017 Change change

Update Factor 1 ...... 1.0130 1.009 1.009 0.9 GAF/DRG Adjustment Factor 1 ...... 0.9976 0.9993 0.9993 ¥0.07 Outlier Adjustment Factor 2 ...... 0.9365 0.9374 1.0010 0.10 Permanent 2-midnight Policy Adjustment Factor ...... N/A 1.002 1.002 0.2 One-Time 2-midnight Policy Adjustment Factor ...... N/A 1.006 1.006 0.6 Capital Federal Rate ...... $438.75 $446.35 1.0173 1.73 1 The proposed update factor and the proposed GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal rates. Thus, for example, the incremental change from FY 2016 to FY 2017 resulting from the application of the proposed 0.9993 GAF/DRG budget neutrality adjustment factor for FY 2017 is a net change of 0.9993 (or ¥0.07 percent). 2 The proposed outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting from the application of the proposed FY 2017 outlier adjustment factor is 0.9374/0.9365, or 1.0010 (or 0.10 percent).

B. Calculation of the Proposed Inpatient same methodology used to pay all other 2. Forecast of the CIPI for FY 2017 Capital-Related Prospective Payments for FY hospitals subject to the capital PPS). Based on the latest forecast by IHS Global 2017 C. Capital Input Price Index Insight, Inc. (first quarter of 2016), we are For purposes of calculating payments for forecasting the FY 2010-based CIPI to each discharge during FY 2017, the capital 1. Background increase 1.2 percent in FY 2017. This reflects Federal rate is adjusted as follows: (Standard Like the operating input price index, the a projected 1.6 percent increase in vintage- × × × Federal Rate) (DRG weight) (GAF) capital input price index (CIPI) is a fixed- weighted depreciation prices (building and fixed equipment, and movable equipment), (COLA for hospitals located in Alaska and weight price index that measures the price Hawaii) × (1 + DSH Adjustment Factor + IME and a projected 2.6 percent increase in other changes associated with capital costs during capital expense prices in FY 2017, partially Adjustment Factor, if applicable). The result a given year. The CIPI differs from the is the adjusted capital Federal rate. offset by a projected 1.5 percent decline in operating input price index in one important Hospitals also may receive outlier vintage-weighted interest expense prices in aspect—the CIPI reflects the vintage nature of payments for those cases that qualify under FY 2017. The weighted average of these three the thresholds established for each fiscal capital, which is the acquisition and use of factors produces the forecasted 1.2 percent increase for the FY 2010-based CIPI as a year. Section 412.312(c) provides for a single capital over time. Capital expenses in any whole in FY 2017. set of thresholds to identify outlier cases for given year are determined by the stock of both inpatient operating and inpatient capital in that year (that is, capital that IV. Proposed Changes to Payment Rates for capital-related payments. The proposed remains on hand from all current and prior Excluded Hospitals: Proposed Rate-of- outlier thresholds for FY 2017 are in section capital acquisitions). An index measuring Increase Percentages for FY 2017 II.A. of this Addendum. For FY 2017, a case capital price changes needs to reflect this Payments for services furnished in would qualify as a cost outlier if the cost for vintage nature of capital. Therefore, the CIPI children’s hospitals, 11 cancer hospitals, and the case plus the (operating) IME and DSH was developed to capture the vintage nature hospitals located outside the 50 States, the payments (including both the empirically of capital by using a weighted-average of past District of Columbia and Puerto Rico (that is, justified Medicare DSH payment and the capital purchase prices up to and including short-term acute care hospitals located in the estimated uncompensated care payment, as the current year. U.S. Virgin Islands, Guam, the Northern discussed in section II.A.4.g.(1) of this We periodically update the base year for Mariana Islands, and American Samoa) that Addendum) is greater than the prospective the operating and capital input price indexes are excluded from the IPPS are made on the payment rate for the MS–DRG plus the to reflect the changing composition of inputs basis of reasonable costs based on the proposed fixed-loss amount of $23,681. hospital’s own historical cost experience, for operating and capital expenses. In the FY Currently, as provided under subject to a rate-of-increase ceiling. A per 2014 IPPS/LTCH PPS final rule (78 FR 50603 § 412.304(c)(2), we pay a new hospital 85 discharge limit (the target amount as defined percent of its reasonable costs during the first through 50607), we rebased and revised the in § 413.40(a) of the regulations) is set for 2 years of operation unless it elects to receive CIPI to a FY 2010 base year to reflect the each hospital based on the hospital’s own payment based on 100 percent of the capital more current structure of capital costs in cost experience in its base year, and updated Federal rate. Effective with the third year of hospitals. For a complete discussion of this annually by a rate-of-increase percentage. operation, we pay the hospital based on 100 rebasing, we refer readers to the FY 2014 (We note that, in accordance with percent of the capital Federal rate (that is, the IPPS/LTCH PPS final rule. § 403.752(a), RNHCIs are also subject to the

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rate-of-increase limits established under for RYs 2004 through 2006, the annual LTCH PPS standard Federal payment rate § 413.40 of the regulations.) update to the LTCH PPS standard Federal based on the full estimated LTCH PPS market In this proposed rule, the FY 2017 rate-of- rate was equal to the previous rate year’s basket increase of 2.4 percent and the 0.7 increase percentage for updating the target Federal rate updated by the most recent percentage point reductions required by amounts for the 11 cancer hospitals, estimate of increases in the appropriate sections 1886(m)(3)(A)(i) and children’s hospitals, the short-term acute care market basket of goods and services included 1886(m)(3)(A)(ii) with 1886(m)(4)(E) of the hospitals located in the U.S. Virgin Islands, in covered inpatient LTCH services. Act. Accordingly, at § 412.523(c)(3)(xii) of the Guam, the Northern Mariana Islands, and In determining the annual update to the regulations, we established an annual update American Samoa, and RNHCIs is the standard Federal rate for RY 2007, based on of 1.7 percent to the standard Federal estimated percentage increase in the IPPS our ongoing monitoring activity, we believed payment rate for FY 2016 (80 FR 49636 operating market basket for FY 2017, in that, rather than solely using the most recent through 49637). In addition, as discussed in accordance with applicable regulations at estimate of the LTCH PPS market basket that same final rule, the annual update for FY § 413.40. Based on IHS Global Insight, Inc.’s update as the basis of the annual update 2016 was further reduced by 2.0 percentage 2016 first quarter forecast, we estimated that factor, it was appropriate to adjust the points for LTCHs that failed to submit quality the FY 2010-based IPPS operating market standard Federal rate to account for the effect reporting data in accordance with the basket update for FY 2017 would be 2.8 of documentation and coding in a prior requirements of the LTCH QRP under section percent (that is, the estimate of the market period that was unrelated to patients’ 1886(m)(5) of the Act. basket rate-of-increase). However, we severity of illness (71 FR 27818). For FY 2017, in this proposed rule, based proposed that if more recent data become Accordingly, we established under on the best available data, we are proposing available for the final rule, we would use § 412.523(c)(3)(iii) that the annual update to an annual update to the LTCH PPS standard them to calculate the IPPS operating market the standard Federal rate for RY 2007 was Federal payment rate of 1.45 percent, which zero percent based on the most recent basket update for FY 2017. Therefore, based is based on the full estimated increase in the estimate of the LTCH PPS market basket at on IHS Global Insight, Inc.’s 2016 first LTCH PPS market basket of 2.7 percent, less that time, offset by an adjustment to account quarter forecast, with historical data through the MFP adjustment of 0.5 percentage point for changes in case-mix in prior periods due 2015 fourth quarter, we estimate that the FY consistent with section 1886(m)(3)(A)(i) of to the effect of documentation and coding 2010-based IPPS operating market basket the Act, and less the 0.75 percentage point that were unrelated to patients’ severity of required by sections 1886(m)(3)(A)(ii) and update for FY 2017 is 2.8 percent (that is, the illness. For RY 2008 through FY 2011, we estimate of the market basket rate-of- (m)(4)(F) of the Act. (As discussed in section also made an adjustment to account for the VII.E. of the preamble of this proposed rule, increase). For children’s hospitals, the 11 effect of documentation and coding that was cancer hospitals, hospitals located outside we are proposing to rebase and revise the unrelated to patients’ severity of illness in 2009-based LTCH-specific market basket to the 50 States, the District of Columbia and establishing the annual update to the Puerto Rico (that is, short-term acute care reflect a 2013 base year.) For LTCHs that fail standard Federal rate as set forth in the to submit the required quality reporting data hospitals located in the U.S. Virgin Islands, regulations at §§ 412.523(c)(3)(iv) through for FY 2017 in accordance with the LTCH Guam, the Northern Mariana Islands, and (c)(3)(vii). For FYs 2012 through 2016, we QRP, the annual update is further reduced by American Samoa), and RNHCIs, the proposed updated the standard Federal rate by the 2.0 percentage points as required by section FY 2017 rate-of-increase percentage that most recent estimate of the LTCH PPS market 1886(m)(5) of the Act (as discussed in greater would be applied to the FY 2016 target basket at that time, including additional detail in section VII.E.2.c. of the preamble of amounts in order to determine the proposed statutory adjustments required by section this proposed rule). Accordingly, we are FY 2017 target amounts is 2.8 percent. 1886(m)(3)(A) of the Act as set forth in the proposing an annual update to the LTCH PPS The IRF PPS, the IPF PPS, and the LTCH regulations at §§ 412.523(c)(3)(viii) through standard Federal payment rate of ¥0.55 PPS are updated annually. We refer readers (c)(3)(ix). percent for LTCHs that fail to submit the to section VII. of the preamble of this Section 1886(m)(3)(A) of the Act, as added required quality reporting data for FY 2017. proposed rule and section V. of the by section 3401(c) of the Affordable Care Act, This proposed ¥0.55 percent update was Addendum to this proposed rule for the specifies that, for rate year 2010 and each calculated based on the full estimated proposed update changes to the Federal subsequent rate year, any annual update to increase in the LTCH PPS market basket of payment rates for LTCHs under the LTCH the standard Federal rate shall be reduced: 2.7 percent, less a MFP adjustment of 0.5 • PPS for FY 2017. The annual updates for the For rate year 2010 through 2019, by the percentage point, less an additional IRF PPS and the IPF PPS are issued by the other adjustment specified in section adjustment of 0.75 percentage point required agency in separate Federal Register 1886(m)(3)(A)(ii) and (m)(4) of the Act; and by the statute, and less 2.0 percentage points • documents. For rate year 2012 and each subsequent for failure to submit quality reporting data as year, by the productivity adjustment V. Proposed Changes to the Payment Rates required by section 1886(m)(5) of the Act. described in section 1886(b)(3)(B)(xi)(II) of for the LTCH PPS for FY 2017 the Act (which we refer to as ‘‘the multifactor 2. Development of the Proposed FY 2017 LTCH PPS Standard Federal Payment Rate A. Proposed LTCH PPS Standard Federal productivity (MFP) adjustment’’) as Payment Rate for FY 2017 discussed in section VII.E.2. of the preamble We continue to believe that the annual of this proposed rule. update to the LTCH PPS standard Federal 1. Background Section 1886(m)(3)(B) of the Act provides payment rate should be based on the most In section VII. of the preamble of this that the application of paragraph (3) of recent estimate of the increase in the LTCH proposed rule, we discuss our proposed section 1886(m) of the Act may result in the PPS market basket, including any statutory annual updates to the payment rates, factors, annual update being less than zero for a rate adjustments. Consistent with our historical and specific policies under the LTCH PPS for year, and may result in payment rates for a practice, for FY 2017, we are proposing to FY 2017. rate year being less than such payment rates apply the annual update to the LTCH PPS Under § 412.523(c)(3)(ii) of the regulations, for the preceding rate year. (As noted in standard Federal payment rate from the for LTCH PPS rate years beginning RY 2004 section VII.E.2.a. of the preamble of this previous year. Furthermore, in determining through RY 2006, we updated the standard proposed rule, the annual update to the the LTCH PPS standard Federal payment rate Federal rate annually by a factor to adjust for LTCH PPS occurs on October 1 and we have for FY 2017, we also are proposing to make the most recent estimate of the increases in adopted the term ‘‘fiscal year’’ (FY) rather certain regulatory adjustments, consistent prices of an appropriate market basket of than ‘‘rate year’’ (RY) under the LTCH PPS with past practices. Specifically, in goods and services for LTCHs. We beginning October 1, 2010. Therefore, for determining the proposed FY 2017 LTCH established this policy of annually updating purposes of clarity, when discussing the PPS standard Federal payment rate, we are the standard Federal rate because, at that annual update for the LTCH PPS, including proposing to apply a budget neutrality time, we believed that was the most the provisions of the Affordable Care Act, we adjustment factor for the proposed changes appropriate method for updating the LTCH use the term ‘‘fiscal year’’ rather than ‘‘rate related to the area wage adjustment (that is, PPS standard Federal rate for years after the year’’ for 2011 and subsequent years.) changes to the wage data and labor-related initial implementation of the LTCH PPS in For FY 2016, consistent with our historical share) in accordance with § 412.523(d)(4). We FY 2003. Therefore, under § 412.523(c)(3)(ii), practice, we established an update to the also are proposing to use more recent data to

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determine the update to the LTCH PPS × 0.998723) for FY 2017. For LTCHs that fail area’’ is defined as any area outside of an standard Federal payment rate for FY 2017 in to submit quality reporting data for FY 2017 urban area. (Information on OMB’s MSA the final rule. in accordance with the requirements of the delineations based on the 2010 standards can For FY 2016, we established an annual LTCHQRP under section 1886(m)(5) of the be found at: http://www.whitehouse.gov/ update to the LTCH PPS standard Federal Act, we are proposing a LTCH PPS standard sites/default/files/omb/assets/fedreg_2010/ payment rate of 1.7 percent based on the full Federal payment rate of $41,480.12 06282010_metro_standards-Complete.pdf). estimated LTCH PPS market basket increase (calculated as $41,762.85× 0.9945 × The CBSA-based geographic classifications of 2.4 percent, less the MFP adjustment of 0.5 0.998723) for FY 2017. We note, as discussed (labor market area definitions) currently used percentage point consistent with section in section VII.B. of the preamble of this under the LTCH PPS, effective for discharges 1886(m)(3)(A)(i) of the Act and less the 0.2 proposed rule, under our application of the occurring on or after October 1, 2014, are percentage point required by sections site neutral payment rate required under based on the OMB labor market area 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. section 1886(m)(6) of the Act, this LTCH PPS delineations based on the 2010 Decennial Accordingly, at § 412.523(c)(3)(xii), we standard Federal payment rate will only be Census data. The current statistical areas established an annual update to the LTCH used to determine payments for LTCH PPS (which were implemented beginning with FY PPS standard Federal payment rate for FY standard Federal payment rate cases (that is, 2015) are based on revised OMB delineations 2015 of 1.7 percent. That is, we applied an those LTCH PPS cases that meet the statutory issued on February 28, 2013, in OMB update factor of 1.017 to the FY 2015 Federal criteria to be excluded from the site neutral Bulletin No. 13–01. We adopted these labor rate of $41,043.71 to determine the FY 2016 payment rate). market area delineations because they are LTCH PPS standard Federal payment rate. based on the best available data that reflect We also applied an area wage level budget B. Proposed Adjustment for Area Wage the local economies and area wage levels of neutrality factor for FY 2016 of 1.000513 to Levels Under the LTCH PPS for FY 2017 the hospitals that are currently located in the LTCH PPS standard Federal payment rate 1. Background these geographic areas. We also believe that to ensure that any changes to the area wage these OMB delineations will ensure that the Under the authority of section 123 of the LTCH PPS area wage level adjustment most level adjustment would not result in any BBRA, as amended by section 307(b) of the change in estimated aggregate LTCH PPS appropriately accounts for and reflects the BIPA, we established an adjustment to the relative hospital wage levels in the payments. Consequently, we established a LTCH PPS standard Federal payment rate to LTCH PPS standard Federal payment rate for geographic area of the hospital as compared account for differences in LTCH area wage to the national average hospital wage level. FY 2016 of $41,762.85 (calculated as levels under § 412.525(c). The labor-related × × We noted that this policy was consistent with $41,043.71 1.017 1.000513) (80 FR share of the LTCH PPS standard Federal 49797). the IPPS policy adopted in FY 2015 under payment rate is adjusted to account for § 412.64(b)(1)(ii)(D) of the regulations (79 FR In this proposed rule, we are proposing an geographic differences in area wage levels by 49951 through 49963). (For additional annual update to the LTCH PPS standard applying the applicable LTCH PPS wage information on the CBSA-based labor market Federal payment rate of 1.45 percent, which index. The applicable LTCH PPS wage index area (geographic classification) delineations was determined using the methodology is computed using wage data from inpatient currently used under the LTCH PPS and the previously described. Accordingly, under acute care hospitals without regard to history of the labor market area definitions § 412.523(c)(3)(xiii), we are proposing to reclassification under section 1886(d)(8) or used under the LTCH PPS, we refer readers apply a factor of 1.0145 to the FY 2017 LTCH section 1886(d)(10) of the Act. to the FY 2015 IPPS/LTCH PPS final rule (79 PPS standard Federal payment rate of When we implemented the LTCH PPS, we FR 50180 through 50185).) $41,762.85 to determine the proposed FY established a 5-year transition to the full area In general, it is our historical practice to 2017 LTCH PPS standard Federal payment wage level adjustment. The area wage level update the CBSA-based labor market area rate. These factors are based on IGI’s first adjustment was completely phased-in for delineations annually based on the most quarter 2016 forecast, which are the best cost reporting periods beginning in FY 2007. recent updates issued by OMB. Generally, available data at this time. For LTCHs that Therefore, for cost reporting periods OMB issues major revisions to statistical fail to submit quality reporting data for FY beginning on or after October 1, 2006, the areas every 10 years, based on the results of 2017 under the LTCH QRP, under proposed applicable LTCH area wage index values are the decennial census. However, OMB § 412.523(c)(3)(xiii), applied in conjunction the full LTCH PPS area wage index values occasionally issues minor updates and with the provisions of § 412.523(c)(4), we are calculated based on acute care hospital revisions to statistical areas in the years proposing to reduce the annual update to the inpatient wage index data without taking into between the decennial censuses. On July 15, LTCH PPS standard Federal payment rate by account geographic reclassification under 2015, OMB issued OMB Bulletin No. 15–01, an additional 2.0 percentage points, section 1886(d)(8) and section 1886(d)(10) of which provides updates to and supersedes consistent with section 1886(m)(5) of the Act. the Act. For additional information on the OMB Bulletin No. 13–01 that was issued on In those cases, the LTCH PPS standard phase-in of the area wage level adjustment February 28, 2013. The attachment to OMB Federal payment rate is updated by -0.55 under the LTCH PPS, we refer readers to the Bulletin No. 15–01 provides detailed percent (that is, a proposed update factor of August 30, 2002 LTCH PPS final rule (67 FR information on the update to statistical areas 0.9945) for FY 2017 for LTCHs that fail to 56015 through 56019) and the RY 2008 LTCH since February 28, 2013. As discussed in submit the required quality reporting data for PPS final rule (72 FR 26891). section III.A.2. of the preamble of this FY 2017 as required under the LTCH QRP. proposed rule, the updates provided in OMB 2. Proposed Geographic Classifications Consistent with § 412.523(d)(4), we also are Bulletin No. 15–01 are based on the (Labor Market Areas) for the LTCH PPS proposing to apply an area wage level budget application of the 2010 Standards for Standard Federal Payment Rate neutrality factor to the FY 2017 LTCH PPS Delineating Metropolitan and Micropolitan standard Federal payment rate of 0.998723, In adjusting for the differences in area Statistical Areas to Census Bureau which was determined using the wage levels under the LTCH PPS, the labor- population estimates for July 1, 2012 and July methodology described below in section related portion of an LTCH’s Federal 1, 2013. A copy of this bulletin may be V.B.4. of this Addendum. We are proposing prospective payment is adjusted by using an obtained on the Web site at: https://www. to apply this area wage level budget appropriate area wage index based on the whitehouse.gov/omb/bulletins_/. neutrality factor to the FY 2017 LTCH PPS geographic classification (labor market area) OMB Bulletin No. 15–01 made the standard Federal payment rate to ensure that in which the LTCH is located. Specifically, following changes that are relevant to the any proposed changes to the area wage level the application of the LTCH PPS area wage LTCH PPS CBSA-based labor market area adjustment (that is, the proposed annual level adjustment under existing § 412.525(c) (geographic classification) delineations: update of the wage index values and labor- is made based on the location of the LTCH— • Garfield County, OK, with principal city related share) will not result in any change either in an ‘‘urban area,’’ or a ‘‘rural area,’’ Enid, OK, which was a Micropolitan (increase or decrease) in estimated aggregate as defined in § 412.503. Under § 412.503, an (geographically rural) area, now qualifies as LTCH PPS standard Federal payment rate ‘‘urban area’’ is defined as a Metropolitan an urban area under new CBSA 21420 payments. Accordingly, we are proposing a Statistical Area (MSA) (which includes a entitled Enid, OK. LTCH PPS standard Federal payment rate of Metropolitan division, where applicable), as • The county of Bedford City, VA, a $42,314.31 (calculated as $41,762.85 × 1.0145 defined by the Executive OMB and a ‘‘rural component of the Lynchburg, VA CBSA

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31340, changed to town status and is added proposal, as discussed in section VII.D.4.e. of greater detail in section VII.D.4.e. of the to Bedford County. Therefore, the county of the preamble of this proposed rule, we are preamble of this proposed rule, the change in Bedford City is now part of the county of proposing that the LTCH PPS labor-related the quantity of labor, particularly for Bedford, VA. The CBSA remains Lynchburg, share for FY 2017 would be the sum of the professional services, outpacing the change VA, 31340. FY 2017 relative importance of each labor- in quantity of products (which are not • The name of Macon, GA, CBSA 31420, related cost category in the proposed 2013- included in the labor-related share) between as well as a principal city of the Macon- based LTCH market basket using the most 2009 and 2013, which more than offsets the Warner Robins, GA combined statistical area, recent available data. Specifically, we are faster relative growth in prices for products. is now Macon-Bibb County, GA. The CBSA proposing that the labor related share for FY 4. Proposed Wage Index for FY 2017 for the code remains as 31420. 2017 would include the sum of the labor- LTCH PPS Standard Federal Payment Rate We believe that these revisions to the related portion of operating costs from the CBSA-based labor market area delineations proposed 2013-based LTCH market basket Historically, we have established LTCH will ensure that the LTCH PPS area wage (that is, the sum of the FY 2017 relative PPS area wage index values calculated from level adjustment most appropriately accounts importance share of Wages and Salaries; acute care IPPS hospital wage data without for and reflects the relative hospital wage Employee Benefits; Professional Fees: Labor- taking into account geographic levels in the geographic area of the hospital Related; Administrative and Facilities reclassification under sections 1886(d)(8) and as compared to the national average hospital Support Services; Installation, Maintenance, 1886(d)(10) of the Act (67 FR 56019). The wage level based on the best available data and Repair Services; All Other: Labor-related area wage level adjustment established under that reflect the local economies and area Services) and a portion of the Capital-Related the LTCH PPS is based on an LTCH’s actual wage levels of the hospitals that are currently cost weight from the proposed 2013-based location without regard to the ‘‘urban’’ or located in these geographic areas and, LTCH PPS market basket. Based on IGI’s first ‘‘rural’’ designation of any related or therefore, we are proposing to adopt them quarter 2016 forecast of the proposed 2013- affiliated provider. under the LTCH PPS, effective October 1, based LTCH market basket, we are proposing In the FY 2016 LTCH PPS final rule (80 FR 2016. Accordingly, the proposed FY 2017 a labor-related share under the LTCH PPS for 49798through 49799), we calculated the FY LTCH PPS wage index values in Tables 12A FY 2017 of 66.6 percent. This proposed 2016 LTCH PPS area wage index values using and 12B listed in section VI. of the labor-related share is determined using the the same data used for the FY 2016 acute care hospital IPPS (that is, data from cost Addendum of this proposed rule (which are same methodology as employed in reporting periods beginning during FY 2012), available via the Internet on the CMS Web calculating all previous LTCH PPS labor- without taking into account geographic site) reflect the revisions to the CBSA-based related shares. Consistent with our historical reclassification under sections 1886(d)(8) and labor market area delineations described practice, we are proposing to use more recent 1886(d)(10) of the Act, as these were the most above. We note that, as discussed in section data to determine the final FY 2017 labor- recent complete data available at that time. III.C.2. of the preamble of this proposed rule, related share in the final rule. In that same final rule, we indicated that we the revisions to the CBSA-based delineations Table VII–9 in section VII.D.4.e. of the computed the FY 2016 LTCH PPS area wage also are proposed for adoption under the preamble of this proposed rule shows the IPPS, effective beginning October 1, 2016. index values, consistent with the urban and proposed FY 2017 relative importance labor- rural geographic classifications (labor market 3. Proposed Labor-Related Share for the related share using the proposed 2013-based areas) that were in place at that time and LTCH PPS Standard Federal Payment Rate LTCH market basket and the FY 2016 relative consistent with the pre-reclassified IPPS importance labor-related share using the Under the payment adjustment for the wage index policy (that is, our historical differences in area wage levels under 2009-based LTCH-specific market basket. The policy of not taking into account IPPS § 412.525(c), the labor-related share of an proposed labor-related share for FY 2017 is geographic reclassifications in determining LTCH’s standard Federal payment rate the sum of the proposed FY 2017 relative payments under the LTCH PPS). As with the payment is adjusted by the applicable wage importance of each labor-related cost IPPS wage index, wage data for multicampus index for the labor market area in which the category, and would reflect the different rates hospitals with campuses located in different LTCH is located. The LTCH PPS labor-related of price change for these cost categories labor market areas (CBSAs) are apportioned share currently represents the sum of the between the base year (2013) and FY 2017. to each CBSA where the campus (or labor-related portion of operating costs The sum of the proposed relative importance campuses) are located. We also continued to (Wages and Salaries; Employee Benefits; for FY 2017 for operating costs (Wages and use our existing policy for determining area Professional Fees Labor-Related, Salaries; Employee Benefits; Professional wage index values for areas where there are Administrative and Business Support Fees: Labor-Related; Administrative and no IPPS wage data. Services; and All-Other: Labor-Related Facilities Support Services; Installation, Consistent with our historical Services) and a labor-related portion of Maintenance, and Repair Services; All Other: methodology, to determine the applicable capital costs using the applicable LTCH PPS Labor-related Services) is 62.3 percent. We area wage index values for the FY 2017 LTCH market basket. Additional background are proposing that the portion of capital- PPS standard Federal payment rate, under information on the historical development of related costs that is influenced by the local the broad authority of section 123 of the the labor-related share under the LTCH PPS labor market is estimated to be 46 percent BBRA, as amended by section 307(b) of the can be found in the RY 2007 LTCH PPS final (the same percentage applied to the 2009- BIPA, we are proposing to use wage data rule (71 FR 27810 through 27817 and 27829 based LTCH-specific market basket). Because collected from cost reports submitted by IPPS through 27830) and the FY 2012 IPPS/LTCH the relative importance for capital-related hospitals for cost reporting periods beginning PPS final rule (76 FR 51766 through 51769 costs under our proposals would be 9.4 during FY 2013, without taking into account and 51808). percent of the proposed 2013-based LTCH geographic reclassification under sections For FY 2013, we revised and rebased the market basket in FY 2017, we are proposing 1886(d)(8) and 1886(d)(10) of the Act, market basket used under the LTCH PPS by to take 46 percent of 9.4 percent to determine because these data are the most recent adopting the newly created FY 2009-based the proposed labor-related share of capital- complete data available. We also note that LTCH-specific market basket. In addition, related costs for FY 2017 (0.46 x 9.4). The these are the same data we are using to beginning in FY 2013, we determined the result is 4.3 percent, which we are proposing compute the proposed FY 2017 acute care labor-related share annually as the sum of the to add to 62.3 percent for the operating cost hospital inpatient wage index, as discussed relative importance of each labor-related cost amount to determine the total proposed in section III. of the preamble of this category of the 2009-based LTCH-specific labor-related share for FY 2017. Therefore, proposed rule. We are computing the market basket for the respective fiscal year the proposed labor-related share under the proposed FY 2017 LTCH PPS standard based on the best available data. (For more LTCH PPS for FY 2017 is 66.6 percent. We Federal payment rate area wage index values details, we refer readers to the FY 2013 IPPS/ note that the proposed FY 2017 labor-related consistent with the ‘‘urban’’ and ‘‘rural’’ LTCH PPS final rule (77 FR 53477 through share using the proposed 2013-based LTCH geographic classifications (that is, labor 53479).) As noted previously, we are market basket is 4.6 percentage points higher market area delineations, including the proposing to rebase and revise the 2009- than the FY 2016 labor-related share using proposed updates, as previously discussed in based LTCH-specific market basket to reflect the 2009-based LTCH-specific market basket. section V.B.2. of this Addendum) and our a 2013 base year. In conjunction with that This is primarily due to, as discussed in historical policy of not taking into account

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IPPS geographic reclassifications under 5. Proposed Budget Neutrality Adjustment payment rate payments using the FY 2016 sections 1886(d)(8) and 1886(d)(10) of the for Changes to the LTCH PPS Standard area wage level adjustments (calculated in Act in determining payments under the Federal Payment Rate Area Wage Level Step 1) by the estimated total LTCH PPS LTCH PPS. We also are proposing to Adjustment standard Federal payment rate payments continue to apportion wage data for Historically, the LTCH PPS wage index and using the proposed FY 2017 area wage level adjustments (calculated in Step 2) to multicampus hospitals with campuses labor-related share are updated annually based on the latest available data. Under determine the proposed area wage level located in different labor market areas to each adjustment budget neutrality factor for FY CBSA where the campus or campuses are § 412.525(c)(2), any changes to the area wage index values or labor-related share are to be 2017 LTCH PPS standard Federal payment located, consistent with the IPPS policy. rate payments. Lastly, consistent with our existing made in a budget neutral manner such that estimated aggregate LTCH PPS payments are Step 4—We then applied the proposed FY methodology for determining the LTCH PPS unaffected; that is, will be neither greater 2017 area wage level adjustment budget wage index values, for FY 2017 we are than nor less than estimated aggregate LTCH neutrality factor from Step 3 to determine the proposing to continue to use our existing PPS payments without such changes to the proposed FY 2017 LTCH PPS standard policy for determining area wage index area wage level adjustment. Under this Federal payment rate after the application of values for areas where there are no IPPS wage policy, we determine an area wage-level the proposed FY 2017 annual update data. adjustment budget neutrality factor that will (discussed previously in section V.A.2. of Under our existing methodology, the LTCH be applied to the standard Federal payment this Addendum). PPS wage index value for urban CBSAs with rate to ensure that any changes to the area We note that, with the exception of cases subject to the transitional blend payment rate no IPPS wage data would be determined by wage level adjustments are budget neutral provisions in the first 2 years, under the dual using an average of all of the urban areas such that any changes to the area wage index values or labor-related share would not result rate LTCH PPS payment structure, only within the State and the LTCH PPS wage LTCH PPS cases that meet the statutory index value for rural areas with no IPPS wage in any change (increase or decrease) in estimated aggregate LTCH PPS payments. criteria to be excluded from the site neutral data would be determined by using the Accordingly, under § 412.523(d)(4), we apply payment rate (that is, LTCH PPS standard unweighted average of the wage indices from an area wage level adjustment budget Federal payment rate cases) are paid based all of the CBSAs that are contiguous to the neutrality factor in determining the standard on the LTCH PPS standard Federal payment rural counties of the State. Federal payment rate, and we also rate. Because the area wage level adjustment Based on the FY 2013 IPPS wage data that established a methodology for calculating an under § 412.525(c) is an adjustment to the we are using to determine the proposed FY area wage level adjustment budget neutrality LTCH PPS standard Federal payment rate, we 2017 LTCH PPS standard Federal payment factor. (For additional information on the only used data from claims that would have rate area wage index values in this proposed establishment of our budget neutrality policy qualified for payment at the LTCH PPS rule, there are no IPPS wage data for the for changes to the area wage level standard Federal payment rate if such rate urban area of Hinesville, GA (CBSA 25980). adjustment, we refer readers to the FY 2012 were in effect at the time of discharge to Consistent with the methodology discussed IPPS/LTCH PPS final rule (76 FR 51771 calculate the FY 2017 LTCH PPS standard Federal payment rate area wage level above, we calculated the proposed FY 2017 through 51773 and 51809).) adjustment budget neutrality factor described wage index value for CBSA 25980 as the In this proposed rule, for FY 2017 LTCH PPS standard Federal payment rate cases, in above. average of the wage index values for all of the accordance with § 412.523(d)(4), we are For this proposed rule, using the steps in other urban areas within the state of Georgia proposing to apply an area wage level the methodology previously described, we (that is, CBSAs 10500, 12020, 12060, 12260, adjustment budget neutrality factor to adjust determined a proposed FY 2017 LTCH PPS 15260, 16860, 17980, 19140, 23580, 31420, the LTCH PPS standard Federal payment rate standard Federal payment rate area wage 40660, 42340, 46660 and 47580), as shown in to account for the estimated effect of the level adjustment budget neutrality factor of Table 12A, which is listed in section VI. of proposed adjustments or updates to the area 0.998723. Accordingly, in section V.A.2. of the Addendum to this proposed rule and wage level adjustment under § 412.525(c)(1) the Addendum to this propose rule, to available via the Internet on the CMS Web on estimated aggregate LTCH PPS payments determine the proposed FY 2017 LTCH PPS site). We note that, as IPPS wage data are using a methodology that is consistent with standard Federal payment rate, we are dynamic, it is possible that urban areas the methodology we established in the FY applying a proposed area wage level without IPPS wage data will vary in the 2012 IPPS/LTCH PPS final rule (76 FR adjustment budget neutrality factor of future. 51773). Specifically, we are proposing to 0.998723, in accordance with § 412.523(d)(4). determine an area wage level adjustment Based on the FY 2013 IPPS wage data that The proposed FY 2017 LTCH PPS standard budget neutrality factor that would be Federal payment rate shown in Table 1E of we are using to determine the proposed FY applied to the LTCH PPS standard Federal the Addendum to this proposed rule reflects 2017 LTCH PPS standard Federal payment payment rate under § 412.523(d)(4) for FY this adjustment factor. rate area wage index values in this proposed 2017 using the following methodology: rule, there are no rural areas without IPPS Step 1—We simulated estimated aggregate C. Proposed Cost-of-Living Adjustment hospital wage data. Therefore, it is not LTCH PPS standard Federal payment rate (COLA) for LTCHs Located in Alaska and necessary to use our established methodology payments using the FY 2016 wage index Hawaii to calculate a proposed LTCH PPS standard values and the FY 2016 labor-related share of Under § 412.525(b), a cost-of-living Federal payment rate wage index value for 62.0 percent (as established in the FY 2016 adjustment (COLA) is provided for LTCHs rural areas with no IPPS wage data for FY IPPS/LTCH PPS final rule (80 FR 49798 and located in Alaska and Hawaii to account for 2017. We note that, as IPPS wage data are 49799). the higher costs incurred in those States. dynamic, it is possible that the number of Step 2—We simulated estimated aggregate Specifically, we apply a COLA to payments rural areas without IPPS wage data will vary LTCH PPS standard Federal payment rate to LTCHs located in Alaska and Hawaii by in the future. The proposed FY 2017 LTCH payments using the proposed FY 2017 wage multiplying the nonlabor-related portion of PPS standard Federal payment rate wage index values (as shown in Tables 12A and the standard Federal payment rate by the 12B listed in the Addendum to this proposed applicable COLA factors established annually index values that would be applicable for rule and available via the Internet on the by CMS. Higher labor-related costs for LTCHs LTCH PPS standard Federal payment rate CMS Web site) and the proposed FY 2017 located in Alaska and Hawaii are taken into discharges occurring on or after October 1, labor-related share of 66.6 percent (based on account in the adjustment for area wage 2016, through September 30, 2017, are the latest available data as previously levels previously described. presented in Table 12A (for urban areas) and discussed previously in this Addendum). Under our current methodology, we update Table 12B (for rural areas), which are listed Step 3—We calculated the ratio of these the COLA factors for Alaska and Hawaii in section VI. of the Addendum of this estimated total LTCH PPS standard Federal every 4 years (at the same time as the update proposed rule and available via the Internet payment rate payments by dividing the to the labor-related share of the IPPS market on the CMS Web site. estimated total LTCH PPS standard Federal basket) (77 FR 53712 through 53713). This

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methodology is based on a comparison of the cases in which there are extraordinarily high 2. Determining LTCH CCRs under the LTCH growth in the Consumer Price Indexes (CPIs) costs relative to the costs of most discharges. PPS for Anchorage, Alaska, and Honolulu, Under this policy, additional payments are a. Background Hawaii, relative to the growth in the CPI for made based on the degree to which the the average U.S. city as published by the estimated cost of a case (which is calculated As noted above, CCRs are used to determine payments for HCO adjustments for Bureau of Labor Statistics (BLS). It also by multiplying the Medicare allowable both payment rates under the LTCH PPS, and includes a 25-percent cap on the CPI-updated covered charge by the hospital’s overall COLA factors. (For additional details on our are also used to determine payments for SSO hospital CCR) exceeds a fixed-loss amount. current methodology for updating the COLA cases under § 412.529 as well as payments for This policy results in greater payment factors for Alaska and Hawaii, we refer site neutral payment rate cases. (We note that readers to section VII.D.3. of the preamble of accuracy under the LTCH PPS and the the provisions of § 412.529 are only the FY 2013 IPPS/LTCH PPS final rule (77 FR Medicare program, and the LTCH sharing the applicable to LTCH PPS standard Federal 53481 through 53482).) financial risk for the treatment of payment rate cases.) Therefore, this We continue to believe that determining extraordinarily high-cost cases. discussion is relevant to all HCO, SSO, and updated COLA factors using this We retained the basic tenets of our HCO site neutral payment rate calculations. methodology would appropriately adjust the policy in FY 2016 when we implemented the As noted earlier, in determining HCO, nonlabor-related portion of the LTCH PPS dual rate LTCH PPS payment structure under SSO, and the site neutral payment rate standard Federal payment rate for LTCHs section 1206 of Public Law 113–67. LTCH (regardless of whether the case is also an located in Alaska and Hawaii. Under our discharges that meet the criteria for exclusion HCO) payments, we generally calculate the current policy, we update the COLA factors from site neutral payment rate (that is, LTCH estimated cost of the case by multiplying the using the methodology described above every PPS standard Federal payment rate cases) are LTCH’s overall CCR by the Medicare allowable charges for the case. An overall 4 years; the first year began in FY 2014 (77 paid at the LTCH PPS standard Federal CCR is used because the LTCH PPS uses a FR 53482). Therefore, in this proposed rule payment rate, which includes, as applicable, single prospective payment per discharge for FY 2017, under the broad authority HCO payments under § 412.523(e). LTCH conferred upon the Secretary by section 123 that covers both inpatient operating and discharges that do not meet the criteria for of the BBRA, as amended by section 307(b) capital-related costs. The LTCH’s overall CCR exclusion are paid at the site neutral payment of the BIPA, to determine appropriate is generally computed based on the sum of payment adjustments under the LTCH PPS, rate, which includes, as applicable, HCO LTCH operating and capital costs (as we are proposing to continue to use the payments under § 412.522(c)(2)(i). In the described in Section 150.24, Chapter 3, of the COLA factors based on the 2009 OPM COLA same rule, we established separate fixed-loss Medicare Claims Processing Manual (Pub. factors updated through 2012 by the amounts and targets for the two different 100–4)) as compared to total Medicare comparison of the growth in the CPIs for LTCH PPS payment rates. Under this charges (that is, the sum of its operating and Anchorage, Alaska, and Honolulu, Hawaii, bifurcated policy, the historic 8 percent HCO capital inpatient routine and ancillary relative to the growth in the CPI for the target was retained for LTCH PPS standard charges), with those values determined from average U.S. city as established in the FY Federal payment rate cases, with the fixed- either the most recently settled cost report or 2014 IPPS/LTCH PPS final rule. (We refer loss amount calculated using only data from the most recent tentatively settled cost report, readers to the FY 2014 IPPS/LTCH PPS final LTCH cases which would have been paid at whichever is from the latest cost reporting period. However, in certain instances, we use rule (78 FR 50998) for a discussion of the FY the LTCH PPS standard Federal payment rate an alternative CCR, such as the statewide 2014 COLA factors.) Consistent with our if that rate had been in effect at the time of historical practice, we are proposing to average CCR, a CCR that is specified by CMS, those discharges. For site neutral payment or one that is requested by the hospital. (We establish that the COLA factors shown in the rate cases, we adopted the operating IPPS following table will be used to adjust the refer readers to § 412.525(a)(4)(iv) of the HCO target (currently 5.1 percent) and set the regulations for further details regarding HCO nonlabor-related portion of the LTCH PPS fixed-loss amount for site neutral payment standard Federal payment rate for LTCHs adjustments for either LTCH PPS payment rate cases at the value of the IPPS fixed-loss located in Alaska and Hawaii under rate, § 412.529(f)(4) for SSO adjustments, and amount. Under the HCO policy for both § 412.525(b). § 412.522(c)(1)(ii) for the site neutral payment rates, an LTCH receives 80 percent payment rate, respectively.) of the difference between the estimated cost The LTCH’s calculated CCR is then PROPOSED COST-OF-LIVING ADJUST- of the case and the applicable HCO compared to the LTCH total CCR ceiling. MENT FACTORS FOR ALASKA AND threshold, which is the sum of the LTCH PPS Under our established policy, an LTCH with HAWAII HOSPITALS UNDER THE payment for the case and the applicable a calculated CCR in excess of the applicable LTCH PPS FOR FY 2017 fixed-loss amount for such case. In order to maximum CCR threshold (that is, the LTCH maintain budget neutrality, consistent with total CCR ceiling, which is calculated as 3 standard deviations from the national the budget neutrality requirement for HCO Alaska: geometric average CCR) is generally assigned City of Anchorage and 80-kilo- payments to LTCH PPS standard Federal rate the applicable statewide CCR. This policy is meter (50-mile) radius by payment cases, we also adopted a budget premised on a belief that calculated CCRs road ...... 1.23 neutrality requirement for HCO payments to above the LTCH total CCR ceiling are most City of Fairbanks and 80-kilo- site neutral payment rate cases by applying likely due to faulty data reporting or entry, meter (50-mile) radius by a budget neutrality factor to the LTCH PPS and CCRs based on erroneous data should road ...... 1.23 payment for those site neutral payment rate not be used to identify and make payments City of Juneau and 80-kilometer cases. (We refer readers to § 412.522(c)(2)(i) for outlier cases. (50-mile) radius by road ...... 1.23 of the regulation for further details). We note b. LTCH Total CCR Ceiling All other areas of Alaska ...... 1.25 during the 2-year transitional period, the site Hawaii: neutral payment rate HCO budget neutrality In this proposed rule, using our established City and County of Honolulu ..... 1.25 methodology for determining the LTCH total factor does not apply to the LTCH PPS County of Hawaii ...... 1.19 CCR ceiling based on IPPS total CCR data standard Federal payment rate portion of the County of Kauai ...... 1.25 from the December 2015 update of the blended rate at § 412.522(c)(3) payable to site County of Maui and County of Provider Specific File (PSF), we are Kalawao ...... 1.25 neutral payment rate cases. (For additional proposing a LTCH total CCR ceiling of 1.302 details on the HCO policy adopted for site under the LTCH PPS for FY 2017 in neutral payment rate cases under the dual D. Proposed Adjustment for LTCH PPS High- accordance with § 412.525(a)(4)(iv)(C)(2) for rate LTCH PPS payment structure, including Cost Outlier (HCO) Cases HCO cases under either payment rate, the budget neutrality adjustment for HCO § 412.529(f)(4)(iii)(B) for SSOs, and 1. HCO Background payments to site neutral payment rate cases, § 412.522(c)(1)(ii) for the site neutral From the beginning of the LTCH PPS, we we refer readers to the FY 2016 IPPS/LTCH payment rate. Consistent with our historical have included an adjustment to account for PPS final rule (80 FR 49617 through 49623).) practice, we also are proposing to use more

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recent data to determine the LTCH total CCR the IPPS. In addition, although Connecticut 3. Proposed High-Cost Outlier Payments for ceiling for the FY 2017 final rule. (For and North Dakota have areas that are LTCH PPS Standard Federal Payment Rate additional information on our methodology designated as rural, in our calculation of the Cases for determining the LTCH total CCR ceiling, LTCH statewide average CCRs, there was no a. Establishment of the Proposed Fixed-Loss we refer readers to the FY 2007 IPPS final data available from short-term, acute care rule (71 FR 48118 through 48119).) Amount for LTCH PPS Standard Federal IPPS hospitals to compute a rural statewide Payment Rate Cases for FY 2017 c. LTCH Statewide Average CCRs average CCR or there were no short-term, When we implemented the LTCH PPS, we Our general methodology for determining acute care IPPS hospitals or LTCHs located established a fixed-loss amount so that total the statewide average CCRs used under the in those areas as of December 2015. estimated outlier payments are projected to LTCH PPS is similar to our established Therefore, consistent with our existing equal 8 percent of total estimated payments methodology for determining the LTCH total methodology, we are proposing to use the under the LTCH PPS (67 FR 56022 through CCR ceiling because it is based on ‘‘total’’ national average total CCR for rural IPPS 56026). When we implemented the dual rate IPPS CCR data. (For additional information LTCH PPS payment structure beginning in on our methodology for determining hospitals for rural Connecticut and North Dakota in Table 8C listed in section VI. of the FY 2016, we established that, in general, that statewide average CCRs under the LTCH PPS, the historical LTCH PPS HCO policy will Addendum to this proposed rule (and we refer readers to the FY 2007 IPPS final continue to apply to LTCH PPS standard rule (71 FR 48119 through 48120).) Under the available via the Internet on the CMS Web Federal payment rate cases. That is, the LTCH PPS HCO policy for cases paid under site). Furthermore, consistent with our fixed-loss amount and target for LTCH PPS either payment rate at § 412.525(a)(4)(iv)(C), existing methodology, in determining the standard Federal payment rate cases is the SSO policy at § 412.529(f)(4)(iii), and the urban and rural statewide average total CCRs determined using the LTCH PPS HCO policy site neutral payment rate at for Maryland LTCHs paid under the LTCH adopted when the LTCH PPS was first § 412.522(c)(1)(ii), the MAC may use a PPS, we are proposing to continue to use, as implemented, but we limited the data used statewide average CCR, which is established a proxy, the national average total CCR for under that policy to LTCH cases that would annually by CMS, if it is unable to determine urban IPPS hospitals and the national have been LTCH PPS standard Federal an accurate CCR for an LTCH in one of the payment rate cases if the statutory changes following circumstances: (1) New LTCHs that average total CCR for rural IPPS hospitals, respectively. We use this proxy because we had been in effect at the time of those have not yet submitted their first Medicare discharges. believe that the CCR data in the PSF for cost report, a new LTCH is defined as an To determine the applicable fixed-loss entity that has not accepted assignment of an Maryland hospitals may not be entirely amount for LTCH PPS standard Federal existing hospital’s provider agreement in accurate (as discussed in greater detail in the payment rate cases, we estimate outlier accordance with § 489.18); (2) LTCHs whose FY 2007 IPPS final rule (71 FR 48120)). payments and total LTCH PPS payments for calculated CCR is in excess of the LTCH total each LTCH PPS standard Federal payment CCR ceiling; and (3) other LTCHs for whom d. Reconciliation of HCO and SSO Payments rate case (or for each case that would have data with which to calculate a CCR are not Under the HCO policy for cases paid under been a LTCH PPS standard Federal payment available (for example, missing or faulty either payment rate at § 412.525(a)(4)(iv)(D) rate case if the statutory changes had been in data). (Other sources of data that the MAC and the SSO policy at § 412.529(f)(4)(iv), the effect at the time of the discharge) using may consider in determining an LTCH’s CCR payments for HCO and SSO cases are subject include data from a different cost reporting claims data from the MedPAR files. The to reconciliation. Specifically, any such period for the LTCH, data from the cost applicable fixed-loss amount for LTCH PPS reporting period preceding the period in payments are reconciled at settlement based standard Federal payment rate cases results which the hospital began to be paid as an on the CCR that is calculated based on the in estimated total outlier payments being LTCH (that is, the period of at least 6 months cost report coinciding with the discharge. projected to be equal to 8 percent of projected that it was paid as a short-term, acute care (We note the existing reconciliation process total LTCH PPS payments for LTCH PPS hospital), or data from other comparable for HCO payments is also applicable to LTCH standard Federal payment rate cases. We use MedPAR claims data and CCRs based on data LTCHs, such as LTCHs in the same chain or PPS payments for site neutral payment rate from the most recent PSF (or from the in the same region.) cases (80 FR 49610).) For additional Consistent with our historical practice of applicable statewide average CCR if an information on the reconciliation policy, we LTCH’s CCR data are faulty or unavailable) using the best available data, in this proposed refer readers to Sections 150.26 through rule, using our established methodology for to establish an applicable fixed-loss 150.28 of the Medicare Claims Processing determining the LTCH statewide average threshold amount for LTCH PPS standard CCRs, based on the most recent complete Manual (Pub. 100–4) as added by Change Federal payment rate cases. IPPS ‘‘total CCR’’ data from the December Request 7192 (Transmittal 2111; December 3, For FY 2017, we are not proposing to make 2015 update of the PSF, we are proposing 2010) and the RY 2009 LTCH PPS final rule any modifications to the current LTCH PPS LTCH PPS statewide average total CCRs for (73 FR 26820 through 26821). HCO payment methodology for LTCH PPS urban and rural hospitals that would be standard Federal payment rate cases. e. Proposed Technical Change to the Therefore, for FY 2017, we are proposing to effective for discharges occurring on or after Definition of ‘‘Outlier Payment’’ October 1, 2016 through September 30, 2017, determine an applicable fixed-loss amount in Table 8C listed in section VI. of the The existing regulations at § 412.503 for LTCH PPS standard Federal payment rate Addendum to this proposed rule (and includes a definition of ‘‘outlier payment,’’ cases using data from LTCH PPS standard available via the Internet on the CMS Web which was adopted when the LTCH PPS was Federal payment rate cases (or cases that site). Consistent with our historical practice, implemented (67 FR 56049). This definition would have been LTCH PPS standard Federal we are proposing to use more recent data to does not account for the dual rate LTCH PPS payment rate cases had the dual rate LTCH PPS payment structure been in effect at the determine the LTCH PPS statewide average payment structure that began in FY 2016. time of those discharges). The proposed total CCRs for FY 2017 in the final rule. Therefore, in this proposed rule, to account Under the current LTCH PPS labor market fixed-loss amount for LTCH PPS standard for our HCO policy for LTCH cases paid areas, all areas in Delaware, the District of Federal payment rate cases would continue Columbia, New Jersey, and Rhode Island are under either payment rate, we are proposing to be determined so that estimated HCO classified as urban. Therefore, there are no to revise the definition of ‘‘outlier payment’’ payments would be projected to equal 8 rural statewide average total CCRs listed for at § 412.503 to mean an additional payment percent of estimated total LTCH PPS those jurisdictions in Table 8C. This policy beyond the LTCH PPS standard Federal standard Federal payment rate cases. is consistent with the policy that we payment rate or the site neutral payment rate Furthermore, in accordance with established when we revised our (including, when applicable, the transitional § 412.523(d)(1), a budget neutrality factor methodology for determining the applicable blended rate), as applicable, for cases with would continue to be applied to LTCH PPS LTCH statewide average CCRs in the FY 2007 unusually high costs. standard Federal payment rate cases to offset IPPS final rule (71 FR 48119 through 48121) that 8 percent so that HCO payments for and is the same as the policy applied under LTCH PPS standard Federal payment rate

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cases will be budget neutral. Below we CCRs from the March 2015 update of the comments on potential improvements to the present our calculation of the proposed fixed- PSF. Based on that data, the estimated outlier determination of the fixed-loss amount for loss amount for LTCH PPS standard Federal payments were projected to be equal to 8 LTCH PPS standard Federal payment rate payment rate cases for FY 2017, which is percent of estimated FY 2016 payments for cases, including the most appropriate method consistent with the methodology used to such cases (80 FR 49803). Using the more of determining an inflation factor for establish the FY 2016 LTCH PPS fixed-loss recent LTCH claims data (that is, FY 2015 projecting the costs of each case when amount. LTCH discharges from the December 2015 determining the fixed-loss threshold. In the FY 2016 IPPS/LTCH PPS final rule update of the MedPAR file and CCRs from For the reasons discussed above, we (80 FR 49803 through 49804), we presented the December 2015 update of the PSF), we believe it is necessary and appropriate to our policies regarding the methodology and currently estimate that the FY 2016 fixed-loss propose an increase to the fixed-loss amount data we used to establish a fixed-loss amount amount of $16,423 results in estimated HCO for LTCH PPS standard Federal payment rate of $16,432 for FY 2016 for LTCH PPS payments for LTCH PPS standard Federal cases for FY 2017 to maintain that, for LTCH standard Federal payment rate cases, which payment rate cases of approximately 9.1 PPS standard Federal payment rate cases, was calculated based on the data and the percent of total estimated FY 2016 LTCH PPS estimated HCO payments would equal 8 rates and policies presented in that final rule payments to those cases, which exceeds the percent of estimated total LTCH PPS in order to maintain estimated HCO 8 percent target. While many factors payments for those cases as required under payments at the projected 8 percent of total contribute to this increase, we found that the § 412.525(a). (For further information on the estimated LTCH PPS payments. Consistent rate-of-change in the Medicare allowable existing 8 percent HCO ‘‘target’’ requirement, with our historical practice of using the best charges on the claims data in the MedPAR is we refer readers to the August 30, 2002 LTCH data available, in determining the proposed a significant contributing factor. In the PPS final rule (67 FR 56022 through 56024).) fixed-loss amount for LTCH PPS standard payment modeling used to estimate LTCH Maintaining the fixed-loss amount at the Federal payment rate cases for FY 2017, we PPS payments for the FY 2016 IPPS/LTCH current level would result in HCO payments used the most recent available LTCH claims PPS final rule, for SSO and HCO cases paid that are substantially more than the current data and CCR data, that is, LTCH claims data as LTCH PPS standard Federal payment rate regulatory 8 percent target that we are from the December 2015 update of the FY cases, we applied an inflation factor of 4.6 applying to total payments for LTCH PPS 2015 MedPAR file and CCRs from the percent (determined by the Office of the standard Federal payment rate cases because December 2015 update of the PSF, as these Actuary) to update the 2014 costs of each a lower fixed-loss amount would result in data were the most recent complete LTCH case to 2016 (80 FR 49833). Upon examining more cases qualifying as outlier cases, as well data available at that time. the FY 2014 LTCH discharge data and the FY as higher outlier payments for qualifying For FY 2017, we are proposing to continue 2015 discharge data, we found that Medicare HCO cases because the maximum loss that an to use our current methodology to calculate allowable charges for LTCH PPS standard LTCH must incur before receiving an HCO an applicable fixed-loss amount for LTCH Federal payment rate cases (had the dual rate payment (that is, the fixed-loss amount) PPS standard Federal payment rate cases for LTCH PPS payment structure been in effect would be smaller. FY 2017 using the best available data that at the time of the discharges) increased b. Application of the High-Cost Outlier would maintain estimated HCO payments at approximately 7 percent. This higher Policy to SSO Cases the projected 8 percent of total estimated inflation factor results in higher estimated Under our implementation of the dual rate LTCH PPS payments for LTCH PPS standard costs for outlier cases and, therefore, more LTCH PPS payment structure required by Federal payment rate cases (based on the estimated outlier payments. statute, LTCH PPS standard Federal payment rates and policies for these cases presented Fluctuations in the fixed-loss amount rate cases (that is, LTCH discharges that meet occurred in the first few years after the in this proposed rule). Specifically, based on the criteria for exclusion from the site neutral the most recent complete LTCH data implementation of the LTCH PPS, due, in payment rate) will continue to be paid based available (that is, LTCH claims data from the part, to the changes in LTCH behavior (such on the LTCH PPS standard Federal payment December 2015 update of the FY 2015 as Medicare beneficiary treatment patterns) rate, and will include all of the existing MedPAR file and CCRs from the December in response to the new payment system and payment adjustments under § 412.525(d), 2015 update of the PSF), we determined a the lack of data and information available to such as the adjustments for SSO cases under proposed fixed-loss amount for LTCH PPS predict how those changes would affect the § 412.529. Under some rare circumstances, an standard Federal payment rate cases for FY estimate costs of LTCH cases. As we gained LTCH discharge can qualify as an SSO case 2017 that will result in estimated outlier more experience with the effects and (as defined in the regulations at § 412.529 in payments projected to be equal to 8 percent implementation of the LTCH PPS, the annual conjunction with § 412.503) and also as an of estimated FY 2017 payments for such changes on the fixed-loss amount generally HCO case, as discussed in the August 30, cases. Under the broad authority of section stabilized relative to the fluctuations that 2002 final rule (67 FR 56026). In this 123(a)(1) of the BBRA and section 307(b)(1) occurred in the early years of the LTCH PPS. scenario, a patient could be hospitalized for of the BIPA, we are proposing a fixed-loss At this time, we are not proposing any less than five-sixths of the geometric average amount of $22,728 for LTCH PPS standard changes to our method for the inflation factor length of stay for the specific MS–LTC–DRG, Federal payment rate cases for FY 2017. applied to update the costs of each case (that and yet incur extraordinarily high treatment Under our proposal, we would continue to is, an inflation factor based on the most costs. If the estimated costs exceeded the make an additional HCO payment for the cost recent estimate of the proposed 2013-based HCO threshold (that is, the SSO payment of an LTCH PPS standard Federal payment LTCH market basket as determined by the plus the applicable fixed-loss amount), the rate case that exceeds the HCO threshold Office of the Actuary) in determining the discharge is eligible for payment as an HCO. amount that is equal to 80 percent of the proposed fixed-loss amount for LTCH PPS Therefore, for an SSO case in FY 2017, we difference between the estimated cost of the standard Federal payment rate cases for FY are proposing the HCO payment would be 80 case and the outlier threshold (the sum of the 2017. We continue to believe that it is percent of the difference between the adjusted LTCH PPS standard Federal appropriate to continue to use our historical estimated cost of the case and the outlier payment rate payment and the fixed-loss approach until we gain experience with the threshold (the sum of the proposed fixed-loss amount for LTCH PPS standard Federal effects and implementation of the dual rate amount of $22,728 and the amount paid payment rate cases of $22,728). LTCH PPS payment structure that began with under the SSO policy as specified in We note that the proposed fixed-loss discharges occurring in cost reporting § 412.529). amount of $22,728 for FY 2017 for LTCH PPS periods beginning on or after October 1, standard Federal payment rate cases is 2015, and the types of cases paid at the LTCH 4. Proposed High-Cost Outlier Payments for notably higher than the FY 2016 fixed-loss PPS standard Federal payment rate under Site Neutral Payment Rate Cases amount for LTCH PPS standard Federal this dual rate payment structure. We may Under § 412.525(a), site neutral payment payment rate cases of $16,423. The FY 2016 revisit this issue in the future if data rate cases receive an additional HCO fixed-loss amount for LTCH PPS standard demonstrate such a change is warranted, and payment for costs that exceed the HCO Federal payment rate cases was determined would propose any changes in the future threshold that is equal to 80 percent of the using LTCH claims data from the March 2015 through the notice-and-comment rulemaking difference between the estimated cost of the update of the FY 2014 MedPAR file and process. However, we are inviting public case and the applicable HCO threshold (80

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FR 49618 through 49629). In the FY 2016 the IPPS comparable amount calculation, case and the outlier threshold (the sum of site IPPS/LTCH PPS final rule, in examining the applicable to discharges occurring on or after neutral payment rate payment and the appropriate fixed-loss amount for site neutral January 1, 2016, consistent with the proposed fixed-loss amount for site neutral payment rate cases issue, we considered how conforming changes made as a result of the payment rate cases of $23,681). (We note that LTCH discharges based on historical claims new IPPS payment requirement.) any site neutral payment rate case that is data would have been classified under the For this proposed rule, in developing a paid 100 percent of the estimated cost of the dual rate LTCH PPS payment structure and proposed fixed-loss amount for site neutral case (because that amount is lower than the the CMS’ Office of the Actuary (OACT) payment rate cases for FY 2017, we IPPS comparable per diem amount) will not projections regarding how LTCHs would considered the same factors we did be eligible to receive a HCO payment likely respond to our proposed developing a fixed-loss amount for such because, by definition, the estimated costs of implementation of policies resulting from the cases for FY 2016. For FY 2017, our actuaries such cases would never exceed the IPPS statutory payment changes. For FY 2016, at currently project that the proportion of cases comparable per diem amount by any that time our actuaries projected that the that would qualify as LTCH PPS standard threshold.) proportion of cases that would qualify as Federal payment rate cases versus site In establishing a HCO policy for site LTCH PPS standard Federal payment rate neutral payment rate cases under the dual neutral payment rate cases, we established a cases versus site neutral payment rate cases rate LTCH PPS payment structure provisions budget neutrality requirement at under the statutory provisions would remain would remain consistent with what is § 412.522(c)(2)(i). We established this consistent with what is reflected in the reflected in the historical LTCH PPS claims requirement because we believe that the HCO historical LTCH PPS claims data. Although data. Based on FY 2014 LTCH claims data, policy for site neutral payment rate cases our actuaries did not project an immediate LTCH claims data, we found that should be budget neutral, just as the HCO change in the proportions found in the approximately 55 percent of LTCH cases policy for LTCH PPS standard Federal historical data, they did project cost and would have been paid the LTCH PPS payment rate cases are budget neutral, resource changes to account for the lower standard Federal payment rate and meaning that estimated site neutral payment payment rates. Our actuaries also projected approximately 45 percent of LTCH cases rate HCO payments should not result in any that the costs and resource use for cases paid would have been paid the site neutral change in estimated aggregate LTCH PPS at the site neutral payment rate would likely payment rate if those rates had been in effect payments. Under § 412.522(c)(2)(i), we adjust be lower, on average, than the costs and at that time.) At this time, our actuaries all payments for site neutral payment rate resource use for cases paid at the LTCH PPS continue to project no immediate change in cases by a budget neutrality factor so that the standard Federal payment rate and would these proportions. However, they do estimated HCO payments payable for site likely mirror the costs and resource use for continue to project that the costs and neutral payment rate cases do not result in IPPS cases assigned to the same MS–DRG, resource use for cases paid at the site neutral any increase in aggregate LTCH PPS regardless of whether the proportion of site payment rate would likely be lower, on payments. Specifically, under neutral payment rate cases in the future average, than the costs and resource use for § 412.522(c)(2)(i), we apply a budget remains similar to what is found based on the cases paid at the LTCH PPS standard Federal neutrality factor to the site neutral payment historical data. In light of these projections payment rate and would likely mirror the rate portion of the transitional blended rate and expectations, we discussed that we costs and resource use for IPPS cases payment (that is applicable to site neutral believed that the use of a single fixed-loss assigned to the same MS–DRG, regardless of payment rate cases during the 2-year amount and HCO target for all LTCH PPS whether the proportion of site neutral transition period provided by the statute) that cases would be problematic. In addition, we payment rate cases in the future remains is established based on an estimated basis. discussed that we did not believe that it similar to what is found based on the (We refer readers to 80 FR 49621 through would be appropriate for comparable LTCH historical data. As discussed in the FY 2016 49622 and 49805.) PPS site neutral payment rate cases to receive IPPS/LTCH PPS final rule (80 FR 49619), this Under the approach adopted for applying dramatically different HCO payments from actuarial assumption is based on our the budget neutrality adjustment to the site those cases that would be paid under the expectation that site neutral payment rate neutral payment rate portion of the IPPS (80 FR 49618 through 49619). For those cases would generally be paid based on an transitional blended rate payment in the FY reasons, in the FY 2016 IPPS/LTCH PPS final IPPS comparable per diem amount under the 2016 IPPS/LTCH PPS final rule (80 FR rule (FR 80 49619), we stated that we believe statutory LTCH PPS payment changes that 49805), we explained that there is no need that the most appropriate fixed-loss amount began in FY 2016, which, in the majority of to perform any calculation of the site neutral for site neutral payment rate cases for a given cases, is much lower than the payment that payment rate case HCO payment budget fiscal year, beginning with FY 2016, would would have been paid if these statutory neutrality adjustment under our finalized be the IPPS fixed-loss amount for that fiscal changes were not enacted. For these reasons, policy. This is because, as discussed year. Accordingly, we established that for FY we continue to believe that the most previously, based on our actuarial 2016, a fixed-loss amount for site neutral appropriate fixed-loss amount for site neutral assumptions we project that our proposal to payment rate cases of $22,544, which was the payment rate cases for FY 2017 is the IPPS use the IPPS fixed-loss threshold for the site same as the FY 2016 IPPS fixed-loss amount. fixed-loss amount for FY 2017. neutral payment rate cases would result in (We note that the FY 2016 fixed-loss amount Therefore, for FY 2017, we are proposing HCO payments for those cases that are under the IPPS was updated, applicable for that the applicable HCO threshold for site similar in proportion as is seen in IPPS cases discharges on or after January 1, 2016, as a neutral payment rate cases is the sum of the assigned to the same MS–DRG; that is, 5.1 conforming change to the implementation of site neutral payment rate for the case and the percent. In other words, we estimated that section 601 of the Consolidated IPPS fixed-loss amount. That is, we are HCO payments for site neutral payment rate Appropriations Act, 2016, which modified proposing a fixed-loss amount for site neutral cases would be 5.1 percent of the site neutral the payment calculation with respect to payment rate cases of $23,681, which is the payment rate payments. Under the statutory operating costs of inpatient hospital services same proposed FY 2017 IPPS fixed-loss transition period, payments to site neutral of a subsection (d) Puerto Rico hospital for amount discussed in section II.A.4.g.(1). of payment rate cases in FY 2017 will be paid inpatient hospital discharges on or after the Addendum to this proposed rule. We under the blended transitional rate. As such, January 1, 2016 (Change Request 9523, continue to believe that this policy will estimated HCO payments for site neutral Transmittal 3449, dated February 4, 2016).) reduce differences between HCO payments payment rate cases in the FY 2017 proposal Consistent with this change, the FY 2016 for similar cases under the IPPS and site would be projected to be 5.1 percent of the fixed-loss amount for site neutral payment neutral payment rate cases under the LTCH portion of the blended rate payment that is rate cases under the LTCH PPS was updated, PPS and promote fairness between the two based on the estimated site neutral payment applicable for discharges on or after January systems. Accordingly, under this proposal, rate payment amount (and would not include 1, 2016, to $22,538, which is the same as the for FY 2017, we would calculate a HCO the LTCH PPS standard Federal payment rate updated IPPS outlier fixed-loss cost payment for site neutral payment rate cases payment amount as specified in threshold for FY 2016. (We refer readers to with costs that exceed the HCO threshold § 412.522(c)(2)(i)). To ensure that estimated Change Request 9527, Transmittal 3445, amount, which is equal to 80 percent of the HCO payments payable to site neutral dated January 29, 2016, which also updated difference between the estimated cost of the payment rate cases in FY 2017 would not

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result any increase in estimated aggregate FY hospitals as empirically justified Medicare statutory criteria to be excluded from the site 2017 LTCH PPS payments, under the budget DSH payments and uncompensated care neutral payment rate are paid based on the neutrality requirement at § 412.522(c)(2)(i), it payments in that year (that is, a percentage LTCH PPS standard Federal payment rate. is necessary to reduce the site neutral of the operating DSH payment amount that Under § 412.525(c), the LTCH PPS standard payment rate portion of the blended rate has historically been reflected in the LTCH Federal payment rate is adjusted to account payment by 5.1 percent to account for the PPS payments that is based on IPPS rates). for differences in area wages by multiplying estimated additional HCO payments payable We also stated that the projected percentage the labor-related share of the LTCH PPS to those cases in FY 2017. In order to achieve will be updated annually, consistent with the standard Federal payment for a case by the this, for FY 2017, we are proposing to annual determination of the amount of applicable LTCH PPS wage index (the continue to apply a budget neutrality factor uncompensated care payments that will be proposed FY 2017 values are shown in of 0.949 (that is, the decimal equivalent of a made to eligible IPPS hospitals. We believe Tables 12A through 12B listed in section VI. 5.1 percent reduction, determined as 1.0–5.1/ that this approach results in appropriate of the Addendum of this proposed rule and 100 = 0.949) to the site neutral payment rate payments under the LTCH PPS and is are available via the Internet on the CMS consistent with our intention that the ‘‘IPPS portion of the blended rate payment (80 FR Web site). The LTCH PPS standard Federal 49805). As stated previously, this adjustment comparable amount’’ and the ‘‘IPPS payment is also adjusted to account for the is necessary so that the estimated HCO equivalent amount’’ under the LTCH PPS higher costs of LTCHs located in Alaska and payments payable for site neutral payment closely resemble what an IPPS payment Hawaii by the applicable COLA factors (the rate cases do not result in any increase in would have been for the same episode of aggregate LTCH PPS payments. care, while recognizing that some features of proposed FY 2017 factors are shown in the the IPPS cannot be translated directly into chart in section V.D. of this Addendum) in E. Proposed Update to the IPPS Comparable/ the LTCH PPS (79 FR 50766 through 50767). accordance with § 412.525(b). In this Equivalent Amounts to Reflect the Statutory For FY 2017, as discussed in greater detail proposed rule, we are proposing an LTCH Changes to the IPPS DSH Payment in section IV.D.3.d.(2) of the preamble of this PPS standard Federal payment rate for FY Adjustment Methodology proposed rule, based on the most recent data 2017 of $42,314.31, as discussed in section In the FY 2014 IPPS/LTCH PPS final rule, available, our estimate of 75 percent of the V.A.2. of the Addendum to this proposed we established a policy for reflecting the amount that would otherwise have been paid rule. We illustrate the methodology to adjust changes to the Medicare IPPS DSH payment as Medicare DSH payments (under the the proposed LTCH PPS standard Federal adjustment methodology provided for by methodology outlined in section 1886(r)(2) of payment rate for FY 2017 in the following section 3133 of the Affordable Care Act in the the Act) is adjusted to 56.74 percent of that example: calculation of the ‘‘IPPS comparable amount’’ amount to reflect the change in the Example: During FY 2017, a Medicare under the SSO policy at § 412.529 and the percentage of individuals who are uninsured. discharge that meets the criteria to be ‘‘IPPS equivalent amount’’ under the 25- The resulting amount is then used to excluded from the site neutral payment rate, percent threshold payment adjustment policy determine the amount of uncompensated that is an LTCH PPS standard Federal at § 412.534 and § 412.536. Historically, the care payments that will be made to eligible payment rate case, is from an LTCH that is determination of both the ‘‘IPPS comparable IPPS hospitals in FY 2017. In other words, located in Chicago, Illinois (CBSA 16974). amount’’ and the ‘‘IPPS equivalent amount’’ Medicare DSH payments prior to the The FY 2017 LTCH PPS proposed wage includes an amount for inpatient operating amendments made by the Affordable Care index value for CBSA 16974 is 1.0486 costs ‘‘for the costs of serving a Act would be adjusted to 42.56 percent (the (obtained from Table 12A listed in section VI. disproportionate share of low-income product of 75 percent and 56.74 percent) and of the Addendum of this proposed rule and patients.’’ Under the statutory changes to the the resulting amount will be used to calculate available via the Internet on the CMS Web Medicare DSH payment adjustment the uncompensated care payments to eligible methodology that began in FY 2014, in hospitals. As a result, for FY 2017, we project site). The Medicare patient case is classified general, eligible IPPS hospitals receive an that the reduction in the amount of Medicare into MS–LTC–DRG 189 (Pulmonary Edema & empirically justified Medicare DSH payment DSH payments pursuant to section 1886(r)(1) Respiratory Failure), which has a proposed equal to 25 percent of the amount they of the Act, along with the payments for relative weight for FY 2017 of 0.9107 otherwise would have received under the uncompensated care under section 1886(r)(2) (obtained from Table 11 listed in section VI. statutory formula for Medicare DSH of the Act, would result in overall Medicare of the Addendum of this proposed rule and payments prior to the amendments made by DSH payments of 67.56 percent of the available via the Internet on the CMS Web the Affordable Care Act. The remaining amount of Medicare DSH payments that site). The LTCH submitted quality reporting amount, equal to an estimate of 75 percent would otherwise have been made in the data for FY 2017 in accordance with the of the amount that otherwise would have absence of amendments made by the LTCHQRP under section 1886(m)(5) of the been paid as Medicare DSH payments, Affordable Care Act (that is, 25 percent + Act. reduced to reflect changes in the percentage 56.74 percent = 67.56 percent). To calculate the LTCH’s total proposed of individuals under the age of 65 who are In this proposed rule, for FY 2017, we are adjusted Federal prospective payment for uninsured, is made available to make proposing that the calculation of the ‘‘IPPS this Medicare patient case in FY 2017, we additional payments to each hospital that comparable amount’’ under § 412.529 and the computed the wage-adjusted Federal qualifies for Medicare DSH payments and ‘‘IPPS equivalent amount’’ under new prospective payment amount by multiplying that has uncompensated care. The additional § 412.538 would include an applicable the unadjusted proposed FY 2017 LTCH PPS uncompensated care payments are based on operating Medicare DSH payment amount standard Federal payment rate ($42,314.31) the hospital’s amount of uncompensated care that is equal to 67.5677 percent of the by the proposed labor-related share (66.6 for a given time period relative to the total operating Medicare DSH payment amount percent) and the wage index value (1.0486). amount of uncompensated care for that same that would have been paid based on the This wage-adjusted amount was then added time period reported by all IPPS hospitals statutory Medicare DSH payment formula but to the proposed nonlabor-related portion of that receive Medicare DSH payments. for the amendments made by the Affordable the unadjusted LTCH PPS standard Federal To reflect the statutory changes to the Care Act. Furthermore, consistent with our Medicare DSH payment adjustment historical practice, we are proposing to use payment rate (33.4 percent; adjusted for cost methodology in the calculation of the ‘‘IPPS more recent data, if available, to determine of living, if applicable) to determine the comparable amount’’ and the ‘‘IPPS this factor in the final rule. adjusted proposed LTCH PPS standard equivalent amount’’ under the LTCH PPS, we Federal payment rate, which is then stated that we will include a reduced F. Computing the Proposed Adjusted LTCH multiplied by the proposed MS–LTC–DRG Medicare DSH payment amount that reflects PPS Federal Prospective Payments for FY relative weight (0.9107) to calculate the total the projected percentage of the payment 2017 proposed adjusted LTCH PPS standard amount calculated based on the statutory Section 412.525 sets forth the adjustments Federal prospective payment for FY 2017 Medicare DSH payment formula prior to the to the LTCH PPS standard Federal payment ($39,782.95). The table below illustrates the amendments made by the Affordable Care rate. Under the dual rate LTCH PPS payment components of the calculations in this Act that will be paid to eligible IPPS structure, only LTCH PPS cases that meet the example.

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Proposed LTCH PPS Standard Federal Prospective Payment Rate ...... $42,314.31 Proposed Labor-Related Share ...... × 0.666 Proposed Labor-Related Portion of the LTCH PPS Standard Federal Payment Rate ...... = $28,181.33 Proposed Wage Index (CBSA 16974) ...... × 1.0486 Proposed Wage-Adjusted Labor Share of LTCH PPS Standard Federal Payment Rate ...... = $29,550.94 Proposed Nonlabor-Related Portion of the LTCH PPS Standard Federal Payment Rate ($42,314.31 × 0.334) ...... + $14,132.98 Proposed Adjusted LTCH PPS Standard Federal Payment Amount ...... = $43,683.92 Proposed MS–LTC–DRG 189 Relative Weight ...... × 0.9107 Total Proposed Adjusted LTCH PPS Standard Federal Prospective Payment ...... = $39,782.95

VI. Tables Referenced in This Proposed Rule quartile. However, as discussed in section Table 6H.2.—Proposed Principal Diagnosis and Available Only Through the Internet on IV.F. of the preamble of this proposed rule, Order Deletions to the CC Exclusions the CMS Web Site we are not providing the hospital-level data List—FY 2017 This section lists the tables referred to as a table associated with this proposed rule. Table 6I.—Proposed Complete Major throughout the preamble of this proposed The hospital-level data for the FY 2017 HAC Complication and Comorbidity (MCC) rule and in this Addendum. In the past, a Reduction Program will be made publicly List—FY 2017 majority of these tables were published in the available once it has undergone the review Table 6I.1.—Proposed Additions to the MCC Federal Register as part of the annual and corrections process. List—FY 2017 proposed and final rules. However, similar to Finally, a hospital’s Factor 3 is the Table 6I.2.—Proposed Deletions to the MCC FYs 2012 through 2016, for the FY 2017 proportion of the uncompensated care List—FY 2017 rulemaking cycle, the IPPS and LTCH tables amount that a DSH eligible hospital will Table 6J.—Proposed Complete Complication will not be published in the Federal Register receive under section 3133 of the Affordable and Comorbidity (CC) List—FY 2017 in the annual IPPS/LTCH PPS proposed and Care Act. Factor 3 is the hospital’s estimated Table 6J.1.—Proposed Additions to the CC final rules and will be available only through number of Medicaid days and Medicare SSI List—FY 2017 the Internet. Specifically, all IPPS tables days (or for a Puerto Rico hospital, a proxy Table 6J.2.—Proposed Deletions to the CC listed below, with the exception of IPPS for its Medicare SSI days) relative to the List—FY 2017 Tables 1A, 1B, 1C, and 1D, and LTCH PPS estimate of all DSH hospitals’ Medicaid days Table 6L.—Proposed Principal Diagnosis Is Table 1E will be available only through the and Medicare SSI days (or for Puerto Rico Its Own MCC List—FY 2017 Internet. IPPS Tables 1A, 1B, 1C, and 1D, and hospitals that are estimated to be eligible for Table 6M.—Proposed Principal Diagnosis Is LTCH PPS Table 1E are displayed at the end DSH payments, a proxy for their Medicare Its Own CC List—FY 2017 of this section and will continue to be SSI days). Table 18 associated with this Table 6M.1.—Proposed Additions to the published in the Federal Register as part of proposed rule contains the FY 2017 Medicare Principal Diagnosis Is Its Own CC List—FY the annual proposed and final rules. DSH uncompensated care payment Factor 3 2017 As discussed in the FY 2016 IPPS/LTCH for all hospitals and identifies whether or not Table 6P.—ICD–10–CM and ICD–10–PCS PPS final rule (80 FR 49807), we streamlined a hospital is projected to receive DSH and, Codes for Proposed MCE and MS–DRG and consolidated the wage index tables for therefore, eligible to receive the additional Changes—FY 2017 FY 2016 and subsequent fiscal years. payment for uncompensated care for FY Table 7A.—Medicare Prospective Payment As discussed in sections II.F.14., II.F.15.b., 2017. System Selected Percentile Lengths of Stay: II.F.16., II.F.17.a., and II.F.19.a.1., a.3., and Readers who experience any problems FY 2015 MedPAR Update—December 2015 c.1. of the preamble of this proposed rule, we accessing any of the tables that are posted on GROUPER V33.0 MS–DRGs developed the following ICD–10–CM and the CMS Web sites identified below should Table 7B.—Medicare Prospective Payment ICD–10–PCS code tables for FY 2017: Table contact Michael Treitel at (410) 786–4552. System Selected Percentile Lengths of Stay: 6A—New Diagnosis Codes; Table 6B—New The following IPPS tables for this FY 2017 FY 2015 MedPAR Update—December 2015 Procedure Codes; Table 6C—Invalid proposed rule are available only through the GROUPER V34.0 MS–DRGs Diagnosis Codes; Table 6G.1—Proposed Internet on the CMS Web site at: http://www. Table 8A.—Proposed FY 2017 Statewide Secondary Diagnosis Order Additions to the cms.gov/Medicare/Medicare-Fee-for-Service- Average Operating Cost-to-Charge Ratios CC Exclusion List; Table 6G.2—Proposed Payment/AcuteInpatientPPS/index.html. (CCRs) for Acute Care Hospitals (Urban Principal Diagnosis Order Additions to the Click on the link on the left side of the screen and Rural) CC Exclusion List; Table 6H.1—Proposed titled, ‘‘FY 2017 IPPS Proposed Rule Home Table 8B.—Proposed FY 2017 Statewide Secondary Diagnosis Order Deletions to the Page’’ or ‘‘Acute Inpatient—Files for Average Capital Cost-to-Charge Ratios CC Exclusion List; Table 6H.2—Proposed Download’’. (CCRs) for Acute Care Hospitals Principal Diagnosis Order Deletions to the CC Table 2.—Proposed Case-Mix Index and Table 10.—Proposed New Technology Add- Exclusion List; Table 6I—Proposed Complete Wage Index Table by CCN—FY 2017 On Payment Thresholds for Applications MCC List; Table 6I.1—Proposed Additions to Table 3.—Proposed Wage Index Table by for FY 2018 MCC List; Table 6I.2—Proposed Deletions to CBSA—FY 2017 Table 14.—List of Hospitals with Fewer Than MCC List; Table 6J—Proposed Complete CC Table 5.—Proposed List of Proposed 1,600 Medicare Discharges Based on the List; Table 6J.1—Proposed Additions to CC Medicare Severity Diagnosis-Related December 2015 Update of the FY 2015 List; Table 6J.2—Proposed Deletions to CC Groups (MS DRGs), Relative Weighting MedPAR File and Potentially Eligible List; Table 6L—Proposed Principal Diagnosis Factors, and Geometric and Arithmetic Hospitals for the Proposed FY 2017 Low Is Its Own MCC List; Table 6M—Proposed Mean Length of Stay—FY 2017 Volume Hospital Payment Adjustment Principal Diagnosis Is Its Own CC List; Table Table 6A.—New Diagnosis Codes for FY 2017 (eligibility for the low-volume hospital 6M.1—Proposed Additions to the Principal Table 6B.—New Procedure Codes for FY payment adjustment is also dependent Diagnosis Is Its Own CC List; and Table 6P— 2017 upon meeting the mileage criteria specified ICD–10–CM and ICD–10–PCS Codes for Table 6C.—Invalid Diagnosis Codes for FY at 42 CFR 412.101(b)(2)(ii).) Proposed MCE and MS–DRG Changes. Table 2017 Table 15.—Proposed FY 2017 Proxy 6P contains multiple tables, 6P.1a through Table 6G.1.—Proposed Secondary Diagnosis Readmissions Adjustment Factors 6P.4k, that include the ICD–10–CM and ICD– Order Additions to the CC Exclusions Table 16.—Proposed Proxy Hospital 10–PCS code lists and translations relating to List—FY 2017 Inpatient Value-Based Purchasing (VBP) specific MCE and MS–DRG proposed Table 6G.2.—Proposed Principal Diagnosis Adjustment Factors for FY 2017 changes. In addition, under the HAC Order Additions to the CC Exclusions Table 18.—Proposed FY 2017 Medicare DSH Reduction Program established by section List—FY 2017 Uncompensated Care Payment Factor 3 3008 of the Affordable Care Act, a hospital’s Table 6H.1.—Proposed Secondary Diagnosis The following LTCH PPS tables for this FY total payment may be reduced by 1 percent Order Deletions to the CC Exclusions 2017 proposed rule are available only if it is in the lowest HAC performance List—FY 2017 through the Internet on the CMS Web site at

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http://www.cms.gov/Medicare/Medicare-Fee- Length of Stay, Short-Stay Outlier (SSO) Table 12B.—Proposed LTCH PPS Wage Index for-Service-Payment/LongTermCareHospital Threshold, and ‘‘IPPS Comparable’’ for Rural Areas for Discharges Occurring PPS/index.html under the list item for Threshold for LTCH PPS Discharges from October 1, 2016 through September Regulation Number CMS–1655–P: Occurring from October 1, 2016 through 30, 2017 Table 8C.—Proposed FY 2017 Statewide September 30, 2017 Table 13A.—Proposed Composition of Low Average Total Cost-to-Charge Ratios (CCRs) Table 12A.—Proposed LTCH PPS Wage Volume Quintiles for MS–LTC–DRGs—FY for LTCHs (Urban and Rural) Index for Urban Areas for Discharges 2017 Table 11.—Proposed MS–LTC–DRGs, Occurring from October 1, 2016 through Table 13B.—Proposed No Volume MS LTC– Relative Weights, Geometric Average September 30, 2017 DRG Crosswalk for FY 2017

TABLE 1A—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (69.6 PERCENT LABOR SHARE/30.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2017

Hospital submitted quality data Hospital submitted quality data Hospital did NOT submit quality Hospital did NOT submit quality and is a meaningful EHR user and is NOT a meaningful EHR data and is a meaningful EHR data and is NOT a meaningful (update = 1.55 percent) user user EHR user (update = ¥0.55 percent) (update = 0.850 percent) (update = ¥1.25 percent) Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor

$3,836.20 $1,675.59 $3,756.87 $1,640.94 $3,809.76 $1,664.04 $3,730.43 $1,629.39

TABLE 1B—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN 1)—FY 2017

$3,417.31 $2,094.48 $3,346.64 $2,051.17 $3,393.76 $2,080.04 $3,323.09 $2,036.73

TABLE 1C—PROPOSED ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR HOSPITALS IN PUERTO RICO, LABOR/ NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2017

Rates if wage index is greater than 1 Rates if wage index is less Standardized amount than or equal to 1 Labor Nonlabor Labor Nonlabor

National1 ...... Not Applicable ...... Not Applicable ...... $3,417.31 $2,094.48 1 For FY 2017, there are no CBSAs in Puerto Rico with a national wage index greater than 1.

TABLE 1D—PROPOSED CAPITAL STANDARD FEDERAL PAYMENT RATE—FY 2017

Rate

National ...... $446.35

TABLE 1E—PROPOSED LTCH PPS STANDARD FEDERAL PAYMENT RATE—FY 2017

Full update Reduced update * (1.45 percent) (¥0.55 percent)

Standard Federal Rate ...... $42,314.31 $41,480.12 * For LTCHs that fail to submit quality reporting data for FY 2017 in accordance with the LTCH Quality Reporting Program (LTCH QRP), the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act.

Appendix A: Economic Analyses (September 30, 1993), Executive Order 13563 on Federalism (August 4, 1999), and the on Improving Regulation and Regulatory Congressional Review Act (5 U.S.C. 804(2)). I. Regulatory Impact Analysis Review (February 2, 2011), the Regulatory Executive Orders 12866 and 13563 direct A. Introduction Flexibility Act (RFA) (September 19, 1980, agencies to assess all costs and benefits of Pub. L. 96–354), section 1102(b) of the Social available regulatory alternatives and, if We have examined the impacts of this Security Act, section 202 of the Unfunded regulation is necessary, to select regulatory proposed rule as required by Executive Order Mandates Reform Act of 1995 (March 22, approaches that maximize net benefits 12866 on Regulatory Planning and Review 1995, Pub. L. 104–4), Executive Order 13132 (including potential economic,

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environmental, public health and safety accordance with the provisions of Executive reasonable costs, subject to a rate-of-increase effects, distributive impacts, and equity). Order 12866, the Executive Office of ceiling. Executive Order 13563 emphasizes the Management and Budget has reviewed this As of March 2016, there were 3,330 IPPS importance of quantifying both costs and proposed rule. acute care hospitals included in our analysis. benefits, of reducing costs, of harmonizing This represents approximately 55 percent of rules, and of promoting flexibility. A B. Statement of Need all Medicare-participating hospitals. The regulatory impact analysis (RIA) must be This proposed rule is necessary in order to majority of this impact analysis focuses on prepared for major rules with economically make payment and policy changes under the this set of hospitals. There also are significant effects ($100 million or more in Medicare IPPS for Medicare acute care approximately 1,374 CAHs. These small, any 1 year). hospital inpatient services for operating and limited service hospitals are paid on the basis We have determined that this proposed capital-related costs as well as for certain of reasonable costs rather than under the rule is a major rule as defined in 5 U.S.C. hospitals and hospital units excluded from IPPS. IPPS-excluded hospitals and units, 804(2). We estimate that the proposed the IPPS. This proposed rule also is which are paid under separate payment changes for FY 2017 acute care hospital necessary to make payment and policy systems, include IPFs, IRFs, LTCHs, RNHCIs, operating and capital payments would changes for Medicare hospitals under the children’s hospitals, 11 cancer hospitals, and redistribute amounts in excess of $100 LTCH PPS. 5 short-term acute care hospitals located in million to acute care hospitals. The the Virgin Islands, Guam, the Northern applicable percentage increase to the IPPS C. Objectives of the IPPS Mariana Islands, and American Samoa. rates required by the statute, in conjunction The primary objective of the IPPS is to Changes in the prospective payment systems with other proposed payment changes in this create incentives for hospitals to operate for IPFs and IRFs are made through separate proposed rule, would result in an estimated efficiently and minimize unnecessary costs rulemaking. Payment impacts of changes to $693 million increase in FY 2017 proposed while at the same time ensuring that the prospective payment systems for these operating payments (or 0.7 percent change) payments are sufficient to adequately IPPS-excluded hospitals and units are not and an estimated $164 million increase in FY compensate hospitals for their legitimate included in this proposed rule. The impact 2017 proposed capital payments (or 2.0 costs in delivering necessary care to of the proposed update and proposed policy percent change). These proposed changes are Medicare beneficiaries. In addition, we share changes to the LTCH PPS for FY 2017 is relative to payments made in FY 2016. The national goals of preserving the Medicare discussed in section I.J. of this Appendix. impact analysis of the proposed capital Hospital Insurance Trust Fund. payments can be found in section I.I. of this F. Effects on Hospitals and Hospital Units We believe that the changes in this Excluded From the IPPS Appendix. In addition, as described in proposed rule would further each of these section I.J. of this Appendix, LTCHs are goals while maintaining the financial As of March 2016, there were 98 children’s expected to experience a decrease in viability of the hospital industry and hospitals, 11 cancer hospitals, 5 short-term payments by $355 million in FY 2017 ensuring access to high quality health care acute care hospitals located in the Virgin relative to FY 2016. for Medicare beneficiaries. We expect that Islands, Guam, the Northern Mariana Islands Our operating impact estimate includes the these proposed changes will ensure that the and American Samoa, and 18 RNHCIs being proposed ¥1.5 percent documentation and outcomes of the prospective payment paid on a reasonable cost basis subject to the coding adjustment applied to the IPPS systems are reasonable and equitable while rate-of-increase ceiling under § 413.40. (In standardized amount, as discussed in section avoiding or minimizing unintended adverse accordance with § 403.752(a) of the II.D. of the preamble of this proposed rule, consequences. regulation, RNHCIs are paid under § 413.40.) which represents part of the recoupment Among the remaining providers, 262 required under section 631 of the ATRA. In D. Limitations of Our Analysis rehabilitation hospitals and 869 addition, our operating payment impact The following quantitative analysis rehabilitation units, and approximately 430 estimate includes the proposed 1.55 percent presents the projected effects of our proposed LTCHs, are paid the Federal prospective per hospital update to the standardized amount policy changes, as well as statutory changes discharge rate under the IRF PPS and the (which includes the estimated 2.8 percent effective for FY 2017, on various hospital LTCH PPS, respectively, and 495 psychiatric market basket update less 0.5 percentage groups. We estimate the effects of individual hospitals and 1,122 psychiatric units are paid point for the proposed multifactor proposed policy changes by estimating the Federal per diem amount under the IPF productivity adjustment and less 0.75 payments per case while holding all other PPS. As stated previously, IRFs and IPFs are percentage point required under the payment policies constant. We use the best not affected by the rate updates discussed in Affordable Care Act). Our operating payment data available, but, generally, we do not this proposed rule. The impacts of the impact estimate also includes a proposed attempt to make adjustments for future changes on LTCHs are discussed in section adjustment of (1/0.998) to permanently changes in such variables as admissions, I.J. of this Appendix. remove the ¥0.2 percent reduction and a lengths of stay, or case-mix. For children’s hospitals, the 11 cancer proposed 1.006 temporary adjustment to hospitals, the 5 short-term acute care address the effects of the 0.2 percent E. Hospitals Included in and Excluded From hospitals located in the Virgin Islands, Guam, reduction in effect for FYs 2014 through 2016 the IPPS the Northern Mariana Islands, and American as a result of the 2-midnight policy (we refer The prospective payment systems for Samoa, and RNHCIs, the update of the rate- readers to section IV.O. of the preamble of hospital inpatient operating and capital- of-increase limit (or target amount) is the this proposed rule for an explanation of these related costs of acute care hospitals estimated FY 2017 percentage increase in the proposed adjustments). The estimates of IPPS encompass most general short-term, acute IPPS operating market basket, consistent with operating payments to acute care hospitals do care hospitals that participate in the section 1886(b)(3)(B)(ii) of the Act, and not reflect any changes in hospital Medicare program. There were 31 Indian §§ 403.752(a) and 413.40 of the regulations. admissions or real case-mix intensity, which Health Service hospitals in our database, As discussed in section IV. of the preamble will also affect overall proposed payment which we excluded from the analysis due to of the FY 2014 IPPS/LTCH PPS final rule, we changes. the special characteristics of the prospective rebased the IPPS operating market basket to The analysis in this Appendix, in payment methodology for these hospitals. a FY 2010 base year. Therefore, we are using conjunction with the remainder of this Among other short-term, acute care hospitals, the percentage increase in the FY 2010-based document, demonstrates that this proposed hospitals in Maryland are paid in accordance IPPS operating market basket to update the rule is consistent with the regulatory with the Maryland All-Payer Model, and target amounts for FY 2017 and subsequent philosophy and principles identified in hospitals located outside the 50 States, the fiscal years for children’s hospitals, the 11 Executive Orders 12866 and 13563, the RFA, District of Columbia, and Puerto Rico (that is, cancer hospitals, the 5 short-term acute care and section 1102(b) of the Act. This proposed 5 short-term acute care hospitals located in hospitals located in the Virgin Islands, Guam, rule would affect payments to a substantial the U.S. Virgin Islands, Guam, the Northern the Northern Mariana Islands, and American number of small rural hospitals, as well as Mariana Islands, and American Samoa) Samoa, and RNHCIs that are paid based on other classes of hospitals, and the effects on receive payment for inpatient hospital reasonable costs subject to the rate-of- some hospitals may be significant. Finally, in services they furnish on the basis of increase limits. Consistent with current law,

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based on IHS Global Insight, Inc.’s first FY 2017 recoupment adjustment for • The effects of the proposed application quarter 2016 forecast of the FY 2010-based documentation and coding described in of the documentation and coding adjustment IPPS market basket increase, we are section II.D. of the preamble of this proposed and the applicable percentage increase estimating the FY 2017 update to be 2.8 rule of ¥1.5 percent to the IPPS national (including the proposed market basket percent (that is, the current estimate of the standardized amounts. This amount also update, the proposed multifactor market basket rate-of-increase). However, the reflects the proposed adjustment of (1/0.998) productivity adjustment, and the applicable Affordable Care Act requires an adjustment to permanently remove the 0.2 percent percentage reduction in accordance with the for multifactor productivity (currently reduction and the proposed 1.006 temporary Affordable Care Act) to the standardized estimated to be 0.5 percentage point for FY adjustment to address the effects of the 0.2 amount and hospital-specific rates. 2017) and a 0.75 percentage point reduction percent reduction in effect for FYs 2014 • The effects of the proposed adjustment of to the market basket update, resulting in a through 2016 related to the 2-midnight (1/0.998) to permanently remove the 0.2 1.55 percent applicable percentage increase policy, which are discussed in section IV.O. percent reduction and the proposed 1.006 for IPPS hospitals that submit quality data of the preamble of this proposed rule. The temporary adjustment to address the effects and are meaningful EHR users, as discussed impacts do not reflect changes in the number of the 0.2 percent reduction in effect for FYs in section IV.B. of the preamble of this of hospital admissions or real case-mix 2014 through 2016 related to the 2-midnight proposed rule. Children’s hospitals, the 11 intensity, which would also affect overall policy, as discussed in section IV.O. of the cancer hospitals, the 5 short-term acute care proposed payment changes. preamble of this proposed rule. hospitals located in the Virgin Islands, Guam, We have prepared separate impact analyses • The effects of the proposed changes to the Northern Mariana Islands, and American of the proposed changes to each system. This the relative weights and MS–DRG GROUPER. Samoa, and RNHCIs that continue to be paid section deals with the proposed changes to • The effects of the proposed changes in based on reasonable costs subject to rate-of- the operating inpatient prospective payment hospitals’ wage index values reflecting increase limits under § 413.40 of the system for acute care hospitals. Our payment updated wage data from hospitals’ cost regulations are not subject to the reductions simulation model relies on the most recent reporting periods beginning during FY 2013, in the applicable percentage increase available data to enable us to estimate the compared to the FY 2012 wage data, to required under the Affordable Care Act. impacts on payments per case of certain calculate the FY 2017 wage index. Therefore, for those hospitals paid under changes in this proposed rule. However, • The effects of the geographic § 413.40 of the regulations, the update is the there are other proposed changes for which reclassifications by the MGCRB (as of percentage increase in the FY 2010-based we do not have data available that would publication of this proposed rule) that would IPPS operating market basket for FY 2017, allow us to estimate the payment impacts be effective for FY 2017. estimated at 2.8 percent, without the using this model. For those proposed • The effects of the proposed rural floor reductions described previously under the changes, we have attempted to predict the and imputed floor with the application of the Affordable Care Act. payment impacts based upon our experience proposed national budget neutrality factor to The impact of the update in the rate-of- and other more limited data. the wage index. increase limit on those excluded hospitals The data used in developing the • The effects of the last year of the 3-year depends on the cumulative cost increases quantitative analyses of proposed changes in transition for hospitals that were located in experienced by each excluded hospital since payments per case presented in this section an urban county that became rural under the its applicable base period. For excluded are taken from the FY 2015 MedPAR file and new OMB delineations or hospitals that were hospitals that have maintained their cost the most current Provider-Specific File (PSF) deemed urban where the urban area became increases at a level below the rate-of-increase that is used for payment purposes. Although rural under the new OMB delineations. limits since their base period, the major effect the analyses of the proposed changes to the • The effects of the proposed frontier State is on the level of incentive payments these operating PPS do not incorporate cost data, wage index adjustment under the statutory excluded hospitals receive. Conversely, for data from the most recently available hospital provision that requires that hospitals located excluded hospitals with cost increases above cost reports were used to categorize in States that qualify as frontier States to not the cumulative update in their rate-of- hospitals. Our analysis has several have a wage index less than 1.0. This increase limits, the major effect is the amount qualifications. First, in this analysis, we do provision is not budget neutral. of excess costs that would not be paid. not make adjustments for future changes in • The effects of the implementation of We note that, under § 413.40(d)(3), an such variables as admissions, lengths of stay, section 1886(d)(13) of the Act, as added by excluded hospital that continues to be paid or underlying growth in real case-mix. section 505 of Public Law 108–173, which under the TEFRA system and whose costs Second, due to the interdependent nature of provides for an increase in a hospital’s wage exceed 110 percent of its rate-of-increase the IPPS payment components, it is very index if a threshold percentage of residents limit receives its rate-of-increase limit plus difficult to precisely quantify the impact of the county where the hospital is located the lesser of: (1) 50 percent of its reasonable associated with each proposed change. Third, commute to work at hospitals in counties costs in excess of 110 percent of the limit; or we use various data sources to categorize with higher wage indexes. This provision is (2) 10 percent of its limit. In addition, under hospitals in the tables. In some cases, not budget neutral. the various provisions set forth in § 413.40, particularly the number of beds, there is a • The total estimated change in payments hospitals can obtain payment adjustments for fair degree of variation in the data from the based on the proposed FY 2017 policies justifiable increases in operating costs that different sources. We have attempted to relative to payments based on FY 2016 exceed the limit. construct these variables with the best policies that include the applicable G. Quantitative Effects of the Proposed Policy available source overall. However, for percentage increase of 1.55 percent (or 2.8 Changes Under the IPPS for Operating Costs individual hospitals, some percent market basket update with a miscategorizations are possible. proposed reduction of 0.5 percentage point 1. Basis and Methodology of Estimates Using cases from the FY 2015 MedPAR for the multifactor productivity adjustment, In this proposed rule, we are announcing file, we simulate payments under the and a 0.75 percentage point reduction, as proposed policy changes and proposed operating IPPS given various combinations of required under the Affordable Care Act). payment rate updates for the IPPS for FY payment parameters. As described To illustrate the impact of the proposed FY 2017 for operating costs of acute care previously, Indian Health Service hospitals 2017 changes, our analysis begins with a FY hospitals. The proposed FY 2017 updates to and hospitals in Maryland were excluded 2016 baseline simulation model using: The the capital payments to acute care hospitals from the simulations. The proposed impact FY 2016 applicable percentage increase of 1.7 are discussed in section I.I. of this Appendix. of payments under the capital IPPS, or the percent and the documentation and coding Based on the overall percentage change in impact of payments for costs other than recoupment adjustment of ¥0.8 percent to payments per case estimated using our inpatient operating costs, are not analyzed in the Federal standardized amount; the FY payment simulation model, we estimate that this section. Estimated payment impacts of 2016 MS–DRG GROUPER (Version 33); the total FY 2017 operating payments would the capital IPPS for FY 2017 are discussed in FY 2016 CBSA designations for hospitals increase by 0.7 percent compared to FY 2016. section I.I. of this Appendix. based on the new OMB definitions; the FY In addition to the applicable percentage We discuss the following proposed 2016 wage index; and no MGCRB increase, this amount reflects the proposed changes: reclassifications. Outlier payments are set at

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5.1 percent of total operating MS–DRG and Each proposed policy change, statutory or table categorizes hospitals by various outlier payments for modeling purposes. otherwise, is then added incrementally to geographic and special payment Section 1886(b)(3)(B)(viii) of the Act, as this baseline, finally arriving at an FY 2017 consideration groups to illustrate the varying added by section 5001(a) of Public Law 109– model incorporating all of the proposed impacts on different types of hospitals. The 171, as amended by section 4102(b)(1)(A) of changes. This simulation would allow us to top row of the table shows the overall impact the ARRA (Pub. L. 111–5) and by section isolate the effects of each proposed change. on the 3,330 acute care hospitals included in 3401(a)(2) of the Affordable Care Act (Pub. L. Our final comparison illustrates the the analysis. 111–148), provides that, for FY 2007 and percent change in payments per case from FY The next four rows of Table I contain each subsequent year through FY 2014, the 2016 to FY 2017. Three factors not discussed hospitals categorized according to their update factor will include a reduction of 2.0 separately have significant impacts here. The geographic location: All urban, which is percentage points for any subsection (d) first factor is the proposed update to the further divided into large urban and other hospital that does not submit data on standardized amount. In accordance with urban; and rural. There are 2,512 hospitals measures in a form and manner and at a time section 1886(b)(3)(B)(i) of the Act, we are located in urban areas included in our specified by the Secretary. Beginning in FY proposing to update the standardized analysis. Among these, there are 1,378 2015, the reduction is one-quarter of such amounts for FY 2017 using a proposed hospitals located in large urban areas applicable percentage increase determined applicable percentage increase of 1.55 (populations over 1 million), and 1,134 without regard to section 1886(b)(3)(B)(ix), percent. This includes our forecasted IPPS hospitals in other urban areas (populations of (xi), or (xii) of the Act, or one-quarter of the operating hospital market basket increase of 1 million or fewer). In addition, there are 818 market basket update. Therefore, for FY 2017, 2.8 percent with a reduction of 0.5 hospitals in rural areas. The next two we are proposing that hospitals that do not percentage point for the multifactor groupings are by bed-size categories, shown submit quality information under rules productivity adjustment and a 0.75 separately for urban and rural hospitals. The established by the Secretary and that are percentage point reduction as required under final groupings by geographic location are by meaningful EHR users under section the Affordable Care Act. Hospitals that fail to census divisions, also shown separately for 1886(b)(3)(B)(ix) of the Act would receive an comply with the quality data submission urban and rural hospitals. applicable percentage increase of 0.85 requirements and are meaningful EHR users The second part of Table I shows hospital percent. At the time that this impact was would receive a proposed update of 0.85 groups based on hospitals’ FY 2017 proposed prepared, 90 hospitals are estimated to not percent. This update includes a reduction of receive the full market basket rate-of-increase payment classifications, including any one-quarter of the market basket update for reclassifications under section 1886(d)(10) of for FY 2016 because they failed the quality failure to submit these data. Hospitals that do data submission process or did not choose to the Act. For example, the rows labeled urban, comply with the quality data submission large urban, other urban, and rural show that participate but are meaningful EHR users. For requirements but are not meaningful EHR purposes of the simulations shown later in ¥ the numbers of hospitals paid based on these users would receive an update of 0.55 categorizations after consideration of this section, we modeled the proposed percent, which includes a reduction of three- geographic reclassifications (including payment changes for FY 2017 using a quarters of the market basket update. reclassifications under sections 1886(d)(8)(B) reduced update for these 90 hospitals. Furthermore, hospitals that do not comply and 1886(d)(8)(E) of the Act that have For FY 2017, in accordance with section with the quality data submission implications for capital payments) are 2,455; 1886(b)(3)(B)(ix) of the Act, a hospital that requirements and also are not meaningful 1,372; 1,083; and 875, respectively. has been identified as not a meaningful EHR EHR users would receive an update of ¥1.25 The next three groupings examine the user would be subject to a reduction of three- percent. Under section 1886(b)(3)(B)(iv) of impacts of the proposed changes on hospitals quarters of such applicable percentage the Act, the update to the hospital-specific grouped by whether or not they have GME increase determined without regard to amounts for SCHs and MDHs also is equal to residency programs (teaching hospitals that section 1886(b)(3)(B)(ix), (xi), or (xii) of the the applicable percentage increase, or 1.55 receive an IME adjustment) or receive Act. Therefore, for FY 2017, we are proposing percent if the hospital submits quality data that hospitals that are identified as not and is a meaningful EHR user. Medicare DSH payments, or some meaningful EHR users and do submit quality A second significant factor that affects the combination of these two adjustments. There information under section 1886(b)(3)(B)(viii) proposed changes in hospitals’ payments per are 2,275 nonteaching hospitals in our of the Act would receive an applicable case from FY 2016 to FY 2017 is the change analysis, 804 teaching hospitals with fewer ¥ percentage increase of 0.55 percent. At the in hospitals’ geographic reclassification than 100 residents, and 251 teaching time that this impact analysis was prepared, status from one year to the next. That is, hospitals with 100 or more residents. 147 hospitals are estimated to not receive the payments may be reduced for hospitals In the DSH categories, hospitals are full market basket rate-of-increase for FY reclassified in FY 2016 that are no longer grouped according to their DSH payment 2017 because they are identified as not reclassified in FY 2017. Conversely, status, and whether they are considered meaningful EHR users that do submit quality payments may increase for hospitals not urban or rural for DSH purposes. The next information under section 1886(b)(3)(B)(viii) reclassified in FY 2016 that are reclassified category groups together hospitals considered of the Act. For purposes of the simulations in FY 2017. urban or rural, in terms of whether they shown in this section, we modeled the A third significant factor is that we receive the IME adjustment, the DSH proposed payment changes for FY 2017 using currently estimate that actual outlier adjustment, both, or neither. a reduced update for these 147 hospitals. payments during FY 2016 would be 5.3 The next three rows examine the impacts Hospitals that are identified as not percent of total MS–DRG payments. When of the proposed changes on rural hospitals by meaningful EHR users under section the FY 2016 IPPS/LTCH PPS final rule was special payment groups (SCHs, RRCs, and 1886(b)(3)(B)(ix) of the Act and also do not published, we projected FY 2016 outlier MDHs). There were 193 RRCs, 326 SCHs, 146 submit quality data under section payments would be 5.1 percent of total MS– MDHs, 126 hospitals that are both SCHs and 1886(b)(3)(B)(viii) of the Act would receive DRG plus outlier payments; the average RRCs, and 15 hospitals that are both MDHs ¥ an applicable percentage increase of 1.25 standardized amounts were offset and RRCs. percent, which reflects a one-quarter correspondingly. The effects of the higher The next series of groupings are based on reduction of the market basket update for than expected outlier payments during FY the type of ownership and the hospital’s failure to submit quality data and a three- 2016 are reflected in the analyses in this Medicare utilization expressed as a percent quarter reduction of the market basket update section comparing our current estimates of of total patient days. These data were taken for being identified as not a meaningful EHR FY 2016 payments per case to estimated FY from the FY 2013 or FY 2012 Medicare cost user. At the time that this impact was 2017 payments per case (with outlier reports. prepared, 30 hospitals are estimated to not payments projected to equal 5.1 percent of The next two groupings concern the receive the full market basket rate-of-increase total MS–DRG payments). geographic reclassification status of for FY 2017 because they are identified as not hospitals. The first grouping displays all meaningful EHR users that do not submit 2. Analysis of Table I urban hospitals that were reclassified by the quality data under section 1886(b)(3)(B)(viii) Table I displays the results of our analysis MGCRB for FY 2017. The second grouping of the Act. of the proposed changes for FY 2017. The shows the MGCRB rural reclassifications.

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TABLE I—IMPACT ANALYSIS OF PROPOSED CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2017

Proposed FY Proposed FY Proposed rural Proposed 2017 weights 2017 wage and imputed Proposed ap- hospital rate and DRG data under floor with application of the Number of update and changes with new CBSA FY 2017 plication of frontier wage All proposed 1 designations MGCRB FY 2017 hospitals documentation application of with applica- reclassifications national rural index and changes and coding recalibration tion of wage and imputed out-migration adjustment budget budget floor budget adjustment neutrality neutrality neutrality

(1) 2 (2) 3 (3) 4 (4) 5 (5) 6 (6) 7 (7) 8

All Hospitals ...... 3,330 0.9 0 0 0 0 0.1 0.7 By Geographic Location: Urban hospitals ...... 2,512 0.8 0 0 ¥0.1 0 0.1 0.6 Large urban areas ...... 1,378 0.8 0.1 0 ¥0.3 ¥0.1 0 0.6 Other urban areas ...... 1,134 0.9 0 0 0.1 0.2 0.2 0.7 Rural hospitals ...... 818 1.5 ¥0.4 0.1 1.4 ¥0.2 0.1 0.8 Bed Size (Urban): 0–99 beds ...... 656 0.8 ¥0.2 0.2 ¥0.5 0.1 0.2 0.7 100–199 beds ...... 765 0.9 ¥0.2 0 0 0.3 0.2 0.5 200–299 beds ...... 449 0.9 ¥0.1 ¥0.1 0.1 0 0.1 0.5 300–499 beds ...... 429 0.9 0.1 0.1 ¥0.2 0 0.2 0.7 500 or more beds ...... 213 0.8 0.2 ¥0.1 ¥0.2 ¥0.1 0 0.8 Bed Size (Rural): 0–49 beds ...... 320 1.3 ¥0.5 0.1 0.3 ¥0.2 0.3 0.6 50–99 beds ...... 292 1.7 ¥0.6 0.1 0.8 ¥0.1 0.1 0.8 100–149 beds ...... 119 1.5 ¥0.4 0 1.5 ¥0.2 0.2 0.6 150–199 beds ...... 46 1.5 ¥0.2 0.1 1.7 ¥0.2 0 1.0 200 or more beds ...... 41 1.5 ¥0.1 0.2 2.5 ¥0.2 0 1.2 Urban by Region: New England ...... 116 0.7 0 ¥0.4 1.3 0.8 0 ¥0.6 Middle Atlantic ...... 315 0.8 0.1 ¥0.3 0.5 ¥0.2 0.1 0.2 South Atlantic ...... 406 0.9 0 ¥0.1 ¥0.4 ¥0.2 0.1 0.8 East North Central ...... 390 0.8 0 0.1 ¥0.2 ¥0.3 0 1.1 East South Central ...... 147 0.9 0 ¥0.2 ¥0.4 ¥0.3 0 1.0 West North Central ...... 163 1 0.1 0 ¥0.7 ¥0.3 0.7 0.9 West South Central ...... 384 0.8 0 0.3 ¥0.4 ¥0.3 0 1.2 Mountain ...... 163 1 0 0.2 ¥0.4 0 0.2 0.7 Pacific ...... 377 0.8 0 0.4 ¥0.4 1.1 0.1 0.4 Puerto Rico ...... 51 0.8 0.1 ¥0.4 ¥0.9 0.2 0.1 0.3 Rural by Region: New England ...... 21 1.2 ¥0.2 0.4 1.5 ¥0.2 0 1.2 Middle Atlantic ...... 55 1.7 ¥0.4 0.1 0.6 ¥0.1 0.1 0.9 South Atlantic ...... 127 1.4 ¥0.4 ¥0.1 2.5 ¥0.2 0.1 0.8 East North Central ...... 115 1.6 ¥0.4 0 1 ¥0.1 0 0.9 East South Central ...... 156 1 ¥0.3 0.4 2.1 ¥0.3 0.1 0.7 West North Central ...... 99 2.1 ¥0.4 0 0.3 ¥0.1 0.3 1.0 West South Central ...... 161 1.6 ¥0.5 0.2 1.6 ¥0.2 0.1 0.9 Mountain ...... 60 1.6 ¥0.4 0.1 0.2 ¥0.1 0.1 0.7 Pacific ...... 24 1.7 ¥0.5 ¥0.2 1.3 ¥0.1 0 0.8 By Payment Classification: Urban hospitals ...... 2,455 0.8 0 0 ¥0.1 0 0.1 0.6 Large urban areas ...... 1,372 0.8 0.1 0 ¥0.3 ¥0.1 0 0.6 Other urban areas ...... 1,083 0.9 0 0 0.2 0.2 0.2 0.7 Rural areas ...... 875 1.6 ¥0.4 0.1 1.1 ¥0.1 0.3 0.9 Teaching Status: Nonteaching ...... 2,275 1 ¥0.2 0 0.2 0.1 0.1 0.6 Fewer than 100 residents 804 0.9 0 0 ¥0.1 0 0.2 0.7 100 or more residents ...... 251 0.8 0.2 ¥0.1 ¥0.1 ¥0.2 0 0.8 Urban DSH: Non-DSH ...... 597 0.9 0 ¥0.1 0.1 ¥0.1 0.1 0.5 100 or more beds ...... 1,608 0.8 0.1 0 ¥0.1 0 0.1 0.7 Less than 100 beds ...... 330 0.8 ¥0.3 0.1 ¥0.6 0.1 0.1 0.5 Rural DSH: SCH ...... 266 2 ¥0.5 0.1 0 0 0 0.9 RRC ...... 347 1.5 ¥0.3 0.1 1.5 ¥0.2 0.3 0.9 100 or more beds ...... 33 0.8 ¥0.4 ¥0.1 2.9 ¥0.3 0.1 0.5 Less than 100 beds ...... 149 0.7 ¥0.4 0.1 1.4 ¥0.3 0.5 0.2 Urban teaching and DSH: Both teaching and DSH ... 880 0.8 0.1 0 ¥0.2 ¥0.1 0.1 0.7 Teaching and no DSH ..... 107 0.8 0 0 0.7 ¥0.1 0 0.2 No teaching and DSH ...... 1,058 0.8 ¥0.1 0.1 0 0.2 0.1 0.5 No teaching and no DSH 410 0.8 0 ¥0.1 ¥0.3 0 0.1 0.7 Special Hospital Types: RRC ...... 193 0.8 ¥0.1 0.2 2 ¥0.1 0.4 1.1 SCH ...... 326 2 ¥0.3 ¥0.1 0 0 0 1.0 MDH ...... 146 1.6 ¥0.6 0 0.5 ¥0.1 0.2 0.8 SCH and RRC ...... 126 2 ¥0.3 0.1 0.4 ¥0.1 0 1.2 MDH and RRC ...... 15 1.8 ¥0.5 ¥0.1 0.8 ¥0.1 0 1.3 Type of Ownership: Voluntary ...... 1,914 0.9 0 0 0 0 0.1 0.7 Proprietary ...... 858 0.9 0 0.1 0.1 0 0.1 0.8 Government ...... 516 0.9 0 ¥0.2 ¥0.2 0.1 0.1 0.5

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TABLE I—IMPACT ANALYSIS OF PROPOSED CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2017—Continued

(1) 2 (2) 3 (3) 4 (4) 5 (5) 6 (6) 7 (7) 8

Medicare Utilization as a Per- cent of Inpatient Days: 0–25 ...... 517 0.7 0.1 0 ¥0.4 0.1 0 0.7 25–50 ...... 2,128 0.9 0 0 0 0 0.1 0.7 50–65 ...... 546 1.1 ¥0.2 ¥0.1 0.6 0.1 0.1 0.5 Over 65 ...... 94 1.1 ¥0.3 0.3 ¥0.5 0.3 0.2 0.9 FY 2017 Reclassifications by the Medicare Geographic Classification Review Board: All Reclassified Hospitals 853 0.9 0 0 2.1 ¥0.1 0 0.6 Non-Reclassified Hos- pitals ...... 2,477 0.9 0 0 ¥0.9 0 0.1 0.7 Urban Hospitals Reclassi- fied ...... 576 0.8 0 0 2 ¥0.1 0 0.5 Urban Nonreclassified Hospitals ...... 1,879 0.8 0.1 0 ¥0.9 0.1 0.1 0.7 Rural Hospitals Reclassi- fied Full Year ...... 277 1.6 ¥0.3 0.1 2.3 ¥0.2 0 1.0 Rural Nonreclassified Hospitals Full Year ...... 484 1.5 ¥0.5 0.2 ¥0.2 ¥0.1 0.3 0.7 All Section 401 Reclassi- fied Hospitals: ...... 57 1.7 ¥0.2 0.2 ¥0.4 0 1.2 1.0 Other Reclassified Hos- pitals (Section 1886(d)(8)(B)) ...... 57 1.2 ¥0.4 0.1 3 ¥0.3 0 0.6 1 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Dis- charge data are from FY 2015, and hospital cost report data are from reporting periods beginning in FY 2012 and FY 2013. 2 This column displays the payment impact of the proposed hospital rate update and other proposed adjustments including the proposed 1.55 percent adjustment to the national standardized amount and hospital-specific rate (the estimated 2.8 percent market basket update reduced by the 0.5 percentage point for the proposed multifactor productivity adjustment and the 0.75 percentage point reduction under the Affordable Care Act), the ¥1.5 percent proposed documentation and coding adjustment to the national standardized amount and the proposed adjustment of (1/0.998) to permanently remove the ¥0.2 percent reduction, and the proposed 1.006 temporary adjustment to address the effects of the 0.2 percent reduction in effect for FYs 2014 through 2016 related to the 2-midnight policy. 3 This column displays the payment impact of the proposed changes to the Version 34 GROUPER, the proposed changes to the relative weights and the recalibration of the MS–DRG weights based on FY 2015 MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the proposed recalibration budget neutrality factor of 0.999006 in accordance with section 1886(d)(4)(C)(iii) of the Act. 4 This column displays the payment impact of the proposed update to wage index data using FY 2013 cost report data and the OMB labor market area delineations based on 2010 Decennial Census data. This column displays the payment impact of the application of the proposed wage budget neutrality factor, which is calculated separately from the proposed recalibration budget neutrality factor, and is calculated in accordance with section 1886(d)(3)(E)(i) of the Act. The proposed wage budget neutrality factor is 0.999785. 5 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) along with the effects of the continued implementation of the new OMB labor market area delineations on these reclassifications. The effects demonstrate the FY 2017 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2017. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects the proposed geographic budget neutrality factor of 0.988816. 6 This column displays the effects of the proposed rural and imputed floor based on the continued implementation of the new OMB labor market area delineations. The Affordable Care Act requires the rural floor budget neutrality adjustment to be 100 percent national level adjustment. The proposed rural floor budget neutrality factor (which includes the proposed imputed floor) applied to the wage index is 0.993806. This column also shows the effect of the 3-year transition for hospitals that were located in urban counties that became rural under the new OMB delineations or hospitals deemed urban where the urban area became rural under the new OMB delineations, with a proposed budget neutrality factor of 0.999999. 7 This column shows the combined impact of the policy required under section 10324 of the Affordable Care Act that hospitals located in frontier States have a wage index no less than 1.0 and of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, which provides for an increase in a hospital’s wage index if a threshold percentage of residents of the county where the hospital is located commute to work at hospitals in counties with higher wage indexes. These are non-budget neutral policies. 8 This column shows the proposed changes in payments from FY 2016 to FY 2017. It reflects the impact of the proposed FY 2017 hospital update and the proposed adjustment for documentation and coding. It also reflects proposed changes in hospitals’ reclassification status in FY 2017 compared to FY 2016. It incorporates all of the proposed changes displayed in Columns 1 through 6. The sum of these impacts may be different from the proposed percentage changes shown here due to rounding and interactive effects.

a. Effects of the Proposed Hospital Update, proposed FY 2017 documentation and coding includes the proposed 1.55 percent update to Documentation and Coding Adjustment, and recoupment adjustment of ¥1.5 percent on the hospital-specific rates which includes the Other Adjustments (Column 1) the national standardized amount as part of proposed 2.8 percent market basket update, As discussed in section IV.B. of the the recoupment required by section 631 of the proposed reduction of 0.5 percentage the ATRA and, as discussed in section IV.O. point for the multifactor productivity preamble of this proposed rule, this column of the preamble of this proposed rule, the adjustment, the 0.75 percentage point includes the proposed hospital update, proposed adjustment of (1/0.998) to reduction in accordance with the Affordable including the proposed 2.8 percent market permanently remove the 0.2 percent Care Act. In addition, this column includes basket update, the proposed reduction of 0.5 reduction and the proposed 1.006 temporary the proposed adjustment to the hospital- percentage point for the multifactor adjustment to address the effects of the 0.2 specific rates of (1/0.998) to permanently productivity adjustment, and the 0.75 percent reduction in effect for FYs 2014 remove the ¥0.2 percent reduction and the percentage point reduction in accordance through 2016 related to the 2-midnight proposed 1.006 temporary adjustment to with the Affordable Care Act. In addition, as policy. As a result, we are proposing to make address the effects of the 0.2 percent discussed in section II.D. of the preamble of a 0.9 percent update to the national reduction in effect for FYs 2014 through this proposed rule, this column includes the standardized amount. This column also 2016, which are discussed in section IV.O. of

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the preamble of this proposed rule. As a c. Effects of the Proposed Wage Index equal to 1.0. In other words, the wage budget result, we are proposing to make a 2.35 Changes (Column 3) neutrality is calculated under the assumption percent update to the hospital-specific rates. Column 3 shows the impact of updated that all hospitals receive the higher labor- Overall, hospitals would experience a 0.9 wage data using FY 2013 cost report data, related share of the standardized amount. percent increase in payments primarily due with the application of the wage budget The proposed FY 2017 wage budget to the combined effects of the proposed neutrality factor. The wage index is neutrality factor is 0.999785, and the overall hospital update and the proposed calculated and assigned to hospitals on the payment change is 0.0 percent. documentation and coding adjustment on the basis of the labor market area in which the Column 3 shows the impacts of updating national standardized amount and the hospital is located. Under section the wage data using FY 2013 cost reports. proposed hospital update to the hospital- 1886(d)(3)(E) of the Act, beginning with FY Overall, the new wage data and the labor- specific rate as well as the proposed 2005, we delineate hospital labor market related share, combined with the proposed adjustment of (1/0.998) to permanently wage budget neutrality adjustment, would ¥ areas based on the Core Based Statistical remove the 0.2 percent reduction and the Areas (CBSAs) established by OMB. The lead to no change for all hospitals as shown proposed 1.006 temporary adjustment to current statistical standards used in FY 2017 in Column 3. address the effects of the 0.2 percent are based on OMB standards published on In looking at the wage data itself, the reduction in effect for FYs 2014 through 2016 February 28, 2013 (75 FR 37246 and 37252), proposed national average hourly wage related to the 2-midnight policy to both the and 2010 Decennial Census data (OMB would increase 1.02 percent compared to FY national standardized amount and the Bulletin No. 13–01). (We refer readers to the 2016. Therefore, the only manner in which hospital-specific rate. Hospitals that are paid FY 2015 IPPS/LTCH PPS final rule (79 FR to maintain or exceed the previous year’s under the hospital-specific rate, namely 49951 through 49963) for a full discussion on wage index was to match or exceed the SCHs, would experience a 2.0 percent our adoption of the OMB labor market area national 1.02 percent increase in average increase in payments; therefore, hospital delineations based on the 2010 Decennial hourly wage. Of the 3,303 hospitals with categories with SCHs paid under the Census data, effective beginning with the FY wage data for both FYs 2016 and 2017, 1.634 hospital-specific rate would experience 2015 IPPS wage index). or 49.5 percent would experience an average increases in payments of more than 0.9 Section 1886(d)(3)(E) of the Act requires hourly wage increase of 1.02 percent or more. percent. that, beginning October 1, 1993, we annually The following chart compares the shifts in b. Effects of the Proposed Changes to the MS– update the wage data used to calculate the wage index values for hospitals due to DRG Reclassifications and Relative Cost- wage index. In accordance with this proposed changes in the average hourly wage Based Weights With Recalibration Budget requirement, the proposed wage index for data for FY 2017 relative to FY 2016. Among Neutrality (Column 2) acute care hospitals for FY 2017 is based on urban hospitals, 5 would experience a decrease of 10 percent or more, and 14 urban Column 2 shows the effects of the data submitted for hospital cost reporting hospitals would experience an increase of 10 proposed changes to the MS–DRGs and periods beginning on or after October 1, 2012 percent or more. One hundred and thirty- relative weights with the application of the and before October 1, 2013. The estimated nine urban hospitals would experience an recalibration budget neutrality factor to the impact of the updated wage data using the increase or decrease of at least 5 percent or standardized amounts. Section FY 2013 cost report data and the OMB labor more but less than 10 percent. Among rural 1886(d)(4)(C)(i) of the Act requires us market area delineations on hospital hospitals, 9 would experience an increase of annually to make appropriate classification payments is isolated in Column 3 by holding at least 5 percent but less than 10 percent, changes in order to reflect changes in the other payment parameters constant in but no rural hospitals would experience a treatment patterns, technology, and any other this simulation. That is, Column 3 shows the decrease of greater than or equal to 5 percent factors that may change the relative use of percentage change in payments when going hospital resources. Consistent with section from a model using the FY 2016 wage index, but less than 10 percent. No rural hospital 1886(d)(4)(C)(iii) of the Act, we are based on FY 2012 wage data, the labor- would experience increases of 10 percent or calculating a recalibration budget neutrality related share of 69.6 percent, under the OMB more, but 2 rural hospitals would experience factor to account for the changes in MS– delineations and having a 100-percent decreases of 10 percent or more. However, DRGs and relative weights to ensure that the occupational mix adjustment applied, to a 794 rural hospitals would experience overall payment impact is budget neutral. model using the FY 2017 pre-reclassification increases or decreases of less than 5 percent, As discussed in section II.E. of the wage index based on FY 2013 wage data with while 2,340 urban hospitals would preamble of this proposed rule, the FY 2017 the labor-related share of 69.6 percent, under experience increases or decreases of less than MS–DRG relative weights would be 100 the OMB delineations, also having a 100- 5 percent. No urban hospital and no rural percent cost-based and 100 percent MS– percent occupational mix adjustment hospital would experience no change to their DRGs. For FY 2017, the MS–DRGs are applied, while holding other proposed wage index. These figures reflect proposed calculated using the FY 2015 MedPAR data payment parameters such as use of the changes in the ‘‘pre-reclassified, occupational grouped to the Version 34 (FY 2017) MS– Version 34 MS–DRG GROUPER constant. mix-adjusted wage index,’’ that is, the DRGs. The methodology to calculate the The proposed FY 2017 occupational mix proposed wage index before the application relative weights and the reclassification adjustment is based on the CY 2013 of proposed geographic reclassification, the changes to the GROUPER are described in occupational mix survey. proposed rural and imputed floors, the more detail in section II.G. of the preamble In addition, the column shows the impact proposed out-migration adjustment, and of this proposed rule. of the proposed application of the wage other proposed wage index exceptions and The ‘‘All Hospitals’’ line in Column 2 budget neutrality to the national adjustments. (We refer readers to sections indicates that proposed changes due to the standardized amount. In FY 2010, we began III.G. through III.L. of the preamble of this MS–DRGs and relative weights would result calculating separate wage budget neutrality proposed rule for a complete discussion of in a 0.0 percent change in payments with the and recalibration budget neutrality factors, in the exceptions and adjustments to the wage application of the proposed recalibration accordance with section 1886(d)(3)(E) of the index.) We note that the proposed ‘‘post- budget neutrality factor of 0.999006 on to the Act, which specifies that budget neutrality to reclassified wage index’’ or proposed standardized amount. Hospital categories account for wage index changes or updates ‘‘payment wage index,’’ which is the that generally treat more surgical cases than made under that subparagraph must be made proposed wage index that includes all such medical cases would experience increases in without regard to the 62 percent labor-related exceptions and adjustments (as reflected in their payments under the relative weights. share guaranteed under section Tables 2 and 3 associated with this proposed Rural hospitals would experience a 0.4 1886(d)(3)(E)(ii) of the Act. Therefore, for FY rule, which are available via the Internet on percent decrease in payments because rural 2017, we are proposing to calculate the wage the CMS Web site) is used to adjust the labor- hospitals tend to treat fewer surgical cases budget neutrality factor to ensure that related share of a hospital’s standardized than medical cases, while teaching hospitals payments under updated wage data and the amount, either 69.6 percent or 62 percent, with more than 100 residents would labor-related share of 69.6 percent are budget depending upon whether a hospital’s wage experience an increase in payments by 0.2 neutral without regard to the lower labor- index is greater than 1.0 or less than or equal percent as those hospitals treat more surgical related share of 62 percent applied to to 1.0. Therefore, the proposed pre- cases than medical cases. hospitals with a wage index less than or reclassified wage index figures in the

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following chart may illustrate a somewhat a hospital’s proposed payment wage index The following chart shows the projected larger or smaller change than would occur in and total payment. impact of proposed changes in the area wage index values for urban and rural hospitals.

PROPOSED FY 2017 PERCENTAGE CHANGE IN AREA WAGE INDEX VALUES

Number of hospitals Urban Rural

Increase 10 percent or more ...... 14 0 Increase greater than or equal to 5 percent and less than 10 percent ...... 88 9 Increase or decrease less than 5 percent ...... 2,340 794 Decrease greater than or equal to 5 percent and less than 10 percent ...... 51 0 Decrease 10 percent or more ...... 5 2 Unchanged ...... 0 0

d. Effects of MGCRB Reclassifications proposed rule, section 4410 of Public Law with the national rural floor budget neutrality (Column 4) 105–33 established the rural floor by factor applied to the wage index based on the Our impact analysis to this point has requiring that the wage index for a hospital OMB labor market area delineations. The assumed acute care hospitals are paid on the in any urban area cannot be less than the column compares the proposed post- basis of their actual geographic location (with wage index received by rural hospitals in the reclassification FY 2017 wage index of the exception of ongoing policies that same State. We would apply a uniform providers before the proposed rural floor and provide that certain hospitals receive budget neutrality adjustment to the wage imputed floor adjustment and the proposed payments on bases other than where they are index. The imputed floor, which is also post-reclassification FY 2017 wage index of geographically located). The proposed included in the calculation of the budget providers with the proposed rural floor and changes in Column 4 reflect the per case neutrality adjustment to the wage index, was imputed floor adjustment based on the OMB payment impact of moving from this baseline extended in FY 2012 for 2 additional years labor market area delineations. Only urban to a simulation incorporating the MGCRB and in FY 2014 and FY 2015 for 1 additional hospitals can benefit from the rural and decisions for FY 2017. year. Prior to FY 2013, only urban hospitals imputed floors. Because the provision is By spring of each year, the MGCRB makes in New Jersey received the imputed floor. As budget neutral, all other hospitals (that is, all reclassification determinations that would be discussed in the FY 2013 IPPS/LTCH PPS rural hospitals and those urban hospitals to effective for the next fiscal year, which final rule (77 FR 53369), we established an which the adjustment is not made) would begins on October 1. The MGCRB may alternative temporary methodology for the experience a decrease in payments due to the approve a hospital’s reclassification request imputed floor, which resulted in an imputed budget neutrality adjustment that is applied for the purpose of using another area’s wage floor for Rhode Island for FY 2013. For FY nationally to their wage index. index value. Hospitals may appeal denials of 2014 and FY 2015, we extended the imputed We estimate that 401 hospitals would MGCRB decisions to the CMS Administrator. rural floor, as calculated under the original benefit from the proposed rural and imputed Further, hospitals have 45 days from methodology and the alternative floors in FY 2017, while the remaining 2,929 methodology. Due to the adoption of the new publication of the IPPS proposed rule in the IPPS hospitals in our model would have their OMB labor market area delineations in FY Federal Register to decide whether to wage index reduced by the rural floor budget 2015, the State of Delaware also became an withdraw or terminate an approved neutrality adjustment of 0.993806 (or 0.62 all-urban State and thus eligible for an geographic reclassification for the following percent). We project that, in aggregate, rural year. imputed floor. For FY 2016, we extended the imputed floor for 1 year, as calculated under hospitals would experience a 0.2 percent The overall effect of geographic decrease in payments as a result of the reclassification is required by section the original methodology and the alternative methodology, through September 30, 2016. application of the proposed rural floor budget 1886(d)(8)(D) of the Act to be budget neutral. neutrality because the rural hospitals do not Therefore, for purposes of this impact For FY 2017, we are proposing to extend the imputed rural floor for 1 year, as calculated benefit from the rural floor, but have their analysis, we are proposing to apply an wage indexes downwardly adjusted to ensure adjustment of 0.988816 to ensure that the under the original methodology and the alternative methodology, through September that the application of the rural floor is effects of the reclassifications under section budget neutral overall. We project hospitals 1886(d)(10) of the Act are budget neutral 20, 2017. As a result, New Jersey, Rhode Island, and Delaware would be able to located in urban areas would experience no (section II.A. of the Addendum to this change in payments because increases in proposed rule). Geographic reclassification receive an imputed floor through September 30, 2017. In New Jersey, 20 out of 64 payments by hospitals benefitting from the generally benefits hospitals in rural areas. We rural floor offset decreases in payments by estimate that the geographic reclassification hospitals would receive the imputed floor, nonrural floor urban hospitals whose wage would increase payments to rural hospitals and 10 out of 11 hospitals in Rhode Island index is downwardly adjusted by the rural by an average of 1.4 percent. By region, all would receive the imputed floor for FY 2017. floor budget neutrality factor. Urban the rural hospital categories will experience For FY 2017, no hospitals would benefit from hospitals in the New England region would increases in payments due to MGCRB the imputed floor in Delaware because the experience a 0.8 percent increase in reclassifications. CBSA wage index for each CBSA in Delaware payments primarily due to the application of New Table 2 listed in section VI. of the under the new OMB delineations is equal to the proposed rural floor in Massachusetts Addendum to this proposed rule and or higher than the imputed rural floor. and the proposed imputed floor in Rhode available via the Internet on the CMS Web The Affordable Care Act requires that we site reflects the proposed reclassifications for apply one rural floor budget neutrality factor Island. Fifteen urban providers in FY 2017. to the wage index nationally, and the Massachusetts are expected to receive the imputed floor is part of the rural floor budget proposed rural floor wage index value, e. Effects of the Proposed Rural Floor and neutrality factor applied to the wage index including the rural floor budget neutrality of Imputed Floor, Including Application of nationally. We have calculated a proposed 0.993806, increasing payments overall to National Budget Neutrality (Column 5) FY 2017 rural floor budget neutrality factor Massachusetts by an estimated $25 million. As discussed in section III.B. of the to be applied to the wage index of 0.993806, We estimate that Massachusetts hospitals preamble of the FY 2009 IPPS final rule, the which would reduce wage indexes by 0.62 would receive approximately a 0.8 percent FY 2010 IPPS/RY 2010 LTCH PPS final rule, percent. increase in IPPS payments due to the the FYs 2011, 2012, 2013, 2014, 2015, 2016 Column 5 shows the projected impact of application of the proposed rural floor in FY IPPS/LTCH PPS final rules, and this the proposed rural floor and imputed floor 2017.

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Urban Puerto Rico hospitals are expected reclassifying to CBSAs with a higher wage manner, with a budget neutrality factor of to experience a 0.2 percent increase in index than the imputed floor. 0.999999. payments as a result of the application of the Column 5 also shows the projected effects In response to a public comment addressed proposed rural floor budget neutrality factor, of the last year of the 3-year hold harmless in the FY 2012 IPPS/LTCH PPS final rule (76 of 0.993806 or 0.62 percent, to the proposed provision for hospitals that were located in FR 51593), we are providing the payment rural floor wage index. an urban county that became rural under the impact of the proposed rural floor and There are 20 hospitals out of the 64 new OMB delineations or hospitals deemed imputed floor with budget neutrality at the hospitals in New Jersey that would benefit urban where the urban area became rural State level. Column 1 of the following table from the proposed extension of the imputed under the new OMB delineations. As displays the number of IPPS hospitals floor and would receive the imputed floor discussed in section III.G.2. of the preamble located in each State. Column 2 displays the wage index value under the OMB labor of this proposed rule, under this transition, number of hospitals in each State that would market area delineations, including the rural hospitals that were located in an urban receive the proposed rural floor or imputed floor budget neutrality of 0.993806, which we county that became rural under the new floor wage index for FY 2017. Column 3 estimate would increase payments to those OMB delineations will generally be assigned displays the percentage of total payments imputed floor hospitals by $20 million the urban wage index value of the CBSA in each State would receive or contribute to (overall, the State would receive an increase which they are physically located in FY 2014 fund the rural floor and imputed floor with of $8 million in payments due to the other for a period of 3 fiscal years (that is, FYs national budget neutrality. The column hospitals in the State that would experience 2015, 2016, and 2017). In addition, as compares the proposed post-reclassification decreases in payments due to the proposed discussed in section III.G.3. of the preamble FY 2017 wage index of providers before the rural floor budget neutrality adjustment). Ten of this proposed rule, under this transition, proposed rural floor and imputed floor hospitals out of the 11 hospitals in Rhode hospitals that were deemed urban where the adjustment and the proposed post- Island would benefit from the proposed urban area became rural under the new OMB reclassification FY 2017 wage index of imputed rural floor calculated under the delineations will generally be assigned the providers with the proposed rural floor and alternative methodology and would receive area wage index value of hospitals imputed floor adjustment. Column 4 displays an additional $18 million. While some reclassified to the urban CBSA (that is, the the estimated payment amount that each hospitals in Delaware are geographically attaching wage index, if applicable) to which State would gain or lose due to the located in CBSAs that are assigned the they were designated in FY 2014. For FY application of the proposed rural floor and imputed floor, none of these hospitals benefit 2017, we are applying the 3-year transition imputed floor with national budget from the imputed floor because they are wage index adjustments in a budget neutral neutrality.

PROPOSED FY 2017 IPPS ESTIMATED PAYMENTS DUE TO RURAL AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY

Proposed percent Number of change in hospitals that will payments due to Proposed State Number of receive the rural application of rural difference hospitals floor or imputed floor and (in millions) floor Imputed floor with budget neutrality

(1) (2) (3) (4)

Alabama ...... 83 6 ¥0.3 $¥4.43 Alaska ...... 6 1 ¥0.2 ¥0.34 Arizona ...... 57 7 ¥0.1 ¥1.55 Arkansas ...... 44 0 ¥0.3 ¥3.07 California ...... 300 185 1.4 139.3 Colorado ...... 48 3 0.3 3.57 Connecticut ...... 31 13 0 0.29 Delaware ...... 6 0 ¥0.4 ¥1.64 Washington, DC ...... 7 0 ¥0.3 ¥1.62 Florida ...... 171 15 ¥0.2 ¥11.11 Georgia ...... 105 0 ¥0.3 ¥7.76 Hawaii ...... 12 0 ¥0.3 ¥0.76 Idaho ...... 14 0 ¥0.2 ¥0.74 Illinois ...... 126 3 ¥0.3 ¥14.43 Indiana ...... 89 0 ¥0.3 ¥8.24 Iowa ...... 35 0 ¥0.3 ¥2.83 Kansas ...... 53 0 ¥0.3 ¥2.5 Kentucky ...... 65 0 ¥0.3 ¥4.71 Louisiana ...... 95 0 ¥0.3 ¥4.19 Maine ...... 18 0 ¥0.3 ¥1.53 Massachusetts ...... 58 15 0.8 25.4 Michigan ...... 95 0 ¥0.3 ¥14.07 Minnesota ...... 49 0 ¥0.2 ¥5.06 Mississippi ...... 62 0 ¥0.3 ¥3.08 Missouri ...... 75 2 ¥0.3 ¥6.19 Montana ...... 12 4 0.3 0.96 Nebraska ...... 26 0 ¥0.2 ¥1.67 Nevada ...... 24 3 ¥0.1 ¥0.79 New Hampshire ...... 13 9 0.4 2.24 New Jersey ...... 64 20 0.2 7.84 New Mexico ...... 25 0 ¥0.2 ¥0.88 New York ...... 154 21 ¥0.3 ¥20.52 North Carolina ...... 84 4 ¥0.2 ¥5.88 North Dakota ...... 6 1 ¥0.2 ¥0.57

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PROPOSED FY 2017 IPPS ESTIMATED PAYMENTS DUE TO RURAL AND IMPUTED FLOOR WITH NATIONAL BUDGET NEUTRALITY—Continued

(1) (2) (3) (4)

Ohio ...... 130 8 ¥0.3 ¥9.5 Oklahoma ...... 86 2 ¥0.3 ¥3.53 Oregon ...... 34 2 ¥0.3 ¥3.1 Pennsylvania ...... 152 5 ¥0.3 ¥15.88 Puerto Rico ...... 51 12 0.2 0.26 Rhode Island ...... 11 10 4.8 18.11 South Carolina ...... 56 5 ¥0.1 ¥0.99 South Dakota ...... 18 0 ¥0.2 ¥0.67 Tennessee ...... 93 20 ¥0.2 ¥5.59 Texas ...... 320 1 ¥0.3 ¥20.35 Utah ...... 33 1 ¥0.3 ¥1.33 Vermont ...... 6 0 ¥0.2 ¥0.39 Virginia ...... 75 1 ¥0.2 ¥6.29 Washington ...... 49 8 0.2 4.38 West Virginia ...... 29 2 ¥0.2 ¥1.21 Wisconsin ...... 65 12 ¥0.2 ¥2.85 Wyoming ...... 10 0 ¥0.1 ¥0.15

f. Effects of the Application of the Proposed percentage of hospital employees who reside productivity adjustment, and the 0.75 Frontier State Wage Index and Out-Migration in the county, but work in a different area percentage point reduction under section Adjustment (Column 6) with a higher wage index. Hospitals located 3401 of the Affordable Care Act. As This column shows the combined effects of in counties that qualify for the payment discussed in section II.D. of the preamble of this proposed rule, this column also includes the application of section 10324(a) of the adjustment are to receive an increase in the the proposed FY 2017 documentation and Affordable Care Act, which requires that we wage index that is equal to a weighted coding recoupment adjustment of -1.5 establish a minimum post-reclassified wage- average of the difference between the wage percent on the national standardized amount index of 1.00 for all hospitals located in index of the resident county, post- reclassification and the higher wage index as part of the recoupment required under ‘‘frontier States,’’ and the effects of section work area(s), weighted by the overall section 631 of the ATRA. In addition, this 1886(d)(13) of the Act, as added by section percentage of workers who are employed in column includes the proposed adjustment of 505 of Public Law 108–173, which provides an area with a higher wage index. There are (1/0.998) to permanently remove the 0.2 for an increase in the wage index for an estimated 249 providers that would percent reduction, and the proposed 1.006 hospitals located in certain counties that receive the out-migration wage adjustment in temporary adjustment to address the effects have a relatively high percentage of hospital FY 2017. Rural hospitals generally qualify for of the 0.2 percent reduction in effect for FYs employees who reside in the county, but the adjustment, resulting in a 0.1 percent 2014 through 2016 related to the 2-midnight work in a different area with a higher wage increase in payments. This provision appears policy, which are discussed in section IV.O. index. These two wage index provisions are to benefit section 401 hospitals and RRCs in of the preamble of this proposed rule. not budget neutral and increase payments that they would experience a 1.2 percent and Hospitals paid under the hospital-specific overall by 0.1 percent compared to the 0.4 percent increase in payments, rate would receive a 1.55 percent proposed provisions not being in effect. respectively. This out-migration wage hospital update in addition to the proposed The term ‘‘frontier States’’ is defined in the adjustment also is not budget neutral, and we adjustment of (1/0.998) to permanently statute as States in which at least 50 percent estimate the impact of these providers remove the 0.2 percent reduction, and the of counties have a population density less receiving the out-migration increase would proposed 1.006 temporary adjustment to than 6 persons per square mile. Based on be approximately $31 million. address the effects of the 0.2 percent these criteria, 5 States (Montana, Nevada, reduction in effect for FYs 2014 through 2016 g. Effects of All FY 2017 Changes (Column North Dakota, South Dakota, and Wyoming) previously described. As described in 7) are considered frontier States and 50 Column 1, the proposed annual hospital hospitals located in those States will receive Column 7 shows our estimate of the update with the proposed documentation a frontier wage index of 1.0000. Overall, this proposed changes in payments per discharge and coding recoupment adjustment for provision is not budget neutral and is from FY 2016 and FY 2017, resulting from all hospitals paid under the national estimated to increase IPPS operating proposed changes reflected in this proposed standardized amount, the proposed payments by approximately $56 million. rule for FY 2017. It includes combined effects adjustment of (1/0.998) to permanently Rural and urban hospitals located in the West of the previous columns in the table. remove the 0.2 percent reduction and the North Central region would experience an The proposed average increase in proposed 1.006 temporary adjustment to increase in payments by 0.3 and 0.7 percent, payments under the IPPS for all hospitals is address the effects of the 0.2 percent respectively, because many of the hospitals approximately 0.7 percent for FY 2017 reduction in effect for FYs 2014 through 2016 located in this region are frontier State relative to FY 2016. This column includes for hospitals paid under the national hospitals. the proposed annual hospital update of 1.55 standardized amount and hospitals paid In addition, section 1886(d)(13) of the Act, percent to the national standardized amount. under the hospital-specific rates, which are as added by section 505 of Public Law 108– This proposed annual hospital update discussed in section IV.O. of the preamble of 173, provides for an increase in the wage includes the 2.8 percent market basket this proposed rule, combined with the index for hospitals located in certain update, the proposed reduction of 0.5 proposed annual hospital update for counties that have a relatively high percentage point for the multifactor hospitals paid under the hospital-specific

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rates would result in a 0.7 percent increase Overall payments to hospitals paid under and rural hospitals and for the different in payments in FY 2017 relative to FY 2016. the IPPS due to the proposed applicable categories of hospitals shown in Table I. It The impact of moving from our estimate of percentage increase and proposed changes to compares the estimated average payments FY 2016 outlier payments, 5.3 percent, to the policies related to MS–DRGs, geographic per discharge for FY 2016 with the proposed proposed estimate of FY 2017 outlier adjustments, and outliers are estimated to estimated average payments per discharge for increase by 0.7 percent for FY 2017. payments, 5.1 percent, would result in a Hospitals in urban areas would experience a FY 2017, as calculated under our models. decrease of 0.2 percent in FY 2017 payments 0.6 percent increase in payments per Therefore, this table presents, in terms of the relative to FY 2016. There also might be discharge in FY 2017 compared to FY 2016. average dollar amounts paid per discharge, interactive effects among the various factors Hospital payments per discharge in rural the combined effects of the proposed changes comprising the payment system that we are areas are estimated to increase by 0.8 percent presented in Table I. The proposed estimated not able to isolate. For these reasons, the in FY 2017. percentage changes shown in the last column values in Column 7 may not equal the sum 3. Impact Analysis of Table II of Table II equal the estimated percentage of the estimated percentage changes Table II presents the projected impact of changes in average payments per discharge described previously. the proposed changes for FY 2017 for urban from Column 7 of Table I.

TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2017 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM [Payments per discharge]

Estimated average Estimated average Number of FY 2016 payment FY 2017 payment Proposed hospitals per discharge per discharge FY 2017 changes

(1) (2) (3) (4)

All Hospitals ...... 3,330 11,524 11,599 0.7 By Geographic Location: Urban hospitals ...... 2,512 11,869 11,944 0.6 Large urban areas ...... 1,378 12,658 12,729 0.6 Other urban areas ...... 1,134 10,924 11,004 0.7 Rural hospitals ...... 818 8,614 8,686 0.8 Bed Size (Urban): 0–99 beds ...... 656 9,393 9,462 0.7 100–199 beds ...... 765 10,006 10,052 0.5 200–299 beds ...... 449 10,758 10,807 0.5 300–499 beds ...... 429 12,068 12,153 0.7 500 or more beds ...... 213 14,591 14,703 0.8 Bed Size (Rural): 0–49 beds ...... 320 7,187 7,230 0.6 50–99 beds ...... 292 8,214 8,278 0.8 100–149 beds ...... 119 8,457 8,506 0.6 150–199 beds ...... 46 9,263 9,359 1.0 200 or more beds ...... 41 10,175 10,295 1.2 Urban by Region: New England ...... 116 12,947 12,870 ¥0.6 Middle Atlantic ...... 315 13,445 13,469 0.2 South Atlantic ...... 406 10,494 10,574 0.8 East North Central ...... 390 11,167 11,290 1.1 East South Central ...... 147 10,022 10,123 1.0 West North Central ...... 163 11,589 11,694 0.9 West South Central ...... 384 10,688 10,812 1.2 Mountain ...... 163 12,273 12,361 0.7 Pacific ...... 377 15,279 15,336 0.4 Puerto Rico ...... 51 8,409 8,432 0.3 Rural by Region: New England ...... 21 11,758 11,897 1.2 Middle Atlantic ...... 55 8,646 8,726 0.9 South Atlantic ...... 127 8,059 8,120 0.8 East North Central ...... 115 8,947 9,023 0.9 East South Central ...... 156 7,642 7,694 0.7 West North Central ...... 99 9,464 9,555 1.0 West South Central ...... 161 7,254 7,321 0.9 Mountain ...... 60 10,142 10,214 0.7 Pacific ...... 24 11,976 12,066 0.8 By Payment Classification: Urban hospitals ...... 2,455 11,888 11,963 0.6 Large urban areas ...... 1,372 12,664 12,735 0.6 Other urban areas ...... 1,083 10,926 11,006 0.7 Rural areas ...... 875 8,890 8,967 0.9 Teaching Status: Nonteaching ...... 2,275 9,593 9,649 0.6 Fewer than 100 residents ...... 804 11,122 11,194 0.7 100 or more residents ...... 251 16,697 16,821 0.8 Urban DSH: Non-DSH ...... 597 10,104 10,156 0.5

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TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2017 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE PAYMENT SYSTEM—Continued [Payments per discharge]

Estimated average Estimated average Number of FY 2016 payment FY 2017 payment Proposed hospitals per discharge per discharge FY 2017 changes

(1) (2) (3) (4)

100 or more beds ...... 1,608 12,247 12,327 0.7 Less than 100 beds ...... 330 8,718 8,759 0.5 Rural DSH: SCH ...... 266 9,218 9,299 0.9 RRC ...... 347 9,200 9,286 0.9 100 or more beds ...... 33 7,070 7,102 0.5 Less than 100 beds ...... 149 6,783 6,798 0.2 Urban teaching and DSH: Both teaching and DSH ...... 880 13,362 13,456 0.7 Teaching and no DSH ...... 107 11,418 11,438 0.2 No teaching and DSH ...... 1,058 10,009 10,061 0.5 No teaching and no DSH ...... 410 9,519 9,585 0.7 Special Hospital Types: RRC ...... 193 9,673 9,782 1.1 SCH ...... 326 10,357 10,459 1.0 MDH ...... 146 7,202 7,262 0.8 SCH and RRC ...... 126 10,814 10,940 1.2 MDH and RRC ...... 15 9,216 9,334 1.3 Type of Ownership: Voluntary ...... 1,914 11,704 11,781 0.7 Proprietary ...... 858 10,110 10,188 0.8 Government ...... 516 12,474 12,532 0.5 Medicare Utilization as a Percent of Inpatient Days: 0–25 ...... 517 14,964 15,062 0.7 25–50 ...... 2,128 11,446 11,523 0.7 50–65 ...... 546 9,341 9,387 0.5 Over 65 ...... 94 6,966 7,025 0.9 FY 2017 Reclassifications by the Medicare Geographic Clas- sification Review Board: All Reclassified Hospitals ...... 853 11,571 11,641 0.6 Non-Reclassified Hospitals ...... 2,477 11,504 11,581 0.7 Urban Hospitals Reclassified ...... 576 12,191 12,256 0.5 Urban Nonreclassified Hospitals ...... 1,879 11,774 11,852 0.7 Rural Hospitals Reclassified Full Year ...... 277 8,994 9,080 1.0 Rural Nonreclassified Hospitals Full Year ...... 484 8,193 8,250 0.7 All Section 401 Reclassified Hospitals: ...... 57 10,782 10,892 1.0 Other Reclassified Hospitals (Section 1886(d)(8)(B)) ...... 57 7,949 7,998 0.6

H. Effects of Other Proposed Policy Changes explained in the preamble to this proposed for FY 2017 because these technologies will In addition to those proposed policy rule, add-on payments for new medical have been on the U.S. market for 3 years. We changes discussed previously that we are services and technologies under section also are proposing to continue to make new able to model using our IPPS payment 1886(d)(5)(K) of the Act are not required to technology add-on payments for the TM simulation model, we are proposing to make be budget neutral. As discussed in section CardioMEMS HF (Heart Failure) various other changes in this proposed rule. II.H.5. of the preamble of this proposed rule, Monitoring System, Blinatumomab TM ® Generally, we have limited or no specific we have not yet determined whether any of (BLINCYTO ), and the LUTONIX Drug data available with which to estimate the these nine technologies for which we Coated Balloon (DCB) Percutaneous impacts of these proposed changes. Our received applications for consideration for Transluminal Angioplasty (PTA) and TM TM estimates of the likely impacts associated new technology add-on payments for FY IN.PACT Admiral Pacliaxel Coated with these other proposed changes are 2017 will meet the specified criteria. Percutaneous Transluminal Angioplasty discussed in this section. Consequently, it is premature to estimate the (PTA) Balloon Catheter in FY 2017 because potential payment impact of these nine these technologies are still considered new. 1. Effects of Proposed Policy Relating to New technologies for any potential new We note that new technology add-on Medical Service and Technology Add-On technology add-on payments for FY 2017. We payments for each case are limited to the Payments note that if any of the nine technologies are lesser of (1) 50 percent of the costs of the new In section II.H. of the preamble to this found to be eligible for new technology add- technology or (2) 50 percent of the amount proposed rule, we discuss nine technologies on payments for FY 2017, in the FY 2017 by which the costs of the case exceed the for which we received applications for add- IPPS/LTCH PPS final rule, we would discuss standard MS–DRG payment for the case. on payments for new medical services and the estimated payment impact for FY 2017. Because it is difficult to predict the actual technologies for FY 2017, as well as the In section II.H.4. of the preamble of this new technology add-on payment for each status of the new technologies that were proposed rule, we are proposing to case, our estimates below are based on the approved to receive new technology add-on discontinue new technology add-on increase in new technology add-on payments payments in FY 2016. We note that one payments for the Argus® II Retinal Prosthesis for FY 2017 as if every claim that would applicant withdraw its application prior to System, KcentraTM, the MitraClip® System, qualify for a new technology add-on payment the issuance of this proposed rule. As and the Responsive Neurostimulator (RNS®) would receive the maximum add-on

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payment. For the CardioMEMSTM HF proportion of a hospital’s low-income is discussed in more detail in section IV.F. Monitoring System, based on the applicant’s insured patient days (sum of Medicaid of the preamble of this proposed rule. estimate from FY 2015, we currently estimate patient days and Medicare SSI patient days) To estimate the impact of the combined that new technology add-on payments for the relative to the low-income insured patient effect of reductions in the percent of CardioMEMSTM HF Monitoring System will days for all hospitals eligible for DSH individuals under age 65 who are uninsured increase overall FY 2017 payments by payments. The reduction to Medicare DSH and additional statutory adjustments (Factor $11,315,625. Based on the applicant’s payments under section 3133 of the 2) and changes in Medicaid and SSI patient estimate for FY 2016, we currently estimate Affordable Care Act is not budget neutral. days (components of Factor 3) on the that new technology add-on payments for In this proposed rule, we are proposing to calculation of Medicare DSH payments, BLINCYTOTM will increase overall FY 2017 establish the overall amount available to be including both empirically justified Medicare payments by $4,593,034 (maximum add-on distributed as uncompensated care payments DSH payments and uncompensated care payment of $27,017.85 * 170 patients). Based to DSH eligible hospitals, which for FY 2017 payments, we compared total DSH payments is $6,054,458,492.68, or 75 percent of what on the weighted cost average for FY 2016 estimated in the FY 2016 IPPS/LTCH PPS otherwise would have been paid for described in the FY 2016 IPPS/LTCH final final rule to total DSH payments estimated in Medicare DSH payment adjustments adjusted rule (80 FR 49469 through 49470), we this FY 2017 IPPS/LTCH PPS proposed rule. currently estimate that new technology add- by a proposed Factor 2 of 56.74 percent. For For FY 2016, for each hospital, we calculated on payments for the LUTONIX® DCB PTA FY 2016, the amount available to be the sum of: (1) 25 percent of the estimated and IN.PACTTM AdmiralTM Pacliaxel Coated distributed for uncompensated care was amount of what would have been paid as PTA Balloon Catheter will increase overall $6,406,145,534.04, or 75 percent of what FY 2017 payments by $36,120,735 otherwise would have been paid for Medicare DSH in FY 2016 in the absence of (maximum add-on payment of $1,035.72 * Medicare DSH payment adjustments adjusted section 3133 of the Affordable Care Act; and 8,875 patients for LUTONIX® DCB PTA by a Factor 2 of 63.69 percent. To calculate (2) 75 percent of the estimated amount of Balloon Catheter; maximum add-on payment Factor 3 for FY 2017, we are proposing to use what would have been paid as Medicare DSH of $1,035.72 * 26,000 patients for IN.PACTTM an average of data computed using Medicaid payments in the absence of section 3133 of AdmiralTM Pacliaxel Coated PTA Balloon days from hospitals’ 2011, 2012, and 2013 the Affordable Care Act, adjusted by a Factor Catheter). cost reports, Medicaid days from 2011 and 2 of 63.69 percent and multiplied by a Factor 2012 cost report data submitted to CMS by 3 as stated in the FY 2016 IPPS/LTCH PPS 2. Effects of the Proposed Changes to IHS hospitals, and SSI days from the FY final rule. For FY 2017, we would calculate Medicare DSH Payments for FY 2017 2012, FY 2013, and FY 2014 SSI ratios. That the sum of: (1) 25 percent of the estimated As discussed in section IV.F. of the is, for each hospital we are proposing to amount of what would be paid as Medicare preamble of this proposed rule, under section calculate an individual Factor 3 for cost DSH payments in FY 2017 absent section 3133 of the Affordable Care Act, hospitals reporting periods beginning during FYs 2011, 3133 of Affordable Care Act; and (2) 75 that are eligible to receive Medicare DSH 2012, and 2013, sum the individual amounts, percent of the estimated amount of what payments will receive 25 percent of the and divide the sum by three in order to would have been paid as Medicare DSH amount they previously would have received calculate an average Factor 3 for the hospital. payments absent section 3133 of the under the former statutory formula for The FY 2017 proposal to use data on low- Affordable Care Act, adjusted by a Factor 2 Medicare DSH payments. The remainder, income insured days from 3 years of cost of 56.74 percent and multiplied by a Factor equal to an estimate of 75 percent of what reports to determine Factor 3, as described 3 as previously stated. formerly would have been paid as Medicare earlier, is in contrast to the methodology Our analysis included 2,434 hospitals that DSH payments (Factor 1), reduced to reflect used in FY 2016, when we used Medicaid are projected to be eligible for DSH in FY changes in the percentage of individuals days from the more recent of a hospital’s full under age 65 who are uninsured and 2017. It did not include hospitals that year 2012 or 2011 cost report from the March terminated their participation from the additional statutory adjustments (Factor 2), is 2015 update of the HCRIS database, Medicaid Medicare program as of July 1, 2015, available to make additional payments to days from 2012 cost report data submitted to Maryland hospitals, and SCHs that are each hospital that qualifies for Medicare DSH CMS by IHS hospitals, and SSI days from the expected to be paid based on their hospital- payments and that has uncompensated care. FY 2013 SSI ratios to calculate Factor 3. In Each hospital eligible for Medicare DSH addition, as explained in section IV.F. of the specific rates. In addition, low-income payments will receive an additional payment preamble of this proposed rule, we are insured days from merged or acquired based on its estimated share of the total proposing to make two additional hospitals were combined into the surviving amount of uncompensated care for all modifications to the Factor 3 methodology: hospital’s CCN, and the nonsurviving CCN hospitals eligible for Medicare DSH (1) To create proxy Medicare SSI values for was excluded from the analysis. In contrast payments. The uncompensated care payment Puerto Rico hospitals and (2) to include all to FY 2016, hospitals participating in the methodology has redistributive effects based hospitals’ cost reports that begin during FYs Rural Community Hospital Demonstration on the proportion of a hospital’s 2011, 2012, and 2013, even in the instance program, which is scheduled to end in FY uncompensated care relative to the where a hospital has more than one cost 2017, are included in the analysis if projected uncompensated care for all hospitals eligible report beginning during a given fiscal year. to be eligible for DSH payments during FY for Medicare DSH payments (Factor 3). For Because residents of Puerto Rico are not 2017. The estimated impact of the proposed FY 2017, because we are proposing to eligible for SSI benefits, we are proposing to changes in Factors 1, 2, and 3 across all continue to use low-income insured patient impute a Medicare SSI value for each Puerto hospitals projected to be eligible for DSH days as a proxy for uncompensated care, the Rico hospital equal to 14 percent of its payments in FY 2017, by hospital uncompensated care payment methodology Medicaid days. The proposed FY 2017 characteristic, is presented in the following has redistributive effects based on the uncompensated care payment methodology table.

MODELED DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR ESTIMATED FY 2017 DSHSBYHOSPITAL TYPE: MODEL DSH $ (IN MILLIONS) FROM FY 2016 TO FY 2017

FY 2017 Number of FY 2016 final proposed rule Dollar estimated rule estimated estimated difference: FY Percent DSHs DSH $ * DSH $ * 2017–FY 2016 change ** (FY 2017) (in millions) (in millions) (in millions)

(1) (2) (3) (4) (5)

Total ...... 2,434 $9,732 $9,598 ¥$134 ¥1.4% By Geographic Location: Urban Hospitals ...... 1,927 9,262 9,148 ¥114 ¥1.2

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MODELED DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR ESTIMATED FY 2017 DSHSBYHOSPITAL TYPE: MODEL DSH $ (IN MILLIONS) FROM FY 2016 TO FY 2017—Continued

(1) (2) (3) (4) (5)

Large Urban Areas ...... 1,048 5,861 5,789 ¥72 ¥1.2 Other Urban Areas ...... 879 3,401 3,359 ¥42 ¥1.2 Rural Hospitals ...... 507 470 450 ¥20 ¥4.3 Bed Size (Urban): 0 to 99 Beds ...... 337 184 186 2 0.9 100 to 249 Beds ...... 841 2,199 2,171 ¥28 ¥1.3 250 to 499 Beds ...... 749 $6,879 $6,791 ¥$88 ¥1.3 Bed Size (Rural): 0 to 99 Beds ...... 375 205 192 ¥$13 ¥6.3 100 to 249 Beds ...... 118 209 202 ¥7 ¥3.4 250 to 499 Beds ...... 14 56 56 0 ¥0.3 Urban by Region: East North Central ...... 317 1,268 1,253 ¥$15 ¥1.2 East South Central ...... 132 575 566 ¥9 ¥1.6 Middle Atlantic ...... 233 1,607 1,583 ¥24 ¥1.5 Mountain ...... 122 447 449 2 0.4 New England ...... 90 386 388 2 0.5 Pacific ...... 313 1,459 1,453 ¥6 ¥0.4 Puerto Rico ...... 42 100 113 12 12.2 South Atlantic ...... 320 1,772 1,737 ¥35 ¥2.0 West North Central ...... 103 450 440 ¥10 ¥2.3 West South Central ...... 255 1,198 1,168 ¥30 ¥2.5 Rural by Region: East North Central ...... 65 48 45 ¥3 ¥6.7 East South Central ...... 142 151 142 ¥9 ¥6.0 Middle Atlantic ...... 26 34 32 ¥2 ¥6.2 Mountain ...... 21 16 16 0 0.1 New England ...... 11 15 16 1 8.8 Pacific ...... 7 8 7 ¥1 ¥16.2 South Atlantic ...... 88 96 96 0 0.2 West North Central ...... 34 20 19 ¥1 ¥5.4 West South Central ...... 113 83 78 ¥5 ¥5.9 By Payment Classification: Urban Hospitals ...... 1,896 9,212 9,097 ¥115 ¥1.2 Large Urban Areas ...... 1,046 5,859 5,788 ¥72 ¥1.2 Other Urban Areas ...... 850 3,353 3,310 ¥43 ¥1.3 Rural Hospitals ...... 538 520 501 ¥20 ¥3.8 Teaching Status: Nonteaching ...... 1,551 3,101 3,065 ¥36 ¥1.2 Fewer than 100 residents ...... 644 3,206 3,157 ¥49 ¥1.5 100 or more residents ...... 239 3,425 3,375 ¥50 ¥1.5 Type of Ownership: Voluntary ...... 1,400 6,020 5,939 ¥81 ¥1.3 Proprietary ...... 550 1,664 1,638 ¥26 ¥1.5 Government ...... 482 2,022 1,996 ¥26 ¥1.3 Unknown ...... 2 27 25 ¥2 ¥5.8 Medicare Utilization Percent: 0–25 ...... 430 3,008 2,972 ¥36 ¥1.2 25–50 ...... 1,625 6,329 6,235 ¥94 ¥1.5 50–65 ...... 320 382 379 ¥3 ¥0.8 Over 65 ...... 59 14 12 ¥2 ¥12.9 Source: Dobson | DaVanzo analysis of 2011–2013 Hospital Cost Reports. * Dollar DSH calculated by [0.25 * estimated section 1886(d)(5)(F) payments] + [0.75 * estimated section 1886(d)(5)(F) payments * Factor 2 * Factor 3]. When summed across all hospitals projected to receive DSH payments, DSH payments are estimated to be $9,372 million in FY 2016 and $9,598 million in FY 2017. ** Percentage change is determined as the difference between Medicare DSH payments modeled for the FY 2017 IPPS/LTCH PPS proposed rule (column 3) and Medicare DSH payments modeled for the FY 2016 IPPS/LTCH final rule (column 2) divided by Medicare DSH payments modeled for the FY 2016 final rule (column 2) 1 times 100 percent.

Changes in projected FY 2017 DSH $14.227 billion; (2) a reduction in the percent The proposed impact analysis found that, payments from DSH payments in FY 2016 are of uninsured (Factor 2) from 63.69 percent to across all projected DSH eligible hospitals, primarily driven by three factors: (1) An 56.74 percent; and (3) a revised proxy FY 2017 DSH payments are estimated at increase in Factor 1 from $13.411 billion to methodology for calculating Factor 3 values. approximately $9.598 billion, or a decrease of

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approximately 1.4 percent from FY 2016 DSH Puerto Rico hospitals are projected to 2017 hospital-specific readmissions payments (approximately $9.732 billion). receive an increase in overall DSH payments, adjustment. As a result, we estimate that the Although Factor 1 increased by including both empirically justified DSH Hospital Readmissions Reduction Program approximately 6.1 percent, the reduction in payments and uncompensated care would save approximately $523 million in Factor 2 offsets this and results in a net payments, due to the proposal to create proxy FY 2017, an increase of $100 million over the decrease in the amount available to be values for SSI days for hospitals in Puerto estimated FY 2016 savings. distributed in uncompensated care payments. Rico for purposes of calculating Factor 3 of 4. Effects of Proposed Changes Under the FY As seen in the above table, percent the uncompensated care payment 2017 Hospital Value-Based Purchasing (VBP) reductions greater than 1.4 percent indicate methodology. For FY 2017, Puerto Rico Program that hospitals within the specified category hospitals are projected to receive $113 are projected to experience a greater million in overall DSH and uncompensated In section IV.H. of the preamble of this reduction in DSH payments, on average, care payments, or a 12.2 percent increase proposed rule, we discuss the Hospital VBP compared to the universe of FY 2017 from FY 2016 payments ($100 million). Of Program under which the Secretary makes projected DSH hospitals. Conversely, percent the estimated $113 million for FY 2017, we value-based incentive payments to hospitals reductions that are less than 1.4 percent estimate that $75 million will be based on their performance on measures indicate a hospital type is projected to have uncompensated care payments to Puerto Rico during the performance period with respect a smaller reduction than the overall average. hospitals. This represents an increase of to a fiscal year. These incentive payments The variation in the distribution of payments approximately 11.2 percent, or $7.6 million, will be funded for FY 2017 through a by hospital characteristic is largely in FY 2017 compared to the estimated $68 reduction to the FY 2017 base operating DRG dependent on the change in a given million in uncompensated care payments to payment amount for the discharge for the hospital’s number of Medicaid days and SSI Puerto Rico hospitals in FY 2016. Moreover, hospital for such fiscal year, as required by days used in the Factor 3 computation. we estimate that uncompensated care section 1886(o)(7)(B) of the Act. The Rural hospitals, grouped by geographic payments to Puerto Rico hospitals for FY applicable percentage for FY 2017 and location, payment classification, and bed 2017 are 12.6 percent, or $8.4 million, higher subsequent years is 2 percent. The total size, are projected to experience a larger with the proposed SSI proxy than they amount available for value-based incentive reduction in DSH payments than urban otherwise would have been without the payments must be equal to the total amount hospitals. Overall, urban hospitals are proposed SSI proxy for FY 2017. In other of reduced payments for all hospitals for the projected to receive a 1.2 percent decrease in words, without the proposed SSI proxy, we fiscal year, as estimated by the Secretary. DSH payments, and rural hospitals are would have expected uncompensated care In section IV.H. of the preamble of this projected to receive a 4.3 percent decrease in payments to Puerto Rico hospitals to decline proposed rule, we estimate the available pool DSH payments. The smaller the rural by approximately $0.9 million between FY of funds for value-based incentive payments hospital, the larger the projected reduction in 2016 and FY 2017. We note that because the in the FY 2017 program year, which, in DSH payments, with rural hospitals that have proposed SSI proxy for Puerto Rico hospitals accordance with section 1886(o)(7)(C)(v) of 0–99 beds projected to experience a 6.3 increases the number of days in the the Act, will be 2.00 percent of base percent payment reduction, and larger rural denominator of Factor 3, this affects hospitals operating DRG payments, or a total of hospitals with 250–499 beds projected to nationally. We estimate that uncompensated approximately $1.7 billion. This estimated experience a 0.3 percent payment reduction. care payments to non-Puerto Rico hospitals available pool for FY 2017 is based on the In contrast, the smallest urban hospitals (0– for FY 2017 are approximately 0.1 percent historical pool of hospitals that were eligible 99 beds) are projected to receive an increase lower with the proposed SSI proxy than they to participate in the FY 2016 program year in DSH payments of 0.9 percent. Larger otherwise would have been without the and the payment information from the hospitals (100–250 beds and 250+ beds) are proposed SSI proxy. projected to receive reductions of 1.3 percent December 2015 update to the FY 2015 in DSH payments that are smaller than the 3. Effects of Proposed Reduction Under the MedPAR file. overall average. Hospital Readmissions Reduction Program The proposed estimated impacts of the FY By region, projected DSH payment In section IV.G. of the preamble of this 2017 program year by hospital characteristic, reductions for urban hospitals were largest in proposed rule, we discuss our proposals for found in the table below, are based on the West South Central, West North Central, the FY 2017 Hospital Readmissions historical TPSs. We used the FY 2016 and South Atlantic regions. The Mountain, Reduction Program (established under program year’s TPSs to calculate the proxy New England, and Puerto Rico region section 3025 of the Affordable Care Act), adjustment factors used for this impact hospitals are projected to receive an increase which requires a reduction to a hospital’s analysis. These are the most recently in DSH payments. Reductions in remaining base operating DRG payments to account for available scores that hospitals were given an urban hospital regions are generally excess readmissions. For FY 2017, the opportunity to review and correct. The proxy consistent with the overall average percent reduction is based on a hospital’s risk- adjustment factors use estimated annual base reduction of 1.4. Regionally, rural hospitals adjusted readmission rate during a 3-year operating DRG payment amounts derived are projected to receive a wider range of period for acute myocardial infarction (AMI), from the December 2015 update to the FY reductions. Rural hospitals in the South heart failure (HF), pneumonia, chronic 2015 MedPAR file. The proxy adjustment Atlantic, Mountain, and most notably New obstructive pulmonary disease (COPD), total factors can be found in Table 16 associated England regions are projected to receive an hip arthroplasty/total knee arthroplasty with this proposed rule (available via the increase in DSH payments. Reductions are (THA/TKA), and coronary artery bypass graft Internet on the CMS Web site). projected to be larger than the overall average (CABG). This provision is not budget neutral. The impact analysis shows that, for the FY in most remaining regions, particularly in the A hospital’s readmission adjustment is the 2017 program year, the number of hospitals Pacific region. higher of a ratio of the hospital’s aggregate that would receive an increase in their base Teaching hospitals are projected to receive payments for excess readmissions to their operating DRG payment amount is higher relatively larger reductions than nonteaching aggregate payments for all discharges, or a than the number of hospitals that would hospitals. Voluntary, proprietary, and floor, which has been defined in the statute receive a decrease. Among urban hospitals, government hospitals are projected to receive as 0.97 (or a 3.0 percent reduction). A those in the New England, South Atlantic, payment reductions generally consistent with hospital’s base operating DRG payment (that East North Central, East South Central, West the overall average percent reduction of 1.4. is, wage-adjusted DRG payment amount, as North Central, West South Central, Government hospitals are projected to discussed in section IV.G. of the preamble of Mountain, and Pacific regions would have an receive slightly smaller reductions in DSH this proposed rule) is the portion of the IPPS increase, on average, in their base operating payments, while proprietary hospitals are payment subject to the readmissions payment DRG payment amount. Urban hospitals in the projected to receive slightly larger reductions adjustment (DSH, IME, outliers and low- Middle Atlantic region would receive an than the overall average. Hospitals with over volume add-on payments are not subject to average decrease in their base operating DRG 65 percent Medicare utilization are projected the readmissions adjustment). In this payment amount. Among rural hospitals, to receive a significant reduction in DSH proposed rule, we estimate that 2,603 those in all regions would have an increase, payments, while lower Medicare utilization hospitals would have their base operating on average, in their base operating DRG percentiles show smaller reductions. DRG payments reduced by their proxy FY payment amounts.

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On average, hospitals that receive a higher days (MCR), those hospitals with an MCR Nonteaching hospitals would have an (50–65) percent of DSH payments would above 65 percent would have the largest average increase, and teaching hospitals receive decreases in base operating DRG average increase in base operating DRG would experience an average decrease in payment amount. With respect to hospitals’ payment amount. base operating DRG payment amount. Medicare utilization as a percent of inpatient

IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT PROPOSED CHANGES RESULTING FROM THE FY 2017 HOSPITAL VBP PROGRAM

Number of Average hospitals (%)

By Geographic Location: All Hospitals ...... 3,041 0.244 Large Urban ...... 1,247 0.117 Other Urban ...... 1,046 0.202 Rural Area ...... 748 0.514 Urban hospitals ...... 2,293 0.156 0–99 beds ...... 517 0.708 100–199 beds ...... 719 0.143 200–299 beds ...... 430 ¥0.035 300–499 beds ...... 419 ¥0.146 500 or more beds ...... 208 ¥0.171 Rural hospitals ...... 748 0.514 0–49 beds ...... 265 0.695 50–99 beds ...... 286 0.540 100–149 beds ...... 115 0.304 150–199 beds ...... 45 0.159 200 or more beds ...... 37 0.103 By Region: Urban By Region ...... 2,293 0.156 New England ...... 110 0.152 Middle Atlantic ...... 297 ¥0.065 South Atlantic ...... 389 0.108 East North Central ...... 368 0.204 East South Central ...... 141 0.126 West North Central ...... 155 0.370 West South Central ...... 324 0.211 Mountain ...... 159 0.128 Pacific ...... 350 0.225 Rural By Region ...... 748 0.514 New England ...... 20 0.528 Middle Atlantic ...... 53 0.373 South Atlantic ...... 117 0.621 East North Central ...... 112 0.514 East South Central ...... 138 0.389 West North Central ...... 94 0.623 West South Central ...... 135 0.416 Mountain ...... 55 0.713 Pacific ...... 24 0.677 By MCR Percent: 0–25 ...... 374 0.131 25–50 ...... 2,024 0.205 50–65 ...... 508 0.409 Over 65 ...... 126 0.539 Missing ...... 9 0.204 BY DSH Percent: 0–25 ...... 1,427 0.384 25–50 ...... 1,320 0.154 50–65 ...... 156 ¥0.067 Over 65 ...... 138 0.007 By Teaching Status: Non-Teaching ...... 2,041 0.381 Teaching ...... 1,000 ¥0.036

Actual FY 2017 program year’s TPSs will the estimated cumulative effect of the will not conclude until after the publication not be reviewed and corrected by hospitals measures and scoring system for the HAC of the FY 2017 IPPS/LTCH PPS final rule, we until after the FY 2017 IPPS/LTCH PPS final Reduction Program proposed in this are not providing hospital-level data or a rule has been published. Therefore, the same proposed rule. In the FY 2016 IPPS/LTCH hospital-level payment impact in conjunction historical universe of eligible hospitals and PPS final rule (80 FR 49575 through 49576), with this FY 2017 IPPS/LTCH PPS proposed corresponding TPSs from the FY 2016 we finalized a Total HAC Score methodology rule. program year will be used for the updated that assigns, for FY 2017, weights for Domain To estimate the impact of the FY 2017 HAC impact analysis in that final rule. 1 and Domain 2 at 15 percent and 85 percent, Reduction Program, we used, as previously respectively. Based on this methodology, the finalized, AHRQ PSI 90 measure results 5. Effects of Proposed Changes to the HAC table below presents data on the estimated based on Medicare FFS discharges from July Reduction Program for FY 2017 proportion of hospitals in the worst- 2013 through June 2015 and version 5.0.1 In section IV.I. of the preamble of this performing quartile of the Total HAC Scores (recalibrated) of the AHRQ software. For the proposed rule, we discuss the proposed by hospital characteristic. We note that CLABSI, CAUTI, Colon and Abdominal changes to the HAC Reduction Program for because scores will undergo a 30-day review Hysterectomy SSI, MRSA Bacteremia, and FY 2017. The table and analysis below show and correction period by the hospitals that CDI measure results, we used standardized

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infection ratios (SIRs) calculated with Rule Impact File. This table includes 3,225 and 3,191 had information for MCR percent. hospital surveillance data reported to the non-Maryland hospitals that had a Total HAC Maryland hospitals and hospitals without a NHSN for infections occurring between Score for FY 2017. Of these, 3,211 hospitals Total HAC Score are not included in the table January 1, 2013 and December 31, 2014. had information for geographic location, below. To analyze the results by hospital region, bed size, DSH percent, and teaching characteristic, we used the FY 2016 Final status, 3,197 had information for ownership,

ESTIMATED PROPORTION OF HOSPITALS IN THE WORST-PERFORMING QUARTILE (75TH PERCENTILE) OF THE TOTAL HAC SCORE FOR THE FY 2017 HAC REDUCTION PROGRAM [By hospital characteristic]

Number of Percent of hospitals in Number of hospitals in Hospital characteristic a the worst- the worst- hospitals performing performing quartile b quartile c

Total d ...... 3,225 774 24.0 By Geographic Location: All hospitals: Urban ...... 2,403 656 27.3 Rural ...... 808 108 13.4 Urban hospitals: 1–99 beds ...... 593 90 15.2 100–199 beds ...... 737 164 22.3 200–299 beds ...... 436 128 29.4 300–399 beds ...... 273 103 37.7 400–499 ...... 151 62 41.1 500 or more beds ...... 213 109 51.2 Rural hospitals: 1–49 beds ...... 306 44 14.4 50–99 beds ...... 294 32 10.9 100–149 beds ...... 120 11 9.2 150–199 beds ...... 47 11 23.4 200 or more beds ...... 41 10 24.4 By Region: New England ...... 134 46 34.3 Mid-Atlantic ...... 367 130 35.4 South Atlantic ...... 520 131 25.2 East North Central ...... 499 105 21.0 East South Central ...... 299 58 19.4 West North Central ...... 262 39 14.9 West South Central ...... 510 79 15.5 Mountain ...... 225 64 28.4 Pacific ...... 395 112 28.4 By DSH Percent: e 0–24 ...... 1,512 336 22.2 25–49 ...... 1,370 329 24.0 50–64 ...... 170 48 28.2 65 and over ...... 159 51 32.1 By Teaching Status: f Non-teaching ...... 2,189 398 18.2 Fewer than 100 residents ...... 1,022 366 35.8 100 or more residents ...... 777 230 29.6 By Type of Ownership: Voluntary ...... 1,874 480 25.6 Proprietary ...... 834 160 19.2 Government ...... 489 122 24.9 By MCR Percent: 0–24 ...... 480 143 29.8 25–49 ...... 2,096 498 23.8 50–64 ...... 533 104 19.5 65 and over ...... 82 14 17.1 Source: FY 2017 HAC Reduction Program Proposed Rule Preliminary Results. Scores are based on AHRQ PSI 90 data from July 2013 through June 2015 and CDC CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia and CDI data from January 2013 to December 2014. Hospital Characteristics are based on the FY 2016 Final Rule Impact File updated on October 8, 2015. a The total number of non-Maryland hospitals with a Total HAC Score with hospital characteristic data (3,211 for geographic location, region, bed size, DSH percent, and teaching status; 3,197 for type of ownership; and 3,191 for MCR) does not add up to the total number of non-Mary- land hospitals with a Total HAC Score for the FY 2017 HAC Reduction Program (3,225) because 14 hospitals are not included in the FY 2016 Final Rule Impact File and not all hospitals have data for all characteristics. b This column is the number of non-Maryland hospitals with a Total HAC Score within the corresponding characteristic that are estimated to be in the worst-performing quartile. c This column is the percent of hospitals within each characteristic that are estimated to be in the worst-performing quartile. The percentages are calculated by dividing the number of non-Maryland hospitals with a Total HAC Score in the worst-performing quartile by the total number of non-Maryland hospitals with a Total HAC Score within that characteristic. d Total excludes 47 Maryland hospitals and 64 non-Maryland hospitals without a Total HAC Score for FY 2017. e A hospital is considered to be a DSH hospital if it has a disproportionate patient percentage (DPP) greater than zero. f A hospital is considered to be a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP) greater than zero.

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6. Effects of Proposed Policy Changes for the added costs of this demonstration. In set of finalized cost reports for cost reporting Relating to Direct GME and IME Payments for other words, we have applied budget periods beginning in FY 2016 when they Rural Training Tracks at Urban Hospitals neutrality across the payment system as a become available, and are proposing to In section IV.J. of the preamble of this whole rather than across the participants of reconcile the budget neutrality offset proposed rule, we discuss our proposal to this demonstration. The language of the amounts for FYs 2011 through 2016 with the extend the period for establishing rural track statutory budget neutrality requirement actual costs of the demonstration once the FTE limitations from 3 years to 5 years for permits the agency to implement the budget finalized cost reports for all of these years are purposes of direct GME and IME payments neutrality provision in this manner. The available, we believe there would be no to urban hospitals with rural track training statutory language requires that aggregate impact from the demonstration on the programs. Specifically, we are proposing to payments made by the Secretary do not national IPPS rates for FY 2017. revise the regulations to permit that, in the exceed the amount which the Secretary 8. Effects of Proposed Implementation of the first 5 program years (rather than the first 3 would have paid if the demonstration was Notice of Observation Treatment and program years) of the rural track’s existence, not implemented but does not identify the Implications for Care Eligibility Act (NOTICE the rural track FTE limitation for each urban range across which aggregate payments must Act) hospital will be the actual number of FTE be held equal. In this FY 2017 proposed rule, we are In section IV.L. of the preamble of this residents training in the rural training track proposed rule, we discuss our proposal to at the urban hospital, and beginning with the proposing a different methodology as compared to previous years for analyzing the implement section 1866(a)(1)(Y) of the Act as urban hospital’s cost reporting period that amended by the NOTICE Act (Pub. L. 114– coincides with or follows the start of the costs attributable to the demonstration for FY 2017. The demonstration will have 42) by revising the basic commitments sixth program year of the rural training providers agree to as part of participating in track’s existence, the rural track FTE substantially phased out by the beginning of FY 2017. The 7 ‘‘originally participating Medicare under a provider agreement by limitation would take effect. This proposed establishing regulations that would specify a change addresses concerns expressed by the hospitals’’, that is, those hospitals that were selected for the demonstration in 2004 and process for hospitals and CAHs to notify an hospital community that rural training tracks, individual, orally and in writing, regarding like any program, should have a sufficient 2008, ended their participation in the 5-year extension period authorized by the the individual’s receipt of observation amount of time for a hospital to ‘‘grow’’ and services as an outpatient for more than 24 to establish a rural track FTE limitation that Affordable Care Act prior to the start of FY 2016. In addition, the participation period for hours and the implications of receiving such reflects the number of FTE residents that it services. The statute mandates the Secretary will actually train, once the program is fully the 14 hospitals that entered the demonstration following the extension of the develop a plain language written notice for grown. In section IV.J. of the preamble of this this purpose. The written notice must be proposed rule, we explain that because we demonstration mandated by the Affordable Care Act and that are still participating will delivered no later than 36 hours after inadvertently did not also amend the observation services are initiated. We have separate direct GME and IME regulations end on a rolling basis according to the end dates of the hospitals’ cost report periods, developed a standardized format for the regarding the growth window and effective notice, which is undergoing OMB approval. date of FTE limitations for rural track respectively, from April 30, 2016 through December 31, 2016. Of these 14 hospitals, 10 The notice would be disseminated during the training programs when we amended the normal course of related business activities. regulations regarding the 5-year growth hospitals will end participation on or before September 30, 2016, leaving 4 hospitals In 2014, there were approximately 977,000 window in the FY 2013 IPPS/LTCH PPS final claims for Medicare outpatient observation rule and regarding the additional changes we participating for the last 3 months of CY 2016 (that is, the first 3 months of FY 2017). Given services lasting greater than 24 hours made in the FY 2015 IPPS/LTCH PPS final furnished by 6,142 hospitals and CAHs.322 rule, we are proposing that the effective date the small number of participating hospitals and the limited time of participation, we are We refer readers to section IX.B. of the regarding the change in the growth window preamble of this proposed rule for a also be effective for rural track training proposing to forego the process of estimating the costs attributable to the demonstration for discussion of the burden associated with this programs started on or after October 1, 2012. notice requirement. Mostly due to the relatively small size of FY 2017 and to instead analyze the set of rural track programs, we estimate that the finalized cost reports for reporting periods 9. Effects of Proposed Technical Changes and proposal would cost approximately $1 beginning in FY 2016 when they become Correction of Typographical Errors in Certain million by the end of the 10-year period, a available. Regulations Under 42 CFR Part 413 Relating negligible cost. In previous IPPS/LTCH PPS final rules, we to Costs to Related Organizations and have determined the amount by which the Medicare Cost Reports 7. Effects of Implementation of Rural actual costs of the demonstration for an Community Hospital Demonstration Program In section IV.M. of the preamble of this earlier, previous year differed from the proposed rule, we discuss a number of In section IV.K. of the preamble of this estimated costs of the demonstration set forth proposed technical changes or corrections of proposed rule, for FY 2017, we discuss our in the corresponding final rule for the typographical errors in 42 CFR part 413 implementation of section 410A of Public corresponding fiscal year, and we relating to costs to related organizations and Law 108–173, as amended, which requires incorporated that amount into the budget Medicare cost reports that need to be made. the Secretary to conduct a demonstration that neutrality offset amount for the upcoming We believe that the impact of these proposed would modify payments for inpatient fiscal year. We note that we have calculated technical changes and corrections is services for up to 30 rural community this difference between the actual costs of the negligible. hospitals. Section 410A(c)(2) requires that in demonstration for FYs 2005 through 2010, as conducting the demonstration program under determined from finalized cost reports once 10. Effects of Proposed Implementation of the this section, the Secretary shall ensure that available, and estimated costs of the Frontier Community Health Integration the aggregate payments made by the demonstration as identified in the applicable Project (FCHIP) Demonstration Secretary do not exceed the amount which IPPS final rules for these years. In this In section VI.B. of the preamble of this the Secretary would have paid if the proposed rule, we are proposing to conduct proposed rule, we discuss the demonstration program under this section this analysis for FYs 2011 through 2016 at implementation of the FCHIP demonstration, was not implemented. one time, when all of the finalized cost which will allow eligible entities to develop As discussed in section IV.K. of the reports for cost reporting periods beginning and test new models for the delivery of preamble of this proposed rule, in the IPPS in FYs 2011 through 2016 are available. health care services in eligible counties in final rules for each of the previous 12 fiscal Given the general lag of 3 years in finalizing order to improve access to and better years, we have estimated the additional cost reports, we expect any such analysis to integrate the delivery of acute care, extended payments made by the program for each of be conducted in FY 2020. care, and other health care services to the participating hospitals as a result of the Because, as discussed earlier, we are Medicare beneficiaries in no more than four demonstration. In order to achieve budget proposing that we would not calculate and neutrality, we have adjusted the national apply an estimated budget neutrality offset 322 Source: CMS Office of Enterprise and Data IPPS rates by an amount sufficient to account amount for FY 2017, but instead analyze the Analytics.

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States. CMS has selected CAHs to participate needed to conduct the budget neutrality • We estimate that Medicare discharges in the demonstration, and budget neutrality analysis, we are proposing that, in the event will be approximately 11.3 million in FY estimates will be based on the demonstration the demonstration is found not to have been 2016 and 11.5 million in FY 2017. period, which is expected to be August 1, budget neutral, any excess costs would be • The capital Federal rate was updated 2016 through July 31, 2019. The selected recouped over a period of three cost report beginning in FY 1996 by an analytical CAHs are located in three States: Montana, periods, beginning in CY 2020. Therefore, framework that considers changes in the Nevada, and North Dakota. The this proposal does not impact any national prices associated with capital-related costs demonstration design includes three payment system for FY 2017. and adjustments to account for forecast error, intervention prongs, under which specific changes in the case-mix index, allowable waivers of Medicare payment rules will I. Effects of Proposed Changes in the Capital changes in intensity, and other factors. As allow for enhanced payment: telemedicine, IPPS discussed in section III.A.1.a. of the nursing facility, and ambulance services. 1. General Considerations Addendum to this proposed rule, the These waivers were formulated with the goal proposed update is 0.9 percent for FY 2017. For the impact analysis presented below, of increasing access to care with no net • In addition to the proposed FY 2017 we used data from the December 2015 update increase in costs. update factor, the proposed FY 2017 capital We have specified the payment of the FY 2015 MedPAR file and the Federal rate was calculated based on a enhancements for the demonstration, and December 2015 update of the Provider- proposed GAF/DRG budget neutrality based our selection of CAHs for participation, Specific File (PSF) that is used for payment adjustment factor of 0.9993, a proposed with the goal of maintaining the budget purposes. Although the analyses of the outlier adjustment factor of 0.9374, and a neutrality of the demonstration on its own proposed changes to the capital prospective proposed adjustment of (1/0.998) to terms (that is, the demonstration will payment system do not incorporate cost data, permanently remove the 0.2 percent produce savings from reduced transfers and we used the December 2015 update of the adjustment, as well as a proposed temporary admissions to other health care providers, most recently available hospital cost report 2-midnight adjustment of 1.006. The 2- thus offsetting any increase in payments data (FYs 2013 and 2014) to categorize midnight adjustments are discussed in resulting from the demonstration). However, hospitals. Our analysis has several section V.C. of the preamble of this proposed because of the small size of this qualifications. We use the best data available rule and are consistent with the proposed 2- demonstration program and uncertainty and make assumptions about case-mix and midnight adjustments on the operating associated with projected Medicare beneficiary enrollment as described later in Federal rate. As discussed in section V.C. of utilization and costs, we are proposing a this section. the preamble of this proposed rule, we are contingency plan to ensure that the budget Due to the interdependent nature of the not proposing to make an additional MS– neutrality requirement in section 123 of IPPS, it is very difficult to precisely quantify DRG documentation and coding adjustment Public Law 110–275 is met. Accordingly, if the impact associated with each change. In to the capital IPPS Federal rates for FY 2017. analysis of claims data for the Medicare addition, we draw upon various sources for beneficiaries receiving services at each of the the data used to categorize hospitals in the 2. Results participating CAHs, as well as of other data tables. In some cases (for instance, the We used the actuarial model previously sources, including cost reports for these number of beds), there is a fair degree of described in section I.I. of Appendix A of this CAHs, shows that increases in Medicare variation in the data from different sources. proposed rule to estimate the potential payments under the demonstration during We have attempted to construct these impact of our proposed changes for FY 2017 the 3-year period are not sufficiently offset by variables with the best available sources on total capital payments per case, using a reductions elsewhere, we will recoup the overall. However, it is possible that some universe of 3,330 hospitals. As previously additional expenditures attributable to the individual hospitals are placed in the wrong described, the individual hospital payment demonstration through a reduction in category. parameters are taken from the best available payments to all CAHs nationwide. The Using cases from the December 2015 data, including the December 2015 update of demonstration is projected to impact update of the FY 2015 MedPAR file, we the FY 2015 MedPAR file, the December payments to participating CAHs under both simulated payments under the capital IPPS 2015 update to the PSF, and the most recent Medicare Part A and Part B. Thus, in the for FY 2016 and FY 2017 for a comparison cost report data from the December 2015 event that we determine that aggregate of total payments per case. Any short-term, update of HCRIS. In Table III, we present a payments under the demonstration exceed acute care hospitals not paid under the comparison of estimated total payments per the payments that would otherwise have general IPPS (for example, Indian Health case for FY 2016 and estimated total been made, we are proposing that CMS Service hospitals and hospitals in Maryland) payments per case for FY 2017 based on the would recoup payments through reductions are excluded from the simulations. proposed FY 2017 payment policies. Column of Medicare payments to all CAHs under The methodology for determining a capital 2 shows estimates of payments per case both Medicare Part A and Part B. Because of IPPS payment is set forth at § 412.312. The under our model for FY 2016. Column 3 the small scale of the demonstration, it basic methodology for calculating the shows estimates of payments per case under would be not be feasible to implement budget proposed capital IPPS payments in FY 2017 our model for FY 2017. Column 4 shows the neutrality by reducing only payments to the is as follows: total percentage change in payments from FY participating CAH providers. We are 2016 to FY 2017. The change represented in (Standard Federal Rate) × (DRG weight) × proposing to make the reduction to payments Column 4 includes the proposed 0.9 percent (GAF) × (COLA for hospitals located in to all CAHs, not just those participating in × update to the capital Federal rate and other the demonstration, because the FCHIP Alaska and Hawaii) (1 + DSH proposed changes in the adjustments to the program is specifically designed to test Adjustment Factor + IME adjustment capital Federal rate. The comparisons are innovations that affect delivery of services by factor, if applicable). provided by: (1) Geographic location; (2) this provider category. We believe that the In addition to the other adjustments, region; and (3) payment classification. language of the statutory budget neutrality hospitals may receive outlier payments for The simulation results show that, on requirement at section 123(g)(1)(B) of the Act those cases that qualify under the threshold average, proposed capital payments per case permits the agency to implement the budget established for each fiscal year. We modeled in FY 2017 are expected to increase as neutrality provision in this manner. The payments for each hospital by multiplying compared to capital payments per case in FY statutory language refers merely to ensuring the capital Federal rate by the GAF and the 2016. This expected increase is due to the that aggregate payments made by the hospital’s case-mix. We then added estimated proposed approximately 1.7 percent increase Secretary do not exceed the amount which payments for indirect medical education, in the capital Federal rate for FY 2017 as the Secretary estimates would have been paid disproportionate share, and outliers, if compared to the FY 2016 capital Federal rate if the demonstration project was not applicable. For purposes of this impact and, to a lesser degree, changes to the MS– implemented, and does not identify the range analysis, the model includes the following DRG reclassifications and recalibrations. (For across which aggregate payments must be assumptions: a discussion of the determination of the held equal. • We estimate that the Medicare case-mix capital Federal rate, we refer readers to Given the 3-year period of performance of index will increase by 0.5 percent in both section III.A. of the Addendum to this the FCHIP demonstration and the time FYs 2016 and 2017. proposed rule.) The proposed increase in

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capital payments per case due to the effects payments per case for hospitals in ‘‘large Hospitals of all types of ownership (that is, of changes to the MS–DRG reclassifications urban areas’’ have an estimated increase of voluntary hospitals, government hospitals, and recalibrations is expected to be slightly 2.0 percent, while hospitals in rural areas, on and proprietary hospitals) are expected to greater for urban hospitals than for rural average, are expected to experience a 2.1 experience an increase in capital payments hospitals. However, less than half of the percent increase in proposed capital per case from FY 2016 to FY 2017. The hospitals in urban areas are expected to payments per case from FY 2016 to FY 2017. proposed increase in capital payments for experience a slight increase in capital Capital IPPS payments per case for ‘‘other voluntary and proprietary hospitals is payments per case due to the effects of urban hospitals’’ are also estimated to estimated to be 2.0 percent and 2.2 percent, proposed changes to the GAFs, while the increase 2.1 percent. The primary factor respectively. For government hospitals, the remainder of these urban area hospitals contributing to the difference in the proposed increase is estimated to be 1.8 percent. would experience no change or a decrease in projected increase in capital IPPS payments Section 1886(d)(10) of the Act established capital payments per case due to proposed per case for urban hospitals as compared to the MGCRB. Hospitals may apply for changes in the GAFs. For most hospitals in rural hospitals is the proposed changes to the reclassification for purposes of the wage rural areas, proposed changes in the GAFs MS–DRGs reclassifications and index for FY 2017. Reclassification for wage are expected to increase capital payments, to recalibrations. index purposes also affects the GAFs because a greater or lesser extent, except for two rural The comparisons by region show that the that factor is constructed from the hospital areas where proposed changes in the GAFs estimated increases in capital payments per wage index. To present the effects of the are expected to decrease capital payments case from FY 2016 to FY 2017 in urban areas per case. These regional effects of the range from a 2.7 percent increase for the West hospitals being reclassified as of the proposed changes to the GAFs on capital South Central urban region to a 0.7 percent publication of this proposed rule for FY payments are consistent with the projected increase for the New England urban region. 2017, we show the average capital payments changes in payments due to proposed For rural regions, the Middle Atlantic rural per case for reclassified hospitals for FY changes in the wage index (and proposed region is projected to experience the largest 2017. Urban reclassified hospitals are policies affecting the wage index) as shown increase in capital IPPS payments per case of expected to experience an increase in capital in Table I in section I.G. of this Appendix A. 2.9 percent; the Mountain rural region is payments of 2.0 percent; urban The net impact of these proposed changes projected to experience the smallest increase nonreclassified hospitals are expected to is an estimated proposed 2.0 percent change in capital IPPS payments per case of 0.7 experience an increase in capital payments of in capital payments per case from FY 2016 percent. The proposed change in the GAFs is 2.1 percent. The estimated percentage to FY 2017 for all hospitals (as shown in the main factor for the Mountain rural region increase for rural reclassified hospitals is 2.3 Table III). experiencing the smallest projected increase percent, and for rural nonreclassified The geographic comparison shows that, on in capital IPPS payments among rural hospitals, the estimated percentage increase average, hospitals in all classifications (urban regions, and it is also the main contributor is 1.5 percent. Other reclassified hospitals and rural) would experience an increase in for the smallest projected increase in capital (section 1886(d)(8)(B) of the Act) are capital IPPS payments per case in FY 2017 IPPS payments for the New England urban expected to experience the largest increase in as compared to FY 2016. Capital IPPS region. capital payments of 2.6 percent.

TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE [FY 2016 payments compared to FY 2017 payments]

Average Average Number of FY 2016 FY 2017 hospitals payments/ payments/ Change case case

By Geographic Location: All hospitals ...... 3,330 895 913 2.0 Large urban areas (populations over 1 million) ...... 1,378 991 1,010 2.0 Other urban areas (populations of 1 million of fewer) ...... 1,134 855 873 2.1 Rural areas ...... 818 607 619 2.1 Urban hospitals ...... 2,512 929 948 2.0 0–99 beds ...... 656 752 766 2.0 100–199 beds ...... 765 805 819 1.8 200–299 beds ...... 449 848 864 1.9 300–499 beds ...... 429 943 963 2.1 500 or more beds ...... 213 1,118 1,142 2.1 Rural hospitals ...... 818 607 619 2.1 0–49 beds ...... 320 509 519 2.0 50–99 beds ...... 292 568 579 2.1 100–149 beds ...... 119 599 610 1.8 150–199 beds ...... 46 656 669 2.1 200 or more beds ...... 41 727 744 2.3 By Region: Urban by Region ...... 2,512 929 948 2.0 New England ...... 116 1,011 1,018 0.7 Middle Atlantic ...... 315 1,035 1,050 1.5 South Atlantic ...... 406 826 843 2.1 East North Central ...... 390 892 913 2.3 East South Central ...... 147 780 800 2.5 West North Central ...... 163 907 926 2.1 West South Central ...... 384 839 862 2.7 Mountain ...... 163 961 980 1.9 Pacific ...... 377 1,194 1,218 2.0 Puerto Rico ...... 51 426 450 5.5 Rural by Region ...... 818 607 619 2.1 New England ...... 21 847 866 2.3 Middle Atlantic ...... 55 579 595 2.9

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TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued [FY 2016 payments compared to FY 2017 payments]

Average Average Number of FY 2016 FY 2017 hospitals payments/ payments/ Change case case

South Atlantic ...... 127 573 581 1.5 East North Central ...... 115 627 642 2.4 East South Central ...... 156 552 563 2.0 West North Central ...... 99 655 666 1.8 West South Central ...... 161 524 538 2.6 Mountain ...... 60 710 715 0.7 Pacific ...... 24 794 813 2.4 By Payment Classification: All hospitals ...... 3,330 895 913 2.0 Large urban areas (populations over 1 million) ...... 1,372 992 1,011 2.0 Other urban areas (populations of 1 million of fewer) ...... 1,083 860 878 2.1 Rural areas ...... 875 622 634 1.9 Teaching Status: Non-teaching ...... 2,275 755 770 1.9 Fewer than 100 Residents ...... 804 868 886 2.1 100 or more Residents ...... 251 1,264 1,290 2.1 Urban DSH: 100 or more beds ...... 1,608 954 973 2.1 Less than 100 beds ...... 330 688 700 1.8 Rural DSH: Sole Community (SCH/EACH) ...... 266 590 603 2.2 Referral Center (RRC/EACH) ...... 347 652 665 2.0 Other Rural: 100 or more beds ...... 33 537 545 1.4 Less than 100 beds ...... 149 515 523 1.6 Urban teaching and DSH: Both teaching and DSH ...... 880 1,029 1,051 2.1 Teaching and no DSH ...... 107 928 942 1.5 No teaching and DSH ...... 1,058 800 816 2.0 No teaching and no DSH ...... 410 804 820 1.9 Rural Hospital Types: Non special status hospitals ...... 2,522 931 949 2.0 RRC/EACH ...... 193 754 774 2.6 SCH/EACH ...... 326 689 702 2.0 SCH, RRC and EACH ...... 126 735 749 1.9 Hospitals Reclassified by the Medicare Geographic Classification Review Board: FY2017 Reclassifications: All Urban Reclassified ...... 576 952 971 2.0 All Urban Non-Reclassified ...... 1,879 925 944 2.1 All Rural Reclassified ...... 277 636 651 2.3 All Rural Non-Reclassified ...... 484 570 578 1.5 Other Reclassified Hospitals (Section 1886(d)(8)(B)) ...... 57 582 597 2.6 Type of Ownership: Voluntary ...... 1,914 908 927 2.0 Proprietary ...... 858 803 820 2.2 Government ...... 516 946 963 1.8 Medicare Utilization as a Percent of Inpatient Days: 0–25 ...... 517 1,086 1,109 2.2 25–50 ...... 2,128 899 917 2.0 50–65 ...... 546 730 744 1.9 Over 65 ...... 94 518 528 2.0

J. Effects of Proposed Payment Rate Changes our proposed decisions as well as LTCHs, 325 proprietary LTCHs, and 17 and Policy Changes Under the LTCH PPS alternatives that were considered. In this LTCHs that are government-owned and 1. Introduction and General Considerations section of Appendix A to this proposed rule, operated. (We note that, although there are we discuss the impact of the proposed currently approximately 430 LTCHs, for In section VII. of the preamble of this changes to the payment rate, factors, and purposes of this impact analysis, we proposed rule and section V. of the other payment rate policies related to the excluded the data of all-inclusive rate Addendum to this proposed rule, we set forth LTCH PPS that are presented in the preamble providers consistent with the development of the proposed annual update to the payment of this proposed rule in terms of their the proposed FY 2017 MS–LTC–DRG relative rates for the LTCH PPS for FY 2017. In the estimated fiscal impact on the Medicare weights (discussed in section VII.C.3.c. of the preamble of this proposed rule, we specify budget and on LTCHs. preamble of this proposed rule).) In the the statutory authority for the proposed There are 420 LTCHs included in this impact analysis, we used the proposed provisions that are presented, identify those impacts analysis, which includes data for 78 payment rate, factors, and policies presented proposed policies, and present rationales for nonprofit (voluntary ownership control) in this proposed rule, which includes the

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continued transition to the site neutral the discharge (§ 412.522(c)(3)). The 9.9 percent of site neutral payment rate cases payment rate required by section transitional blended payment rate uses the are from LTCHs whose cost reporting periods 1886(m)(6)(A) of the Act (discussed in same blend percentages (that is, 50 percent) begin in the first quarter of FY 2016; 26.4 section VII.B. of the preamble of this for both years of the 2-year transition period. percent of site neutral payment rate cases are proposed rule), the proposed 1.45 percent Therefore, when estimating FY 2017 LTCH from LTCHs whose cost reporting periods annual update to the LTCH PPS standard PPS payments for site neutral payment rate begin in the second quarter of FY 2016; 10.3 Federal payment rate in accordance with cases for this impact analysis, the transitional percent of site neutral payment rate cases are section 1886(m)(5)(C) of the Act (which is blended payment rate was applied to all such from LTCHs whose cost reporting periods based on the full estimated increase of the cases because all discharges in FY 2017 will begin in the third quarter of FY 2016; and proposed revised and rebased LTCH PPS either be in the hospital’s cost reporting 53.4 percent of site neutral payment rate market basket and the reductions required by period that began during FY 2016 or in the cases are from LTCHs whose cost reporting sections 1886(m)(3) and (m)(4) of the Act), hospital’s cost reporting period that will periods begin in the fourth quarter of FY the proposed update to the MS–LTC–DRG begin during FY 2017. However, when 2016. classifications and relative weights, the estimating FY 2016 LTCH PPS payments for Based on the FY 2015 LTCH cases that proposed update to the wage index values site neutral payment rate cases for this were used for the analyses in this proposed and labor-related share, and the best impact analysis because the statute specifies rule, approximately 45 percent of those available claims and CCR data to estimate the that the site neutral payment rate effective LTCH cases would have been classified as proposed change in payments for FY 2017. date for a given LTCH is determined based site neutral payment rate cases if the site Under the dual rate LTCH PPS payment on the date on which that LTCH’s cost neutral payment rate had been in effect in FY structure, payment for LTCH discharges that reporting period begins during FY 2016, we 2015 (that is, 45 percent of such LTCH cases meet the criteria for exclusion from the site included an adjustment to account for this would not have met the patient-level criteria neutral payment rate (that is, LTCH PPS rolling effective date, consistent with the for exclusion from the site neutral payment standard Federal payment rate cases) is based approach used for the LTCH PPS impact rate). Our Office of the Actuary estimates that on the LTCH PPS standard Federal payment analysis presented in the FY 2016 IPPS/ the percent of LTCH PPS cases that will be rate. Consistent with the statute, the site LTCH PPS final rule (80 FR 49831). This paid at the site neutral payment rate in FY neutral payment rate is the lower of the IPPS approach accounts for the fact that LTCHs 2017 will not change significantly from the comparable per diem amount as determined with discharges in FY 2016 that are in cost historical data. Taking into account the under § 412.529(d)(4), including any reporting periods that begin before October 1, transitional blended payment rate and other applicable outlier payments as specified in 2015, continued to be paid for all discharges proposed changes that would apply to the § 412.525(a); or 100 percent of the estimated (including those that did not meet the site neutral payment rate cases in FY 2017, we estimate that aggregate LTCH PPS cost of the case as determined under existing patient-level criteria for exclusion from the payments for these site neutral payment rate § 412.529(d)(2). In addition, there are two site neutral payment rate) at the LTCH PPS cases would decrease by approximately 21 separate HCO targets—one for LTCH PPS standard Federal payment rate until the start percent (or approximately $367 million). standard Federal payment rate cases and one of their first cost reporting period beginning Approximately 55 percent of LTCH cases for site neutral payment rate cases. The after October 1, 2015. are expected to meet the patient-level criteria statute also establishes a transitional For purposes of this impact analysis, to for exclusion from the site neutral payment payment method for cases that are paid the estimate total FY 2016 LTCH PPS payments rate in FY 2017, and will be paid based on site neutral payment rate for LTCH for site neutral payment rate cases, we used the LTCH PPS standard Federal payment rate discharges occurring in cost reporting the same approach as was used in the FY for the full year. We estimate that total LTCH periods beginning during FY 2016 and FY 2016 IPPS/LTCH PPS final rule. In summary, PPS payments for these LTCH PPS standard 2017. The transitional payment amount for under this approach, we grouped LTCHs Federal payment rate cases in FY 2017 would site neutral payment rate cases is a blended based on the quarter of FY 2016 their cost increase approximately 0.3 percent (or payment rate, which is calculated as 50 reporting periods began during FY 2016. For approximately $12 million). This estimated percent of the applicable site neutral example, LTCHs with cost reporting periods increase in LTCH PPS payments for LTCH payment rate amount for the discharge as that began during October through December PPS standard Federal payment rate cases in determined under new § 412.522(c)(1) and 50 2015 began during the first quarter of FY FY 2017 is primarily due to the combined percent of the applicable LTCH PPS standard 2016. For LTCHs grouped in each quarter of effects of the proposed 1.45 percent annual Federal payment rate for the discharge FY 2016, we modeled those LTCHs’ update to the LTCH PPS standard Federal determined under § 412.523. estimated FY 2016 site neutral payment rate payment rate for FY 2017 (discussed in Based on the best available data for the 420 payments under the transitional blended section V.A. of the Addendum to this LTCHs in our database that were considered payment rate based on the quarter in which proposed rule) and an estimated decrease in in the analyses used for this proposed rule, the LTCHs in each group become subject to HCO payments for these cases (discussed in we estimate that overall LTCH PPS payments the site neutral payment rate. Then, we section V.D.3. of the Addendum to this in FY 2017 would decrease by approximately modeled for LTCHs grouped in each quarter proposed rule). 6.9 percent (or approximately $355 million). of FY 2016, estimated FY 2016 payments Based on the 420 LTCHs that were This projection takes into account estimated under the LTCH PPS standard Federal represented in the FY 2015 LTCH cases that payments for LTCH cases in our database that payment rate based on the quarter in which were used for the analyses in this proposed would have met the patient-level criteria and the LTCHs in each group become subject to rule, we estimate that aggregate FY 2017 been paid the LTCH PPS standard Federal the site neutral payment rate. (For additional LTCH PPS payments would be payment rate if those criteria had been in details on our method of taking into account approximately $4.757 billion, as compared to effect at the time of the discharge, and the rolling effective date of the application of estimated aggregate FY 2016 LTCH PPS estimated payments for LTCH cases that the site neutral payment rate when payments of approximately $5.112 billion, would not have met the patient-level criteria estimating payments for FY 2016, we refer resulting in an estimated overall decrease in and been paid under the site neutral payment readers to the description presented in FY LTCH PPS payments of approximately $355 rate if that rate had been in effect at the time 2016 IPPS/LTCH PPS final rule (80 FR million. Because the combined distributional of the discharge, as described in the 49831).) We continue to believe that this effects and estimated payment changes following paragraph. approach is a reasonable means of taking the exceed $100 million, this proposed rule is a The statutory transitional payment method rolling effective date into account when major economic rule. We note that this for cases that are paid the site neutral estimating FY 2016 payments. estimated $355 million decrease in LTCH payment rate for LTCH discharges occurring Based on the fiscal year start dates PPS payments in FY 2017 (which includes in cost reporting periods beginning during recorded in the December 2015 update of the estimated payments for LTCH PPS standard FY 2016 or FY 2017 uses a blended payment PSF, of the 420 LTCHs in our database of Federal payment rate cases and site neutral rate, which is determined as 50 percent of the LTCH claims from the December 2015 update payment rate cases) does not reflect changes site neutral payment rate amount for the of the FY 2015 MedPAR files used for this in LTCH admissions or case-mix intensity, discharge and 50 percent of the standard proposed rule, the following percentages which would also affect the overall payment Federal prospective payment rate amount for apply in the approach previously described: effects of the proposals in this proposed rule.

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The LTCH PPS standard Federal payment payment rate cases, which decreases the appropriate Medicare payments that are rate for FY 2016 is $41,762.85. For FY 2017, LTCH PPS standard Federal payment rate by consistent with the statute. we are proposing an LTCH PPS standard approximately 0.13 percent. 2. Impact on Rural Hospitals Federal payment rate of $42,314.31, which We currently estimate total HCO payments reflects the proposed 1.45 percent annual for LTCH PPS standard Federal payment rate For purposes of section 1102(b) of the Act, update to the LTCH PPS standard Federal cases would decrease from FY 2016 to FY we define a small rural hospital as a hospital payment rate and the proposed area wage 2017. Based on the FY 2015 LTCH cases that that is located outside of an urban area and budget neutrality factor of 0.998723 to ensure were used for the analyses in this proposed has fewer than 100 beds. As shown in Table that the proposed changes in the wage rule, we estimate that the FY 2016 HCO IV, we are projecting a 0.3 percent increase indexes and labor-related share do not threshold of $16,423 (as established in the FY in estimated payments for LTCH PPS influence aggregate payments. For LTCHs 2016 IPPS/LTCH PPS final rule) would result standard Federal payment rate cases. This that fail to submit data for the LTCH QRP, in estimated HCO payments for LTCH PPS estimated impact is based on the FY 2015 in accordance with section 1886(m)(5)(C) of standard Federal payment rate cases in FY data for the 21 rural LTCHs (out of 420 the Act, we are proposing an LTCH PPS 2016 that are above the estimated 8 percent LTCHs) that were used for the impact standard Federal payment rate of $41,480.12. target. Specifically, we currently estimate analyses shown in Table VI. This proposed reduced LTCH PPS standard that HCO payments for LTCH PPS standard 3. Anticipated Effects of Proposed LTCH PPS Federal payment rate reflects the updates Federal payment rate cases would be Payment Rate Changes and Policy Changes previously described as well as the required approximately 9.1 percent of the estimated 2.0 percentage point reduction to the annual total LTCH PPS standard Federal payment a. Budgetary Impact update for failure to submit data under the rate payments in FY 2016. Combined with Section 123(a)(1) of the BBRA requires that LTCH QRP. We note that the factors our estimate that FY 2017 HCO payments for the PPS developed for LTCHs ‘‘maintain previously described to determine the LTCH PPS standard Federal payment rate budget neutrality.’’ We believe that the proposed FY 2017 LTCH PPS standard cases would be 8.0 percent of estimated total statute’s mandate for budget neutrality Federal payment rate are applied to the FY LTCH PPS standard Federal payment rate applies only to the first year of the 2016 LTCH PPS standard Federal rate set payments in FY 2017, this results in the implementation of the LTCH PPS (that is, FY forth under § 412.523(c)(3)(xi) (that is, estimated decrease in HCO payments of 2003). Therefore, in calculating the FY 2003 $41,762.85). approximately 1.1 percent between FY 2016 standard Federal payment rate under Table IV shows the estimated impact for and FY 2017. § 412.523(d)(2), we set total estimated LTCH PPS standard Federal payment rate In calculating these estimated HCO payments for FY 2003 under the LTCH PPS cases. The estimated change attributable payments, we increased estimated costs by so that estimated aggregate payments under solely to the proposed annual update to the our actuaries’ projected market basket the LTCH PPS were estimated to equal the LTCH PPS standard Federal payment rate is percentage increase factor. This increase in amount that would have been paid if the projected to result in an increase of 1.3 estimated costs also results in a projected LTCH PPS had not been implemented. percent in payments per discharge for LTCH increase in SSO payments in FY 2017 Section 1886(m)(6)(A) of the Act PPS standard Federal payment rate cases (because 100 percent of the estimated cost of establishes a dual rate LTCH PPS payment from FY 2016 to FY 2017, on average, for all the case is an option in the SSO payment structure with two distinct payment rates for LTCHs (Column 6). In addition to the formula (§ 412.529)). We estimate that these LTCH discharges beginning in FY 2016. proposed annual update to the LTCH PPS increased SSO payments in FY 2017 would Under this statutory change, LTCH standard Federal payment rate for FY 2017, increase total payments for LTCH PPS discharges that meet the patient-level criteria the estimated increase of 1.3 percent shown standard Federal payment rate cases by for exclusion from the site neutral payment in Column 6 of Table IV also includes approximately 0.25 percent. (Payments for rate (that is, LTCH PPS standard Federal estimated payments for SSO cases that will SSO cases represent approximately 14 payment rate cases) are paid based on the be paid using special methodologies that are percent of the estimated total FY 2017 LTCH PPS standard Federal payment rate. not affected by the proposed annual update payments for LTCH PPS standard Federal LTCH discharges paid at the site neutral to the LTCH PPS standard Federal payment payment rate cases.) payment rate are generally paid the lower of rate, as well as the reduction that is applied Table IV shows the estimated impact of the the IPPS comparable per diem amount, to the proposed annual update of LTCHs that proposed payment rate and policy changes including any applicable HCO payments, or do not submit the required LTCH QRP data. on LTCH PPS payments for LTCH PPS 100 percent of the estimated cost of the case. Therefore, for all hospital categories, the standard Federal payment rate cases for FY The statute also establishes a transitional projected increase in payments based on the 2017 by comparing estimated FY 2016 LTCH payment method for cases that are paid at the proposed LTCH PPS standard Federal PPS payments to estimated FY 2017 LTCH site neutral payment rate for LTCH payment rate to LTCH PPS standard Federal PPS payments. (As noted earlier, our analysis discharges occurring in cost reporting payment rate cases is somewhat less than the does not reflect changes in LTCH admissions periods beginning during FY 2016 or FY proposed 1.45 percent proposed annual or case-mix intensity.) The projected increase 2017, under which the site neutral payment update for FY 2017. in payments from FY 2016 to FY 2017 for rate cases are paid based on a blended For FY 2017, we are proposing to update LTCH PPS standard Federal payment rate payment rate calculated as 50 percent of the the wage index values based on the most cases of 0.3 percent is attributable to the applicable site neutral payment rate amount recent available data, and we are proposing impacts of the change to the LTCH PPS for the discharge and 50 percent of the to continue to use labor market areas based standard Federal payment rate (1.3 percent in applicable LTCH PPS standard Federal on the OMB CBSA delineations (as discussed Column 6) and the effect of the estimated payment rate for the discharge. in section V.B. of the Addendum to this decrease in HCO payments for LTCH PPS As discussed in section I.J.1. of this proposed rule). In addition, we are proposing standard Federal payment cases (¥1.1 Appendix, we project a decrease in aggregate an increase in the labor-related share from percent), and the estimated increase in LTCH PPS payments in FY 2017 of 62.0 percent to 66.6 percent under the LTCH payments for SSO cases (0.25 percent). We approximately $355 million. This estimated PPS for FY 2017, based on the most recent note that these impacts do not include LTCH decrease in payments reflects the projected available data on the relative importance of PPS site neutral payment rate cases for the increase in payments to LTCH PPS standard the labor-related share of operating and reasons discussed in section I.J.3. of this Federal payment rate cases of approximately capital costs of the proposed 2013-based Appendix. $12 million and the projected decrease in LTCH market basket (as discussed in section As we discuss in detail throughout this payments to site neutral payment rate cases VII.D. of the preamble of this proposed rule). proposed rule, based on the most recent of approximately $367 million under the We also are proposing to apply an area wage available data, we believe that the provisions dual rate LTCH PPS payment rate structure level budget neutrality factor of 0.998723 to of this proposed rule relating to the LTCH required by the statute beginning in FY 2016. ensure that the proposed changes to the wage PPS, which are projected to result in an As discussed in section VII.B.7.b. of the data and labor-related share do not result in overall decrease in estimated aggregate LTCH preamble of this proposed rule, our actuaries a change in estimated aggregate LTCH PPS PPS payments, and the resulting LTCH PPS project cost and resource changes for site payments to LTCH PPS standard Federal payment amounts would result in neutral payment rate cases due to the site

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neutral payment rates required under the rate LTCH PPS payment structure, the LTCH modeling payments based on the FY 2017 statute. Specifically, our actuaries project PPS standard Federal payment rate is LTCH PPS standard Federal payment rate, we that the costs and resource use for cases paid generally only used to determine payments used the proposed FY 2017 standard Federal at the site neutral payment rate will likely be for LTCH PPS standard Federal payment rate payment rate of $42,314.31, or $41,480.12 for lower, on average, than the costs and cases (that is, those LTCH PPS cases that LTCHs that failed to submit quality data as resource use for cases paid at the LTCH PPS meet the statutory criteria to be excluded required under the requirements of the LTCH standard Federal payment rate, and will from the site neutral payment rate). LTCH QRP. In each case, we applied the applicable likely mirror the costs and resource use for discharges that do not meet the patient-level proposed adjustments for area wage levels IPPS cases assigned to the same MS–DRG. criteria for exclusion are paid the site neutral and the COLA for LTCHs located in Alaska While we are able to incorporate this payment rate, which we are calculating as the and Hawaii. Specifically, for modeling FY projection at an aggregate level into our lower of the IPPS comparable per diem 2016 LTCH PPS payments, we used the payment modeling, because the historical amount as determined under § 412.529(d)(4), current FY 2016 labor-related share (62.0 claims data that we are using in this including any applicable outlier payments, or percent); the wage index values established proposed rule to project estimated FY 2017 100 percent of the estimated cost of the case in the Tables 12A through 12D listed in the LTCH PPS payments (that is, FY 2015 LTCH as determined under existing § 412.529(d)(2). Addendum to the FY 2016 IPPS/LTCH PPS claims data) do not reflect this actuarial In addition, when certain thresholds are met, final rule (which are available via the projection, we are unable to model the LTCHs also receive HCO payments for both Internet on the CMS Web site); the FY 2016 impact of the change in LTCH PPS payments LTCH PPS standard Federal payment rate HCO fixed-loss amount for LTCH PPS for site neutral payment rate cases at the cases and site neutral payment rate cases that standard Federal payment rate cases of same level of detail with which we are able are paid at the IPPS comparable per diem $16,423 (as discussed in section V.D. of the to model the impacts of the changes to LTCH amount. Addendum to that final rule) and the FY PPS payments for LTCH PPS standard To understand the impact of the changes 2016 COLA factors (shown in the table in Federal payment rate cases. Therefore, Table to the LTCH PPS payments for LTCH PPS section V.C. of the Addendum to that final IV only reflects proposed changes in LTCH standard Federal payment rate cases rule) to adjust the FY 2016 nonlabor-related PPS payments for LTCH PPS standard presented in this proposed rule on different share (38.0 percent) for LTCHs located in Federal payment rate cases and, unless categories of LTCHs for FY 2017, it is Alaska and Hawaii. Similarly, for modeling otherwise noted, the remaining discussion in necessary to estimate payments per discharge FY 2017 LTCH PPS payments, we used the section I.J.3. of this Appendix refers only to for FY 2016 using the rates, factors, and the proposed FY 2017 LTCH PPS labor-related the impact on LTCH PPS payments for LTCH policies established in the FY 2016 IPPS/ share (66.6 percent), the proposed FY 2017 PPS standard Federal payment rate cases. In LTCH PPS final rule and estimate payments wage index values from Tables 12A and 12B the following section, we present our per discharge for FY 2017 using the rates, listed in section VI. of the Addendum to this provider impact analysis for the changes that factors, and the policies proposed in this FY proposed rule (which are available via the affect LTCH PPS payments for LTCH PPS 2017 IPPS/LTCH PPS proposed rule (as Internet on the CMS Web site), the proposed standard Federal payment rate cases. discussed in section VII. of the preamble of FY 2017 fixed-loss amount for LTCH PPS standard Federal payment rate cases of b. Impact on Providers this proposed rule and section V. of the Addendum to this proposed rule). As $22,728 (as discussed in section V.D.3. of the Under the dual rate LTCH PPS payment discussed elsewhere in this proposed rule, Addendum to this proposed rule), and the structure, there are two distinct payment these estimates are based on the best proposed FY 2017 COLA factors (shown in rates for LTCH discharges occurring in cost available LTCH claims data and other factors, the table in section V.C. of the Addendum to reporting periods beginning on or after such as the application of inflation factors to this proposed rule) to adjust the proposed FY October 1, 2016. Under that statute, any estimate costs for SSO and HCO cases in each 2017 nonlabor-related share (33.4 percent) for discharges that occur on or after October 1, year. The resulting analyses can then be used LTCHs located in Alaska and Hawaii. 2015, but prior to the start of the LTCH’s FY to compare how our proposed policies As previously discussed, our impact 2016 cost reporting period, will be paid at the applicable to LTCH PPS standard Federal analysis reflects an estimated change in LTCH PPS standard Federal payment rate. payment rate cases affect different groups of payments for SSO cases, as well as an On or after the start of an LTCH’s FY 2017 LTCHs. estimated decrease in HCO payments for cost reporting period, discharges are paid For the following analysis, we group LTCH PPS standard Federal payment rate based on the nature of the case. As described hospitals based on characteristics provided cases (as described previously in section I.J.1. previously, LTCH PPS standard Federal in the OSCAR data, FY 2012 through FY of this Appendix). In modeling proposed payment rate cases are defined as LTCH 2013 cost report data in HCRIS, and PSF payments for SSO and HCO cases for LTCH discharges that meet the patient-level criteria data. Hospital groups included the following: PPS standard Federal payment rate cases, we to be excluded from the typically lower site • Location: Large urban/other urban/rural. applied an inflation factor of 4.8 percent neutral payment rate, and site neutral • Participation date. (determined by the Office of the Actuary) to payment rate cases are defined as LTCH • Ownership control. update the 2015 costs of each case. discharges that do not meet the patient-level • Census region. The impacts that follow reflect the criteria and generally will be paid the lower • Bed size. estimated ‘‘losses’’ or ‘‘gains’’ among the site neutral payment rate. However, for various classifications of LTCHs from FY discharges occurring in cost reporting c. Calculation of LTCH PPS Payments for 2016 to FY 2017 based on the proposed periods beginning in FY 2016 or 2017, the LTCH PPS Standard Federal Payment Rate payment rates and policy changes applicable statute specifies that site neutral payment Cases to LTCH PPS standard Federal payment rate rate cases are paid based on a transitional For purposes of this impact analysis, to cases presented in this proposed rule. Table payment method that is calculated as 50 estimate the per discharge payment effects of IV illustrates the estimated aggregate impact percent of the applicable site neutral our proposed policies on payments for LTCH of the change in LTCH PPS payments for payment rate amount and 50 percent of the PPS standard Federal payment rate cases, we LTCH PPS standard Federal payment rate applicable LTCH PPS standard Federal simulated FYs 2016 and 2017 payments on cases among various classifications of payment rate. a case-by-case basis using historical LTCH LTCHs. (As discussed previously, these The basic methodology for determining a claims from the FY 2015 MedPAR files that impacts do not include LTCH PPS site per discharge payment for LTCH PPS would have met the criteria to be paid at the neutral payment rate cases.) standard Federal payment rate cases is LTCH PPS standard Federal payment rate if • The first column, LTCH Classification, currently set forth under §§ 412.515 through the statutory patient-level criteria had been identifies the type of LTCH. 412.536. In addition to adjusting the LTCH in effect at the time of discharge for those • The second column lists the number of PPS standard Federal payment rate by the cases. For modeling FY 2016 LTCH PPS LTCHs of each classification type. MS–LTC–DRG relative weight, we make payments, we used the FY 2016 standard • The third column identifies the number adjustments to account for area wage levels Federal payment rate of $41,762.85, or of LTCH cases expected to meet the LTCH and SSOs. LTCHs located in Alaska and $40,941.55 for LTCHs that failed to submit PPS standard Federal payment rate criteria. Hawaii also have their payments adjusted by quality data as required under the • The fourth column shows the estimated a COLA. Under our application of the dual requirements of the LTCH QRP. Similarly, for FY 2016 payment per discharge for LTCH

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cases expected to meet the LTCH PPS from FY 2016 to FY 2017 due to the annual proposed area wage level budget neutrality standard Federal payment rate criteria (as update to the standard Federal rate (as factor (as discussed in section V.B. of the described previously). discussed in section V.A.2. of the Addendum Addendum to this proposed rule). • The fifth column shows the estimated FY to this proposed rule). • • The eighth column shows the percentage 2017 payment per discharge for LTCH cases The seventh column shows the change in estimated payments per discharge expected to meet the LTCH PPS standard percentage change in estimated payments per for LTCH PPS standard Federal payment rate Federal payment rate criteria (as described discharge for LTCH PPS standard Federal previously). payment rate cases from FY 2016 to FY 2017 cases from FY 2016 (Column 4) to FY 2017 • The sixth column shows the percentage for proposed changes to the area wage level (Column 5) for all proposed changes (and change in estimated payments per discharge adjustment (that is, the proposed wage includes the effect of estimated changes to for LTCH cases expected to meet the LTCH indexes and the proposed labor-related HCO and SSO payments). PPS standard Federal payment rate criteria share), including the application of the

TABLE IV—IMPACT OF PROPOSED PAYMENT RATE AND POLICY CHANGES TO LTCH PPS PAYMENTS FOR STANDARD PAYMENT RATE CASES FOR FY 2017 [Estimated FY 2016 payments compared to estimated FY 2017 payments]

Proposed Proposed Proposed percent Percent percent change in pay- Number of average FY change in pay- change in LTCH PPS Average FY 2017 LTCH ments per payments per ments per case due to LTCH classification Number of standard 2016 LTCH PPS standard case due to case from FY LTCHs Federal PPS payment Federal changes to the 2016 to FY the annual area wage payment rate per case payment rate update to the 2017 for all cases payment per level proposed LTCH PPS adjustment case 1 changes 4 standard with budget Federal rate 2 neutrality 3

(1) (2) (3) (4) (5) (6) (7) (8)

ALL PROVIDERS ...... 420 72,064 $46,944 $47,105 1.3 0.0 0.3 BY LOCATION: RURAL ...... 21 2,271 38,858 38,808 1.3 ¥0.6 0.2 URBAN ...... 399 69,793 47,207 47,375 1.3 0.0 0.3 LARGE ...... 202 41,448 49,428 49,738 1.3 0.2 0.3 OTHER ...... 197 28,345 43,959 43,920 1.3 ¥0.3 0.2 BY PARTICIPATION DATE: BEFORE OCT. 1983 ...... 14 1,929 42,951 43,133 1.3 0.0 0.3 OCT. 1983–SEPT. 1993 ...... 42 8,856 53,153 53,438 1.2 0.3 0.4 OCT. 1993–SEPT. 2002 ...... 174 31,584 45,536 45,721 1.3 0.1 0.2 OCTOBER 2002 and AFTER ...... 190 29,695 46,849 46,947 1.3 ¥0.2 0.2 BY OWNERSHIP TYPE: VOLUNTARY ...... 78 10,016 47,838 47,719 1.3 ¥0.3 0.2 PROPRIETARY .... 325 60,366 46,633 46,844 1.3 0.1 0.3 GOVERNMENT ...... 17 1,682 52,773 52,799 1.3 0.0 0.3 BY REGION: NEW ENGLAND ... 13 2,792 43,643 43,864 1.3 0.0 0.3 MIDDLE ATLAN- TIC ...... 26 5,486 51,620 52,093 1.3 0.5 0.3 SOUTH ATLANTIC 63 12,021 46,804 46,754 1.3 ¥0.4 0.3 EAST NORTH CENTRAL ...... 69 11,588 46,982 47,092 1.3 ¥0.2 0.2 EAST SOUTH CENTRAL ...... 34 5,367 44,251 44,005 1.3 ¥0.8 0.2 WEST NORTH CENTRAL ...... 29 3,877 46,850 46,623 1.3 ¥0.4 0.2 WEST SOUTH CENTRAL ...... 128 18,590 42,312 42,344 1.3 ¥0.1 0.2 MOUNTAIN ...... 33 4,287 49,026 49,174 1.3 0.2 0.2 PACIFIC ...... 25 8,056 56,476 57,556 1.2 1.2 0.4 BY BED SIZE: BEDS: 0–24 ...... 26 1,497 43,923 44,126 1.3 ¥0.1 0.2 BEDS: 25–49 ...... 194 24,575 44,012 44,018 1.3 ¥0.4 0.2 BEDS: 50–74 ...... 119 19,597 48,823 48,938 1.3 0.1 0.3 BEDS: 75–124 ...... 48 12,941 49,992 50,356 1.3 0.3 0.3 BEDS: 125–199 .... 23 8,347 46,472 46,688 1.3 0.1 0.3 BEDS: 200 + ...... 10 5,107 47,771 48,242 1.2 0.4 0.3 1 Estimated proposed FY 2017 LTCH PPS payments for LTCH PPS standard Federal payment rate criteria based on the proposed payment rate and factor changes applicable to such cases presented in the preamble of and the Addendum to this proposed rule.

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2 Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2016 to FY 2017 for the proposed annual update to the LTCH PPS standard Federal payment rate. The temporary exclusion from the site neutral payment rate provided by section 231 of Public Law 114–113 is not reflected in these estimated FY 2017 LTCH PPS payments. 3 Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2016 to FY 2017 for proposed changes to the area wage level adjustment under § 412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule). 4 Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2016 (shown in Column 4) to FY 2017 (shown in Column 5), including all of the proposed changes to the rates and factors applicable to such cases presented in the preamble and the Addendum to this proposed rule. We note that this column, which shows the percent change in estimated payments per discharge for all proposed changes, does not equal the sum of the percent changes in estimated payments per discharge for the proposed annual update to the LTCH PPS standard Federal payment rate (Column 6) and the proposed changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments for LTCH PPS standard Federal payment rate cases (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated.

d. Results Federal payment rate. Consequently, for percent of LTCHs began participating in the Based on the FY 2015 LTCH cases (from certain hospital categories, we estimate that Medicare program between October 1983 and 420 LTCHs) that were used for the analyses payments to LTCH PPS standard Federal September 1993. These LTCHs are projected in this proposed rule, we have prepared the payment rate cases may increase by less than to experience a larger than average increase following summary of the impact (as shown 1.45 percent due to the proposed annual (0.4 percent) in estimated payments for LTCH in Table IV) of the proposed LTCH PPS update to the LTCH PPS standard Federal PPS standard Federal payment rate cases payment rate and proposed policy changes payment rate for FY 2017. from FY 2016 to FY 2017, which is primarily for LTCH PPS standard Federal payment rate (1) Location due to a projected larger than average increase in payments due to the proposed cases presented in this proposed rule. The Based on the most recent available data, impact analysis in Table IV shows that changes to the area wage adjustment. LTCHs the vast majority of LTCHs are located in that began participating in the Medicare estimated payments per discharge for LTCH urban areas. Only approximately 5 percent of program after October 1, 2002, which treat PPS standard Federal payment rate cases are the LTCHs are identified as being located in approximately 41 percent of all LTCH PPS expected to increase 0.3 percent, on average, a rural area, and approximately 3 percent of standard Federal payment rate cases, are for all LTCHs from FY 2016 to FY 2017 as all LTCH PPS standard Federal payment rate projected to experience a 0.2 percent increase a result of the proposed payment rate and cases are expected to be treated in these rural in estimated payments from FY 2016 to FY policy changes applicable to LTCH PPS hospitals. The impact analysis presented in 2017. standard Federal payment rate cases Table IV shows that the overall average (3) Ownership Control presented in this proposed rule. This percent increase in estimated payments per estimated 0.3 percent increase in LTCH PPS discharge for LTCH PPS standard Federal LTCHs are grouped into three categories payments per discharge was determined by payment rate cases from FY 2016 to FY 2017 based on ownership control type: Voluntary, comparing estimated FY 2017 LTCH PPS for all hospitals is 0.3 percent. For rural proprietary, and government. Based on the payments (using the proposed payment rates LTCHs, the overall percent change for LTCH most recent available data, approximately 19 and factors discussed in this proposed rule) PPS standard Federal payment rate cases is percent of LTCHs are identified as voluntary to estimated FY 2016 LTCH PPS payments estimated to be a 0.2 percent increase, while (Table IV). The majority (approximately 77 for LTCH discharges which would be LTCH for urban LTCHs, we estimate the increase percent) of LTCHs are identified as PPS standard Federal payment rate cases if will be 0.3 percent. Large urban LTCHs are proprietary, while government owned and operated LTCHs represent approximately 4 the dual rate LTCH PPS payment structure projected to experience an increase of 0.3 percent of LTCHs. Based on ownership type, had been in effect at the time of the discharge percent in estimated payments per discharge voluntary LTCHs are expected to experience (as described in section I.J.3. of this for LTCH PPS standard Federal payment rate an average increase in payments to LTCH Appendix). cases from FY 2016 to FY 2017, and other PPS standard Federal payment rate cases of As stated previously, we are proposing to urban LTCHs are projected to experience an update the LTCH PPS standard Federal 0.2 percent. Both proprietary and government increase of 0.2 percent in estimated payments owned and operating LTCHs are expected to payment rate for FY 2017 by 1.45 percent per discharge for LTCH PPS standard Federal based on the estimate of the proposed 2013- experience an increase of 0.3 percent in payment rate cases from FY 2016 to FY 2017, payments to LTCH PPS standard Federal based LTCH PPS market basket increase (2.7 as shown in Table IV. percent), the proposed reduction of 0.5 payment rate cases from FY 2016 to FY 2017. percentage point for the MFP adjustment, (2) Participation Date (4) Census Region and the 0.75 percentage point reduction LTCHs are grouped by participation date Estimated payments per discharge for consistent with sections 1886(m)(3) and into four categories: (1) Before October 1983; LTCH PPS standard Federal payment rate (m)(4) of the Act. For LTCHs that fail to (2) between October 1983 and September cases for FY 2017 are projected to increase submit quality data under the requirements 1993; (3) between October 1993 and for LTCHs located in all regions in of the LTCH QRP, as required by section September 2002; and (4) October 2002 and comparison to FY 2016. Of the 9 census 1886(m)(5)(C) of the Act, a 2.0 percentage after. Based on the most recent available data, regions, we project that the increase in point reduction is applied to the proposed the categories of LTCHs with the largest estimated payments per discharge to LTCH annual update to the LTCH PPS standard expected percentage of LTCH PPS standard PPS standard Federal payment rate cases Federal payment rate. As explained earlier in Federal payment rate cases (approximately would have the largest positive impact on this section, for most categories of LTCHs (as 44 percent) are in LTCHs that began LTCHs in the Pacific region (0.4 percent as shown in Table IV, Column 6), the estimated participating in the Medicare program shown in Table IV), which is largely payment increase due to the 1.45 percent between October 1993 and September 2002, attributable to the proposed changes in the proposed annual update to the LTCH PPS and they are projected to experience a 0.2 area wage level adjustment. standard Federal payment rate is projected to percent increase in estimated payments per In contrast, LTCHs located in the East result in approximately a 1.3 percent increase discharge for LTCH PPS standard Federal North Central, East South Central, West in estimated payments per discharge for payment rate cases from FY 2016 to FY 2017, North Central, West South Central, and LTCH PPS standard Federal payment rate as shown in Table IV. Mountain regions are projected to experience cases for all LTCHs from FY 2016 to FY 2017. Approximately 3.3 percent of LTCHs began the smallest increase in estimated payments This is because our estimate of the changes participating in the Medicare program before per discharge for LTCH PPS standard Federal in payments due to the proposed update to October 1983, and these LTCHs are projected payment rate cases from FY 2016 to FY 2017. the LTCH PPS standard Federal payment rate to experience an average percent increase The lower than national average estimated also reflects estimated payments for SSO (0.3 percent) in estimated payments per increase in payments of 0.2 percent is cases that are paid using special discharge for LTCH PPS standard Federal primarily due to estimated decreases in methodologies that are not affected by the payment rate cases from FY 2016 to FY 2017, payments associated with the proposed proposed update to the LTCH PPS standard as shown in Table IV. Approximately 10 changes to the area wage level adjustment.

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(5) Bed Size We are proposing to remove the electronic we believe no additional burden on hospitals LTCHs are grouped into six categories versions of: (1) AMI–2: Aspirin Prescribed at will result from the proposed refinements to based on bed size: 0–24 beds; 25–49 beds; Discharge for AMI (NQF #0142); (2) AMI–7a: these two claims-based measures. In addition, we are proposing to add four 50–74 beds; 75–124 beds; 125–199 beds; and Fibrinolytic Therapy Received Within 30 claims-based measures to the Hospital IQR greater than 200 beds. All bed size categories minutes of Hospital Arrival; (3) AMI–10: Statin Prescribed at Discharge; (4) HTN: Program measure set beginning with the FY are projected to receive an increase in Healthy Term Newborn (NQF #0716); (5) PN– 2019 payment determination: (1) Aortic estimated payments per discharge for LTCH 6: Initial Antibiotic Selection for Community- Aneurysm Procedure Clinical Episode-Based PPS standard Federal payment rate cases Acquired Pneumonia (CAP) in Payment Measure; (2) Cholecystectomy and from FY 2016 to FY 2017. We project that Immunocompetent Patients (NQF #0147); (6) Common Duct Exploration Clinical Episode- LTCHs with 50 or more beds (that is, LTCHs SCIP-Inf-1a: Prophylactic Antibiotic Received Based Payment Measure; (3) Spinal Fusion in the 50–74 beds; 75–124 beds; 125–199 within 1 Hour Prior to Surgical Incision Clinical Episode-Based Payment Measure; beds; and 200+ beds categories) would (NQF #0527); (7) SCIP-Inf-2a: Prophylactic and (4) Excess Days in Acute Care after experience an average increase in payments Antibiotic Selection for Surgical Patients Hospitalization for Pneumonia. We believe for LTCH PPS standard Federal payment rate (NQF #0528); (8) SCIP Inf-9: Urinary Catheter no additional burden on hospitals would cases (0.3 percent). LTCHs with less than 50 Removed on Postoperative Day 1 (POD1) or result from the addition of these four beds (that is, LTCHs in the 0–24 beds and Postoperative Day 2 (POD2) with Day of proposed claims-based measures. 25–49 beds categories) are expected to Surgery Being Day Zero; (9) STK–4: For the FY 2019 payment determination experience a smaller than average increase in Thrombolytic Therapy (NQF #0437); (10) and subsequent years, we are proposing to payments per discharge for LTCH PPS VTE–3: Venous Thromboembolism Patients require hospitals to submit data for all standard Federal payment rate cases from FY with Anticoagulation Overlap Therapy (NQF available eCQMs included in the Hospital 2016 to FY 2017 (0.2 percent), mostly due to #0373); (11) VTE–4: Venous IQR Program measure set in a manner that estimated decreases in payments from the Thromboembolism Patients Receiving will permit eligible hospitals to align proposed area wage level adjustment. Unfractionated Heparin (UFH) with Dosages/ Hospital IQR Program requirements with 4. Effect on the Medicare Program Platelet Count Monitoring by Protocol (or some requirements under the Medicare and Nomogram); (12) VTE–5: Venous Medicaid EHR Incentive Programs. As stated previously, we project that the Thromboembolism Discharge Instructions; Specifically, hospitals would be required to provisions of this proposed rule would result and (13) VTE–6: Incidence of Potentially submit a full calendar year of data for all in an increase in estimated aggregate LTCH Preventable Venous Thromboembolism. eCQMs, on an annual basis beginning with PPS payments to LTCH PPS standard Federal We are also proposing to remove: (1) STK– CY 2017 reporting for the FY 2019 payment payment rate cases in FY 2017 relative to FY 4: Thrombolytic Therapy (NQF #0437); and determination, as further explained in 2016 of approximately $12 million (or section X.B.6. of the preamble of this (2) VTE–5: Venous Thromboembolism approximately 0.3 percent) for the 420 proposed rule. In total, we expect that this Discharge Instructions in their chart- LTCHs in our database. Although, as stated proposal would increase burden by 30,800 abstracted form. Finally, we are also previously, the hospital-level impacts do not hours across all hospitals participating in the proposing to remove two structural measures: include LTCH PPS site neutral payment rate Hospital IQR Program. (1) Participation in a Systematic Clinical cases, we estimate that the provisions of this As we noted in the FY 2016 IPPS/LTCH Database Registry for Nursing Sensitive Care; proposed rule would result in a decrease in PPS final rule (80 FR 49763), for validation and (2) Participation in a Systematic Clinical estimated aggregate LTCH PPS payments to of chart-abstracted data, we require hospitals Database Registry for General Surgery. site neutral payment rate cases in FY 2017 to provide 72 charts per hospital per year As further explained in section X.B.6. of relative to FY 2016 of approximately (with an average page length of 1,500), the preamble of this proposed rule, we $367million (or approximately 21 percent) including 40 charts for HAI validation and 32 believe that there would be a reduction in for the 420 LTCHs in our database. Therefore, charts for clinical process of care validation, burden for hospitals due to the removal of we project that the provisions of this for a total of 108,000 pages per hospital per two chart-abstracted measures (STK–4 and proposed rule would result in a decrease in year. We reimburse hospitals at 12 cents per VTE–5). Due to the burden associated with estimated aggregate LTCH PPS payments to photocopied page for a total per hospital cost the collection of chart-abstracted data, we all LTCH cases in FY 2017 relative to FY of $12,960. For hospitals providing charts estimate that the removal of STK–4 would 2016 of approximately $355 million (or digitally via a re-writable disc, such as result in a burden reduction of approximately approximately 6.9 percent) for the 420 encrypted CD–ROMs, DVDs, or flash drives, 303,534 hours across all hospitals LTCHs in our database. we will reimburse hospitals at a rate of 40 participating in the Hospital IQR Program for cents per disc, and additionally hospitals 5. Effect on Medicare Beneficiaries the FY 2019 payment determination. We will be reimbursed $3.00 per record. For Under the LTCH PPS, hospitals receive estimate that the removal of VTE–5 would hospitals providing charts via secure file payment based on the average resources result in a burden reduction of approximately transfer, we will reimburse hospitals at a rate consumed by patients for each diagnosis. We 653,565 hours across all hospitals of $3.00 per record. We will maintain these do not expect any changes in the quality of participating in the Hospital IQR Program for requirements for the FY 2019 payment care or access to services for Medicare the FY 2019 payment determination. We determination and subsequent years. beneficiaries as a result of this proposed rule, believe that removing 13 eCQMs would In this proposed rule, we are proposing to but we continue to expect that paying reduce burden for hospitals, however, if our modify the existing validation process for prospectively for LTCH services will enhance proposal to require hospitals to submit data Hospital IQR Program data to include a the efficiency of the Medicare program. on all of the available eCQMs included in the random sample of up to 200 hospitals for Hospital IQR Program measure set is validation of eCQMs in the Hospital IQR K. Effects of Proposed Requirements for the finalized as proposed, this modest reduction Program. As further explained in section Hospital Inpatient Quality Reporting (IQR) in burden would be offset by the increased X.B.5. of the preamble of this proposed rule, Program burden associated with submitting data on 15 we estimate that 43 hours of work for up to In section VIII.A. of the preamble of this eCQMs instead of 4 eCQMs. We believe that 200 hospitals reflects a total burden increase proposed rule, we discuss our requirements there would be a negligible burden reduction of 8,533 labor hours. As such, we estimate an for hospitals to report quality data under the due to the removal of the two structural hourly labor cost of $32.84 and a cost Hospital IQR Program in order to receive the measures. increase of $280,224 (8,533 additional full annual percentage increase for the FY Also, we are proposing refinements to two burden hours × $32.84 per hour) across the 2019 payment determination. previously adopted measures: (1) Expanding up to 200 hospitals selected for eCQM In section VIII.A.3.b. of the preamble of the population cohort for the Hospital-Level, validation, on an annual basis. this proposed rule, we are proposing to Risk-Standardized 30-Day Episode-of-Care Finally, we are proposing to update our remove 15 measures: 13 eCQMs (2 of which Payment Measure for Pneumonia; and (2) Extraordinary Circumstances Extensions or we are proposing to remove also in their Patient Safety and Adverse Events Composite Exemptions (ECE) policy. We believe the chart-abstracted form) and 2 structural (NQF #0531). As further explained in section proposed updates would have no effect on measures. X.B.6. of the preamble of this proposed rule, burden for hospitals.

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Historically, 100 hospitals, on average, that Patients Receiving Outpatient Chemotherapy report all Healthcare Associated Infections participate in the Hospital IQR Program do measure is a claims-based measure and, (HAI) (CAUTI, CLABSI, MRSA Bacteremia, not receive the full annual percentage therefore, poses no additional burden for CDI, VAE) and vaccination data, (Influenza increase in any fiscal year due to the PCHs to submit data beyond that which they Vaccination Coverage Among Healthcare requirements of this program. We anticipate currently submit as part of the claims Personnel measure); and the LTCH CARE that, because of the new requirements for process. Data Set, which is submitted to the QIES reporting we are proposing for the FY 2019 One expected effect of the PCHQR Program ASAP system. payment determination, the number of is to keep the public informed of the quality The data collection burden associated with hospitals not receiving the full annual of care provided by PCHs. We will display reporting quality measures via the CDC’s percentage increase may be higher than publicly the quality measure data collected NHSN is discussed in the FY 2016 IPPS/ average. At this time, information is not under the PCHQR Program as required under LTCH PPS final rule (80 FR 49838 through available to determine the precise number of the Act. These data will be displayed on the 49839). These measures are stewarded by the hospitals that would not meet the proposed Hospital Compare Web site. The goals of CDC, and the reporting burden is approved requirements to receive the full annual making these data available to the public in under OMB control number 0920–0666. percentage increase for the FY 2019 payment a user-friendly and relevant format include, The All-Cause Unplanned Readmission determination. If the number of hospitals but are not limited to: (1) Allowing the public Measure for 30 Days Post-Discharge from failing to receive the full annual percentage to compare PCHs in order to make informed Long-Term Care Hospitals (NQF #2512) increase does increase because of the new health care decisions regarding care setting; measure is calculated based on Medicare FFS requirements, we anticipate that, over the and (2) providing information about current claims data, and therefore does not have any long run, this number would decline as trends in health care. Furthermore, PCHs can associated data reporting burden for LTCHs. hospitals gain more experience with these use their own health care quality data for The remaining assessment-based quality requirements. many purposes such as in risk management measure data are reported to CMS by LTCHs Under OMB number 0938–1022, programs, healthcare associated infection using the LTCH CARE Data Set. As of April considering the policies proposed above, we prevention programs, and research and 1, 2016, LTCHs use the LTCH CARE Data Set estimate a total burden decrease of 917,766 development activities, among others. Version 3.00 (approved under OMB control hours, at a total cost decrease of number 0938–1163) which includes data approximately $30 million across M. Effects of Proposed Requirements for the elements related to the following quality approximately 3,300 hospitals participating Long-Term Care Hospital Quality Reporting measures: Percent of Residents or Patients in the Hospital IQR Program for the FY 2019 Program (LTCH QRP) for the FY 2018 with Pressure Ulcers That Are New or payment determination. In implementing the Payment Determination and Subsequent Worsened (NQF #0678), Percent of Residents Hospital IQR Program and other quality Years or Patients Who Were Assessed and reporting programs, we have focused on In section VIII.C.1. of the preamble of this Appropriately Given the Seasonal Influenza measures that have high impact and support proposed rule, we discuss the Vaccine (Short Stay) (NQF #0680); CMS and HHS priorities for improved quality implementation of section 1886(m)(5) of the Application of Percent of Residents and efficiency of care for Medicare Act, which was added by section 3004(a) of Experiencing One or More Falls with Major beneficiaries. the Affordable Care Act. Section 1886(m)(5) Injury (Long Stay) (NQF #0674); Percent of L. Effects of Proposed Requirements for the of the Act provides that, for rate year 2014 Long-Term Care Hospital Patients with an PPS-Exempt Cancer Hospital Quality and each subsequent year, any LTCH that Admission and Discharge Functional Reporting (PCHQR) Program does not submit data to the Secretary in Assessment and a Care Plan That Addresses In section VIII.B. of the preamble of this accordance with section 1886(m)(5)(C) and Function (NQF #2631); Application of proposed rule, we discuss our policies for the (F) of the Act shall receive a 2 percentage Percent of Long-Term Care Hospital Patients quality data reporting program for PPS- point reduction to the annual update to the with an Admission and Discharge Functional exempt cancer hospitals (PCHs), which we standard Federal rate for discharges for the Assessment and a Care Plan That Addresses refer to as the PPS-Exempt Cancer Hospital hospital during the applicable fiscal year. Function (NQF #2631); and Functional Quality Reporting (PCHQR) Program. The In the FY 2016 IPPS/LTCH PPS final rule Outcome Measure: Change in Mobility PCHQR Program is authorized under section (80 FR 49838 through 49839), we estimated Among Long-Term Care Hospital Patients 1866(k) of the Act, which was added by that only a few LTCHs will not receive the Requiring Ventilator Support (NQF #2632). section 3005 of the Affordable Care Act. full annual percentage increase in any fiscal In this proposed rule, we are retaining 13 In section VIII.B.3. of the preamble of this year as a result of failure to submit data previously finalized quality measures and are proposed rule, we are proposing updates to under the LTCH QRP. There are proposing 4 additional measures for use in one of the measures on which PCHs currently approximately 432 LTCHs currently the LTCH QRP. In section VII.C.6. of the submit data: Oncology: Radiation Dose reporting quality data to CMS. At the time preamble of this proposed rule, we are Limits to Normal Tissues (NQF #0382). In that this analysis was prepared, 39, or proposing three measures for the FY 2018 addition, in section VIII.B.4.b. of the approximately 9.5 percent, of 412 eligible payment determination and subsequent preamble of this proposed rule, we are LTCHs were determined to be noncompliant years: (1) MSPB–PAC LTCH QRP; (2) proposing the addition of one claims-based and therefore will receive a 2 percentage Discharge to Community—PAC LTCH QRP; quality measure for the PCHQR Program: point reduction to their FY 2016 annual and (3) Potentially Preventable 30-Day Post- Admissions and Emergency Department (ED) payment update. Discharge Readmission Measure for the PAC Visits for Patients Receiving Outpatient Information is not available to determine LTCH QRP. These three measures are Chemotherapy. the precise number of LTCHs that will not Medicare claims-based measures, and The impact of the proposed new meet the requirements to receive the full because claims-based measures can be requirements for the PCHQR Program is annual percentage increase for the FY 2017 calculated based on data that are already expected to be minimal overall since payment determination. reported to the Medicare program for beginning with Q1 2016 events, PCHs have We believe that a majority of LTCHs will payment purposes, we believe there would been reporting Clinical Process/Oncology continue to collect and submit data for the be no additional burden if any of these Care Measures using a sampling methodology FY 2017 payment determination and measures are finalized. which requires reporting no more than 25 subsequent years because they will continue In section VIII.C.9.d. of the preamble of cases per facility (79 FR 28259). As the to view the LTCH QRP as an important step this proposed rule, we are proposing to measure cohort expansion for Oncology: in improving the quality of care patients expand the data collection timeframe for the Radiation Dose Limits to Normal Tissues receive in the LTCHs. We believe that the measure NQF #0680 Percent of Residents or (NQF #0382) does not expand the maximum burden associated with the LTCH QRP is the Patients Who Were Assessed and required sample, we do not anticipate that time and effort associated with data Appropriately Given the Seasonal Influenza this cohort expansion will significantly collection. Vaccine (77 FR 53624 through 53627), impact the operational burden for PCHs. Currently, LTCHs use two separate data beginning with the FY 2019 payment In addition, the Admissions and collection mechanisms to report quality data determination. The data collection time Emergency Department (ED) Visits for to CMS: The CDC’s NHSN, which is used to frame and associated data submission

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deadlines are currently aligned with the annually or $6,017,146 for all LTCHs Web site postings, CMS Open Door Forums, Influenza Vaccination Season (IVS) (October annually. In addition, we estimate that the and general and technical help desks. 1 of a given year through March 31 of the cost to report the previously finalized quality subsequent year), and only require data measures via the CDC’s NHSN was $10,896 N. Effects of Proposed Updates to the collection during the two calendar year per LTCH annually or $4,706,857 for all Inpatient Psychiatric Facility Quality quarters that align with the IVS. We have LTCHs annually. The revised total estimate Reporting (IPFQR) Program proposed to expand the data collection for all 13 previously finalized measures was As discussed in section VIII.D. of the timeframe from just two quarters (covering $24,825 per LTCH annually or $10,724,003 preamble of this proposed rule and in the IVS) to a full four quarters or 12 months. for all LTCHs annually. The two estimates accordance with section 1886(s)(4)(A)(i) of We refer readers to section VIII.C.9.d. of the discussed above, as well as the the Act, we will implement a 2.0 percentage preamble of this proposed rule for further comprehensive estimate discussed below, point reduction in the FY 2019 market basket details on the proposed expansion of data include overhead; however, obtaining data update for IPFs that have failed to comply collection for this measures (NQF #0680), on other overhead costs is challenging. with the IPFQR Program requirements for FY including data collection timeframes and Overhead costs vary greatly across industries 2019, including reporting on the required associated submission deadlines. We and firm sizes. In addition, the precise cost measures. In section VIII.D. of the preamble originally finalized this measure for use in elements assigned as ‘‘indirect’’ or of this proposed rule, we discuss how the 2 the FY 2013 IPPS/LTCH PPS final rule (77 FR ‘‘overhead’’ costs, as opposed to direct costs percentage point reduction will be applied. 53624 through 53627). Although we finalized or employee wages, are subject to some For FY 2016, of the 1,684 IPFs eligible for the data collection for this measure to coincide interpretation at the firm level. Therefore, we IPFQR Program, 51 did not receive the full with the IVS, we originally proposed year- have chosen to calculate the cost of overhead market basket update because of the IPFQR round data collection. The associated PRA at 100 percent of the mean hourly wage. This Program; 24 of these IPFs chose not to package, which was approved under OMB is necessarily a rough adjustment, both participate and 27 did not meet the control number 0938–1163, included burden because fringe benefits and overhead costs requirements of the program. We anticipate calculations that aligned with our original vary significantly from employer to employer that even fewer IPFs will receive the proposal for year-round data collection. All and because methods of estimating these reduction for FY 2017 as IPFs become more subsequent PRA packages, and the PRA costs vary widely from study to study. familiar with the requirements. Thus, we package that is currently under review by Nonetheless, there is no practical alternative, estimate that this policy will have a OMB, included burden calculations and we believe that doubling the hourly wage negligible impact on overall IPF payments for reflecting year-round (12 month) data to estimate total cost is a reasonably accurate FY 2017. collection for this measure. Because of this, estimation method. Based on the proposals in this proposed the proposed change in the data collection Because we are proposing to add the Drug rule, we estimate a total increase in burden timeframe for this measure, and any Regimen Review Conducted with Follow-Up due to the proposed addition of a chart- associated burden related to increased data for Identified Issues—PAC LTCH QRP abstracted measure set of 212 hours per IPF collection, has already been accounted for in measure in the LTCH CARE Data Set Version or 357,008 hours across all IPFs, resulting in the total burden figures included in this 4.00, the estimated burden and cost would a total increase in financial burden of section of the preamble of this proposed rule. increase if this measure is finalized. The approximately $6,962 per IPF or $11,724,143 In section VIII.C.7. of the preamble of this additional data elements for this proposed across all IPFs. We also estimate a total proposed rule, we are proposing to adopt one quality measure will take 6 minutes of increase in burden for training of 2 hours per measure for the FY 2020 payment nursing/clinical staff time to report data on IPF or 3,368 hours across all IPFs, resulting determination and subsequent years: Drug admission and 4 minutes of nursing/clinical in a total increase in financial burden of Regimen Review Conducted with Follow-Up staff time to report data on discharge, for a $65.68 per IPF or $110,605 across all IPFs. for Identified Issues—PAC LTCH QRP. In total of 10 minutes. We believe that the Our estimate for the total increase in burden, addition, we are proposing that data for this additional LTCH CARE Data Set items we are including the newly proposed chart- measure will be collected and reported using proposing would be completed by registered abstracted measure set and training, is the LTCH CARE Data Set Version 4.00 nurses and pharmacists. As a result, we 360,376 hours across all IPFs, which at (effective April 1, 2018). estimate that the total cost related to the $32.84 labor cost per hour, totals While reporting quality measure data proposed Drug Regimen Review Conducted $11,834,748. As discussed in section X.B.10. involves collecting information, we believe with Follow-Up for Identified Issues—PAC of the preamble of this proposed rule, we will that the burden associated with LTCH QRP measure would be $3,080 per attribute the costs associated with the modifications to the LTCH CARE Data Set LTCH annually, or $1,330,721 for all LTCHs finalized proposals to the year in which these discussed in this proposed rule fall under the annually. Because the three measures costs begin; for the purposes of all the PRA exceptions provided in section proposed in section VII.C.6. of the preamble proposed changes made in this proposed 1899B(m) of the Act. Section 1899B(m) of the of this proposed rule are claims-based and rule, that year is FY 2017. Further Act, which was added by the IMPACT Act, would be calculated based on data that are information on these estimates can be found states that the PRA requirements do not already reported to the Medicare program for in section X.B.10. of the preamble of this apply to section 1899B of the Act and the payment purposes, we believe that there proposed rule. sections referenced in section 1899B(a)(2)(B) would be no additional LTCH burden if any We intend to closely monitor the effects of of the Act that require modifications in order of these measures is finalized. this quality reporting program on IPFs and to achieve standardized patient assessment Overall, we estimate the total cost for the help facilitate successful reporting outcomes data. However, the PRA requirements and 13 previously adopted measures and the 4 through ongoing stakeholder education, burden estimates will be submitted to OMB proposed measures would be $27,905 per national trainings, and a technical help desk. for review and approval when modifications LTCH annually or $12,054,724 for all LTCHs to the LTCH CARE Data Set or other annually. This is an average increase of 14 O. Effects of Proposed Requirements applicable PAC assessment instruments are percent to all LTCHs over the burden Regarding Electronic Health Record (EHR) not used to achieve standardized patient discussed in the FY 2016 IPPS/LTCH PPS Meaningful Use Program assessment data. final rule (80 FR 49838 through 49840), In section VIII.E. of the preamble of this In the FY 2016 IPPS/LTCH PPS final rule which included all quality measures that proposed rule, we discuss proposed (80 FR 49838 through 49840), we discussed LTCHs are required to report under the LTCH requirements for the Medicare and Medicaid burden estimates for the 13 previously QRP, with the exception of those 4 new EHR Incentive Programs. We are proposing finalized quality measures which we are measures we are proposing in this proposed CQM reporting requirements, including retaining in this proposed rule using the rule. reporting periods and submission periods, as LTCH CARE Data Set Version 2.01. Based on We intend to continue to closely monitor well as CQMs required and information a revised PRA package for the LTCH CARE the effects of the LTCH QRP on LTCHs and about CQM specifications’ updates, for the Data Set Version 3.00, we estimate the total help facilitate successful reporting outcomes Medicare and Medicaid EHR Incentive cost for the previously finalized assessment- through ongoing stakeholder education, Programs for eligible hospitals and CAHs for based measures was $13,929 per LTCH national trainings, LTCH announcements, 2017. We note that these proposals would

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only apply for eligible hospitals and CAHs previous pages, in combination with the rest LTCH PPS as a result of the proposed submitting CQMs electronically in CY 2017. of this proposed rule, constitute a regulatory payment rates and factors and other Because these proposals for data collection impact analysis. provisions presented in this proposed rule would align with the reporting requirements 2. LTCHs based on the data for the 420 LTCHs in our in place for the Hospital IQR Program and database. All expenditures are classified as Overall, LTCHs are projected to experience eligible hospitals and CAHs still have the transfers to Medicare providers (that is, option to submit their clinical quality a decrease in estimated payments per discharge in FY 2017. In the impact analysis, LTCHs). measures via attestation for the Medicare and The savings to the Federal Government Medicaid EHR Incentive Programs, we do not we are using the proposed rates, factors, and policies presented in this proposed rule, associated with the policies for LTCHs in this believe these proposals would have a proposed rule are estimated at $355 million. significant impact. including updated wage index values and relative weights, and the best available P. Alternatives Considered claims and CCR data to estimate the change TABLE VI—ACCOUNTING STATEMENT: This proposed rule contains a range of in payments under the LTCH PPS for FY CLASSIFICATION OF ESTIMATED EX- proposed policies. It also provides 2017. Accordingly, based on the best PENDITURES FROM THE FY 2016 available data for the 420 LTCHs in our descriptions of the statutory provisions that LTCH PPS TO THE FY 2017 LTCH are addressed, identifies the proposed database, we estimate that FY 2017 LTCH policies, and presents rationales for our PPS payments would decrease approximately PPS decisions and, where relevant, alternatives $355 million relative to FY 2016 as a result that were considered. of the proposed payment rates and factors Category Transfers presented in this proposed rule. Q. Overall Conclusion Annualized ¥$355 million. II. Accounting Statements and Tables 1. Acute Care Hospitals Monetized A. Acute Care Hospitals Transfers. Table I of section I.G. of this Appendix From Whom to Federal Government to demonstrates the estimated distributional As required by OMB Circular A–4 Whom. LTCH Medicare Providers impact of the IPPS budget neutrality (available at http://www.whitehouse.gov/ requirements for the proposed MS–DRG and omb/circulars/a004/a-4.pdf), in the following wage index changes, and for the wage index Table V, we have prepared an accounting III. Regulatory Flexibility Act (RFA) reclassifications under the MGCRB. Table I statement showing the classification of the Analysis also shows a projected overall increase of 0.7 expenditures associated with the provisions The RFA requires agencies to analyze percent in operating payments. As discussed of this proposed rule as they relate to acute options for regulatory relief of small entities. in section I.G. of this Appendix, we estimate care hospitals. This table provides our best For purposes of the RFA, small entities that operating payments would increase by estimate of the change in Medicare payments include small businesses, nonprofit approximately $693 million in FY 2017 to providers as a result of the proposed organizations, and small government changes to the IPPS presented in this relative to FY 2016. However, when we jurisdictions. We estimate that most hospitals proposed rule. All expenditures are classified account for the impact of the proposed and most other providers and suppliers are as transfers to Medicare providers. changes in Medicare DSH payments and the small entities as that term is used in the RFA. The costs to the Federal Government impact of the proposed additional payments The great majority of hospitals and most based on uncompensated care in accordance associated with the proposed policies in this proposed rule are estimated at $539 million. other health care providers and suppliers are with section 3133 of the Affordable Care Act, small entities, either by being nonprofit based on estimates provided by the CMS organizations or by meeting the SBA Office of the Actuary, consistent with our ABLE CCOUNTING TATEMENT T V—A S : definition of a small business (having policy discussed in section IV.F. of the CLASSIFICATION OF ESTIMATED EX- revenues of less than $7.5 million to $38.5 preamble of this proposed rule, we estimate PENDITURES UNDER THE IPPS million in any 1 year). (For details on the that operating payments would increase by latest standards for health care providers, we approximately $525 million relative to FY FROM FY 2016 TO FY 2017 2016. We currently estimate that the refer readers to page 36 of the Table of Small proposed changes in new technology add-on Category Transfers Business Size Standards for NAIC 622 found on the SBA Web site at: http://www.sba.gov/ payments for FY 2017 would decrease _ _ spending by approximately $50 million due Annualized $539 million. sites/default/files/files/Size Standards to the expiration of new technology add-on Monetized Table.pdf.) payments for four technologies. In addition, Transfers. For purposes of the RFA, all hospitals and the proposed changes to the Hospital From Whom to Federal Government to IPPS other providers and suppliers are considered Readmissions Reduction Program for FY Whom. Medicare Providers. to be small entities. Individuals and States 2017 would decrease spending by $100 are not included in the definition of a small million, as a result of the proposed inclusion B. LTCHs entity. We believe that the provisions of this of the refinement to the pneumonia As discussed in section I.J. of this proposed rule relating to acute care hospitals readmissions measure that expanded the Appendix, the impact analysis of the would have a significant impact on small measure cohort, along with the addition of proposed payment rates and factors entities as explained in this Appendix. the CABG readmission measure, in the presented in this proposed rule under the Because we lack data on individual hospital calculation of the FY 2017 payment LTCH PPS is projected to result in a decrease receipts, we cannot determine the number of adjustment factor. This estimate, combined in estimated aggregate LTCH PPS payments small proprietary LTCHs. Therefore, we are with our estimated increase in FY 2017 in FY 2017 relative to FY 2016 of assuming that all LTCHs are considered operating payment of $525 million, would approximately $355 million based on the small entities for the purpose of the analysis result in an estimated increase of data for 420 LTCHs in our database that are in section I.J. of this Appendix. MACs are not approximately $375 million for FY 2017. We subject to payment under the LTCH PPS. considered to be small entities. Because we estimate that hospitals would experience a Therefore, as required by OMB Circular A– acknowledge that many of the affected 2.0 percent increase in capital payments per 4 (available at http://www.whitehouse.gov/ entities are small entities, the analysis case, as shown in Table III of section I.I. of omb/circulars/a004/a-4.pdf), in Table VI, we discussed throughout the preamble of this this Appendix. We project that there would have prepared an accounting statement proposed rule constitutes our regulatory be a $164 million increase in capital showing the classification of the flexibility analysis. In this proposed rule, we payments in FY 2017 compared to FY 2016. expenditures associated with the provisions are soliciting public comments on our The cumulative operating and capital of this proposed rule as they relate to the estimates and analysis of the impact of our payments would result in a net increase of proposed changes to the LTCH PPS. Table VI proposals on those small entities. Any public approximately $539 million to IPPS provides our best estimate of the estimated comments that we receive and our responses providers. The discussions presented in the change in Medicare payments under the will be presented in the final rule.

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IV. Impact on Small Rural Hospitals the recommendations of MedPAC, of three-quarters of the applicable percentage Section 1102(b) of the Social Security Act recommend update factors for inpatient increase (prior to the application of other requires us to prepare a regulatory impact hospital services for each fiscal year that take statutory adjustments; also referred to as the analysis for any proposed or final rule that into account the amounts necessary for the market basket update or rate-of-increase may have a significant impact on the efficient and effective delivery of medically (with no adjustments)) for hospitals not operations of a substantial number of small appropriate and necessary care of high considered to be meaningful electronic rural hospitals. This analysis must conform quality. Under section 1886(e)(5) of the Act, health record (EHR) users in accordance with to the provisions of section 603 of the RFA. we are required to publish update factors section 1886(b)(3)(B)(ix) of the Act, and then With the exception of hospitals located in recommended by the Secretary in the subject to an adjustment based on changes in certain New England counties, for purposes proposed and final IPPS rules, respectively. economy-wide productivity (the multifactor of section 1102(b) of the Act, we define a Accordingly, this Appendix provides the productivity (MFP) adjustment), and an small rural hospital as a hospital that is recommendations for the update factors for additional reduction of 0.75 percentage point the IPPS national standardized amount, the located outside of an urban area and has as required by section 1886(b)(3)(B)(xii) of hospital-specific rate for SCHs and MDHs, fewer than 100 beds. Section 601(g) of the the Act. Sections 1886(b)(3)(B)(xi) and and the rate-of-increase limits for certain Social Security Amendments of 1983 (Pub. L. (b)(3)(B)(xii) of the Act, as added by section hospitals excluded from the IPPS, as well as 98–21) designated hospitals in certain New 3401(a) of the Affordable Care Act, state that England counties as belonging to the adjacent LTCHs. In prior years, we have made a recommendation in the IPPS proposed rule application of the MFP adjustment and the urban area. Thus, for purposes of the IPPS additional FY 2017 adjustment of 0.75 and the LTCH PPS, we continue to classify and final rule for the update factors for the payment rates for IRFs and IPFs. However, percentage point may result in the applicable these hospitals as urban hospitals. (We refer percentage increase being less than zero. readers to Table I in section I.G. of this for FY 2017 consistent with approach for FY 2016, we are including the Secretary’s Based on the most recent data available for Appendix for the quantitative effects of the recommendation for the update factors for this FY 2017 IPPS/LTCH PPS proposed rule, proposed policy changes under the IPPS for IRFs and IPFs in separate Federal Register in accordance with section 1886(b)(3)(B) of operating costs.) documents at the time that we announce the the Act, we are proposing to base the V. Unfunded Mandates Reform Act Analysis annual updates for IRFs and IPFs. We also proposed FY 2017 market basket update used to determine the applicable percentage Section 202 of the Unfunded Mandates discuss our response to MedPAC’s increase for the IPPS on the IHS Global Reform Act of 1995 (Pub. L. 104–4) also recommended update factors for inpatient Insight, Inc. (IGI’s) first quarter 2016 forecast requires that agencies assess anticipated costs hospital services. of the FY 2010-based IPPS market basket and benefits before issuing any rule whose II. Inpatient Hospital Update for FY 2017 rate-of-increase with historical data through mandates require spending in any 1 year of fourth quarter 2015, which is estimated to be $100 million in 1995 dollars, updated A. Proposed FY 2017 Inpatient Hospital 2.8 percent. In accordance with section annually for inflation. In 2016, that threshold Update 1886(b)(3)(B) of the Act, as amended by level is approximately $146 million. This As discussed in section IV.B. of the proposed rule would not mandate any preamble to this proposed rule, consistent section 3401(a) of the Affordable Care Act, in requirements for State, local, or tribal with section 1886(b)(3)(B) of the Act, as section IV.B. of the preamble of this proposed governments, nor would it affect private amended by sections 3401(a) and 10319(a) of rule, we are proposing an MFP adjustment of sector costs. the Affordable Care Act, we are setting the 0.5 percent for FY 2017. Therefore, based on applicable percentage increase by applying IGI’s first quarter 2016 forecast of the FY VI. Executive Order 12866 the following adjustments in the following 2010-based IPPS market basket, depending In accordance with the provisions of sequence. Specifically, the applicable on whether a hospital submits quality data Executive Order 12866, the Executive Office percentage increase under the IPPS is equal under the rules established in accordance of Management and Budget reviewed this to the rate-of-increase in the hospital market with section 1886(b)(3)(B)(viii) of the Act proposed rule. basket for IPPS hospitals in all areas, subject (hereafter referred to as a hospital that to a reduction of one-quarter of the submits quality data) and is a meaningful Appendix B: Recommendation of applicable percentage increase (prior to the EHR user under section 1886(b)(3)(B)(ix) of Update Factors for Operating Cost application of other statutory adjustments; the Act (hereafter referred to as a hospital Rates of Payment for Inpatient Hospital also referred to as the market basket update that is a meaningful EHR user), there are four Services or rate-of-increase (with no adjustments)) for possible applicable percentage increases that hospitals that fail to submit quality can be applied to the standardized amount. I. Background information under rules established by the Below we provide a table summarizing the Section 1886(e)(4)(A) of the Act requires Secretary in accordance with section four proposed applicable percentage that the Secretary, taking into consideration 1886(b)(3)(B)(viii) of the Act and a reduction increases.

Hospital Hospital Hospital did Hospital did submitted submitted NOT submit NOT submit quality data quality data quality data quality data FY 2017 and is a and is NOT a and is a and is NOT a meaningful meaningful meaningful meaningful EHR user EHR user EHR user EHR user

B. Proposed Update for SCHs and MDHs for percentage increase in the hospital-specific same update factor as for all other hospitals FY 2017 rate for SCHs and MDHs equals the subject to the IPPS). As discussed in section IV.N. of the Section 1886(b)(3)(B)(iv) of the Act applicable percentage increase set forth in section 1886(b)(3)(B)(i) of the Act (that is, the preamble of this proposed rule, section 205 provides that the FY 2017 applicable of the Medicare Access and CHIP

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Reauthorization Act of 2015 (MACRA) (Pub. Mariana Islands, and American Samoa are current law for FY 2017. MedPAC’s rationale L. 114–10, enacted on April 16, 2015) among the remaining types of hospitals still for this update recommendation is described extended the MDH program (which, under paid under the reasonable cost methodology, in more detail below. As mentioned above, previous law, was to be in effect for subject to the rate-of-increase limits. As we section 1886(e)(4)(A) of the Act requires that discharges on or before March 31, 2015 only) finalized in the FY 2015 IPPS/LTCH PPS the Secretary, taking into consideration the for discharges occurring on or after April 1, final rule (79 FR 50156 through 50157), we recommendations of MedPAC, recommend 2015, through FY 2017 (that is, for discharges are applying the FY 2017 percentage increase update factors for inpatient hospital services occurring on or before September 30, 2017). in the IPPS operating market basket to the for each fiscal year that take into account the As previously mentioned, the update to the target amount for children’s hospitals, PPS- amounts necessary for the efficient and hospital specific rate for SCHs and MDHs is excluded cancer hospitals, RNHCIs, and effective delivery of medically appropriate subject to section 1886(b)(3)(B)(i) of the Act, short-term acute care hospitals located in the and necessary care of high quality. Consistent as amended by sections 3401(a) and 10319(a) U.S. Virgin Islands, Guam, the Northern with current law, depending on whether a of the Affordable Care Act. Accordingly, Mariana Islands, and American Samoa. For hospital submits quality data and is a depending on whether a hospital submits this proposed rule, the current estimate of the meaningful EHR user, we are recommending quality data and is a meaningful EHR user, IPPS operating market basket percentage the four applicable percentage increases to we are proposing the same four possible increase for FY 2017 is 2.8 percent. the standardized amount listed in the table applicable percentage increases in the table E. Proposed Update for LTCHs for FY 2017 under section II. of this Appendix B. We are above for the hospital-specific rate applicable recommending that the same applicable Section 123 of Public Law 106–113, as to SCHs and MDHs. percentage increases apply to SCHs and amended by section 307(b) of Public Law MDHs. C. Proposed FY 2017 Puerto Rico Hospital 106–554 (and codified at section 1886(m)(1) In addition to making a recommendation Update of the Act), provides the statutory authority for IPPS hospitals, in accordance with As discussed in section IV.A. of the for updating payment rates under the LTCH section 1886(e)(4)(A) of the Act, we are preamble of this proposed rule, prior to PPS. recommending update factors for certain January 1, 2016, Puerto Rico hospitals were As discussed in section V.A. of the other types of hospitals excluded from the Addendum to this proposed rule, we are paid based on 75 percent of the national IPPS. Consistent with our policies for these proposing to establish an update to the LTCH standardized amount and 25 percent of the facilities, we are recommending an update to PPS standard Federal rate for FY 2017 based Puerto Rico-specific standardized amount. the target amounts for children’s hospitals, on the full proposed 2013-based LTCH PPS Section 601 of Public Law 114–113 amended cancer hospitals, RNHCIs, and short-term market basket increase estimate (for this section 1886(d)(9)(E) of the Act to specify acute care hospitals located in the U.S. Virgin proposed rule, estimated to be 2.7 percent), that the payment calculation with respect to Islands, Guam, the Northern Mariana Islands, subject to an adjustment based on changes in operating costs of inpatient hospital services and American Samoa of 2.8 percent. economy-wide productivity and an of a subsection (d) Puerto Rico hospital for For FY 2017, consistent with policy set additional reduction required by sections inpatient hospital discharges on or after forth in section VII. of the preamble of this 1886(m)(3)(A)(ii) and (m)(4)(F) of the Act. In proposed rule, for LTCHs that submit quality January 1, 2016, shall use 100 percent of the accordance with the LTCHQR Program under national standardized amount. Because data, we are recommending an update of 1.45 section 1886(m)(5) of the Act, we are percent to the LTCH PPS standard Federal Puerto Rico hospitals are no longer paid with proposing to reduce the annual update to the a Puerto Rico-specific standardized amount rate. For LTCHs that fail to submit quality LTCH PPS standard Federal rate by 2.0 data for FY 2017, we are recommending an under the amendments to section percentage points for failure of a LTCH to 1886(d)(9)(E) of the Act, there is no longer a annual update to the LTCH PPS standard submit the required quality data. The MFP Federal rate of ¥0.55 percent. need for us to propose an update to the adjustment described in section Puerto Rico standardized amount. Hospitals 1886(b)(3)(B)(xi)(ii) of the Act is currently IV. MedPAC Recommendation for Assessing in Puerto Rico are now paid 100 percent of estimated to be 0.5 percent for FY 2017. In Payment Adequacy and Updating Payments the national standardized amount and, addition, section 1886(m)(3)(A)(ii) of the Act in Traditional Medicare therefore, are subject to the same update to requires that any annual update for FY 2017 In its March 2016 Report to Congress, the national standardized amount discussed be reduced by the ‘‘other adjustment’’ at MedPAC assessed the adequacy of current under section IV.B.1. of the preamble of this section 1886(m)(4)(F) of the Act, which is payments and costs, and the relationship proposed rule. Accordingly, for FY 2017, we 0.75 percentage point. Therefore, based on between payments and an appropriate cost are proposing an applicable percentage IGI’s first quarter 2016 forecast of the base. MedPAC recommended an update to increase of 1.55 percent to the standardized proposed FY 2017 LTCH PPS market basket the hospital inpatient rates in the amount amount for hospitals located in Puerto Rico. increase, we are proposing to establish an specified in current law. We refer the reader D. Proposed Update for Hospitals Excluded annual update to the LTCH PPS standard to the March 2016 MedPAC report, which is From the IPPS for FY 2017 Federal rate of 1.45 percent (that is, the available for download at www.medpac.gov current FY 2017 estimate of the proposed for a complete discussion on this Section 1886(b)(3)(B)(ii) of the Act is used market basket rate-of-increase of 2.7 percent recommendation. MedPAC expects Medicare for purposes of determining the percentage less a proposed adjustment of 0.5 percentage margins to remain low in 2016. At the same increase in the rate-of-increase limits for point for MFP and less 0.75 percentage time, MedPAC’s analysis finds that efficient children’s hospitals, cancer hospitals, and point). Accordingly, we are proposing to hospitals have been able to maintain positive hospitals located outside the 50 States, the apply an update factor of 1.0145 percent in Medicare margins while maintaining a District of Columbia, and Puerto Rico (that is, determining the LTCH PPS standard Federal relatively high quality of care. short-term acute care hospitals located in the rate for FY 2017. For LTCHs that fail to Response: We agree with MedPAC and U.S. Virgin Islands, Guam, the Northern submit quality data for FY 2017, we are consistent with current law we are proposing Mariana Islands, and America Samoa). proposing to apply an annual update to the an applicable percentage increase for FY Section 1886(b)(3)(B)(ii) of the Act sets the LTCH PPS standard Federal rate of ¥0.55 2017 of 1.55 percent, provided the hospital percentage increase in the rate-of-increase percent (that is, the proposed annual update submits quality data and is a meaningful EHR limits equal to the market basket percentage for FY 2017 of 1.45 percent less 2.0 user, consistent with statutory requirements. increase. In accordance with § 403.752(a) of percentage points for failure to submit the We note that, because the operating and the regulations, RNHCIs are paid under the required quality data in accordance with capital prospective payment systems remain provisions of § 413.40, which also use section section 1886(m)(5)(C) of the Act and our separate, we are continuing to use separate 1886(b)(3)(B)(ii) of the Act to update the rules) by applying a proposed update factor updates for operating and capital payments. percentage increase in the rate-of-increase of 0.9945 percent in determining the LTCH The update to the capital rate is discussed in limits. PPS standard Federal rate for FY 2017. section III. of the Addendum to this proposed Currently, children’s hospitals, PPS- rule. excluded cancer hospitals, RNHCIs, and III. Secretary’s Recommendations short-term acute care hospitals located in the MedPAC is recommending an inpatient [FR Doc. 2016–09120 Filed 4–18–16; 4:15 pm] U.S. Virgin Islands, Guam, the Northern hospital update in the amount specified in BILLING CODE 4120–01–P

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