Medicare Program; Inpatient Psychiatric Facilities Prospective Payment System Payment Update for Rate Year Beginning July 1, 2009 (RY 2010), 20362-20399 [E9-9962]
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20362
Federal Register / Vol. 74, No. 83 / Friday, May 1, 2009 / Notices
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
[CMS–1495–NC]
RIN 0938–AP50
Medicare Program; Inpatient
Psychiatric Facilities Prospective
Payment System Payment Update for
Rate Year Beginning July 1, 2009 (RY
2010)
AGENCY: Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Notice; request for comments.
SUMMARY: This notice updates the
payment rates for the Medicare
prospective payment system (PPS) for
inpatient psychiatric hospital services
provided by inpatient psychiatric
facilities (IPFs). These changes are
applicable to IPF discharges occurring
during the rate year beginning July 1,
2009 through June 30, 2010. We are also
requesting comments on the IPF PPS
teaching adjustment and the market
basket.
DATES:
Effective Date: The updated IPF
prospective payment rates are effective
for discharges occurring on or after July
1, 2009 through June 30, 2010.
Comment Date: To be assured
consideration, comments must be
received at one of the addresses
provided below, no later than 5 p.m. on
June 30, 2009.
ADDRESSES: In commenting, please refer
to file code CMS–1495–NC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
1. Electronically. You may submit
electronic comments on specific issues
in this regulation to https://
www.regulations.gov. Follow the
instructions for ‘‘Comment or
Submission’’ and enter the file code to
find the document accepting comments.
2. By regular mail. You may mail
written comments (one original and two
copies) to the following address only:
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Attention: CMS–1495–
NC, P.O. Box 8010, Baltimore, MD
21244–1850.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments (one
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original and two copies) to the following
address only: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
CMS–1495–NC, Mail Stop C4–26–05,
7500 Security Boulevard, Baltimore, MD
21244–1850.
4. By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments (one original
and two copies) before the close of the
comment period to either of the
following addresses.
a. Room 445–G, Hubert H. Humphrey
Building, 200 Independence Avenue,
SW., Washington, DC 20201.
(Because access to the interior of the
HHH Building is not readily available to
persons without Federal Government
identification, commenters are
encouraged to leave their comments in
the CMS drop slots located in the main
lobby of the building. A stamp-in clock
is available for persons wishing to retain
a proof of filing by stamping in and
retaining an extra copy of the comments
being filed.)
b. 7500 Security Boulevard,
Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call telephone number (410) 786–
9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Dorothy Myrick or Jana Lindquist, (410)
786–4533 (for general information).
Bridget Dickensheets, (410) 786–8670
(for information regarding the market
basket and labor-related share).
Theresa Bean, (410) 786–2287 (for
information regarding the regulatory
impact analysis).
SUPPLEMENTARY INFORMATION: Inspection
of Public Comments: All comments
received before the close of the
comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: https://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
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approximately 3 weeks after publication
of a document, at the headquarters of
the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday
through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an
appointment to view public comments,
phone 1–800–743–3951.
Table of Contents
To assist readers in referencing
sections contained in this document, we
are providing the following table of
contents.
I. Background
A. Annual Requirements for Updating the
IPF PPS
B. Overview of the Legislative
Requirements of the IPF PPS
C. IPF PPS—General Overview
II. Transition Period for Implementation of
the IPF PPS
III. Updates to the IPF PPS for RY Beginning
July 1, 2009
A. Determining the Standardized BudgetNeutral Federal Per Diem Base Rate
1. Standardization of the Federal Per Diem
Base Rate and Electroconvulsive Therapy
Rate
2. Calculation of the Budget Neutrality
Adjustment
a. Outlier Adjustment
b. Stop-Loss Provision Adjustment
c. Behavioral Offset
B. Update of the Federal Per Diem Base
Rate and Electroconvulsive Therapy Rate
1. Market Basket for IPFs Reimbursed
Under the IPF PPS
a. Market Basket Index for the IPF PPS
b. Overview of the RPL Market Basket
2. Labor-Related Share
3. One-Time Prospective Adjustment to the
Standard Federal Rate
IV. Update of the IPF PPS Adjustment
Factors
A. Overview of the IPF PPS Adjustment
Factors
B. Patient-Level Adjustments
1. Adjustment for MS–DRG Assignment
2. Payment for Comorbid Conditions
3. Patient Age Adjustments
4. Variable Per Diem Adjustments
C. Facility-Level Adjustments
1. Wage Index Adjustment
a. Background
b. Wage Index for RY 2010
c. OMB Bulletins
2. Adjustment for Rural Location
3. Teaching Adjustment
4. Cost of Living Adjustment for IPFs
Located in Alaska and Hawaii
5. Adjustment for IPFs With a Qualifying
Emergency Department (ED)
D. Other Payment Adjustments and
Policies
1. Outlier Payments
a. Update to the Outlier Fixed Dollar Loss
Threshold Amount
b. Statistical Accuracy of Cost-to-Charge
Ratios
2. Expiration of the Stop-Loss Provision
V. Request for Comments
VI. Waiver of Proposed Rulemaking
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VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Analysis
Addenda
Acronyms
Because of the many terms to which
we refer by acronym in this notice,
we are listing the acronyms used
and their corresponding terms in
alphabetical order below:
BBRA Medicare, Medicaid and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget Refinement Act
of 1999, (Pub. L. 106–113)
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
DSM–IV–TR Diagnostic and Statistical
Manual of Mental Disorders Fourth
Edition—Text Revision
DRGs Diagnosis-related groups
FY Federal fiscal year
ICD–9–CM International Classification of
Diseases, 9th Revision, Clinical
Modification
IPFs Inpatient psychiatric facilities
IRFs Inpatient rehabilitation facilities
LTCHs Long-term care hospitals
MedPAR Medicare provider analysis and
review file
RY Rate Year
TEFRA Tax Equity and Fiscal
Responsibility Act of 1982, (Pub. L. 97–
248)
I. Background
A. Annual Requirements for Updating
the IPF PPS
In November 2004, we implemented
the inpatient psychiatric facilities (IPF)
prospective payment system (PPS) in a
final rule that appeared in the
November 15, 2004 Federal Register (69
FR 66922). In developing the IPF PPS,
in order to ensure that the IPF PPS is
able to account adequately for each
IPF’s case-mix, we performed an
extensive regression analysis of the
relationship between the per diem costs
and certain patient and facility
characteristics to determine those
characteristics associated with
statistically significant cost differences
on a per diem basis. For characteristics
with statistically significant cost
differences, we used the regression
coefficients of those variables to
determine the size of the corresponding
payment adjustments.
In that final rule, we explained that
we believe it is important to delay
updating the adjustment factors derived
from the regression analysis until we
have IPF PPS data that includes as
much information as possible regarding
the patient-level characteristics of the
population that each IPF serves.
Therefore, we indicated that we did not
intend to update the regression analysis
and recalculate the Federal per diem
base rate and the patient- and facility-
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level adjustments until we complete
that analysis. Until that analysis is
complete, we stated our intention to
publish a notice in the Federal Register
each spring to update the IPF PPS (71
FR 27041).
Updates to the IPF PPS as specified in
42 CFR 412.428 include the following:
• A description of the methodology
and data used to calculate the updated
Federal per diem base payment amount.
• The rate of increase factor as
described in § 412.424(a)(2)(iii), which
is based on the excluded hospital with
capital market basket under the update
methodology of section 1886(b)(3)(B)(ii)
of the Social Security Act (the Act) for
each year (effective from the
implementation period until June 30,
2006).
• For discharges occurring on or after
July 1, 2006, the rate of increase factor
for the Federal portion of the IPF’s
payment, which is based on the
rehabilitation, psychiatric, and longterm care (RPL) market basket.
• The best available hospital wage
index and information regarding
whether an adjustment to the Federal
per diem base rate is needed to maintain
budget neutrality.
• Updates to the fixed dollar loss
threshold amount in order to maintain
the appropriate outlier percentage.
• Description of the International
Classification of Diseases, 9th Revision,
Clinical Modification (ICD–9–CM)
coding and diagnosis-related groups
(DRGs) classification changes discussed
in the annual update to the hospital
inpatient prospective payment system
(IPPS) regulations.
• Update to the electroconvulsive
therapy (ECT) payment by a factor
specified by CMS.
• Update to the national urban and
rural cost-to-charge ratio medians and
ceilings.
• Update to the cost of living
adjustment factors for IPFs located in
Alaska and Hawaii, if appropriate.
Our most recent annual update
occurred in the May 2008 IPF PPS
notice (73 FR 25709) that set forth
updates to the IPF PPS payment rates
for RY 2009. This notice updates the IPF
per diem payment rates that were
published in the May 2008 IPF PPS
notice in accordance with our
established policies.
B. Overview of the Legislative
Requirements for the IPF PPS
Section 124 of the Medicare,
Medicaid, and SCHIP (State Children’s
Health Insurance Program) Balanced
Budget Refinement Act of 1999, (Pub. L.
106–113) (BBRA) required
implementation of the IPF PPS.
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Specifically, section 124 of the BBRA
mandated that the Secretary develop a
per diem PPS for inpatient hospital
services furnished in psychiatric
hospitals and psychiatric units that
includes an adequate patient
classification system that reflects the
differences in patient resource use and
costs among psychiatric hospitals and
psychiatric units.
Section 405(g)(2) of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub.
L. 108–173) extended the IPF PPS to
distinct part psychiatric units of critical
access hospitals (CAHs).
To implement these provisions, we
published various proposed and final
rules in the Federal Register. For more
information regarding these rules, see
the CMS Web sites https://
www.cms.hhs.gov/
InpatientPsychFacilPPS/ and https://
www.cms.hhs.gov/
InpatientpsychfacilPPS/
02_regulations.asp.
C. IPF PPS—General Overview
The November 2004 IPF PPS final
rule (69 FR 66922) established the IPF
PPS, as authorized under section 124 of
the BBRA and codified at subpart N of
part 412 of the Medicare regulations.
The November 2004 IPF PPS final rule
set forth the per diem Federal rates for
the implementation year (the 18-month
period from January 1, 2005 through
June 30, 2006), and it provided payment
for the inpatient operating and capital
costs to IPFs for covered psychiatric
services they furnish (that is, routine,
ancillary, and capital costs, but not costs
of approved educational activities, bad
debts, and other services or items that
are outside the scope of the IPF PPS).
Covered psychiatric services include
services for which benefits are provided
under the fee-for-service Part A
(Hospital Insurance Program) Medicare
program.
The IPF PPS established the Federal
per diem base rate for each patient day
in an IPF derived from the national
average daily routine operating,
ancillary, and capital costs in IPFs in FY
2002. The average per diem cost was
updated to the midpoint of the first year
under the IPF PPS, standardized to
account for the overall positive effects of
the IPF PPS payment adjustments, and
adjusted for budget neutrality.
The Federal per diem payment under
the IPF PPS is comprised of the Federal
per diem base rate described above and
certain patient- and facility-level
payment adjustments that were found in
the regression analysis to be associated
with statistically significant per diem
cost differences.
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The patient-level adjustments include
age, DRG assignment, comorbidities,
and variable per diem adjustments to
reflect higher per diem costs in the early
days of an IPF stay. Facility-level
adjustments include adjustments for the
IPF’s wage index, rural location,
teaching status, a cost of living
adjustment for IPFs located in Alaska
and Hawaii, and presence of a
qualifying emergency department (ED).
The IPF PPS provides additional
payment policies for: Outlier cases;
stop-loss protection (which was
applicable only during the IPF PPS
transition period); interrupted stays; and
a per treatment adjustment for patients
who undergo ECT.
A complete discussion of the
regression analysis appears in the
November 2004 IPF PPS final rule (69
FR 66933 through 66936).
Section 124 of BBRA does not specify
an annual update rate strategy for the
IPF PPS and is broadly written to give
the Secretary discretion in establishing
an update methodology. Therefore, in
the November 2004 IPF PPS final rule,
we implemented the IPF PPS using the
following update strategy:
• Calculate the final Federal per diem
base rate to be budget neutral for the 18month period of January 1, 2005
through June 30, 2006.
• Use a July 1 through June 30 annual
update cycle.
• Allow the IPF PPS first update to be
effective for discharges on or after July
1, 2006 through June 30, 2007.
II. Transition Period for
Implementation of the IPF PPS
In the November 2004 IPF PPS final
rule, we provided for a 3-year transition
period. During this 3-year transition
period, an IPF’s total payment under the
PPS was based on an increasing
percentage of the Federal rate with a
corresponding decreasing percentage of
the IPF PPS payment that is based on
reasonable cost concepts. However,
effective for cost reporting periods
beginning on or after January 1, 2008,
IPF PPS payments are based on 100
percent of the Federal rate.
III. Updates to the IPF PPS for RY
Beginning July 1, 2009
The IPF PPS is based on a
standardized Federal per diem base rate
calculated from IPF average per diem
costs and adjusted for budget-neutrality
in the implementation year. The Federal
per diem base rate is used as the
standard payment per day under the IPF
PPS and is adjusted by the applicable
wage index factor and the patient-and
facility-level adjustments that are
applicable to the IPF stay. A detailed
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explanation of how we calculated the
average per diem cost appears in the
November 2004 IPF PPS final rule (69
FR 66926).
A. Determining the Standardized
Budget-Neutral Federal Per Diem Base
Rate
Section 124(a)(1) of the BBRA
requires that we implement the IPF PPS
in a budget neutral manner. In other
words, the amount of total payments
under the IPF PPS, including any
payment adjustments, must be projected
to be equal to the amount of total
payments that would have been made if
the IPF PPS were not implemented.
Therefore, we calculated the budgetneutrality factor by setting the total
estimated IPF PPS payments to be equal
to the total estimated payments that
would have been made under the Tax
Equity and Fiscal Responsibility Act of
1982 (TEFRA) (Pub. L. 97–248)
methodology had the IPF PPS not been
implemented.
Under the IPF PPS methodology, we
calculated the final Federal per diem
base rate to be budget neutral during the
IPF PPS implementation period (that is,
the 18-month period from January 1,
2005 through June 30, 2006) using a July
1 update cycle. We updated the average
cost per day to the midpoint of the IPF
PPS implementation period (that is,
October 1, 2005), and this amount was
used in the payment model to establish
the budget-neutrality adjustment.
A step-by-step description of the
methodology used to estimate payments
under the TEFRA payment system
appears in the November 2004 IPF PPS
final rule (69 FR 66926).
1. Standardization of the Federal Per
Diem Base Rate and Electroconvulsive
Therapy (ECT) Rate
In the November 2004 IPF PPS final
rule, we describe how we standardized
the IPF PPS Federal per diem base rate
in order to account for the overall
positive effects of the IPF PPS payment
adjustment factors. To standardize the
IPF PPS payments, we compared the IPF
PPS payment amounts calculated from
the FY 2002 Medicare Provider Analysis
and Review (MedPAR) file to the
projected TEFRA payments from the FY
2002 cost report file updated to the
midpoint of the IPF PPS
implementation period (that is, October
2005). The standardization factor was
calculated by dividing total estimated
payments under the TEFRA payment
system by estimated payments under
the IPF PPS. The standardization factor
was calculated to be 0.8367.
As described in detail in the May
2006 IPF PPS final rule (71 FR 27045),
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in reviewing the methodology used to
simulate the IPF PPS payments used for
the November 2004 IPF PPS final rule,
we discovered that due to a computer
code error, total IPF PPS payments were
underestimated by about 1.36 percent.
Since the IPF PPS payment total should
have been larger than the estimated
figure, the standardization factor should
have been smaller (0.8254 vs. 0.8367). In
turn, the Federal per diem base rate and
the ECT rate should have been reduced
by 0.8254 instead of 0.8367.
To resolve this issue, in RY 2007, we
amended the Federal per diem base rate
and the ECT payment rate
prospectively. Using the standardization
factor of 0.8254, the average cost per day
was effectively reduced by 17.46
percent (100 percent minus 82.54
percent = 17.46 percent).
2. Calculation of the Budget Neutrality
Adjustment
To compute the budget neutrality
adjustment for the IPF PPS, we
separately identified each component of
the adjustment, that is, the outlier
adjustment, stop-loss adjustment, and
behavioral offset.
A complete discussion of how we
calculate each component of the budget
neutrality adjustment appears in the
November 2004 IPF PPS final rule (69
FR 66932 through 66933) and in the
May 2006 IPF PPS final rule (71 FR
27044 through 27046).
a. Outlier Adjustment
Since the IPF PPS payment amount
for each IPF includes applicable outlier
amounts, we reduced the standardized
Federal per diem base rate to account
for aggregate IPF PPS payments
estimated to be made as outlier
payments. The outlier adjustment was
calculated to be 2 percent. As a result,
the standardized Federal per diem base
rate was reduced by 2 percent to
account for projected outlier payments.
b. Stop-Loss Provision Adjustment
As explained in the November 2004
IPF PPS final rule, we provided a stoploss payment during the transition from
cost-based reimbursement to the per
diem payment system to ensure that an
IPF’s total PPS payments were no less
than a minimum percentage of their
TEFRA payment, had the IPF PPS not
been implemented. We reduced the
standardized Federal per diem base rate
by the percentage of aggregate IPF PPS
payments estimated to be made for stoploss payments. As a result, the
standardized Federal per diem base rate
was reduced by 0.39 percent to account
for stop-loss payments. Since the
transition was completed in RY 2009,
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the stop-loss provision is no longer
applicable, and for cost reporting
periods beginning on or after January 1,
2008, IPFs were paid 100 percent PPS.
c. Behavioral Offset
As explained in the November 2004
IPF PPS final rule, implementation of
the IPF PPS may result in certain
changes in IPF practices, especially with
respect to coding for comorbid medical
conditions. As a result, Medicare may
make higher payments than assumed in
our calculations. Accounting for these
effects through an adjustment is
commonly known as a behavioral offset.
Based on accepted actuarial practices
and consistent with the assumptions
made in other PPSs, we assumed in
determining the behavioral offset that
IPFs would regain 15 percent of
potential ‘‘losses’’ and augment
payment increases by 5 percent. We
applied this actuarial assumption,
which is based on our historical
experience with new payment systems,
to the estimated ‘‘losses’’ and ‘‘gains’’
among the IPFs. The behavioral offset
for the IPF PPS was calculated to be
2.66 percent. As a result, we reduced
the standardized Federal per diem base
rate by 2.66 percent to account for
behavioral changes. As indicated in the
November 2004 IPF PPS final rule, we
do not plan to change adjustment factors
or projections until we analyze IPF PPS
data.
If we find that an adjustment is
warranted, the percent difference may
be applied prospectively to the
established PPS rates to ensure the rates
accurately reflect the payment level
intended by the statute. In conducting
this analysis, we will be interested in
the extent to which improved coding of
patients’ principal and other diagnoses,
which may not reflect real increases in
underlying resource demands, has
occurred under the PPS.
B. Update of the Federal Per Diem Base
Rate and Electroconvulsive Therapy
Rate
1. Market Basket for IPFs Reimbursed
Under the IPF PPS
As described in the November 2004
IPF PPS final rule (69 FR 66931), the
average per diem cost was updated to
the midpoint of the implementation
year. This updated average per diem
cost of $724.43 was reduced by 17.46
percent to account for standardization to
projected TEFRA payments for the
implementation period, by 2 percent to
account for outlier payments, by 0.39
percent to account for stop-loss
payments, and by 2.66 percent to
account for the behavioral offset. The
Federal per diem base rate in the
implementation year was $575.95. The
increase in the per diem base rate for RY
2009 included the 0.39 percent increase
due to the removal of the stop-loss
provision. We indicated in the
November 2004 IPF PPS final rule (69
FR 66932) that we would remove this
0.39 percent reduction to the Federal
per diem base rate after the transition.
For RY 2009 and beyond, the stop-loss
provision has ended and is therefore no
longer a part of budget neutrality.
Applying the market basket increase
of 2.1 percent and the wage index
budget neutrality factor of 1.0009 to the
RY 2009 Federal per diem base rate of
$637.78 yields a Federal per diem base
rate of $651.76 for RY 2010. Similarly,
applying the market basket increase and
wage index budget neutrality factor to
the RY 2009 ECT rate yields an ECT rate
of $280.60 for RY 2010.
a. Market Basket Index for the IPF PPS
The market basket index that was
used to develop the IPF PPS was the
excluded hospital with capital market
basket. This market basket was based on
1997 Medicare cost report data and
included data for Medicare-participating
IPFs, inpatient rehabilitation facilities
(IRFs), long-term care hospitals
(LTCHs), cancer, and children’s
hospitals.
Beginning with the May 2006 IPF PPS
final rule (71 FR 27046 through 27054),
IPF PPS payments were updated using
a 2002-based market basket reflecting
the operating and capital cost structures
for IRFs, IPFs, and LTCHs (hereafter
referred to as the rehabilitation,
psychiatric, long-term care (RPL) market
basket).
We excluded cancer and children’s
hospitals from the RPL market basket
because their payments are based
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entirely on reasonable costs subject to
rate-of-increase limits established under
the authority of section 1886(b) of the
Act, which are implemented in
regulations at § 413.40. They are not
reimbursed through a PPS. Also, the FY
2002 cost structures for cancer and
children’s hospitals are noticeably
different than the cost structures of the
IRFs, IPFs, and LTCHs. A complete
discussion of the RPL market basket
appears in the May 2006 IPF PPS final
rule (71 FR 27046 through 27054).
We seek comments below on the
possibility of creating a stand-alone IPF
market basket.
b. Overview of the RPL Market Basket
The RPL market basket is a fixed
weight, Laspeyres-type price index. A
market basket is described as a fixedweight index because it answers the
question of how much it would cost, at
another time, to purchase the same mix
(quantity and intensity) of goods and
services needed to provide hospital
services in a base period. The effects on
total expenditures resulting from
changes in the mix of goods and
services purchased subsequent to the
base period are not measured. In this
manner, the market basket measures
pure price change only. Only when the
index is rebased would changes in the
quantity and intensity be captured in
the cost weights. Therefore, we rebase
the market basket periodically so that
cost weights reflect recent changes in
the mix of goods and services that
hospitals purchase to furnish patient
care between base periods.
The terms ‘‘rebasing’’ and ‘‘revising,’’
while often used interchangeably,
actually denote different activities.
Rebasing means moving the base year
for the structure of costs of an input
price index (for example, shifting the
base year cost structure from FY 1997 to
FY 2002). Revising means changing data
sources, methodology, or price proxies
used in the input price index. In 2006,
we rebased and revised the market
basket used to update the IPF PPS.
Table 1 below sets forth the
completed FY 2002-based RPL market
basket including the cost categories,
weights, and price proxies.
TABLE 1—FY 2002-BASED RPL MARKET BASKET COST CATEGORIES, WEIGHTS, AND PRICE PROXIES
FY 2002-based RPL
market basket cost
weight
Cost categories
Total ................................................................................
Compensation .................................................................
Wages and Salaries* ...............................................
Employee Benefits* .................................................
Professional Fees, Non-Medical* ...................................
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100.000
65.877
52.895
12.982
2.892
Fmt 4701
Sfmt 4703
FY 2002-based RPL market basket price proxies
ECI–Wages and Salaries, Civilian Hospital Workers.
ECI–Benefits, Civilian Hospital Workers.
ECI–Compensation for Professional & Related occupations.
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TABLE 1—FY 2002-BASED RPL MARKET BASKET COST CATEGORIES, WEIGHTS, AND PRICE PROXIES—Continued
FY 2002-based RPL
market basket cost
weight
Cost categories
Utilities ............................................................................
Electricity .................................................................
Fuel Oil, Coal, etc. ..................................................
Water and Sewage ..................................................
Professional Liability Insurance ......................................
All Other Products and Services ....................................
All Other Products ...................................................
Pharmaceuticals ......................................................
Food: Direct Purchase ............................................
Food: Contract Service ...........................................
Chemicals ................................................................
Medical Instruments ................................................
Photographic Supplies ............................................
Rubber and Plastics ................................................
Paper Products ........................................................
Apparel ....................................................................
Machinery and Equipment ......................................
Miscellaneous Products** ........................................
All Other Services ...........................................................
Telephone ................................................................
Postage ...................................................................
All Other: Labor Intensive* ......................................
All Other: Non-labor Intensive .................................
Capital-Related Costs*** .................................................
Depreciation ....................................................................
Fixed Assets ............................................................
Movable Equipment .................................................
Interest Costs .................................................................
Nonprofit ..................................................................
0.656
0.351
0.108
0.197
1.161
19.265
13.323
5.103
0.873
0.620
1.100
1.014
0.096
1.052
1.000
0.207
0.297
1.963
5.942
0.240
0.682
2.219
2.800
10.149
6.186
4.250
1.937
2.775
2.081
For Profit ..................................................................
0.694
Other Capital-Related Costs ..........................................
1.187
FY 2002-based RPL market basket price proxies
PPI–Commercial Electric Power.
PPI–Commercial Natural Gas.
CPI–U—Water & Sewage Maintenance.
CMS Professional Liability Premium Index.
PPI Prescription Drugs.
PPI Processed Foods & Feeds.
CPI–U Food Away From Home.
PPI Industrial Chemicals.
PPI Medical Instruments & Equipment.
PPI Photographic Supplies.
PPI Rubber & Plastic Products.
PPI Converted Paper & Paperboard Products.
PPI Apparel.
PPI Machinery & Equipment
PPI Finished Goods less Food & Energy.
CPI–U Telephone Services.
CPI–U Postage.
ECI–Compensation for Private Service Occupations.
CPI–U All Items.
Boeckh Institutional Construction 23-year useful life.
WPI Machinery & Equipment 11-year useful life.
Average yield on domestic municipal bonds (Bond Buyer 20
bonds) vintage-weighted (23 years).
Average yield on Moody’s Aaa bond vintage-weighted (23
years).
CPI–U Residential Rent.
* Labor-related.
** Blood
and blood-related products is included in miscellaneous products.
portion of capital costs (0.46) are labor-related.
Note: Due to rounding, weights may not sum to total.
*** A
We evaluated the price proxies using
the criteria of reliability, timeliness,
availability, and relevance. Reliability
indicates that the index is based on
valid statistical methods and has low
sampling variability. Timeliness implies
that the proxy is published regularly
(preferably at least once a quarter).
Availability means that the proxy is
publicly available. Finally, relevance
means that the proxy is applicable and
representative of the cost category
weight to which it is applied. The
Consumer Price Indexes (CPIs),
Producer Price Indexes (PPIs), and
Employment Cost Indexes (ECIs) used as
proxies in this market basket meet these
criteria.
We note that the proxies are the same
as those used for the FY 1997-based
excluded hospital with capital market
basket. Because these proxies meet our
criteria of reliability, timeliness,
availability, and relevance, we believe
they continue to be the best measure of
price changes for the cost categories. For
further discussion on the FY 1997-based
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excluded hospital with capital market
basket, see the August 1, 2002 hospital
inpatient prospective payment system
(IPPS) final rule (67 FR at 50042).
The RY 2010 (that is, beginning July
1, 2009) update for the IPF PPS using
the FY 2002-based RPL market basket
and Information Handling Services
(IHS) Global Insight’s 1st quarter 2009
forecast for the market basket
components is 2.1 percent. This
includes increases in both the operating
section and the capital section for the
12-month RY period (that is, July 1,
2009 through June 30, 2010). IHS Global
Insight, Inc. is a nationally recognized
economic and financial forecasting firm
that contracts with CMS to forecast the
components of the market baskets.
2. Labor-Related Share
Due to the variations in costs and
geographic wage levels, we believe that
payment rates under the IPF PPS should
continue to be adjusted by a geographic
wage index. This wage index applies to
the labor-related portion of the Federal
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per diem base rate, hereafter referred to
as the labor-related share.
The labor-related share is determined
by identifying the national average
proportion of operating costs that are
related to, influenced by, or vary with
the local labor market. Using our current
definition of labor-related, the laborrelated share is the sum of the relative
importance of wages and salaries, fringe
benefits, professional fees, laborintensive services, and a portion of the
capital share from an appropriate
market basket. We used the FY 2002based RPL market basket cost weights
relative importance to determine the
labor-related share for the IPF PPS.
The labor-related share for RY 2010 is
the sum of the RY 2010 relative
importance of each labor-related cost
category, and reflects the different rates
of price change for these cost categories
between the base year (FY 2002) and RY
2010. The sum of the relative
importance for the RY 2010 operating
costs (wages and salaries, employee
benefits, professional fees, and labor-
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intensive services) is 71.935, as shown
in below. The portion of capital that is
influenced by the local labor market is
estimated to be 46 percent, which is the
same percentage used in the FY 1997based IRF and IPF payment systems.
Since the relative importance for
capital is 8.596 percent of the FY 2002based RPL market basket in RY 2010, we
are taking 46 percent of 8.596 percent to
determine the labor-related share of
capital for RY 2010. The result is 3.954
percent, which we added to 71.935
percent for the operating cost amount to
determine the total labor-related share
for RY 2010. Thus, the labor-related
share that we are using for IPF PPS in
RY 2010 is 75.889 percent. Table 2
below shows the RY 2010 labor-related
share using the FY 2002-based RPL
market basket. We note that this laborrelated share is determined by using the
same methodology as employed in
calculating all previous IPF laborrelated shares.
A complete discussion of the IPF
labor-related share methodology appears
in the November 2004 IPF PPS final rule
(69 FR 66952 through 66954).
TABLE 2—TOTAL LABOR-RELATED SHARE—RELATIVE IMPORTANCE FOR RY 2010
FY 2002-based RPL
market basket laborrelated share relative
importance (percent)
RY 2009*
FY 2002-based RPL
market basket laborrelated share relative
importance (percent)
RY 2010**
Wages and salaries .............................................................................................................................
Employee benefits ...............................................................................................................................
Professional fees .................................................................................................................................
All other labor-intensive services .........................................................................................................
52.645
14.004
2.895
2.137
53.062
13.852
2.895
2.126
Subtotal .........................................................................................................................................
Labor-related share of capital costs (0.46) .........................................................................................
71.681
3.950
71.935
3.954
Total ..............................................................................................................................................
75.631
75.889
Cost category
* Based on 2008 1st Quarter forecast.
** Based on 2009 1st Quarter forecast.
3. One-time Prospective Adjustment to
the Standard Federal Rate
As we discussed in the November
2004 IPF PPS final rule, consistent with
the statutory requirement for budget
neutrality in section 124 of the BBRA,
we estimated aggregate payments under
the IPF PPS for the IPF PPS
implementation year (that is, the 18month period from January 1, 2005
through June 30, 2006) to be equal to the
estimated aggregate payments that
would be made if the IPF PPS had not
been implemented. Our methodology
for estimating payments for purposes of
the budget neutrality calculations used
the best available data at the time and
necessarily reflected several
assumptions (for example, costs,
inflation factors and intensity of
services provided).
We indicated from the inception of
the IPF PPS that it was possible for the
aggregate amount of actual payments in
the implementation year to be
significantly higher or lower than the
estimates on which the budget
neutrality calculations were based to the
extent that later, more complete data
differ significantly from the data that
were available at the time of the original
calculations.
Section 124 of the BBRA provides
broad authority to the Secretary in
developing the IPF PPS, including the
authority for establishing appropriate
adjustments. Under this broad authority
to make appropriate adjustments, we
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provided in § 412.424(c)(3)(ii) for the
possibility of making a one-time
prospective adjustment to the IPF PPS
rates, so that the effect of any significant
difference between actual payments and
estimated payments for the first year of
the IPF PPS would not be perpetuated
in the IPF PPS rates for future years.
The November 2004 IPF PPS final
rule implementing the IPF PPS (69 FR
66922), was based upon the broad
authority granted to the Secretary under
section 124 of the BBRA. In that same
final rule, we discussed our authority to
make a one-time prospective adjustment
to the IPF PPS rates, which was
reflected in § 412.424(c)(3)(ii).
Evaluating the appropriateness of the
possible one-time prospective
adjustment under § 412.424(c)(3)(ii)
requires a thorough review of the
relevant IPF data. When we established
the IPF PPS Federal per diem base rate
in a budget neutral manner, we used the
most recent IPF cost report data
available at that time (that is, FY 2002
data), and trended that data forward to
estimate what CMS would have paid to
IPFs in the implementation year under
the TEFRA payment system if the PPS
were not implemented (69 FR 66927).
We have since conducted a review of
the relevant data. From the cost reports,
we have TEFRA and PPS payment data
for January 1, 2005 through June 30,
2006, the 18-month period for the
implementation of the IPF PPS. These
data are drawn from reports with cost
reporting periods beginning in FY 2005
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and FY 2006. More than 70 percent of
the cost reports from FY 2005 were
settled. However, only approximately 33
percent of the cost reports from FY 2006
have been settled. The remaining 67
percent from FY 2006 are either assubmitted or have been reopened.
Therefore, because we lack a complete
set of final cost report data from the IPF
PPS 18-month implementation period,
we are not making a one-time
adjustment to the IPF PPS rates for RY
2010.
We plan to revisit the possibility of
making a one-time prospective
adjustment to the IPF PPS rates as more
cost report data becomes available.
IV. Update of the IPF PPS Adjustment
Factors
A. Overview of the IPF PPS Adjustment
Factors
The IPF PPS payment adjustments
were derived from a regression analysis
of 100 percent of the FY 2002 MedPAR
data file, which contained 483,038
cases. For this notice, we used the same
results of the regression analysis used to
implement the November 2004 IPF PPS
final rule. For a more detailed
description of the data file used for the
regression analysis, see the November
2004 IPF PPS final rule (69 FR 66935
through 66936). While we have since
used more recent claims data to set the
fixed dollar loss threshold amount, we
use the same results of this regression
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analysis to update the IPF PPS for RY
2009 as well as RY 2010.
As previously stated, we do not plan
to update the regression analysis until
we are able to analyze IPF PPS claims
and cost report data. However, we
continue to monitor claims and
payment data independently from cost
report data to assess issues, to determine
whether changes in case-mix or
payment shifts have occurred among
freestanding governmental, non-profit
and private psychiatric hospitals, and
psychiatric units of general hospitals,
and CAHs and other issues of
importance to IPFs.
B. Patient-Level Adjustments
In the May 2008 IPF PPS notice (73
FR 25709), we provided payment
adjustments for the following patientlevel characteristics: Medicare Severity
diagnosis related groups (MS–DRGs)
assignment of the patient’s principal
diagnosis, selected comorbidities,
patient age, and the variable per diem
adjustments.
1. Adjustment for MS–DRG Assignment
The IPF PPS includes payment
adjustments for the psychiatric DRG
assigned to the claim based on each
patient’s principal diagnosis. The IPF
PPS recognizes the MS–DRGs. The DRG
adjustment factors were expressed
relative to the most frequently reported
psychiatric DRG in FY 2002, that is,
DRG 430 (psychoses). The coefficient
values and adjustment factors were
derived from the regression analysis.
In accordance with § 412.27(a),
payment under the IPF PPS is
conditioned on IPFs admitting ‘‘only
patients whose admission to the unit is
required for active treatment, of an
intensity that can be provided
appropriately only in an inpatient
hospital setting, of a psychiatric
principal diagnosis that is listed in
Chapter Five (‘‘Mental Disorders’’) of
the International Classification of
Diseases, Ninth Revision, Clinical
Modification (ICD–9–CM)]’’ or in the
Fourth Edition, Text Revision of the
American Psychiatric Association’s
Diagnostic and Statistical Manual,
(DSM–IV–TR). IPF claims with a
principal diagnosis included in Chapter
Five of the ICD–9–CM or the DSM–IV–
TR are paid the Federal per diem base
rate under the IPF PPS and all other
applicable adjustments, including any
applicable DRG adjustment. Psychiatric
principal diagnoses that do not group to
one of the designated DRGs still receive
the Federal per diem base rate and all
other applicable adjustments, but the
payment would not include a DRG
adjustment.
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The Standards for Electronic
Transaction final rule published in the
Federal Register on August 17, 2000 (65
FR 50312), adopted the ICD–9–CM as
the designated code set for reporting
diseases, injuries, impairments, other
health related problems, their
manifestations, and causes of injury,
disease, impairment, or other health
related problems. Therefore, we use the
ICD–9–CM as the designated code set
for the IPF PPS.
We believe that it is important to
maintain the same diagnostic coding
and DRG classification for IPFs that are
used under the IPPS for providing the
psychiatric care. Therefore, when the
IPF PPS was implemented for cost
reporting periods beginning on or after
January 1, 2005, we adopted the same
diagnostic code set and DRG patient
classification system (that is, the CMS
DRGs) that were utilized at the time
under the hospital inpatient prospective
payment system (IPPS). Since the
inception of the IPF PPS, the DRGs used
as the patient classification system
under the IPF PPS have corresponded
exactly with the CMS DRGs applicable
under the IPPS for acute care hospitals.
Every year, changes to the ICD–9–CM
coding system are addressed in the IPPS
proposed and final rules. The changes to
the codes are effective October 1 of each
year and must be used by acute care
hospitals as well as other providers to
report diagnostic and procedure
information. The IPF PPS has always
incorporated ICD–9–CM coding changes
made in the annual IPPS update. We
publish coding changes in a
Transmittal/Change Request, similar to
how coding changes are announced by
the IPPS and LTCH PPS. Those ICD–9–
CM coding changes are also published
in the following IPF PPS RY update, in
either the IPF PPS proposed and final
rules, or in an IPF PPS update notice.
In the May 2008 IPF PPS notice (73
FR 25714), we discussed CMS’ effort to
better recognize resource use and the
severity of illness among patients. CMS
adopted the new MS–DRGs for the IPPS
in the FY 2008 IPPS final rule with
comment period (72 FR 47130). We
believe by better accounting for patients’
severity of illness in Medicare payment
rates, the MS–DRGs encourage hospitals
to improve their coding and
documentation of patient diagnoses.
The MS–DRGs, which are based on the
CMS DRGs, represent a significant
increase in the number of DRGs (from
538 to 745, an increase of 207). For a
full description of the development and
implementation of the MS–DRGs, see
the FY 2008 IPPS final rule with
comment period (72 FR 47141 through
47175).
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All of the ICD–9–CM coding changes
are reflected in the FY 2009 GROUPER,
Version 26.0, effective for IPPS
discharges occurring on or after October
1, 2008 through September 30, 2009.
The GROUPER Version 26.0 software
package assigns each case to an MS–
DRG on the basis of the diagnosis and
procedure codes and demographic
information (that is, age, sex, and
discharge status). The Medicare Code
Editor (MCE) 25.0 uses the new ICD–9–
CM codes to validate coding for IPPS
discharges on or after October 1, 2008.
For additional information on the
GROUPER Version 26.0 and MCE 25.0,
see Transmittal 1610 (Change Request
6189), dated October 3, 2008. The IPF
PPS has always used the same
GROUPER and Code Editor as the IPPS.
Therefore, the ICD–9–CM changes,
which were reflected in the GROUPER
Version 26.0 and MCE 25.0 on October
1, 2008, also became effective for the
IPF PPS for discharges occurring on or
after October 1, 2008.
The impact of the new MS–DRGs on
the IPF PPS was negligible. Mapping to
the MS–DRGs resulted in the current 17
MS–DRGs, instead of the original 15, for
which the IPF PPS provides an
adjustment. Although the code set is
updated, the same associated
adjustment factors apply now that have
been in place since implementation of
the IPF PPS, with one exception that is
unrelated to the update to the codes.
When DRGs 521 and 522 were
consolidated into MS–DRG 895, we
carried over the adjustment factor of
1.02 from DRG 521 to the newly
consolidated MS–DRG. This was done
to reflect the higher claims volume
under DRG 521, with more than eight
times the number of claims than billed
under DRG 522. The updates are
reflected in Table 5. For a detailed
description of the mapping changes
from the original DRG adjustment
categories to the current MS–DRG
adjustment categories we refer readers
to the May 2008 IPF PPS notice (73 FR
25714).
The official version of the ICD–9–CM
is available on CD–ROM from the U.S.
Government Printing Office. The FY
2009 version can be ordered by
contacting the Superintendent of
Documents, U.S. Government Printing
Office, Department 50, Washington, DC
20402–9329, telephone number (202)
512–1800. Questions concerning the
ICD–9–CM should be directed to
Patricia E. Brooks, Co-Chairperson, ICD–
9–CM Coordination and Maintenance
Committee, CMS, Center for Medicare
Management, Hospital and Ambulatory
Policy Group, Division of Acute Care,
Mailstop C4–08–06, 7500 Security
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August 19, 2008 Federal Register (73 FR
48434) and at https://www.cms.hhs.gov/
AcuteInpatientPPS/IPPS/
list.asp#TopOfPage.
Tables 3 and 4 below list the FY 2009
new and invalid ICD–9–CM diagnosis
codes that group to one of the 17 MS–
DRGs for which the IPF PPS provides an
Boulevard, Baltimore, Maryland 21244–
1850.
Further information concerning the
official version of the ICD–9–CM can be
found in the IPPS final rule with
comment period, ‘‘Changes to Hospital
Inpatient Prospective Payment System
and Fiscal Year 2009 Rates’’ in the
20369
adjustment. These tables are only a
listing of FY 2009 changes and do not
reflect all of the currently valid and
applicable ICD–9–CM codes classified
in the MS–DRGs. When coded as a
principal code or diagnosis, these codes
receive the correlating MS–DRG
adjustment.
TABLE 3—FY 2009 NEW DIAGNOSIS CODES
Diagnosis code
046.11
046.19
046.71
046.72
046.79
Description
Variant Creutzfeldt-Jakob disease ..................................................................................
Other and unspecified Creutzfeldt-Jakob disease ..........................................................
¨
Gerstmann-Straussler-Scheinker syndrome ...................................................................
Fatal familial insomnia ....................................................................................................
Other and unspecified prion disease of central nervous system ...................................
........................................................
........................................................
........................................................
........................................................
........................................................
MS–DRG
056,
056,
056,
056,
056,
057
057
057
057
057
TABLE 4—FY 2009 INVALID DIAGNOSIS CODES
Diagnosis code
Description
046.1 ..........................................................
Jakob-Creutzfeldt ............................................................................................................
We do not plan to update the
regression analysis until we are able to
analyze IPF PPS data. The MS–DRG
adjustment factors (as shown in Table 5)
MS–DRG
056, 057
will continue to be paid for discharges
occurring in RY 2010.
TABLE 5—RY 2010 CURRENT MS–DRGS APPLICABLE FOR THE PRINCIPAL DIAGNOSIS ADJUSTMENT
MS–DRG
056
057
080
081
876
880
881
882
883
884
885
886
887
894
895
896
897
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
Degenerative nervous system disorders w MCC ...........................................................
Degenerative nervous system disorders w/o MCC ........................................................
Nontraumatic stupor & coma w MCC .............................................................................
Nontraumatic stupor & coma w/o MCC ..........................................................................
O.R. procedure w principal diagnoses of mental illness ................................................
Acute adjustment reaction & psychosocial dysfunction .................................................
Depressive neuroses ......................................................................................................
Neuroses except depressive ..........................................................................................
Disorders of personality & impulse control .....................................................................
Organic disturbances & mental retardation ....................................................................
Psychoses .......................................................................................................................
Behavioral & developmental disorders ...........................................................................
Other mental disorder diagnoses ...................................................................................
Alcohol/drug abuse or dependence, left AMA ................................................................
Alcohol/drug abuse or dependence w rehabilitation therapy .........................................
Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC .........................
Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC ......................
2. Payment for Comorbid Conditions
The intent of the comorbidity
adjustments is to recognize the
increased costs associated with
comorbid conditions by providing
additional payments for certain
concurrent medical or psychiatric
conditions that are expensive to treat. In
the May 2008 IPF PPS notice (73 FR
25716), we explained that the IPF PPS
includes 17 comorbidity categories and
identified the new, revised, and deleted
ICD–9–CM diagnosis codes that generate
a comorbid condition payment
adjustment under the IPF PPS for RY
2009 (73 FR 25718).
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Adjustment
factor
MS–DRG descriptions
Jkt 217001
Comorbidities are specific patient
conditions that are secondary to the
patient’s principal diagnosis and that
require treatment during the stay.
Diagnoses that relate to an earlier
episode of care and have no bearing on
the current hospital stay are excluded
and must not be reported on IPF claims.
Comorbid conditions must exist at the
time of admission or develop
subsequently, and affect the treatment
received, length of stay (LOS), or both
treatment and LOS.
For each claim, an IPF may receive
only one comorbidity adjustment per
comorbidity category, but it may receive
an adjustment for more than one
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1.05
1.05
1.07
1.07
1.22
1.05
0.99
1.02
1.02
1.03
1.00
0.99
0.92
0.97
1.02
0.88
0.88
comorbidity category. Billing
instructions require that IPFs must enter
the full ICD–9–CM codes for up to 8
additional diagnoses if they co-exist at
the time of admission or develop
subsequently and impact the treatment
provided.
The comorbidity adjustments were
determined based on the regression
analysis using the diagnoses reported by
IPFs in FY 2002. The principal
diagnoses were used to establish the
DRG adjustments and were not
accounted for in establishing the
comorbidity category adjustments,
except where ICD–9–CM ‘‘code first’’
instructions apply. As we explained in
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the May 2008 IPF PPS notice (73 FR
25716), the code first rule applies when
a condition has both an underlying
etiology and a manifestation due to the
underlying etiology. For these
conditions, the ICD–9–CM has a coding
convention that requires the underlying
conditions to be sequenced first
followed by the manifestation.
Whenever a combination exists, there is
a ‘‘use additional code’’ note at the
etiology code and a code first note at the
manifestation code.
As discussed in the MS–DRG section,
it is our policy to maintain the same
diagnostic coding set for IPFs that is
used under the IPPS for providing the
same psychiatric care. Although the
ICD–9–CM code set has been updated,
the same adjustment factors have been
in place since the implementation of the
IPF PPS. Table 6 below lists the FY 2009
new ICD diagnosis codes that impact the
comorbidity adjustments under the IPF
PPS. Table 6 is not a list of all currently
valid ICD codes applicable for the IPF
PPS comorbidity adjustments.
TABLE 6—FY 2009 NEW ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENT
Diagnosis code
Description
Comorbidity category
038.12 ....................................................
046.11 ....................................................
046.19 ....................................................
046.71 ....................................................
046.72 ....................................................
046.79 ....................................................
051.01 ....................................................
051.02 ....................................................
059.00 ....................................................
059.01 ....................................................
059.09 ....................................................
059.10 ....................................................
059.11 ....................................................
059.12 ....................................................
059.19 ....................................................
059.20 ....................................................
059.21 ....................................................
059.22 ....................................................
059.8 ......................................................
059.9 ......................................................
199.2 ......................................................
203.02 ....................................................
203.12 ....................................................
203.82 ....................................................
204.02 ....................................................
204.12 ....................................................
204.22 ....................................................
204.82 ....................................................
204.92 ....................................................
205.02 ....................................................
205.12 ....................................................
205.22 ....................................................
205.32 ....................................................
205.82 ....................................................
205.92 ....................................................
206.02 ....................................................
206.12 ....................................................
206.22 ....................................................
206.82 ....................................................
206.92 ....................................................
207.02 ....................................................
207.12 ....................................................
207.22 ....................................................
207.82 ....................................................
208.02 ....................................................
208.12 ....................................................
208.22 ....................................................
208.82 ....................................................
208.92 ....................................................
209.00 ....................................................
209.01 ....................................................
209.02 ....................................................
209.03 ....................................................
209.10 ....................................................
209.11 ....................................................
209.12 ....................................................
209.13 ....................................................
209.14 ....................................................
209.15 ....................................................
209.16 ....................................................
209.17 ....................................................
Methicillin resistant Staphylococcus aureus septicemia .......................................
Variant Creutzfeldt-Jakob disease ........................................................................
Other and unspecified Creutzfeldt-Jakob disease ................................................
¨
Gerstmann-Straussler-Scheinker syndrome .........................................................
Fatal familial insomnia ..........................................................................................
Other and unspecified prion disease of central nervous system .........................
Cowpox .................................................................................................................
Vaccinia not from vaccination ...............................................................................
Orthopoxvirus infection, unspecified .....................................................................
Monkeypox ............................................................................................................
Other orthopoxvirus infections ..............................................................................
Parapoxvirus infection, unspecified ......................................................................
Bovine stomatitis ...................................................................................................
Sealpox .................................................................................................................
Other parapoxvirus infections ...............................................................................
Yatapoxvirus infection, unspecified ......................................................................
Tanapox ................................................................................................................
Yaba monkey tumor virus .....................................................................................
Other poxvirus infections ......................................................................................
Poxvirus infections, unspecified ............................................................................
Malignant neoplasm associated with transplant organ ........................................
Multiple myeloma, in relapse ................................................................................
Plasma cell leukemia, in relapse ..........................................................................
Other immunoproliferative neoplasms, in relapse ................................................
Acute lymphoid leukemia, in relapse ....................................................................
Chronic lymphoid leukemia, in relapse .................................................................
Subacute lymphoid leukemia, in relapse ..............................................................
Other lymphoid leukemia, in relapse ....................................................................
Unspecified lymphoid leukemia, in relapse ..........................................................
Acute myeloid leukemia, in relapse ......................................................................
Chronic myeloid leukemia, in relapse ...................................................................
Subacute myeloid leukemia, in relapse ................................................................
Myeloid sarcoma, in relapse .................................................................................
Other myeloid leukemia, in relapse ......................................................................
Unspecified myeloid leukemia, in relapse ............................................................
Acute monocytic leukemia, in relapse ..................................................................
Chronic monocytic leukemia, in relapse ...............................................................
Subacute monocytic leukemia, in relapse ............................................................
Other monocytic leukemia, in relapse ..................................................................
Unspecified monocytic leukemia, in relapse ........................................................
Acute erythremia and erythroleukemia, in relapse ...............................................
Chronic erythremia, in relapse ..............................................................................
Megakaryocytic leukemia, in relapse ....................................................................
Other specified leukemia, in relapse ....................................................................
Acute leukemia of unspecified cell type, in relapse .............................................
Chronic leukemia of unspecified cell type, in relapse ..........................................
Subacute leukemia of unspecified cell type, in relapse .......................................
Other leukemia of unspecified cell type, in relapse .............................................
Unspecified leukemia, in relapse ..........................................................................
Malignant carcinoid tumor of the small intestine, unspecified portion .................
Malignant carcinoid tumor of the duodenum ........................................................
Malignant carcinoid tumor of the jejunum ............................................................
Malignant carcinoid tumor of the ileum ................................................................
Malignant carcinoid tumor of the large intestine, unspecified portion ..................
Malignant carcinoid tumor of the appendix ..........................................................
Malignant carcinoid tumor of the cecum ..............................................................
Malignant carcinoid tumor of the ascending colon ...............................................
Malignant carcinoid tumor of the transverse colon ..............................................
Malignant carcinoid tumor of the descending colon .............................................
Malignant carcinoid tumor of the sigmoid colon ...................................................
Malignant carcinoid tumor of the rectum ..............................................................
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Infectious Disease.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
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TABLE 6—FY 2009 NEW ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENT—Continued
Diagnosis code
Description
Comorbidity category
209.20 ....................................................
209.21 ....................................................
209.22 ....................................................
209.23 ....................................................
209.24 ....................................................
209.25 ....................................................
209.26 ....................................................
209.27 ....................................................
209.29 ....................................................
209.30 ....................................................
209.40 ....................................................
209.41 ....................................................
209.42 ....................................................
209.43 ....................................................
209.50 ....................................................
209.51 ....................................................
209.52 ....................................................
209.53 ....................................................
209.54 ....................................................
209.55 ....................................................
209.56 ....................................................
209.57 ....................................................
209.60 ....................................................
209.61 ....................................................
209.62 ....................................................
209.63 ....................................................
209.64 ....................................................
209.65 ....................................................
209.66 ....................................................
209.67 ....................................................
209.69 ....................................................
238.77 ....................................................
V45.11 ...................................................
Malignant carcinoid tumor of unknown primary site .............................................
Malignant carcinoid tumor of the bronchus and lung ...........................................
Malignant carcinoid tumor of the thymus .............................................................
Malignant carcinoid tumor of the stomach ...........................................................
Malignant carcinoid tumor of the kidney ...............................................................
Malignant carcinoid tumor of foregut, not otherwise specified .............................
Malignant carcinoid tumor of midgut, not otherwise specified .............................
Malignant carcinoid tumor of hindgut, not otherwise specified ............................
Malignant carcinoid tumor of other sites ..............................................................
Malignant poorly differentiated neuroendocrine carcinoma, any site ...................
Benign carcinoid tumor of the small intestine, unspecified portion ......................
Benign carcinoid tumor of the duodenum ............................................................
Benign carcinoid tumor of the jejunum .................................................................
Benign carcinoid tumor of the ileum .....................................................................
Benign carcinoid tumor of the large intestine, unspecified portion ......................
Benign carcinoid tumor of the appendix ...............................................................
Benign carcinoid tumor of the cecum ...................................................................
Benign carcinoid tumor of the ascending colon ...................................................
Benign carcinoid tumor of the transverse colon ...................................................
Benign carcinoid tumor of the descending colon .................................................
Benign carcinoid tumor of the sigmoid colon .......................................................
Benign carcinoid tumor of the rectum ..................................................................
Benign carcinoid tumor of unknown primary site .................................................
Benign carcinoid tumor of the bronchus and lung ...............................................
Benign carcinoid tumor of the thymus ..................................................................
Benign carcinoid tumor of the stomach ................................................................
Benign carcinoid tumor of the kidney ...................................................................
Benign carcinoid tumor of foregut, not otherwise specified .................................
Benign carcinoid tumor of midgut, not otherwise specified ..................................
Benign carcinoid tumor of hindgut, not otherwise specified .................................
Benign carcinoid tumor of other sites ...................................................................
Post-transplant lymphoproliferative disorder (PTLD) ............................................
Renal dialysis status .............................................................................................
V45.12 ...................................................
Noncompliance with renal dialysis ........................................................................
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Chronic Renal Failure.
Chronic Renal Failure.
Table 7 lists the FY 2009 revised ICD
diagnosis codes that are applicable for
the comorbidity adjustment.
TABLE 7—FY 2009 REVISED ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENT
Description
Comorbidity
category
Methicillin susceptible Staphylococcus aureus septicemia ..................................
Multiple myeloma, without mention of having achieved remission ......................
Plasma cell leukemia, without mention of having achieved remission ................
Other immunoproliferative neoplasms, without mention of having achieved remission.
Acute lymphoid leukemia, without mention of having achieved remission ..........
Chronic lymphoid leukemia, without mention of having achieved remission .......
Subacute lymphoid leukemia, without mention of having achieved remission ....
Other lymphoid leukemia, without mention of having achieved remission ..........
Unspecified lymphoid leukemia, without mention of having achieved remission
Acute myeloid leukemia, without mention of having achieved remission ............
Chronic myeloid leukemia, without mention of having achieved remission .........
Subacute myeloid leukemia, without mention of having achieved remission ......
Myeloid sarcoma, without mention of having achieved remission .......................
Other myeloid leukemia, without mention of having achieved remission ............
Unspecified myeloid leukemia, without mention of having achieved remission ..
Acute monocytic leukemia, without mention of having achieved remission ........
Chronic monocytic leukemia, without mention of having achieved remission .....
Subacute monocytic leukemia, without mention of having achieved remission ..
Other monocytic leukemia, without mention of having achieved remission ........
Unspecified monocytic leukemia, without mention of having achieved remission
Acute erythremia and erythroleukemia, without mention of having achieved remission.
Chronic erythremia, without mention of having achieved remission ....................
Infectious Disease.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Diagnosis code
038.11
203.00
203.10
203.80
....................................................
....................................................
....................................................
....................................................
204.00
204.10
204.20
204.80
204.90
205.00
205.10
205.20
205.30
205.80
205.90
206.00
206.10
206.20
206.80
206.90
207.00
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
....................................................
207.10 ....................................................
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Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Oncology Treatment.
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TABLE 7—FY 2009 REVISED ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENT—Continued
Diagnosis code
Description
Comorbidity
category
207.20 ....................................................
207.80 ....................................................
208.00 ....................................................
Megakaryocytic leukemia, without mention of having achieved remission ..........
Other specified leukemia, without mention of having achieved remission ..........
Acute leukemia of unspecified cell type, without mention of having achieved remission.
Chronic leukemia of unspecified cell type, without mention of having achieved
remission.
Subacute leukemia of unspecified cell type, without mention of having
achieved remission.
Other leukemia of unspecified cell type, without mention of having achieved remission.
Unspecified leukemia, without mention of having achieved remission ................
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
208.10 ....................................................
208.20 ....................................................
208.80 ....................................................
208.90 ....................................................
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Table 8 lists the invalid FY 2009 ICD–
9–CM codes no longer applicable for the
comorbidity adjustment.
TABLE 8—FY 2009 INVALID ICD CODES NO LONGER APPLICABLE FOR THE COMORBIDITY ADJUSTMENT
Diagnosis Code
Description
046.1 ....................................................
051.0 ....................................................
V45.1 ...................................................
Jakob-Creutzfeldt disease .................................................................................
Cowpox ..............................................................................................................
Renal dialysis status .........................................................................................
For RY 2010, we are applying the
seventeen comorbidity categories for
which we are providing an adjustment,
their respective codes, including the
new FY 2009 ICD–9–CM codes, and
Comorbidity category
Infectious Disease.
Infectious Disease.
Chronic Renal Failure.
their respective adjustment factors in
Table 9 below.
TABLE 9—RY 2010 DIAGNOSIS CODES AND ADJUSTMENT FACTORS FOR COMORBIDITY CATEGORIES
Adjustment
factor
Description of comorbidity
ICD–9CM Code
Developmental Disabilities .........................
Coagulation Factor Deficits ........................
Tracheostomy .............................................
Renal Failure, Acute ..................................
317, 3180, 3181, 3182, and 319 ....................................................................................
2860 through 2864 ..........................................................................................................
51900 through 51909 and V440 .....................................................................................
5845 through 5849, 63630, 63631, 63632, 63730, 63731, 63732, 6383, 6393, 66932,
66934, 9585.
40301, 40311, 40391, 40402, 40412, 40413, 40492, 40493, 5853, 5854, 5855, 5856,
5859, 586, V451, V560, V561, and V562.
1400 through 2399 with a radiation therapy code 92.21–92.29 or chemotherapy code
99.25.
25002, 25003, 25012, 25013, 25022, 25023, 25032, 25033, 25042, 25043, 25052,
25053, 25062, 25063, 25072, 25073, 25082, 25083, 25092, and 25093.
260 through 262 ..............................................................................................................
3071, 30750, 31203, 31233, and 31234 ........................................................................
01000 through 04110, 042, 04500 through 05319, 05440 through 05449, 0550
through 0770, 0782 through 07889, and 07950 through 07959.
2910, 2920, 29212, 2922, 30300, and 30400 ................................................................
1.04
1.13
1.06
1.11
3910, 3911, 3912, 40201, 40403, 4160, 4210, 4211, and 4219 ...................................
44024 and 7854 ..............................................................................................................
49121, 4941, 5100, 51883, 51884, V4611 and V4612, V4613 and V4614 ...................
56960 through 56969, 9975, and V441 through V446 ...................................................
6960, 7100, 73000 through 73009, 73010 through 73019, and 73020 through 73029
1.11
1.10
1.12
1.08
1.09
96500 through 96509, 9654, 9670 through 9699, 9770, 9800 through 9809, 9830
through 9839, 986, 9890 through 9897.
1.11
Renal Failure, Chronic ...............................
Oncology Treatment ...................................
Uncontrolled Diabetes-Mellitus with or
without complications.
Severe Protein Calorie Malnutrition ...........
Eating and Conduct Disorders ...................
Infectious Disease ......................................
Drug and/or Alcohol Induced Mental Disorders.
Cardiac Conditions .....................................
Gangrene ...................................................
Chronic Obstructive Pulmonary Disease ...
Artificial Openings—Digestive and Urinary
Severe Musculoskeletal and Connective
Tissue Diseases.
Poisoning ....................................................
3. Patient Age Adjustments
As explained in the November 2004
IPF PPS final rule (69 FR 66922), we
analyzed the impact of age on per diem
cost by examining the age variable (that
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is, the range of ages) for payment
adjustments.
In general, we found that the cost per
day increases with age. The older age
groups are more costly than the under
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1.11
1.07
1.05
1.13
1.12
1.07
1.03
45 age group, the differences in per
diem cost increase for each successive
age group, and the differences are
statistically significant.
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For RY 2010, we are continuing to use
the patient age adjustments currently in
effect as shown in Table 10 below.
Adjustment
factor
Under 45 ...................................
45 and under 50 .......................
50 and under 55 .......................
55 and under 60 .......................
60 and under 65 .......................
65 and under 70 .......................
70 and under 75 .......................
75 and under 80 .......................
80 and over ..............................
Adjustment
factor
Day-of-Stay
TABLE 10—AGE GROUPINGS AND
ADJUSTMENT FACTORS
Age
TABLE 11—VARIABLE PER DIEM
ADJUSTMENTS—Continued
1.00
1.01
1.02
1.04
1.07
1.10
1.13
1.15
1.17
4. Variable Per Diem Adjustments
We explained in the November 2004
IPF PPS final rule (69 FR 66946) that the
regression analysis indicated that per
diem cost declines as the LOS increases.
The variable per diem adjustments to
the Federal per diem base rate account
for ancillary and administrative costs
that occur disproportionately in the first
days after admission to an IPF.
We used a regression analysis to
estimate the average differences in per
diem cost among stays of different
lengths. As a result of this analysis, we
established variable per diem
adjustments that begin on day 1 and
decline gradually until day 21 of a
patient’s stay. For day 22 and thereafter,
the variable per diem adjustment
remains the same each day for the
remainder of the stay. However, the
adjustment applied to day 1 depends
upon whether the IPF has a qualifying
ED. If an IPF has a qualifying ED, it
receives a 1.31 adjustment factor for day
1 of each stay. If an IPF does not have
a qualifying ED, it receives a 1.19
adjustment factor for day 1 of the stay.
The ED adjustment is explained in more
detail in section IV.C.5 of this notice.
For RY 2010, we are to continuing to
use the variable per diem adjustment
factors currently in effect as shown in
Table 11 below. A complete discussion
of the variable per diem adjustments
appears in the November 2004 IPF PPS
final rule (69 FR 66946).
Day 4 ........................................
Day 5 ........................................
Day 6 ........................................
Day 7 ........................................
Day 8 ........................................
Day 9 ........................................
Day 10 ......................................
Day 11 ......................................
Day 12 ......................................
Day 13 ......................................
Day 14 ......................................
Day 15 ......................................
Day 16 ......................................
Day 17 ......................................
Day 18 ......................................
Day 19 ......................................
Day 20 ......................................
Day 21 ......................................
After Day 21 .............................
1.05
1.04
1.02
1.01
1.01
1.00
1.00
0.99
0.99
0.99
0.99
0.98
0.97
0.97
0.96
0.95
0.95
0.95
0.92
C. Facility-Level Adjustments
The IPF PPS includes facility-level
adjustments for the wage index, IPFs
located in rural areas, teaching IPFs,
cost of living adjustments for IPFs
located in Alaska and Hawaii, and IPFs
with a qualifying ED.
1. Wage Index Adjustment
a. Background
As discussed in the May 2006 IPF PPS
final rule and in the May 2007 and May
2008 update notices, in providing an
adjustment for geographic wage levels,
the labor-related portion of an IPF’s
payment is adjusted using an
appropriate wage index. Currently, an
IPF’s geographic wage index value is
determined based on the actual location
of the IPF in an urban or rural area as
defined in § 412.64(b)(1)(ii)(A) through
§ 412.64(C).
b. Wage Index for RY 2010
Since the inception of the IPF PPS, we
have used hospital wage data in
developing a wage index to be applied
to IPFs. We are continuing that practice
for RY 2010. We apply the wage index
adjustment to the labor-related portion
of the Federal rate, which is 75.889
percent. This percentage reflects the
labor-related relative importance of the
TABLE 11—VARIABLE PER DIEM
RPL market basket for RY 2010 (see
ADJUSTMENTS
section III.B.2 of this notice). The IPF
PPS uses the pre-floor, pre-reclassified
Adjustment hospital wage index. Changes to the
Day-of-Stay
factor
wage index are made in a budget neutral
manner so that updates do not increase
Day 1—IPF Without a Qualifying ED ................................
1.19 expenditures.
For RY 2010, we are applying the
Day 1—IPF With a Qualifying
ED .........................................
1.31 most recent hospital wage index (that is,
Day 2 ........................................
1.12 the FY 2009 pre-floor, pre-reclassified
Day 3 ........................................
1.08 hospital wage index because this is the
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most appropriate index as it best reflects
the variation in local labor costs of IPFs
in the various geographic areas) using
the most recent hospital wage data (that
is, data from FY 2005 hospital cost
reports), and applying an adjustment in
accordance with our budget neutrality
policy. This policy requires us to
estimate the total amount of IPF PPS
payments in RY 2009 using the
applicable wage index value divided by
the total estimated IPF PPS payments in
RY 2010 using the most recent wage
index. The estimated payments are
based on FY 2007 IPF claims, inflated
to the appropriate RY. This quotient is
the wage index budget neutrality factor,
and it is applied in the update of the
Federal per diem base rate for RY 2010
in addition to the market basket
described in section III.B.1 of this
notice. The wage index budget
neutrality factor for RY 2010 is 1.0009.
The wage index applicable for RY
2010 appears in Table 1 and Table 2 in
Addendum B of this notice. As
explained in the May 2006 IPF PPS final
rule for RY 2007 (71 FR 27061), the IPF
PPS applies the hospital wage index
without a hold-harmless policy, and
without an out-commuting adjustment
or out-migration adjustment because the
statutory authority for these policies
applies only to the IPPS.
Also in the May 2006 IPF PPS final
rule for RY 2007 (71 FR 27061), we
adopted the changes discussed in the
Office of Management and Budget
(OMB) Bulletin No. 03–04 (June 6,
2003), which announced revised
definitions for Metropolitan Statistical
Areas (MSAs), and the creation of
Micropolitan Statistical Areas and
Combined Statistical Areas. In adopting
the OMB Core-Based Statistical Area
(CBSA) geographic designations, since
the IPF PPS was already in a transition
period from TEFRA payments to PPS
payments, we did not provide a separate
transition for the CBSA-based wage
index.
As was the case in RY 2009, for RY
2010 we will continue to use the CBSAbased wage index values as presented in
Tables 1 and 2 in Addendum B of this
notice. A complete discussion of the
CBSA labor market definitions appears
in the May 2006 IPF PPS final rule (71
FR 27061 through 27067).
c. OMB Bulletins
The Office of Management and Budget
(OMB) publishes bulletins regarding
CBSA changes, including changes to
CBSA numbers and titles. In the May
2008 IPF PPS notice, we incorporated
the CBSA nomenclature changes
published in the most recent OMB
bulletin that applies to the hospital
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wage data used to determine the current
IPF PPS wage index (73 FR 25721). We
will continue to do the same for all such
OMB CBSA nomenclature changes in
future IPF PPS rules and notices, as
necessary. The OMB bulletins may be
accessed Online at https://
www.whitehouse.gov/omb/bulletins/
index.html.
In summary, for RY 2010 we will use
the FY 2009 wage index data (collected
from cost reports submitted by hospitals
for cost reporting periods beginning
during FY 2005) to adjust IPF PPS
payments beginning July 1, 2009.
2. Adjustment for Rural Location
In the November 2004 IPF PPS final
rule, we provided a 17 percent payment
adjustment for IPFs located in a rural
area. This adjustment was based on the
regression analysis, which indicated
that the per diem cost of rural facilities
was 17 percent higher than that of urban
facilities after accounting for the
influence of the other variables included
in the regression. For RY 2010, we are
applying a 17 percent payment
adjustment for IPFs located in a rural
area as defined at § 412.64(b)(1)(ii)(C).
As stated in the November 2004 IPF PPS
final rule, we do not intend to update
the adjustment factors derived from the
regression analysis until we are able to
analyze IPF PPS data. A complete
discussion of the adjustment for rural
locations appears in the November 2004
IPF PPS final rule (69 FR 66954).
3. Teaching Adjustment
In the November 2004 IPF PPS final
rule, we implemented regulations at
§ 412.424(d)(1)(iii) to establish a facilitylevel adjustment for IPFs that are, or are
part of, teaching institutions. The
teaching adjustment accounts for the
higher indirect operating costs
experienced by facilities that participate
in graduate medical education (GME)
programs. The payment adjustments are
made based on the number of full-time
equivalent (FTE) interns and residents
training in the IPF and the IPF’s average
daily census.
Medicare makes direct GME payments
(for direct costs such as resident and
teaching physician salaries, and other
direct teaching costs) to all teaching
hospitals including those paid under the
IPPS, and those that were once paid
under the TEFRA rate-of-increase limits
but are now paid under other PPSs.
These direct GME payments are made
separately from payments for hospital
operating costs and are not part of the
PPSs. The direct GME payments do not
address the estimated higher indirect
operating costs teaching hospitals may
face.
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For teaching hospitals paid under the
TEFRA rate-of-increase limits, Medicare
did not make separate medical
education payments because payments
to these hospitals were based on the
hospitals’ reasonable costs. Since
payments under TEFRA were based on
hospitals’ reasonable costs, the higher
indirect costs that may be associated
with teaching programs were factored
automatically into the TEFRA
payments.
The results of the regression analysis
of FY 2002 IPF data established the
basis for the payment adjustments
included in the November 2004 IPF PPS
final rule. The results showed that the
indirect teaching cost variable is
significant in explaining the higher
costs of IPFs that have teaching
programs. We calculated the teaching
adjustment based on the IPF’s ‘‘teaching
variable,’’ which is one plus the ratio of
the number of FTE residents training in
the IPF (subject to limitations described
below) to the IPF’s average daily census
(ADC).
We established the teaching
adjustment in a manner that limited the
incentives for IPFs to add FTE residents
for the purpose of increasing their
teaching adjustment. We imposed a cap
on the number of FTE residents that
may be counted for purposes of
calculating the teaching adjustment. We
emphasize that the cap limits the
number of FTE residents that teaching
IPFs may count for the purposes of
calculating the IPF PPS teaching
adjustment, not the number of residents
teaching institutions can hire or train.
We calculated the number of FTE
residents that trained in the IPF during
a ‘‘base year’’ and used that FTE
resident number as the cap. An IPF’s
FTE resident cap is ultimately
determined based on the final
settlement of the IPF’s most recent cost
report filed before November 15, 2004
(that is, the publication date of the IPF
PPS final rule).
In the regression analysis, the
logarithm of the teaching variable had a
coefficient value of 0.5150. We
converted this cost effect to a teaching
payment adjustment by treating the
regression coefficient as an exponent
and raising the teaching variable to a
power equal to the coefficient value. We
note that the coefficient value of 0.5150
was based on the regression analysis
holding all other components of the
payment system constant.
As with other adjustment factors
derived through the regression analysis,
we do not plan to rerun the regression
analysis until we analyze IPF PPS data.
Therefore, for RY 2010, we are retaining
the coefficient value of 0.5150 for the
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teaching adjustment to the Federal per
diem base rate.
A complete discussion of how the
teaching adjustment was calculated
appears in the November 2004 IPF PPS
final rule (69 FR 66954 through 66957)
and the May 2008 IPF PPS notice (73 FR
25721). Below, in the ‘‘Request for
Comments’’ section of this notice, we
are seeking public input on the FTE
Intern and Resident Cap Adjustment.
4. Cost of Living Adjustment for IPFs
Located in Alaska and Hawaii
The IPF PPS includes a payment
adjustment for IPFs located in Alaska
and Hawaii based upon the county in
which the IPF is located. As we
explained in the November 2004 IPF
PPS final rule, the FY 2002 data
demonstrated that IPFs in Alaska and
Hawaii had per diem costs that were
disproportionately higher than other
IPFs. Other Medicare PPSs (for example,
the IPPS and LTCH PPS) have adopted
a cost of living adjustment (COLA) to
account for the cost differential of care
furnished in Alaska and Hawaii.
We analyzed the effect of applying a
COLA to payments for IPFs located in
Alaska and Hawaii. The results of our
analysis demonstrated that a COLA for
IPFs located in Alaska and Hawaii
would improve payment equity for
these facilities. As a result of this
analysis, we provided a COLA in the
November 2004 IPF PPS final rule.
A COLA adjustment for IPFs located
in Alaska and Hawaii is made by
multiplying the non-labor share of the
Federal per diem base rate by the
applicable COLA factor based on the
COLA area in which the IPF is located.
As previously stated in the November
2004 IPF PPS final rule, we will update
the COLA factors according to updates
established by the U.S. Office of
Personnel Management (OPM), which
issued a final rule, May 28, 2008 to
change COLA rates.
The COLA factors are published on
the OPM Web site at (https://
www.opm.gov/oca/cola/rates.asp).
We note that the COLA areas for
Alaska are not defined by county as are
the COLA areas for Hawaii. In 5 CFR
591.207, the OPM established the
following COLA areas:
(a) City of Anchorage, and 80kilometer (50-mile) radius by road, as
measured from the Federal courthouse;
(b) City of Fairbanks, and 80kilometer (50-mile) radius by road, as
measured from the Federal courthouse;
(c) City of Juneau, and 80-kilometer
(50-mile) radius by road, as measured
from the Federal courthouse;
(d) Rest of the State of Alaska.
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For RY 2010, IPFs located in Alaska
and Hawaii will continue to receive the
updated COLA factors based on the
COLA area in which the IPF is located
as shown in Table 12 below.
TABLE 12—COLA FACTORS FOR
ALASKA AND HAWAII IPFS
Location
Alaska ......
Hawaii ......
COLA
Anchorage ..................
Fairbanks ....................
Juneau ........................
Rest of Alaska ............
Honolulu County .........
Hawaii County ............
Kauai County ..............
Maui County ...............
Kalawao County .........
1.23
1.23
1.23
1.25
1.25
1.18
1.25
1.25
1.25
5. Adjustment for IPFs With a
Qualifying Emergency Department (ED)
Currently, the IPF PPS includes a
facility-level adjustment for IPFs with
qualifying EDs. We provide an
adjustment to the Federal per diem base
rate to account for the costs associated
with maintaining a full-service ED. The
adjustment is intended to account for
ED costs incurred by a freestanding
psychiatric hospital with a qualifying
ED or a distinct part psychiatric unit of
an acute hospital or a CAH for
preadmission services otherwise
payable under the Medicare Outpatient
Prospective Payment System (OPPS)
furnished to a beneficiary during the
day immediately preceding the date of
admission to the IPF (see § 413.40(c)(2))
and the overhead cost of maintaining
the ED. This payment is a facility-level
adjustment that applies to all IPF
admissions (with one exception
described below), regardless of whether
a particular patient receives
preadmission services in the hospital’s
ED.
The ED adjustment is incorporated
into the variable per diem adjustment
for the first day of each stay for IPFs
with a qualifying ED. That is, IPFs with
a qualifying ED receive an adjustment
factor of 1.31 as the variable per diem
adjustment for day 1 of each stay. If an
IPF does not have a qualifying ED, it
receives an adjustment factor of 1.19 as
the variable per diem adjustment for day
1 of each patient stay.
The ED adjustment is made on every
qualifying claim except as described
below. As specified in
§ 412.424(d)(1)(v)(B), the ED adjustment
is not made where a patient is
discharged from an acute care hospital
or critical access hospital (CAH) and
admitted to the same hospital’s or
CAH’s psychiatric unit. An ED
adjustment is not made in this case
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because the costs associated with ED
services are reflected in the DRG
payment to the acute care hospital or
through the reasonable cost payment
made to the CAH. If we provided the ED
adjustment in these cases, the hospital
would be paid twice for the overhead
costs of the ED, as stated in the
November 2004 IPF PPS final rule (69
FR 66960).
Therefore, when patients are
discharged from an acute care hospital
or CAH and admitted to the same
hospital’s or CAH’s psychiatric unit, the
IPF receives the 1.19 adjustment factor
as the variable per diem adjustment for
the first day of the patient’s stay in the
IPF.
For RY 2010, we are retaining the 1.31
adjustment factor for IPFs with
qualifying EDs. A complete discussion
of the steps involved in the calculation
of the ED adjustment factor appears in
the November 2004 IPF PPS final rule
(69 FR 66959 through 66960) and the
May 2006 IPF PPS final rule (71 FR
27070 through 27072).
D. Other Payment Adjustments and
Policies
For RY 2010, the IPF PPS includes:
An outlier adjustment to promote access
to IPF care for those patients who
require expensive care and to limit the
financial risk of IPFs treating unusually
costly patients. In this section, we also
explain the reason for ending the stoploss provision that was applicable
during the transition period.
1. Outlier Payments
In the November 2004 IPF PPS final
rule, we implemented regulations at
§ 412.424(d)(3)(i) to provide a per-case
payment for IPF stays that are
extraordinarily costly. Providing
additional payments to IPFs for
extremely costly cases strongly
improves the accuracy of the IPF PPS in
determining resource costs at the patient
and facility level. These additional
payments reduce the financial losses
that would otherwise be incurred in
treating patients who require more
costly care and, therefore, reduce the
incentives for IPFs to under-serve these
patients.
We make outlier payments for
discharges in which an IPF’s estimated
total cost for a case exceeds a fixed
dollar loss threshold amount
(multiplied by the IPF’s facility-level
adjustments) plus the Federal per diem
payment amount for the case.
In instances when the case qualifies
for an outlier payment, we pay 80
percent of the difference between the
estimated cost for the case and the
adjusted threshold amount for days 1
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through 9 of the stay (consistent with
the median LOS for IPFs in FY 2002),
and 60 percent of the difference for day
10 and thereafter. We established the 80
percent and 60 percent loss sharing
ratios because we were concerned that
a single ratio established at 80 percent
(like other Medicare PPSs) might
provide an incentive under the IPF per
diem payment system to increase LOS
in order to receive additional payments.
After establishing the loss sharing ratios,
we determined the current fixed dollar
loss threshold amount of $6,113 through
payment simulations designed to
compute a dollar loss beyond which
payments are estimated to meet the 2
percent outlier spending target.
a. Update to the Outlier Fixed Dollar
Loss Threshold Amount:
In accordance with the update
methodology described in § 412.428(d),
we are updating the fixed dollar loss
threshold amount used under the IPF
PPS outlier policy. Based on the
regression analysis and payment
simulations used to develop the IPF
PPS, we established a 2 percent outlier
policy which strikes an appropriate
balance between protecting IPFs from
extraordinarily costly cases while
ensuring the adequacy of the Federal
per diem base rate for all other cases
that are not outlier cases.
We believe it is necessary to update
the fixed dollar loss threshold amount
because analysis of the latest available
data (that is, FY 2007 IPF claims) and
rate increases indicates adjusting the
fixed dollar loss amount is necessary in
order to maintain an outlier percentage
that equals 2 percent of total estimated
IPF PPS payments.
In the May 2006 IPF PPS final rule (71
FR 27072), we describe the process by
which we calculate the outlier fixed
dollar loss threshold amount. We
continue to use this process for RY
2010. We begin by simulating aggregate
payments with and without an outlier
policy, and applying an iterative process
to a fixed dollar loss amount that will
result in outlier payments being equal to
2 percent of total estimated payments
under the simulation. Based on this
process, for RY 2010, the IPF PPS will
use $6,565 as the fixed dollar loss
threshold amount in the outlier
calculation in order to maintain the 2
percent outlier policy.
b. Statistical Accuracy of Cost-to-Charge
Ratios
As previously stated, under the IPF
PPS, an outlier payment is made if an
IPF’s cost for a stay exceeds a fixed
dollar loss threshold amount. In order to
establish an IPF’s cost for a particular
case, we multiply the IPF’s reported
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charges on the discharge bill by its
overall cost-to-charge ratio (CCR). This
approach to determining an IPF’s cost is
consistent with the approach used
under the IPPS and other PPSs. In FY
2004, we implemented changes to the
IPPS outlier policy used to determine
CCRs for acute care hospitals because
we became aware that payment
vulnerabilities resulted in inappropriate
outlier payments. Under the IPPS, we
established a statistical measure of
accuracy for CCRs in order to ensure
that aberrant CCR data did not result in
inappropriate outlier payments.
As we indicated in the November
2004 IPF PPS final rule, because we
believe that the IPF outlier policy is
susceptible to the same payment
vulnerabilities as the IPPS, we adopted
an approach to ensure the statistical
accuracy of CCRs under the IPF PPS (69
FR 66961). Therefore, we adopted the
following procedure in the November
2004 IPF PPS final rule:
• We calculated two national ceilings,
one for IPFs located in rural areas and
one for IPFs located in urban areas. We
computed the ceilings by first
calculating the national average and the
standard deviation of the CCR for both
urban and rural IPFs.
To determine the rural and urban
ceilings, we multiplied each of the
standard deviations by 3 and added the
result to the appropriate national CCR
average (either rural or urban). The
upper threshold CCR for IPFs in RY
2010 is 1.7381 for rural IPFs, and 1.7647
for urban IPFs, based on CBSA-based
geographic designations. If an IPF’s CCR
is above the applicable ceiling, the ratio
is considered statistically inaccurate
and we assign the appropriate national
(either rural or urban) median CCR to
the IPF.
We are applying the national CCRs to
the following situations:
++ New IPFs that have not yet
submitted their first Medicare cost
report.
++ IPFs whose overall CCR is in
excess of 3 standard deviations above
the corresponding national geometric
mean (that is, above the ceiling).
++ Other IPFs for which the Medicare
contractor obtains inaccurate or
incomplete data with which to calculate
a CCR.
For new IPFs, we are using these
national CCRs until the facility’s actual
CCR can be computed using the first
tentatively or final settled cost report.
We are not making any changes to the
procedures for ensuring the statistical
accuracy of CCRs in RY 2010. However,
we are updating the national urban and
rural CCRs (ceilings and medians) for
IPFs for RY 2010 based on the CCRs
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entered in the latest available IPF PPS
Provider Specific File.
The national CCRs for RY 2010 are
0.6515 for rural IPFs and 0.5300 for
urban IPFs and will be used in each of
the three situations listed above. These
calculations are based on the IPF’s
location (either urban or rural) using the
CBSA-based geographic designations.
A complete discussion regarding the
national median CCRs appears in the
November 2004 IPF PPS final rule (69
FR 66961 through 66964).
2. Expiration of the Stop-Loss Provision
In the November 2004 IPF PPS final
rule, we implemented a stop-loss policy
that reduced financial risk to IPFs
projected to experience substantial
reductions in Medicare payments
during the period of transition to the IPF
PPS. This stop-loss policy guaranteed
that each facility received total IPF PPS
payments that were no less than 70
percent of its TEFRA payments had the
IPF PPS not been implemented. This
policy was applied to the IPF PPS
portion of Medicare payments during
the 3-year transition.
In the implementation year, the 70
percent of TEFRA payment stop-loss
policy required a reduction in the
standardized Federal per diem and ECT
base rates of 0.39 percent in order to
make the stop-loss payments budget
neutral. As described in the May 2008
IPF PPS notice for RY 2009, we
increased the Federal per diem base rate
and ECT rate by 0.39 percent because
these rates were reduced by 0.39 percent
in the implementation year to ensure
stop-loss payments were budget neutral.
The stop-loss provision ended during
RY 2009 (that is for discharges occurring
on or after July 1, 2008 through June 30,
2009). The stop-loss policy is no longer
applicable under the IPF PPS.
V. Request for Comments
A. Market Basket Index for the IPF PPS;
Costs and Cost Structures of IPF
Providers
We are interested in exploring the
possibility of creating a stand-alone IPF
market basket that reflects the cost
structures of only IPF providers. The
intent would be to join the Medicare
cost report data from freestanding IPF
providers (presently incorporated into
the RPL market basket) with data from
hospital-based IPF providers.
An examination of the Medicare cost
report data comparing freestanding and
hospital-based IPFs reveals considerable
differences in both cost levels and cost
structure. We have reviewed several
explanatory variables such as
geographic variation, case mix
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(including DRG, comorbidity, and age),
urban or rural status, length of stay,
teaching status, and presence of a
qualifying emergency department;
however, we are currently unable to
fully understand the differences
between these two types of IPF
providers. As a result, we feel that
further research is required. Having
examined the relevant data that is
internal to CMS, we welcome any help
from the public in the form of additional
information, data, or suggested data
sources that may help us to better
understand the underlying reasons for
the variations in cost structures between
freestanding and hospital-based IPFs.
B. FTE Intern and Resident Cap
Adjustment
As previously mentioned, the IPF PPS
imposed a cap on the number of fulltime equivalent (FTE) residents that
may be used to calculate the teaching
status adjustment. The cap is based on
the number of FTE residents reported in
the IPF’s most recent cost report filed
before November 15, 2004.
CMS has been asked to reconsider its
position under the IPF PPS regulations
regarding application of the FTE
resident cap when residents in a
psychiatry residency program must be
relocated from one IPF to another.
Specifically, we have been asked to
reconsider our current policy and
permit an increase in the FTE resident
cap when the IPF increases the number
of FTE residents it trains due to the
acceptance of relocated residents when
another IPF closes or closes its
psychiatry residency program.
Currently, if an IPF with a psychiatry
residency training program agrees to
accept residents relocated from another
IPF after November 2004, the IPF’s FTE
resident count would continue to be
capped at the number of FTE residents
included in the cost report filed before
November 15, 2004. Furthermore,
according to § 412.424(d)(1)(iii)(D), an
adjustment to the FTE resident cap can
only be made for those IPFs that begin
training residents in a new approved
psychiatric residency program after
November 15, 2004. For a new program
adjustment, the IPF’s FTE cap would be
revised beginning with the fourth year
of the new training program. We
included these policies because we
believe it is important to limit the total
pool of FTE resident cap positions
within the IPF community and avoid
incentives for IPFs to add FTE residents
in order to increase their payments.
We are now assessing how many IPFs
have been, or expect to be, adversely
affected by their inability to adjust their
caps under § 412.424(d)(1) in situations
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where residents from a hospital that
closed or from a program that closed at
a hospital are moved to another hospital
to complete their training. To help us
access this situation, we specifically
request public comment from IPFs to
help us understand the impact of this
issue on IPFs. At a minimum, we need
to know the following information:
1. How many IPFs currently training
additional residents from a closed
residency program have exceeded their
caps because of those residents?
2. How many IPFs have been asked to
train additional residents from a closed
residency program but have not
currently agreed because these
additional residents would cause them
to exceed the caps?
We will take all comments into
consideration as we assess the IPF PPS
regulations with respect to the FTE
resident cap and the relocation of FTE
residents from one IPF to another due to
closure of an IPF or an IPF’s psychiatry
residency training program.
VI. Waiver of Proposed Rulemaking
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register to provide a period for public
comment before the provisions of a rule
take effect. We can waive this
procedure, however, if we find good
cause that notice and comment
procedures are impracticable,
unnecessary, or contrary to the public
interest and we incorporate a statement
of finding and its reasons in the notice.
We find it is unnecessary to undertake
notice and comment rulemaking for the
update in this notice because the update
does not make any substantive changes
in policy, but merely reflects the
application of previously established
methodologies. Therefore, under 5
U.S.C. 553(b)(3)(B), for good cause, we
waive notice and comment procedures.
VII. Collection of Information
Requirement
This document does not impose any
information collection and
recordkeeping requirements.
Consequently, it need not be reviewed
by the Office of Management and
Budget under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C. 35).
VIII. Response to Comments
Because of the large number of public
comments we normally receive on
Federal Register documents, we are not
able to acknowledge or respond to them
individually. We will consider all
comments we receive by the date and
time specified in the DATES section of
this preamble, and, when we proceed
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with a subsequent document, we will
respond to the comments in the
preamble to that document.
IX. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this
notice as required by Executive Order
12866 (September 1993, Regulatory
Planning and Review), the September
19, 1980 Regulatory Flexibility Act
(RFA) (Pub. L. 96–354), section 1102(b)
of the Social Security Act, the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), Executive Order 13132 on
Federalism, and the Congressional
Review Act (5 U.S.C. 804(2)).
Executive Order 12866 directs
agencies to assess all costs and benefits
of available regulatory alternatives and,
if regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). A regulatory impact
analysis (RIA) must be prepared for
major rules with economically
significant effects ($100 million or more
in any 1 year). Although this notice does
not meet the $100 million threshold
established by Executive Order 12866,
we are considering this notice to be
‘‘economically significant’’ because the
redistributive effects are estimated to be
close to constituting a shift of $100
million. For purposes of Title 5, United
States Code, section 804(2), we estimate
that this rulemaking is ‘‘economically
significant’’, and is also a major rule
under the Congressional Review Act.
Accordingly, we have prepared a
Regulatory Impact Analysis that to the
best of our ability presents the costs and
benefits of the rulemaking on the 1,706
IPFs.
The updates to the IPF labor-related
share and wage indices are made in a
budget neutral manner and thus have no
effect on estimated costs to the Medicare
program. Therefore, the estimated
increased cost to the Medicare program
is due to the updated IPF payment rates,
which results in an approximate $91
million increase in payments, and the
increase to the outlier fixed dollar loss
threshold amount, which results in
about a $4 million decrease in
payments. The distribution of these
impacts is summarized in Table 13. The
net effect of the updates described in
this notice results in an overall
estimated $87 million increase in
payments from RY 2009 to RY 2010.
The RFA requires agencies to analyze
options for regulatory relief of small
businesses, if a rule has a significant
impact on a substantial number of small
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entities. For purposes of the RFA, we
estimate that the great majority of IPFs
are small entities as that term is used in
the RFA (include small businesses,
nonprofit organizations, and small
governmental jurisdictions). The
majority of hospitals and most other
health care providers and suppliers are
small entities, either by being nonprofit
organizations or by meeting the SBA
definition of a small business (having
revenues of $7 million to $34.5 million
in any 1 year). (For details, see the
Small Business Administration’s
Interim final rule that set forth size
standards at 70 FR 72577, December 6,
2005.) Because we lack data on
individual hospital receipts, we cannot
determine the number of small
proprietary IPFs or the proportion of
IPFs’ revenue that is derived from
Medicare payments. Therefore, we
assume that all IPFs are considered
small entities. The Department of Health
and Human Services generally uses a
revenue impact of 3 to 5 percent as a
significance threshold under the RFA.
As shown in Table 13, we estimate that
the net revenue impact of this notice on
all IPFs is to increase payments by about
2.0 percent. Since the estimated impact
of this notice is a net increase in
revenue across all categories of IPFs, we
believe that this notice would not
impose a significant burden on small
entities. Medicare contractors are not
considered to be small entities.
Individuals and States are not included
in the definition of a small entity.
Although section 1102(b) of the Act
applies to regulations for which a
proposed rule is published, the HHS
policy is to prepare an analysis of the
impact on small rural hospitals for any
regulation published. As a result, we are
voluntarily determining whether this
notice will have a significant impact on
the operations of a substantial number
of small rural hospitals. For purposes of
section 1102(b) of the Act, we define a
small rural hospital as a hospital with
fewer than 100 beds that is located
outside of an MSA. As discussed in
detail below, the rates and policies set
forth in this notice will not have an
adverse impact on the rural hospitals
based on the data of the 317 rural units
and 68 rural hospitals in our database of
1,706 IPFs for which data were
available.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. In 2009, that
threshold is approximately $133
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million. This notice will not impose
spending costs on State, local, or tribal
governments in the aggregate, or by the
private sector, of $133 million.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
We have reviewed this notice under the
criteria set forth in Executive Order
13132 and have determined that the
notice will not have any substantial
direct impact on State, or local
governments, preempt States, or
otherwise have a Federalism
implication.
B. Anticipated Effects
We discuss below the historical
background of the IPF PPS and the
impact of this notice on the Federal
Medicare budget and on IPFs.
1. Budgetary Impact
As discussed in the November 2004
and May 2006 IPF PPS final rules, we
applied a budget neutrality factor to the
Federal per diem and ECT base rates to
ensure that total estimated payments
under the IPF PPS in the
implementation period would equal the
amount that would have been paid if the
IPF PPS had not been implemented. The
budget neutrality factor includes the
following components: Outlier
adjustment, stop-loss adjustment, and
the behavioral offset. As discussed in
the May 2008 IPF PPS notice (73 FR
25711), the stop-loss adjustment is no
longer applicable under the IPF PPS.
In accordance with § 412.424(c)(3)(ii),
we indicated that we would evaluate the
accuracy of the budget neutrality
adjustment within the first 5 years after
implementation of the payment system.
We may make a one-time prospective
adjustment to the Federal per diem and
ECT base rates to account for differences
between the historical data on costbased TEFRA payments (the basis of the
budget neutrality adjustment) and
estimates of TEFRA payments based on
actual data from the first year of the IPF
PPS. As part of that process, we will
reassess the accuracy of all of the factors
impacting budget neutrality.
In addition, as discussed in section
III.B.2 of this notice, we are using the
wage index and labor market share in a
budget neutral manner by applying a
wage index budget neutrality factor to
the Federal per diem and ECT base
rates. Thus, the budgetary impact to the
Medicare program by the update of the
IPF PPS will be due to the market basket
update (see section III.B.2.a of this
notice) and the increase in the fixed
dollar loss threshold amount.
2. Impacts on Providers
To understand the impact of the
changes to the IPF PPS on providers,
discussed in this notice, it is necessary
to compare estimated payments under
the IPF PPS rates and factors for RY
2010 versus those under RY 2009. The
estimated payments for RY 2009 and RY
2010 will be 100 percent of the IPF PPS
payment, since the transition period has
ended and stop-loss payments are no
longer paid. We determined the percent
change of estimated RY 2010 IPF PPS
payments to estimated RY 2009 IPF PPS
payments for each category of IPFs. In
addition, for each category of IPFs, we
have included the estimated percent
change in payments resulting from the
increase to the fixed dollar loss
threshold amount, the wage index
changes for the RY 2010 IPF PPS, and
the market basket update to IPF PPS
payments.
To illustrate the impacts of the final
RY 2010 changes in this notice, our
analysis begins with a RY 2009 baseline
simulation model based on FY 2007 IPF
payments inflated to the midpoint of RY
2009 using IHS Global Insight’s most
recent forecast of the market basket
update (see section III.2.b of this notice);
the estimated outlier payments in RY
2009; the CBSA designations for IPFs
based on OMB’s MSA definitions after
June 2003; the FY 2008 pre-floor, prereclassified hospital wage index; the RY
2009 labor-market share; and the RY
2009 percentage amount of the rural
adjustment. During the simulation, the
outlier payment is maintained at the
target of 2 percent of total PPS
payments.
Each of the following changes is
added incrementally to this baseline
model in order for us to isolate the
effects of each change:
• The increase to the outlier fixed
dollar loss threshold amount.
• The FY 2009 pre-floor, prereclassified hospital wage index and RY
2010 final labor-related share. Our final
comparison illustrates the percent
change in payments from RY 2009 (that
is, July 1, 2008 to June 30, 2009) to RY
2010 (that is, July 1, 2009 to June 30,
2010) and includes a 2.1 percent market
basket update to the IPF PPS base rates.
TABLE 13—PROJECTED IMPACTS
Facility by type
Number of
facilities
Outlier
(percent)
CBSA wage
index &
labor share
(percent)
Total with
2.1 market
basket
(percent)
(1)
(2)
(3)
(4)
(5)
All Facilities ......................................................................................................................
Total Urban ...............................................................................................................
Total Rural ................................................................................................................
Urban DPU ...............................................................................................................
Urban CAH Unit ........................................................................................................
Urban hospital ..........................................................................................................
Rural DPU ................................................................................................................
Rural CAH Unit .........................................................................................................
Rural hospital ............................................................................................................
Freestanding IPF by Type of Ownership:
Urban Psychiatric Hospitals:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
Rural Psychiatric Hospitals:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
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1,706
1,321
385
924
14
383
264
53
68
¥0.1
¥0.1
¥0.2
¥0.2
¥0.4
0.0
¥0.2
¥0.2
¥0.1
0.0
0.0
0.1
¥0.1
0.3
0.1
0.1
¥0.1
0.3
2.0
1.9
2.0
1.8
2.1
2.2
2.0
1.8
2.3
149
86
148
¥0.1
¥0.1
0.0
0.2
¥0.1
0.2
2.2
1.9
2.3
43
9
16
¥0.1
¥0.1
¥0.2
0.2
0.5
0.6
2.2
2.5
2.5
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TABLE 13—PROJECTED IMPACTS—Continued
Facility by type
Number of
facilities
Outlier
(percent)
CBSA wage
index &
labor share
(percent)
Total with
2.1 market
basket
(percent)
(1)
(2)
(3)
(4)
(5)
IPF Units by Type of Ownership:
Urban DPU:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
Urban CAH:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
Rural DPU:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
Rural CAH:
Government .......................................................................................................
Non-Profit ..........................................................................................................
For-Profit ............................................................................................................
By Teaching Status:
Non-teaching ............................................................................................................
Less than 10 interns and residents to beds .....................................................
10 to 30 interns and residents to beds .............................................................
More than 30 interns and residents to beds .....................................................
By Region:
New England ............................................................................................................
Mid-Atlantic ...............................................................................................................
South Atlantic ...........................................................................................................
East North Central ....................................................................................................
East South Central ...................................................................................................
West North Central ...................................................................................................
West South Central ..................................................................................................
Mountain ...................................................................................................................
Pacific .......................................................................................................................
By Bed Size:
Psychiatric Hospitals:
Less than 12 beds .............................................................................................
12 to 25 beds ....................................................................................................
25 to 50 beds ....................................................................................................
50 to 75 beds ....................................................................................................
More than 75 beds ............................................................................................
Psychiatric Units:
Less than 12 beds .............................................................................................
12 to 25 beds ....................................................................................................
25 to 50 beds ....................................................................................................
50 to 75 beds ....................................................................................................
More than 75 beds ............................................................................................
3. Results
Table 13 above displays the results of
our analysis. The table groups IPFs into
the categories listed below based on
characteristics provided in the Provider
of Services (POS) file, the IPF provider
specific file, and cost report data from
HCRIS:
• Facility Type.
• Location.
• Teaching Status Adjustment.
• Census Region.
• Size.
The top row of the table shows the
overall impact on the 1,706 IPFs
included in the analysis.
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636
130
¥0.2
¥0.2
¥0.1
¥0.1
¥0.1
0.0
1.8
1.8
1.9
7
6
1
¥0.3
¥0.5
0.0
0.8
¥0.1
¥0.3
2.5
1.5
1.8
63
154
47
¥0.3
¥0.1
¥0.2
0.0
0.0
0.4
1.8
1.9
2.4
23
27
3
¥0.2
¥0.2
¥0.1
0.0
¥0.2
¥0.2
1.9
1.7
1.9
1,458
140
73
35
¥0.1
¥0.2
¥0.2
¥0.1
0.1
¥0.3
¥0.2
0.2
2.0
1.6
1.7
2.2
119
287
238
289
164
151
236
85
130
¥0.2
¥0.1
¥0.1
¥0.2
¥0.1
¥0.2
¥0.2
¥0.2
¥0.2
0.2
¥0.6
¥0.3
¥0.5
¥0.2
0.3
0.4
0.1
1.5
2.1
1.4
1.7
1.4
1.8
2.2
2.3
2.0
3.4
25
67
98
83
178
¥0.2
¥0.1
0.0
0.0
0.0
0.2
0.5
0.0
0.5
0.0
2.1
2.4
2.1
2.6
2.1
487
438
219
59
52
¥0.3
¥0.2
¥0.2
¥0.2
¥0.1
0.1
0.1
¥0.1
¥0.2
¥0.5
1.9
2.0
1.8
1.7
1.5
In column 3, we present the effects of
the increase in the fixed dollar loss
threshold amount. The overall aggregate
effect, across all hospital groups, is
projected to be a 0.1 percent decrease in
payments to IPFs. All categories of IPFs
are projected to receive either a decrease
or no change in payments. There are
distributional effects of this change
among different categories of IPFs.
Urban, for-profit freestanding
psychiatric hospitals; urban, for-profit
IPF units located in CAHs; and
psychiatric hospitals with 25 beds or
more will experience no changes in
their payments. Alternatively, urban,
non-profit psychiatric units in CAHs
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will receive the largest decrease of 0.5
percent.
In column 4, we present the effects of
the budget-neutral update to the laborrelated share and the wage index
adjustment under the CBSA geographic
area definitions announced by OMB in
June 2003. This is a comparison of the
simulated RY 2010 payments under the
FY 2009 hospital wage index under
CBSA classification and associated
labor-related share to the simulated RY
2009 payments under the FY 2008
hospital wage index under CBSA
classifications and associated laborrelated share. We note that there is no
projected change in aggregate payments
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to IPFs, as indicated in the first row of
column 4. However, there would be
small distributional effects among
different categories of IPFs. For
example, IPFs located in the MidAtlantic region will experience a 0.6
percent decrease in payments. IPFs
located in the Pacific region will receive
the largest increase of 1.5 percent.
Column 5 compares our estimates of
the changes reflected in this notice for
RY 2010, to our estimates of payments
for RY 2009 (without these changes).
This column reflects all RY 2010
changes relative to RY 2009 (as shown
in columns 3 and 4). The average
increase for all IPFs is approximately
2.0 percent. This increase includes the
effects of the market basket update
resulting in a 2.1 percent increase in
total RY 2010 payments, and an
approximate 0.1 percent decrease in RY
2009 payments for the fixed dollar loss
threshold amount.
Overall, the largest payment increase
is projected to be among IPFs located in
the Pacific region, which will receive a
3.4 percent increase. IPFs located in the
East North Central and Mid-Atlantic
regions will receive the smallest
increase of 1.4 percent.
4. Effect on the Medicare Program
Based on actuarial projections
resulting from our experience with other
PPSs, we estimate that Medicare
spending (total Medicare program
payments) for IPF services over the next
5 years would be as shown in Table 14
below.
These estimates are based on the
current estimate of increases in the RPL
market basket as follows:
• 2.1 percent for RY 2010.
• 2.8 percent for RY 2011.
• 2.9 percent for RY 2012.
• 3.1 percent for RY 2013.
• 3.2 percent for RY 2014.
We estimate that there would be a
change in fee-for-service Medicare
beneficiary enrollment as follows:
• 0.1 percent in RY 2010.
• 1.8 percent in RY 2011.
• 2.9 percent in RY 2012.
• 3.1 percent in RY 2013.
• 3.0 percent in RY 2014.
5. Effect on Beneficiaries
Under the IPF PPS, IPFs will receive
payment based on the average resources
consumed by patients for each day. We
do not expect changes in the quality of
care or access to services for Medicare
beneficiaries under the RY 2010 IPF
PPS. In fact, we believe that access to
IPF services will be enhanced due to the
patient- and facility-level adjustment
factors, all of which are intended to
adequately reimburse IPFs for expensive
cases. Finally, the outlier policy is
intended to assist IPFs that experience
high-cost cases.
C. Alternatives Considered
The statute does not specify an update
strategy for the IPF PPS and is broadly
written to give the Secretary discretion
in establishing an update methodology.
Therefore, we are updating the IPF PPS
using the methodology published in the
November 2004 IPF PPS final rule.
We note that this notice does not
TABLE 14—ESTIMATED PAYMENTS
initiate any policy changes with regard
to the IPF PPS; rather, it simply
Dollars
Rate year
provides an update to the rates for RY
in millions
2010. Therefore, no options were
July 1, 2009 to June 30, 2010
4,531 considered.
July
July
July
July
1,
1,
1,
1,
2010
2011
2012
2013
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to
to
to
June
June
June
June
30,
30,
30,
30,
2011
2012
2013
2014
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5,005
5,320
5,656
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D. Accounting Statement
As required by OMB Circular A–4
(available at https://
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www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), in Table 15 below, we
have prepared an accounting statement
showing the classification of the
expenditures associated with the
provisions of this notice. This table
provides our best estimate of the
increase in Medicare payments under
the IPF PPS notice, as a result of the
changes presented in this notice, and
based on the data for 1,706 IPFs in our
database. All expenditures are classified
as transfers to Medicare providers (that
is, IPFs).
TABLE 15—ACCOUNTING STATEMENT:
CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2009 IPF
PPS RY TO THE 2010 IPF PPS RY
[In millions]
Category
Annualized Monetized
Transfers.
From Whom To
Whom?
Transfers
$87.
Federal Government
To IPF Medicare
Providers.
In accordance with the provisions of
Executive Order 12866, this notice was
reviewed by OMB.
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: March 6, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: March 20, 2009.
Charles E. Johnson,
Acting Secretary.
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[FR Doc. E9–9962 Filed 4–30–09; 8:45 am]
Agencies
[Federal Register Volume 74, Number 83 (Friday, May 1, 2009)]
[Notices]
[Pages 20362-20399]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-9962]
[[Page 20361]]
-----------------------------------------------------------------------
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
Medicare Program; Inpatient Psychiatric Facilities Prospective Payment
System Payment Update for Rate Year Beginning July 1, 2009 (RY 2010);
Notice
Federal Register / Vol. 74, No. 83 / Friday, May 1, 2009 / Notices
[[Page 20362]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-1495-NC]
RIN 0938-AP50
Medicare Program; Inpatient Psychiatric Facilities Prospective
Payment System Payment Update for Rate Year Beginning July 1, 2009 (RY
2010)
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice; request for comments.
-----------------------------------------------------------------------
SUMMARY: This notice updates the payment rates for the Medicare
prospective payment system (PPS) for inpatient psychiatric hospital
services provided by inpatient psychiatric facilities (IPFs). These
changes are applicable to IPF discharges occurring during the rate year
beginning July 1, 2009 through June 30, 2010. We are also requesting
comments on the IPF PPS teaching adjustment and the market basket.
DATES:
Effective Date: The updated IPF prospective payment rates are
effective for discharges occurring on or after July 1, 2009 through
June 30, 2010.
Comment Date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on June 30, 2009.
ADDRESSES: In commenting, please refer to file code CMS-1495-NC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to https://www.regulations.gov. Follow the
instructions for ``Comment or Submission'' and enter the file code to
find the document accepting comments.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address only: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1495-NC, P.O. Box 8010, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1495-NC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses.
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Dorothy Myrick or Jana Lindquist,
(410) 786-4533 (for general information).
Bridget Dickensheets, (410) 786-8670 (for information regarding the
market basket and labor-related share).
Theresa Bean, (410) 786-2287 (for information regarding the
regulatory impact analysis).
SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all comments received before the close of the comment period on
the following Web site as soon as possible after they have been
received: https://www.regulations.gov. Follow the search instructions on
that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
Table of Contents
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.
I. Background
A. Annual Requirements for Updating the IPF PPS
B. Overview of the Legislative Requirements of the IPF PPS
C. IPF PPS--General Overview
II. Transition Period for Implementation of the IPF PPS
III. Updates to the IPF PPS for RY Beginning July 1, 2009
A. Determining the Standardized Budget-Neutral Federal Per Diem
Base Rate
1. Standardization of the Federal Per Diem Base Rate and
Electroconvulsive Therapy Rate
2. Calculation of the Budget Neutrality Adjustment
a. Outlier Adjustment
b. Stop-Loss Provision Adjustment
c. Behavioral Offset
B. Update of the Federal Per Diem Base Rate and
Electroconvulsive Therapy Rate
1. Market Basket for IPFs Reimbursed Under the IPF PPS
a. Market Basket Index for the IPF PPS
b. Overview of the RPL Market Basket
2. Labor-Related Share
3. One-Time Prospective Adjustment to the Standard Federal Rate
IV. Update of the IPF PPS Adjustment Factors
A. Overview of the IPF PPS Adjustment Factors
B. Patient-Level Adjustments
1. Adjustment for MS-DRG Assignment
2. Payment for Comorbid Conditions
3. Patient Age Adjustments
4. Variable Per Diem Adjustments
C. Facility-Level Adjustments
1. Wage Index Adjustment
a. Background
b. Wage Index for RY 2010
c. OMB Bulletins
2. Adjustment for Rural Location
3. Teaching Adjustment
4. Cost of Living Adjustment for IPFs Located in Alaska and
Hawaii
5. Adjustment for IPFs With a Qualifying Emergency Department
(ED)
D. Other Payment Adjustments and Policies
1. Outlier Payments
a. Update to the Outlier Fixed Dollar Loss Threshold Amount
b. Statistical Accuracy of Cost-to-Charge Ratios
2. Expiration of the Stop-Loss Provision
V. Request for Comments
VI. Waiver of Proposed Rulemaking
[[Page 20363]]
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Analysis
Addenda
Acronyms
Because of the many terms to which we refer by acronym in this
notice, we are listing the acronyms used and their corresponding terms
in alphabetical order below:
BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, (Pub. L. 106-113)
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
DSM-IV-TR Diagnostic and Statistical Manual of Mental Disorders
Fourth Edition--Text Revision
DRGs Diagnosis-related groups
FY Federal fiscal year
ICD-9-CM International Classification of Diseases, 9th Revision,
Clinical Modification
IPFs Inpatient psychiatric facilities
IRFs Inpatient rehabilitation facilities
LTCHs Long-term care hospitals
MedPAR Medicare provider analysis and review file
RY Rate Year
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, (Pub. L. 97-
248)
I. Background
A. Annual Requirements for Updating the IPF PPS
In November 2004, we implemented the inpatient psychiatric
facilities (IPF) prospective payment system (PPS) in a final rule that
appeared in the November 15, 2004 Federal Register (69 FR 66922). In
developing the IPF PPS, in order to ensure that the IPF PPS is able to
account adequately for each IPF's case-mix, we performed an extensive
regression analysis of the relationship between the per diem costs and
certain patient and facility characteristics to determine those
characteristics associated with statistically significant cost
differences on a per diem basis. For characteristics with statistically
significant cost differences, we used the regression coefficients of
those variables to determine the size of the corresponding payment
adjustments.
In that final rule, we explained that we believe it is important to
delay updating the adjustment factors derived from the regression
analysis until we have IPF PPS data that includes as much information
as possible regarding the patient-level characteristics of the
population that each IPF serves. Therefore, we indicated that we did
not intend to update the regression analysis and recalculate the
Federal per diem base rate and the patient- and facility-level
adjustments until we complete that analysis. Until that analysis is
complete, we stated our intention to publish a notice in the Federal
Register each spring to update the IPF PPS (71 FR 27041).
Updates to the IPF PPS as specified in 42 CFR 412.428 include the
following:
A description of the methodology and data used to
calculate the updated Federal per diem base payment amount.
The rate of increase factor as described in Sec.
412.424(a)(2)(iii), which is based on the excluded hospital with
capital market basket under the update methodology of section
1886(b)(3)(B)(ii) of the Social Security Act (the Act) for each year
(effective from the implementation period until June 30, 2006).
For discharges occurring on or after July 1, 2006, the
rate of increase factor for the Federal portion of the IPF's payment,
which is based on the rehabilitation, psychiatric, and long-term care
(RPL) market basket.
The best available hospital wage index and information
regarding whether an adjustment to the Federal per diem base rate is
needed to maintain budget neutrality.
Updates to the fixed dollar loss threshold amount in order
to maintain the appropriate outlier percentage.
Description of the International Classification of
Diseases, 9th Revision, Clinical Modification (ICD-9-CM) coding and
diagnosis-related groups (DRGs) classification changes discussed in the
annual update to the hospital inpatient prospective payment system
(IPPS) regulations.
Update to the electroconvulsive therapy (ECT) payment by a
factor specified by CMS.
Update to the national urban and rural cost-to-charge
ratio medians and ceilings.
Update to the cost of living adjustment factors for IPFs
located in Alaska and Hawaii, if appropriate.
Our most recent annual update occurred in the May 2008 IPF PPS
notice (73 FR 25709) that set forth updates to the IPF PPS payment
rates for RY 2009. This notice updates the IPF per diem payment rates
that were published in the May 2008 IPF PPS notice in accordance with
our established policies.
B. Overview of the Legislative Requirements for the IPF PPS
Section 124 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999, (Pub.
L. 106-113) (BBRA) required implementation of the IPF PPS.
Specifically, section 124 of the BBRA mandated that the Secretary
develop a per diem PPS for inpatient hospital services furnished in
psychiatric hospitals and psychiatric units that includes an adequate
patient classification system that reflects the differences in patient
resource use and costs among psychiatric hospitals and psychiatric
units.
Section 405(g)(2) of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF
PPS to distinct part psychiatric units of critical access hospitals
(CAHs).
To implement these provisions, we published various proposed and
final rules in the Federal Register. For more information regarding
these rules, see the CMS Web sites https://www.cms.hhs.gov/InpatientPsychFacilPPS/ and https://www.cms.hhs.gov/InpatientpsychfacilPPS/02_regulations.asp.
C. IPF PPS--General Overview
The November 2004 IPF PPS final rule (69 FR 66922) established the
IPF PPS, as authorized under section 124 of the BBRA and codified at
subpart N of part 412 of the Medicare regulations. The November 2004
IPF PPS final rule set forth the per diem Federal rates for the
implementation year (the 18-month period from January 1, 2005 through
June 30, 2006), and it provided payment for the inpatient operating and
capital costs to IPFs for covered psychiatric services they furnish
(that is, routine, ancillary, and capital costs, but not costs of
approved educational activities, bad debts, and other services or items
that are outside the scope of the IPF PPS). Covered psychiatric
services include services for which benefits are provided under the
fee-for-service Part A (Hospital Insurance Program) Medicare program.
The IPF PPS established the Federal per diem base rate for each
patient day in an IPF derived from the national average daily routine
operating, ancillary, and capital costs in IPFs in FY 2002. The average
per diem cost was updated to the midpoint of the first year under the
IPF PPS, standardized to account for the overall positive effects of
the IPF PPS payment adjustments, and adjusted for budget neutrality.
The Federal per diem payment under the IPF PPS is comprised of the
Federal per diem base rate described above and certain patient- and
facility-level payment adjustments that were found in the regression
analysis to be associated with statistically significant per diem cost
differences.
[[Page 20364]]
The patient-level adjustments include age, DRG assignment,
comorbidities, and variable per diem adjustments to reflect higher per
diem costs in the early days of an IPF stay. Facility-level adjustments
include adjustments for the IPF's wage index, rural location, teaching
status, a cost of living adjustment for IPFs located in Alaska and
Hawaii, and presence of a qualifying emergency department (ED).
The IPF PPS provides additional payment policies for: Outlier
cases; stop-loss protection (which was applicable only during the IPF
PPS transition period); interrupted stays; and a per treatment
adjustment for patients who undergo ECT.
A complete discussion of the regression analysis appears in the
November 2004 IPF PPS final rule (69 FR 66933 through 66936).
Section 124 of BBRA does not specify an annual update rate strategy
for the IPF PPS and is broadly written to give the Secretary discretion
in establishing an update methodology. Therefore, in the November 2004
IPF PPS final rule, we implemented the IPF PPS using the following
update strategy:
Calculate the final Federal per diem base rate to be
budget neutral for the 18-month period of January 1, 2005 through June
30, 2006.
Use a July 1 through June 30 annual update cycle.
Allow the IPF PPS first update to be effective for
discharges on or after July 1, 2006 through June 30, 2007.
II. Transition Period for Implementation of the IPF PPS
In the November 2004 IPF PPS final rule, we provided for a 3-year
transition period. During this 3-year transition period, an IPF's total
payment under the PPS was based on an increasing percentage of the
Federal rate with a corresponding decreasing percentage of the IPF PPS
payment that is based on reasonable cost concepts. However, effective
for cost reporting periods beginning on or after January 1, 2008, IPF
PPS payments are based on 100 percent of the Federal rate.
III. Updates to the IPF PPS for RY Beginning July 1, 2009
The IPF PPS is based on a standardized Federal per diem base rate
calculated from IPF average per diem costs and adjusted for budget-
neutrality in the implementation year. The Federal per diem base rate
is used as the standard payment per day under the IPF PPS and is
adjusted by the applicable wage index factor and the patient-and
facility-level adjustments that are applicable to the IPF stay. A
detailed explanation of how we calculated the average per diem cost
appears in the November 2004 IPF PPS final rule (69 FR 66926).
A. Determining the Standardized Budget-Neutral Federal Per Diem Base
Rate
Section 124(a)(1) of the BBRA requires that we implement the IPF
PPS in a budget neutral manner. In other words, the amount of total
payments under the IPF PPS, including any payment adjustments, must be
projected to be equal to the amount of total payments that would have
been made if the IPF PPS were not implemented. Therefore, we calculated
the budget-neutrality factor by setting the total estimated IPF PPS
payments to be equal to the total estimated payments that would have
been made under the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been
implemented.
Under the IPF PPS methodology, we calculated the final Federal per
diem base rate to be budget neutral during the IPF PPS implementation
period (that is, the 18-month period from January 1, 2005 through June
30, 2006) using a July 1 update cycle. We updated the average cost per
day to the midpoint of the IPF PPS implementation period (that is,
October 1, 2005), and this amount was used in the payment model to
establish the budget-neutrality adjustment.
A step-by-step description of the methodology used to estimate
payments under the TEFRA payment system appears in the November 2004
IPF PPS final rule (69 FR 66926).
1. Standardization of the Federal Per Diem Base Rate and
Electroconvulsive Therapy (ECT) Rate
In the November 2004 IPF PPS final rule, we describe how we
standardized the IPF PPS Federal per diem base rate in order to account
for the overall positive effects of the IPF PPS payment adjustment
factors. To standardize the IPF PPS payments, we compared the IPF PPS
payment amounts calculated from the FY 2002 Medicare Provider Analysis
and Review (MedPAR) file to the projected TEFRA payments from the FY
2002 cost report file updated to the midpoint of the IPF PPS
implementation period (that is, October 2005). The standardization
factor was calculated by dividing total estimated payments under the
TEFRA payment system by estimated payments under the IPF PPS. The
standardization factor was calculated to be 0.8367.
As described in detail in the May 2006 IPF PPS final rule (71 FR
27045), in reviewing the methodology used to simulate the IPF PPS
payments used for the November 2004 IPF PPS final rule, we discovered
that due to a computer code error, total IPF PPS payments were
underestimated by about 1.36 percent. Since the IPF PPS payment total
should have been larger than the estimated figure, the standardization
factor should have been smaller (0.8254 vs. 0.8367). In turn, the
Federal per diem base rate and the ECT rate should have been reduced by
0.8254 instead of 0.8367.
To resolve this issue, in RY 2007, we amended the Federal per diem
base rate and the ECT payment rate prospectively. Using the
standardization factor of 0.8254, the average cost per day was
effectively reduced by 17.46 percent (100 percent minus 82.54 percent =
17.46 percent).
2. Calculation of the Budget Neutrality Adjustment
To compute the budget neutrality adjustment for the IPF PPS, we
separately identified each component of the adjustment, that is, the
outlier adjustment, stop-loss adjustment, and behavioral offset.
A complete discussion of how we calculate each component of the
budget neutrality adjustment appears in the November 2004 IPF PPS final
rule (69 FR 66932 through 66933) and in the May 2006 IPF PPS final rule
(71 FR 27044 through 27046).
a. Outlier Adjustment
Since the IPF PPS payment amount for each IPF includes applicable
outlier amounts, we reduced the standardized Federal per diem base rate
to account for aggregate IPF PPS payments estimated to be made as
outlier payments. The outlier adjustment was calculated to be 2
percent. As a result, the standardized Federal per diem base rate was
reduced by 2 percent to account for projected outlier payments.
b. Stop-Loss Provision Adjustment
As explained in the November 2004 IPF PPS final rule, we provided a
stop-loss payment during the transition from cost-based reimbursement
to the per diem payment system to ensure that an IPF's total PPS
payments were no less than a minimum percentage of their TEFRA payment,
had the IPF PPS not been implemented. We reduced the standardized
Federal per diem base rate by the percentage of aggregate IPF PPS
payments estimated to be made for stop-loss payments. As a result, the
standardized Federal per diem base rate was reduced by 0.39 percent to
account for stop-loss payments. Since the transition was completed in
RY 2009,
[[Page 20365]]
the stop-loss provision is no longer applicable, and for cost reporting
periods beginning on or after January 1, 2008, IPFs were paid 100
percent PPS.
c. Behavioral Offset
As explained in the November 2004 IPF PPS final rule,
implementation of the IPF PPS may result in certain changes in IPF
practices, especially with respect to coding for comorbid medical
conditions. As a result, Medicare may make higher payments than assumed
in our calculations. Accounting for these effects through an adjustment
is commonly known as a behavioral offset.
Based on accepted actuarial practices and consistent with the
assumptions made in other PPSs, we assumed in determining the
behavioral offset that IPFs would regain 15 percent of potential
``losses'' and augment payment increases by 5 percent. We applied this
actuarial assumption, which is based on our historical experience with
new payment systems, to the estimated ``losses'' and ``gains'' among
the IPFs. The behavioral offset for the IPF PPS was calculated to be
2.66 percent. As a result, we reduced the standardized Federal per diem
base rate by 2.66 percent to account for behavioral changes. As
indicated in the November 2004 IPF PPS final rule, we do not plan to
change adjustment factors or projections until we analyze IPF PPS data.
If we find that an adjustment is warranted, the percent difference
may be applied prospectively to the established PPS rates to ensure the
rates accurately reflect the payment level intended by the statute. In
conducting this analysis, we will be interested in the extent to which
improved coding of patients' principal and other diagnoses, which may
not reflect real increases in underlying resource demands, has occurred
under the PPS.
B. Update of the Federal Per Diem Base Rate and Electroconvulsive
Therapy Rate
1. Market Basket for IPFs Reimbursed Under the IPF PPS
As described in the November 2004 IPF PPS final rule (69 FR 66931),
the average per diem cost was updated to the midpoint of the
implementation year. This updated average per diem cost of $724.43 was
reduced by 17.46 percent to account for standardization to projected
TEFRA payments for the implementation period, by 2 percent to account
for outlier payments, by 0.39 percent to account for stop-loss
payments, and by 2.66 percent to account for the behavioral offset. The
Federal per diem base rate in the implementation year was $575.95. The
increase in the per diem base rate for RY 2009 included the 0.39
percent increase due to the removal of the stop-loss provision. We
indicated in the November 2004 IPF PPS final rule (69 FR 66932) that we
would remove this 0.39 percent reduction to the Federal per diem base
rate after the transition. For RY 2009 and beyond, the stop-loss
provision has ended and is therefore no longer a part of budget
neutrality.
Applying the market basket increase of 2.1 percent and the wage
index budget neutrality factor of 1.0009 to the RY 2009 Federal per
diem base rate of $637.78 yields a Federal per diem base rate of
$651.76 for RY 2010. Similarly, applying the market basket increase and
wage index budget neutrality factor to the RY 2009 ECT rate yields an
ECT rate of $280.60 for RY 2010.
a. Market Basket Index for the IPF PPS
The market basket index that was used to develop the IPF PPS was
the excluded hospital with capital market basket. This market basket
was based on 1997 Medicare cost report data and included data for
Medicare-participating IPFs, inpatient rehabilitation facilities
(IRFs), long-term care hospitals (LTCHs), cancer, and children's
hospitals.
Beginning with the May 2006 IPF PPS final rule (71 FR 27046 through
27054), IPF PPS payments were updated using a 2002-based market basket
reflecting the operating and capital cost structures for IRFs, IPFs,
and LTCHs (hereafter referred to as the rehabilitation, psychiatric,
long-term care (RPL) market basket).
We excluded cancer and children's hospitals from the RPL market
basket because their payments are based entirely on reasonable costs
subject to rate-of-increase limits established under the authority of
section 1886(b) of the Act, which are implemented in regulations at
Sec. 413.40. They are not reimbursed through a PPS. Also, the FY 2002
cost structures for cancer and children's hospitals are noticeably
different than the cost structures of the IRFs, IPFs, and LTCHs. A
complete discussion of the RPL market basket appears in the May 2006
IPF PPS final rule (71 FR 27046 through 27054).
We seek comments below on the possibility of creating a stand-alone
IPF market basket.
b. Overview of the RPL Market Basket
The RPL market basket is a fixed weight, Laspeyres-type price
index. A market basket is described as a fixed-weight index because it
answers the question of how much it would cost, at another time, to
purchase the same mix (quantity and intensity) of goods and services
needed to provide hospital services in a base period. The effects on
total expenditures resulting from changes in the mix of goods and
services purchased subsequent to the base period are not measured. In
this manner, the market basket measures pure price change only. Only
when the index is rebased would changes in the quantity and intensity
be captured in the cost weights. Therefore, we rebase the market basket
periodically so that cost weights reflect recent changes in the mix of
goods and services that hospitals purchase to furnish patient care
between base periods.
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. Rebasing means
moving the base year for the structure of costs of an input price index
(for example, shifting the base year cost structure from FY 1997 to FY
2002). Revising means changing data sources, methodology, or price
proxies used in the input price index. In 2006, we rebased and revised
the market basket used to update the IPF PPS.
Table 1 below sets forth the completed FY 2002-based RPL market
basket including the cost categories, weights, and price proxies.
Table 1--FY 2002-Based RPL Market Basket Cost Categories, Weights, and Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2002-based RPL
Cost categories market basket cost FY 2002-based RPL market basket price proxies
weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total.................................... 100.000 .......................................................................................
Compensation............................. 65.877 .......................................................................................
Wages and Salaries\*\................ 52.895 ECI-Wages and Salaries, Civilian Hospital Workers.
Employee Benefits\*\................. 12.982 ECI-Benefits, Civilian Hospital Workers.
Professional Fees, Non-Medical\*\........ 2.892 ECI-Compensation for Professional & Related occupations.
[[Page 20366]]
Utilities................................ 0.656 .......................................................................................
Electricity.......................... 0.351 PPI-Commercial Electric Power.
Fuel Oil, Coal, etc.................. 0.108 PPI-Commercial Natural Gas.
Water and Sewage..................... 0.197 CPI-U--Water & Sewage Maintenance.
Professional Liability Insurance......... 1.161 CMS Professional Liability Premium Index.
All Other Products and Services.......... 19.265 .......................................................................................
All Other Products................... 13.323 .......................................................................................
Pharmaceuticals...................... 5.103 PPI Prescription Drugs.
Food: Direct Purchase................ 0.873 PPI Processed Foods & Feeds.
Food: Contract Service............... 0.620 CPI-U Food Away From Home.
Chemicals............................ 1.100 PPI Industrial Chemicals.
Medical Instruments.................. 1.014 PPI Medical Instruments & Equipment.
Photographic Supplies................ 0.096 PPI Photographic Supplies.
Rubber and Plastics.................. 1.052 PPI Rubber & Plastic Products.
Paper Products....................... 1.000 PPI Converted Paper & Paperboard Products.
Apparel.............................. 0.207 PPI Apparel.
Machinery and Equipment.............. 0.297 PPI Machinery & Equipment
Miscellaneous Products\**\........... 1.963 PPI Finished Goods less Food & Energy.
All Other Services....................... 5.942 .......................................................................................
Telephone............................ 0.240 CPI-U Telephone Services.
Postage.............................. 0.682 CPI-U Postage.
All Other: Labor Intensive\*\........ 2.219 ECI-Compensation for Private Service Occupations.
All Other: Non-labor Intensive....... 2.800 CPI-U All Items.
Capital-Related Costs\***\............... 10.149 .......................................................................................
Depreciation............................. 6.186 .......................................................................................
Fixed Assets......................... 4.250 Boeckh Institutional Construction 23-year useful life.
Movable Equipment.................... 1.937 WPI Machinery & Equipment 11-year useful life.
Interest Costs........................... 2.775 .......................................................................................
Nonprofit............................ 2.081 Average yield on domestic municipal bonds (Bond Buyer 20 bonds) vintage-weighted (23
years).
For Profit........................... 0.694 Average yield on Moody's Aaa bond vintage-weighted (23 years).
Other Capital-Related Costs.............. 1.187 CPI-U Residential Rent.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ Labor-related.
\**\ Blood and blood-related products is included in miscellaneous products.
\***\ A portion of capital costs (0.46) are labor-related.
Note: Due to rounding, weights may not sum to total.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly
(preferably at least once a quarter). Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. The Consumer Price Indexes (CPIs), Producer Price Indexes
(PPIs), and Employment Cost Indexes (ECIs) used as proxies in this
market basket meet these criteria.
We note that the proxies are the same as those used for the FY
1997-based excluded hospital with capital market basket. Because these
proxies meet our criteria of reliability, timeliness, availability, and
relevance, we believe they continue to be the best measure of price
changes for the cost categories. For further discussion on the FY 1997-
based excluded hospital with capital market basket, see the August 1,
2002 hospital inpatient prospective payment system (IPPS) final rule
(67 FR at 50042).
The RY 2010 (that is, beginning July 1, 2009) update for the IPF
PPS using the FY 2002-based RPL market basket and Information Handling
Services (IHS) Global Insight's 1st quarter 2009 forecast for the
market basket components is 2.1 percent. This includes increases in
both the operating section and the capital section for the 12-month RY
period (that is, July 1, 2009 through June 30, 2010). IHS Global
Insight, Inc. is a nationally recognized economic and financial
forecasting firm that contracts with CMS to forecast the components of
the market baskets.
2. Labor-Related Share
Due to the variations in costs and geographic wage levels, we
believe that payment rates under the IPF PPS should continue to be
adjusted by a geographic wage index. This wage index applies to the
labor-related portion of the Federal per diem base rate, hereafter
referred to as the labor-related share.
The labor-related share is determined by identifying the national
average proportion of operating costs that are related to, influenced
by, or vary with the local labor market. Using our current definition
of labor-related, the labor-related share is the sum of the relative
importance of wages and salaries, fringe benefits, professional fees,
labor-intensive services, and a portion of the capital share from an
appropriate market basket. We used the FY 2002-based RPL market basket
cost weights relative importance to determine the labor-related share
for the IPF PPS.
The labor-related share for RY 2010 is the sum of the RY 2010
relative importance of each labor-related cost category, and reflects
the different rates of price change for these cost categories between
the base year (FY 2002) and RY 2010. The sum of the relative importance
for the RY 2010 operating costs (wages and salaries, employee benefits,
professional fees, and labor-
[[Page 20367]]
intensive services) is 71.935, as shown in below. The portion of
capital that is influenced by the local labor market is estimated to be
46 percent, which is the same percentage used in the FY 1997-based IRF
and IPF payment systems.
Since the relative importance for capital is 8.596 percent of the
FY 2002-based RPL market basket in RY 2010, we are taking 46 percent of
8.596 percent to determine the labor-related share of capital for RY
2010. The result is 3.954 percent, which we added to 71.935 percent for
the operating cost amount to determine the total labor-related share
for RY 2010. Thus, the labor-related share that we are using for IPF
PPS in RY 2010 is 75.889 percent. Table 2 below shows the RY 2010
labor-related share using the FY 2002-based RPL market basket. We note
that this labor-related share is determined by using the same
methodology as employed in calculating all previous IPF labor-related
shares.
A complete discussion of the IPF labor-related share methodology
appears in the November 2004 IPF PPS final rule (69 FR 66952 through
66954).
Table 2--Total Labor-Related Share--Relative Importance for RY 2010
------------------------------------------------------------------------
FY 2002-based RPL FY 2002[dash]based
market basket labor- RPL market basket
Cost category related share labor-related share
relative importance relative importance
(percent) RY 2009* (percent) RY 2010**
------------------------------------------------------------------------
Wages and salaries............ 52.645 53.062
Employee benefits............. 14.004 13.852
Professional fees............. 2.895 2.895
All other labor-intensive 2.137 2.126
services.....................
-----------------------------------------
Subtotal.................. 71.681 71.935
Labor-related share of capital 3.950 3.954
costs (0.46).................
-----------------------------------------
Total..................... 75.631 75.889
------------------------------------------------------------------------
* Based on 2008 1st Quarter forecast.
** Based on 2009 1st Quarter forecast.
3. One-time Prospective Adjustment to the Standard Federal Rate
As we discussed in the November 2004 IPF PPS final rule, consistent
with the statutory requirement for budget neutrality in section 124 of
the BBRA, we estimated aggregate payments under the IPF PPS for the IPF
PPS implementation year (that is, the 18-month period from January 1,
2005 through June 30, 2006) to be equal to the estimated aggregate
payments that would be made if the IPF PPS had not been implemented.
Our methodology for estimating payments for purposes of the budget
neutrality calculations used the best available data at the time and
necessarily reflected several assumptions (for example, costs,
inflation factors and intensity of services provided).
We indicated from the inception of the IPF PPS that it was possible
for the aggregate amount of actual payments in the implementation year
to be significantly higher or lower than the estimates on which the
budget neutrality calculations were based to the extent that later,
more complete data differ significantly from the data that were
available at the time of the original calculations.
Section 124 of the BBRA provides broad authority to the Secretary
in developing the IPF PPS, including the authority for establishing
appropriate adjustments. Under this broad authority to make appropriate
adjustments, we provided in Sec. 412.424(c)(3)(ii) for the possibility
of making a one-time prospective adjustment to the IPF PPS rates, so
that the effect of any significant difference between actual payments
and estimated payments for the first year of the IPF PPS would not be
perpetuated in the IPF PPS rates for future years.
The November 2004 IPF PPS final rule implementing the IPF PPS (69
FR 66922), was based upon the broad authority granted to the Secretary
under section 124 of the BBRA. In that same final rule, we discussed
our authority to make a one-time prospective adjustment to the IPF PPS
rates, which was reflected in Sec. 412.424(c)(3)(ii).
Evaluating the appropriateness of the possible one-time prospective
adjustment under Sec. 412.424(c)(3)(ii) requires a thorough review of
the relevant IPF data. When we established the IPF PPS Federal per diem
base rate in a budget neutral manner, we used the most recent IPF cost
report data available at that time (that is, FY 2002 data), and trended
that data forward to estimate what CMS would have paid to IPFs in the
implementation year under the TEFRA payment system if the PPS were not
implemented (69 FR 66927). We have since conducted a review of the
relevant data. From the cost reports, we have TEFRA and PPS payment
data for January 1, 2005 through June 30, 2006, the 18-month period for
the implementation of the IPF PPS. These data are drawn from reports
with cost reporting periods beginning in FY 2005 and FY 2006. More than
70 percent of the cost reports from FY 2005 were settled. However, only
approximately 33 percent of the cost reports from FY 2006 have been
settled. The remaining 67 percent from FY 2006 are either as-submitted
or have been reopened. Therefore, because we lack a complete set of
final cost report data from the IPF PPS 18-month implementation period,
we are not making a one-time adjustment to the IPF PPS rates for RY
2010.
We plan to revisit the possibility of making a one-time prospective
adjustment to the IPF PPS rates as more cost report data becomes
available.
IV. Update of the IPF PPS Adjustment Factors
A. Overview of the IPF PPS Adjustment Factors
The IPF PPS payment adjustments were derived from a regression
analysis of 100 percent of the FY 2002 MedPAR data file, which
contained 483,038 cases. For this notice, we used the same results of
the regression analysis used to implement the November 2004 IPF PPS
final rule. For a more detailed description of the data file used for
the regression analysis, see the November 2004 IPF PPS final rule (69
FR 66935 through 66936). While we have since used more recent claims
data to set the fixed dollar loss threshold amount, we use the same
results of this regression
[[Page 20368]]
analysis to update the IPF PPS for RY 2009 as well as RY 2010.
As previously stated, we do not plan to update the regression
analysis until we are able to analyze IPF PPS claims and cost report
data. However, we continue to monitor claims and payment data
independently from cost report data to assess issues, to determine
whether changes in case-mix or payment shifts have occurred among
freestanding governmental, non-profit and private psychiatric
hospitals, and psychiatric units of general hospitals, and CAHs and
other issues of importance to IPFs.
B. Patient-Level Adjustments
In the May 2008 IPF PPS notice (73 FR 25709), we provided payment
adjustments for the following patient-level characteristics: Medicare
Severity diagnosis related groups (MS-DRGs) assignment of the patient's
principal diagnosis, selected comorbidities, patient age, and the
variable per diem adjustments.
1. Adjustment for MS-DRG Assignment
The IPF PPS includes payment adjustments for the psychiatric DRG
assigned to the claim based on each patient's principal diagnosis. The
IPF PPS recognizes the MS-DRGs. The DRG adjustment factors were
expressed relative to the most frequently reported psychiatric DRG in
FY 2002, that is, DRG 430 (psychoses). The coefficient values and
adjustment factors were derived from the regression analysis.
In accordance with Sec. 412.27(a), payment under the IPF PPS is
conditioned on IPFs admitting ``only patients whose admission to the
unit is required for active treatment, of an intensity that can be
provided appropriately only in an inpatient hospital setting, of a
psychiatric principal diagnosis that is listed in Chapter Five
(``Mental Disorders'') of the International Classification of Diseases,
Ninth Revision, Clinical Modification (ICD-9-CM)]'' or in the Fourth
Edition, Text Revision of the American Psychiatric Association's
Diagnostic and Statistical Manual, (DSM-IV-TR). IPF claims with a
principal diagnosis included in Chapter Five of the ICD-9-CM or the
DSM-IV-TR are paid the Federal per diem base rate under the IPF PPS and
all other applicable adjustments, including any applicable DRG
adjustment. Psychiatric principal diagnoses that do not group to one of
the designated DRGs still receive the Federal per diem base rate and
all other applicable adjustments, but the payment would not include a
DRG adjustment.
The Standards for Electronic Transaction final rule published in
the Federal Register on August 17, 2000 (65 FR 50312), adopted the ICD-
9-CM as the designated code set for reporting diseases, injuries,
impairments, other health related problems, their manifestations, and
causes of injury, disease, impairment, or other health related
problems. Therefore, we use the ICD-9-CM as the designated code set for
the IPF PPS.
We believe that it is important to maintain the same diagnostic
coding and DRG classification for IPFs that are used under the IPPS for
providing the psychiatric care. Therefore, when the IPF PPS was
implemented for cost reporting periods beginning on or after January 1,
2005, we adopted the same diagnostic code set and DRG patient
classification system (that is, the CMS DRGs) that were utilized at the
time under the hospital inpatient prospective payment system (IPPS).
Since the inception of the IPF PPS, the DRGs used as the patient
classification system under the IPF PPS have corresponded exactly with
the CMS DRGs applicable under the IPPS for acute care hospitals.
Every year, changes to the ICD-9-CM coding system are addressed in
the IPPS proposed and final rules. The changes to the codes are
effective October 1 of each year and must be used by acute care
hospitals as well as other providers to report diagnostic and procedure
information. The IPF PPS has always incorporated ICD-9-CM coding
changes made in the annual IPPS update. We publish coding changes in a
Transmittal/Change Request, similar to how coding changes are announced
by the IPPS and LTCH PPS. Those ICD-9-CM coding changes are also
published in the following IPF PPS RY update, in either the IPF PPS
proposed and final rules, or in an IPF PPS update notice.
In the May 2008 IPF PPS notice (73 FR 25714), we discussed CMS'
effort to better recognize resource use and the severity of illness
among patients. CMS adopted the new MS-DRGs for the IPPS in the FY 2008
IPPS final rule with comment period (72 FR 47130). We believe by better
accounting for patients' severity of illness in Medicare payment rates,
the MS-DRGs encourage hospitals to improve their coding and
documentation of patient diagnoses. The MS-DRGs, which are based on the
CMS DRGs, represent a significant increase in the number of DRGs (from
538 to 745, an increase of 207). For a full description of the
development and implementation of the MS-DRGs, see the FY 2008 IPPS
final rule with comment period (72 FR 47141 through 47175).
All of the ICD-9-CM coding changes are reflected in the FY 2009
GROUPER, Version 26.0, effective for IPPS discharges occurring on or
after October 1, 2008 through September 30, 2009. The GROUPER Version
26.0 software package assigns each case to an MS-DRG on the basis of
the diagnosis and procedure codes and demographic information (that is,
age, sex, and discharge status). The Medicare Code Editor (MCE) 25.0
uses the new ICD-9-CM codes to validate coding for IPPS discharges on
or after October 1, 2008. For additional information on the GROUPER
Version 26.0 and MCE 25.0, see Transmittal 1610 (Change Request 6189),
dated October 3, 2008. The IPF PPS has always used the same GROUPER and
Code Editor as the IPPS. Therefore, the ICD-9-CM changes, which were
reflected in the GROUPER Version 26.0 and MCE 25.0 on October 1, 2008,
also became effective for the IPF PPS for discharges occurring on or
after October 1, 2008.
The impact of the new MS-DRGs on the IPF PPS was negligible.
Mapping to the MS-DRGs resulted in the current 17 MS-DRGs, instead of
the original 15, for which the IPF PPS provides an adjustment. Although
the code set is updated, the same associated adjustment factors apply
now that have been in place since implementation of the IPF PPS, with
one exception that is unrelated to the update to the codes. When DRGs
521 and 522 were consolidated into MS-DRG 895, we carried over the
adjustment factor of 1.02 from DRG 521 to the newly consolidated MS-
DRG. This was done to reflect the higher claims volume under DRG 521,
with more than eight times the number of claims than billed under DRG
522. The updates are reflected in Table 5. For a detailed description
of the mapping changes from the original DRG adjustment categories to
the current MS-DRG adjustment categories we refer readers to the May
2008 IPF PPS notice (73 FR 25714).
The official version of the ICD-9-CM is available on CD-ROM from
the U.S. Government Printing Office. The FY 2009 version can be ordered
by contacting the Superintendent of Documents, U.S. Government Printing
Office, Department 50, Washington, DC 20402-9329, telephone number
(202) 512-1800. Questions concerning the ICD-9-CM should be directed to
Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination and
Maintenance Committee, CMS, Center for Medicare Management, Hospital
and Ambulatory Policy Group, Division of Acute Care, Mailstop C4-08-06,
7500 Security
[[Page 20369]]
Boulevard, Baltimore, Maryland 21244-1850.
Further information concerning the official version of the ICD-9-CM
can be found in the IPPS final rule with comment period, ``Changes to
Hospital Inpatient Prospective Payment System and Fiscal Year 2009
Rates'' in the August 19, 2008 Federal Register (73 FR 48434) and at
https://www.cms.hhs.gov/AcuteInpatientPPS/IPPS/list.asp#TopOfPage.
Tables 3 and 4 below list the FY 2009 new and invalid ICD-9-CM
diagnosis codes that group to one of the 17 MS-DRGs for which the IPF
PPS provides an adjustment. These tables are only a listing of FY 2009
changes and do not reflect all of the currently valid and applicable
ICD-9-CM codes classified in the MS-DRGs. When coded as a principal
code or diagnosis, these codes receive the correlating MS-DRG
adjustment.
Table 3--FY 2009 New Diagnosis Codes
------------------------------------------------------------------------
Diagnosis code Description MS-DRG
------------------------------------------------------------------------
046.11........................... Variant Creutzfeldt- 056, 057
Jakob disease.
046.19........................... Other and unspecified 056, 057
Creutzfeldt-Jakob
disease.
046.71........................... Gerstmann- 056, 057
Str[auml]ussler-
Scheinker syndrome.
046.72........................... Fatal familial insomnia. 056, 057
046.79........................... Other and unspecified 056, 057
prion disease of
central nervous system.
------------------------------------------------------------------------
Table 4--FY 2009 Invalid Diagnosis Codes
------------------------------------------------------------------------
Diagnosis code Description MS-DRG
------------------------------------------------------------------------
046.1............................ Jakob-Creutzfeldt....... 056, 057
------------------------------------------------------------------------
We do not plan to update the regression analysis until we are able
to analyze IPF PPS data. The MS-DRG adjustment factors (as shown in
Table 5) will continue to be paid for discharges occurring in RY 2010.
Table 5--RY 2010 Current MS-DRGs Applicable for the Principal Diagnosis
Adjustment
------------------------------------------------------------------------
Adjustment
MS-DRG MS-DRG descriptions factor
------------------------------------------------------------------------
056.............................. Degenerative nervous 1.05
system disorders w MCC.
057.............................. Degenerative nervous 1.05
system disorders w/o
MCC.
080.............................. Nontraumatic stupor & 1.07
coma w MCC.
081.............................. Nontraumatic stupor & 1.07
coma w/o MCC.
876.............................. O.R. procedure w 1.22
principal diagnoses of
mental illness.
880.............................. Acute adjustment 1.05
reaction & psychosocial
dysfunction.
881.............................. Depressive neuroses..... 0.99
882.............................. Neuroses except 1.02
depressive.
883.............................. Disorders of personality 1.02
& impulse control.
884.............................. Organic disturbances & 1.03
mental retardation.
885.............................. Psychoses............... 1.00
886.............................. Behavioral & 0.99
developmental disorders.
887.............................. Other mental disorder 0.92
diagnoses.
894.............................. Alcohol/drug abuse or 0.97
dependence, left AMA.
895.............................. Alcohol/drug abuse or 1.02
dependence w
rehabilitation therapy.
896.............................. Alcohol/drug abuse or 0.88
dependence w/o
rehabilitation therapy
w MCC.
897.............................. Alcohol/drug abuse or 0.88
dependence w/o
rehabilitation therapy
w/o MCC.
------------------------------------------------------------------------
2. Payment for Comorbid Conditions
The intent of the comorbidity adjustments is to recognize the
increased costs associated with comorbid conditions by providing
additional payments for certain concurrent medical or psychiatric
conditions that are expensive to treat. In the May 2008 IPF PPS notice
(73 FR 25716), we explained that the IPF PPS includes 17 comorbidity
categories and identified the new, revised, and deleted ICD-9-CM
diagnosis codes that generate a comorbid condition payment adjustment
under the IPF PPS for RY 2009 (73 FR 25718).
Comorbidities are specific patient conditions that are secondary to
the patient's principal diagnosis and that require treatment during the
stay. Diagnoses that relate to an earlier episode of care and have no
bearing on the current hospital stay are excluded and must not be
reported on IPF claims. Comorbid conditions must exist at the time of
admission or develop subsequently, and affect the treatment received,
length of stay (LOS), or both treatment and LOS.
For each claim, an IPF may receive only one comorbidity adjustment
per comorbidity category, but it may receive an adjustment for more
than one comorbidity category. Billing instructions require that IPFs
must enter the full ICD-9-CM codes for up to 8 additional diagnoses if
they co-exist at the time of admission or develop subsequently and
impact the treatment provided.
The comorbidity adjustments were determined based on the regression
analysis using the diagnoses reported by IPFs in FY 2002. The principal
diagnoses were used to establish the DRG adjustments and were not
accounted for in establishing the comorbidity category adjustments,
except where ICD-9-CM ``code first'' instructions apply. As we
explained in
[[Page 20370]]
the May 2008 IPF PPS notice (73 FR 25716), the code first rule applies
when a condition has both an underlying etiology and a manifestation
due to the underlying etiology. For these conditions, the ICD-9-CM has
a coding convention that requires the underlying conditions to be
sequenced first followed by the manifestation. Whenever a combination
exists, there is a ``use additional code'' note at the etiology code
and a code first note at the manifestation code.
As discussed in the MS-DRG section, it is our policy to maintain
the same diagnostic coding set for IPFs that is used under the IPPS for
providing the same psychiatric care. Although the ICD-9-CM code set has
been updated, the same adjustment factors have been in place since the
implementation of the IPF PPS. Table 6 below lists the FY 2009 new ICD
diagnosis codes that impact the comorbidity adjustments under the IPF
PPS. Table 6 is not a list of all currently valid ICD codes applicable
for the IPF PPS comorbidity adjustments.
Table 6--FY 2009 New ICD Codes Applicable for the Comorbidity Adjustment
----------------------------------------------------------------------------------------------------------------
Diagnosis code Description Comorbidity category
----------------------------------------------------------------------------------------------------------------
038.12.................................. Methicillin resistant Infectious Disease.
Staphylococcus aureus
septicemia.
046.11.................................. Variant Creutzfeldt-Jakob Infectious Disease.
disease.
046.19.................................. Other and unspecified Infectious Disease.
Creutzfeldt-Jakob disease.
046.71.................................. Gerstmann-Str[auml]ussler- Infectious Disease.
Scheinker syndrome.
046.72.................................. Fatal familial insomnia......... Infectious Disease.
046.79.................................. Other and unspecified prion Infectious Disease.
disease of central nervous
system.
051.01.................................. Cowpox.......................... Infectious Disease.
051.02.................................. Vaccinia not from vaccination... Infectious Disease.
059.00.................................. Orthopoxvirus infection, Infectious Disease.
unspecified.
059.01.................................. Monkeypox....................... Infectious Disease.
059.09.................................. Other orthopoxvirus infections.. Infectious Disease.
059.10.................................. Parapoxvirus infection, Infectious Disease.
unspecified.
059.11.................................. Bovine stomatitis............... Infectious Disease.
059.12.................................. Sealpox......................... Infectious Disease.
059.19.................................. Other parapoxvirus infections... Infectious Disease.
059.20.................................. Yatapoxvirus infection, Infectious Disease.
unspecified.
059.21.................................. Tanapox......................... Infectious Disease.
059.22.................................. Yaba monkey tumor virus......... Infectious Disease.
059.8................................... Other poxvirus infections....... Infectious Disease.
059.9................................... Poxvirus infections, unspecified Infectious Disease.
199.2................................... Malignant neoplasm associated Oncology Treatment.
with transplant organ.
203.02.................................. Multiple myeloma, in relapse.... Oncology Treatment.
203.12.................................. Plasma cell leukemia, in relapse Oncology Treatment.
203.82.................................. Other immunoproliferative Oncology Treatment.
neoplasms, in relapse.
204.02.................................. Acute lymphoid leukemia, in Oncology Treatment.
relapse.
204.12.................................. Chronic lymphoid leukemia, in Oncology Treatment.
relapse.
204.22.................................. Subacute lymphoid leukemia, in Oncology Treatment.
relapse.
204.82.................................. Other lymphoid leukemia, in Oncology Treatment.
relapse.
204.92.................................. Unspecified lymphoid leukemia, Oncology Treatment.
in relapse.
205.02.................................. Acute myeloid leukemia, in Oncology Treatment.
relapse.
205.12.................................. Chronic myeloid leukemia, in Oncology Treatment.
relapse.
205.22.................................. Subacute myeloid leukemia, in Oncology Treatment.
relapse.
205.32.................................. Myeloid sarcoma, in relapse..... Oncology Treatment.
205.82.................................. Other myeloid leukemia, in Oncology Treatment.
relapse.
205.92.................................. Unspecified myeloid leukemia, in Oncology Treatment.
relapse.
206.02.................................. Acute monocytic leukemia, in Oncology Treatment.
relapse.
206.12.................................. Chronic monocytic leukemia, in Oncology Treatment.
relapse.
206.22.................................. Subacute monocytic leukemia, in Oncology Treatment.
relapse.
206.82.................................. Other monocytic leukemia, in Oncology Treatment.
relapse.
206.92.................................. Unspecified monocytic leukemia, Oncology Treatment.
in relapse.
207.02.................................. Acute erythremia and Oncology Treatment.
erythroleukemia, in relapse.
207.12.................................. Chronic erythremia, in relapse.. Oncology Treatment.
207.22.......