Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2010 Rates and to the Long-Term Care Hospital Prospective Payment System and Rate Year 2010 Rates, 24080-24686 [E9-10458]

Download as PDF 24080 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 412, 413, 415, and 489 [CMS–1406–P] RIN 0938–AP39 Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2010 Rates and to the Long-Term Care Hospital Prospective Payment System and Rate Year 2010 Rates sroberts on PROD1PC70 with FRONTMATTER AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems, and to implement certain provisions made by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, Pub. L. 110–275) and the American Recovery and Reinvestment Act of 2009 (ARRA, Pub. L. 111–5). In addition, in the Addendum to this proposed rule, we describe the proposed changes to the amounts and factors used to determine the rates for Medicare acute care hospital inpatient services for operating costs and capital-related costs. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. We also are setting forth the proposed update to the rate-ofincrease limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The proposed updated rate-ofincrease limits would be effective for cost reporting periods beginning on or after October 1, 2009. In addition, we are proposing to update the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs). In the Addendum to this proposed rule, we also set forth the proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for rate year 2010. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. In this proposed rule, we also note those provisions of the ARRA that amended provisions of the Medicare, Medicaid, and SCHIP VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Extension Act of 2007 (MMSEA, Pub. L. 110–173) relating to payments to LTCHs and new LTCHs and LTCH satellite facilities, and increases in beds in existing LTCHs and LTCH satellite facilities under the LTCH PPS that will be implemented in the final rule issued for this proposed rule. DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. E.S.T. on June 30, 2009. ADDRESSES: When commenting on issues presented in this proposed rule, please refer to file code CMS–1406–P. 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 this regulation at https://www.regulations.gov. Follow the instructions for ‘‘Comment or Submission’’ and enter the file code CMS–1406–P to submit comments on this proposed rule. 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–1406– P, P.O. Box 8011, 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–1406–P, 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.) PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 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– 7195 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. Submission of comments on paperwork requirements. You may submit comments on this document’s paperwork requirements by following the instructions at the end of the ‘‘Collection of Information Requirements’’ section in this document. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION, CONTACT: Tzvi Hefter, (410) 786–4487, Operating Prospective Payment, MS–DRGs, Wage Index, New Medical Service and Technology Add-On Payments, Hospital Geographic Reclassifications, Capital Prospective Payment, Excluded Hospitals, Direct and Indirect Graduate Medical Education Payments, EMTALA, Hospital Emergency Services, and Hospital-Within-Hospital Issues. Michele Hudson, (410) 786–4487, Long-Term Care Hospital Prospective Payment System and MS–LTC–DRGs Issues. Siddhartha Mazumdar, (410) 786– 6673, Rural Community Hospital Demonstration Program Issues. Sheila Blackstock, (410) 786–3502, Quality Data for Annual Payment Update Issues. Thomas Valuck, (410) 786–7479, Hospital-Acquired Conditions. 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 at that Web site to view public comments. Comments received timely will also be available for public inspection, 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 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 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. sroberts on PROD1PC70 with FRONTMATTER Electronic Access This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web, (the Superintendent of Documents’ home Web page address is https://www.gpoaccess.gov/), by using local WAIS client software, or by telnet to swais.access.gpo.gov, then log in as guest (no password required). Dial-in users should use communications software and modem to call (202) 512– 1661; type swais, then log in as guest (no password required). Acronyms 3M 3M Health Information System AAHKS American Association of Hip and Knee Surgeons AAMC Association of American Medical Colleges ACGME Accreditation Council for Graduate Medical Education AHA American Hospital Association AHIC American Health Information Community AHIMA American Health Information Management Association AHRQ Agency for Healthcare Research and Quality ALOS Average length of stay ALTHA Acute Long Term Hospital Association AMA American Medical Association AMGA American Medical Group Association AOA American Osteopathic Association APR DRG All Patient Refined Diagnosis Related Group System ARRA American Recovery and Reinvestment Act of 2009, Public Law 111–5 ASC Ambulatory surgical center ASCA Administrative Simplification Compliance Act of 2002, Public Law 107– 105 ASITN American Society of Interventional and Therapeutic Neuroradiology BBA Balanced Budget Act of 1997, Public Law 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Public Law 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000, Public Law 106–554 BLS Bureau of Labor Statistics CAH Critical access hospital CARE [Medicare] Continuity Assessment Record & Evaluation [Instrument] VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 CART CMS Abstraction & Reporting Tool CBSAs Core-based statistical areas CC Complication or comorbidity CCR Cost-to-charge ratio CDAC [Medicare] Clinical Data Abstraction Center CDAD Clostridium difficile-associated disease CIPI Capital input price index CMI Case-mix index CMS Centers for Medicare & Medicaid Services CMSA Consolidated Metropolitan Statistical Area COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 99– 272 COLA Cost-of-living adjustment CoP [Hospital] condition of participation CPI Consumer price index CY Calendar year DPP Disproportionate patient percentage DRA Deficit Reduction Act of 2005, Public Law 109–171 DRG Diagnosis-related group DSH Disproportionate share hospital ECI Employment cost index EMR Electronic medical record EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 99–272 FAH Federation of Hospitals FDA Food and Drug Administration FFY Federal fiscal year FHA Federal Health Architecture FIPS Federal information processing standards FQHC Federally qualified health center FTE Full-time equivalent FY Fiscal year GAAP Generally Accepted Accounting Principles GAF Geographic Adjustment Factor GME Graduate medical education HACs Hospital-acquired conditions HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems HCFA Health Care Financing Administration HCO High-cost outlier HCRIS Hospital Cost Report Information System HHA Home health agency HHS Department of Health and Human Services HIPAA Health Insurance Portability and Accountability Act of 1996, Public Law 104–191 HIPC Health Information Policy Council HIS Health information system HIT Health information technology HMO Health maintenance organization HPMP Hospital Payment Monitoring Program HSA Health savings account HSCRC [Maryland] Health Services Cost Review Commission HSRV Hospital-specific relative value HSRVcc Hospital-specific relative value cost center HQA Hospital Quality Alliance HQI Hospital Quality Initiative HwH Hospital-Within-a-Hospital ICD–9–CM International Classification of Diseases, Ninth Revision, Clinical Modification ICR Information collection requirement PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 24081 IHS Indian Health Service IME Indirect medical education I–O Input-Output IOM Institute of Medicine IPF Inpatient psychiatric facility IPPS [Acute care hospital] inpatient prospective payment system IRF Inpatient rehabilitation facility LAMCs Large area metropolitan counties LOS Length of stay LTC–DRG Long-term care diagnosis-related group LTCH Long-term care hospital MA Medicare Advantage MAC Medicare Administrative Contractor MCC Major complication or comorbidity MCE Medicare Code Editor MCO Managed care organization MCV Major cardiovascular condition MDC Major diagnostic category MDH Medicare-dependent, small rural hospital MedPAC Medicare Payment Advisory Commission MedPAR Medicare Provider Analysis and Review File MEI Medicare Economic Index MGCRB Medicare Geographic Classification Review Board MIEA–TRHCA Medicare Improvements and Extension Act, Division B of the Tax Relief and Health Care Act of 2006, Public Law 109–432 MIPPA Medicare Improvements for Patients and Providers Act of 2008, Public Law 110–275 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Public Law 108–173 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110–173 MPN Medicare provider number MRHFP Medicare Rural Hospital Flexibility Program MRSA Methicillin-resistant Staphylococcus aureus MSA Metropolitan Statistical Area MS–DRG Medicare severity diagnosisrelated group MS–LTC–DRG Medicare severity long-term care diagnosis-related group NAICS North American Industrial Classification System NALTH National Association of Long Term Hospitals NCD National coverage determination NCHS National Center for Health Statistics NCQA National Committee for Quality Assurance NCVHS National Committee on Vital and Health Statistics NECMA New England County Metropolitan Areas NQF National Quality Forum NTIS National Technical Information Service NVHRI National Voluntary Hospital Reporting Initiative OACT [CMS’] Office of the Actuary OBRA 86 Omnibus Budget Reconciliation Act of 1996, Public Law 99–509 OES Occupational employment statistics OIG Office of the Inspector General OMB Executive Office of Management and Budget OPM U.S. Office of Personnel Management E:\FR\FM\22MYP2.SGM 22MYP2 24082 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER O.R. Operating room OSCAR Online Survey Certification and Reporting [System] PIP Periodic interim payment PLI Professional liability insurance PMSAs Primary metropolitan statistical areas POA Present on admission PPI Producer price index PPS Prospective payment system PRM Provider Reimbursement Manual ProPAC Prospective Payment Assessment Commission PRRB Provider Reimbursement Review Board PSF Provider-Specific File PS&R Provider Statistical and Reimbursement (System) QIG Quality Improvement Group, CMS QIO Quality Improvement Organization RCE Reasonable compensation equivalent RHC Rural health clinic RHQDAPU Reporting hospital quality data for annual payment update RNHCI Religious nonmedical health care institution RPL Rehabilitation psychiatric long-term care (hospital) RRC Rural referral center RTI Research Triangle Institute, International RUCAs Rural-urban commuting area codes RY Rate year SAF Standard Analytic File SCH Sole community hospital SFY State fiscal year SIC Standard Industrial Classification SNF Skilled nursing facility SOCs Standard occupational classifications SOM State Operations Manual SSO Short-stay outlier TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97– 248 TEP Technical expert panel TMA TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110–90 TJA Total joint arthroplasty UHDDS Uniform hospital discharge data set VAP Ventilator-associated pneumonia Table of Contents I. Background A. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) 2. Hospitals and Hospital Units Excluded from the IPPS 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) 4. Critical Access Hospitals (CAHs) 5. Payments for Graduate Medical Education (GME) B. Provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) C. Provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) D. Major Contents of This Proposed Rule 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 3. Proposed Rebasing and Revision of the Hospital Market Basket for Acute Care Hospitals 4. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs 5. FY 2010 Policy Governing the IPPS for Capital-Related Costs 6. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-ofIncrease Percentages 7. Proposed Changes to the LTCH PPS 8. Determining Proposed Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals 9. Determining Proposed Prospective Payments Rates for LTCHs 10. Impact Analysis 11. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services 12. Discussion of Medicare Payment Advisory Commission Recommendations E. Public Comments Received on Two LTCH PPS Interim Final Rules with Comment Period Issued in 2008 II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS–DRG) Classifications and Relative Weights A. Background B. MS–DRG Reclassifications 1. General 2. Yearly Review for Making MS–DRG Changes C. Adoption of the MS–DRGs in FY 2008 D. Proposed FY 2010 MS–DRG Documentation and Coding Adjustment, Including the Applicability to the Hospital-Specific Rates and the Puerto Rico-Specific Standardized Amount 1. Background on the Prospective MS–DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110–90 2. Prospective Adjustment to the Average Standardized Amounts Required by Section 7(b)(1)(A) of Public Law 110–90 3. Recoupment or Repayment Adjustments in FYs 2010 through 2012 Required by Public Law 110–90 4. Retrospective Evaluation of FY 2008 Claims Data 5. Proposed Adjustments for FY 2010 and Subsequent Years Authorized by Section 7(b)(1)(A) of Public Law 110–90 and Section 1886(d)(3)(vi) of the Act 6. Additional Adjustment for FY 2010 Authorized by Section 7(b)(1)(B) of Public Law 110–90 7. Background on the Application of the Documentation and Coding Adjustment to the Hospital-Specific Rates 8. Proposed Documentation and Coding Adjustment to the Hospital-Specific Rates for FY 2010 and Subsequent Years 9. Background on the Application of the Documentation and Coding Adjustment to the Puerto Rico-Specific Standardized Amount 10. Proposed Documentation and Coding Adjustment to the Puerto Rico-Specific Standardized Amount E. Refinement of the MS–DRG Relative Weight Calculation 1. Background PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 a. Summary of the RTI Study of Charge Compression and CCR Refinement b. Summary of the Rand Corporation Study of Alternative Relative Weight Methodologies 2. Summary of FY 2009 Changes and Discussion for FY 2010 3. Timeline for Revising the Medicare Cost Report F. Preventable Hospital-Acquired Conditions (HACs), Including Infections 1. Statutory Authority 2. HAC Selection Process 3. Collaborative Process 4. Selected HAC Categories 5. Public Input Regarding Selected and Potential Candidate HACs 6. POA Indicator Reporting G. Proposed Changes to Specific MS–DRG Classifications 1. MDC 5 (Diseases and Disorders of the Circulatory System): Intraoperative Fluorescence Vascular Angiography (IFVA) 2. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue): Infected Hip and Knee Replacements 3. Proposed Medicare Code Editor (MCE) Changes a. Diagnoses Allowed for Males Only Edit b. Manifestation Codes as Principal Diagnosis Edit c. Invalid Diagnosis or Procedure Code d. Unacceptable Principal Diagnosis e. Proposed Creation of New Edit Titled ‘‘Wrong Surgeries’’ f. Procedures Allowed for Females Only Edit 4. Surgical Hierarchies 5. Complication or Comorbidity (CC) Exclusions List a. Background b. CC Exclusions List for FY 2010 6. Review of Procedure Codes in MS–DRGs 981 through 983, 984 through 986, and 987 through 989 a. Moving Procedure Codes from MS–DRGs 981 through 983 or MS–DRGs 987 through 989 to MDCs b. Reassignment of Procedures among MS– DRGs 981 through 983, 984 through 986, and 987 through 989 c. Adding Diagnosis or Procedure Codes to MDCs 7. Changes to the ICD–9–CM Coding System H. Recalibration of MS–DRG Weights I. Proposed Add-On Payments for New Services and Technologies 1. Background 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments 3. FY 2010 Status of Technologies Approved for FY 2009 Add-On Payments 4. FY 2010 Applications for New Technology Add-On Payments a. The AutoLITTTM System b. CLOLAR® (clofarabine) Injection c. LipiScanTM Coronary Imaging System d. Spiration® IBV® Valve System e. TherOx Downstream® System 5. Technical Correction III. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules A. Background B. Requirements of Section 106 of the MIEA–TRHCA 1. Wage Index Study Required Under the MIEA–TRHCA a. Legislative Requirement b. Interim and Final Reports on Results of Acumen’s Study 2. FY 2009 Policy Changes in Response to Requirements Under Section 106(b) of the MIEA–TRHCA a. Reclassification Average Hourly Wage Comparison Criteria b. Within-State Budget Neutrality Adjustment for the Rural and Imputed Floors C. Core-Based Statistical Areas for the Hospital Wage Index D. Proposed Occupational Mix Adjustment to the Proposed FY 2010 Wage Index 1. Development of Data for the Proposed FY 2010 Occupational Mix Adjustment Based on the 2007–2008 Occupational Mix Survey 2. Calculation of the Proposed Occupational Mix Adjustment for FY 2010 E. Worksheet S–3 Wage Data for the Proposed FY 2010 Wage Index 1. Included Categories of Costs 2. Excluded Categories of Costs 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals Under the IPPS F. Verification of Worksheet S–3 Wage Data G. Method for Computing the Proposed FY 2010 Unadjusted Wage Index H. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2010 Occupational Mix Adjusted Wage Index I. Revisions to the Wage Index Based on Hospital Redesignations 1. General 2. Effects of Reclassification/Redesignation 3. FY 2010 MGCRB Reclassifications 4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of the Act 5. Reclassifications Under Section 1886(d)(8)(B) of the Act 6. Reclassifications Under Section 508 of Public Law 108–173 J. Proposed FY 2010 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees K. Process for Requests for Wage Index Data Corrections IV. Proposed Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals A. Background B. Rebasing and Revising the IPPS Market Basket 1. Development of Cost Categories and Weights a. Medicare Cost Reports b. Other Data Sources 2. Final Cost Category Computation 3. Selection of Price Proxies a. Wages and Salaries b. Employment Benefits c. Fuel, Oil, and Gasoline d. Electricity e. Water and Sewage f. Professional Liability Insurance VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 g. Pharmaceuticals h. Food: Direct Purchase i. Food: Contract Services j. Chemicals k. Blood and Blood Products l. Medical Instruments m. Photographic Supplies n. Rubber and Plastics o. Paper and Printing Products p. Apparel q. Machinery and Equipment r. Miscellaneous Products s. Professional Fees: Labor-Related t. Administrative and Business Support Services u. All Other: Labor-Related Services v. Professional Fees: Nonlabor-Related w. Financial Services x. Telephone Services y. Postage z. All Other: Nonlabor-Related Services 4. Labor-Related Share C. Separate Market Basket for Certain Hospitals Presently Excluded From the IPPS D. Rebasing and Revising the Capital Input Price Index (CIPI) V. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs A. Reporting of Hospital Quality Data for Annual Hospital Payment Update 1. Background a. Overview b. Hospital Quality Data Reporting Under Section 501(b) of Public Law 108–173 c. Hospital Quality Data Reporting Under Section 5001(a) of Public Law 109–171 2. Retirement of RHQDAPU Program Measures 3. Quality Measures for the FY 2011 Payment Determination and Subsequent Years a. Considerations in Expanding and Updating Quality Measures Under the RHQDAPU Program b. Proposed RHQDAPU Program Quality Measures for the FY 2011 Payment Determination 3. Possible New Quality Measures for the FY 2012 Payment Determination and Subsequent Years 4. Possible New Quality Measures for the FY 2012 Payment Determination and Subsequent Years 5. Form, Manner, and Timing of Quality Data Submission a. Proposed RHQDAPU Program Procedures for the FY 2011 Payment Determination b. RHQDAPU Program Disaster Extensions and Waivers c. HACHPS Requirements for the FY 2011 Payment Determination 6. Proposed Chart Validation Requirements a. Proposed Chart Validation Requirements and Methods for the FY 2011 Payment Determination b. Proposed Chart Validation Requirements and Methods for the FY 2012 Payment Determination and Subsequent Years c. Possible Supplements to the Chart Validation Process for the FY 2013 Payment Determination and Subsequent Years 7. Data Accuracy and Completeness Acknowledgement Requirements for the PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 24083 FY 2011 Payment Determination and Subsequent Years 8. Public Display Requirements for the FY 2011 Payment Determination and Subsequent Years 9. Proposed Reconsideration and Appeal Procedures for the FY 2010 Payment Determination 10. RHQDAPU Program Withdrawal Deadlines 11. Electronic Health Records a. Background b. EHR Testing of Quality Measures Submission c. HITECH Act EHR Provisions B. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs): Budget Neutrality Adjustment Factors for FY 2002-Based Hospital-Specific Rate for MDHs 1. Background 2. FY 2002-Based Hospital-Specific Rate C. Rural Referral Centers (RRCs) 1. Case-Mix Index 2. Discharges D. Indirect Medical Education (IME) Adjustment 1. Background 2. IME Adjustment Factor for FY 2010 3. IME-Related Proposed Changes in Other Sections of this Proposed Rule E. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) 1. Background 2. Proposed Policy Change Relating to the Inclusion of Labor and Delivery Patient Days in the Medicare DSH Calculation a. Background b. Proposed Policy Change 3. Proposed Policy Change Relating to Calculation of Inpatient Days in the Medicaid Fraction in the Medicare DSH Calculation a. Background b. Proposed Policy Change 4. Proposed Policy Change Relating to the Exclusion of Observation Beds and Patient Days From the Medicare DSH Calculation a. Background b. Proposed Policy Change F. Technical Correction to Regulations on Payments for Anesthesia Services Furnished by Hospital or CAH Employed Nonphysician Anesthetists or Obtained Under Arrangements G. Payments for Direct Graduate Medical Education (GME) Costs 1. Background 2. Clarification of Definition of New Medical Residency Training Program 3. Participation of New Teaching Hospitals in Medicare GME Affiliated Groups 4. Technical Corrections to Regulations H. Hospital Emergency Services Under EMTALA 1. Background 2. Proposed Changes Relating to Applicability of Sanctions Under EMTALA I. Rural Community Hospital Demonstration Program J. Technical Correction to Regulations Relating to Calculation of the Federal Rate Under the IPPS VI. Proposed Changes to the IPPS for CapitalRelated Costs E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24084 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules A. Overview B. Exception Payments C. New Hospitals D. Hospitals Located in Puerto Rico E. Proposed Changes 1. Proposed FY 2010 MS–DRG Documentation and Coding Adjustment a. Background on the Prospective MS–DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 b. Proposed Prospective MS–DRG Documentation and Coding Adjustment to the National Capital Federal Rate for FY 2010 and Subsequent Years c. Proposed Documentation and Coding Adjustment to the Puerto Rico-Specific Capital Rate 2. Revision to the FY 2009 IME Adjustment Factor 3. Other Proposed Changes for FY 2010 VII. Proposed Changes for Hospitals Excluded From the IPPS A. Excluded Hospitals B. Criteria for Satellite Facilities of Hospitals C. Critical Access Hospitals (CAHs) 1. Background 2. Payment for Clinical Diagnostic Laboratory Tests Furnished by CAHs 3. CAH Optional Method of Payment for Outpatient Services D. Provider-Based Status of Facilities and Organizations: Proposed Policy Changes 1. Background 2. Proposed Changes to the Scope of the Provider-Based Status Regulations for CAHs a. CAH-Based Clinical Diagnostic Laboratory Facilities b. CAH-Based Ambulance Services 3. Technical Correction to Regulations VIII. Proposed Changes to the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for RY 2010 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority 2. Criteria for Classification as a LTCH a. Classification as a LTCH b. Hospitals Excluded from the LTCH PPS 3. Limitation on Charges to Beneficiaries 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group (MS–LTC– DRG) Classifications and Relative Weights 1. Background 2. Patient Classifications Into MS–LTC– DRGs a. Background b. Proposed Changes to the MS–LTC–DRGs for RY 2010 3. Development of the Proposed RY 2010 MS–LTC–DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights b. Data c. Hospital-Specific Relative Value (HSRV) Methodology d. Treatment of Severity Levels in Developing the Proposed MS–LTC–DRG Relative Weights e. Low-Volume MS–LTC–DRGs f. Steps for Determining the Proposed RY 2010 MS–LTC–DRG Relative Weights VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 C. Proposed Changes to the LTCH Payment Rates and Other Changes to the RY 2010 LTCH PPS 1. Overview of Development of the LTCH Payment Rates 2. Market Basket for LTCHs Reimbursed under the LTCH PPS a. Overview b. Proposed Market Basket under the LTCH PPS for RY 2010 c. Proposed Market Basket Update for LTCHs for RY 2010 d. Proposed Labor-Related Share under the LTCH PPS for RY 2010 3. Proposed Adjustment for Changes in LTCHs’ Case-Mix Due to Changes in Documentation and Coding Practices That Occurred in a Prior Period a. Background b. Evaluation of FY 2007 Claims Data c. Evaluation of FY 2008 Claims Data d. Proposed RY 2010 Documentation and Coding Adjustment D. Monitoring E. Research Conducted by the Research Triangle Institute, International (RTI) F. Proposed Technical Corrections of LTCH PPS Regulations IX. MedPAC Recommendations X. Other Required Information A. Requests for Data from the Public B. Collection of Information Requirements C. Additional Information Collection Requirements 1. Present on Admission (POA) Indicator Reporting 2. Proposed Add-On Payments for New Services and Technologies 3. Reporting of Hospital Quality Data for Annual Hospital Payment Update 4. Occupational Mix Adjustment to the FY 2010 Index (Hospital Wage Index Occupational Mix Survey) 5. Hospital Applications for Geographic Reclassifications by the MGCRB C. Response to Public Comments Regulation Text Addendum—Proposed Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or after October 1, 2009 I. Summary and Background II. Proposed Changes to the Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2010 A. Calculation of the Adjusted Standardized Amount B. Proposed Adjustments for Area Wage Levels and Cost-of-Living C. Proposed MS–DRG Relative Weights D. Calculation of the Proposed Prospective Payment Rates III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient CapitalRelated Costs for FY 2010 A. Determination of Proposed Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update B. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2010 C. Capital Input Price Index PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 IV. Proposed Changes to Payment Rates for Certain Excluded Hospitals: Rate-ofIncrease Percentages V. Proposed Changes to the Payment Rates for the LTCH PPS for RY 2010 A. Proposed LTCH PPS Standard Federal Rate for RY 2010 B. Proposed Adjustment for Area Wage Levels under the LTCH PPS for RY 2010 C. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases D. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for RY 2010 VI. Tables Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (67.1 Percent Labor Share/32.9 Percent Nonlabor Share If Wage Index Is Greater Than 1) Table 1B.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Is Less Than or Equal to 1) Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D.—Capital Standard Federal Payment Rate Table 1E.—LTCH Standard Federal Prospective Payment Rate Table 2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2008; Hospital Wage Indexes for Federal Fiscal Year 2010; Hospital Average Hourly Wages for Federal Fiscal Years 2008 (2004 Wage Data), 2009 (2005 Wage Data), and 2010 (2006 Wage Data); and 3-Year Average of Hospital Average Hourly Wages Table 3A.—FY 2010 and 3-Year Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA Table 3B.—FY 2010 and 3-Year Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2010 Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2010 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2010 Table 4D–1.—Rural Floor Budget Neutrality Factors for Acute Care Hospitals—FY 2010 Table 4D–2.—Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor or Imputed Floor Wage Index—FY 2010 Table 4E.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2010 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA—FY 2010 Table 4J.—Out-Migration Adjustment for Acute Care Hospitals—FY 2010 E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Table 5.—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay—FY 2010 Table 6A.—New Diagnosis Codes Table 6B.—New Procedure Codes Table 6C.—Invalid Diagnosis Codes Table 6D.—Invalid Procedure Codes Table 6E.—Revised Diagnosis Code Titles Table 6F.—Revised Procedure Code Titles Table 6G.—Additions to the CC Exclusions List (Available through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/AcuteInpatientPPS/) Table 6H.—Deletions from the CC Exclusions List (Available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/) Table 6I.—Complete List of Complication and Comorbidity (CC) Exclusions (Available only through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/AcuteInpatientPPS/) Table 6J.—Major Complication and Comorbidity (MCC) List (Available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/) Table 6K.—Complication and Comorbidity (CC) List (Available through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/AcuteInpatientPPS/) Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2008 MedPAR Update— December 2008 GROUPER V26.0 MS– DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2008 MedPAR Update— December 2008 GROUPER V27.0 MS– DRGs Table 8A.—Proposed Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals—March 2009 Table 8B.—Proposed Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals—March 2009 Table 8C.—Proposed Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs—March 2009 Table 9A.—Hospital Reclassifications and Redesignations—FY 2010 Table 9C.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2010 Table 10.—Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Medicare Severity Diagnosis-Related Groups (MS–DRGs)—March 2009 Table 11.—Proposed MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, and Short-Stay Outlier Threshold for Discharges Occurring from October 1, 2009 through September 30, 2010 under the LTCH PPS Table 12A.—LTCH PPS Wage Index for Urban Areas for Discharges Occurring from October 1, 2009 through September 30, 2010 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Table 12B.—LTCH PPS Wage Index for Rural Ares for Discharges Occurring from October 1, 2009 through September 30, 2010 Appendix A—Regulatory Impact Analysis I. Overall Impact II. Objectives of the IPPS III. Limitations of Our Analysis IV. Hospitals Included in and Excluded From the IPPS V. Effects on Hospitals Excluded from the IPPS VI. Quantitative Effects of the Policy Changes under the IPPS for Operating Costs A. Basis and Methodology of Estimates B. Analysis of Table I C. Effects of the Proposed Changes to the MS–DRG Reclassifications and Relative Cost-Based Weights (Column 1) D. Effects of the Application of Recalibration Budget Neutrality (Column 2) E. Effects of Proposed Wage Index Changes (Column 3) F. Application of the Wage Budget Neutrality Factor (Column 4) G. Combined Effects of Proposed MS–DRG and Wage Index Changes (Column 5) H. Effects of MGCRB Reclassifications (Column 6) I. Effects of the Proposed Rural Floor and Imputed Floor, Including the Transition To Apply Budget Neutrality at the State Level (Column 7) J. Effects of the Proposed Wage Index Adjustment for Out-Migration (Column 8) K. Effects of All Proposed Changes Prior to Documentation and Coding (or CMI) Adjustment (Column 9) L. Effects of All Proposed Changes With Documentation and Coding (or CMI) Adjustment (Column 10) M. Effects of Policy on Payment Adjustments for Low-Volume Hospitals N. Impact Analysis of Table II VII. Effects of Other Proposed Policy Changes A. Effects of Proposed Policy on HACs, Including Infections B. Effects of Proposed Policy Change Relating to New Medical Service and Technology Add-On Payments C. Effects of Proposed Requirements for Hospital Reporting of Quality Data for Annual Hospital Payment Update D. Effects of Correcting the FY 2002-Based Hospital-Specific Rates for MDHs E. Effects of Proposed Policy Changes Relating to DSH Payment Adjustment F. Effects of Proposed Policy Changes Related to Direct GME G. Effects of Proposed Policy Changes Relating to Hospital Emergency Services under EMTALA H. Effects of Proposed Policy Changes Relating to Payments to CAHs I. Effects of Proposed Policy Changes Relating to Provider-Based Status of Facilities and Organizations J. Effects of Proposed Policy Changes Relating to Criteria for Satellite Facilities of Hospitals K. Effects of Implementation of Rural Community Hospital Demonstration Program PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 24085 VIII. Effects of Proposed Changes in the Capital IPPS A. General Considerations B. Results IX. Effects of Proposed Payment Rate Changes and Policy Changes Under the LTCH PPS A. Introduction and General Considerations B. Impact on Rural Hospitals C. Anticipated Effects of Proposed LTCH PPS Payment Rate Change and Policy Changes D. Effect on the Medicare Program E. Effect on Medicare Beneficiaries X. Alternatives Considered XI. Overall Conclusion A. Acute Care Hospitals B. LTCHs XII. Accounting Statements A. Acute Care Hospitals B. LTCHs XIII. Executive Order 12866 Appendix B—Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background II. Inpatient Hospital Update for FY 2010 III. Secretary’s Recommendation IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare I. Background A. Summary 1. Acute Care Hospital Inpatient Prospective Payment System (IPPS) Section 1886(d) of the Social Security Act (the Act) sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of hospital inpatient stays under a prospective payment system (PPS). Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The laborrelated share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24086 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules This add-on payment, known as the disproportionate share hospital (DSH) adjustment, provides for a percentage increase in Medicare payments to hospitals that qualify under either of two statutory formulas designed to identify hospitals that serve a disproportionate share of low-income patients. For qualifying hospitals, the amount of this adjustment may vary based on the outcome of the statutory calculations. If the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds. Additional payments may be made for cases that involve new technologies or medical services that have been approved for special add-on payments. To qualify, a new technology or medical service must demonstrate that it is a substantial clinical improvement over technologies or services otherwise available, and that, absent an add-on payment, it would be inadequately paid under the regular DRG payment. The costs incurred by the hospital for a case are evaluated to determine whether the hospital is eligible for an additional payment as an outlier case. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any DSH, IME, and new technology or medical service add-on adjustments. Although payments to most hospitals under the IPPS are made on the basis of the standardized amounts, some categories of hospitals are paid in whole or in part based on their hospitalspecific rate based on their costs in a base year. For example, sole community hospitals (SCHs) receive the higher of a hospital-specific rate based on their costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the standardized amount. Through and including FY 2006, a Medicaredependent, small rural hospital (MDH) received the higher of the Federal rate or the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 hospital-specific rate. As discussed below, for discharges occurring on or after October 1, 2007, but before October 1, 2011, an MDH will receive the higher of the Federal rate or the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-specific VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 rate. SCHs are the sole source of care in their areas, and MDHs are a major source of care for Medicare beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is located more than 35 road miles from another hospital or that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary), is the sole source of hospital inpatient services reasonably available to Medicare beneficiaries. In addition, certain rural hospitals previously designated by the Secretary as essential access community hospitals are considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is located in a rural area, has no more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its cost reporting year beginning in FY 1987 or in two of its three most recently settled Medicare cost reporting years). Both of these categories of hospitals are afforded this special payment protection in order to maintain access to services for beneficiaries. Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ The basic methodology for determining capital prospective payments is set forth in our regulations at 42 CFR 412.308 and 412.312. Under the capital IPPS, payments are adjusted by the same DRG for the case as they are under the operating IPPS. Capital IPPS payments are also adjusted for IME and DSH, similar to the adjustments made under the operating IPPS. We began phasing out the capital IPPS IME adjustment in FY 2008, as discussed in section VI.B.2. of this preamble. However, section 4301(b)(1) of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111–5), enacted on February 17, 2009, requires that the 50-percent reduction in the capital IPPS teaching adjustment for FY 2009 specified in the regulations at § 412.322(c) shall not be applied. Section 4301(b)(2) of Public Law 111–5 specifies that, for subsequent years, the change made by section 4301(b)(1) has no effect on the capital teaching adjustment. Therefore, beginning in FY 2010, there will no longer be a capital teaching adjustment under the capital IPPS. The provisions of section 4301(b) of Public Law 111–5 are discussed in sections VI.A. and E. of this preamble. In addition, hospitals may receive PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 outlier payments for those cases that have unusually high costs. The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR Part 412, Subparts A through M. 2. Hospitals and Hospital Units Excluded from the IPPS Under section 1886(d)(1)(B) of the Act, as amended, certain hospitals and hospital units are excluded from the IPPS. These hospitals and units are: Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric hospitals and units; children’s hospitals; and cancer hospitals. Religious nonmedical health care institutions (RNHCIs) are also excluded from the IPPS. Various sections of the Balanced Budget Act of 1997 (BBA, Pub. L. 105– 33), the Medicare, Medicaid and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106–113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106–554) provide for the implementation of PPSs for rehabilitation hospitals and units (referred to as inpatient rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and units (referred to as inpatient psychiatric facilities (IPFs)). (We note that the proposed annual updates to the LTCH PPS are now included as part of the IPPS annual update document (for RY 2010, in this proposed rule). Updates to the IRF PPS and IPF PPS are issued as separate documents.) Children’s hospitals, cancer hospitals, and RNHCIs continue to be paid solely under a reasonable cost-based system subject to a rate-ofincrease ceiling on inpatient operating costs per discharge. The existing regulations governing payments to excluded hospitals and hospital units are located in 42 CFR Parts 412 and 413. 3. Long-Term Care Hospital Prospective Payment System (LTCH PPS) The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) effective for cost reporting periods beginning on or after October 1, 2002. The LTCH PPS was established under the authority of sections 123(a) and (c) of Public Law 106–113 and section 307(b)(1) of Public Law 106–554. During the 5-year (optional) transition period, a LTCH’s payment under the PPS was based on an increasing proportion of the LTCH Federal rate with a corresponding decreasing proportion based on reasonable cost principles. Effective for E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules cost reporting periods beginning on or after October 1, 2006, all LTCHs are paid 100 percent of the Federal rate. The existing regulations governing payment under the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with RY 2010, we are issuing the annual updates to the LTCH PPS in the same documents that update the IPPS (73 FR 26797 through 26798). 4. Critical Access Hospitals (CAHs) Under sections 1814(l), 1820, and 1834(g) of the Act, payments are made to critical access hospitals (CAHs) (that is, rural hospitals or facilities that meet certain statutory requirements) for inpatient and outpatient services are generally based on 101 percent of reasonable cost. Reasonable cost is determined under the provisions of section 1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts 413 and 415. 5. Payments for Graduate Medical Education (GME) Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital’s number of residents in that period and the hospital’s costs per resident in a base year. The existing regulations governing payments to the various types of hospitals are located in 42 CFR Part 413. sroberts on PROD1PC70 with FRONTMATTER B. Provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) Section 148 of the MIPPA (Pub. L. 110–275) changes the payment rules regarding outpatient clinical diagnostic laboratory tests furnished by a CAH. The statutory change applies to services furnished on or after July 1, 2009. In section VI.C.2. of the preamble of this proposed rule, we discuss our proposal to codify policies in the Medicare regulations to implement this provision. C. Provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) Section 4301(b) of the American Recovery and Reinvestment Act of 2009 (AARA), Public Law 111–5, enacted on February 17, 2009, requires that the phase-out of the capital IPPS teaching adjustment at § 412.322(c) (that is, the 50-percent reduction for FY 2009) shall be applied, as if such paragraph had not been in effect. Section 4301(b) of Public VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Law 111–5 also specifies that there will be no effect on the phase-out of the capital teaching adjustment for subsequent years, such that, for discharges occurring during FY 2010 and thereafter, there will no longer be a teaching adjustment under the capital IPPS as is currently specified at § 412.322(d). We discuss the proposed implementation of these provisions in section VI.A. and E. of the preamble of this proposed rule. Section 4302 of Public Law 111–5 included several amendments to provisions of section 114 of the MMSEA relating to (1) the 3-year delay in the application of certain provisions of the payment adjustments for short-stay outliers and revision to the RY 2008 standard Federal rate for LTCHs; and (2) the 3-year moratorium on the establishment of new LTCHs and LTCH satellite facilities and on increases in beds in existing LTCHs and LTCH satellite facilities. We discuss the proposed implementation of these provisions in sections I.E. and VIII. of the preamble of this proposed rule. D. Major Contents of this Proposed Rule In this proposed rule, we are setting forth proposed changes to the Medicare IPPS for operating costs and for capitalrelated costs of acute care hospitals in FY 2010. We also are setting forth proposed changes relating to payments for IME costs and payments to certain hospitals and units that continue to be excluded from the IPPS and paid on a reasonable cost basis. In addition, we are setting forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for RY 2010. The following is a summary of the major changes that we are proposing to make: 1. Proposed Changes to MS–DRG Classifications and Recalibrations of Relative Weights In section II. of the preamble of this proposed rule, we are including— • Proposed changes to MS–DRG classifications based on our yearly review. • Proposed application of the documentation and coding adjustment to hospital-specific rates for FY 2010 resulting from implementation of the MS–DRG system. • A discussion of the Research Triangle International, Inc. (RTI) and RAND Corporation reports and recommendations relating to charge compression, including a solicitation of public comments on the ‘‘over’’ standardization of hospital charges. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 24087 • Proposed recalibrations of the MS– DRG relative weights. We are also presenting a listing and discussion of hospital-acquired conditions (HACs), including infections, that are subject to the statutorily required quality adjustment in MS–DRG payments for FY 2010. We are presenting our evaluation and analysis of the FY 2010 applicants for add-on payments for high-cost new medical services and technologies (including public input, as directed by Pub. L. 108–173, obtained in a town hall meeting). 2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals In section III. of the preamble to this proposed rule, we are proposing revisions to the wage index for acute care hospitals and the annual update of the wage data. Specific issues addressed include the following: • Second year of the 3-year transition from national to within-State budget neutrality for the rural floor and imputed floor. • Final year of the 2-year transition for changes in the average hourly wage criterion for geographic reclassifications. • Changes to the CBSA designations. • The proposed FY 2010 wage index update using wage data from cost reporting periods that began during FY 2007. • Analysis and implementation of the proposed FY 2010 occupational mix adjustment to the wage index for acute care hospitals, including the use of data from the 2007–2008 occupational mix survey. • Proposed revisions to the wage index for acute care hospitals based on hospital redesignations and reclassifications. • The proposed adjustment to the wage index for acute care hospitals for FY 2010 based on commuting patterns of hospital employees who reside in a county and work in a different area with a higher wage index. • The timetable for reviewing and verifying the wage data used to compute the proposed FY 2010 wage index for acute care hospitals. 3. Proposed Rebasing and Revision of the Hospital Market Basket for Acute Care Hospitals In section IV. of the preamble of this proposed rule, we are proposing to rebase and revise the acute care hospital operating and capital market baskets to be used in developing the FY 2010 update factor for the operating and capital prospective payment rates and the FY 2010 update factor for the E:\FR\FM\22MYP2.SGM 22MYP2 24088 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules excluded hospital rate-of-increase limits. We also are setting forth the data sources used to determine the proposed revised market basket relative weights. 4. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs In section V. of the preamble of this proposed rule, we discuss a number of the provisions of the regulations in 42 CFR Parts 412, 413, and 489, including the following: • The reporting of hospital quality data as a condition for receiving the full annual payment update increase. • Discussion of applying the correct budget neutrality adjustment for the FY 2002-based hospital-specific rates for MDHs. • The proposed updated national and regional case-mix values and discharges for purposes of determining RRC status. • The statutorily-required IME adjustment factor for FY 2010. • Proposed changes to the policies governing payments to Medicare disproportionate share hospitals, including proposed policies relating to the inclusion of labor and delivery patient days in the calculation of the DSH payment adjustment, calculation of inpatient days in the Medicaid fraction for the Medicare DSH calculation, and exclusion of observation beds and patient days from the Medicare DSH calculation and from the bed count for the IME adjustment. • Proposed changes to the policies governing payment for direct GME. • Proposed changes to policies on hospital emergency services under EMTALA relating to the applicability of sanctions under EMTALA. • Discussion of the implementation of the Rural Community Hospital Demonstration Program in FY 2010. • Proposed technical correction to the regulations governing the calculation of the Federal rate under the IPPS. sroberts on PROD1PC70 with FRONTMATTER 5. FY 2010 Policy Governing the IPPS for Capital-Related Costs In section VI. of the preamble to this proposed rule, we discuss the payment policy requirements for capital-related costs and capital payments to hospitals for FY 2010. We also are proposing to remove a section of the regulations relating to the phase-out of the capital IME adjustment for FY 2009 to implement the provisions of section 4301(b) of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111– 5). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 6. Proposed Changes to the Payment Rates for Certain Excluded Hospitals: Rate-of-Increase Percentages In section VII. of the preamble of this proposed rule, we discuss— • Proposed changes to payments to excluded hospitals. • Proposed changes to the regulations governing satellite facilities of hospitals. • Proposed changes relating to payments to CAHs, including payment for clinical laboratory tests furnished by CAHs and payment for outpatient facility services when a CAH elects the optional payment method. • Proposed changes to the rules governing provider-based status of facilities and a proposed technical correction to the regulations governing provider-based entities. 7. Proposed Changes to the LTCH PPS In section VIII.A. through C. and F. of the preamble of this proposed rule, we set forth proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for RY 2010, including the annual update of the MS–LTC–DRG classifications and relative weights for use under the LTCH PPS for RY 2010, the proposed use of the FY 2002-based RPL market basket for LTCHs, and proposed technical corrections to the LTCH PPS regulations. In section VIII.D. of the preamble of this proposed rule, we discuss our ongoing monitoring protocols under the LTCH PPS. In section VIII.E., we discuss the Research Triangle Institute, International (RTI) Phase III Report on its evaluation of the feasibility of establishing facility and patient criteria for LTCHs, as recommended by MedPAC in its June 2004 Report to Congress. 8. Determining Proposed Prospective Payment Operating and Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals In the Addendum to this proposed rule, we set forth proposed changes to the amounts and factors for determining the proposed FY 2010 prospective payment rates for operating costs and capital-related costs for acute care hospitals. We also establish the proposed threshold amounts for outlier cases. In addition, we address the proposed update factors for determining the rate-of-increase limits for cost reporting periods beginning in FY 2010 for hospitals excluded from the IPPS. 9. Determining Proposed Prospective Payment Rates for LTCHs In the Addendum to this proposed rule, we set forth proposed changes to PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 the amounts and factors for determining the proposed RY 2010 prospective standard Federal rate. We also establish the proposed adjustments for wage levels, the labor-related share, the costof-living adjustment, and high-cost outliers, including the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS. 10. Impact Analysis In Appendix A of this proposed rule, we set forth an analysis of the impact that the proposed changes would have on affected acute care hospitals and LTCHs. 11. Recommendation of Update Factors for Operating Cost Rates of Payment for Hospital Inpatient Services In Appendix B of this proposed rule, as required by sections 1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the appropriate percentage changes for FY 2010 for the following: • A single average standardized amount for all areas for hospital inpatient services paid under the IPPS for operating costs of acute care hospitals (and hospital-specific rates applicable to SCHs and MDHs). • Target rate-of-increase limits to the allowable operating costs of hospital inpatient services furnished by certain hospitals excluded from the IPPS. • The standard Federal rate for hospital inpatient services furnished by LTCHs. 12. Discussion of Medicare Payment Advisory Commission Recommendations Under section 1805(b) of the Act, MedPAC is required to submit a report to Congress, no later than March 1 of each year, in which MedPAC reviews and makes recommendations on Medicare payment policies. MedPAC’s March 2008 recommendations concerning hospital inpatient payment policies address the update factor for hospital inpatient operating costs and capital-related costs under the IPPS, for hospitals and distinct part hospital units excluded from the IPPS, and for LTCHs. We address these recommendations in Appendix B of this proposed rule. For further information relating specifically to the MedPAC March 2008 report or to obtain a copy of the report, contact MedPAC at (202) 220–3700 or visit MedPAC’s Web site at: https:// www.medpac.gov. E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules E. Public Comments Received on Two LTCH PPS Interim Final Rules With Comment Period Issued in 2008 On May 6, 2008 and May 22, 2008, we issued in the Federal Register two interim final rules with comment periods relating to the LTCH PPS (73 FR 24871 and 73 FR 29699, respectively), which implement section 114 of Public Law 110–173 (MMSEA). The May 6, 2008 interim final rule with comment period implemented provisions of section 114 of Public Law 110–173 relating to a 3-year delay in the application of certain provisions of the payment adjustment for short-stay outliers and revisions to the RY 2008 standard Federal rate for LTCHs. The May 22, 2008 interim final rule with comment period implemented certain provisions of section 114 of Public Law 110–173 relating to a 3-year moratorium on the establishment of new LTCHs and LTCH satellite facilities and on increases in beds in existing LTCHs and LTCH satellite facilities. The May 22, 2008 interim final rule with comment period also implemented a 3-year delay in the application of certain payment policies that apply to payment adjustments for discharges from LTCHs and LTCH satellite facilities that were admitted from certain referring hospitals in excess of various percentage thresholds. Section 4302 of the American Recovery and Reinvestment Act of 2009 (ARRA, Pub. L. 111–5) included several amendments to section 114 of Public Law 110–173. We have issued instructions to the fiscal intermediaries and Medicare administrative contractors (MACs) to interpret these amendments (Change Request 6444). We intend to implement the provisions of section 4302 of Public Law 111–5 by issuing an interim final rule with comment period along with the FY 2010 IPPS and RY 2010 LTCH PPS final rule that is scheduled for publication in August 2009. In the FY 2010 IPPS and RY 2010 LTCH PPS final rule, we also intend to respond to the public comments that we received on the two interim final rules with comment period noted above and finalize those provisions, as appropriate. sroberts on PROD1PC70 with FRONTMATTER II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS– DRG) Classifications and Relative Weights A. Background Section 1886(d) of the Act specifies that the Secretary shall establish a classification system (referred to as DRGs) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 assigned to each DRG. Therefore, under the IPPS, we pay for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary’s stay is assigned. The formula used to calculate payment for a specific case multiplies an individual hospital’s payment rate per case by the weight of the DRG to which the case is assigned. Each DRG weight represents the average resources required to care for cases in that particular DRG, relative to the average resources used to treat cases in all DRGs. Congress recognized that it would be necessary to recalculate the DRG relative weights periodically to account for changes in resource consumption. Accordingly, section 1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG classifications and relative weights at least annually. These adjustments are made to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. B. MS–DRG Reclassifications 1. General As discussed in the preamble to the FY 2008 IPPS final rule with comment period (72 FR 47138), we focused our efforts in FY 2008 on making significant reforms to the IPPS consistent with the recommendations made by MedPAC in its ‘‘Report to the Congress, PhysicianOwned Specialty Hospitals’’ in March 2005. MedPAC recommended that the Secretary refine the entire DRG system by taking severity of illness into account and applying hospital-specific relative value (HSRV) weights to DRGs.1 We began this reform process by adopting cost-based weights over a 3-year transition period beginning in FY 2007 and making interim changes to the DRG system for FY 2007 by creating 20 new CMS DRGs and modifying 32 other DRGs across 13 different clinical areas involving nearly 1.7 million cases. As described in more detail below, these refinements were intermediate steps towards comprehensive reform of both the relative weights and the DRG system as we undertook further study. For FY 2008, we adopted 745 new Medicare Severity DRGs (MS–DRGs) to replace the CMS DRGs. We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a full detailed discussion of how the MS–DRG system, based on severity levels of illness, was established (72 FR 47141). Currently, cases are classified into MS–DRGs for payment under the IPPS based on the following information reported by the hospital: The principal diagnosis, up to eight additional diagnoses, and up to six procedures performed during the stay. In a small number of MS–DRGs, classification is also based on the age, sex, and discharge status of the patient. The diagnosis and procedure information is reported by the hospital using codes from the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). The process of developing the MS– DRGs was begun by dividing all possible principal diagnoses into mutually exclusive principal diagnosis areas, referred to as Major Diagnostic Categories (MDCs). The MDCs were formulated by physician panels to ensure that the DRGs would be clinically coherent. The diagnoses in each MDC correspond to a single organ system or etiology and, in general, are associated with a particular medical specialty. Thus, in order to maintain the requirement of clinical coherence, no final MS–DRG could contain patients in different MDCs. For example, MDC 6 is Diseases and Disorders of the Digestive System. This approach is used because clinical care is generally organized in accordance with the organ system affected. However, some MDCs are not constructed on this basis because they involve multiple organ systems (for example, MDC 22 (Burns)). For FY 2009, cases are assigned to one of 746 MS– DRGs in 25 MDCs. The table below lists the 25 MDCs. MAJOR DIAGNOSTIC CATEGORIES (MDCS) 1 ....... 2 ....... 3 ....... 4 ....... 5 ....... 6 ....... 7 ....... 8 ....... 9 ....... 10 ..... 11 ..... 1 Medicare Payment Advisory Commission: Report to the Congress, Physician-Owned Specialty Hospitals, March 2005, page viii. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 24089 12 ..... E:\FR\FM\22MYP2.SGM Diseases and Disorders of the Nervous System. Diseases and Disorders of the Eye. Diseases and Disorders of the Ear, Nose, Mouth, and Throat. Diseases and Disorders of the Respiratory System. Diseases and Disorders of the Circulatory System. Diseases and Disorders of the Digestive System. Diseases and Disorders of the Hepatobiliary System and Pancreas. Diseases and Disorders of the Musculoskeletal System and Connective Tissue. Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast. Endocrine, Nutritional and Metabolic Diseases and Disorders. Diseases and Disorders of the Kidney and Urinary Tract. Diseases and Disorders of the Male Reproductive System. 22MYP2 24090 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules MAJOR DIAGNOSTIC CATEGORIES (MDCS)—Continued 13 ..... 14 ..... 15 ..... 16 ..... 17 ..... 18 ..... 19 ..... 20 ..... 21 ..... 22 ..... 23 ..... 24 ..... 25 ..... PRE-MAJOR DIAGNOSTIC CATEGORIES (PRE-MDCS)—Continued Diseases and Disorders of the Female Reproductive System. Pregnancy, Childbirth, and the Puerperium. Newborns and Other Neonates with Conditions Originating in the Perinatal Period. Diseases and Disorders of the Blood and Blood Forming Organs and Immunological Disorders. Myeloproliferative Diseases and Disorders and Poorly Differentiated Neoplasms. Infectious and Parasitic Diseases (Systemic or Unspecified Sites). Mental Diseases and Disorders. Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental Disorders. Injuries, Poisonings, and Toxic Effects of Drugs. Burns. Factors Influencing Health Status and Other Contacts with Health Services. Multiple Significant Trauma. Human Immunodeficiency Virus Infections. In general, cases are assigned to an MDC based on the patient’s principal diagnosis before assignment to an MS– DRG. However, under the most recent version of the Medicare GROUPER (Version 26.0), there are 13 MS–DRGs to which cases are directly assigned on the basis of ICD–9–CM procedure codes. These MS–DRGs are for heart transplant or implant of heart assist systems; liver and/or intestinal transplants; bone marrow transplants; lung transplants; simultaneous pancreas/kidney transplants; pancreas transplants; and tracheostomies. Cases are assigned to these MS–DRGs before they are classified to an MDC. The table below lists the 13 current pre-MDCs. PRE-MAJOR DIAGNOSTIC CATEGORIES (PRE-MDCS) MS–DRG 001. MS–DRG 002. sroberts on PROD1PC70 with FRONTMATTER MS–DRG 003. MS–DRG 004. MS–DRG 005. VerDate Nov<24>2008 Heart Transplant or Implant of Heart Assist System with MCC. Heart Transplant or Implant of Heart Assist System without MCC. ECMO or Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis with Major O.R. Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis with Major O.R. Liver Transplant with MCC or Intestinal Transplant. 08:10 May 21, 2009 Jkt 217001 MS–DRG 006. MS–DRG 007. MS–DRG 008. MS–DRG 009. MS–DRG 010. MS–DRG 011. MS–DRG 012. MS–DRG 013. Liver Transplant without MCC. Lung Transplant. Simultaneous Pancreas/Kidney Transplant. Bone Marrow Transplant. Pancreas Transplant. Tracheostomy for Face, Mouth, and Neck Diagnoses with MCC. Tracheostomy for Face, Mouth, and Neck Diagnoses with CC. Tracheostomy for Face, Mouth, and Neck Diagnoses without CC/MCC. Once the MDCs were defined, each MDC was evaluated to identify those additional patient characteristics that would have a consistent effect on hospital resource consumption. Because the presence of a surgical procedure that required the use of the operating room would have a significant effect on the type of hospital resources used by a patient, most MDCs were initially divided into surgical DRGs and medical DRGs. Surgical DRGs are based on a hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. Medical DRGs generally are differentiated on the basis of diagnosis and age (0 to 17 years of age or greater than 17 years of age). Some surgical and medical DRGs are further differentiated based on the presence or absence of a complication or comorbidity (CC) or a major complication or comorbidity (MCC). Generally, nonsurgical procedures and minor surgical procedures that are not usually performed in an operating room are not treated as O.R. procedures. However, there are a few non-O.R. procedures that do affect MS–DRG assignment for certain principal diagnoses. An example is extracorporeal shock wave lithotripsy for patients with a principal diagnosis of urinary stones. Lithotripsy procedures are not routinely performed in an operating room. Therefore, lithotripsy codes are not classified as O.R. procedures. However, our clinical advisors believe that patients with urinary stones who undergo extracorporeal shock wave lithotripsy should be considered similar to other patients who undergo O.R. procedures. Therefore, we treat this group of patients similar to patients undergoing O.R. procedures. Once the medical and surgical classes for an MDC were formed, each diagnosis PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 class was evaluated to determine if complications or comorbidities would consistently affect hospital resource consumption. Each diagnosis was categorized into one of three severity levels. These three levels include a major complication or comorbidity (MCC), a complication or comorbidity (CC), or a non-CC. Physician panels classified each diagnosis code based on a highly iterative process involving a combination of statistical results from test data as well as clinical judgment. As stated earlier, we refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a full detailed discussion of how the MS–DRG system was established based on severity levels of illness (72 FR 47141). A patient’s diagnosis, procedure, discharge status, and demographic information is entered into the Medicare claims processing systems and subjected to a series of automated screens called the Medicare Code Editor (MCE). The MCE screens are designed to identify cases that require further review before classification into an MS–DRG. After patient information is screened through the MCE and any further development of the claim is conducted, the cases are classified into the appropriate MS–DRG by the Medicare GROUPER software program. The GROUPER program was developed as a means of classifying each case into an MS–DRG on the basis of the diagnosis and procedure codes and, for a limited number of MS–DRGs, demographic information (that is, sex, age, and discharge status). After cases are screened through the MCE and assigned to an MS–DRG by the GROUPER, the PRICER software calculates a base MS–DRG payment. The PRICER calculates the payment for each case covered by the IPPS based on the MS–DRG relative weight and additional factors associated with each hospital, such as IME and DSH payment adjustments. These additional factors increase the payment amount to hospitals above the base MS–DRG payment. The records for all Medicare hospital inpatient discharges are maintained in the Medicare Provider Analysis and Review (MedPAR) file. The data in this file are used to evaluate possible MS– DRG classification changes and to recalibrate the MS–DRG weights. However, in the FY 2000 IPPS final rule (64 FR 41500), we discussed a process for considering non-MedPAR data in the recalibration process. In order for us to consider using particular non-MedPAR data, we must have sufficient time to evaluate and test the data. The time necessary to do so depends upon the E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER nature and quality of the non-MedPAR data submitted. Generally, however, a significant sample of the non-MedPAR data should be submitted by midOctober for consideration in conjunction with the next year’s proposed rule. This date allows us time to test the data and make a preliminary assessment as to the feasibility of using the data. Subsequently, a complete database should be submitted by early December for consideration in conjunction with the next year’s proposed rule. As we indicated above, for FY 2008, we made significant improvements in the DRG system to recognize severity of illness and resource usage by adopting MS–DRGs that were reflected in the FY 2008 GROUPER, Version 25.0, and were effective for discharges occurring on or after October 1, 2007. Our MS–DRG analysis for the FY 2009 final rule was based on data from the March 2008 update of the FY 2007 MedPAR file, which contained hospital bills received through March 31, 2008, for discharges occurring through September 30, 2007. For this proposed rule, for FY 2010, our MS–DRG analysis is based on data from the September 2008 update of the FY 2008 MedPAR file, which contains hospital bills received through September 30, 2008, for discharges occurring through September 30, 2008. 2. Yearly Review for Making MS–DRG Changes Many of the changes to the MS–DRG classifications we make annually are the result of specific issues brought to our attention by interested parties. We encourage individuals with comments about MS–DRG classifications to submit these comments no later than early December of each year so they can be carefully considered for possible inclusion in the annual proposed rule and, if included, may be subjected to public review and comment. Therefore, similar to the timetable for interested parties to submit non-MedPAR data for consideration in the MS–DRG recalibration process, comments about MS–DRG classification issues should be submitted no later than early December in order to be considered and possibly included in the next annual proposed rule updating the IPPS. The actual process of forming the MS–DRGs was, and will likely continue to be, highly iterative, involving a combination of statistical results from test data combined with clinical judgment. In the FY 2008 IPPS final rule (72 FR 47140 through 47189), we described in detail the process we used to develop the MS–DRGs that we adopted for FY 2008. In addition, in VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 deciding whether to make further modification to the MS–DRGs for particular circumstances brought to our attention, we considered whether the resource consumption and clinical characteristics of the patients with a given set of conditions are significantly different than the remaining patients in the MS–DRG. We evaluated patient care costs using average charges and lengths of stay as proxies for costs and relied on the judgment of our medical advisors to decide whether patients are clinically distinct or similar to other patients in the MS–DRG. In evaluating resource costs, we considered both the absolute and percentage differences in average charges between the cases we selected for review and the remainder of cases in the MS–DRG. We also considered variation in charges within these groups; that is, whether observed average differences were consistent across patients or attributable to cases that were extreme in terms of charges or length of stay, or both. Further, we considered the number of patients who will have a given set of characteristics and generally preferred not to create a new MS–DRG unless it would include a substantial number of cases. C. Adoption of the MS–DRGs in FY 2008 In the FY 2006, FY 2007, and FY 2008 IPPS final rules, we discussed a number of recommendations made by MedPAC regarding revisions to the DRG system used under the IPPS (70 FR 47473 through 47482; 71 FR 47881 through 47939; and 72 FR 47140 through 47189). As we noted in the FY 2006 IPPS final rule, we had insufficient time to complete a thorough evaluation of these recommendations for full implementation in FY 2006. However, we did adopt severity-weighted cardiac DRGs in FY 2006 to address public comments on this issue and the specific concerns of MedPAC regarding cardiac surgery DRGs. We also indicated that we planned to further consider all of MedPAC’s recommendations and thoroughly analyze options and their impacts on the various types of hospitals in the FY 2007 IPPS proposed rule. For FY 2007, we began this process. In the FY 2007 IPPS proposed rule, we proposed to adopt Consolidated Severity DRGs (CS DRGs) for FY 2008 (if not earlier). Based on public comments received on the FY 2007 IPPS proposed rule, we decided not to adopt the CS DRGs. In the FY 2007 IPPS final rule (71 FR 47906 through 47912), we discussed several concerns raised by commenters regarding the proposal to adopt CS DRGs. We acknowledged the many comments suggesting the logic of PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 24091 Medicare’s DRG system should continue to remain in the public domain as it has since the inception of the PPS. We also acknowledged concerns about the impact on hospitals and software vendors of moving to a proprietary system. Several commenters suggested that CMS refine the existing DRG classification system to preserve the many policy decisions that were made over the last 20 years and were already incorporated into the DRG system, such as complexity of services and new device technologies. Consistent with the concerns expressed in the public comments, this option had the advantage of using the existing DRGs as a starting point (which was already familiar to the public) and retained the benefit of many DRG decisions that were made in recent years. We stated our belief that the suggested approach of incorporating severity measures into the existing DRG system was a viable option that would be evaluated. Therefore, we decided to make interim changes to the existing DRGs for FY 2007 by creating 20 new DRGs involving 13 different clinical areas that would significantly improve the CMS DRG system’s recognition of severity of illness. We also modified 32 DRGs to better capture differences in severity. The new and revised DRGs were selected from 40 existing CMS DRGs that contained 1,666,476 cases and represented a number of body systems. In creating these 20 new DRGs, we deleted 8 existing DRGs and modified 32 existing DRGs. We indicated that these interim steps for FY 2007 were being taken as a prelude to more comprehensive changes to better account for severity in the DRG system by FY 2008. In the FY 2007 IPPS final rule (71 FR 47898), we indicated our intent to pursue further DRG reform through two initiatives. First, we announced that we were in the process of engaging a contractor to assist us with evaluating alternative DRG systems that were raised as potential alternatives to the CMS DRGs in the public comments. Second, we indicated our intent to review over 13,000 ICD–9–CM diagnosis codes as part of making further refinements to the current CMS DRGs to better recognize severity of illness based on the work that CMS (then HCFA) did in the mid-1990’s in connection with adopting severity DRGs. We describe below the progress we have made on these two initiatives, our actions for FY 2008 and FY 2009, and our proposals for FY 2010 based on our continued analysis of reform of the DRG system. We note that the adoption of the MS– DRGs to better recognize severity of E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24092 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules illness has implications for the outlier threshold, the application of the postacute care transfer policy, the measurement of real case-mix versus apparent case-mix, and the IME and DSH payment adjustments. We discuss these implications for FY 2010 in other sections of this preamble and in the Addendum to this proposed rule. In the FY 2007 IPPS proposed rule, we discussed MedPAC’s recommendations to move to a costbased HSRV weighting methodology using HSRVs beginning with the FY 2007 IPPS proposed rule for determining the DRG relative weights. Although we proposed to adopt the HSRV weighting methodology for FY 2007, we decided not to adopt the proposed methodology in the final rule after considering the public comments we received on the proposal. Instead, in the FY 2007 IPPS final rule, we adopted a cost-based weighting methodology without the HSRV portion of the proposed methodology. The cost-based weights were adopted over a 3-year transition period in 1/3 increments between FY 2007 and FY 2009. In addition, in the FY 2007 IPPS final rule, we indicated our intent to further study the HSRV-based methodology as well as other issues brought to our attention related to the cost-based weighting methodology adopted in the FY 2007 final rule. There was significant concern in the public comments that our costbased weighting methodology does not adequately account for charge compression—the practice of applying a higher percentage charge markup over costs to lower cost items and services and a lower percentage charge markup over costs to higher cost items and services. Further, public commenters expressed concern about potential inconsistencies between how costs and charges are reported on the Medicare cost reports and charges on the Medicare claims. In the FY 2007 IPPS final rule, we used costs and charges from the cost report to determine departmental level cost-to-charge ratios (CCRs) which we then applied to charges on the Medicare claims to determine the cost-based weights. The commenters were concerned about potential distortions to the cost-based weights that would result from inconsistent reporting between the cost reports and the Medicare claims. After publication of the FY 2007 IPPS final rule, we entered into a contract with RTI International (RTI) to study both charge compression and to what extent our methodology for calculating DRG relative weights is affected by inconsistencies between how hospitals VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 report costs and charges on the cost reports and how hospitals report charges on individual claims. Further, as part of its study of alternative DRG systems, the RAND Corporation analyzed the HSRV cost-weighting methodology. We refer readers to section II.E. of the preamble of this proposed rule for discussion of the issue of charge compression and the HSRV cost-weighting methodology for FY 2010. We believe that revisions to the DRG system to better recognize severity of illness and changes to the relative weights based on costs rather than charges are improving the accuracy of the payment rates in the IPPS. We agree with MedPAC that these refinements should be pursued. Although we continue to caution that any prospective payment system based on grouping cases will always present some opportunities for providers to specialize in cases they believe have higher margins, we believe that the changes we have adopted and the continuing reforms we are proposing to make in this proposed rule for FY 2010 will improve payment accuracy and reduce financial incentives to create specialty hospitals. We refer readers to section II.D. of the FY 2008 IPPS final rule with comment period for a full discussion of how the MS–DRG system was established based on severity levels of illness (72 FR 47141). D. Proposed FY 2010 MS–DRG Documentation and Coding Adjustment, Including the Applicability to the Hospital-Specific Rates and the Puerto Rico-Specific Standardized Amount 1. Background on the Prospective MS– DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110–90 As we discussed earlier in this preamble, we adopted the MS–DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize severity of illness in Medicare payment rates for acute care hospitals. The adoption of the MS–DRG system resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008 (currently, 746 DRGs, which include 1 additional MS–DRG created in FY 2009). By increasing the number of DRGs and more fully taking into account patients’ severity of illness in Medicare payment rates for acute care hospitals, the use of MS–DRGs encourages hospitals to improve their documentation and coding of patient diagnoses. In the FY 2008 IPPS final rule with comment period (72 FR 47175 PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 through 47186), we indicated that we believe the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for additional documentation and coding. In that final rule with comment period, we exercised our authority under section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget neutrality by adjusting the national standardized amount to eliminate the estimated effect of changes in coding or classification that do not reflect real changes in case-mix. Our actuaries estimated that maintaining budget neutrality required an adjustment of ¥4.8 percent to the national standardized amount. We phased in this ¥4.8 percent adjustment over 3 years. Specifically, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010. On September 29, 2007, Congress enacted the TMA [Transitional Medical Assistance], Abstinence Education, and QI [Qualifying Individuals] Programs Extension Act of 2007, Public Law 110– 90. Section 7(a) of Public Law 110–90 reduced the documentation and coding adjustment made as a result of the MS– DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009. Section 7(a) of Public Law 110–90 did not adjust the FY 2010 ¥1.8 percent documentation and coding adjustment promulgated in the FY 2008 IPPS final rule with comment period. To comply with section 7(a) of Public Law 110–90, we promulgated a final rule on November 27, 2007 (72 FR 66886) that modified the IPPS documentation and coding adjustment for FY 2008 to ¥0.6 percent, and revised the FY 2008 payment rates, factors, and thresholds accordingly. These revisions were effective on October 1, 2007. For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent instead of the ¥1.8 percent adjustment established in the FY 2008 IPPS final rule with comment period. As discussed in the FY 2009 IPPS final rule (73 FR 48447) and required by statute, we applied a documentation and coding adjustment of ¥0.9 percent to the FY 2009 IPPS national standardized amount. The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period, as amended by Public Law 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules adjustment for FY 2009 was in addition to the ¥0.6 percent adjustment for FY 2008, yielding a combined effect of ¥1.5 percent. sroberts on PROD1PC70 with FRONTMATTER 2. Prospective Adjustment to the Average Standardized Amounts Required by Section 7(b)(1)(A) of Public Law 110–90 Section 7(b)(1)(A) of Public Law 110– 90 requires that if the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different than the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, the Secretary shall make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average standardized amounts for subsequent fiscal years in order to eliminate the effect of such coding or classification changes. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as the payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 reflected the change that occurred in those years. 3. Recoupment or Repayment Adjustments in FYs 2010 through 2012 Required by Public Law 110–90 If, based on a retroactive evaluation of claims data, the Secretary determines that implementation of the MS–DRG system resulted in changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 or FY 2009 that are different from the prospective documentation and coding adjustments applied under section 7(a) of Public Law 110–90, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act. This adjustment must offset the estimated increase or decrease in aggregate payments for FYs 2008 and 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. This adjustment is in addition to making an appropriate adjustment to the standardized amounts under section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) of Public Law 110–90. That is, these VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 adjustments are intended to recoup (or repay) spending in excess of (or less than) spending that would have occurred had the prospective adjustments for changes in documentation and coding applied in FY 2008 and FY 2009 precisely matched the changes that occurred in those years. Public Law 110–90 requires that the Secretary make these recoupment or repayment adjustments for discharges occurring during FYs 2010, 2011, and 2012. 4. Retrospective Evaluation of FY 2008 Claims Data In order to implement the requirements of section 7 of Public Law 110–90, we indicated in the FY 2009 IPPS final rule (73 FR 48450) that we planned a thorough retrospective evaluation of our claims data. We stated that the results of this evaluation would be used by our actuaries to determine any necessary payment adjustments to the standardized amounts under section 1886(d) of the Act beginning in FY 2010 to ensure the budget neutrality of the MS–DRGs implementation for FY 2008 and FY 2009, as required by law. In the FY 2009 IPPS proposed rule (73 FR 23541 through 23542), we described our preliminary plan for a retrospective analysis of inpatient hospital claims data and invited public input on our proposed methodology. In that proposed rule, we indicated that we intended to measure and corroborate the extent of the overall national average changes in case-mix for FY 2008 and FY 2009. We expected that the two largest parts of this overall national average change would be attributable to underlying changes in actual patient severity and to documentation and coding improvements under the MS–DRG system. In order to separate the two effects, we planned to isolate the effect of shifts in cases among base DRGs from the effect of shifts in the types of cases within-base DRGs. The MS–DRGs divide the base DRGs into three severity levels (with MCC, with CC and without CC); the previously used CMS DRGs had only two severity levels (with CC and without CC). Under the CMS DRG system, the majority of hospital discharges had a secondary diagnosis which was on the CC list, which led to the higher severity level. The MS–DRGs significantly changed the code lists of what was classified as an MCC or a CC. Many codes that were previously classified as a CC are no longer included on the MS–DRG CC list because the data and clinical review showed these conditions did not lead to a significant PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 24093 increase in resource use. The addition of a new level of high severity conditions, the MCC list, also provided a new incentive to code more precisely in order to increase the severity level. We anticipated that hospitals would examine the MS–DRG MCC and CC code lists and then work with physicians and coders on documentation and coding practices so that coders could appropriately assign codes from the highest possible severity level. We note that there have been numerous seminars and training sessions on this particular coding issue. The topic of improving documentation practices in order to code conditions on the MCC list was also discussed extensively by participants at the March 11–12, 2009 ICD–9–CM Coordination and Maintenance Committee meeting. Participants discussed their hospitals’ efforts to encourage physicians to provide more precise documentation so that coders could appropriately assign codes that would lead to a higher severity level. Because we expected most of the documentation and coding changes under the MS–DRG system would occur in the secondary diagnoses, we believed that the shifts among base DRGs were less likely to be the result of the MS–DRG system and the shifts within base DRGs were more likely to be the result of the MS–DRG system. We also anticipated evaluating data to identify the specific MS–DRGs and diagnoses that contributed significantly to the documentation and coding payment effect and to quantify their impact. This step entailed analysis of the secondary diagnoses driving the shifts in severity within specific base DRGs. In that same proposed rule, we also stated that, while we believe that the data analysis plan described previously will produce an appropriate estimate of the extent of case-mix changes resulting from documentation and coding changes, we might decide, if feasible, to use historical data from our Hospital Payment Monitoring Program (HPMP) to corroborate the within-base DRG shift analysis. The HPMP is supported by the Medicare Clinical Data Abstraction Center (CDAC). In the FY 2009 IPPS proposed rule, we solicited public comments on the analysis plans described above, as well as suggestions on other possible approaches for performing a retrospective analysis to identify the amount of case-mix changes that occurred in FY 2008 and FY 2009 that did not reflect real increases in patients’ severity of illness. A few commenters, including MedPAC, expressed support for the E:\FR\FM\22MYP2.SGM 22MYP2 24094 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules claims data through the FY 2008 GROUPER (Version 25.0) by the CMI obtained by grouping these same FY 2008 claims through the FY 2007 GROUPER (Version 24.0). This resulted in a value of 1.028. Because these cases are the same FY 2008 cases grouped using the Versions 24.0 and 25.0 of the GROUPER, we attribute this increase primarily to two factors: (1) The effect of changes in documentation and coding under the MS–DRG system; and (2) the measurement effect from the calibration of the GROUPER. We estimated the measurement effect from the calibration of the GROUPER by dividing the CMI obtained by grouping cases in the FY 2007 claims data through the FY 2008 GROUPER by the CMI obtained by grouping cases in these same claims through the FY 2007 GROUPER. This resulted in a value of 1.003. In order to isolate the documentation and coding effect, we then divided the combined effect of the changes in documentation and coding and measurement (1.028) by the measurement effect (1.003) to yield 1.025. Therefore, our estimate of the documentation and coding increase is 2.5 percent. We then sought to corroborate this 2.5 percent estimate by examining the increases in the within-base DRGs as compared to the increases in the across base DRGs as described earlier in our analysis plan. In other words, we looked for improvements in code selection that would lead to a secondary diagnosis increasing the severity level to either a CC or an MCC level. We found that the within-base DRG increases were almost entirely responsible for the case-mix change, supporting our conclusion that the 2.5 percent estimate was an accurate reflection of the FY 2008 effect of changes in documentation and coding under the MS–DRG system. In fact, almost every base DRG that was split into different severity levels under the MS–DRG system experienced increases in the within-base DRGs. In Figure 1 below, we show that, between FY 2007 and FY 2008, there was a 5 percentage point increase in the discharges with an MCC from 21 percent to 26 percent and a corresponding decrease of 5 percentage points from 56 percent to 51 percent in discharges without a CC or an MCC. We then further analyzed the changes in the within-base DRGs to determine which MS–DRGs had the highest contributions to this increase. Consistent with the expectations of our medical coding experts concerning areas with potential for documentation and coding improvements, the top contributors were heart failure, chronic obstructive pulmonary disease, and simple pneumonia and pleurisy. In fact, the coding of heart failure was discussed extensively at the March 11– 12, 2009 ICD–9–CM Coordination and Maintenance Committee meeting. Heart failure is a very common secondary diagnosis among Medicare hospital admissions. The heart failure codes are assigned to all three severity levels. Some are classified as non-CCs, while others are on the CC and MCC lists. By changing physician documentation to more precisely identify the type of heart failure, coders are able to appropriately change the severity level of cases from the lowest level (non-CC) to a higher severity level (CC or MCC). This point was stressed repeatedly at the March 11–12, 2009 ICD–9–CM Coordination and Maintenance Committee meeting as coders discussed their work with physicians on this coding issue. Many of the participants indicated that VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.000</GPH> sroberts on PROD1PC70 with FRONTMATTER analytic approach described in the FY 2009 IPPS proposed rule. A number of other commenters expressed concerns about certain aspects of the approach and/or suggested alternate analyses or study designs. In addition, one commenter recommended that any determination or retrospective evaluation by the actuaries of the impact of the MS–DRGs on case-mix be open to public scrutiny prior to the implementation of the payment adjustments beginning in FY 2010. We took these comments into consideration as we developed our proposed analysis plan (described in greater detail below) and in this proposed rule are seeking comment on our methodology. We performed a retrospective evaluation of the FY 2008 data for claims paid through December 2008. Based on this evaluation, our actuaries have determined that implementation of the MS–DRG system resulted in a 2.5 percent change due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008. In performing this analysis, we first divided the case-mix index (CMI) obtained by grouping the FY 2008 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules additional work was still needed with their physicians in order to document conditions in the medical record more precisely. The results of this analysis provides additional support for our conclusion that the 2.5 percent estimate accurately reflects the FY 2008 increases in documentation and coding under the MS–DRG system. While we attempted to use the CDAC data to distinguish real increase in casemix growth from documentation and coding in the overall case-mix number, we found aberrant data and significant variation across the FY 1999–FY 2007 analysis period. It was not possible to distinguish changes in documentation and coding from changes in real casemix in the CDAC data. Therefore, we concluded that the CDAC data would not support analysis of real case-mix growth that could be used in our retrospective evaluation of the FY 2008 claims data. Although we could not use the CDAC data, we did examine the overall growth in case-mix using the FY 2007 claims data in which we grouped cases using the FY 2007 GROUPER and the FY 2008 data in which we grouped cases using the FY 2008 GROUPER. We found the overall growth in case-mix was 1.9 percent. The implication of overall FY 2008 case-mix growth of 1.9 percent relative to our estimate of the FY 2008 documentation and coding effect and the GROUPER measurement effect is that real case-mix declined between FY 2007 and FY 2008. After additional data analysis, our actuaries determined that the 1.9 percent growth in overall casemix was consistent with our 2.5 percent estimate of the FY 2008 documentation and coding effect for reasons that included: (1) Our mathematical model for determining the 2.5 percent documentation and coding effect was corroborated by the amount of case-mix growth attributed to within-DRG improvements in secondary coding of MCCs and CCs; (2) our data analysis confirmed the substitution of specified diagnosis for unspecified diagnoses for such common conditions as heart failure and chronic obstructive pulmonary disease; and (3) there was a relative decline in above average cost short-stay surgical cases that can be performed on an outpatient basis, such as certain high volume pacemaker procedures. We also examined the differences in case-mix between the FY 2008 claims data in which cases were grouped through the FY 2008 GROUPER (Version 25.0) and the FY 2009 GROUPER (Version 26.0). This was to help inform analysis of the potential for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 increase in the documentation and coding effect in FY 2009. In FY 2008, we were transitioning to the fully implemented MS–DRG relative weights and the fully implemented cost-based weights. We found that the use of the transition weights mitigated the FY 2008 documentation and coding effect on expenditures. Using the FY 2009 relative weights, the documentation and coding effect would have been an estimated 3.2 percent in FY 2008 instead of our estimated 2.5 percent. Even assuming no continued improvement in documentation and coding in FY 2009, we estimate that the use of the FY 2009 relative weights will result in an additional 0.7 percent documentation and coding effect in FY 2009. After taking into account the results of our FY 2008 analysis and the expertise of our coding staff, our actuaries continue to estimate that the cumulative overall effect of documentation and coding improvements under the MS–DRG system will be 4.8 percent. However, our actuaries estimate that these improvements will be substantially complete by the end of FY 2009. Therefore, our current estimate of the FY 2009 MS–DRG documentation and coding effect is 2.3 percent. As in prior years, the FY 2008 MedPAR files are available to the public to allow independent analysis of the FY 2008 documentation and coding effect. Interested individuals may order these files by going to the Web site at https://www.cms.hhs.gov/ LimitedDataSets/ and clicking on MedPAR Limited Data Set (LDS)Hospital (National). This Web page will describe the file and provide directions and further detailed instructions for how to order. Persons placing an order must send the following: a Letter of Request, the LDS Data Use Agreement and Research Protocol (refer to the Web site for further instructions), the LDS Form, and a check for $3,655 to: Mailing address if using the U.S. Postal Service: Centers for Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, Baltimore, MD 21207– 0520. Mailing address if using express mail: Centers for Medicare & Medicaid Services, OFM/Division of Accounting—RDDC, 7500 Security Boulevard, C3–07–11, Baltimore, MD 21244–1850. We are seeking public comment on our methodology and analysis. We intend to update our analysis with FY 2008 data on claims paid through March 2008 in the FY 2010 IPPS final rule. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 24095 5. Proposed Adjustments for FY 2010 and Subsequent Years Authorized by Section 7(b)(1)(A) of Public Law 110–90 and Section 1886(d)(3)(vi) of the Act The estimated 2.5 percent change in FY 2008 case-mix due to changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 exceeded the ¥0.6 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90 by 1.9 percentage points. Under section 7(B)(1)(a) of Public Law 119–90, the Secretary is required to make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act to the average standardized amounts for subsequent fiscal years in order to eliminate the full effect of the documentation and coding changes. In addition, we note that the Secretary has the authority to make this prospective adjustment in FY 2010 under section 1886(d)(3)(A)(vi) of the Act. As we have consistently stated since the initial implementation of the MS–DRG system, we do not believe it is appropriate for expenditures to increase due to MS– DRG-related changes in documentation and coding that do not reflect real changes in case-mix. Therefore, we are proposing to change the average standardized amounts under section 1886(d) of the Act in FY 2010 by ¥1.9 percent, the difference between the changes in documentation and coding that do not reflect real changes in case-mix for discharges occurring during FY 2008 and the prospective adjustment applied under section 7 of Public Law 110–90. We are proposing to leave this adjustment in place for subsequent fiscal years in order to ensure that changes in documentation and coding resulting from the adoption of the MS–DRGs do not lead to an increase in aggregate payments not reflective of an increase in real casemix. We also estimate that the change in case-mix due to changes in documentation and coding that do not reflect real changes in case-mix for discharges occurring during FY 2009 will be 2.3 percent, which would exceed by 1.4 percentage points the ¥0.9 percent prospective documentation and coding adjustment for FY 2009 applied under section 7(a) of Public Law 100– 90. We have the statutory authority to adjust the FY 2010 rates for this estimated 1.4 percentage point increase. However, given that Public Law 100–90 requires a retrospective claims evaluation for the additional adjustments described in section II.D.6. of this preamble, we believe our E:\FR\FM\22MYP2.SGM 22MYP2 24096 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER evaluation of the extent of the overall national average changes in case-mix for FY 2009 should also be based on a retrospective evaluation of all FY 2009 claims data. Because we will not receive all FY 2009 claims data prior to publication of the final rule, we will address any difference between the increase in FY 2009 case-mix due to changes in documentation and coding that did not reflect real changes in casemix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90 in the FY 2011 rulemaking cycle. We are seeking public comment on the proposed ¥1.9 percent prospective adjustment to the standardized amounts under section 1886(d) of the Act to address the effects of documentation and coding changes unrelated to changes in real case-mix in FY 2008. In addition, we are seeking public comments on addressing in the FY 2011 rulemaking cycle any differences between the increase in FY 2009 casemix due to changes in documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90. 6. Additional Adjustment for FY 2010 Authorized by Section 7(b)(1)(B) of Public Law 110–90 As indicated above, the 2.5 percent change due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 exceeded the ¥0.6 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90 by 1.9 percentage points. Our actuaries currently estimate that this 1.9 percentage point increase resulted in an increase in aggregate payments of approximately $2.2 billion. As described earlier, section 7(b)(1)(B) of Public Law 110–90 requires an additional adjustment for discharges occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount of this increase in aggregate payments (including interest). Although section 7(b)(1)(B) of Public Law 110–90 requires us to make this adjustment in FYs 2010, 2011, and/or 2012, we have discretion as to when during this 3 year period we will apply the adjustment. For example, we could make adjustments to the standardized amounts under section 1886(d) of the Act in FY 2010, 2011, and 2012. Alternatively, we could delay offsetting VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the increase in FY 2008 aggregate payments by applying the adjustment required under section 7(b)(1)(B) of Public Law 110–90 only to FYs 2011 and 2012. We are not proposing to make an adjustment to FY 2010 to offset, in whole or in part, the estimated increase in aggregate payments for discharges occurring in FY 2008, but intend to address this issue in future rulemaking for FYs 2011 and 2012. That is, we will address recouping the additional expenditures that occurred in FY 2008 as a result of the 1.9 percentage point difference between the actual changes in documentation and coding that do not reflect real changes in case-mix, or 2.5 percent, and the ¥0.6 percent adjustment applied under Public Law 110–90 in FY 2011 and/or FY 2012, as required by law. While we have the statutory authority to make this ¥1.9 percent recoupment adjustment entirely in FY 2010, we are proposing to delay the adjustment until FY 2011 and FY 2012 because we do not have any data yet on the magnitude of the documentation and coding effect in FY 2009. If the documentation and coding effect were less in FY 2009 than our current estimates, it could lessen the anticipated recoupment adjustment that we currently estimate we would have to make for FY 2008 and FY 2009 combined. As we have the authority to recoup the aggregate effect of this 1.9 percentage point difference in FY 2008 IPPS payments in FY 2011 or FY 2012 (with interest), delaying this adjustment would have no effect on Federal budget outlays. For this reason, we are proposing to wait until we have a complete year of data on the FY 2009 documentation and coding effect before applying a recoupment adjustment for IPPS spending that occurred in FY 2008 or we estimate will occur in FY 2009. As discussed above, section 7(b)(1)(B) of Public Law 110–90 requires the Secretary to make an additional adjustment to the standardized amounts under section 1886(d) of the Act to offset the estimated increase or decrease in aggregate payments for FY 2009 (including interest) resulting from the difference between the estimated actual documentation and coding effect and the documentation and coding adjustments applied under section 7(a) of Public Law 110–90. This determination must be based on a retrospective evaluation of claims data. Because we will not receive all FY 2009 claims data prior to publication of the final rule, we intend to address any increase or decrease in FY 2009 payments in future rulemaking for FY 2011 and 2012 after we perform a PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 retrospective evaluation of the FY 2009 claims data. Our actuaries currently estimate that this adjustment will be approximately ¥3.3 percent. This reflects the difference between the estimated 4.8 percent cumulative actual documentation and coding changes for FY 2009 (2.5 percent for FY 2008 and an additional 2.3 percent for FY 2009) and the cumulative ¥1.5 percent documentation and coding adjustments applied under section 7(a) of Public Law 110–90 (¥0.6 percent in FY 2008 and ¥0.9 percent in FY 2009). We note that the actual adjustments are multiplicative and not additive. This estimated 4.8 percent cumulative actual documentation and coding changes for FY 2009 includes the impact of the changes in documentation and coping first occurring in FY 2008 because we believe hospitals will continue these changes in documentation and coding in subsequent fiscal years. Consequently, these documentation and coding changes will continue to impact payments under the IPPS absent a prospective adjustment to account for the effect of these changes. We note that unlike the proposed ¥1.9 adjustment to the standardized amounts under section 7(b)(1)(A) of Public Law 110–90 described earlier, any adjustment to the standardized amounts under section 7(b)(1)(B) of Public Law 110–90 would not be cumulative, but would be removed for subsequent fiscal years once we have offset the increase in aggregate payments for discharges occurring in FY 2008 expenditures and FY 2009 expenditures, if any. We are seeking public comment on our proposal not to offset the 1.9 percent increase in aggregate payments (including interest) for discharges occurring in FY 2008 resulting from the adoption of the MS–DRGs, but to instead address this issue in future rulemaking for FYs 2011 and 2012. To assist the public in commenting on this issue, the following table shows our estimate of the adjustments required under section 7(b)(1) of Public Law 110– 90. Column (A) and Column (C) show the prospective adjustments discussed above in section II.D.5. of this preamble. Column (B) and Column (D) show the retrospective adjustments discussed above in section II.D.6. of this preamble. Column (E) shows the ¥1.9 percent adjustment from Column (A) that we are proposing for FY 2010. The estimated ¥6.6 percent adjustment in Column (F) reflects the cumulative effect of the remaining ¥1.9 adjustment from Column (B), the remaining ¥1.4 percent adjustment from Column (C), and the remaining ¥3.3 adjustment from E:\FR\FM\22MYP2.SGM 22MYP2 24097 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Column (D) that are required by statute, but that we are not proposing for FY 2010. Column (G) shows the combined effect of the ¥1.9 percent adjustment in Column (E) that we are proposing for FY 2010 and the ¥6.6 percent adjustment in Column (F) that we currently estimate we will need to propose in future years. As noted above, we are unable to provide our final estimate of the documentation and coding changes in FY 2009 that do not reflect real changes in case-mix, as we do not have all FY 2009 claims data. The table instead reflects our current estimate of the difference between changes in documentation and coding in FY 2009 that do not reflect real changes in casemix and the prospective adjustment applied in FY 2009 under section 7(a) of Public Law 110–90. If documentation and coding increases were to exceed current projections for FY 2009, future adjustments would be greater than those shown here. If documentation and coding adjustments were to be less than current projections for FY 2009, future adjustments would be less than those shown here. FY 2010 MS–DRG DOCUMENTATION AND CODING ADJUSTMENT RANGE Prospective adjustment for FY 2008 Amount of Adjustment Prospective adjustment for FY 2009 * Recoupment adjustment for FY 2009 * Adjustment proposed for FY 2010 Estimated remaining adjustment * Total adjustment FY 2010– FY 2012 * (A) FY 2010 Proposal ....... Recoupment adjustment for FY 2008 (B) (C) (D) (E) (F) (G) Proposed for FY 2010. ¥1.9 ............. Not Proposed for FY 2010. ¥1.9 ...................... Not Proposed Not Proposed for for FY 2010. FY 2010. ¥1.4 ............. ¥3.3 ...................... ¥1.9 ¥6.6 ¥8.5 sroberts on PROD1PC70 with FRONTMATTER * Estimated. The actual percentage adjustment to the national standardized amounts for the purpose of offsetting the estimated $2.2 billion in increased payments under IPPS in FY 2008 will depend on when we apply the adjustment. However, we believe this adjustment will be approximately ¥1.9 percent, or the difference between the actual changes in documentation and coding that do not reflect real changes in case-mix in FY 2008 and the documentation and coding adjustment applied under section 7(a) of Public Law 110–90. Similarly, we based our estimate of the percentage adjustment to the national standardized amounts for the purpose of offsetting the expected increase in payments in FY 2009 on the estimated difference between the cumulative actual changes in documentation and coding that do not reflect real changes in case-mix in FY 2009 and the documentation and coding adjustments applied under section 7(a) of Public Law 110–90, or 3.3 percent. As discussed earlier, we are not permitted to apply a retroactive FY 2009 adjustment until we have performed an analysis of the FY 2009 data. 7. Background on the Application of the Documentation and Coding Adjustment to the Hospital-Specific Rates Under section 1886(d)(5)(D)(i) of the Act, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: The Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or the updated hospital-specific rate based on FY 2006 costs per discharge. Under section 1886(d)(5)(G) of the Act, MDHs are paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate based on the greatest of the FY 1982, FY 1987, or FY 2002 costs per discharge. In the FY 2008 IPPS final rule with comment period (72 FR 47152 through 47188), we established a policy of applying the documentation and coding adjustment to the hospital-specific rates. In that final rule with comment period, we indicated that because SCHs and MDHs use the same DRG system as all other hospitals, we believe they should be equally subject to the budget neutrality adjustment that we are applying for adoption of the MS–DRGs to all other hospitals. In establishing this policy, we relied on section 1886(d)(3)(A)(vi) of the Act, which provides us with the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 authority to adjust ‘‘the standardized amount’’ to eliminate the effect of changes in coding or classification that do not reflect real change in case-mix. However, in the final rule that appeared in the Federal Register on November 27, 2007 (72 FR 66886), we rescinded the application of the documentation and coding adjustment to the hospital-specific rates retroactive to October 1, 2007. In that final rule, we indicated that, while we still believe it would be appropriate to apply the documentation and coding adjustment to the hospital-specific rates, upon further review, we decided that the application of the documentation and coding adjustment to the hospitalspecific rates is not consistent with the plain meaning of section 1886(d)(3)(A)(vi) of the Act, which only mentions adjusting ‘‘the standardized amount’’ under section 1886(d) of the Act and does not mention adjusting the hospital-specific rates. In the FY 2009 IPPS proposed rule (73 FR 23540), we indicated that we continued to have concerns about this issue. Because hospitals paid based on the hospital-specific rate use the same MS–DRG system as other hospitals, we believe they have the potential to realize increased payments from documentation and coding changes that do not reflect real increases in patients’ severity of illness. In section 1886(d)(3)(A)(vi) of the Act, Congress stipulated that hospitals paid based on PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 the standardized amount should not receive additional payments based on the effect of documentation and coding changes that do not reflect real changes in case-mix. Similarly, we believe that hospitals paid based on the hospitalspecific rates should not have the potential to realize increased payments due to documentation and coding changes that do not reflect real increases in patients’ severity of illness. While we continue to believe that section 1886(d)(3)(A)(vi) of the Act does not provide explicit authority for application of the documentation and coding adjustment to the hospitalspecific rates, we believe that we have the authority to apply the documentation and coding adjustment to the hospital-specific rates using our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) of the Act. The special exceptions and adjustment provision authorizes us to provide ‘‘for such other exceptions and adjustments to [IPPS] payment amounts * * * as the Secretary deems appropriate.’’ In the FY 2009 IPPS final rule (73 FR 48448 through 48449), we indicated that, for the FY 2010 rulemaking, we planned to examine our FY 2008 claims data for hospitals paid based on the hospital-specific rate. We further indicated that if we found evidence of significant increases in casemix for patients treated in these hospitals that do not reflect real changes in case-mix, we would consider E:\FR\FM\22MYP2.SGM 22MYP2 24098 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER proposing application of the documentation and coding adjustments to the FY 2010 hospital-specific rates under our authority in section 1886(d)(5)(I)(i) of the Act. In response to public comments received on the FY 2009 IPPS proposed rule, we stated in the FY 2009 IPPS final rule that we would consider whether such a proposal is warranted for FY 2010. To gather information to evaluate these considerations, we indicated that we planned to perform analyses on FY 2008 claims data to examine whether there has been a significant increase in case-mix for hospitals paid based on the hospital-specific rate. If we found that application of the documentation and coding adjustment to the hospitalspecific rates for FY 2010 is warranted, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 we indicated that we would include a proposal to do so in the FY 2010 IPPS proposed rule. 8. Proposed Documentation and Coding Adjustment to the Hospital-Specific Rates for FY 2010 and Subsequent Fiscal Years We performed a retrospective evaluation of the FY 2008 claims data for SCHs and MDHs using the same methodology described earlier for other IPPS hospitals. We found that, independently for both SCHs and MDHs, the change due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 slightly exceeded the 2.5 percent result PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 discussed earlier, but did not significantly differ from that result. Again, we found that the within-base DRG increases were almost entirely responsible for the case-mix change. In Figure 2 below, we show that, for SCHs, there was a 5 percentage point increase in the discharges with an MCC from 17 percent to 22 percent and a corresponding decrease of 5 percentage points from 59 percent to 54 percent in discharges without a CC or an MCC. In Figure 3 below, we show that, for MDHs, there was a 5 percentage point increase in the discharges with an MCC from 15 percent to 20 percent and a decrease of 6 percentage points from 60 percent to 54 percent in discharges without a CC or an MCC. BILLING CODE 4120–01–P E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24099 EP22MY09.002</GPH> VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.001</GPH> sroberts on PROD1PC70 with FRONTMATTER BILLING CODE 4120–01–C sroberts on PROD1PC70 with FRONTMATTER 24100 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules The largest within-base DRG contributors for both types of hospitals are heart failure and shock, chronic obstructive pulmonary disease, and simple pneumonia and pleurisy. For each of these conditions, a significant decrease in the percentage of discharges without a CC or an MCC was observed. Therefore, consistent with our statements in prior IPPS rules, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to prospectively adjust the hospitalspecific rates by ¥2.5 percent in FY 2010 to account for our estimated documentation and coding effect in FY 2008 that does not reflect real changes in case-mix. We are proposing to leave this adjustment in place for subsequent fiscal years in order to ensure that changes in documentation and coding resulting from the adoption of the MS– DRGs do not lead to an increase in aggregate payments for SCHs and MDHs not reflective of an increase in real casemix. This proposed ¥2.5 percent adjustment to the hospital-specific rates exceeds the proposed ¥1.9 percent adjustment to the national standardized amount under section 7(b)(1)(A) of Public Law 110–90 because, unlike the national standardized rates, the FY 2008 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. Consistent with our proposed approach for IPPS hospitals discussed earlier, we will address in the FY 2011 rulemaking cycle any changes in documentation and coding that do not reflect real changes in case-mix for discharges occurring during FY 2009. We note that, unlike the national standardized rates, the FY 2009 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. We are seeking public comment on the proposed ¥2.5 percent prospective adjustment to the hospital-specific rates under section 1886(d)(5)(I)(i) of the Act and addressing in the FY 2011 rulemaking cycle any changes in FY 2009 case-mix due to changes in documentation and coding that do not VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 reflect real changes in case-mix for discharges occurring during FY 2009. We intend to update our analysis with FY 2008 data on claims paid through March 2008 for the FY 2010 IPPS final rule. 9. Background on the Application of the Documentation and Coding Adjustment to the Puerto Rico-Specific Standardized Amount Puerto Rico hospitals are paid based on 75 percent of the national standardized amount and 25 percent of the Puerto Rico-specific standardized amount. As noted previously, the documentation and coding adjustment we adopted in the FY 2008 IPPS final rule with comment period relied upon our authority under section 1886(d)(3)(A)(vi) of the Act, which provides the Secretary the authority to adjust ‘‘the standardized amounts computed under this paragraph’’ to eliminate the effect of changes in coding or classification that do not reflect real changes in case-mix. Section 1886(d)(3)(A)(vi) of the Act applies to the national standardized amounts computed under section 1886(d)(3) of the Act, but does not apply to the Puerto Rico-specific standardized amount computed under section 1886(d)(9)(C) of the Act. In calculating the FY 2008 payment rates, we made an inadvertent error and applied the FY 2008 ¥0.6 percent documentation and coding adjustment to the Puerto Rico-specific standardized amount, relying on our authority under section 1886(d)(3)(A)(vi) of the Act. However, section 1886(d)(3)(A)(vi) of the Act authorizes application of a documentation and coding adjustment to the national standardized amount and does not apply to the Puerto Rico specific standardized amount. In the FY 2009 IPPS final rule (73 FR 48449), we corrected this inadvertent error by removing the ¥0.6 percent documentation and coding adjustment from the FY 2008 Puerto Rico-specific rates. While section 1886(d)(3)(A)(vi) of the Act is not applicable to the Puerto Ricospecific standardized amount, we believe that we have the authority to apply the documentation and coding adjustment to the Puerto Rico-specific standardized amount using our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) of the Act. Similar to SCHs and MDHs that are paid PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 based on the hospital-specific rate, we believe that Puerto Rico hospitals that are paid based on the Puerto Ricospecific standardized amount should not have the potential to realize increased payments due to documentation and coding changes that do not reflect real increases in patients’ severity of illness. Consistent with the approach described for SCHs and MDHs, in the FY 2009 IPPS final rule (73 FR 48449), we indicated that we planned to examine our FY 2008 claims data for hospitals in Puerto Rico. We indicated in the FY 2009 IPPS proposed rule (73 FR 23541), that if we found evidence of significant increases in casemix for patients treated in these hospitals, we would consider proposing application of the documentation and coding adjustments to the FY 2010 Puerto Rico-specific standardized amount under our authority in section 1886(d)(5)(I)(i) of the Act. 10. Proposed Documentation and Coding Adjustment to the Puerto RicoSpecific Standardized Amount We performed a retrospective evaluation of the FY 2008 claims data for Puerto Rico hospitals using the same methodology described earlier for IPPS hospitals paid under the national standardized amounts under section 1886(d) of the Act. We found that, for Puerto Rico hospitals, the increase in payments for discharges occurring during FY 2008 due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 was approximately 1.1 percent. When we calculate the within-base DRG changes and the across-base DRG changes for Puerto Rico hospitals, we find that responsibility for the case-mix change between FY 2007 and FY 2008 is much more evenly shared. Across-base DRG shifts account for 44 percent of the changes, and within-base DRG shifts account for 56 percent. Thus, the change in the percentage of discharges with an MCC is not as large as that for other IPPS hospitals. In Figure 4 below, we show that, for Puerto Rico hospitals, there was a 3 percentage point increase in the discharges with an MCC from 22 percent to 25 percent and a corresponding decrease of 3 percentage points from 58 percent to 55 percent in discharges without a CC or an MCC. E:\FR\FM\22MYP2.SGM 22MYP2 The top contributing base DRGs to the case-mix change due to the within-base DRG changes differ partially from those of other hospitals. The top three are acute myocardial infarction, major small and large bowel procedures, and chronic obstructive pulmonary disease. Given these documentation and coding increases, consistent with our statements in prior IPPS rules, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to adjust the Puerto Rico-specific standardized amount by ¥1.1 percent in FY 2010 to account for the FY 2008 documentation and coding increase not due to changes in real case-mix and to leave that adjustment in place for subsequent fiscal years. The proposed ¥1.1 percent adjustment will be applied to the Puerto Rico-specific rate that accounts for 25 percent of payments to Puerto Rico hospitals, with the remaining 75 percent based on the national standardized amount, which we are proposing to adjust as described above. Consequently, the overall reduction to the payment rates for Puerto Rico hospitals to account for documentation and coding changes will be slightly less than the reduction for IPPS hospitals paid based on 100 percent of the national standardized amount. We note that, as with the hospital-specific rates, the Puerto Ricospecific standardized amount had not previously been reduced based on estimated changes in documentation and coding associated with the adoption of the MS–DRGs. Consistent with our proposed approach for IPPS hospitals discussed above, we will address in the FY 2011 rulemaking cycle any change in FY 2009 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009. We note that, unlike the national standardized rates, the FY 2009 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. We are seeking public comment on the proposed ¥1.1 percent prospective adjustment to the hospital-specific rates under section 1886(d)(5)(I)(i) of the Act and addressing in the FY 2011 rulemaking cycle any changes in FY 2009 case-mix due to changes in documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009. We intend to update our analysis with FY 2008 data on claims paid through March 2008 for the FY 2010 IPPS final rule. E. Refinement of the MS–DRG Relative Weight Calculation 1. Background In the FY 2009 IPPS final rule (73 FR 48450), we continued to implement significant revisions to Medicare’s inpatient hospital rates by completing our 3-year transition from charge-based relative weights to cost-based relative weights. Beginning in FY 2007, we implemented relative weights based on cost report data instead of based on charge information. We had initially proposed to develop cost-based relative weights using the hospital-specific relative value cost center (HSRVcc) PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 24101 methodology as recommended by MedPAC. However, after considering concerns expressed in the public comments we received on the proposal, we modified MedPAC’s methodology to exclude the hospital-specific relative weight feature. Instead, we developed national CCRs based on distinct hospital departments and engaged a contractor to evaluate the HSRVcc methodology for future consideration. To mitigate payment instability due to the adoption of cost-based relative weights, we decided to transition cost-based weights over 3 years by blending them with charge-based weights beginning in FY 2007. (We refer readers to the FY 2007 IPPS final rule for details on the HSRVcc methodology and the 3-year transition blend from charge-based relative weights to cost-based relative weights (71 FR 47882 through 47898).) In FY 2008, we adopted severitybased MS–DRGs, which increased the number of DRGs from 538 to 745. Many commenters raised concerns as to how the transition from charge-based weights to cost-based weights would continue with the introduction of new MS–DRGs. We decided to implement a 2-year transition for the MS–DRGs to coincide with the remainder of the transition to cost-based relative weights. In FY 2008, 50 percent of the relative weight for each DRG was based on the CMS DRG relative weight and 50 percent was based on the MS–DRG relative weight. In FY 2009, the third and final year of the transition from charge-based weights to cost-based weights, we calculated the MS–DRG relative weights based on 100 percent of hospital costs. We refer readers to the FY 2007 IPPS final rule (71 FR 47882) for a more E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.003</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24102 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER detailed discussion of our final policy for calculating the cost-based DRG relative weights and to the FY 2008 IPPS final rule with comment period (72 FR 47199) for information on how we blended relative weights based on the CMS DRGs and MS–DRGs. a. Summary of the RTI Study of Charge Compression and CCR Refinement As we transitioned to cost-based relative weights, some commenters raised concerns about potential bias in the weights due to ‘‘charge compression,’’ which is the practice of applying a higher percentage charge markup over costs to lower cost items and services, and a lower percentage charge markup over costs to higher cost items and services. As a result, the costbased weights would undervalue highcost items and overvalue low-cost items if a single CCR is applied to items of widely varying costs in the same cost center. To address this concern, in August 2006, we awarded a contract to RTI to study the effects of charge compression in calculating the relative weights and to consider methods to reduce the variation in the CCRs across services within cost centers. RTI issued an interim draft report in January 2007 with its findings on charge compression (which was posted on the CMS Web site at: https://www.cms.hhs.gov/reports/ downloads/Dalton.pdf). In that report, RTI found that a number of factors contribute to charge compression and affect the accuracy of the relative weights. RTI’s findings demonstrated that charge compression exists in several CCRs, most notably in the Medical Supplies and Equipment CCR. In its interim draft report, RTI offered a number of recommendations to mitigate the effects of charge compression, including estimating regression-based CCRs to disaggregate the Medical Supplies Charged to Patients, Drugs Charged to Patients, and Radiology cost centers, and adding new cost centers to the Medicare cost report, such as adding a ‘‘Devices, Implants and Prosthetics’’ line under ‘‘Medical Supplies Charged to Patients’’ and a ‘‘CT Scanning and MRI’’ subscripted line under ‘‘Radiology-Diagnostics’’. (For more details on RTI’s findings and recommendations, we refer readers to the FY 2009 IPPS final rule (73 FR 48452).) Despite receiving public comments in support of the regressionbased CCRs as a means to immediately resolve the problem of charge compression, particularly within the Medical Supplies and Equipment CCR, we did not adopt RTI’s recommendation to create additional regression-based CCRs for several reasons. We were VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 concerned that RTI’s analysis was limited to charges on hospital inpatient claims, while typically hospital cost report CCRs combine both inpatient and outpatient services. Further, because both the IPPS and the OPPS rely on cost-based weights, we preferred to introduce any methodological adjustments to both payment systems at the same time. RTI’s analysis of charge compression has since been expanded to incorporate outpatient services. RTI evaluated the cost estimation process for the OPPS cost-based relative weights, including a reassessment of the regression-based CCR models using both outpatient and inpatient charge data. This interim report was made available in April 2008 during the public comment period on the FY 2009 IPPS proposed rule and can be found on RTI’s Web site at: https://www.rti.org/ reports/cms/HHSM–500–2005–0029I/ PDF/Refining_Cost_to_Charge_ Ratios_200804.pdf . The IPPS-specific chapters, which were separately displayed in the April 2008 interim report, as well as the more recent OPPS chapters, were included in the July 3, 2008 RTI final report entitled, ‘‘Refining Cost-to-Charge Ratios for Calculating APC [Ambulatory Payment Classification] and DRG Relative Payment Weights,’’ that became available at the time of the development of the FY 2009 IPPS final rule. The RTI final report can be found on RTI’s Web site at: https://www.rti.org/reports/cms/ HHSM–500–2005–0029I/PDF/ Refining_Cost_to_Charge_Ratios_ 200807_Final.pdf. RTI’s final report distinguished between two types of research findings and recommendations: those pertaining to the accounting or cost report data and those related to statistical regression analysis. Importantly, RTI found that, under the IPPS and the OPPS, accounting improvements to the cost reporting data reduce some of the sources of aggregation bias without having to use regression-based adjustments. In general, with respect to the regression-based adjustments, RTI confirmed the findings of its March 2007 report that regression models are a valid approach for diagnosing potential aggregation bias within selected services for the IPPS and found that regression models are equally valid for setting payments under the OPPS. RTI also suggested that regression-based CCRs could provide a short-term correction until accounting data could be sufficiently refined to support more accurate CCR estimates under both the IPPS and the OPPS. RTI also noted that cost-based weights are only one component of a final PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 prospective payment rate. There are other rate adjustments (wage index, IME, and DSH) to payments derived from the revised cost-based weights and the cumulative effect of these components may not improve the ability of final payment to reflect resource cost. With regard to APCs and MS–DRGs that contain substantial device costs, RTI cautioned that the other rate adjustments largely offset the effects of charge compression among hospitals that receive these adjustments. RTI endorsed short-term regression-based adjustments, but also concluded that more refined and accurate accounting data are the preferred long-term solution to mitigate charge compression and related bias in hospital cost-based weights. As a result of this research, RTI made 11 recommendations. For a more detailed summary of RTI’s findings, recommendations, and public comments we received on the report, we refer readers to the FY 2009 IPPS final rule (73 FR 48452 through 48453). b. Summary of the RAND Corporation Study of Alternative Relative Weight Methodologies One of the reasons that we did not implement regression-based CCRs at the time of the FY 2008 IPPS final rule with comment period was our inability to investigate how regression-based CCRs would interact with the implementation of MS–DRGs. In the FY 2008 final rule with comment period (72 FR 47197), we stated that we engaged the RAND Corporation as the contractor to evaluate the HSRV methodology in conjunction with regression-based CCRs, and that we would consider its analysis as we prepared for the FY 2009 IPPS rulemaking process. In the FY 2009 IPPS final rule (73 FR 48453 through 48457), we provided a summary of the RAND report and the public comments we received in response to the FY 2009 IPPS proposed rule. The report may be found on RAND’s Web site at: https:// www.rand.org/pubs/working_papers/ WR560/. RAND evaluated six different methods that could be used to establish relative weights, CMS’ current relative weight methodology of 15 national CCRs and 5 alternatives, including a method in which the 15 national CCRs are disaggregated using the regressionbased methodology, and a method using hospital-specific CCRs for the 15 cost center groupings. In addition, RAND analyzed our standardization methodologies that account for systematic cost differences across hospitals. The purpose of standardization is to eliminate E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules systematic facility-specific differences in cost so that these cost differences do not influence the relative weights. The three standardization methodologies analyzed by RAND include: The ‘‘hospital payment factor’’ methodology currently used by CMS, under which a hospital’s wage index factor, and IME and/or DSH factor, are divided out of its estimated DRG cost; the HSRV methodology, which standardizes the cost for a given discharge by the hospital’s own costliness rather than by the effect of the systematic cost differences across groups of hospitals; and the HSRVcc methodology, which removes hospital-level cost variation by calculating hospital-specific chargebased relative values for each DRG at the cost center level and standardizing them for differences in case-mix. Under the HSRVcc methodology, a national average charge-based relative weight is calculated for each cost center. Overall, RAND found that none of the alternative methods of calculating the relative weights represented a marked improvement in payment accuracy over the current method, and there was little difference across methods in their ability to predict cost at either the discharge-level or the hospital-level. In their regression analysis, RAND found that after controlling for hospital payment factors, the relative weights are compressed (that is, understated). However, RAND also found that the hospital payment factors are overstated and increase more rapidly than cost. Therefore, while the relative weights are compressed, these payment factors offset the compression such that total payments to hospitals increase more rapidly than hospitals’ costs. RAND found that relative weights using the 19 national disaggregated regression-based CCRs result in significant redistributions in payments among hospital groupings. However, RAND did not believe the regressionbased charge compression adjustments significantly improve payment accuracy. With regard to standardization methodologies, while RAND found that there is no clear advantage to the HSRV method or the HSRVcc method of standardizing cost compared to the current hospital payment factor standardization method, its analysis did reveal significant limitations of CMS’ current hospital payment factor standardization method. The current standardization method has a larger impact on the relative weights and payment accuracy than any of the other alternatives that RAND analyzed because the method ‘‘over-standardizes’’ by removing more variability for hospitals receiving a payment factor VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 than can be empirically supported as being cost-related (particularly for IME and DSH). RAND found that instead of increasing proportionately with cost, the payment factors CMS currently uses (some of which are statutory) increase more rapidly than cost, thereby reducing payment accuracy. RAND concluded that further analysis is needed to isolate the cost-related component of the IPPS payment adjustments (some of which has already been done by MedPAC), use them to standardize cost, and revise the analysis of payment accuracy to reflect only the cost-related component. 2. Summary of FY 2009 Changes and Discussion for FY 2010 In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in response to the RTI’s recommendations concerning cost report refinements, and because of RAND’s finding that regression-based adjustments to the CCRs do not significantly improve payment accuracy, we discussed our decision to pursue changes to the cost report to split the cost center for Medical Supplies Charged to Patients into one line for ‘‘Medical Supplies Charged to Patients’’ and another line for ‘‘Implantable Devices Charged to Patients.’’ We acknowledged, as RTI had found, that charge compression occurs in several cost centers that exist on the Medicare cost report. However, as we stated in the final rule, we focused on the CCR for Medical Supplies and Equipment because RTI found that the largest impact on the MS–DRG relative weights could result from correcting charge compression for devices and implants. In determining what should be reported in these respective cost centers, we adopted the commenters’ recommendation that hospitals should use revenue codes established by AHA’s National Uniform Billing Committee to determine what should be reported in the ‘‘Medical Supplies Charged to Patients’’ and the ‘‘Implantable Devices Charged to Patients’’ cost centers. When we developed the FY 2009 IPPS final rule, we considered all of the public comments we received both for and against adopting regression-based CCRs. Also noteworthy is RAND’s belief that regression-based CCRs may not significantly improve payment accuracy, and that it is equally, if not more, important to consider revisions to the current IPPS hospital payment factor standardization method in order to improve payment accuracy. We continue to believe that, ultimately, improved and more precise cost reporting is the best way to minimize charge compression and improve the PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 24103 accuracy of the cost weights. Accordingly, we are not proposing to adopt regression-based CCRs for the calculation of the FY 2010 IPPS relative weights. However, we are concerned about RAND’s finding that there are significant limitations of CMS’ current hospital payment factor standardization method. As summarized above, RAND found that the current standardization method ‘‘over-standardizes’’ by removing more variability for hospitals receiving a payment factor than can be empirically supported as being costrelated (particularly for IME and DSH). RAND found that instead of increasing proportionately with cost, the payment factors CMS currently uses (some of which are statutory) increase more rapidly than cost, thereby reducing payment accuracy. Further analysis is needed to isolate the cost-related component of the IPPS payment adjustments, use them to standardize cost, and revise the analysis of payment accuracy to reflect only the cost-related component. However, RAND cautions that ‘‘re-estimating’’ these payment factors ‘‘raises important policy issues that warrant additional analyses’’ (page 49 of RAND’s report, which is available on the Web site at: https://www.rand.org/ pubs/working_papers/WR560/), particularly to ‘‘determine the analytically justified-levels using the MS–DRGs’’ (page 86 of the RAND report). In addition, we note that RTI, in its July 2008 final report, also observed that the adjustment factors under the IPPS (the wage index, IME, and DSH adjustments) complicate the determination of cost and these factors ‘‘within the rate calculation may offset the effects of understated weights due to charge compression’’ (page 109 of RTI’s final report, which is available at the Web site at: https://www.rti.org/reports/ cms/HHSM–500–2005–0029I/PDF/ Refining_Cost_to_Charge_ Ratios_200807_Final.pdf). While it may be more accurate to standardize using the empirically justified levels of the IME and DSH adjustments, consideration needs to be given to the extent to which these payment factors offset the compression of the relative weights. We understand that MedPAC has performed an analysis to identify empirically justifiable formulas for determining appropriate IME and DSH adjustments. For example, in its March 2007 report (and reiterated in its March 2009 report), MedPAC asserts that the current level of the IME adjustment factor, 5.5 percent for every 10 percent increase in resident-to-bed ratio, overstates IME payments by more than E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24104 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules twice the empirically justified level, resulting in approximately $3 billion in overpayments. The empirical level of the IME adjustment is estimated to be 2.2 percent for every 10 percent increase in the resident-to-bed ratio. We cannot propose to change the IME and DSH factors used for actual payment under the IPPS because these factors are mandated by law. However, under section 1886(d)(4) of the Act, we have the authority to determine the appropriate weighting factor for each MS–DRG (including which factors or method we will employ in making annual adjustments to the MS–DRGs so as to reflect changes in the relative use of hospital resources). In addition, section 1886(d)(7)(B) of the Act precludes judicial review of our methodology for determining the appropriate weighting factors. Therefore, we do have some flexibility in what factors may be used for standardization purposes. For purposes of standardization only, one option may be for CMS to use the empirically justified IME adjustment of 2.2 percent, such that only the cost-related component of teaching hospitals is removed from the claim charges prior to calculating the relative weights. Similarly, for the DSH adjustment, in its March 2007 report, MedPAC found that costs per case increase about 0.4 percent for each 10 percent increase in the low income patient percentage. This is significantly less than the percentage increase expressed by the current factors used in the DSH payment formulas. (According to MedPAC, in FY 2004, about $5.5 billion in DSH payments were made above the empirically justified level.) In looking only at urban hospitals with greater than 100 beds, which manifest the strongest positive correlation between cost and low income patient share, MedPAC found that costs increase about 1.4 percent for every 10 percent increment of the lowincome patient percentage. MedPAC did not find a positive cost relationship between low-income patient percentage and costs per case for urban hospitals with less than 100 beds and/or for rural hospitals. Therefore, for purposes of standardizing for the DSH adjustment, an option we may consider is to incorporate an adjustment factor of 1.4 percent for urban hospitals with greater than 100 beds, and to remove the DSH payment adjustment altogether for other hospitals that otherwise currently qualify for DSH payment. While we cannot predict the effect of using the empirical factors for IME and DSH in the standardized methodology on the relative weights without further VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 analysis, dividing out (that is, excluding) reduced IME and DSH payment factors from a hospital’s total payment would result in a greater share of teaching and DSH hospitals’ costs used in calculating the relative weights. With respect to the wage index, because there are multiple wage index factors, one for each geographic area, determining the true cost associated with geographic location and standardizing for those costs is much more challenging. While we are not proposing changes for FY 2010, in light of the previous discussion of the current IME and DSH adjustments in the standardization process, we are interested in receiving public comments as to how the standardization process can be improved to more precisely remove cost differences across hospitals, thereby improving the accuracy of the relative weights in subsequent fiscal years. 3. Timeline for Revising the Medicare Cost Report As mentioned in the FY 2009 IPPS final rule (73 FR 48467), we are currently in the process of comprehensively reviewing the Medicare hospital cost report, and the finalized policy from the FY 2009 IPPS final rule to split the current cost center for Medical Supplies Charged to Patients into one line for ‘‘Medical Supplies Charged to Patients’’ and another line for ‘‘Implantable Devices Charged to Patients,’’ as part of our initiative to update and revise the hospital cost report. Under an effort initiated by CMS to update the Medicare hospital cost report to eliminate outdated requirements in conjunction with provisions of the Paperwork Reduction Act (PRA), we have been planning to propose the actual changes to the cost reporting form, the attending cost reporting software, and the cost reporting instructions in Chapter 40 of the Medicare Provider Reimbursement Manual (PRM), Part II. Under the effort to update the cost report and eliminate outdated requirements in conjunction with the provisions of the PRA, changes to the cost reporting form and cost reporting instructions would be made available to the public for comment. Thus, the public would have an opportunity to suggest comprehensive reforms (which they had advocated in the FY 2009 IPPS final rule in response to our proposals), and would similarly be able to make suggestions for ensuring that these reforms are made in a manner that is not disruptive to hospitals’ billing and accounting systems, and are within the guidelines of GAAP, PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 Medicare principles of reimbursement, and sound accounting practices. In the FY 2009 IPPS final rule (73 FR 48468), we stated that we expect the revised cost reporting forms that reflect one cost center for ‘‘Medical Supplies Charged to Patients’’ and one cost center for ‘‘Implantable Devices Charged to Patients’’ would not be available until cost reporting periods beginning after the Spring of 2009. At this time, we anticipate that the transmittal to create this new cost center will be issued in June 2009. Because there is approximately a 3-year lag between the availability of cost report data for IPPS and OPPS ratesetting purposes in a given fiscal year or calendar year, we may be able to derive two distinct CCRs, one for medical supplies and one for devices, for use in calculating the FY 2013 IPPS relative weights and the CY 2013 OPPS relative weights. Until the revised cost reporting forms are published, hospitals must include costs and charges of separately chargeable medical supplies and implantable medical devices in the cost center for ‘‘Medical Supplies Charged to Patients’’ (section 2202.8 of the PRM-I), and effective for cost reporting periods specified in the revised cost reporting forms, hospitals must include costs and charges of separately chargeable medical supplies in the cost center for ‘‘Medical Supplies Charged to Patients’’ and of separately chargeable implantable medical devices in the new ‘‘Implantable Devices Charged to Patients’’ cost center. F. Preventable Hospital-Acquired Conditions (HACs), Including Infections 1. Statutory Authority Section 1886(d)(4)(D) of the Act addresses certain hospital-acquired conditions (HACs), including infections. By October 1, 2007, the Secretary was required to select, in consultation with CDC, at least two conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher paying MS–DRG when present as a secondary diagnosis (that is, conditions under the MS–DRG system that are CCs or MCCs); and (c) could reasonably have been prevented through the application of evidencebased guidelines. The list of conditions can be revised from time to time, again in consultation with CDC, as long as the list contains at least two conditions. Medicare continues to assign a discharge to a higher paying MS–DRG if a selected condition is present on admission (POA). However, since October 1, 2008, Medicare no longer assigns an inpatient hospital discharge to a higher paying MS–DRG if a selected E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules condition is not POA. That is, if there is a HAC, the case is paid as though the secondary diagnosis was not present. However, if any nonselected CC/MCC appears on the claim, the claim will be paid at the higher MS–DRG rate; to cause a lower MS–DRG payment, all CCs/MCCs on the claim must be selected conditions for the HAC payment provision. Since October 1, 2007, hospitals have been required to submit information on Medicare claims specifying whether diagnoses were POA. The POA indicator reporting requirement and the HAC payment provision apply to IPPS hospitals only. Non-IPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children’s hospitals, hospitals in Maryland operating under waivers, rural health clinics, federally qualified health centers, RNHCIs, and Department of Veterans Affairs/ Department of Defense hospitals, are exempt from POA reporting and the HAC payment provision. Throughout this section, the term ‘‘hospital’’ refers to IPPS hospitals. 2. HAC Selection Process In the FY 2007 IPPS proposed rule (71 FR 24100), we sought public input regarding conditions with evidencebased prevention guidelines that should be selected in implementing section 1886(d)(4)(D) of the Act. The public comments we received were summarized in the FY 2007 IPPS final rule (71 FR 48051 through 48053). In the FY 2008 IPPS proposed rule (72 FR 24716 through 24726), we sought public comment on conditions that we proposed to select. In the FY 2008 IPPS final rule with comment period (72 FR 47200 through 47218), we selected 8 categories to which the HAC payment provisions would apply. In the FY 2009 IPPS proposed rule (73 FR 23547), we proposed several additional candidate HACs and proposed refinements to the previously selected HACs. In the FY 2009 IPPS final rule (73 FR 48471), we expanded and refined several of the previouslyselected HACs and we selected 2 additional categories of HACs. A complete list of the 10 current categories of HACs is included in section II.F.4. of this preamble. 3. Collaborative Process CMS experts have worked closely with public health and infectious disease professionals from the CDC to 24105 identify the candidate preventable HACs, review comments, and select HACs. CMS and CDC staff have also collaborated on the process for hospitals to submit a POA indicator for each diagnosis listed on IPPS hospital Medicare claims and on the payment implications of the various POA reporting options. On December 17, 2007, CMS and CDC hosted a jointly sponsored HAC and POA Listening Session to receive input from interested organizations and individuals. On December 18, 2008, CMS and CDC again hosted a jointly sponsored HAC and POA Listening Session to receive input from interested organizations and individuals. Experts from AHRQ also participated in the event. The agenda, presentations, audio file, and written transcript of the December 18, 2008, Listening Session are available on the CMS Web site at: https://www.cms.hhs.gov/ HospitalAcqCond/07_Educational Resources.asp#TopOfPage. 4. Selected HAC Categories The following table lists the current HACs. HAC CC/MCC (ICD–9–CM code) Foreign Object Retained After Surgery .................................................... Air Embolism ............................................................................................ Blood Incompatibility ................................................................................. Pressure Ulcer Stages III & IV ................................................................. Falls and Trauma: —Fracture —Dislocation —Intracranial Injury —Crushing Injury —Burn —Electric Shock Catheter-Associated Urinary Tract Infection (UTI) ................................... 998.4 (CC), 998.7 (CC). 999.1 (MCC). 999.6 (CC). 707.23 (MCC), 707.24 (MCC). Codes within these ranges on the CC/MCC list: 800–829, 830–839, 850–854, 925–929, 940–949, 991–994. Vascular Catheter-Associated Infection ................................................... Manifestations of Poor Glycemic Control ................................................. Surgical Site Infections: Surgical Site Infection, Mediastinitis, Following Coronary Artery Bypass Graft (CABG). Surgical Site Infection Following Certain Orthopedic Procedures ........... Surgical Site Infection Following Bariatric Surgery for Obesity ............... sroberts on PROD1PC70 with FRONTMATTER Deep Vein Thrombosis and Pulmonary Embolism Following Certain Orthopedic Procedures. We refer readers to section II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS final rule with comment VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 996.64 (CC). Also excludes the following from acting as a CC/MCC: 112.2 (CC), 590.10 (CC), 590.11 (MCC), 590.2 (MCC), 590.3 (CC), 590.80 (CC), 590.81 (CC), 595.0 (CC), 597.0 (CC), 599.0 (CC). 999.31 (CC). 250.10–250.13 (MCC), 250.20–250.23 (MCC), 251.0 (CC), 249.10– 249.11 (MCC), 249.20–249.21 (MCC). 519.2 (MCC). And one of the following procedure codes: 36.10–36.19. 996.67 (CC), 998.59 (CC). And one of the following procedure codes: 81.01–81.08, 81.23–81.24, 81.31–81.38, 81.83, 81.85. Principal Diagnosis—278.01, 998.59 (CC). And one of the following procedure codes: 44.38, 44.39, or 44.95. 415.11 (MCC), 415.19 (MCC), 453.40–453.42 (MCC). And one of the following procedure codes: 00.85–00.87, 81.51–81.52, or 81.54. period (73 FR 48474 through 48486) for detailed analyses supporting the selection of each of these HACs. The list of selected HAC categories is dependent upon CMS’ list of diagnoses PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 designated as CC/MCCs. As changes and/or new diagnosis codes are proposed and finalized to the list of CC/ MCCs, these changes need to be reflected in the list of selected HAC E:\FR\FM\22MYP2.SGM 22MYP2 24106 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules categories. We refer readers to Table 6A in the Addendum to this proposed rule for proposed changes. In Table 6A, we are proposing the following changes that reflect the new diagnosis codes that are within the fracture code range for the falls/trauma HAC category: ICD–9–CM code Proposed CC/ MCC designations VerDate Nov<24>2008 Torus fracture of ulna. Torus fracture of radius and ulna. 08:10 May 21, 2009 CC Jkt 217001 Indicator Descriptor 1 ............... Signifies exemption from POA reporting. CMS established this code as a workaround to blank reporting on the electronic 4010A1. A list of exempt ICD–9–CM diagnosis codes is available in the ICD– 9–CM Official Guidelines for Coding and Reporting. 6. POA Indicator Reporting Collection of POA indicator data is necessary to identify which conditions 813.47 ...... CC were acquired during hospitalization for the HAC payment provision as well as for broader public health uses of Medicare data. Through Change Request No. 5679 (released on June 20, 2007), If these proposed CC designations for ICD–9–CM codes 813.46 and 813.47 are CMS issued instructions requiring IPPS hospitals to submit POA indicator data finalized, these codes will be adopted within the fracture code range for the for all diagnosis codes on Medicare falls/trauma HAC category. claims. CMS also issued Change Request No. 6086 (released on June 13, 2008) 5. Public Input Regarding Selected and regarding instructions for processing Potential Candidate HACs non-IPPS claims. Specific instructions We are not proposing to add or on how to select the correct POA remove categories of HACs at this time. indicator for each diagnosis code are However, we continue to encourage included in the ICD–9–CM Official public dialogue about refinements to the Guidelines for Coding and Reporting, HAC list. During and after the December available on the CDC Web site at: 18, 2008 Listening Session, we received https://www.cdc.gov/nchs/datawh/ many oral and written stakeholder ftpserv/ftpicd9/icdguide07.pdf (the POA comments about both previously reporting guidelines begin on page 92). selected and potential candidate HACs. Additional information regarding POA Some stakeholders commented on indicator reporting and application of previously selected HACs. For example, the POA reporting options is available one commenter requested a coding on the CMS Web site at: https:// change to the Stages III and IV Pressure www.cms.hhs.gov/HospitalAcqCond. Ulcer HAC. The commenter CMS has historically not provided recommended that CMS include the coding advice. Rather, CMS collaborates following ICD–9–CM codes to further with the American Hospital Association define pressure ulcers as a HAC: (1) (AHA) through the Coding Clinic for 707.20 (Pressure ulcer, unspecified ICD–9–CM. CMS has been collaborating stage); and (2) 707.25 (Pressure ulcer, with the AHA to promote the Coding unstageable). However, these codes are Clinic for ICD–9–CM as the source for not classified as CCs or MCCs and, coding advice about the POA indicator. therefore, do not meet the statutory requirement of causing a higher paying There are five POA indicator MS–DRG. reporting options, as defined by the Commenters strongly supported using ICD–9–CM Official Guidelines for information gathered from early Coding and Reporting: experience with the HAC payment provision to inform maintenance of the Indicator Descriptor HAC list and consideration of future potential candidate HACs. Now that we Y .............. Indicates that the condition was present on admission. have early program data, we are focused W ............. Affirms that the provider has deon evaluating the impact of the HAC termined based on data and payment provision through a joint clinical judgment that it is not program evaluation with CDC and possible to document when AHRQ. That evaluation process will the onset of the condition ocprovide valuable information for future curred. policymaking aimed at preventing N .............. Indicates that the condition was HACs. Commenters emphasized during not present on admission. the IPPS FY 2009 rulemaking and U .............. Indicates that the documentation during and after the December 18, 2008 is insufficient to determine if Listening Session the need for a robust the condition was present at the time of admission. program evaluation prior to changing the HAC list. 813.46 ...... sroberts on PROD1PC70 with FRONTMATTER Code descriptor As an early aspect of the program evaluation, we plan to analyze the available POA data. This early analysis may be useful for future HAC policymaking and for other purposes like identifying priorities for the development of HAC prevention guidelines. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 In the FY 2009 IPPS final rule (73 FR 48487), we adopted our proposal to: (1) Pay the CC/MCC MS–DRGs for those HACs coded with ‘‘Y’’ and ‘‘W’’ indicators; and (2) not pay the CC/MCC MS–DRGs for those HACs coded with ‘‘N’’ and ‘‘U’’ indicators. We are not proposing changes to the payment implications of the POA indicator reporting options at this time. As we have noted in previous IPPS rulemaking documents, most recently in the FY 2009 IPPS final rule (73 FR 48487), the American Health Information Management Association (AHIMA) has promulgated Standards of Ethical Coding that require accurate coding regardless of the payment implications of the diagnoses. Further, Medicare program integrity initiatives closely monitor for inaccurate coding and coding inconsistent with medical record documentation. G. Proposed Changes to Specific MS– DRG Classifications 1. MDC 5 (Diseases and Disorders of the Circulatory System): Intraoperative Fluorescence Vascular Angiography (IFVA) We received a request to reassign cases reporting the use of intraoperative fluorescence vascular angiography (IFVA) with coronary artery bypass graft (CABG) procedures from MS–DRGs 235 and 236 (Coronary Bypass without Cardiac Catheterization with and without MCC, respectively) into MS– DRG 233 (Coronary Bypass with Cardiac Catheterization with MCC) and MS– DRG 234 (Coronary Bypass with Cardiac Catheterization without MCC). Effective October 1, 2007, procedure code 88.59 (Intraoperative fluorescence vascular angiography (IFVA)) describes this technology. IFVA technology consists of a mobile device imaging system with software. The technology is used to test cardiac graft patency and technical adequacy at the time of coronary artery bypass grafting (CABG). While this system does not involve fluoroscopy or cardiac catheterization, it has been suggested by the manufacturer and clinical studies that it yields results that are similar to those achieved with selective coronary E:\FR\FM\22MYP2.SGM 22MYP2 24107 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules arteriography and cardiac catheterization. Intraoperative coronary angiography provides information about the quality of the anastomosis, blood flow through the graft, distal perfusion and durability. For additional detailed information regarding IFVA technology, we refer readers to the September 28– 29, 2006 ICD–9–CM Coordination and Maintenance Committee meeting handout at the following Web site: https://www.cms.hhs.gov/ ICD9ProviderDiagnosticCodes/ 03_meetings.asp#TopOfPage. We examined data on cases identified by procedure code 88.59 in MS–DRGs 233, 234, 235, and 236 in the FY 2008 MedPAR file. As shown in the table below, for both MS–DRGs 235 and 236, the cases utilizing IFVA technology identified by procedure code 88.59 have a shorter length of stay and lower average costs compared to all cases in MS–DRGs 235 and 236. There were a total of 10,312 cases in MS–DRG 235 with an average length of stay of 11.12 days with average costs of $33,846. There were 88 cases in MS–DRG 235 identified by procedure code 88.59 with an average length of stay of 9.82 days with average costs of $29,258. In MS– DRG 236, there were a total of 24,799 cases with an average length of stay of 6.52 days and average costs of $22,329. There were 159 cases in MS–DRG 236 identified by procedure code 88.59 with an average length of stay of 6.30 days and average costs of $20,404. The data clearly demonstrate that the IFVA cases identified by procedure code 88.59 are assigned appropriately to MS–DRGs 235 and 236. We also examined data on cases identified by procedure code 88.59 in MS–DRGs 233 and 234. Similarly, in MS–DRGs 233 and 234, cases identified by procedure code 88.59 reflect shorter lengths of stay and lower average costs compared to all of the other cases in those MS–DRGs. There were a total of 17,453 cases in MS–DRG 233 with an average length of stay of 13.65 days with average costs of $41,199. There were 60 cases in MS– DRG 233 identified by procedure code 88.59 with an average length of stay of 12.82 days and average costs of $38,842. In MS–DRG 234, there were a total of 27,003 cases with an average length of stay of 8.70 days and average costs of $28,327. There were 69 cases in MS– DRG 234 identified by procedure code 88.59 with an average length of stay of 8.75 days and average costs of $25,308. As a result of our analysis, the data demonstrate that the IFVA cases identified by procedure code 88.59 are appropriately assigned to MS–DRGs 233 and 234. Number of cases MS–DRG 235—All cases ......................................................................................................................................... 235—Cases with code 88.59 .................................................................................................................. 235—Cases without code 88.59 ............................................................................................................. 236—All cases ......................................................................................................................................... 236—Cases with code 88.59 .................................................................................................................. 236—Cases without code 88.59 ............................................................................................................. 10,312 88 10,224 24,799 159 24,640 Number of cases MS–DRG 233—All cases ......................................................................................................................................... 233—Cases with code 88.59 .................................................................................................................. 233—Cases without code 88.59 ............................................................................................................. 234—All cases ......................................................................................................................................... 234—Cases with code 88.59 .................................................................................................................. 234—Cases without code 88.59 ............................................................................................................. 17,453 60 17,393 27,003 69 26,934 Average length of stay 11.12 9.82 11.14 6.52 6.30 6.52 Average length of stay 13.65 12.82 13.65 8.70 8.75 8.70 Average cost* $33,846 29,258 33,886 22,329 20,404 22,341 Average cost* $41,199 38,842 41,207 28,327 25,308 28,334 sroberts on PROD1PC70 with FRONTMATTER * In the FY 2007 IPPS final rule (71 FR 47882), we adopted a cost-based weighting methodology. The cost-based weights were adopted over a 3-year transition period in 1/3 increments between FY 2007 and FY 2009. The average cost represents the average standardized charges on the claims reduced to cost using the cost center-specific CCRs for a specific DRG. The standardization process includes adjustments for IME, DSH, and wage index as applied to individual hospitals. This estimation of cost is the same method used in the computation of the relative weights. We are using cost-based data instead of our historical charge-based data to evaluate proposed MS–DRG classification changes. We believe that if the cases identified by procedure code 88.59 were proposed to be reassigned from MS–DRGs 235 and 236 to MS–DRGs 233 and 234, they would be significantly overpaid. In addition, because the cases in MS–DRGs 235 and 236 did not actually have a cardiac catheterization performed, a proposal to reassign cases identified by procedure code 88.59 would result in lowering the relative weights of MS– DRGs 233 and 234 where a cardiac catheterization is truly performed. In summary, the data do not support moving IFVA cases identified by procedure code 88.59 from MS–DRGs 235 and 236 into MS–DRGs 233 and 234. We invite the public to submit comments on our proposal not to make any MS–DRG modifications for cases VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 reporting procedure code 88.59 for FY 2010. 2. MDC 8 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue): Infected Hip and Knee Replacements We received a request that we examine the issue of patients who have undergone hip or knee replacement procedures that have subsequently become infected and who are then admitted for inpatient services for removal of the prosthesis. The requestor stated that these patients are presented with devastating complications and require extensive resources to treat. The infection often results in the need for multiple re-operations, prolonged use of intravenous and oral antibiotics, PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 extended rehabilitation, and frequent followups. Furthermore, the requestor stated that, even with extensive treatment, the outcomes can still be poor for some of these patients. The requestor stated that patients who are admitted for inpatient services with an infected hip or knee prosthesis must first undergo a procedure to remove the prosthesis and to insert an antibiotic spacer to treat the infection and maintain a space for the new prosthesis. The new prosthesis cannot be inserted until after the infection has been treated. Patients who are admitted for inpatient services with a hip or knee infection and then undergo a removal of the prosthesis are captured by the following procedure codes: E:\FR\FM\22MYP2.SGM 22MYP2 24108 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules • 80.05 (Arthrotomy for removal of prosthesis, hip) • 80.06 (Arthrotomy for removal of prosthesis, knee) In addition, code 84.56 (Insertion or replacement of (cement) spacer) would be used for any insertion of a spacer that would be reported if an antibiotic spacer were inserted. The issue of hip and knee infections and revisions was discussed in the FY 2009 IPPS final rule (73 FR 48498 through 48507) in response to a more complicated request that we received involving the creation and modification of several joint DRGs. Because data did not support the requestor’s suggested changes, we did not make any modifications to the joint DRGs at that time. The current requestor asked that we move cases involving the removal of hip and knee prostheses (procedure codes 80.05 and 80.06) from their current assignment in MS–DRGs 480, 481, and 482 (Hip and Femur Procedures Except Major Joint with MCC, with CC, without CC/MCC, respectively) and in MS–DRGs 495, 496, and 497 (Local Excision of Internal Fixation Device Except Hip and Femur with MCC, with CC, and with CC/MCC, respectively) and assign them to MS–DRGs 463, 464, and 465 (Wound Debridement and Skin Graft Except Hand, for Musculo-Connective Tissue Disease with MCC, with CC, without CC/MCC, respectively). MS–DRGs 463, 464, and 465 include cases that are treated with a debridement for infection. The requestor stated that these cases are clinically similar to those captured by procedure codes 80.05 and 80.06 where the prosthesis is removed and a new prosthesis is not inserted because of an infection. The requestor specifically asked that we remove the hip arthrotomy code 80.05 from MS–DRGs 480, 481, and 482, and assign it to MS–DRGs 463, 464, and 465. The requestor also recommended that we remove the knee arthrotomy code 80.06 from MS–DRGs 495, 496, and 497 and assign it to MS–DRGs 463, 464, and 465. If we were to accept the requestor’s suggestion, joint replacement cases in which the patients were admitted for inpatient services to remove the prosthesis because of an infection would be assigned to the higher paying debridement MS–DRGs (MS–DRGs 463, 464, and 465). As mentioned earlier, these MS–DRGs contain other cases involving treatment for infections. We examined hip replacement cases identified by procedure code 80.05 in MS–DRGs 480, 481, and 482, and knee replacement cases identified by procedure code 80.06 in MS–DRGs 495, 496, and 497 using the FY 2008 MedPAR file. Our data support the requestor’s suggestion that these cases have similar costs to those in MS–DRGs 463, 464, and 465, and that they are significantly more expensive to treat than those in their current MS–DRG assignments. The following table summarizes those findings: Number of cases MS–DRG 463—All Cases ........................................................................................................................................ 464—All Cases ........................................................................................................................................ 465—All Cases ........................................................................................................................................ 480—All Cases ........................................................................................................................................ 480—Cases with code 80.05 .................................................................................................................. 480—Cases without code 80.05 ............................................................................................................. 481—All Cases ........................................................................................................................................ 481—Cases with code 80.05 .................................................................................................................. 481—Cases without code 80.05 ............................................................................................................. 482—All Cases ........................................................................................................................................ 482—Cases with code 80.05 .................................................................................................................. 482—Cases without code 80.05 ............................................................................................................. 495—All Cases ........................................................................................................................................ 495—Cases with code 80.06 .................................................................................................................. 495—Cases without code 80.06 ............................................................................................................. 496—All Cases ........................................................................................................................................ 496—Cases with code 80.06 .................................................................................................................. 496—Cases without code 80.06 ............................................................................................................. 497—All Cases ........................................................................................................................................ 497—Cases with code 80.06 .................................................................................................................. 497—Cases without code 80.06 ............................................................................................................. 4,834 4,934 1,696 31,181 643 30,538 72,406 871 71,535 37,443 282 37,161 2,140 513 1,627 5,518 1,346 4,172 5,856 688 5,168 Average length of stay 16.59 9.52 5.45 8.89 13.35 8.80 5.68 8.34 5.65 4.65 6.82 4.63 10.40 11.53 10.04 5.73 6.67 5.42 2.84 5.08 2.54 Average cost* $26,696 15,065 9,041 17,168 26,053 16,981 11,259 17,202 11,187 9,320 13,718 9,287 18,729 23,508 17,432 10,827 14,454 9,657 7,148 12,234 6,470 sroberts on PROD1PC70 with FRONTMATTER * In the FY 2007 IPPS final rule (71 FR 47882), we adopted a cost-based weighting methodology. The cost-based weights were adopted over a 3-year transition period in 1/3 increments between FY 2007 and FY 2009. The average cost represents the average standardized charges on the claims reduced to cost using the cost center-specific CCRs for a specific DRG. The standardization process includes adjustments for IME, DSH, and wage index as applied to individual hospitals. This estimation of cost is the same method used in the computation of the relative weights. We are using cost-based data instead of our historical charge-based data to evaluate proposed MS–DRG classification changes. The data show that hip replacement cases with procedure code 80.05 in MS– DRGs 480, 481, and 482 have average costs of $26,053, $17,202, and $13,718, respectively, compared to overall average costs of $17,168 in MS–DRG 480; $11,259 in MS–DRG 481; and $9,320 in MS–DRG 482. The data also show that knee replacement cases with procedure code 80.06 in MS–DRGs 495, 496, and 497 have average costs of $23,508, $14,454, and $12,234, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 respectively, compared to average costs of all cases of $18,729 in MS–DRG 495, $10,827 in MS–DRG 496, and $7,148 in MS–DRG 497. All cases in MS–DRGs 463, 464, and 465 had average costs of $26,696, $15,065, and $9,041, respectively. The results of this analysis of data support the reassignment of procedure codes 80.05 and 80.06 to MS–DRGs 463, 464, and 465. Therefore, we are proposing to move procedure codes PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 80.05 and 80.06 from their current assignments in MS–DRGs 480, 481, and 482 and 495, 496, and 497 and assign them to MS–DRGs 463, 464, and 465. We also are proposing to revise the code title of procedure code 80.05 to read ‘‘Arthrotomy for removal of prosthesis without replacement, hip’’ and the title of procedure code 80.06 to read ‘‘Arthrotomy for removal of prosthesis without replacement, knee’’, effective October 1, 2009, as is shown in Table E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 6F of the Addendum to this proposed rule. 3. Proposed Medicare Code Editor (MCE) Changes As explained under section II.B.1. of the preamble of this final rule, the Medicare Code Editor (MCE) is a software program that detects and reports errors in the coding of Medicare claims data. Patient diagnoses, procedure(s), and demographic information are entered into the Medicare claims processing systems and are subjected to a series of automated screens. The MCE screens are designed to identify cases that require further review before classification into a DRG. For FY 2010, we are proposing to make the following changes to the MCE edits: sroberts on PROD1PC70 with FRONTMATTER a. Diagnoses Allowed for Males Only Edit There are four diagnosis codes that were inadvertently left off of the MCE edit titled ‘‘Diagnoses Allowed for Males Only.’’ These codes are located in the chapter of the ICD–9–CM diagnosis codes entitled ‘‘Diseases of Male Genital Organs.’’ In the FY 2009 IPPS final rule, we indicated that we were adding the following four codes to this MCE edit: • 603.0 (Encysted hydrocele) • 603.1 (Infected hydrocele) • 603.8 (Other specified types of hydrocele) • 603.9 (Hydrocele, unspecified). We had no reported problems or confusion with the omission of these codes from this section of the MCE, but in order to have an accurate product, we indicated that we were adding these codes for FY 2009. However, through an oversight, we failed to implement the indicated FY 2009 changes to the MCE by adding codes 603.0, 603.1, 603.8, and 603.9 to the MCE edit of diagnosis allowed for males only. In this FY 2010 IPPS proposed rule, we are acknowledging this omission and are again proposing to make the changes. b. Manifestation Codes as Principal Diagnosis Edit Manifestation codes describe the manifestation of an underlying disease, not the disease itself. Therefore, manifestation codes should not be used as a principal diagnosis. The National Center for Health Statistics (NCHS) has removed the advice ‘‘code first associated disorder’’ from three codes, thereby making them acceptable principal diagnosis codes. These codes are: • 365.41 (Glaucoma associated with chamber angle anomalies) • 365.42 (Glaucoma associated with anomalies of iris) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 • 365.43 (Glaucoma associated with other anterior segment anomalies) In order to make conforming changes to the MCE, we are proposing to remove codes 365.41, 365.42, and 365.43 from the Manifestation Code as Principal Diagnosis Edit. c. Invalid Diagnosis or Procedure Code The MCE checks each diagnosis, including the admitting diagnosis, and each procedure against a table of valid ICD–9–CM codes. If an entered code does not agree with any code on the list, it is assumed to be invalid or that the 4th or 5th digit of the code is invalid or missing. An error was discovered in this edit. ICD–9–CM code 00.01 (Therapeutic ultrasound of vessels of head and neck) was inadvertently left out of the MCE tables. The inclusion of this code in the MCE tables would have generated an error message at the Medicare contractor level, but we had instructed the Medicare contractors to override this edit for discharges on or after October 1, 2008. To make a conforming change to the MCE, we are proposing to add code 00.01 to the table of valid codes. d. Unacceptable Principal Diagnosis There are selected codes that describe a circumstance that influences an individual’s health status but not a current illness or injury and codes that are not specific manifestations but may describe illnesses due to an underlying cause. These codes are considered unacceptable as a principal diagnosis. For FY 2008, a series of diagnostic codes were created at subcategory 209, Neuroendocrine Tumors. An instructional note under this subcategory stated that coders were to ‘‘Code first any associated multiple endocrine neoplasia syndrome (258.01– 258.03)’’. Medicare contractors had interpreted this note to mean that none of the codes in subcategory 209 were acceptable principal diagnoses and had entered these codes on the MCE edit for unacceptable principal diagnoses. We later deemed this interpretation to be incorrect. We had not intended that the series of codes at subcategory 209 were only acceptable as secondary diagnoses. To avoid future misinterpretation, in this proposed rule, we are proposing to remove the following codes from the MCE edit for unacceptable principal diagnoses. • 209.00 (Malignant carcinoid tumor of the small intestine, unspecified portion) • 209.01 (Malignant carcinoid tumor of the duodenum) • 209.02 (Malignant carcinoid tumor of the jejunum) PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 24109 • 209.03 (Malignant carcinoid tumor of the ileum) • 209.10 (Malignant carcinoid tumor of the large intestine, unspecified portion) • 209.11 (Malignant carcinoid tumor of the appendix) • 209.12 (Malignant carcinoid tumor of the cecum) • 209.13 (Malignant carcinoid tumor of the ascending colon) • 209.14 (Malignant carcinoid tumor of the transverse colon) • 209.15 (Malignant carcinoid tumor of the descending colon) • 209.16 (Malignant carcinoid tumor of the sigmoid colon) • 209.17 (Malignant carcinoid tumor of the rectum) • 209.20 (Malignant carcinoid tumor of unknown primary site) • 209.21 (Malignant carcinoid tumor of the bronchus and lung) • 209.22 (Malignant carcinoid tumor of the thymus) • 209.23 (Malignant carcinoid tumor of the stomach) • 209.24 (Malignant carcinoid tumor of the kidney) • 209.25 (Malignant carcinoid tumor of foregut, not otherwise specified) • 209.26 (Malignant carcinoid tumor of midgut, not otherwise specified) • 209.27 (Malignant carcinoid tumor of hindgut, not otherwise specified) • 209.29 (Malignant carcinoid tumor of other sites) • 209.30 (Malignant poorly differentiated neuroendocrine carcinoma, any site) • 209.40 (Benign carcinoid tumor of the small intestine, unspecified portion) • 209.41 (Benign carcinoid tumor of the duodenum) • 209.42 (Benign carcinoid tumor of the jejunum) • 209.43 (Benign carcinoid tumor of the ileum) • 209.50 (Benign carcinoid tumor of the large intestine, unspecified portion) • 209.51 (Benign carcinoid tumor of the appendix) • 209.52 (Benign carcinoid tumor of the cecum) • 209.53 (Benign carcinoid tumor of the ascending colon) • 209.54 (Benign carcinoid tumor of the transverse colon) • 209.55 (Benign carcinoid tumor of the descending colon) • 209.56 (Benign carcinoid tumor of the sigmoid colon) • 209.57 (Benign carcinoid tumor of the rectum) • 209.60 (Benign carcinoid tumor of unknown primary site) • 209.61 (Benign carcinoid tumor of the bronchus and lung) • 209.62 (Benign carcinoid tumor of the thymus) E:\FR\FM\22MYP2.SGM 22MYP2 24110 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules • 209.63 (Benign carcinoid tumor of the stomach) • 209.64 (Benign carcinoid tumor of the kidney) • 209.65 (Benign carcinoid tumor of foregut, not otherwise specified) • 209.66 (Benign carcinoid tumor of midgut, not otherwise specified) • 209.67 (Benign carcinoid tumor of hindgut, not otherwise specified) • 209.69 (Benign carcinoid tumor of other sites) In the meantime, CMS has issued instructions in the form of an interim working document called a joint signature memorandum to the Medicare contractors to override this edit and process claims containing codes from the subcategory 209 series as acceptable principal diagnoses. sroberts on PROD1PC70 with FRONTMATTER e. Proposed Creation of New Edit Titled ‘‘Wrong Surgeries’’ On January 15, 2009, CMS issued three National Coverage Decision memoranda on the coverage of erroneous surgeries on Medicare patients: Wrong Surgical or Other Invasive Procedure Performed on a Patient (CAG–00401N); Surgical or Other Invasive Procedure Performed on the Wrong Body Part (CAG–00402N); and Surgical or Other Invasive Procedure Performed on the Wrong Patient (CAG–00403N). We refer readers to the following CMS Web sites to view the memoranda in their entirety: For the decision memorandum on surgery on the wrong body part: https:// www.cms.hhs.gov/mcd/ viewdecisionmemo.asp?id=222. For the decision memorandum on surgery on the wrong patient: https:// www.cms.hhs.gov/mcd/ viewdecisionmemo.asp?id=221. For the decision memorandum on the wrong surgery performed on a patient: https:// www.cms.hhs.gov/mcd/ viewdecisionmemo.asp?id=223. To conform to these new coverage decisions, in this proposed rule, we are proposing to create a new edit to identify cases in which wrong surgeries occurred. The NCHS has revised the title of one E-code and created two new E-codes to identify cases in which incorrect surgeries have occurred. The revised E-code title is: • E876.5 (Performance of wrong operation (procedure) on correct patient). The two new E-codes are as follows: • E876.6 (Performance of operation (procedure) on patient not scheduled for surgery) • E876.7 (Performance of correct operation (procedure) on wrong side/ body part) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 A complete list of all of the E-codes that will be implemented on October 1, 2009, can be found on the CMS Web site home page at: https://www.cms.hhs.gov/ ICD9ProviderDiagnosticCodes/ 07_summarytables.asp#TopOfPage in the download titled ‘‘New, Deleted, and Invalid Diagnosis and Procedure Codes.’’ Currently, an E-code used as a principal diagnosis will receive the MCE Edit ‘‘E-code as principal diagnosis’’. This edit will remain in effect. However, we are proposing a change to the MCE so that E-codes E876.5 through E876.7, whether they are in the principal or secondary diagnosis position, will trigger the ‘‘Wrong Surgery’’ edit. Any claim with this edit will be denied and returned to the provider. f. Procedures Allowed for Females Only Edit It has come to our attention that code 75.37 (Amnioinfusion) and code 75.38 (Fetal pulse oximetry) were inadvertently omitted from the MCE edit ‘‘Procedures Allowed for Females Only.’’ In order to correct this omission, we are proposing to add codes 75.37 and 75.38 and to the edit for procedures allowed for females only. 4. Surgical Hierarchies Some inpatient stays entail multiple surgical procedures, each one of which, occurring by itself, could result in assignment of the case to a different MS–DRG within the MDC to which the principal diagnosis is assigned. Therefore, it is necessary to have a decision rule within the GROUPER by which these cases are assigned to a single MS–DRG. The surgical hierarchy, an ordering of surgical classes from most resource-intensive to least resource-intensive, performs that function. Application of this hierarchy ensures that cases involving multiple surgical procedures are assigned to the MS–DRG associated with the most resource-intensive surgical class. Because the relative resource intensity of surgical classes can shift as a function of MS–DRG reclassification and recalibrations, we reviewed the surgical hierarchy of each MDC, as we have for previous reclassifications and recalibrations, to determine if the ordering of classes coincides with the intensity of resource utilization. A surgical class can be composed of one or more MS–DRGs. For example, in MDC 11, the surgical class ‘‘kidney transplant’’ consists of a single MS–DRG (MS–DRG 652) and the class ‘‘major bladder procedures’’ consists of three MS–DRGs (MS–DRGs 653, 654, and PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 655). Consequently, in many cases, the surgical hierarchy has an impact on more than one MS–DRG. The methodology for determining the most resource-intensive surgical class involves weighting the average resources for each MS–DRG by frequency to determine the weighted average resources for each surgical class. For example, assume surgical class A includes MS–DRGs 1 and 2 and surgical class B includes MS–DRGs 3, 4, and 5. Assume also that the average costs of MS–DRG 1 is higher than that of MS– DRG 3, but the average costs of MS– DRGs 4 and 5 are higher than the average costs of MS–DRG 2. To determine whether surgical class A should be higher or lower than surgical class B in the surgical hierarchy, we would weight the average costs of each MS–DRG in the class by frequency (that is, by the number of cases in the MS– DRG) to determine average resource consumption for the surgical class. The surgical classes would then be ordered from the class with the highest average resource utilization to that with the lowest, with the exception of ‘‘other O.R. procedures’’ as discussed below. This methodology may occasionally result in assignment of a case involving multiple procedures to the lowerweighted MS–DRG (in the highest, most resource-intensive surgical class) of the available alternatives. However, given that the logic underlying the surgical hierarchy provides that the GROUPER search for the procedure in the most resource-intensive surgical class, in cases involving multiple procedures, this result is sometimes unavoidable. We note that, notwithstanding the foregoing discussion, there are a few instances when a surgical class with a lower average cost is ordered above a surgical class with a higher average cost. For example, the ‘‘other O.R. procedures’’ surgical class is uniformly ordered last in the surgical hierarchy of each MDC in which it occurs, regardless of the fact that the average costs for the MS–DRG or MS–DRGs in that surgical class may be higher than those for other surgical classes in the MDC. The ‘‘other O.R. procedures’’ class is a group of procedures that are only infrequently related to the diagnoses in the MDC, but are still occasionally performed on patients in the MDC with these diagnoses. Therefore, assignment to these surgical classes should only occur if no other surgical class more closely related to the diagnoses in the MDC is appropriate. A second example occurs when the difference between the average costs for two surgical classes is very small. We have found that small differences E:\FR\FM\22MYP2.SGM 22MYP2 24111 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules generally do not warrant reordering of the hierarchy because, as a result of reassigning cases on the basis of the hierarchy change, the average costs are likely to shift such that the higherordered surgical class has a lower average costs than the class ordered below it. For FY 2010, we are not proposing any revisions to the surgical hierarchy. 5. Complications or Comorbidity (CC) Exclusions List a. Background As indicated earlier in the preamble of this proposed rule, under the IPPS DRG classification system, we have developed a standard list of diagnoses that are considered CCs. Historically, we developed this list using physician panels that classified each diagnosis code based on whether the diagnosis, when present as a secondary condition, would be considered a substantial complication or comorbidity. A substantial complication or comorbidity was defined as a condition that, because of its presence with a specific principal diagnosis, would cause an increase in the length of stay by at least 1 day in at least 75 percent of the patients. We refer readers to section II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with comment period for a discussion of the refinement of CCs in relation to the MS–DRGs we adopted for FY 2008 (72 FR 47121 through 47152). sroberts on PROD1PC70 with FRONTMATTER b. CC Exclusions List for FY 2010 In the September 1, 1987 final notice (52 FR 33143) concerning changes to the DRG classification system, we modified the GROUPER logic so that certain diagnoses included on the standard list of CCs would not be considered valid CCs in combination with a particular principal diagnosis. We created the CC Exclusions List for the following reasons: (1) To preclude coding of CCs for closely related conditions; (2) to preclude duplicative or inconsistent coding from being treated as CCs; and (3) to ensure that cases are appropriately classified between the complicated and uncomplicated DRGs in a pair. As we indicated above, we developed a list of diagnoses, using physician panels, to include those diagnoses that, when present as a secondary condition, would be considered a substantial complication or comorbidity. In previous years, we have made changes to the list of CCs, either by adding new CCs or deleting CCs already on the list. In the May 19, 1987 proposed notice (52 FR 18877) and the September 1, 1987 final notice (52 FR 33154), we explained that the excluded secondary VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 diagnoses were established using the following five principles: • Chronic and acute manifestations of the same condition should not be considered CCs for one another. • Specific and nonspecific (that is, not otherwise specified (NOS)) diagnosis codes for the same condition should not be considered CCs for one another. • Codes for the same condition that cannot coexist, such as partial/total, unilateral/bilateral, obstructed/ unobstructed, and benign/malignant, should not be considered CCs for one another. • Codes for the same condition in anatomically proximal sites should not be considered CCs for one another. • Closely related conditions should not be considered CCs for one another. The creation of the CC Exclusions List was a major project involving hundreds of codes. We have continued to review the remaining CCs to identify additional exclusions and to remove diagnoses from the master list that have been shown not to meet the definition of a CC.2 For FY 2010, we are proposing to make limited revisions to the CC Exclusions List to take into account the changes that will be made in the ICD– 9–CM diagnosis coding system effective October 1, 2009. (See section II.G.7. of the preamble of this proposed rule for a discussion of ICD–9–CM changes.) We are proposing to make these changes in accordance with the principles 2 See the FY 1989 final rule (53 FR 38485, September 30, 1988), for the revision made for the discharges occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 1, 1989), for the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September 4, 1990), for the FY 1991 revision; the FY 1992 final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final rule (57 FR 39753, September 1, 1992), for the FY 1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 1993), for the FY 1994 revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994), for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782, September 1, 1995), for the FY 1996 revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996), for the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998), for the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August 1, 2000), for the FY 2001 revisions; the FY 2002 final rule (66 FR 39851, August 1, 2001), for the FY 2002 revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002), for the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 1, 2003), for the FY 2004 revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004), for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640, August 12, 2005), for the FY 2006 revisions; the FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72 FR 47130) for the FY 2008 revisions, and the FY 2009 final rule (73 FR 48510). In the FY 2000 final rule (64 FR 41490, July 30, 1999, we did not modify the CC Exclusions List because we did not make any changes to the ICD–9–CM codes for FY 2000. PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 established when we created the CC Exclusions List in 1987. Tables 6G and 6H, Additions to and Deletions from the CC Exclusion List, respectively, which would be effective for discharges occurring on or after October 1, 2009, are not being published in this proposed rule because of the length of the two tables. Instead, we are making them available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS. Each of these principal diagnoses for which there is a CC exclusion is shown in Tables 6G and 6H with an asterisk, and the conditions that will not count as a CC, are provided in an indented column immediately following the affected principal diagnosis. A complete updated MCC, CC, and Non-CC Exclusions List is also available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS. Beginning with discharges on or after October 1, 2009, the indented diagnoses will not be recognized by the GROUPER as valid CCs for the asterisked principal diagnosis. To assist readers in the review of changes to the MCC and CC lists that occurred as a result of updates to the ICD–9–CM codes, as described in Tables 6A, 6C, and 6E of the Addendum to this proposed rule, we are providing the following summaries of those MCC and CC changes. SUMMARY OF ADDITIONS TO THE MS– DRG MCC LIST—TABLE 6I.1 Code Description 277.88 ...... 670.22 ...... Tumor lysis syndrome. Puerperal sepsis, delivered, with mention of postpartum complication. Puerperal sepsis, postpartum condition or complication. Puerperal septic thrombophlebitis, delivered, with mention of postpartum complication. Puerperal septic thrombophlebitis, postpartum condition or complication. Other major puerperal infection, unspecified as to episode of care or not applicable. Other major puerperal infection, delivered, with mention of postpartum complication. Other major puerperal infection, postpartum condition or complication. Omphalocele. Gastroschisis. Severe hypoxic-ischemic encephalopathy. Bilious vomiting in newborn. 670.24 ...... 670.32 ...... 670.34 ...... 670.80 ...... 670.82 ...... 670.84 ...... 756.72 ...... 756.73 ...... 768.73 ...... 779.32 ...... E:\FR\FM\22MYP2.SGM 22MYP2 24112 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules SUMMARY OF DELETIONS FROM THE MS–DRG MCC LIST—TABLE 6I.2 Code 768.7 ........ Description Code Description 209.71 ...... Secondary neuroendocrine tumor of distant lymph nodes. Secondary neuroendocrine tumor of liver. Secondary neuroendocrine tumor of bone. Secondary neuroendocrine tumor of peritoneum. Secondary neuroendocrine tumor of other sites. Chronic pulmonary embolism. Chronic venous embolism and thrombosis of unspecified deep vessels of lower extremity. Chronic venous embolism and thrombosis of deep vessels of proximal lower extremity. Chronic venous embolism and thrombosis of deep vessels of distal lower extremity. Venous embolism and thrombosis of superficial vessels of lower extremity. Chronic venous embolism and thrombosis of superficial veins of upper extremity. Chronic venous embolism and thrombosis of deep veins of upper extremity. Chronic venous embolism and thrombosis of upper extremity, unspecified. Chronic venous embolism and thrombosis axillary veins. Chronic venous embolism and thrombosis of subclavian veins. Chronic venous embolism and thrombosis of internal jugular veins. Chronic venous embolism and thrombosis of other thoracic veins. Chronic venous embolism and thrombosis of other specified veins. Acute venous embolism and thrombosis of superficial veins of upper extremity. Acute venous embolism and thrombosis of deep veins of upper extremity. Acute venous embolism and thrombosis of upper extremity, unspecified. Acute venous embolism and thrombosis of axillary veins. Acute venous embolism and thrombosis of subclavian veins. 209.74 ...... 209.79 ...... 416.2 ........ 453.50 ...... 453.51 ...... 453.52 ...... 453.6 ........ 453.71 ...... 453.72 ...... 453.73 ...... 453.74 ...... 453.75 ...... 453.76 ...... 453.77 ...... 453.79 ...... 453.81 ...... sroberts on PROD1PC70 with FRONTMATTER 453.82 ...... 453.83 ...... 453.84 ...... 453.85 ...... VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Acute venous embolism and thrombosis of internal jugular veins. Acute venous embolism and thrombosis of other thoracic veins. Acute venous embolism and thrombosis of other specified veins. Pouchitis. Other complications of intestinal pouch. Puerperal endometritis, unspecified as to episode of care or not applicable. Puerperal endometritis, delivered, with mention of postpartum complication. Puerperal endometritis, postpartum condition or complication. Puerperal sepsis, unspecified as to episode of care or not applicable. Puerperal septic thrombophlebitis, unspecified as to episode of care or not applicable. Hypoxic-ischemic encephalopathy, unspecified. Mild hypoxic-ischemic encephalopathy. Moderate hypoxic-ischemic encephalopathy. Torus fracture of ulna (alone). Torus fracture of radius and ulna. 453.87 ...... 453.89 ...... Code 209.73 ...... Description 453.86 ...... Hypoxic-ischemic encephalopathy (HIE). SUMMARY OF ADDITIONS TO THE MS– DRG CC LIST—TABLE 6J.1 209.72 ...... SUMMARY OF ADDITIONS TO THE MS– Barnes Road, Wallingford, CT 06492; or DRG CC LIST—TABLE 6J.1—Con- by calling (203) 949–0303, or by obtaining an order form at the Web site: tinued 569.71 ...... 569.79 ...... 670.10 ...... 670.12 ...... 670.14 ...... 670.20 ...... 670.30 ...... 768.70 ...... 768.71 ...... 768.72 ...... 813.46 ...... 813.47 ...... SUMMARY OF DELETIONS FROM THE MS–DRG CC LIST—TABLE 6J.2 Code Description 453.8 ........ Other venous embolism and thrombosis of other specified veins. Alternatively, the complete documentation of the GROUPER logic, including the current CC Exclusions List, is available from 3M/Health Information Systems (HIS), which, under contract with CMS, is responsible for updating and maintaining the GROUPER program. The current MS– DRG Definitions Manual, Version 26.0, is available for $250.00, which includes shipping and handling. Version 26.0 of the manual is also available on a CD for $200.00; a combination hard copy and CD is available for $400.00. Version 27.0 of this manual, which will include the final FY 2010 MS–DRG changes, will be available in CD only for $225.00. These manuals may be obtained by writing 3M/HIS at the following address: 100 PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 https://www.3MHIS.com. Please specify the revision or revisions requested. 6. Review of Procedure Codes in MS DRGs 981 through 983; 984 through 986; and 987 through 989 Each year, we review cases assigned to former CMS DRG 468 (Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis) to determine whether it would be appropriate to change the procedures assigned among these CMS DRGs. Under the MS–DRGs that we adopted for FY 2008, CMS DRG 468 was split three ways and became MS–DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 476 became MS–DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 477 became MS–DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC). MS–DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly CMS DRGs 468, 476, and 477, respectively) are reserved for those cases in which none of the O.R. procedures performed are related to the principal diagnosis. These DRGs are intended to capture atypical cases, that is, those cases not occurring with sufficient frequency to represent a distinct, recognizable clinical group. MS–DRGs 984 through 986 (previously CMS DRG 476) are assigned to those discharges in which one or more of the following prostatic procedures are performed and are unrelated to the principal diagnosis: • 60.0, Incision of prostate • 60.12, Open biopsy of prostate • 60.15, Biopsy of periprostatic tissue • 60.18, Other diagnostic procedures on prostate and periprostatic tissue • 60.21, Transurethral prostatectomy • 60.29, Other transurethral prostatectomy • 60.61, Local excision of lesion of prostate • 60.69, Prostatectomy, not elsewhere classified • 60.81, Incision of periprostatic tissue • 60.82, Excision of periprostatic tissue • 60.93, Repair of prostate • 60.94, Control of (postoperative) hemorrhage of prostate E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules • 60.95, Transurethral balloon dilation of the prostatic urethra • 60.96, Transurethral destruction of prostate tissue by microwave thermotherapy • 60.97, Other transurethral destruction of prostate tissue by other thermotherapy • 60.99, Other operations on prostate All remaining O.R. procedures are assigned to MS–DRGs 981 through 983 and 987 through 989, with MS–DRGs 987 through 989 assigned to those discharges in which the only procedures performed are nonextensive procedures that are unrelated to the principal diagnosis.3 For FY 2010, we are not proposing to change the procedures assigned among these MS–DRGs. a. Moving Procedure Codes from MS– DRGs 981 Through 983 or MS–DRGs 987 Through 989 to MDCs sroberts on PROD1PC70 with FRONTMATTER We annually conduct a review of procedures producing assignment to MS–DRGs 981 through 983 (formerly CMS DRG 468) or MS–DRGs 987 through 989 (formerly CMS DRG 477) on the basis of volume, by procedure, to see if it would be appropriate to move procedure codes out of these MS–DRGs into one of the surgical MS–DRGs for the MDC into which the principal diagnosis falls. The data are arrayed in two ways for comparison purposes. We look at a frequency count of each major operative procedure code. We also compare procedures across MDCs by 3 The original list of the ICD–9–CM procedure codes for the procedures we consider nonextensive procedures, if performed with an unrelated principal diagnosis, was published in Table 6C in section IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), and the FY 1998 final rule (62 FR 45981), we moved several other procedures from DRG 468 to DRG 477, and some procedures from DRG 477 to DRG 468. No procedures were moved in FY 1999, as noted in the final rule (63 FR 40962); in FY 2000 (64 FR 41496); in FY 2001 (65 FR 47064); or in FY 2002 (66 FR 39852). In the FY 2003 final rule (67 FR 49999) we did not move any procedures from DRG 477. However, we did move procedure codes from DRG 468 and placed them in more clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 477 because the procedures are nonextensive. In the FY 2005 final rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In addition, we added several existing procedures to DRGs 476 and 477. In the FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and assigned it to DRGs 479, 553, and 554. In FYs 2008 and 2009, no procedures were moved, as noted in the FY 2008 final rule with comment period (72 FR 46241), and in the FY 2009 final rule (73 FR 48513). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 volume of procedure codes within each MDC. We identify those procedures occurring in conjunction with certain principal diagnoses with sufficient frequency to justify adding them to one of the surgical DRGs for the MDC in which the diagnosis falls. For FY 2010, we are not proposing to remove any procedures from MS–DRGs 981 through 983 or MS–DRGs 987 through 989. b. Reassignment of Procedures among MS-DRGs 981 through 983, 984 through 986, and 987 through 989) We also annually review the list of ICD–9–CM procedures that, when in combination with their principal diagnosis code, result in assignment to MS-DRGs 981 through 983, 984 through 986, and 987 through 989 (formerly, CMS DRGs 468, 476, and 477, respectively), to ascertain whether any of those procedures should be reassigned from one of these three MSDRGs to another of the three MS-DRGs based on average charges and the length of stay. We look at the data for trends such as shifts in treatment practice or reporting practice that would make the resulting MS-DRG assignment illogical. If we find these shifts, we would propose to move cases to keep the MSDRGs clinically similar or to provide payment for the cases in a similar manner. Generally, we move only those procedures for which we have an adequate number of discharges to analyze the data. For FY 2010, we are not proposing to move any procedure codes among these MS-DRGs. c. Adding Diagnosis or Procedure Codes to MDCs Based on our review this year, we are not proposing to add any diagnosis codes to MDCs for FY 2010. 7. Changes to the ICD–9–CM Coding System As described in section II.B.1. of the preamble of this proposed rule, the ICD– 9–CM is a coding system used for the reporting of diagnoses and procedures performed on a patient. In September 1985, the ICD–9–CM Coordination and Maintenance Committee was formed. This is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS), the Centers for Disease Control and Prevention, and CMS, charged with maintaining and updating the ICD–9– CM system. The Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the ICD–9–CM to reflect newly developed PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 24113 procedures and technologies and newly identified diseases. The Committee is also responsible for promoting the use of Federal and non-Federal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system. The Official Version of the ICD–9–CM contains the list of valid diagnosis and procedure codes. (The Official Version of the ICD–9–CM is available from the Government Printing Office on CD-ROM for $19.00 by calling (202) 512–1800.) Complete information on ordering the CD-ROM is also available at: https:// www.cms.hhs.gov/ ICD9ProviderDiagnosticCodes/ 05_CDROM.asp#TopOfPage. The Official Version of the ICD–9–CM is no longer available in printed manual form from the Federal Government; it is only available on CD–ROM. Users who need a paper version are referred to one of the many products available from publishing houses. The NCHS has lead responsibility for the ICD–9–CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD–9–CM procedure codes included in the Tabular List and Alphabetic Index for Procedures. The Committee encourages participation in the above process by health-related organizations. In this regard, the Committee holds public meetings for discussion of educational issues and proposed coding changes. These meetings provide an opportunity for representatives of recognized organizations in the coding field, such as the American Health Information Management Association (AHIMA), the American Hospital Association (AHA), and various physician specialty groups, as well as individual physicians, health information management professionals, and other members of the public, to contribute ideas on coding matters. After considering the opinions expressed at the public meetings and in writing, the Committee formulates recommendations, which then must be approved by the agencies. The Committee presented proposals for coding changes for implementation in FY 2010 at a public meeting held on September 24–25, 2008 and finalized the coding changes after consideration of comments received at the meetings and in writing by December 5, 2008. Those coding changes are announced in Tables 6A through 6F in the Addendum to this proposed rule. The Committee held its 2009 meeting on March 11–12, 2009. New codes for which there was a E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24114 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules consensus of public support and for which complete tabular and indexing changes are made by May 2009 will be included in the October 1, 2009 update to ICD–9–CM. Code revisions that were discussed at the March 11–12, 2009 Committee meeting but that could not be finalized in time to include them in the Addendum to this proposed rule are not included in Tables 6A through 6F. These additional codes will be included in Tables 6A through 6F of the final rule and will be marked with an asterisk (*). Copies of the minutes of the procedure codes discussions at the Committee’s September 24–25, 2008 meeting and March 11–12, 2009 meeting can be obtained from the CMS Web site at: https://cms.hhs.gov/ ICD9ProviderDiagnosticCodes/ 03_meetings.asp. The minutes of the diagnosis codes discussions at the September 24–25, 2008 meeting and March 11–12, 2009 meeting are found at: https://www.cdc.gov/nchs/icd9.htm. Paper copies of these minutes are no longer available and the mailing list has been discontinued. These Web sites also provide detailed information about the Committee, including information on requesting a new code, attending a Committee meeting, and timeline requirements and meeting dates. We encourage commenters to address suggestions on coding issues involving diagnosis codes to: Donna Pickett, CoChairperson, ICD–9–CM Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo Road, Hyattsville, MD 20782. Comments may be sent by e-mail to: dfp4@cdc.gov. Questions and comments concerning the procedure codes should be addressed to: Patricia E. Brooks, CoChairperson, ICD–9–CM Coordination and Maintenance Committee, CMS, Center for Medicare Management, Hospital and Ambulatory Policy Group, Division of Acute Care, C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244–1850. Comments may be sent by e-mail to: patricia.brooks2@cms.hhs.gov. The ICD–9–CM code changes that have been approved will become effective October 1, 2009. The new ICD– 9–CM codes are listed, along with their DRG classifications, in Tables 6A and 6B (New Diagnosis Codes and New Procedure Codes, respectively) in the Addendum to this proposed rule. As we stated above, the code numbers and their titles were presented for public comment at the ICD–9–CM Coordination and Maintenance Committee meetings. Both oral and written comments were considered before the codes were approved. In this FY 2010 IPPS proposed rule, we are VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 only soliciting comments on the proposed classification of these new codes. For codes that have been replaced by new or expanded codes, the corresponding new or expanded diagnosis codes are included in Table 6A in the Addendum to this proposed rule. New procedure codes are shown in Table 6B in the Addendum to this proposed rule. Diagnosis codes that have been replaced by expanded codes or other codes or have been deleted are in Table 6C (Invalid Diagnosis Codes) in the Addendum to this proposed rule. These invalid diagnosis codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2009. Table 6D in the Addendum to this proposed rule contains invalid procedure codes. These invalid procedure codes will not be recognized by the GROUPER beginning with discharges occurring on or after October 1, 2009. Revisions to diagnosis code titles are in Table 6E (Revised Diagnosis Code Titles) in the Addendum to this proposed rule, which also includes the MS–DRG assignments for these revised codes. Table 6F in the Addendum to this proposed rule includes revised procedure code titles for FY 2010. In the September 7, 2001 final rule implementing the IPPS new technology add-on payments (66 FR 46906), we indicated we would attempt to include proposals for procedure codes that would describe new technology discussed and approved at the Spring meeting as part of the code revisions effective the following October. As stated previously, ICD–9–CM codes discussed at the March 11–12, 2009 Committee meeting that receive consensus and that were finalized by May 2009 will be included in Tables 6A through 6F in the Addendum to the final rule. Section 503(a) of Public Law 108–173 included a requirement for updating ICD–9–CM codes twice a year instead of a single update on October 1 of each year. This requirement was included as part of the amendments to the Act relating to recognition of new technology under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by adding a clause (vii) which states that the ‘‘Secretary shall provide for the addition of new diagnosis and procedure codes on April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) * * * until the fiscal year that begins after such date.’’ This requirement improves the recognition of new technologies under the IPPS system PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 by providing information on these new technologies at an earlier date. Data will be available 6 months earlier than would be possible with updates occurring only once a year on October 1. While section 1886(d)(5)(K)(vii) of the Act states that the addition of new diagnosis and procedure codes on April 1 of each year shall not require the Secretary to adjust the payment, or DRG classification, under section 1886(d) of the Act until the fiscal year that begins after such date, we have to update the DRG software and other systems in order to recognize and accept the new codes. We also publicize the code changes and the need for a mid-year systems update by providers to identify the new codes. Hospitals also have to obtain the new code books and encoder updates, and make other system changes in order to identify and report the new codes. The ICD–9–CM Coordination and Maintenance Committee holds its meetings in the spring and fall in order to update the codes and the applicable payment and reporting systems by October 1 of each year. Items are placed on the agenda for the ICD–9–CM Coordination and Maintenance Committee meeting if the request is received at least 2 months prior to the meeting. This requirement allows time for staff to review and research the coding issues and prepare material for discussion at the meeting. It also allows time for the topic to be publicized in meeting announcements in the Federal Register as well as on the CMS Web site. The public decides whether or not to attend the meeting based on the topics listed on the agenda. Final decisions on code title revisions are currently made by March 1 so that these titles can be included in the IPPS proposed rule. A complete addendum describing details of all changes to ICD–9–CM, both tabular and index, is published on the CMS and NCHS Web sites in May of each year. Publishers of coding books and software use this information to modify their products that are used by health care providers. This 5-month time period has proved to be necessary for hospitals and other providers to update their systems. A discussion of this timeline and the need for changes are included in the December 4–5, 2005 ICD–9–CM Coordination and Maintenance Committee minutes. The public agreed that there was a need to hold the fall meetings earlier, in September or October, in order to meet the new implementation dates. The public provided comment that additional time would be needed to update hospital E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules systems and obtain new code books and coding software. There was considerable concern expressed about the impact this new April update would have on providers. In the FY 2005 IPPS final rule, we implemented section 1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 108–173, by developing a mechanism for approving, in time for the April update, diagnosis and procedure code revisions needed to describe new technologies and medical services for purposes of the new technology add-on payment process. We also established the following process for making these determinations. Topics considered during the Fall ICD–9–CM Coordination and Maintenance Committee meeting are considered for an April 1 update if a strong and convincing case is made by the requester at the Committee’s public meeting. The request must identify the reason why a new code is needed in April for purposes of the new technology process. The participants at the meeting and those reviewing the Committee meeting summary report are provided the opportunity to comment on this expedited request. All other topics are considered for the October 1 update. Participants at the Committee meeting are encouraged to comment on all such requests. There were no requests approved for an expedited April 1, 2009 implementation of an ICD–9–CM code at the September 24– 25, 2008 Committee meeting. Therefore, there were no new ICD–9–CM codes implemented on April 1, 2009. Current addendum and code title information is published on the CMS Web site at: https://www.cms.hhs.gov/ icd9ProviderDiagnosticCodes/ 01_overview.asp#TopofPage. Information on ICD–9–CM diagnosis codes, along with the Official ICD–9– CM Coding Guidelines, can be found on the Web site at: https://www.cdc.gov/ nchs/icd9.htm. Information on new, revised, and deleted ICD–9–CM codes is also provided to the AHA for publication in the Coding Clinic for ICD–9–CM. AHA also distributes information to publishers and software vendors. CMS also sends copies of all ICD–9– CM coding changes to its Medicare contractors for use in updating their systems and providing education to providers. These same means of disseminating information on new, revised, and deleted ICD–9–CM codes will be used to notify providers, publishers, software vendors, contractors, and others of any changes to the ICD–9–CM codes that are implemented in April. The code titles VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 are adopted as part of the ICD–9–CM Coordination and Maintenance Committee process. Thus, although we publish the code titles in the IPPS proposed and final rules, they are not subject to comment in the proposed or final rules. We will continue to publish the October code updates in this manner within the IPPS proposed and final rules. For codes that are implemented in April, we will assign the new procedure code to the same DRG in which its predecessor code was assigned so there will be no DRG impact as far as DRG assignment. Any midyear coding updates will be available through the Web sites indicated above and through the Coding Clinic for ICD–9–CM. Publishers and software vendors currently obtain code changes through these sources in order to update their code books and software systems. We will strive to have the April 1 updates available through these Web sites 5 months prior to implementation (that is, early November of the previous year), as is the case for the October 1 updates. H. Recalibration of MS–DRG Weights In section II.E. of the preamble of this proposed rule, we state that we fully implemented the cost-based DRG relative weights for FY 2009, which was the third year in the 3-year transition period to calculate the relative weights at 100 percent based on costs. In the FY 2008 IPPS final rule with comment period (72 FR 47267), as recommended by RTI, for FY 2008, we added two new CCRs for a total of 15 CCRs: One for ‘‘Emergency Room’’ and one for ‘‘Blood and Blood Products,’’ both of which can be derived directly from the Medicare cost report. In developing the FY 2010 proposed system of weights, we used two data sources: Claims data and cost report data. As in previous years, the claims data source is the MedPAR file. This file is based on fully coded diagnostic and procedure data for all Medicare inpatient hospital bills. The FY 2008 MedPAR data used in this proposed rule include discharges occurring on October 1, 2007, through September 30, 2008, based on bills received by CMS through December 31, 2008, from all hospitals subject to the IPPS and short-term, acute care hospitals in Maryland (which are under a waiver from the IPPS under section 1814(b)(3) of the Act). The FY 2008 MedPAR file used in calculating the relative weights includes data for approximately 11,648,471 Medicare discharges from IPPS providers. Discharges for Medicare beneficiaries enrolled in a Medicare Advantage managed care plan are excluded from this analysis. The data exclude CAHs, PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 24115 including hospitals that subsequently became CAHs after the period from which the data were taken. The second data source used in the cost-based relative weighting methodology is the FY 2007 Medicare cost report data files from HCRIS (that is, cost reports beginning on or after October 1, 2006, and before October 1, 2007), which represents the most recent full set of cost report data available. We used the December 31, 2008 update of the HCRIS cost report files for FY 2007 in setting the relative cost-based weights. The methodology we used to calculate the DRG cost-based relative weights from the FY 2008 MedPAR claims data and FY 2007 Medicare cost report data is as follows: • To the extent possible, all the claims were regrouped using the proposed FY 2010 MS–DRG classifications discussed in sections II.B. and G. of the preamble of this proposed rule. • The transplant cases that were used to establish the relative weights for heart and heart-lung, liver and/or intestinal, and lung transplants (MS–DRGs 001, 002, 005, 006, and 007, respectively) were limited to those Medicareapproved transplant centers that have cases in the FY 2008 MedPAR file. (Medicare coverage for heart, heart-lung, liver and/or intestinal, and lung transplants is limited to those facilities that have received approval from CMS as transplant centers.) • Organ acquisition costs for kidney, heart, heart-lung, liver, lung, pancreas, and intestinal (or multivisceral organs) transplants continue to be paid on a reasonable cost basis. Because these acquisition costs are paid separately from the prospective payment rate, it is necessary to subtract the acquisition charges from the total charges on each transplant bill that showed acquisition charges before computing the average cost for each MS–DRG and before eliminating statistical outliers. • Claims with total charges or total length of stay less than or equal to zero were deleted. Claims that had an amount in the total charge field that differed by more than $10.00 from the sum of the routine day charges, intensive care charges, pharmacy charges, special equipment charges, therapy services charges, operating room charges, cardiology charges, laboratory charges, radiology charges, other service charges, labor and delivery charges, inhalation therapy charges, emergency room charges, blood charges, and anesthesia charges were also deleted. • At least 95.9 percent of the providers in the MedPAR file had E:\FR\FM\22MYP2.SGM 22MYP2 24116 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER charges for 10 of the 15 cost centers. Claims for providers that did not have charges greater than zero for at least 10 of the 15 cost centers were deleted. • Statistical outliers were eliminated by removing all cases that were beyond 3.0 standard deviations from the mean of the log distribution of both the total charges per case and the total charges per day for each MS–DRG. • Effective October 1, 2008, because hospital inpatient claims include a POA indicator field for each diagnosis present on the claim, the POA indicator field was reset to ‘‘Y’’ for ‘‘Yes’’ just for relative weight-setting purposes for all claims that otherwise have an ‘‘N’’ (No) or a ‘‘U’’ (documentation insufficient to determine if the condition was present at the time of inpatient admission) in the POA field. Under current payment policy, the presence of specific HAC codes, as indicated by the POA field values, can generate a lower payment for the claim. Specifically, if the particular condition is present on admission (that is, a ‘‘Y’’ indicator is associated with the diagnosis on the claim), then it is not a ‘‘HAC,’’ and the hospital is paid with the higher severity (and, therefore, higher weighted MS–DRG). If the particular condition is not present on admission (that is, an ‘‘N’’ indicator is associated with the diagnosis on the claim) and there are no other complicating conditions, the DRG VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 GROUPER assigns the claim to a lower severity (and, therefore, lower weighted) MS–DRG as a penalty for allowing a Medicare inpatient to contract a ‘‘HAC.’’ While this meets policy goals of encouraging quality care and generates program savings, it presents an issue for the relative weight-setting process. Because cases identified as HACs are likely to be more complex than similar cases that are not identified as HACs, the charges associated with HACs are likely to be higher as well. Thus, if the higher charges of these HAC claims are grouped into lower severity MS–DRGs prior to the relative weight-setting process, the relative weights of these particular MS–DRGs would become artificially inflated, potentially skewing the relative weights. In addition, we want to protect the integrity of the budget neutrality process by ensuring that, in estimating payments, no increase to the standardized amount occurs as a result of lower overall payments in a previous year that stem from using weights and case-mix that are based on lower severity MS–DRG assignments. If this would occur, the anticipated cost savings from the HAC policy would be lost. To avoid these problems, we are proposing to reset the POA indicator field to ‘‘Y’’ just for relative weight-setting purposes for all claims that otherwise have an ‘‘N’’ or a ‘‘U’’ in the POA field. This ‘‘forces’’ the PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 more costly HAC claims into the higher severity MS–DRGs as appropriate, and the relative weights calculated for each MS–DRG more closely reflect the true costs of those cases. Once the MedPAR data were trimmed and the statistical outliers were removed, the charges for each of the 15 cost groups for each claim were standardized to remove the effects of differences in area wage levels, IME and DSH payments, and for hospitals in Alaska and Hawaii, the applicable costof-living adjustment. Because hospital charges include charges for both operating and capital costs, we standardized total charges to remove the effects of differences in geographic adjustment factors, cost-of-living adjustments, and DSH payments under the capital IPPS as well. Charges were then summed by MS–DRG for each of the 15 cost groups so that each MS–DRG had 15 standardized charge totals. These charges were then adjusted to cost by applying the national average CCRs developed from the FY 2007 cost report data. The 15 cost centers that we used in the relative weight calculation are shown in the following table. The table shows the lines on the cost report and the corresponding revenue codes that we used to create the 15 national cost center CCRs. BILLING CODE 4120–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24117 EP22MY09.004</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.005</GPH> sroberts on PROD1PC70 with FRONTMATTER 24118 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24119 EP22MY09.006</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.007</GPH> sroberts on PROD1PC70 with FRONTMATTER 24120 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24121 EP22MY09.008</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.009</GPH> sroberts on PROD1PC70 with FRONTMATTER 24122 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules We developed the national average CCRs as follows: Taking the FY 2007 cost report data, we removed CAHs, Indian Health Service hospitals, all-inclusive rate hospitals, and cost reports that represented time periods of less than 1 year (365 days). We included hospitals located in Maryland as we are including their charges in our claims database. We then created CCRs for each provider for each cost center (see prior table for line items used in the calculations) and removed any CCRs that were greater than 10 or less than 0.01. We normalized the departmental CCRs by dividing the CCR for each department by the total CCR for the hospital for the purpose of trimming the data. We then took the logs of the normalized cost center CCRs and removed any cost center CCRs where the log of the cost center CCR was greater or less than the mean log plus/minus 3 times the standard deviation for the log of that cost center CCR. Once the cost report data were trimmed, we calculated a Medicare-specific CCR. The Medicarespecific CCR was determined by taking the Medicare charges for each line item from Worksheet D–4 and deriving the Medicare-specific costs by applying the hospital-specific departmental CCRs to the Medicare-specific charges for each line item from Worksheet D–4. Once each hospital’s Medicare-specific costs were established, we summed the total Medicare-specific costs and divided by the sum of the total Medicare-specific charges to produce national average, charge-weighted CCRs. After we multiplied the total charges for each MS–DRG in each of the 15 cost centers by the corresponding national average CCR, we summed the 15 ‘‘costs’’ across each MS–DRG to produce a total standardized cost for the MS–DRG. The average standardized cost for each MS– DRG was then computed as the total standardized cost for the MS–DRG divided by the transfer-adjusted case count for the MS–DRG. The average cost for each MS–DRG was then divided by VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 When we recalibrated the DRG weights for previous years, we set a threshold of 10 cases as the minimum number of cases required to compute a reasonable weight. We are proposing to use that same case threshold in recalibrating the MS–DRG weights for FY 2010. Using the FY 2008 MedPAR data set, there are 8 MS–DRGs that contain fewer than 10 cases. Under the MS–DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we no longer have separate DRGs for patients age 0 to 17 years. With the exception of newborns, we previously separated some DRGs based on whether the patient was age 0 to 17 Group CCR years or age 17 years and older. Other than the age split, cases grouping to Routine Days ............................ 0.534 Intensive Days .......................... 0.469 these DRGs are identical. The DRGs for Drugs ........................................ 0.199 patients age 0 to 17 years generally have Supplies & Equipment .............. 0.344 very low volumes because children are Therapy Services ...................... 0.408 typically ineligible for Medicare. In the Laboratory ................................. 0.160 past, we have found that the low Operating Room ....................... 0.281 volume of cases for the pediatric DRGs Cardiology ................................. 0.178 could lead to significant year-to-year Radiology .................................. 0.161 instability in their relative weights. Emergency Room ..................... 0.276 Although we have always encouraged Blood and Blood Products ........ 0.426 Other Services .......................... 0.418 non-Medicare payers to develop weights Labor & Delivery ....................... 0.460 applicable to their own patient Inhalation Therapy .................... 0.199 populations, we have heard frequent Anesthesia ................................ 0.134 complaints from providers about the use of the Medicare relative weights in the As we explained in section II.E. of the pediatric population. We believe that preamble of this proposed rule, we have eliminating this age split in the MS– completed our 2-year transition to the DRGs will provide more stable payment MS–DRGs. For FY 2008, the first year of for pediatric cases by determining their the transition, 50 percent of the relative payment using adult cases that are weight for an MS–DRG was based on the much higher in total volume. Newborns two-thirds cost-based weight/one-third are unique and require separate MS– charge-based weight calculated using DRGs that are not mirrored in the adult FY 2006 MedPAR data grouped to the population. Therefore, it remains Version 24.0 (FY 2007) DRGs. The necessary to retain separate MS–DRGs remaining 50 percent of the FY 2008 for newborns. All of the low-volume relative weight for an MS–DRG was MS–DRGs listed below are for based on the two-thirds cost-based newborns. In FY 2010, because we do weight/one-third charge-based weight not have sufficient MedPAR data to set calculated using FY 2006 MedPAR accurate and stable cost weights for grouped to the Version 25.0 (FY 2008) these low-volume MS–DRGs, we are MS–DRGs. In FY 2009, the relative proposing to compute weights for the weights were based on 100 percent cost low-volume MS–DRGs by adjusting weights computed using the Version their FY 2009 weights by the percentage 26.0 (FY 2009) MS–DRGs. change in the average weight of the the national average standardized cost per case to determine the relative weight. The new cost-based relative weights were then normalized by an adjustment factor of 1.54005 so that the average case weight after recalibration was equal to the average case weight before recalibration. The normalization adjustment is intended to ensure that recalibration by itself neither increases nor decreases total payments under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act. The 15 proposed national average CCRs for FY 2010 are as follows: PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.010</GPH> sroberts on PROD1PC70 with FRONTMATTER BILLING CODE 4120–01–C 24123 24124 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules cases in other MS–DRGs. The crosswalk table is shown below: Low-volume MS–DRG MS–DRG title 768 ................ Vaginal Delivery with O.R. Procedure Except Sterilization and/ or D&C. Neonates, Died or Transferred to Another Acute Care Facility 789 ................ 790 ................ Crosswalk to MS–DRG 791 ................ Extreme Immaturity or Respiratory Distress Syndrome, Neonate. Prematurity with Major Problems ................................................ 792 ................ Prematurity without Major Problems ........................................... 793 ................ Full-Term Neonate with Major Problems .................................... 794 ................ Neonate with Other Significant Problems ................................... 795 ................ Normal Newborn ......................................................................... I. Proposed Add-On Payments for New Services and Technologies sroberts on PROD1PC70 with FRONTMATTER 1. Background Sections 1886(d)(5)(K) and (L) of the Act establish a process of identifying and ensuring adequate payment for new medical services and technologies (sometimes collectively referred to in this section as ‘‘new technologies’’) under the IPPS. Section 1886(d)(5)(K)(vi) of the Act specifies that a medical service or technology will be considered new if it meets criteria established by the Secretary after notice and opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that the process must apply to a new medical service or technology if, ‘‘based on the estimated costs incurred with respect to discharges involving such service or technology, the DRG prospective payment rate otherwise applicable to such discharges under this subsection is inadequate.’’ We note that beginning with FY 2008, CMS transitioned from CMS–DRGs to MS– DRGs. The regulations implementing these provisions specify three criteria for a new medical service or technology to receive an additional payment: (1) The medical service or technology must be new; (2) the medical service or technology must be costly such that the DRG rate otherwise applicable to discharges involving the medical service or technology is determined to be inadequate; and (3) the service or technology must demonstrate a substantial clinical improvement over existing services or technologies. These three criteria are explained below in the ensuing paragraphs in further detail. Under the first criterion, as reflected in 42 CFR 412.87(b)(2), a specific VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). FY 2009 FR weight (adjusted by percent weight of the cases in other MS–DRGs). medical service or technology will be considered ‘‘new’’ for purposes of new medical service or technology add-on payments until such time as Medicare data are available to fully reflect the cost of the technology in the MS–DRG weights through recalibration. Typically, there is a lag of 2 to 3 years from the point a new medical service or technology is first introduced on the market (generally on the date that the technology receives FDA approval/ clearance) and when data reflecting the use of the medical service or technology are used to calculate the MS–DRG weights. For example, data from discharges occurring during FY 2008 are used to calculate the FY 2010 MS–DRG weights in this proposed rule. Section 412.87(b)(2) of the regulations therefore provides that ‘‘a medical service or technology may be considered new within 2 or 3 years after the point at which data begin to become available reflecting the ICD–9–CM code assigned to the new medical service or technology (depending on when a new code is assigned and data on the new medical service or technology become available for DRG recalibration). After CMS has recalibrated the DRGs, based on available data to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered ‘new’ under the criterion for this section.’’ The 2-year to 3-year period during which a medical service or technology can be considered new would ordinarily begin on the date on which the medical service or technology received FDA approval or clearance. (We note that, for purposes of this section of the proposed rule, we generally refer to both FDA approval and FDA clearance as FDA PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 change in average change in average change in average change in average change in average change in average change in average change in average ‘‘approval.’’) However, in some cases, initially there may be no Medicare data available for the new service or technology following FDA approval. For example, the newness period could extend beyond the 2-year to 3-year period after FDA approval is received in cases where the product initially was generally unavailable to Medicare patients following FDA approval, such as in cases of a national noncoverage determination or a documented delay in bringing the product onto the market after that approval (for instance, component production or drug production has been postponed following FDA approval due to shelf life concerns or manufacturing issues). After the MS–DRGs have been recalibrated to reflect the costs of an otherwise new medical service or technology, the medical service or technology is no longer eligible for special add-on payment for new medical services or technologies (as specified under § 412.87(b)(2)). For example, an approved new technology that received FDA approval in October 2008 and entered the market at that time may be eligible to receive add-on payments as a new technology for discharges occurring before October 1, 2011 (the start of FY 2012). Because the FY 2012 MS–DRG weights would be calculated using FY 2010 MedPAR data, the costs of such a new technology would be fully reflected in the FY 2012 MS–DRG weights. Therefore, the new technology would no longer be eligible to receive add-on payments as a new technology for discharges occurring in FY 2012 and thereafter. Under the second criterion, § 412.87(b)(3) further provides that, to be eligible for the add-on payment for new medical services or technologies, E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules the MS–DRG prospective payment rate otherwise applicable to the discharge involving the new medical services or technologies must be assessed for adequacy. Under the cost criterion, to assess the adequacy of payment for a new technology paid under the applicable MS–DRG prospective payment rate, we evaluate whether the charges for cases involving the new technology exceed certain threshold amounts. In the FY 2004 IPPS final rule (68 FR 45385), we established the threshold at the geometric mean standardized charge for all cases in the MS–DRG plus 75 percent of 1 standard deviation above the geometric mean standardized charge (based on the logarithmic values of the charges and converted back to charges) for all cases in the MS–DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant MS–DRGs, if the new medical service or technology occurs in more than one MS–DRG). However, section 503(b)(1) of Public Law 108–173 amended section 1886(d)(5)(K)(ii)(I) of the Act to provide that, beginning in FY 2005, CMS will apply ‘‘a threshold * * * that is the lesser of 75 percent of the standardized amount (increased to reflect the difference between cost and charges) or 75 percent of one standard deviation for the diagnosis-related group involved.’’ (We refer readers to section IV.D. of the preamble to the FY 2005 IPPS final rule (69 FR 49084) for a discussion of the revision of the regulations to incorporate the change made by section 503(b)(1) of Public Law 108–173.) Table 10 that was included in the notice published in the Federal Register on October 3, 2008, contains the final thresholds that are being used to evaluate applications for new technology add-on payments for FY 2010 (73 FR 57888). We note that section 124 of Public Law 110–275 extended, through FY 2009, wage index reclassifications under section 508 of Public Law 108–173 (the MMA) and special exceptions contained in the final rule promulgated in the Federal Register on August 11, 2004 (69 FR 49105 and 49107) and extended under section 117 of Public Law 110– 173 (the MMSEA). The wage data affects the standardized amounts (as well as the outlier offset and budget neutrality factors that are applied to the standardized amounts), which we use to compute the cost criterion thresholds. Therefore, the thresholds reflected in Table 10 in the Addendum to the FY 2009 IPPS final rule were tentative. As noted earlier, on October 3, 2008, we published a Federal Register notice (73 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 FR 57888) that contained a new Table 10 with revised thresholds that reflect the wage index rates for FY 2009 as a result of implementation of section 124 of Public Law 110–275. The revised thresholds also were published on the CMS Web site. The revised thresholds published in Table 10 in the October 3, 2008 Federal Register notice are being used to determine if an applicant for new technology add-on payments discussed in this FY 2010 proposed rule meets the cost criterion threshold for new technology add-on payments for FY 2010. In the September 7, 2001 final rule that established the new technology add-on payment regulations (66 FR 46917), we discussed the issue of whether the HIPAA Privacy Rule at 45 CFR Parts 160 and 164 applies to claims information that providers submit with applications for new technology add-on payments. Specifically, we explained that health plans, including Medicare, and providers that conduct certain transactions electronically, including the hospitals that would be receiving payment under the FY 2001 IPPS final rule, are required to comply with the HIPAA Privacy Rule. We further explained how such entities could meet the applicable HIPAA requirements by discussing how the HIPAA Privacy Rule permitted providers to share with health plans information needed to ensure correct payment, if they had obtained consent from the patient to use that patient’s data for treatment, payment, or health care operations. We also explained that, because the information to be provided within applications for new technology add-on payment would be needed to ensure correct payment, no additional consent would be required. The HHS Office of Civil Rights has since amended the HIPAA Privacy Rule, but the results remain. The HIPAA Privacy Rule no longer requires covered entities to obtain consent from patients to use or disclose protected health information for treatment, payment, or health care operations, and expressly permits such entities to use or to disclose protected health information for any of these purposes. (We refer readers to 45 CFR 164.502(a)(1)(ii), and 164.506(c)(1) and (c)(3), and the Standards for Privacy of Individually Identifiable Health Information published in the Federal Register on August 14, 2002, for a full discussion of changes in consent requirements.) Under the third criterion, § 412.87(b)(1) of our existing regulations provides that a new technology is an appropriate candidate for an additional payment when it represents ‘‘an advance that substantially improves, PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 24125 relative to technologies previously available, the diagnosis or treatment of Medicare beneficiaries.’’ For example, a new technology represents a substantial clinical improvement when it reduces mortality, decreases the number of hospitalizations or physician visits, or reduces recovery time compared to the technologies previously available. (We refer readers to the September 7, 2001 final rule for a complete discussion of this criterion (66 FR 46902).) The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies while preserving some of the incentives inherent under an average-based prospective payment system. The payment mechanism is based on the cost to hospitals for the new medical service or technology. Under § 412.88, if the costs of the discharge (determined by applying cost to charge ratios (‘‘CCRs’’) as described in § 412.84(h)) exceed the full DRG payment (including payments for IME and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: (1) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology exceed Medicare’s payment); or (2) 50 percent of the difference between the full DRG payment and the hospital’s estimated cost for the case. Unless the discharge qualifies for an outlier payment, Medicare payment is limited to the full MS–DRG payment plus 50 percent of the estimated costs of the new technology. Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments to annual MS–DRG classifications and relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. Therefore, in the past, we accounted for projected payments under the new medical service and technology provision during the upcoming fiscal year, while at the same time estimating the payment effect of changes to the MS–DRG classifications and recalibration. The impact of additional payments under this provision was then included in the budget neutrality factor, which was applied to the standardized amounts and the hospital-specific amounts. However, section 503(d)(2) of Public Law 108–173 provides that there shall be no reduction or adjustment in aggregate payments under the IPPS due to add-on payments for new medical services and technologies. Therefore, following section 503(d)(2) of Public E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24126 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Law 108–173, add-on payments for new medical services or technologies for FY 2005 and later years have not been subjected to budget neutrality. In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we modified our regulations at § 412.87 to codify our current practice of how CMS evaluates the eligibility criteria for new medical service or technology add-on payment applications. We also amended § 412.87(c) to specify that all applicants for new technology add-on payments must have FDA approval for their new medical service or technology by July 1 of each year prior to the beginning of the fiscal year that the application is being considered. Applicants for add-on payments for new medical services or technologies for FY 2011 must submit a formal request, including a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement, along with a significant sample of data to demonstrate the medical service or technology meets the high-cost threshold. Complete application information, along with final deadlines for submitting a full application, will be posted as it becomes available on our Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/08_newtech.asp. To allow interested parties to identify the new medical services or technologies under review before the publication of the proposed rule for FY 2011, the Web site also will list the tracking forms completed by each applicant. The Council on Technology and Innovation (CTI) at CMS oversees the agency’s cross-cutting priority on coordinating coverage, coding and payment processes for Medicare with respect to new technologies and procedures, including new drug therapies, as well as promoting the exchange of information on new technologies between CMS and other entities. The CTI, composed of senior CMS staff and clinicians, was established under section 942(a) of Public Law 108–173. The Council is cochaired by the Director of the Office of Clinical Standards and Quality (OCSQ) and the Director of the Center for Medicare Management (CMM), who is also designated as the CTI’s Executive Coordinator. The specific processes for coverage, coding, and payment are implemented by CMM, OCSQ, and the local claimspayment contractors (in the case of local coverage and payment decisions). The CTI supplements, rather than replaces, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 these processes by working to assure that all of these activities reflect the agency-wide priority to promote highquality, innovative care. At the same time, the CTI also works to streamline, accelerate, and improve coordination of these processes to ensure that they remain up to date as new issues arise. To achieve its goals, the CTI works to streamline and create a more transparent coding and payment process, improve the quality of medical decisions, and speed patient access to effective new treatments. It is also dedicated to supporting better decisions by patients and doctors in using Medicare-covered services through the promotion of better evidence development, which is critical for improving the quality of care for Medicare beneficiaries. CMS plans to continue its Open Door forums with stakeholders who are interested in CTI’s initiatives. In addition, to improve the understanding of CMS’ processes for coverage, coding, and payment and how to access them, the CTI has developed an ‘‘innovator’s guide’’ to these processes. The intent is to consolidate this information, much of which is already available in a variety of CMS documents and in various places on the CMS Web site, in a userfriendly format. This guide was published in August 2008 and is available on the CMS Web site at: https://www.cms.hhs.gov/ CouncilonTechInnov/Downloads/ InnovatorsGuide8_25_08.pdf. As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we invite any product developers or manufacturers of new medical technologies to contact the agency early in the process of product development if they have questions or concerns about the evidence that would be needed later in the development process for the agency’s coverage decisions for Medicare. The CTI aims to provide useful information on its activities and initiatives to stakeholders, including Medicare beneficiaries, advocates, medical product manufacturers, providers, and health policy experts. Stakeholders with further questions about Medicare’s coverage, coding, and payment processes, or who want further guidance about how they can navigate these processes, can contact the CTI at CTI@cms.hhs.gov or from the ‘‘Contact Us’’ section of the CTI home page (https://www.cms.hhs.gov/ CouncilonTechInnov/). PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 2. Public Input Before Publication of a Notice of Proposed Rulemaking on AddOn Payments Section 1886(d)(5)(K)(viii) of the Act, as amended by section 503(b)(2) of Public Law 108–173, provides for a mechanism for public input before publication of a notice of proposed rulemaking regarding whether a medical service or technology represents a substantial clinical improvement or advancement. The process for evaluating new medical service and technology applications requires the Secretary to— • Provide, before publication of a proposed rule, for public input regarding whether a new service or technology represents an advance in medical technology that substantially improves the diagnosis or treatment of Medicare beneficiaries; • Make public and periodically update a list of the services and technologies for which applications for add-on payments are pending; • Accept comments, recommendations, and data from the public regarding whether a service or technology represents a substantial clinical improvement; and • Provide, before publication of a proposed rule, for a meeting at which organizations representing hospitals, physicians, manufacturers, and any other interested party may present comments, recommendations, and data regarding whether a new medical service or technology represents a substantial clinical improvement to the clinical staff of CMS. In order to provide an opportunity for public input regarding add-on payments for new medical services and technologies for FY 2010 prior to publication of this proposed rule, we published a notice in the Federal Register on November 28, 2008 (73 FR 72490), and held a town hall meeting at the CMS Headquarters Office in Baltimore, MD, on February 17, 2009. In the announcement notice for the meeting, we stated that the opinions and alternatives provided during the meeting would assist us in our evaluations of applications by allowing public discussion of the substantial clinical improvement criterion for each of the FY 2010 new medical service and technology add-on payment applications before the publication of the FY 2010 IPPS proposed rule. Approximately 90 individuals registered to attend the town hall meeting in person, while additional individuals listened over an open telephone line. Each of the five FY 2010 applicants presented information on its E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER technology, including a discussion of data reflecting the substantial clinical improvement aspect of the technology. We considered each applicant’s presentation made at the town hall meeting, as well as written comments submitted on each applicant’s application, in our evaluation of the new technology add-on applications for FY 2010 in this proposed rule. In response to the published notice and the new technology town hall meeting, we received two written comments regarding applications for FY 2010 new technology add-on payments. We have summarized these comments or, if applicable, indicated that there were no comments received, at the end of each discussion of the individual applications. We did not receive any general comments about the application of the substantial clinical improvement criterion. A further discussion of our evaluation of the applications and the documentation for new technology addon payments submitted for FY 2010 approval is provided under the specified areas under this section. 3. FY 2010 Status of Technologies Approved for FY 2009 Add-On Payments We approved one application for new technology add-on payments for FY 2009: CardioWestTM Temporary Total Artificial Heart System (CardioWestTM TAH–t). SynCardia Systems, Inc. submitted an application for approval of the CardioWest TM temporary Total Artificial Heart system (TAH–t). The TAH–t is a technology that is used as a bridge to heart transplant device for heart transplant-eligible patients with end-stage biventricular failure. The TAH–t pumps up to 9.5 liters of blood per minute. This high level of perfusion helps improve hemodynamic function in patients, thus making them better heart transplant candidates. The TAH–t was approved by the FDA on October 15, 2004, for use as a bridge to transplant device in cardiac transplant-eligible candidates at risk of imminent death from biventricular failure. The TAH–t is intended to be used in hospital inpatients. One of the FDA’s post-approval requirements is that the manufacturer agrees to provide a post-approval study demonstrating success of the device at one center can be reproduced at other centers. The study was to include at least 50 patients who would be followed up to 1 year, including (but not limited to) the following endpoints: Survival to transplant; adverse events; and device malfunction. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 In the past, Medicare did not cover artificial heart devices, including the TAH–t. However, on May 1, 2008, CMS issued a final national coverage determination (NCD) expanding Medicare coverage of artificial hearts when they are implanted as part of a study that is approved by the FDA and is determined by CMS to meet CMS’s Coverage with Evidence Development (CED) clinical research criteria. (The final NCD is available on the CMS Web site at: https://www.cms.hhs.gov/mcd/ viewdecisionmemo.asp?id=211.) We indicated in the FY 2009 IPPS final rule (73 FR 48555) that, because Medicare’s previous coverage policy with respect to this device had precluded payment from Medicare, we did not expect the costs associated with this technology to be currently reflected in the data used to determine the relative weights of MS–DRGs. As we have indicated in the past, and as we discussed in the FY 2009 IPPS final rule, although we generally believe that the newness period would begin on the date that FDA approval was granted, in cases where the applicant can demonstrate a documented delay in market availability subsequent to FDA approval, we would consider delaying the start of the newness period. This technology’s situation represented such a case. We also noted that section 1886(d)(5)(K)(ii)(II) of the Act requires that we provide for the collection of cost data for a new medical service or technology for a period of at least 2 years and no more than 3 years ‘‘beginning on the date on which an inpatient hospital code is issued with respect to the service or technology.’’ Furthermore, the statute specifies that the term ‘‘inpatient hospital code’’ means any code that is used with respect to inpatient hospital services for which payment may be made under the IPPS and includes ICD–9–CM codes and any subsequent revisions. Although the TAH–t has been described by the ICD– 9–CM code(s) since the time of its FDA approval, because the TAH–t had not been covered under the Medicare program (and, therefore, no Medicare payment had been made for this technology), this code could not be ‘‘used with respect to inpatient hospital services for which payment’’ is made under the IPPS, and thus we assumed that none of the costs associated with this technology would be reflected in the Medicare claims data used to recalibrate the MS–DRG relative weights for FY 2009. For this reason, as discussed in the FY 2009 IPPS final rule, despite the FDA approval date of the technology, we determined that PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 24127 TAH–t would still be eligible to be considered ‘‘new’’ for purposes of the new technology add-on payment because the TAH–t met the newness criterion on the date that Medicare coverage began, consistent with issuance of the final NCD, effective on May 1, 2008. After evaluation of the newness, costs, and substantial clinical improvement criteria for new technology add-on payments for the TAH–t and consideration of the public comments we received on the FY 2009 IPPS proposed rule, we approved the TAH– t for new technology add-on payments for FY 2009 (73 FR 48557). We indicated that we believed the TAH–t offered a new treatment option that previously did not exist for patients with end-stage biventricular failure. However, we indicated that we recognized that Medicare coverage of the TAH–t is limited to approved clinical trial settings. The new technology add-on payment status does not negate the restrictions under the NCD nor does it obviate the need for continued monitoring of clinical evidence for the TAH–t. We remain interested in seeing whether the clinical evidence demonstrates that the TAH–t continues to be effective. If evidence is found that the TAH–t may no longer offer a substantial clinical improvement, we reserve the right to discontinue new technology add-on payments, even within the 2 to 3 year period that the device may still be considered to be new. The new technology add-on payment for the TAH–t for FY 2009 is triggered by the presence of ICD–9–CM procedure code 37.52 (Implantation of total heart replacement system), condition code 30, and the diagnosis code reflecting clinical trial—V70.7 (Examination of participant in clinical trial). For FY 2009 we finalized a maximum add-on payment of $53,000 (that is 50 percent of the estimated operating costs of the device of $106,000) for cases that involve this technology. As noted above, the TAH–t is still eligible to be considered ‘‘new’’ for purposes of the new technology add-on payment because the TAH–t met the newness criterion on the date that Medicare coverage began, consistent with issuance of the final NCD, effective on May 1, 2008. Therefore, for FY 2010, we are proposing to continue new technology add-on payments for cases involving the TAH–t in FY 2010 with a maximum add-on payment of $53,000. E:\FR\FM\22MYP2.SGM 22MYP2 24128 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 4. FY 2010 Applications for New Technology Add-On Payments We received six applications to be considered for new technology add-on payment for FY 2010. However, one applicant withdrew its application. Emphasys Medical submitted an application for new technology add-on payments for FY 2010 for the Emphasys Medical Zephyr® Endobronchial Valve (Zephyr® EBV). However, Emphasys Medical withdrew its application from further review in December 2008. Since the Zephyr® EBV application was withdrawn prior to the town hall meeting and publication of the FY 2010 IPPS proposed rule, we are not discussing the application in this proposed rule. A discussion of the remaining five applications is presented below. At the time this proposed rule was developed, some of the technologies had not yet received FDA approval. Consequently, our discussion below of these cases may be limited. sroberts on PROD1PC70 with FRONTMATTER a. The AutoLITT TM System Monteris Medical submitted an application for new technology add-on payments for FY 2010 for the AutoLITT TM. AutoLITT TM is a minimally invasive, MRI-guided catheter tipped laser designed to destroy malignant brain tumors with interstitial thermal energy and is designed to cause immediate coagulation and necrosis of diseased tissue. The applicant asserts that the AutoLITT TM delivers laser energy to the lesion with a proprietary 3mm diameter probe that directs the energy radially (that is, at right angle to the axis of the probe) toward the targeted tumor tissue in a narrow beam profile and at the same time, a proprietary probe cooling system removes heat from tissue not directly in the path of the laser beam, ostensibly protecting it from thermal damage and enabling the physician to selectively coagulate only targeted tissue. The applicant expects that AutoLITT TM will receive a 510K FDA clearance in early 2009, and the FDA approval will be for use in patients with glioblastoma multiforme brain tumors. Because the technology is not yet approved by the FDA, we will limit our discussion of this technology to data and information that the applicant submitted, rather than make specific proposals with respect to whether the device would meet the new technology add-on payment criteria. With regard to the newness criterion, we are concerned that the AutoLITT TM may be substantially similar to the device that it listed as its predicate device in its application to the FDA for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 approval. The applicant identified Visual-ase as its predicate device, which is also used to treat tumors of the brain. Visual-ase was approved by the FDA in 2006. The applicant maintains that AutoLITT TM can be distinguished from the Visual-ase by its mechanism of action (that is, side-firing laser versus elliptical firing). A new ICD–9–CM procedure code, 17.61 (Laser interstitial thermal therapy [LITT] of lesion or tissue of brain under guidance), was recommended for approval at the September 2008 ICD–9– CM Coordination and Maintenance Committee meeting. If approved, the new code would become effective on October 1, 2009. We welcome comments from the public regarding whether or not the AutoLITT TM is substantially similar to the Visual-ase. In an effort to demonstrate that AutoLITT TM meets the cost criterion, the applicant used 2006 Medicare data from the Healthcare Cost and Utilization Project (HCUP). We first note that the applicant believes that cases eligible for the AutoLITT TM will map to MS–DRGs 25 (Craniotomy and Endovascular Intracranial Procedures with MCC), 26 (Craniotomy and Endovascular Intracranial Procedures with CC), and 27 (Craniotomy and Endovascular Intracranial Procedures without CC or MCC). The applicant searched HCUP hospital data for cases potentially eligible for the AutoLITT TM that was assigned one of the following ICD–9– CM diagnosis codes: a diagnosis code that begins with a prefix of 191 (Malignant neoplasm of brain); diagnosis code 225.0 (Benign neoplasm of brain and other parts of nervous system); or diagnosis code 239.6 (Neoplasm of the brain of unspecified nature). The applicant found 39,295 cases and weighted the standardized charge per case based on the amount of cases found within each of the diagnosis codes listed above rather than the percentage of cases that would group to different MS–DRGs. Based on this analysis, the average standardized charge per case was $46,754. While the applicant’s analysis established a caseweighted average charge per case, it did not determine a case-weighted average standardized charge per case by MS– DRG (as required by the application). Therefore, in order to determine a caseweighted average standardized charge per case by MS–DRG, the applicant used data from a Rand health report 4 to first determine the percentage of cases that 4 Rand Corporation: Rand Health—Understanding Medicare Severity-DRGs. A presentation given by Barbara Wynn at the Florida Hospital Association Meeting on November 1, 2007. PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 would map to MS–DRGs 25, 26, and 27 and combined this analysis with the analysis above to determine a caseweighted average standardized charge per case by MS–DRG. According to its report, Rand used 2006 MedPAR claims data and found 63,876 cases in CMS– DRG 1 (Craniotomy Age Greater Than 17 with CC) and 39,878 cases in CMS–DRG 2 (Craniotomy Age Greater Than 17 without CC) for a total of 103,754 cases. Based on ICD–9–CM procedure and diagnosis codes, Rand converted these cases from CMS–DRGs 1 and 2 to MS– DRGs 25, 26, and 27. Rand determined that, of the 63,876 cases in CMS–DRG 1, 24,116 of these cases would map to MS– DRG 25 (or 23.2 percent of all cases) and 39,760 cases would map to MS–DRG 26 (or 38.4 percent of all cases). All 39,878 cases from CMS–DRG 2 would map to MS–DRG 27 (or 38.4 percent of all cases in CMS–DRGs 1 and 2). Using the percentages from Rand’s analysis, the case-weighted average standardized charge per case by MS–DRG was $46,754. We note that, combining the Rand analysis with the HCUP analysis did not change the case-weighted average standardized charge per case from the results from the HCUP analysis (both analyses produced a caseweighted average standardized charge per case of $46,754). The applicant did identify the average standardized charge per case in the aggregate but has yet to identify cases within the MS–DRGs themselves and, therefore, the applicant has not determined the case-weighted average standardized charge per case by MS–DRG. The applicant also noted that the case-weighted average standardized charge per case of $46,754 did not include charges related to the AutoLITT TM. Therefore, it is necessary to add the charges related to the device to the case-weighted average standardized charge per case in evaluating the cost threshold criterion. Although the applicant submitted data related to the estimated cost of the AutoLITT TM per case, the applicant stated that the cost of the device was proprietary information. Based on a study of charge compression data by RTI 5 and charge master data from Stanford University and University of California, San Francisco, the applicant estimates $24,389 in charges related to the AutoLITT TM (we note that some of the data used a markup of 294 percent of the costs). Adding the estimated charges related to the device to the caseweighted average standardized charge 5 RTI International, A Study of Charge Compression in Calculating DRG Relative Weights, RTI Project No. 0207964.012.008; January 2007. E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules per case resulted in a case-weighted average standardized charge per case of $71,143 ($46,754 plus $24,389). Using the FY 2010 thresholds published in Table 10 (73 FR 58008), the caseweighted threshold for MS–DRGs 25, 26, and 27 was $58,069 (all calculations above were performed using unrounded numbers). Because the case-weighted average standardized charge per case for the applicable MS–DRGs exceeds the case-weighted threshold amount, the applicant maintains that the AutoLITT TM would meet the cost criterion. We invite public comment on whether or not the AutoLITT TM meets the cost criterion for a new technology add-on payment, particularly in light of the fact that the applicant did not determine a case-weighted average standardized charge per case by MS– DRG (as discussed above). With respect to the substantial clinical improvement criterion, the applicant maintains that it meets this criterion in its application. Specifically, the applicant stated that several nonAutoLITT TM clinical trials have demonstrated that nonfocused LITT (and more recently, the use of LITT plus MRI) improved survival, quality of life, and recovery in patients with advanced glioblastoma multiforme tumors and advanced metastatic brain tumors that cannot be effectively treated with surgery, radiosurgery, radiation, chemotherapy, or any currently available clinical procedure. In a number of these patients, nonfocused LITT was the treatment of last resort, due to either the unresponsiveness or inability of these therapies to treat the brain tumor (due to tumor location, type, or size, among others). The applicant also maintains that improved clinical outcomes using nonfocused LITT have included reduced recovery time and a reduced rate of complications (that is, infection, brain edema). The applicant stated that these factors, as discussed in the FY 2001 final rule (66 FR 46914 through 46915) demonstrate that the AutoLITT TM meets the new technology criterion for substantial clinical improvement. The applicant further asserts that AutoLITT TM would represent a substantial clinical improvement over existing standards of care for a number of reasons and should build upon less sophisticated, nonfocused LITT therapies. These clinical improvements cited by the applicant include: a less invasive method of tumor ablation, potentially leading to lower complication rates post procedure (infection, edema); an ability to employ multiple interventions over shorter VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 periods of time and an ability to be used as a treatment of last resort (radiosurgery is limited due to radiation dosing and craniotomy is limited to 1 to 2 procedures); an ability to be used in hard-to-reach brain tumors (the AutoLITT TM may be used as a treatment of last resort); and a shorter recovery time (the possibility for same day surgery, which has been demonstrated above with non-focused LITT). We appreciate the applicant’s summary of why this technology represents a substantial clinical improvement. While we recognize the future potential of this interesting therapy, we have concerns that, besides lacking FDA approval at this time, to date the AutoLITT TM has been used for the treatment of only a few patients as part of a safety evaluation with no comparative efficacy data and, therefore, there may not be sufficient objective clinical evidence to determine if the AutoLITT TM meets the substantial clinical improvement criteria. We invite public comment on whether or not the AutoLITT TM meets the substantial clinical improvement criterion. We did not receive any written public comments regarding this application for new technology add-on payments concerning the new technology town hall meeting. b. CLOLAR ® (clofarabine) Injection Genzyme Oncology submitted an application for new technology add-on payments for FY 2010 for CLOLAR ® (clofarabine) injection. CLOLAR ® is a chemotherapeutic agent that is administered intravenously and is currently being evaluated for the treatment of patients with acute myeloid leukemia (AML). CLOLAR ® was first granted FDA approval in December 2004 for the treatment of pediatric patients (ages 1–21 years), a population not typically eligible for Medicare, with acute lymphoblastic leukemia (ALL) who did not respond to at least two prior treatment attempts. Genzyme Oncology submitted a supplement to its pediatric application (sNDA) to the FDA in November 2008, in which it requested approval for CLOLAR® use in previously untreated adult patients with AML with at least one unfavorable baseline prognostic factor. Unfavorable prognostic factors include: Age greater than or equal to 70 years; antecedent hematologic disorder (AHD); Easter Cooperative Oncology Group (ECOG) performance status (PS) of 2; or intermediate/unfavorable risk karyotype. CLOLAR ® is expecting to receive sNDA approval from the FDA by May 2009. Because the technology is not yet approved by the FDA, we are PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 24129 limiting our discussion of this technology to data that the applicant submitted, rather than making specific proposals with respect to whether the device would meet the new technology add-on payment criteria. With regard to the newness criterion, we note that, although the applicant has submitted an application to the FDA for an sNDA for the treatment of patients with AML, the FDA approval for the new indication alone does not necessarily demonstrate that CLOLAR ® would meet the newness criterion for purposes of new technology add-on payments. The newness criterion is intended to apply to technologies that have been available to Medicare beneficiaries for no more than 2 to 3 years. Therefore, a technology that applies for a supplemental FDA approval must demonstrate that the new approval is not substantially similar to the prior approval. As discussed above, the new technology add-on payment is available to new medical services or technologies that satisfy the three criteria set forth in our regulations at § 412.87(b) (that is, newness, high-costs, and substantial clinical improvement). Typically, we begin our analysis with an evaluation of whether an applicant’s technology meets what we refer to as the ‘‘newness criterion’’ under § 412.87(b)(2) (that is, whether Medicare data are available to fully reflect the cost of the technology in the MS–DRG weights through recalibration). Generally, we believe that the costs of a technology begin to be reflected in the hospital charge data used to recalibrate the MS–DRG relative weights when the technology becomes available on the market, usually on or soon after the date on which it receives FDA approval. Unlike the typical applicant for the new technology add-on payment, however, CLOLAR ® is not new to the market but has been available since it was first granted FDA approval in December 2004 for the treatment of pediatric patients with acute lymphoblastic leukemia (ALL). Therefore, we first must determine whether CLOLAR ® nevertheless should be considered a new technology if approved by the FDA for a new indication, specifically for use in adult patients age 70 and above with AML. Congress provided for the new technology add-on payment in order to ensure that Medicare beneficiaries have access to new technologies. As discussed previously, there often is a lag time of 2 to 3 years before the costs of new technologies are reflected in the recalibration of the relevant MS–DRGs. Because a new technology often has higher costs than existing technologies, E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24130 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules during this lag time the current MS– DRG payment may not adequately reflect the costs of the new technology. The new technology add-on payment addresses this concern by ensuring that hospitals receive an add-on payment under the IPPS for costly new technologies that represent a substantial clinical improvement over existing technologies until such time when the cost of the technology is reflected within the MS–DRG relative weights. When an existing technology receives FDA approval for a new indication, similar concerns may arise. If, prior to the FDA approval for the new indication, the technology has not been used to treat Medicare patients for purposes consistent with the new indication, the relevant MS–DRGs may not reflect the cost of the technology. Consequently, Medicare beneficiaries may not have adequate access to the technology when used for purposes consistent with the new indication. Allowing the new technology add-on payment for the technology when used for the new indication would address this concern. For these reasons, we believe that treating an existing technology as ‘‘new’’ when approved by the FDA for a new indication may be warranted under certain circumstances. In the September 7, 2001 final Rule (66 FR 46915), we stated that a new use of an existing technology may be eligible for the new technology add-on payment under certain conditions. We believe it is appropriate to consider an existing technology for the new technology add-on payments when its new use is not substantially similar to existing uses of the technology. In the FY 2006 IPPS final rule (70 FR 47351), we explained our policy regarding substantial similarity in detail and its relevance for assessing if the hospital charge data used in the development of the relative weights for the relevant DRGs reflect the costs of the technology. In that final rule, we stated that, for determining substantial similiarity, we consider (1) Whether a product uses the same or a similar mechanism of action to achieve a therapeutic outcome, and (2) whether a product is assigned to the same or a different DRG are relevant for determining substantial similarity. We indicated that both of the above criteria should be met in order for a technology to be considered ‘‘substantially similar’’ to an existing technology. However, in that same final rule, we also noted that, due to the complexity of issues regarding the substantial similarity component of the newness criterion, it may be necessary to exercise flexibility when considering whether technologies VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 are substantially similar to one another. Specifically, we stated that we may consider additional criteria or factors in some contexts, but not others. We believe that in determining whether a new use of an existing technology is substantially similar to existing uses of the technology, it may be relevant to consider not only the two criteria discussed in the FY 2006 IPPS final rule, but also certain additional factors. Specifically, we believe it may also be appropriate to analyze whether, as compared to existing uses of the technology, the new use involves the treatment of the same or similar type of disease and the same or similar patient population. Accordingly, we would determine that the new use of an existing technology is substantially similar to one or more existing uses of the technology if (1) the new and existing uses of the technology use the same or a similar mechanism of action to achieve a therapeutic outcome, (2) the new use of the product is assigned to the same MS–DRG(s) as the existing uses, and (3) the new use of the technology involves the treatment of the same or similar type of disease and the same or similar patient population. If all three criteria are met and the new use is deemed substantially similar to one or more of the existing uses of the technology (that is beyond the newness period), we would conclude that the technology is not new and, therefore is not eligible for the new technology addon payment. We note that we considered, but rejected, the inclusion of the third factor in the FY 2006 IPPS final rule on the grounds that we believed that it was more relevant to analyze whether the costs of the technology were already reflected in the relative weights of the MS–DRGs. However, upon further consideration, we believe that both the type of disease and patient population for which a technology is used are also relevant in determining whether one indication of a technology is ‘‘substantially similar’’ to another. We note that the discussion of substantial similarity in the FY 2006 IPPS final rule related to comparing two separate technologies made by different manufacturers. Nevertheless, we believe the criteria discussed in the FY 2006 IPPS final rule also are relevant when comparing the similarity between a new use and existing uses of the same technology (or a very similar technology manufactured by the same manufacturer). In other words, it is necessary to establish that the new indication for which the technology has received FDA approval is not substantially similar to that of the prior PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 indication. Such a distinction is necessary to determine the appropriate start date of the newness period in evaluating whether the technology would qualify for add-on payments (that is, the date of the ‘‘new’’ FDA approval or that of the prior approval), or whether the technology could qualify for separate new technology add-on payments under each indication. We welcome comments on our proposed modification to analyzing whether a technology is substantially similar to another. With respect to CLOLAR®, it is relevant to consider whether there is a clear distinction between the types of disease that CLOLAR® is intended to treat and the patient populations described in the indications in assessing whether the indication for which a supplemental FDA approval is pending is substantially similar to the indication related to the existing FDA approval for CLOLAR. Accordingly, we have analyzed both the current and pending FDA approvals and indications in order to determine whether or not CLOLAR® for the treatment of ALL in patients ages 1–21 should be deemed substantially similar to CLOLAR® when used for the treatment of AML in patients ages 70 and above. In this case, we compared the two indications against the substantial similarity factors that we outlined in the FY 2006 IPPS final rule (referenced above). We determined that CLOLAR® meets both factors of the substantial similarity criteria that we outlined in the FY 2006 IPPS final rule (that is, the use of CLOLAR® for either indication utilizes the same or a similar mechanism of effect to achieve a therapeutic outcome, and both indications map to the same MS–DRGs). We also analyzed both the current and pending FDA approvals and indications against the two additional factors we described above (that is, whether the new indication as compared to the old indication would involve the use of CLOLAR to treat the same or similar disease and the same or similar patient population). In the course of our analysis, we determined that, although ALL and AML are both types of leukemia, they are separate and distinct hematologic malignancies that typically affect different patient populations. Furthermore, patients ages 1–21 with ALL differ significantly from older patients ages 70 and above with AMI in terms of clinical factors, such as the presence of comorbid conditions, and expected prognosis. Accordingly, because the two indications do not meet the additional factors we included under substantial similarity, we do not E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules believe that CLOLAR® for the indication of treatment of ALL in patients ages 1– 21 should be considered substantially similar to CLOLAR® for the indication of treatment of AML in older patients. With respect to application of the newness criterion under § 412.87(b)(2), our evaluation also considers whether the data for the relevant MS–DRGs reflect use of the new technology for one or more purposes outside the previously approved indication(s). To the extent that the data suggest that the technology has been used outside the previously approved indication for more than 2 or 3 years (for example, the technology has been used for a purpose that is the basis of the newly approved indication), we believe that the costs of the technology for the new use are reflected in the weights assigned to the relevant MS– DRGs. In this case, we will conclude that the technology does not meet the newness criterion under § 412.87(b)(2) because its costs are already reflected within the relevant MS–DRGs. Therefore, even if we determine that the new use of CLOLAR® is not substantially similar to the existing use of CLOLAR®, we believe it is relevant to assess whether the likelihood that the costs of this drug are included in the data that goes into determining the MS– DRG relative weights because CLOLAR® has not been FDA approved to treat the types of patients that are commonly found in the Medicare population. Regarding this point, the applicant maintains that because of the age group for which CLOLAR® is currently used to treat patients with ALL (that is, pediatric patients who are ages 1–21 years), ‘‘it is statistically improbable that claims paid under the relevant MS– DRGs include CLOLAR® costs.’’ Currently, ICD–9–CM procedure code 99.25 (Injection or infusion of cancer chemotherapeutic substance) would be used to identify the administration of CLOLAR® for the treatment of both ALL and AML. We note that the applicant submitted an application for a unique ICD–9–CM procedure code that was discussed at the March 11, 2009 ICD–9– CM Coordination and Maintenance Committee meeting. In addition, cases involving the use of CLOLAR® for either indication would be expected to routinely map to MS–DRGs 837, 838, and 839 (Chemotherapy with Acute Leukemia as Secondary Diagnosis or High Dose Chemotherapy Agent with MCC, Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or High Dose Chemotherapy Agent, and Chemotherapy with Acute Leukemia as Secondary Diagnosis without CC/MCC, respectively). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Although we generally agree with the applicant’s statement that it is statistically improbable that any Medicare patients received CLOLAR® under the currently approved indication for younger patients with ALL, the applicant has not, to date, demonstrated that none of the inpatients who received CLOLAR® for the treatment of patients with ALL were Medicare patients. The applicant maintains that no data are available to identify the exact number of Medicare beneficiaries who are age 21 years or less (that is, those patients whose age identically matches that of the group for whom CLOLAR® is an approved treatment). However, the applicant conducted an analysis of the FY 2007 MedPAR claims data for the MS–DRGs associated with chemotherapy treatment for ALL (CMS– DRG 492 and MS–DRGs 837, 838, and 839) and found that less than 1 percent of all claims that map to those DRGs were for patients who are age 25 years or less. Therefore, the applicant asserts that, given the small number of patients eligible to receive CLOLAR® for its FDA approved indication, it is statistically improbable that claims paid under the relevant DRGs include or adequately reflect the costs of CLOLAR®. We welcome comments from the public on whether the costs of CLOLAR® are already included in the data used to determine the relative weights for the MS–DRGs to which cases involving CLOLAR® map and on whether the current FDA-approved indication of CLOLAR® is substantially similar to that of the pending one. In an effort to demonstrate that CLOLAR® meets the cost criterion, the applicant searched the FY 2007 MedPAR file for cases potentially eligible for CLOLAR® that were assigned a combination of the following codes: any principal diagnosis code with a prefix of V58.1 (Encounter for antineoplastic chemotherapy and immunotherapy), or a principal diagnosis code of V67.2 (Chemotherapy follow up examination), or any diagnosis code that begins with a prefix of 205 (Acute promyelocytic leukemia). The applicant found 874 cases (or 30.3 percent of all cases) in MS–DRG 837 (Chemotherapy with Acute Leukemia as Secondary Diagnosis or with High Dose Chemotherapy Agent with MCC), 863 cases (or 29.9 percent of all cases) in MS–DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or with High Dose Chemotherapy Agent), and 1,148 cases (or 39.8 percent of all cases) in MS–DRG 839 (Chemotherapy with Acute Leukemia as Secondary Diagnosis without CC/MCC). The average PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 24131 standardized charge per case was $133,428 for MS–DRG 837, $66,997 for MS–DRG 838, and $28,453 for MS–DRG 839, which result in a case-weighted average standardized charge per case of $71,785. The average standardized charge per case does not include charges related to CLOLAR®; therefore, it is necessary to add the charges related to CLOLAR® to the average standardized charge per case in evaluating the cost threshold criterion. Although the applicant submitted data related to the estimated cost of CLOLAR® per case, the applicant noted that the cost of the drug was proprietary information. The applicant estimates $63,364 in charges related to CLOLAR® (based on a 100-percent charge markup of the cost of the drug). Adding the charges related to the drug to the average standardized charge per case (based on the case distribution from the applicant’s FY 2007 MedPAR claims data analysis) resulted in a caseweighted average standardized charge per case of $135,149 ($71,785 plus $63,364). Using the FY 2010 thresholds published in Table 10 (73 FR 58008), the case-weighted threshold for MS– DRGs 837, 838, and 839 was $55,802 (all calculations above were performed using unrounded numbers). Because the case-weighted average standardized charge per case for the applicable MS– DRGs exceeds the case-weighted threshold amount, the applicant maintains that CLOLAR® would meet the cost criterion. We invite public comment on whether or not CLOLAR® meets the cost criterion. With regard to the substantial clinical improvement criterion, the applicant asserts that despite significant advances that have been made in the management of AML in younger adults (that is, persons under the age of 60 years), including the benefit of intensive remission induction therapy [often comprised of an anthracycline combined with intermediate or highdose cytarabine (‘‘7 + 3’’)] to either achieve or maintain a complete remission (CR) or CR with incomplete platelet recovery (CRp) that has been progressively demonstrated over the past several years, such success has not been achieved in persons over the age of 60 years. The applicant stated that for the older patient population, conventional induction therapy with ‘‘7 + 3’’ is poorly tolerated and often does not benefit older patients with unfavorable baseline prognostic factors. In addition, the applicant stated that older adult patients are also at high risk for early induction mortality. According to the applicant, depending on comorbidity factors, the rate of E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24132 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules induction mortality can be as high as 65 percent within 8 weeks following conventional intensive chemotherapy. The applicant also presented an analysis of some recent data that has emerged in connection with CLOLAR® use in older patients with AML. A Phase II study comparing single agent CLOLAR® to CLOLAR® combined with low-dose cytarabine (LDAC) in patients age 60 years and older, found that 42 percent of the patients treated with CLOLAR® alone achieved a CR or CR with incomplete peripheral blood count recovery, and found that 59 percent of the patients treated with the combination therapy achieved a CR or CR with incomplete peripheral blood count recovery. Both treatment regimens were tolerated in this patient population without a distinction in terms of toxicity. The safety and efficacy of CLOLAR® was recently reported in another Phase II study of 66 older adult patients (over age 65 years) with untreated AML. All patients were considered unfit for conventional induction therapy due to the presence of one or more unfavorable prognostic factors. In the group of patients with adverse cytogenetic profiles, the overall response rate was 53 percent with a CR rate of 42 percent. In addition, this group had a significantly prolonged median survival (more than 6 months) when compared to a similar group that had received LDAC. The applicant conducted a pivotal, multicenter clinical trial which serves as the basis for an sNDA to the FDA for approval of CLOLAR® as a treatment for adult AML. According to the applicant, the primary objective of this study was to assess the efficacy of CLOLAR® in previously untreated adults who were at least 60 years old with AML for whom standard induction chemotherapy was unlikely to be of benefit due to at least one unfavorable baseline prognostic factor. The results of this pivotal trial indicate that single agent CLOLAR® is active and well-tolerated when administered to previously untreated adults with AML and at least one adverse prognostic factor. The overall remission rate (CR + CRp = 45 percent) with CLOLAR® compared favorably to historical studies with ‘‘7 + 3’’ regimens. Responses in patients receiving CLOLAR® were consistent regardless of the number or the type of unfavorable prognostic factor including a CR of 43 percent in patients with unfavorable cytogenetics, 50 percent in patients with AHD, 40 percent in patients more than the age of 70, and 38 percent in patients with an Eastern Cooperative Oncology Group (ECOG) PS of 2. In addition, it did not appear that response rates were VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 affected by the presence of multiple adverse prognostic factors (50 percent, 48 percent, and 42 percent in patients with one, two and three risk factors, respectively). The overall response rate was even higher in patients who were less than age 70 years (56 percent), and in patients with an ECOG PS of 0 (64 percent). Thirty-day mortality (for all causes) was 9.6 percent. Drug-related adverse events were consistent with prior reports with single agent CLOLAR®, and were manageable in the patient population studied. Five patients (4 percent) had to discontinue treatment due to toxicity, but many patients were able to receive subsequent consolidation CLOLAR® treatments. The applicant maintains that there is no standard treatment in older adult patients with comorbid conditions or adverse disease characteristics for whom conventional induction therapy is not considered an appropriate option. The applicant further asserts that the absence of treatment options, especially in a disease with onset at a median age of 67, clearly represents a significant unmet medical need. We are concerned that this drug may offer little to no increased survival benefit in a patient population whose overall prognosis is exceedingly poor. Therefore, it is not clear that the drug represents a substantial clinical improvement over existing therapies, such as increased benefit survival or reduced need for hospitalization or physician visits. (We refer readers to 66 FR 46941 for a more detailed discussion relating to the substantial clinical improvement criterion.) We welcome public comment about whether or not CLOLAR® represents a substantial clinical improvement. We did not receive any written public comments regarding this application for new technology add-on payments concerning the new technology town hall meeting. c. LipiScanTM Coronary Imaging System InfraReDx, Inc. submitted an application for new technology add-on payments for FY 2010 for the LipiScanTM Coronary Imaging System (LipiScanTM). The LipiScanTM device is a diagnostic tool that uses Intravascular Near Infrared Spectroscopy (INIRS) during an invasive coronary catheterization to scan the artery wall in order to determine coronary plaque composition. The purpose of the device is to identify lipid-rich areas in the artery because such areas have been shown to be more prone to rupture. The procedure does not require flushing or occlusion of the artery. INIRS identifies the chemical content of plaque by PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 focusing near infrared light at the vessel wall and measuring reflected light at different wavelengths (that is, spectroscopy). The LipiScanTM system collects approximately 1,000 measurements per 12.5 mm of pullback, with each measurement interrogating an area of 1 to 2 mm2 of lumen surface perpendicular to the longitudinal axis of the catheter. When the catheter is in position, the physician activates the pullback and rotation device and the scan is initiated providing 360 degree images of the length of the artery. The rapid acquisition speed for the image freezes the motion of the heart and permits scanning of the artery in less than 2 minutes. When the catheter pullback is completed, the console displays the scan results, which is referred to as a ‘‘chemogram’’ image. The chemogram image requires reading by a trained user, but, according to the applicant was designed to be simple to interpret. With regard to the newness criterion, the LipiScanTM received a 510K FDA clearance for a new indication on April 25, 2008, and was available on the market immediately thereafter. On June 23, 2006, InfraReDx, Inc. was granted a 510K FDA clearance for the ‘‘InfraReDx Near Infrared (NIR) Imaging System.’’ Both devices are under the common name of ‘‘Near Infrared Imaging System’’ according to the 510K summary document from the FDA. However, the InfraReDx NIR Imaging System device that was approved by the FDA in 2006 was approved ‘‘for the near infrared imaging of the coronary arteries,’’ whereas the LipiscanTM device cleared by the FDA in 2008 is for a modified indication. The modified indication specified that LipiscanTM is ‘‘intended for the near-infrared examination of coronary arteries * * *, the detection of lipid-core-containing plaques of interest * * * [and] for the assessment of coronary artery lipid core burden.’’ We have concerns regarding whether LipiscanTM is substantially similar to its predicate device that was approved by FDA in 2006. Specifically, it appears that the two devices, which are manufactured by the same company, do not differ in either design or functionality, according to the approval order documents from the FDA. In the 2008 approval order, the FDA stated, ‘‘The LipiScan Coronary Imaging System utilizes the same basic catheter design as the predicate, the InfraReDx NIR Imaging System (June 23, 2006). These devices have a similar intended use, use the same operating principal, incorporate the same basic catheter design, have the same shelf life, and are E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules packaged using the same materials and processes. The modifications from the lnfraReDx NIR Imaging System to the LipiScan Coronary Imaging System are the improved catheter design, improved user interface (including PBR and console), and the additional testing required to support an expanded indication for use.’’ Therefore, it appears that the only difference between the two approvals may be a modification of the intended use. As mentioned earlier in our discussion of the CLOLAR® application in section II.I.4.b. of this proposed rule, our policy regarding substantial similarity discussed in the FY 2006 final rule (70 FR 47351 through 47532) outlined two criteria as it relates to two separate technologies that are made by different manufacturers that were used to guide our determination of whether two technologies were substantially similar to one another. Although the LipicanTM is a diagnostic device and not a therapeutic device we believe that the substantial similarity component of the newness criterion still applies. Both the prior and the new FDA indications for LipiScanTM use the same or a similar mechanism of action to achieve a desired therapeutic outcome, and both treat patients that would generally be assigned to the same MS– DRG. Similarly, both indications of LipiScanTM are intended to treat the same disease in the same patient population. Consequently, we have concerns as to whether or not the two intended uses are substantially similar, especially considering that the technologies appear essentially identical. We welcome public comment on whether or not the latest 510K FDA clearance should be considered ‘‘substantially similar’’ to its predicate technology approved by the FDA in 2006. We note that the LipiscanTM technology is identified by ICD–9–CM procedure code 38.23 (Intravascular spectroscopy), which became effective October 1, 2008, and cases involving the use of this device generally map to MS– DRG 246 (Percutaneous Cardiovascular Procedures with Drug-Eluting Stent(s) with MCC or 4+ Vessels/Stents); MS– DRG 247 (Percutaneous Cardiovascular Procedures with Drug-Eluting Stent(s) without MCC); MS–DRG 248 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent(s) with MCC or 4+ Vessels/Stents); MS–DRG 249 (Percutaneous Cardiovascular Procedures with NonDrug-Eluting Stent(s) without MCC); MS–DRG 250 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent with MCC); and VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 MS–DRG 251 (Percutaneous Cardiovascular Procedures without Coronary Artery Stent without MCC). In an effort to demonstrate that the technology meets the cost criterion, the applicant used the FY 2009 After Outliers Removed (AOR) file (posted on the CMS Web site) for cases potentially eligible for LipiscanTM. The applicant believes that every case within DRGs 246, 247, 248, 249, 250, and 251 are eligible for LipiscanTM. In addition, the applicant believes that LipiscanTM will be evenly distributed across patients in each of the six MS–DRGs (16.6 percent within each MS–DRG). Using data from the AOR file, the applicant found the average standardized charge per case for MS–DRGs 246, 247, 248, 249, 250, and 251 was $65,364, $42,162, $58,754, $37,048, $61,016, and $35,878 respectively, equating to an average standardized charge per case of $50,037. The applicant indicated that the average standardized charge per case does not include charges related to LipiscanTM; therefore, it is necessary to add the charges related to the device to the average standardized charge per case in evaluating the cost threshold criterion. Although the applicant submitted data related to the estimated cost of LipiscanTM per case, the applicant noted that the cost of the device was proprietary information. Based on a sampling of two hospitals that have used the device, the applicant used a markup of 120 percent of the costs and estimates $5,280 in charges related to LipiscanTM. Because the applicant lacked a significant sample of cases to determine the charges associated with the device, we have concerns as to whether or not the estimate of $5,280 in charges related to the device is a valid estimate. Adding the estimated charges related to the drug to the average standardized charge per case (based on the case distribution from the applicant’s 2009 AOR analysis) results in a case-weighted average standardized charge per case of $55,317 ($50,037 plus $5,280). Using the FY 2010 thresholds published in Table 10 (73 FR 58008), the case-weighted threshold for MS– DRGs 246, 247, 248, 249, 250, and 251 was $53,847 (all calculations above were performed using unrounded numbers). Because the case-weighted average standardized charge per case for the applicable MS–DRGs exceeds the case-weighted threshold amount, the applicant maintains that LipiscanTM would meet the cost criterion. We invite public comment on whether or not LipiscanTM meets the cost criterion. With regard to substantial clinical improvement, the applicant maintains that the device meets this criterion for PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 24133 the following reasons. The applicant noted that the September 1, 2001 final rule states that one facet of the criterion for substantial clinical improvement is ‘‘the device offers the ability to diagnose a medical condition in a patient population where the medical condition is currently undetectable or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods. There must also be evidence that use of the device to make a diagnosis affects the management of the patient’’ (66 FR 46914). The applicant believes that LipiscanTM meets all facets of this criterion. The applicant asserted that the device is able to detect a condition that is not currently detectable. The applicant explained that LipiScanTM is the first device of its kind to be able to detect lipid-core-containing plaques of interest and to assess of coronary artery lipid core burden. The applicant further noted that FDA, in its approval documentation, has indicated that ‘‘This is the first device that can help assess the chemical makeup of coronary artery plaques and help doctors identify those of particular concern.’’ In addition, the applicant stated that the LipiScanTM chemogram permits a clinician to detect lipid-core-containing plaques in the coronary arteries compared to other currently available devices that do not have this ability. The applicant explained that the angiogram, the conventional test for coronary atherosclerosis, shows only minimal coronary narrowing. However, the applicant indicated that the LipiScanTM chemogram has the ability to reveal when an artery contains extensive lipid-core-containing plaque at an earlier stage. The applicant also noted that the device has the ability to make a diagnosis that better affects the management of the patient. Specifically, the applicant explained that the chemogram results are available to the interventional cardiologist during the PCI procedure, and have been found to be useful in decision-making. Physicians have reported changes in therapy based on LipiScanTM findings in 20 to 50 percent of patients. The most common use of LipiScanTM results has been for selection of the length of artery to be stented. In some cases a longer stent has been used when there is a lipid-core-containing plaque adjacent to the area that is being stented because a flow-limiting stenosis is present. Therefore, the applicant contends that the use of LipiScanTM by clinicians to select the length of artery to be stented and as an aid in selection of intensity of lipid-altering therapy, demonstrates that E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24134 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules LipiScanTM affects the management of patients. While we recognize that the identification of lipid-rich plaques in the coronary vasculature holds promise in the management of coronary artery disease, we are concerned that statements in the FDA approval documents, as well as statements made by investigators in the literature, suggest that the clinical implications of identifying these lipid-rich plaques are not yet certain and that further studies need to be done to understand the clinical implications of obtaining this information. We are also concerned that there are no outcome data regarding the use of the LipiScanTM technology. The applicant also submitted commentary from Interventional Cardiologists (a group of clinicians who currently utilize the LipiScanTM device) explaining the clinical benefits of the device. The applicant further noted that the device may have other potential uses that would be of clinical benefit, and studies are currently being conducted to investigate these other potential uses. The applicant explained that LipiScanTM offers promise as a means to enhance progress against the two leading problems in coronary disease management: (1) The unacceptably high rate of second events that occur even after catheterization, revascularization, and the institution of optimal medical therapy; and (2) the failure to diagnose coronary disease early, which results in sudden death or myocardial infarction being the first sign of the disease in most patients. The applicant further stated that the identification of coronary lipid-corecontaining plaques, which can most readily be done in those already undergoing catheterization, is likely to be of benefit in the prevention of second events. In the longer term, the applicant stated that the identification of lipidcore-containing plaques by LipiScanTM may contribute to the important goal of primary prevention of coronary events, which, in the absence of adequate diagnostic methods, continue to cause extensive morbidity, mortality and health care expenditures in Medicare beneficiaries and the general population. We welcome public comment regarding whether or not the LipiScanTM technology represents a substantial clinical improvement in the Medicare population. Below we summarize the written comments we received in response to the town hall meeting. Comment: The manufacturer of LipiScanTM stated that, prior to the availability of LipiScanTM, current VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 methods of diagnosis could not detect that a patient has a lipid-core plaque prior to the occurrence of a myocardial infarction. In April 2008, the FDA approved the LipiScanTM Coronary Imaging System for identification of these lipid-core plaques in patients undergoing coronary angiography, thereby allowing the detection of this condition in patients prior to the occurrence of a myocardial infarction. The manufacturer stated that, since its FDA approval, LipiScanTM has been used in over 110 patients and has identified lipid-core plaques that were previously undetectable, thereby revealing earlier stages of the disease. The manufacturer noted that physicians have used this diagnostic information to provide clinical benefits to their patients, including improved identification of the length of the artery to be stented and selection of the appropriate intensity of pharmacologic therapy designed to alter plasma lipids. In addition to these early diagnostic uses, the manufacturer believes that LipiScanTM opens the possibility of eventual detection and treatment of lipid-core plaques before they cause a stenosis and/or a clinical event. The manufacturer added that the use of this technology could lead to prevention of myocardial infarction, which in turn would reduce the occurrence of heart failure and arrhythmias—two conditions responsible for severe morbidity and massive health care expenditures. In addition, the manufacturer reiterated its assertion that LipiScanTM meets the newness criterion. The manufacturer explained that FDA, in its approval documentation, has indicated that ‘‘This is the first device that can help assess the chemical makeup of coronary artery plaques and help doctors identify those of particular concern.’’ The manufacturer further noted that, while LipiScanTM is equivalent to the predicate intravascular ultrasound (IVUS) device, the features of the LipiScanTM system produce different information because it permits the physician to detect lipid-core plaques of interest and the lipid burden index. The manufacturer also noted that the case-weighted average standardized charge per case exceeds the caseweighted threshold (as discussed above) and, therefore, the manufacturer believes that the technology meets the cost criterion. In addition, the manufacturer reasserted that it meets the substantial clinical improvement criterion by the arguments it put forth in its application regarding substantial clinical improvement (which are PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 presented above in this section of the preamble). Finally, in its comment, the manufacturer concluded that LipiScanTM is a novel diagnostic method that meets the three criteria for a new technology add-on payment and that more frequent utilization of LipiScanTM would occur with additional reimbursement resulting in possible improved outcomes for patients undergoing stenting. The manufacturer stated that LipiScanTM has the added potential of contributing to the prevention of acute coronary syndromes. Response: We thank the manufacturer for its comments that were submitted concerning the town hall meeting. We have considered these comments in our evaluation of the technology in this proposed rule. As stated above, we invite additional public comment relating to objective data regarding the assertions presented by the manufacturer. d. Spiration® IBV® Valve System Spiration, Inc. submitted an application for new technology add-on payments for FY 2010 for the Spiration® IBV® Valve System (Spiration® IBV®). The Spiration® IBV® is a device that is used to place, via bronchoscopy, small, one-way valves into selected small airways in the lung in order to limit airflow into selected portions of lung tissue that have prolonged air leaks following surgery while still allowing mucus, fluids, and air to exit, thereby reducing the amount of air that enters the pleural space. The device is intended to control prolonged air leaks following three specific surgical procedures: lobectomy; segmentectomy; or lung volume reduction surgery. According to the applicant, an air leak that is present on postoperative day 7 is considered ‘‘prolonged’’ unless present only during forced exhalation or cough. In order to help prevent valve migration, there are five anchors with tips that secure the valve to the airway. The implanted valves are intended to be removed no later than 6 weeks after implantation. With regard to the newness criterion, the Spiration® IBV® received a Humanitarian Device Exemption (HDE) approval from the FDA on October 24, 2008. We are unaware of any previously FDA-approved predicate devices, or otherwise similar devices, that could be considered substantially similar to the Spiration® IBV®. However, the applicant asserted that the FDA has precluded the device from being used in the treatment of any patients until Institutional Review Board (IRB) E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules approvals regarding its study sites. Therefore, it would appear that the Spiration® IBV® would meet the newness criterion once it has obtained at least one IRB approval because the device would then be available on the market to treat Medicare beneficiaries. We welcome public comments about the date on which the newness period should begin for this technology should it meet the other criteria to be approved for new technology add-on payments. We note that the Spiration® IBV® is currently described by ICD–9–CM procedure code 33.71 (Endoscopic insertion or replacement of bronchial valve(s)). At the September 2008 ICD–9– CM Coordination and Maintenance Committee meeting, we discussed a proposal to revise the existing code and create a new code for endoscopic bronchial valve insertion in single and multiple lobes. In an effort to demonstrate that the technology meets the cost criterion, the applicant searched the FY 2007 MedPAR file for cases potentially eligible for use of the Spiration® IBV®. Specifically, the applicant searched for cases with one of the following procedure codes: 32.4 (Lobectomy of lung); 32.3 (Segmental resection of lung); or 32.22 (Long volume reduction surgery). The applicant found 4,225 cases (or 21.6 percent of all cases) in MS–DRG 163 (Major Chest Procedure with MCC), 8,960 cases (or 45.8 percent of all cases) in MS–DRG 164 (Major Chest Procedure with CC), and 6,358 cases (or 32.5 percent of all cases) in MS–DRG 165 (Major Chest Procedure without CC/MCC). The average standardized charge per case was $88,326 for MS–DRG 163, $48,494 for MS–DRG 164, and $38,463 for MS–DRG 165, equating to a case-weighted average standardized charge per case of $53,842. The average standardized charge per case does not include charges related to the Spiration® IBV®; therefore, it is necessary to add the charges related to the device to the average standardized charge per case in evaluating the cost threshold criterion. Although the applicant submitted data related to the estimated cost of the Spiration® IBV® per case, the applicant noted that the cost of the device was proprietary information. The applicant estimates $21,450 in charges related to the Spiration® IBV® (based on a 100-percent charge markup of the cost of the device). The applicant based this amount on seven actual cases that received the device. Because the applicant lacked a significant sample of cases to determine the charges associated with the device, we have concerns as to whether or not the $21,450 in charges related to the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 device is a valid estimate. In addition, based on the seven cases, the applicant made an estimate of the number of valves used per case (the applicant noted that the number of valves used per case is proprietary). We also have concerns that the applicant lacked a significant sample of cases to determine a valid estimate of the number of valves per case. Adding the estimated charges related to the device to the average standardized charge per case (based on the case distribution from the applicant’s FY 2007 MedPAR claims data analysis) resulted in a caseweighted average standardized charge per case of $75,292 ($53,842 plus $21,450). Using the FY 2010 thresholds published in Table 10 (73 FR 58008), the case-weighted threshold for MS– DRGs 163, 164, and 165 was $54,715 (all calculations above were performed using unrounded numbers). Because the case-weighted average standardized charge per case for the applicable MS– DRGs exceeds the case-weighted threshold amount, the applicant maintains that the Spiration® IBV® would meet the cost criterion. We invite public comment on whether or not the Spiration® IBV® meets the cost criterion. With respect to how the device would meet the substantial clinical improvement criterion, the applicant submitted information that was based on the Summary of Safety and Probable Benefit (SSPB) from the FDA’s HDE approval order for the device. The clinical results indicate the Spiration® IBV® can be deployed in the intended airway reasonably safely with a minimally invasive bronchoscopy procedure. There have been a limited number of device complications and no occurrences of device erosion or migration. The Spiration® IBV® can be removed using a bronchoscope. Laboratory results indicate that the Spiration® IBV® significantly reduces airflow to the lung tissue beyond the treated airway. A significant reduction in distal airflow is anticipated to augment the resolution of air leaks of the lung. Therefore, the applicant asserts, it is reasonable to conclude that the probable benefit to health associated with using the device for the target population outweighs the risk of illness or injuries, taking into account the probable risks and benefits of currently available devices or alternative forms of treatment when used as indicated in accordance with the directions for use. We recognize that prolonged air leaks after these types of lung surgery can be a significant problem, and that Spiration® IBV® therapy may represent a new alternative in treating properly PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 24135 selected patients. However, we have concerns that the outcome data presented is from a sample set of only seven patients, and the FDA HDE did not require demonstration of either safety or effectiveness. Therefore, we welcome public comment as to whether or not the Spiration® IBV® represents a substantial clinical improvement for Medicare beneficiaries. We did not receive any written public comments regarding this application for new technology add-on payments concerning the new technology town hall meeting. e. TherOx Downstream® System TherOx, Inc. submitted an application for new technology add-on payments for FY 2010 for the TherOx Downstream® System. The TherOx Downstream® System uses SuperSaturatedOxygen Therapy (SSO2) that is designed to limit myocardial necrosis by minimizing microvascular damage in acute myocardial infarction (AMI) patients following intervention with percutaneous transluminal coronary angioplasty (PTCA), and coronary stent placement by perfusing the affected myocardium with blood that has been supersaturated with oxygen. SSO2 therapy refers to the delivery of superoxygenated arterial blood directly to areas of myocardial tissue that have been reperfused using PTCA and stent placement, but which may still be at risk. The desired effect of SSO2 therapy is to reduce infarct size and, thus, preserve heart muscle and function. The TherOx DownStream® System is the console portion of a disposable cartridge-based system that withdraws a small amount of the patient’s arterial blood, mixes it with a small amount of saline, and supersaturates it with oxygen to create highly oxygen-enriched blood. The superoxygenated blood is delivered directly to the infarct-related artery via the TherOx infusion catheter. SSO2 therapy is a catheter laboratorybased procedure. Additional time in the catheter laboratory area averages 100 minutes. The applicant claimed that the SSO2 therapy duration lasts 90 minutes and requires an additional 10 minutes post-procedure preparation for transfer time. We note that the TherOx DownStream® System is currently identified by ICD–9–CM procedure code 00.49 (Supersaturated oxygen therapy). TherOx, Inc. submitted an application for new technology add-on payments for FY 2009 for this technology. However, although FDA approval was expected in the second quarter of 2008, it had not received FDA approval at the time the proposed rule for FY 2009 was published. Because the technology was E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24136 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules not approved by the FDA during the development of the proposed rule, we limited our discussion of this technology to data that the applicant submitted, rather than make specific proposals with respect to whether the device would meet the new technology add-on payment criteria. For its FY 2010 new technology add on payment application, the applicant has indicated to CMS that it expects to receive FDA approval in the second quarter of 2009. However, because the technology has not yet received approval by the FDA, we are limiting our discussion of this technology to data that the applicant submitted rather than making specific proposals with respect to whether the device would meet the new technology add-on payment criteria in this proposed rule. In an effort to demonstrate that TherOx Downstream® System would meet the cost criterion, the applicant submitted two analyses. The applicant stated that it believed that the cases that would be eligible for the TherOx Downstream® System would most frequently group to MS–DRGs 246 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with DrugEluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), and 249 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent without MCC). The first analysis used data based on 83 clinical trial patients from 10 clinical sites. Of the 83 cases, 78 were assigned to MS–DRGs 246, 247, 248, or 249. (The remaining five cases grouped to MS–DRGs that the technology would not frequently group to and, therefore, are not included in this analysis.) The data showed that 32 of these patients were 65 years old or older. There were 12 cases (or 15.4 percent of the 78 cases) in MS–DRG 246, 56 cases (or 71.8 percent of the 78 cases) in MS–DRG 247, 2 cases (or 2.6 percent of the 78 cases) in MS–DRG 248, and 8 cases (or 10.3 percent of the 78 cases) in MS–DRG 249. The average standardized charge per case for MS–DRGs 246, 247, 248, and 249 was $71,955, $60,790, $55,238, and $42,723, respectively, equating to a case-weighted average standardized charge per case of $60,512. The average standardized charge per case does not include charges related to the TherOx Downstream® System. Therefore, it is necessary to add the charges related to the device to the average standardized charge per case in evaluating the cost threshold criterion. Although the applicant submitted data related to the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 estimated cost of the TherOx Downstream® System per case, the applicant noted that the cost of the device was proprietary information. The applicant estimates $22,739.40 in charges related to the TherOx Downstream® System (based on a 100percent charge markup of the cost of the drug). Adding the charges related to the device to the average standardized charge per case resulted in a caseweighted average standardized charge per case of $83,251 ($60,512 plus $22,739). Based on the FY 2010 threshold from Table 10 (73 FR 58008), the case-weighted threshold for the four MS–DRGs listed above was $51,564 (all calculations above were performed using unrounded numbers). The applicant also searched the FY 2007 MedPAR file to identify cases that would be eligible for the TherOx Downstream® System. The applicant specifically searched for cases with primary ICD–9–CM diagnosis code 410.00 (Acute myocardial infarction of anterolateral wall with episode of care unspecified), 410.01 (Acute myocardial infarction of anterolateral wall with initial episode of care), 410.10 (Acute myocardial infarction of other anterior wall with episode of care unspecified), or 410.11 (Acute myocardial infarction of other anterior wall with initial episode of care) in combination with ICD–9–CM procedure code 36.06 (Insertion of non-drug-eluting coronary artery stent(s)) or 36.07 (Insertion of drug-eluting coronary artery stent(s)). The applicant’s search found 12,345 cases within MS–DRGs 246, 247, 248, and 249 distributed as follows: 1,591 cases (or 12.9 percent of cases) in MS– DRG 246; 6,203 cases (or 50.2 percent of cases) in MS–DRG 247; 1,132 cases (or 9.2 percent of cases) in MS–DRG 248; and 3,419 cases (or 27.7 percent of cases) in MS–DRG 249. Not including the charges associated with the technology, the average standardized charge per case for MS–DRGs 246, 247, 248, and 249 was $65,967, $46,828, $56,807 and $40,107, respectively, equating to a case-weighted average standardized charge per case of $48,348. The applicant estimated that it was necessary to add an additional $22,739 in charges to the total case-weighted average standardized charge per case (as described above). In the additional charge amount, the applicant included charges for supplies and tests related to the technology, charges for 100 minutes of additional procedure time in the catheter laboratory, and charges for the technology itself. The inclusion of these charges would result in a total caseweighted average standardized charge PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 per case of $71,087. The case-weighted threshold for MS–DRGs 246, 247, 248, and 249 (from Table 10 (73 FR 58008)) was $51,073 (all calculations above were performed using unrounded numbers). Because the total caseweighted average standardized charge per case from the first analysis of clinical trial patients and the caseweighted standardized charge per case from the second analysis of the FY 2006 MedPAR claims data exceeds the applicable case-weighted thresholds, the applicant maintained the TherOx Downstream® System would meet the cost criterion. We invite public comment on whether or not the TherOx Downstream® System meets the cost criterion. With respect to the substantial clinical improvement criterion, the applicant asserts that their technology represents a substantial clinical improvement in the treatment of acute anterior myocardial infarction in conjunction with percutaneous coronary intervention (PCI) with stent placement within 6 hours of onset of symptoms compared to PCI and stent placement alone. Specifically, the applicant asserts that there is a 6.5 percent absolute reduction in infarct size using the TherOx Downstream® System as assessed using Tc–99m Sestamibi SPECT nuclear imaging in the Acute Myocardial Infarction Hyperbaric Oxygen Treatment (AMIHOT) II clinical trial, and such a reduction has been correlated with both short-term (less than 30 day) and long-term (greater than 30 day) mortality reductions. Although the TherOx Downstream® System remains investigational and has not yet received approval from the FDA at this time, we do recognize that a clear reduction of infarct size in acute anterior myocardial infarction may represent a substantial clinical improvement. However, we have concerns that the data presented by the applicant in the application are derived from a Bayesian methodology, which includes data from a subgroup of an earlier trial (AMIHOT I), that showed no overall benefit of using the technology, and that the AMIHOT II trial has yet to be published in any peer reviewed literature. We also are concerned that there were a higher number of adverse bleeding events in patients who had been treated in the group of AMIHOT II clinical trial, and the study did not demonstrate any specific improved clinical outcomes. We invite public comment on whether or not the TherOx Downstream® System meets the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules substantial clinical improvement criterion. Below we summarize the written comments we received concerning the town hall meeting. Comment: The physician who presented information at the town hall meeting on behalf of the applicant also submitted additional written comments in response to questions raised during the town hall meeting. Specifically, the physician addressed questions relating to the study of additional functional endpoints, such as ejection fraction a year after a patient received therapy using the TherOx Downstream® System or New York Heart Association (NYHA) functional class, and why the AMIHOT I study design included patients who presented up to 24 hours after infarction (instead of up to 6 hours). With regard to studying ejection fraction out to one year, the physician acknowledged that such an endpoint was considered during the design of the AMIHOT II trial, but that it was ultimately rejected because it was not required by the FDA. The physician further acknowledged that the AMIHOT I trial failed to meet its overall primary efficacy endpoint, but asserted that when analyzing the subset of 105 patients from the trial who had an anterior myocardial infarction and were reperfused within 6 hours, ‘‘substantial clinical benefit’’ was observed. The physician noted that, although some people may have considered the subset of the anterior myocardial infarction patients a ‘‘post hoc’’ analysis, the subset was actually a ‘‘pre-specified data set.’’ In addition, the physician maintained that the analysis of the subset of data was the basis for the second randomized trial (AMIHOT II), and that the FDA ‘‘was unambiguous in its contention that infarct size by single photon emission computed tomography (SPECT) imaging had been thoroughly validated as a surrogate endpoint* * *.’’ Finally, the physician emphasized information regarding the technology’s efficacy that was presented in its application. First, the physician stated that patients with an ejection fraction of less than 40 percent who received supersaturated oxygen therapy had an absolute difference in infarct size of 12.5 percent when compared to the control arm. The physician further asserted that such outcomes support that ‘‘among the sickest acute MI patients* * * supersaturated oxygen is of the greatest benefit.’’ Secondly, the physician noted that the pooled, adjusted data for AMIHOT II and the anterior MI patients from AMIHOT I show that there were nearly twice as many supersaturated oxygen patients with an imperceptible VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 infarct compared to controls (18.2 percent versus 10.3 percent, respectively). The physician described an ‘‘imperceptible’’ infarct as that which is nearly undetectable upon SPECT imaging after an acute myocardial infarction patient undergoes primary coronary intervention at the hospital. Response: In response to the physician’s statements regarding the FDA rejecting the use of ejection fraction as a primary endpoint for the AMIHOT II trial, we note that the standards used in the determination of whether a new technology is ‘‘safe and effective’’ (FDA standards for approval) are not necessarily equivalent to the standards that are used to determine whether a new technology represents a substantial clinical improvement to the Medicare beneficiary patient population over existing technologies. While we welcome insight and data obtained during the FDA approval process, we are charged with going beyond the ‘‘safe and effective’’ standards of FDA for purposes of deeming that a new technology represents a substantial clinical improvement to the Medicare beneficiary patient population. We have considered the comments concerning the town hall meeting and in response to questions raised at the town hall meeting in our evaluation of this technology in this proposed rule. As stated above, we invite additional public comment on objective data regarding the assertions presented by the physician. 5. Technical Correction to the Regulations In the FY 2009 IPPS final rule, when we revised the regulations at § 412.87 to incorporate changes relating to the announcement of determinations and deadline for consideration of new medical service or technology applications, we made a change to paragraph (b)(1) (73 FR 48755). In paragraph (b)(1), we inadvertently used the incorrect word ‘‘relating’’ in the provision that read ‘‘A new medical service or technology represents an advance that substantially improves, relating to technologies previously available, the diagnosis or treatment of Medicare beneficiaries’’ (emphasis added). The correct word should have been ‘‘relative’’. We are proposing to make this technical change to § 412.87(b)(1). III. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals A. Background Section 1886(d)(3)(E) of the Act requires that, as part of the methodology PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 24137 for determining prospective payments to hospitals, the Secretary must adjust the standardized amounts ‘‘for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.’’ In accordance with the broad discretion conferred under the Act, we currently define hospital labor market areas based on the definitions of statistical areas established by the Office of Management and Budget (OMB). A discussion of the proposed FY 2010 hospital wage index based on the statistical areas, including OMB’s revised definitions of Metropolitan Areas, appears under section III.C. of this preamble. Beginning October 1, 1993, section 1886(d)(3)(E) of the Act requires that we update the wage index annually. Furthermore, this section provides that the Secretary base the update on a survey of wages and wage-related costs of short-term, acute care hospitals. The survey must exclude the wages and wage-related costs incurred in furnishing skilled nursing services. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. The proposed adjustment for FY 2010 is discussed in section II.B. of the Addendum to this proposed rule. As discussed below in section III.I. of this preamble, we also take into account the geographic reclassification of hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. The proposed budget neutrality adjustment for FY 2010 is discussed in section II.A.4.b. of the Addendum to this proposed rule. Section 1886(d)(3)(E) of the Act also provides for the collection of data every 3 years on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. A discussion of the occupational mix adjustment that we are proposing to apply beginning October 1, 2009 (the FY 2010 wage E:\FR\FM\22MYP2.SGM 22MYP2 24138 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules index) appears under section III.D. of this preamble. B. Requirements of Section 106 of the MIEA–TRHCA sroberts on PROD1PC70 with FRONTMATTER 1. Wage Index Study Required under the MIEA–TRHCA a. Legislative Requirement Section 106(b)(1) of the MIEA– TRHCA (Pub. L. 109–432) required MedPAC to submit to Congress, not later than June 30, 2007, a report on the Medicare wage index classification system applied under the Medicare IPPS. Section 106(b) of MIEA–TRHCA required the report to include any alternatives that MedPAC recommends to the method to compute the wage index under section 1886(d)(3)(E) of the Act. In addition, section 106(b)(2) of the MIEA–TRHCA instructed the Secretary of Health and Human Services, taking into account MedPAC’s recommendations on the Medicare wage index classification system, to include in the FY 2009 IPPS proposed rule one or more proposals to revise the wage index adjustment applied under section 1886(d)(3)(E) of the Act for purposes of the IPPS. The Secretary was also to consider each of the following: • Problems associated with the definition of labor markets for the wage index adjustment. • The modification or elimination of geographic reclassifications and other adjustments. • The use of Bureau of Labor of Statistics (BLS) data or other data or methodologies to calculate relative wages for each geographic area. • Minimizing variations in wage index adjustments between and within MSAs and statewide rural areas. • The feasibility of applying all components of CMS’ proposal to other settings. • Methods to minimize the volatility of wage index adjustments while maintaining the principle of budget neutrality. • The effect that the implementation of the proposal would have on health care providers on each region of the country. • Methods for implementing the proposal(s), including methods to phase in such implementations. • Issues relating to occupational mix such as staffing practices and any evidence on quality of care and patient safety including any recommendation for alternative calculations to the occupational mix. In the FY 2009 IPPS final rule (73 FR 48563 through 48567), we discussed the MedPAC’s study and recommendations, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the CMS contract with Acumen, L.L.C. for assistance with impact analysis and study of wage index reform, and public comments we received on the MedPAC recommendations and the CMS/ Acumen study and analysis. b. Interim and Final Reports on Results of Acumen’s Study (1) Interim Report on Impact Analysis of Using MedPAC’s Recommended Wage Index In the FY 2009 IPPS final rule (73 FR 48566 through 48567), we discussed the analysis conducted by Acumen comparing use of the MedPAC recommended wage indices to the current CMS wage index. We refer readers to section III.B.1.e. of that final rule for a full discussion of the impact analysis as well as to Acumen’s interim report available on the Web site: https://www.acumenllc.com/reports/cms. (2) Acumen’s Final Report on Analysis of the Wage Index Data and Methodology Acumen’s final report addressing the issues in section 106(b)(2) of the MIEA– TRHCA is divided into two parts. The first part analyzes the strengths and weaknesses of the data sources used to construct the MedPAC and CMS indexes. This part of Acumen’s study is complete and will be published immediately after the publication of this proposed rule. The second part, which is expected to be released after the publication of the FY 2010 IPPS final rule, will focus on the methodology of wage index construction and covers issues related to the definition of wage areas and methods of adjusting for differences among neighboring wage areas, as well as reasons for differential impacts of shifting to a new index. Both reports, when available, will be accessible at the Web site: https:// www.acumenllc.com/reports/cms. The following is a description of the analyses for both parts of Acumen’s final report. Part I: Wage Data Analysis • Differences between the BLS data and the CMS wage data—Acumen assessed the strengths and weaknesses of the data used to construct the CMS wage index and the MedPAC compensation index by examining the differences between the BLS and the CMS wage data. Acumen also evaluated the importance of accounting for selfemployed workers, part-time workers, and industry wage differences. • Employee benefit (wage-related) cost—Acumen considered whether benefit costs need to be included in the hospital wage index and discussed the PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 differences between Worksheet A benefits data (proposed by MedPAC to use with BLS wage data) and Worksheet S–3 benefit data. Acumen also analyzed the possibility of using BLS’ Employer Costs for Employee Compensation (ECEC) series as an alternative to Worksheet A or Worksheet S–3 benefits data that would pose less of a data collection burden for providers. • Impact of the fixed national occupational weights—Acumen assessed MedPAC’s and CMS’ methods for adjusting for occupational mix differences. While the proposed MedPAC compensation index uses fixed weights for occupations representative of the hospital industry nationally, the CMS wage index incorporates an occupational mix adjustment (OMA) from a separate data collection. • Year-to-year volatility in the CMS and BLS wage data—Acumen calculated the extent of volatility in the CMS and BLS wage indexes using several measures of volatility. Acumen also explored potential causes of volatility, such as the number of hospitals and the annual change in the number of hospitals in a wage area. Finally, Acumen evaluated the impact on annual volatility of using a 2-year rolling average of CMS wage index values. Part II: Wage Index Construction • Alternative wage area definitions— Acumen will explore the conceptual basis for defining wage areas and investigate alternative wage area definitions that have been considered in prior literature to reduce differences between areas. • Differences between and within contiguous wage areas—Acumen will estimate different methods for smoothing wage index values between geographically proximate areas and examine the justification for and sensitivity to assumptions used by MedPAC in its smoothing method. • Reasons for differential impacts of shifting to a new index—Acumen will analyze the impact on hospitals if CMS were to adopt MedPAC’s proposed compensation index, with a focus on hospitals that would no longer qualify for exceptions such as geographic reclassification and the rural floor. Acumen will also determine if there are identifiable reasons for the different impacts. As of the publication date of this proposed rule, Acumen has not completed its analysis for the second part of its final report. We indicated in the FY 2009 IPPS final rule that, in developing any proposal(s) for additional wage index reform that may be included in the FY E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 2010 IPPS proposed rule, we would consider all of the public comments on the MedPAC recommendations that we had received in that proposed rulemaking cycle, along with the interim and final reports to be submitted to us by Acumen. As Acumen’s study is not yet complete, we are not proposing any additional changes to the hospital wage index for acute care hospitals in this proposed rule. 2. FY 2009 Policy Changes in Response to Requirements Under Section 106(b) of the MIEA–TRHCA To implement the requirements of section 106(b) of the MIEA–TRHCA and respond to MedPAC’s recommendations in its June 2007 report to Congress, in the FY 2009 IPPS final rule (73 FR 48567 through 48574), we made the following policy changes relating to the hospital wage index. (We refer readers to the FY 2009 IPPS final rule for a full discussion of the basis for the proposals, the public comments received, and the FY 2009 final policy.) sroberts on PROD1PC70 with FRONTMATTER a. Reclassification Average Hourly Wage Comparison Criteria In the FY 2009 IPPS final rule, we adopted the policy to adjust the reclassification average hourly wage standard, comparing a reclassifying hospital’s (or county hospital group’s) average hourly wage relative to the average hourly wage of the area to which it seeks reclassification. We provided for a phase-in of the adjustment over 2 years. For applications for reclassification for the first transitional year, FY 2010, the average hourly wage standards were set at 86 percent for urban hospitals and group reclassifications and 84 percent for rural hospitals. For applications for reclassification for FY 2011 (for which the application deadline is September 1, 2009) and for subsequent fiscal years, the average hourly wage standards will be 88 percent for urban and group reclassifications and 86 percent for rural hospitals (§§ 412.230, 412.232, and 412.234 of the regulations). As stated above, these policies were adopted in the FY 2009 IPPS final rule. b. Within-State Budget Neutrality Adjustment for the Rural and Imputed Floors In the FY 2009 IPPS final rule, we adopted State level budget neutrality (rather than the national budget neutrality adjustment) for the rural and imputed floors, to be effective beginning with the FY 2009 wage index. The transition from the national budget neutrality adjustment to the State level budget neutrality adjustment is being VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 phased in over a 3-year period. In FY 2009, hospitals received a blended wage index that was 20 percent of a wage index with the State level rural and imputed floor budget neutrality adjustment and 80 percent of a wage index with the national budget neutrality adjustment. In FY 2010, the blended wage index will reflect 50 percent of the State level adjustment and 50 percent of the national adjustment. In FY 2011, the adjustment will be completely transitioned to the State level methodology. In the FY 2009 IPPS final rule, we incorporated this policy in our regulation at § 412.64(e)(4). Specifically, we provided that CMS makes an adjustment to the wage index to ensure that aggregate payments after implementation of the rural floor under section 4410 of the Balanced Budget Act of 1997 (Pub. L. 105–33) and the imputed rural floor under § 412.64(h)(4) are made in a manner that ensures that aggregate payments to hospitals are not affected and that, beginning October 1, 2008, CMS would transition from a nationwide adjustment to a statewide adjustment, with a statewide adjustment fully in place by October 1, 2010. We note that the imputed floor expires on September 30, 2011 (as discussed in section III.H. of this preamble). C. Core-Based Statistical Areas for the Hospital Wage Index The wage index is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. In accordance with the broad discretion under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we define hospital labor market areas based on the Core-Based Statistical Areas (CBSAs) established by OMB and announced in December 2003 (69 FR 49027). For a discussion of OMB’s revised definitions of CBSAs and our implementation of the CBSA definitions, we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). As with the FY 2009 final rule, for FY 2010, we are proposing to provide that hospitals receive 100 percent of their wage index based upon the CBSA configurations. Specifically, for each hospital, we are proposing to determine a wage index for FY 2010 employing wage index data from hospital cost reports for cost reporting periods beginning during FY 2006 and using the CBSA labor market definitions. We consider CBSAs that are MSAs to be urban, and CBSAs that are Micropolitan Statistical Areas as well as areas outside of CBSAs to be rural. In addition, it has been our longstanding policy that where PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 24139 an MSA has been divided into Metropolitan Divisions, we consider the Metropolitan Division to comprise the labor market areas for purposes of calculating the wage index (69 FR 49029) (regulations at § 412.64(b)(1)(ii)(A)). On November 20, 2008, OMB announced three Micropolitan Statistical Areas that now qualify as MSAs (OMB Bulletin No. 09–01). The new urban CBSAs are as follows: • Cape Girardeau-Jackson, MissouriIllinois (CBSA 16020). This CBSA is comprised of the principal cities of Cape Girardeau and Jackson, Missouri in Alexander County, Illinois; Bollinger County, Missouri, and Cape Girardeau County, Missouri. • Manhattan, Kansas (CBSA 31740). This CBSA is comprised of the principal city of Manhattan, Kansas in Geary County, Pottawatomie County, and Riley County. • Mankato-North Mankato, Minnesota (CBSA 31860). This CBSA is comprised of the principal cities of Mankato and North Mankato, Minnesota in Blue Earth County and Nicollet County. OMB also changed the principal cities and titles of a number of CBSAs and a Metropolitan Division, as follows: • Broomfield, Colorado qualifies as a new principal city of the DenverAurora, Colorado CBSA. The new title is Denver-Aurora-Broomfield, Colorado CBSA. • Chapel Hill, North Carolina qualifies as a new principal city of the Durham, North Carolina CBSA. The new title is Durham-Chapel Hill, North Carolina CBSA. • Chowchilla, California qualifies as a new principal city of the Madera, California CBSA. The new title is Madera-Chowchilla, California CBSA. • Panama City Beach, Florida qualifies as a new principal city of the Panama City-Lynn Haven, Florida CBSA. The new title is Panama CityLynn Haven-Panama City Beach, Florida CBSA. • East Wenatchee, Washington qualifies as a new principal city of the Wenatchee, Washington CBSA. The new title is Wenatchee-East Wenatchee, Washington CBSA. • Rockville, Maryland replaces Gaithersburg, Maryland as the third most populous city of the BethesdaFrederick-Gaithersburg, Maryland Metropolitan Division. The new title is Bethesda-Frederick-Rockville, Maryland Metropolitan Division. The OMB bulletin is available on the OMB Web site at https:// www.whitehouse.gov/OMB—go to ‘‘Bulletins’’ or ‘‘Statistical Programs and E:\FR\FM\22MYP2.SGM 22MYP2 24140 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Standards.’’ CMS will apply these changes to the IPPS beginning October 1, 2009. sroberts on PROD1PC70 with FRONTMATTER D. Proposed Occupational Mix Adjustment to the Proposed FY 2010 Wage Index As stated earlier, section 1886(d)(3)(E) of the Act provides for the collection of data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index, for application beginning October 1, 2004 (the FY 2005 wage index). The purpose of the occupational mix adjustment is to control for the effect of hospitals’ employment choices on the wage index. For example, hospitals may choose to employ different combinations of registered nurses, licensed practical nurses, nursing aides, and medical assistants for the purpose of providing nursing care to their patients. The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor. 1. Development of Data for the Proposed FY 2010 Occupational Mix Adjustment Based on the 2007–2008 Occupational Mix Survey As provided for under section 1886(d)(3)(E) of the Act, we collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program. For the FY 2009 hospital wage index, we used data from the 2006 Medicare Wage Index Occupational Mix Survey (the 2006 survey) to calculate the occupational mix adjustment. In the 2006 survey, we included several modifications to the original occupational mix survey, the 2003 survey, including (1) allowing hospitals to report their own average hourly wage rather than using BLS data; (2) extending the prospective survey period; and (3) reducing the number of occupational categories but refining the subcategories for registered nurses. The 2006 survey provided for the collection of hospital-specific wages and hours data, a 6-month prospective reporting period (that is, January 1, 2006, through June 30, 2006), the transfer of each general service category that comprised less than 4 percent of total hospital employees in the 2003 survey to the ‘‘all other occupations’’ category (the revised survey focused only on the mix of nursing occupations), additional clarification of the definitions for the occupational categories, an expansion of the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 registered nurse category to include functional subcategories, and the exclusion of average hourly rate data associated with advance practice nurses. The 2006 survey included only two general occupational categories: Nursing and ‘‘all other occupations.’’ The nursing category had four subcategories: Registered nurses, licensed practical nurses, aides, orderlies, attendants, and medical assistants. The registered nurse subcategory included two functional subcategories: Management personnel and staff nurses or clinicians. As indicated above, the 2006 survey provided for a 6-month data collection period, from January 1, 2006 through June 30, 2006. To allow flexibility for the reporting period beginning and ending dates to accommodate some hospitals’ biweekly payroll and reporting systems, we modified the 6month data collection period for the 2006 survey from January 1, 2006 through June 30, 2006, to a 6-month reporting period that began on or after December 25, 2005, and end before July 9, 2006. OMB approved the revised 2006 occupational mix survey (Form CMS–10079 (2006)) on April 25, 2006. The original timelines for the collection, review, and correction of the 2006 occupational mix data were discussed in detail in the FY 2007 IPPS final rule (71 FR 48008). For the proposed FY 2010 hospital wage index, we are using occupational mix data collected on a revised 2007– 2008 Medicare Wage Index Occupational Mix Survey (the 2007– 2008 survey) to compute the proposed occupational mix adjustment for FY 2010. In the FY 2008 IPPS final rule with comment period (72 FR 47315), we discussed how we modified the 2006 occupational mix survey. The revised 2007–2008 occupational mix survey provided for the collection of hospitalspecific wages and hours data for the 1year period of July 1, 2007, through June 30, 2008, additional clarifications to the survey instructions, the elimination of the registered nurse subcategories, some refinements to the definitions of the occupational categories, and the inclusion of additional cost centers that typically provide nursing services. On February 2, 2007, we published in the Federal Register a notice soliciting comments on the proposed revisions to the 2006 occupational mix survey (72 FR 5055). The comment period for the notice ended on April 3, 2007. After considering the comments we received, we made a few minor editorial changes and published the final 2007–2008 occupational mix survey on September 14, 2007 (72 FR 52568). OMB approved the survey without change on February PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 1, 2008 (OMB Control Number 0938 0907). The 2007–2008 Medicare occupational mix survey (Form CMS– 10079 (2008)) is available on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/WIFN/ list.asp#TopOfPage, and through the fiscal intermediaries/MACs. Hospitals were required to submit their completed surveys to their fiscal intermediaries/ MACs by September 2, 2008. The preliminary, unaudited 2007–2008 occupational mix survey data was released in early October 2008, along with the FY 2006 Worksheet S–3 wage data, for the FY 2010 wage index review and correction process. 2. Calculation of the Proposed Occupational Mix Adjustment for FY 2010 For FY 2010 (as we did for FY 2009), we are proposing to calculate the occupational mix adjustment factor using the following steps: Step 1—For each hospital, determine the percentage of the total nursing category attributable to a nursing subcategory by dividing the nursing subcategory hours by the total nursing category’s hours. Repeat this computation for each of the four nursing subcategories: Registered nurses; licensed practical nurses; nursing aides, orderlies, and attendants; and medical assistants. Step 2—Determine a national average hourly rate for each nursing subcategory by dividing a subcategory’s total salaries for all hospitals in the occupational mix survey database by the subcategory’s total hours for all hospitals in the occupational mix survey database. Step 3—For each hospital, determine an adjusted average hourly rate for each nursing subcategory by multiplying the percentage of the total nursing category (from Step 1) by the national average hourly rate for that nursing subcategory (from Step 2). Repeat this calculation for each of the four nursing subcategories. Step 4—For each hospital, determine the adjusted average hourly rate for the total nursing category by summing the adjusted average hourly rate (from Step 3) for each of the nursing subcategories. Step 5—Determine the national average hourly rate for the total nursing category by dividing total nursing category salaries for all hospitals in the occupational mix survey database by total nursing category hours for all hospitals in the occupational mix survey database. Step 6—For each hospital, compute the occupational mix adjustment factor for the total nursing category by dividing the national average hourly rate for the total nursing category (from E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER Step 5) by the hospital’s adjusted average hourly rate for the total nursing category (from Step 4). If the hospital’s adjusted average hourly rate is less than the national average hourly rate (indicating the hospital employs a less costly mix of nursing employees), the occupational mix adjustment factor is greater than 1.0000. If the hospital’s adjusted average hourly rate is greater than the national average hourly rate, the occupational mix adjustment factor is less than 1.0000. Step 7—For each hospital, calculate the occupational mix adjusted salaries and wage-related costs for the total nursing category by multiplying the hospital’s total salaries and wage-related costs (from Step 5 of the unadjusted wage index calculation in section III.G. of this preamble) by the percentage of the hospital’s total workers attributable to the total nursing category (using the occupational mix survey data, this percentage is determined by dividing the hospital’s total nursing category salaries by the hospital’s total salaries for ‘‘nursing and all other’’) and by the total nursing category’s occupational mix adjustment factor (from Step 6 above). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 The remaining portion of the hospital’s total salaries and wage-related costs that is attributable to all other employees of the hospital is not adjusted by the occupational mix. A hospital’s all other portion is determined by subtracting the hospital’s nursing category percentage from 100 percent. Step 8—For each hospital, calculate the total occupational mix adjusted salaries and wage-related costs for a hospital by summing the occupational mix adjusted salaries and wage-related costs for the total nursing category (from Step 7) and the portion of the hospital’s salaries and wage-related costs for all other employees (from Step 7). To compute a hospital’s occupational mix adjusted average hourly wage, divide the hospital’s total occupational mix adjusted salaries and wage-related costs by the hospital’s total hours (from Step 4 of the unadjusted wage index calculation in section III.G. of this preamble). Step 9—To compute the occupational mix adjusted average hourly wage for an urban or rural area, sum the total occupational mix adjusted salaries and wage-related costs for all hospitals in the area, then sum the total hours for all PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 24141 hospitals in the area. Next, divide the area’s occupational mix adjusted salaries and wage-related costs by the area’s hours. Step 10—To compute the national occupational mix adjusted average hourly wage, sum the total occupational mix adjusted salaries and wage-related costs for all hospitals in the Nation, then sum the total hours for all hospitals in the Nation. Next, divide the national occupational mix adjusted salaries and wage-related costs by the national hours. The proposed FY 2010 occupational mix adjusted national average hourly wage is $33.4935. Step 11—To compute the occupational mix adjusted wage index, divide each area’s occupational mix adjusted average hourly wage (Step 9) by the national occupational mix adjusted average hourly wage (Step 10). Step 12—To compute the Puerto Rico specific occupational mix adjusted wage index, follow Steps 1 through 11 above. The proposed FY 2010 occupational mix adjusted Puerto Rico specific average hourly wage is $14.2555. The table below is an illustrative example of the proposed occupational mix adjustment. BILLING CODE 4120–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.011</GPH> sroberts on PROD1PC70 with FRONTMATTER 24142 24143 BILLING CODE 4120–01–C VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.012</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER 24144 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Because the occupational mix adjustment is required by statute, all hospitals that are subject to payments under the IPPS, or any hospital that would be subject to the IPPS if not granted a waiver, must complete the occupational mix survey, unless the hospital has no associated cost report wage data that are included in the proposed FY 2010 wage index. For the FY 2007–2008 survey, the response rate was 89 percent. In computing the proposed FY 2010 wage index, if a hospital did not respond to the occupational mix survey, or if we determined that a hospital’s submitted data were too erroneous to include in the wage index, we assigned the hospital the average occupational mix adjustment for the labor market area. We believed this method had the least impact on the wage index for other hospitals in the area. For areas where no hospital submitted data for purposes of calculating the proposed occupational mix adjustment, we applied the national occupational mix factor of 1.0000 in calculating the area’s proposed FY 2010 occupational mix adjusted wage index. (We indicated in the FY 2008 and FY 2009 IPPS final rules that we reserve the right to apply a different approach in future years, including potentially penalizing nonresponsive hospitals (72 FR 47314).) In addition, if a hospital submitted a survey, but that survey data cannot be used because we determine it to be aberrant, we also are proposing to assign the hospital the average occupational mix adjustment for its labor market area. For example, if a hospital’s individual nurse category average hourly wages were out of range (that is, unusually high or low), and the hospital did not provide sufficient documentation to explain the aberrancy, or the hospital did not submit any registered nurse salaries or hours data, we are proposing to assign the hospital the average occupational mix adjustment for the labor market area in which it is located. In calculating the average occupational mix adjustment factor for a labor market area, we replicated Steps 1 through 6 of the calculation for the occupational mix adjustment. However, instead of performing these steps at the hospital level, we aggregated the data at the labor market area level. In following these steps, for example, for CBSAs that contain providers that did not submit occupational mix survey data, the occupational mix adjustment factor ranged from a low of 0.8452 (CBSA 17780, College Station-Bryan, TX), to a high of 1.0939 (CBSA 29700, Laredo, TX). Also, in computing a hospital’s occupational mix adjusted salaries and VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 wage-related costs for nursing employees (Step 7 of the calculation), in the absence of occupational mix survey data, we multiplied the hospital’s total salaries and wage-related costs by the percentage of the area’s total workers attributable to the area’s total nursing category. For FY 2010, there are 8 CBSAs (that include 16 hospitals) for which we did not have occupational mix data for any of its hospitals. The CBSAs are: • CBSA 16220—Casper, WY (one hospital) • CBSA 21940—Fajardo, PR (one hospital) • CBSA 22140—Farmington, NM (one hospital) • CBSA 25020—Guayama, PR (three hospitals) • CBSA 36140—Ocean City, NJ (one hospital) • CBSA 38660—Ponce, PR (six hospitals) • CBSA 41900—San German-Cabo Rojo, PR (two hospitals) • CBSA 49500—Yauco, PR (one hospital) Since the FY 2007 IPPS final rule, we have periodically discussed applying a hospital-specific penalty to hospitals that fail to submit occupational mix survey data (71 FR 48013 through 48014; 72 FR 47314 through 47315; and 73 FR 48580). During the FY 2008 rulemaking cycle, some commenters suggested a penalty equal to a 1- to 2percent reduction in the hospital’s wage index value or a set percentage of the standardized amount. During the FY 2009 rulemaking cycle, several commenters reiterated their view that full participation in the occupational mix survey is critical, and that CMS should develop a methodology that encourages hospitals to report occupational mix survey data but does not unfairly penalize neighboring hospitals. However, to date, we have not adopted a penalty for hospitals that fail to submit occupational mix data. After review of the data for the proposed FY 2010 wage index, we became concerned about the increasing number of hospitals that fail to submit occupational mix data and the impact it may have on area wage indices. The survey response rate has dropped significantly from 93.8 percent for the 2003 survey to 90.7 percent for the 2006 survey and 89 percent for the 2007– 2008 survey. In 43 areas, the response rate was only 66.7 percent or less. In addition, for 46 areas, including New York-White Plains-Wayne, New YorkNew Jersey (35644), Oklahoma City, Oklahoma (36420), Rural Georgia (11), and Rural Oklahoma (37), the area response rate decreased 20 percent or PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 more between the 2006 survey and the 2007–2008 survey. In all of Puerto Rico, only 21.6 percent of hospitals submitted 2007–2008 survey data. If we had proposed to apply a penalty for nonresponsive hospitals for the FY 2010 wage index, Puerto Rico hospitals would have been significantly adversely affected in both the proposed national and Puerto Rico-specific wage indices. While we are not proposing a penalty at this time, we will consider the public comments we previously received, as well as any public comments on this proposed rule, as we develop the proposed FY 2011 wage index. One approach that we will explore is to assign any nonresponsive hospital the occupational mix factor deriving from the survey that would result in the greatest negative adjustment to the hospital’s wage index. We also will consider applying the same penalty to hospitals that submit unusable occupational mix data. Although we would apply this penalty factor in establishing the hospital’s payment rate, we would not use this factor in computing the area’s wage index. Rather, in computing the area wage index, we would apply the same methodology as described above (that is, assign the nonresponsive hospital the average occupational mix adjustment factor for the labor market area) so that other hospitals in the area are minimally impacted by the hospital’s failure to submit occupational mix data. Again, we note that we reserve the right to penalize nonresponsive hospitals in the future. We welcome public comments on this matter and look forward to addressing this issue in next year’s IPPS proposed rule. E. Worksheet S–3 Wage Data for the Proposed FY 2010 Wage Index The proposed FY 2010 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY 2006 (the FY 2009 wage index was based on FY 2005 wage data). 1. Included Categories of Costs The proposed FY 2010 wage index includes the following categories of data associated with costs paid under the IPPS (as well as outpatient costs): • Salaries and hours from short-term, acute care hospitals (including paid lunch hours and hours associated with military leave and jury duty) • Home office costs and hours • Certain contract labor costs and hours (which includes direct patient care, certain top management, pharmacy, laboratory, and nonteaching E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules physician Part A services, and certain contract indirect patient care services (as discussed in the FY 2008 final rule with comment period (72 FR 47315)) • Wage-related costs, including pensions and other deferred compensation costs. We note that, on March 28, 2008, CMS published a technical clarification to the cost reporting instructions for pension and deferred compensation costs (sections 2140 through 2142.7 of the Provider Reimbursement Manual, Part I). These instructions are used for developing pension and deferred compensation costs for purposes of the wage index, as discussed in the instructions for Worksheet S–3, Part II, Lines 13 through 20 and in the FY 2006 IPPS final rule (70 FR 47369). 2. Excluded Categories of Costs Consistent with the wage index methodology for FY 2009, the proposed wage index for FY 2010 also excludes the direct and overhead salaries and hours for services not subject to IPPS payment, such as SNF services, home health services, costs related to GME (teaching physicians and residents) and certified registered nurse anesthetists (CRNAs), and other subprovider components that are not paid under the IPPS. The proposed FY 2010 wage index also excludes the salaries, hours, and wage-related costs of hospital-based rural health clinics (RHCs), and Federally qualified health centers (FQHCs) because Medicare pays for these costs outside of the IPPS (68 FR 45395). In addition, salaries, hours, and wage-related costs of CAHs are excluded from the wage index, for the reasons explained in the FY 2004 IPPS final rule (68 FR 45397). sroberts on PROD1PC70 with FRONTMATTER 3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals under the IPPS Data collected for the IPPS wage index are also currently used to calculate wage indices applicable to other providers, such as SNFs, home health agencies, and hospices. In addition, they are used for prospective payments to IRFs, IPFs, and LTCHs, and for hospital outpatient services. We note that, in the IPPS rules, we do not address comments pertaining to the wage indices for non-IPPS providers, other than for LTCHs. (Beginning with the FY 2010 IPPS rule, for the RY 2010, we are including in the same document updates to the LTCH PPS.) Such comments should be made in response to separate proposed rules for those providers. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 F. Verification of Worksheet S–3 Wage Data The wage data for the proposed FY 2010 wage index were obtained from Worksheet S–3, Parts II and III of the FY 2006 Medicare cost reports. Instructions for completing Worksheet S–3, Parts II and III are in the Provider Reimbursement Manual (PRM), Part II, sections 3605.2 and 3605.3. The data file used to construct the wage index includes FY 2006 data submitted to us as of March 2, 2009. As in past years, we performed an intensive review of the wage data, mostly through the use of edits designed to identify aberrant data. We asked our fiscal intermediaries/ MACs to revise or verify data elements that resulted in specific edit failures. For the proposed FY 2010 wage index, we identified and excluded 34 providers with data that was too aberrant to include in the proposed wage index, although if data elements for some of these providers are corrected, we intend to include some of these providers in the FY 2010 final wage index. We instructed fiscal intermediaries/MACs to complete their data verification of questionable data elements and to transmit any changes to the wage data no later than April 15, 2009. We believe all unresolved data elements will be resolved by the date the final rule is issued. The revised data will be reflected in the FY 2010 IPPS final rule. In constructing the proposed FY 2010 wage index, we included the wage data for facilities that were IPPS hospitals in FY 2006, inclusive of those facilities that have since terminated their participation in the program as hospitals, as long as those data did not fail any of our edits for reasonableness. We believe that including the wage data for these hospitals is, in general, appropriate to reflect the economic conditions in the various labor market areas during the relevant past period and to ensure that the current wage index represents the labor market area’s current wages as compared to the national average of wages. However, we excluded the wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 45397). For this proposed rule, we removed 11 hospitals that converted to CAH status between February 18, 2008, the cut-off date for CAH exclusion from the FY 2009 wage index, and February 16, 2009, the cut-off date for CAH exclusion from the FY 2010 wage index. After removing hospitals with aberrant data and hospitals that converted to CAH status, the proposed FY 2010 wage index is calculated based on 3,521 hospitals. PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 24145 In the FY 2008 final rule with comment period (72 FR 47317) and the FY 2009 IPPS final rule (73 FR 48582), we discussed our policy for allocating a multicampus hospital’s wages and hours data, by full-time equivalent (FTE) staff, among the different labor market areas where its campuses are located. During the FY 2010 wage index desk review process, we requested fiscal intermediaries/MACs to contact multicampus hospitals that had campuses in different labor market areas to collect the data for the allocation. The proposed FY 2010 wage index in this proposed rule includes separate wage data for campuses of three multicampus hospitals. For FY 2010, we are again allowing hospitals to use FTE or discharge data for the allocation of a multicampus hospital’s wage data among the different labor market areas where its campuses are located. The Medicare cost report was updated in May 2008 to provide for the reporting of FTE data by campus for multicampus hospitals. Because the data from cost reporting periods that begin in FY 2008 will not be used in calculating the wage index until FY 2012, a multicampus hospital will still have the option, through the FY 2011 wage index, to use either FTE or discharge data for allocating wage data among its campuses by providing the information from the applicable cost reporting period to CMS through its fiscal intermediary/MAC. Two of the three multicampus hospitals chose to have their wage data allocated by their Medicare discharge data for the FY 2010 wage index. One of the hospitals provided FTE staff data for the allocation. The average hourly wage associated with each geographical location of a multicampus hospital is reflected in Table 2 of the Addendum to this proposed rule. G. Method for Computing the Proposed FY 2010 Unadjusted Wage Index The method used to compute the proposed FY 2009 wage index without an occupational mix adjustment follows: Step 1—As noted above, we are basing the proposed FY 2010 wage index on wage data reported on the FY 2006 Medicare cost reports. We gathered data from each of the non-Federal, short-term, acute care hospitals for which data were reported on the Worksheet S–3, Parts II and III of the Medicare cost report for the hospital’s cost reporting period beginning on or after October 1, 2005, and before October 1, 2006. In addition, we included data from some hospitals that had cost reporting periods beginning E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24146 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules before October 2005 and reported a cost reporting period covering all of FY 2005. These data are included because no other data from these hospitals would be available for the cost reporting period described above, and because particular labor market areas might be affected due to the omission of these hospitals. However, we generally describe these wage data as FY 2005 data. We note that, if a hospital had more than one cost reporting period beginning during FY 2006 (for example, a hospital had two short cost reporting periods beginning on or after October 1, 2005, and before October 1, 2006), we included wage data from only one of the cost reporting periods, the longer, in the wage index calculation. If there was more than one cost reporting period and the periods were equal in length, we included the wage data from the later period in the wage index calculation. Step 2—Salaries—The method used to compute a hospital’s average hourly wage excludes certain costs that are not paid under the IPPS. (We note that, beginning with FY 2008 (72 FR 47315), we include Lines 22.01, 26.01, and 27.01 of Worksheet S–3, Part II for overhead services in the wage index. However, we note that the wages and hours on these lines are not incorporated into Line 101, Column 1 of Worksheet A, which, through the electronic cost reporting software, flows directly to Line 1 of Worksheet S–3, Part II. Therefore, the first step in the wage index calculation for FY 2010 is to compute a ‘‘revised’’ Line 1, by adding to the Line 1 on Worksheet S–3, Part II (for wages and hours respectively) the amounts on Lines 22.01, 26.01, and 27.01.) In calculating a hospital’s average salaries plus wage-related costs, we subtract from Line 1 (total salaries) the GME and CRNA costs reported on Lines 2, 4.01, 6, and 6.01, the Part B salaries reported on Lines 3, 5 and 5.01, home office salaries reported on Line 7, and exclude salaries reported on Lines 8 and 8.01 (that is, direct salaries attributable to SNF services, home health services, and other subprovider components not subject to the IPPS). We also subtract from Line 1 the salaries for which no hours were reported. To determine total salaries plus wagerelated costs, we add to the net hospital salaries the costs of contract labor for direct patient care, certain top management, pharmacy, laboratory, and nonteaching physician Part A services (Lines 9 and 10), home office salaries and wage-related costs reported by the hospital on Lines 11 and 12, and nonexcluded area wage-related costs (Lines 13, 14, and 18). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 We note that contract labor and home office salaries for which no corresponding hours are reported are not included. In addition, wage-related costs for nonteaching physician Part A employees (Line 18) are excluded if no corresponding salaries are reported for those employees on Line 4. Step 3—Hours—With the exception of wage-related costs, for which there are no associated hours, we compute total hours using the same methods as described for salaries in Step 2. Step 4—For each hospital reporting both total overhead salaries and total overhead hours greater than zero, we then allocate overhead costs to areas of the hospital excluded from the wage index calculation. First, we determine the ratio of excluded area hours (sum of Lines 8 and 8.01 of Worksheet S–3, Part II) to revised total hours (Line 1 minus the sum of Part II, Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, and Part III, Line 13 of Worksheet S–3). We then compute the amounts of overhead salaries and hours to be allocated to excluded areas by multiplying the above ratio by the total overhead salaries and hours reported on Line 13 of Worksheet S–3, Part III. Next, we compute the amounts of overhead wage-related costs to be allocated to excluded areas using three steps: (1) We determine the ratio of overhead hours (Part III, Line 13 minus the sum of lines 22.01, 26.01, and 27.01) to revised hours excluding the sum of lines 22.01, 26.01, and 27.01 (Line 1 minus the sum of Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, 8, 8.01, 22.01, 26.01, and 27.01). (We note that for the FY 2008 and subsequent wage index calculations, we are excluding the sum of lines 22.01, 26.01, and 27.01 from the determination of the ratio of overhead hours to revised hours because hospitals typically do not provide fringe benefits (wage-related costs) to contract personnel. Therefore, it is not necessary for the wage index calculation to exclude overhead wagerelated costs for contract personnel. Further, if a hospital does contribute to wage-related costs for contracted personnel, the instructions for Lines 22.01, 26.01, and 27.01 require that associated wage-related costs be combined with wages on the respective contract labor lines.); (2) we compute overhead wage-related costs by multiplying the overhead hours ratio by wage-related costs reported on Part II, Lines 13, 14, and 18; and (3) we multiply the computed overhead wagerelated costs by the above excluded area hours ratio. Finally, we subtract the computed overhead salaries, wagerelated costs, and hours associated with excluded areas from the total salaries PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 (plus wage-related costs) and hours derived in Steps 2 and 3. Step 5—For each hospital, we adjust the total salaries plus wage-related costs to a common period to determine total adjusted salaries plus wage-related costs. To make the wage adjustment, we estimate the percentage change in the employment cost index (ECI) for compensation for each 30-day increment from October 14, 2003, through April 15, 2005, for private industry hospital workers from the BLS’ Compensation and Working Conditions. We use the ECI because it reflects the price increase associated with total compensation (salaries plus fringes) rather than just the increase in salaries. In addition, the ECI includes managers as well as other hospital workers. This methodology to compute the monthly update factors uses actual quarterly ECI data and assures that the update factors match the actual quarterly and annual percent changes. We also note that, since April 2006 with the publication of March 2006 data, the BLS’ ECI uses a different classification system, the North American Industrial Classification System (NAICS), instead of the Standard Industrial Codes (SICs), which no longer exist. We have consistently used the ECI as the data source for our wages and salaries and other price proxies in the IPPS market basket and do not propose to make any changes to the usage for FY 2010. The factors used to adjust the hospital’s data were based on the midpoint of the cost reporting period, as indicated below. MIDPOINT OF COST REPORTING PERIOD After 10/14/2005 11/14/2005 12/14/2005 01/14/2006 02/14/2006 03/14/2006 04/14/2006 05/14/2006 06/14/2006 07/14/2006 08/14/2006 09/14/2006 10/14/2006 11/14/2006 12/14/2006 01/14/2007 02/14/2007 03/14/2007 Before 11/15/2005 12/15/2005 01/15/2006 02/15/2006 03/15/2006 04/15/2006 05/15/2006 06/15/2006 07/15/2006 08/15/2006 09/15/2006 10/15/2006 11/15/2006 12/15/2006 01/15/2007 02/15/2007 03/15/2007 04/15/2007 Adjustment factor 1.04966 1.04632 1.04296 1.03955 1.03610 1.03269 1.02936 1.02613 1.02298 1.01990 1.01688 1.01391 1.01098 1.00808 1.00526 1.00257 1.00000 0.99745 For example, the midpoint of a cost reporting period beginning January 1, 2006, and ending December 31, 2006, is June 30, 2006. An adjustment factor of 1.02298 would be applied to the wages E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules of a hospital with such a cost reporting period. In addition, for the data for any cost reporting period that began in FY 2006 and covered a period of less than 360 days or more than 370 days, we annualize the data to reflect a 1-year cost report. Dividing the data by the number of days in the cost report and then multiplying the results by 365 accomplishes annualization. Step 6—Each hospital is assigned to its appropriate urban or rural labor market area before any reclassifications under section 1886(d)(8)(B), section 1886(d)(8)(E), or section 1886(d)(10) of the Act. Within each urban or rural labor market area, we add the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in that area to determine the total adjusted salaries plus wage-related costs for the labor market area. Step 7—We divide the total adjusted salaries plus wage-related costs obtained under both methods in Step 6 by the sum of the corresponding total hours (from Step 4) for all hospitals in each labor market area to determine an average hourly wage for the area. Step 8—We add the total adjusted salaries plus wage-related costs obtained in Step 5 for all hospitals in the Nation and then divide the sum by the national sum of total hours from Step 4 to arrive at a national average hourly wage. Using the data as described above, the proposed national average hourly wage (unadjusted for occupational mix) is $33.5184. Step 9—For each urban or rural labor market area, we calculate the hospital wage index value, unadjusted for occupational mix, by dividing the area average hourly wage obtained in Step 7 by the national average hourly wage computed in Step 8. Step 10—Following the process set forth above, we develop a separate Puerto Rico-specific wage index for purposes of adjusting the Puerto Rico standardized amounts. (The national Puerto Rico standardized amount is adjusted by a wage index calculated for all Puerto Rico labor market areas based on the national average hourly wage as described above.) We add the total adjusted salaries plus wage-related costs (as calculated in Step 5) for all hospitals in Puerto Rico and divide the sum by the total hours for Puerto Rico (as calculated in Step 4) to arrive at an overall proposed average hourly wage (unadjusted for occupational mix) of $14.2462 for Puerto Rico. For each labor market area in Puerto Rico, we calculate the Puerto Rico-specific wage index value by dividing the area average hourly wage (as calculated in Step 7) by VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the overall Puerto Rico average hourly wage. Step 11—Section 4410 of Public Law 105–33 provides that, for discharges on or after October 1, 1997, the area wage index applicable to any hospital that is located in an urban area of a State may not be less than the area wage index applicable to hospitals located in rural areas in that State. The areas affected by this provision are identified in Table 4D–2 of the Addendum to this proposed rule. In the FY 2005 IPPS final rule (69 FR 49109), we adopted the ‘‘imputed’’ floor as a temporary 3-year measure to address a concern by some individuals that hospitals in all-urban States were disadvantaged by the absence of rural hospitals to set a wage index floor in those States. The imputed floor was originally set to expire in FY 2007, but we extended it an additional year in the FY 2008 IPPS final rule with comment period (72 FR 47321). In the FY 2009 IPPS final rule (73 FR 48570 through 48574 and 48584), we extended the imputed floor for an additional 3 years, through FY 2011. H. Analysis and Implementation of the Proposed Occupational Mix Adjustment and the Proposed FY 2010 Occupational Mix Adjusted Wage Index As discussed in section III.D. of this preamble, for FY 2010, we are proposing to apply the occupational mix adjustment to 100 percent of the FY 2010 wage index. We calculated the proposed occupational mix adjustment using data from the 2007–2008 occupational mix survey data, using the methodology described in section III.D.3. of this preamble. Using the occupational mix survey data and applying the occupational mix adjustment to 100 percent of the proposed FY 2010 wage index results in a proposed national average hourly wage of $33.4935 and a Puerto-Rico specific average hourly wage of $14.2555. After excluding data of hospitals that either submitted aberrant data that failed critical edits, or that do not have FY 2006 Worksheet S–3 cost report data for use in calculating the proposed FY 2010 wage index, we calculated the proposed FY 2010 wage index using the occupational mix survey data from 3,135 hospitals. Using the Worksheet S–3 cost report data of 3,521 hospitals and occupational mix survey data from 3,135 hospitals represents an 89-percent survey response rate. The proposed FY 2010 national average hourly wages for each occupational mix nursing subcategory as calculated in Step 2 of the PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 24147 occupational mix calculation are as follows: Occupational mix nursing subcategory National RN .................... National LPN and Surgical Technician .......... National Nurse Aide, Orderly, and Attendant .... National Medical Assistant ............................... National Nurse Category Average hourly wage $36.067749019 20.908955714 14.610222480 16.358327509 30.484719916 The proposed national average hourly wage for the entire nurse category as computed in Step 5 of the occupational mix calculation is $30.484719916. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of greater than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of less than 1.0. Hospitals with a nurse category average hourly wage (as calculated in Step 4) of less than the national nurse category average hourly wage receive an occupational mix adjustment factor (as calculated in Step 6) of greater than 1.0. Based on the July 2007 through June 2008 occupational mix survey data, we determined (in Step 7 of the occupational mix calculation) that the national percentage of hospital employees in the nurse category is 44.32 percent, and the national percentage of hospital employees in the all other occupations category is 55.68 percent. At the CBSA level, the percentage of hospital employees in the nurse category ranged from a low of 29.08 percent in one CBSA, to a high of 70.76 percent in another CBSA. We compared the proposed FY 2010 occupational mix adjusted wage indices for each CBSA to the proposed unadjusted wage indices for each CBSA. As a result of applying the occupational mix adjustment to the wage data, the proposed wage index values for 205 (46.8 percent) urban areas and 33 (70.2 percent) rural areas would increase. One hundred and nine (24.9 percent) urban areas would increase by 1 percent or more, and 5 (1.1 percent) urban areas would increase by 5 percent or more. Nineteen (40.4 percent) rural areas would increase by 1 percent or more, and no rural areas would increase by 5 percent or more. However, the proposed wage index values for 185 (42.2 percent) urban areas and 14 (29.8 percent) rural areas would decrease. Eighty-nine (20.3 percent) urban areas would decrease by 1 percent or more, and 1 (0.23 percent) urban area would decrease by 5 percent or more. Six (12.8 percent) rural areas would decrease by 1 percent or more, E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24148 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules and no rural areas would decrease by 5 percent or more. The largest positive impacts are 7.86 percent for an urban area and 2.98 percent for a rural area. The largest negative impacts are 5.68 percent for an urban area and 2.07 percent for a rural area. One urban area would be unaffected. These results indicate that a larger percentage of rural areas (70.2 percent) benefit from the occupational mix adjustment than do urban areas (46.8 percent). While these results are more positive overall for rural areas than under the previous occupational mix adjustment that used survey data from 2006, approximately one-third (29.8 percent) of rural CBSAs would still experience a decrease in their wage indices as a result of the occupational mix adjustment. We also compared the proposed FY 2010 wage data adjusted for occupational mix from the 2007–2008 survey to the proposed FY 2010 wage data adjusted for occupational mix from the 2006 survey. This analysis illustrates the effect on area wage indices of using the 2007–2008 survey data compared to the 2006 survey data; that is, it shows whether hospitals’ wage indices are increasing or decreasing under the current survey data as compared to the prior survey data. Our analysis shows that the FY 2010 proposed wage index values for 186 (47.6 percent) urban areas and 18 (38.3 percent) rural areas would increase. Sixty-three (16.1 percent) urban areas would increase by 1 percent or more, and no urban areas would increase by 5 percent or more. One (2.1 percent) rural area would increase by 1 percent or more, and no rural areas would increase by 5 percent or more. However, the proposed wage index values for 201 (51.4 percent) urban areas and 28 (59.6 percent) rural areas would decrease using the 2007–2008 data. Fifty-six (14.3 percent) urban areas would decrease by 1 percent or more, and one (0.26 percent) urban area would decrease by 5 percent or more. Four (8.5 percent) rural areas would decrease by 1 percent or more, and no rural areas would decrease by 5 percent or more. The largest positive impacts using the 2007– 2008 data compared to the 2006 data are 4.36 percent for an urban area and 2.39 percent for a rural area. The largest negative impacts are 6.46 percent for an urban area and 4.39 percent for a rural area. Four urban areas and one rural area would be unaffected. These results indicate that a larger percentage of urban areas (47.6 percent) would benefit from the 2007–2008 occupational mix survey as compared to the 2006 survey than would rural areas (38.3 percent). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Further, the wage indices of more CBSAs overall (52.3 percent) would be decreasing due to application of the 2007–2008 occupational mix survey data as compared to the 2006 survey data to the wage index. However, as noted in the analysis above, a greater percentage of rural areas (70.2 percent) would benefit from the application of the occupational mix adjustment than would urban areas. The proposed wage index values for FY 2010 (except those for hospitals receiving wage index adjustments under section 1886(d)(13) of the Act) included in Tables 4A, 4B, 4C, and 4F of the Addendum to this proposed rule include the proposed occupational mix adjustment. Tables 3A and 3B in the Addendum to this proposed rule list the 3-year average hourly wage for each labor market area before the redesignation of hospitals based on FYs 2008, 2009, and 2010 cost reporting periods. Table 3A lists these data for urban areas and Table 3B lists these data for rural areas. In addition, Table 2 in the Addendum to this proposed rule includes the adjusted average hourly wage for each hospital from the FY 2004 and FY 2005 cost reporting periods, as well as the FY 2006 period used to calculate the proposed FY 2010 wage index. The 3year averages are calculated by dividing the sum of the dollars (adjusted to a common reporting period using the method described previously) across all 3 years, by the sum of the hours. If a hospital is missing data for any of the previous years, its average hourly wage for the 3-year period is calculated based on the data available during that period. The average hourly wages in Tables 2, 3A, and 3B in the Addendum to this proposed rule include the occupational mix adjustment. The proposed wage index values in Tables 4A, 4B, 4C, and 4D–1 also include the proposed Statespecific rural floor and imputed floor budget neutrality adjustments. I. Revisions to the Wage Index Based on Hospital Redesignations 1. General Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. Hospitals must apply to the MGCRB to reclassify 13 months prior to the start of the fiscal year for which reclassification is sought (generally by September 1). Generally, hospitals must be proximate to the labor market area to which they are seeking reclassification and must demonstrate characteristics similar to hospitals located in that area. The PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 MGCRB issues its decisions by the end of February for reclassifications that become effective for the following fiscal year (beginning October 1). The regulations applicable to reclassifications by the MGCRB are located in 42 CFR 412.230 through 412.280. Section 1886(d)(10)(D)(v) of the Act provides that, beginning with FY 2001, a MGCRB decision on a hospital reclassification for purposes of the wage index is effective for 3 fiscal years, unless the hospital elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of the Act provides that the MGCRB must use average hourly wage data from the 3 most recently published hospital wage surveys in evaluating a hospital’s reclassification application for FY 2003 and any succeeding fiscal year. Section 304(b) of Public Law 106–554 provides that the Secretary must establish a mechanism under which a statewide entity may apply to have all of the geographic areas in the State treated as a single geographic area for purposes of computing and applying a single wage index, for reclassifications beginning in FY 2003. The implementing regulations for this provision are located at 42 CFR 412.235. Section 1886(d)(8)(B) of the Act requires the Secretary to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the labor market area to which the greatest number of workers in the county commute, if the rural county would otherwise be considered part of an urban area under the standards for designating MSAs and if the commuting rates used in determining outlying counties were determined on the basis of the aggregate number of resident workers who commute to (and, if applicable under the standards, from) the central county or counties of all contiguous MSAs. In light of the CBSA definitions and the Census 2000 data that we implemented for FY 2005 (69 FR 49027), we undertook to identify those counties meeting these criteria. Eligible counties are discussed and identified under section III.I.5. of this preamble. 2. Effects of Reclassification/ Redesignation Section 1886(d)(8)(C) of the Act provides that the application of the wage index to redesignated hospitals is dependent on the hypothetical impact that the wage data from these hospitals would have on the wage index value for the area to which they have been redesignated. These requirements for determining the wage index values for E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules redesignated hospitals are applicable both to the hospitals deemed urban under section 1886(d)(8)(B) of the Act and hospitals that were reclassified as a result of the MGCRB decisions under section 1886(d)(10) of the Act. Therefore, as provided in section 1886(d)(8)(C) of the Act, the wage index values were determined by considering the following: • If including the wage data for the redesignated hospitals would reduce the wage index value for the area to which the hospitals are redesignated by 1 percentage point or less, the area wage index value determined exclusive of the wage data for the redesignated hospitals applies to the redesignated hospitals. • If including the wage data for the redesignated hospitals reduces the wage index value for the area to which the hospitals are redesignated by more than 1 percentage point, the area wage index determined inclusive of the wage data for the redesignated hospitals (the combined wage index value) applies to the redesignated hospitals. • If including the wage data for the redesignated hospitals increases the wage index value for the urban area to which the hospitals are redesignated, both the area and the redesignated hospitals receive the combined wage index value. Otherwise, the hospitals located in the urban area receive a wage index excluding the wage data of hospitals redesignated into the area. Rural areas whose wage index values would be reduced by excluding the wage data for hospitals that have been redesignated to another area continue to have their wage index values calculated as if no redesignation had occurred (otherwise, redesignated rural hospitals are excluded from the calculation of the rural wage index). The wage index value for a redesignated rural hospital cannot be reduced below the wage index value for the rural areas of the State in which the hospital is located. CMS also has adopted the following policies: • The wage data for a reclassified urban hospital is included in both the wage index calculation of the urban area to which the hospital is reclassified (subject to the rules described above) and the wage index calculation of the urban area where the hospital is physically located. • In cases where hospitals have reclassified to rural areas, such as urban hospitals reclassifying to rural areas under 42 CFR 412.103, the hospital’s wage data are: (a) Included in the rural wage index calculation, unless doing so would reduce the rural wage index; and (b) included in the urban area where the hospital is physically located. The effect VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 of this policy, in combination with the statutory requirement at section 1886(d)(8)(C)(ii) of the Act, is that rural areas may receive a wage index based upon the highest of: (1) Wage data from hospitals geographically located in the rural area; (2) wage data from hospitals geographically located in the rural area, but excluding all data associated with hospitals reclassifying out of the rural area under section 1886(d)(8)(B) or section 1886(d)(10) of the Act; or (3) wage data associated with hospitals geographically located in the area plus all hospitals reclassified into the rural area. In addition, in accordance with the statutory language referring to ‘‘hospitals’’ in the plural under sections 1886(d)(8)(C)(i) and 1886(d)(8)(C)(ii) of the Act, our longstanding policy is to consider reclassified hospitals as a group when deciding whether to include or exclude them from both urban and rural wage index calculations. 3. FY 2010 MGCRB Reclassifications Under section 1886(d)(10) of the Act, the MGCRB considers applications by hospitals for geographic reclassification for purposes of payment under the IPPS. The specific procedures and rules that apply to the geographic reclassification process are outlined in 42 CFR 412.230 through 412.280. At the time this proposed rule was constructed, the MGCRB had completed its review of FY 2010 reclassification requests. Based on such reviews, there were 292 hospitals approved for wage index reclassifications by the MGCRB for FY 2010. Because MGCRB wage index reclassifications are effective for 3 years, for FY 2010, hospitals reclassified during FY 2008 or FY 2009 are eligible to continue to be reclassified to a particular labor market area based on such prior reclassifications. There were 313 hospitals approved for wage index reclassifications in FY 2008 and 271 hospitals approved for wage index reclassifications in FY 2009. Of all of the hospitals approved for reclassification for FY 2008, FY 2009, and FY 2010, based upon the review at the time of the proposed rule, 876 hospitals are in a reclassification status for FY 2010. Under 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications within 45 days of the publication of a proposed rule. Generally stated, the request for withdrawal of an application for reclassification or termination of an existing 3-year reclassification that would be effective in FY 2010 must be PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 24149 received by the MGCRB within 45 days of the publication of the proposed rule. Hospitals may also cancel prior reclassification withdrawals or terminations in certain circumstances. For further information about withdrawing, terminating, or canceling a previous withdrawal or termination of a 3-year reclassification for wage index purposes, we refer the reader to 42 CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887) and the FY 2003 IPPS final rule (67 FR 50065). Changes to the wage index that result from withdrawals of requests for reclassification, wage index corrections, appeals, and the Administrator’s review process will be incorporated into the wage index values published in the FY 2010 IPPS final rule. These changes affect not only the wage index value for specific geographic areas, but also the wage index value redesignated hospitals receive; that is, whether they receive the wage index that includes the data for both the hospitals already in the area and the redesignated hospitals. Further, the wage index value for the area from which the hospitals are redesignated may be affected. Applications for FY 2011 reclassifications are due to the MGCRB by September 1, 2009 (the first working day of September 2009). We note that this is also the deadline for canceling a previous wage index reclassification withdrawal or termination under 42 CFR 412.273(d). Applications and other information about MGCRB reclassifications may be obtained, beginning in mid-July 2009, via the CMS Internet Web site at: https:// cms.hhs.gov/providers/prrb/ mgcinfo.asp, or by calling the MGCRB at (410) 786–1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244– 2670. 4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of the Act Section 1886(d)(8)(B) of the Act requires us to treat a hospital located in a rural county adjacent to one or more urban areas as being located in the MSA if certain criteria are met. Effective beginning FY 2005, we use OMB’s 2000 CBSA standards and the Census 2000 data to identify counties in which hospitals qualify under section 1886(d)(8)(B) of the Act to receive the wage index of the urban area. Hospitals located in these counties have been known as ‘‘Lugar’’ hospitals and the counties themselves are often referred to as ‘‘Lugar’’ counties. We provide the FY 2010 chart below with the listing of the rural counties containing the hospitals designated as urban under section E:\FR\FM\22MYP2.SGM 22MYP2 24150 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 1886(d)(8)(B) of the Act. For discharges occurring on or after October 1, 2009, hospitals located in the rural county in the first column of this chart will be redesignated for purposes of using the wage index of the urban area listed in the second column. RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(D)(8)(B) OF THE ACT [Based on CBSAs and Census 2000 Data] Rural County CBSA Cherokee, AL ............ Macon, AL ................. Talladega, AL ............ Hot Springs, AR ........ Windham, CT ............ Rome, GA. Auburn-Opelika, AL. Anniston-Oxford, AL. Hot Springs, AR. Hartford-West Hartford-East Hartford, CT. Gainesville, FL. West Palm BeachBoca Raton-Boynton, FL. Gainesville, FL. Fort Walton BeachCrestview-Destin, FL. Gainesville, GA. Chattanooga, TN-GA. Atlanta-Sandy Springs-Marietta, GA. Atlanta-Sandy Springs-Marietta, GA. Atlanta-Sandy Springs-Marietta, GA. Macon, GA. Atlanta-Sandy Springs-Marietta, GA. Columbus, GA-AL. Idaho Falls, ID. Springfield, IL. Bloomington-Normal, IL. Kankakee-Bradley, IL. Springfield, IL. Peoria, IL. Rockford, IL. Lafayette, IN. Indianapolis-Carmel, IN. Evansville, IN-KY. Gary, IN. Lafayette, IN. Ames, IA. Waterloo-Cedar Falls, IA. Iowa City, IA. Bowling Green, KY. Baton Rouge, LA. Bradford, FL .............. Hendry, FL ................ Levy, FL .................... Walton, FL ................. Banks, GA ................. Chattooga, GA .......... Jackson, GA .............. Lumpkin, GA ............. Morgan, GA ............... Peach, GA ................. Polk, GA .................... Talbot, GA ................. Bingham, ID .............. Christian, IL ............... DeWitt, IL .................. Iroquois, IL ................ Logan, IL ................... Mason, IL .................. Ogle, IL ..................... Clinton, IN ................. Henry, IN ................... sroberts on PROD1PC70 with FRONTMATTER Spencer, IN ............... Starke, IN .................. Warren, IN ................. Boone, IA .................. Buchanan, IA ............ Cedar, IA ................... Allen, KY ................... Assumption Parish, LA. St. James Parish, LA Allegan, MI ................ Montcalm, MI ............ VerDate Nov<24>2008 Baton Rouge, LA. Holland-Grand Haven, MI. Grand Rapids-Wyoming, MI. 08:10 May 21, 2009 Jkt 217001 RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(D)(8)(B) OF THE ACT—Continued RURAL COUNTIES CONTAINING HOSPITALS REDESIGNATED AS URBAN UNDER SECTION 1886(D)(8)(B) OF THE ACT—Continued [Based on CBSAs and Census 2000 Data] [Based on CBSAs and Census 2000 Data] Rural County CBSA Rural County CBSA Oceana, MI ............... Muskegon-Norton Shores, MI. Lansing-East Lansing, MI. Saginaw-Saginaw Township North, MI. Rochester, MN. Springfield, MO. Gulfport-Biloxi, MS. Burlington, NC. Greensboro-High Point, NC. Durham, NC. Raleigh-Cary, NC. Charlotte-GastoniaConcord, NC-SC. Spartanburg, SC. Santa Fe, NM. Carson City, NV. Syracuse, NY. Albany-SchenectadyTroy, NY. Rochester, NY. Albany-SchenectadyTroy, NY. Ithaca, NY. Poughkeepsie-Newburgh-Middletown, NY. Buffalo-Niagara Falls, NY. Cleveland-Elyria-Mentor, OH. Springfield, OH. Youngstown-WarrenBoardman, OH-PA. Lawton, OK. Corvallis, OR. York-Hanover, PA. Williamsport, PA. Pittsburgh, PA. Allentown-BethlehemEaston, PA-NJ. Reading, PA. Binghamton, NY. Sumter, SC. Sumter, SC. Greenville, SC. Spartanburg, SC. Cleveland, TN. Waco, TX. Waco, TX. Dallas-Plano-Irving, TX. College StationBryan, TX. Longview, TX. Dallas-Plano-Irving, TX. Austin-Round Rock, TX. Dallas-Plano-Irving, TX. Brownsville-Harlingen, TX. Charlottesville, VA. Floyd, VA .................. BlacksburgChristiansburgRadford, VA. Virginia Beach-Norfolk-Newport News, VA. Harrisonburg, VA. Winchester, VA-WV. Seattle-BellevueEverett, WA. Olympia, WA. Longview, WA. Charleston, WV. Charleston, WV. Madison, WI. Fond du Lac, WI. MilwaukeeWaukesha-West Allis, WI. MilwaukeeWaukesha-West Allis, WI. Shiawassee, MI ......... Tuscola, MI ............... Fillmore, MN .............. Dade, MO .................. Pearl River, MS ......... Caswell, NC .............. Davidson, NC ............ Granville, NC ............. Harnett, NC ............... Lincoln, NC ............... Polk, NC .................... Los Alamos, NM ....... Lyon, NV ................... Cayuga, NY ............... Columbia, NY ............ Genesee, NY ............ Greene, NY ............... Schuyler, NY ............. Sullivan, NY .............. Wyoming, NY ............ Ashtabula, OH ........... Champaign, OH ........ Columbiana, OH ....... Cotton, OK ................ Linn, OR .................... Adams, PA ................ Clinton, PA ................ Greene, PA ............... Monroe, PA ............... Schuylkill, PA ............ Susquehanna, PA ..... Clarendon, SC .......... Lee, SC ..................... Oconee, SC .............. Union, SC .................. Meigs, TN .................. Bosque, TX ............... Falls, TX .................... Fannin, TX ................ Grimes, TX ................ Harrison, TX .............. Henderson, TX .......... Milam, TX .................. Van Zandt, TX ........... Willacy, TX ................ Buckingham, VA ....... PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 Middlesex, VA ........... Page, VA ................... Shenandoah, VA ....... Island, WA ................. Mason, WA ............... Wahkiakum, WA ....... Jackson, WV ............. Roane, WV ................ Green, WI .................. Green Lake, WI ......... Jefferson, WI ............. Walworth, WI ............. As in the past, hospitals redesignated under section 1886(d)(8)(B) of the Act are also eligible to be reclassified to a different area by the MGCRB. Affected hospitals are permitted to compare the reclassified wage index for the labor market area in Table 4C in the Addendum to this proposed rule into which they have been reclassified by the MGCRB to the wage index for the area to which they are redesignated under section 1886(d)(8)(B) of the Act. Hospitals may withdraw from an MGCRB reclassification within 45 days of the publication of this proposed rule. 5. Reclassifications Under Section 1886(d)(8)(B) of the Act As discussed in the FY 2009 IPPS final rule (73 FR 48588), Lugar hospitals are treated like reclassified hospitals for purposes of determining their applicable wage index and receive the reclassified wage index for the urban area to which they have been redesignated. Because Lugar hospitals are treated like reclassified hospitals, when they are seeking reclassification by the MGCRB, they are subject to the rural reclassification rules set forth at 42 CFR 412.230. The procedural rules set forth at § 412.230 list the criteria that a hospital must meet in order to reclassify as a rural hospital. Lugar hospitals are subject to the proximity criteria and payment thresholds that apply to rural hospitals. Specifically, the hospital must be no more than 35 miles from the area to which it seeks reclassification E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules (§ 412.230(b)(1)); and the hospital must show that its average hourly wage is at least 106 percent of the average hourly wage of all other hospitals in the area in which the hospital is located (§ 412.230(d)(1)(iii)(C)). In accordance with policy adopted in the FY 2009 IPPS final rule (73 FR 48568 and 48569), beginning with reclassifications for the FY 2010 wage index, a Lugar hospital must also demonstrate that its average hourly wage is equal to at least 84 percent (for FY 2010 reclassifications) and 86 percent (for reclassifications for FY 2011 and subsequent fiscal years) of the average hourly wage of hospitals in the area to which it seeks redesignation (§ 412.230(d)(1)(iv)(C)). Hospitals not located in a Lugar county seeking reclassification to the urban area where the Lugar hospitals have been redesignated are not permitted to measure to the Lugar county to demonstrate proximity (no more than 15 miles for an urban hospital, and no more than 35 miles for a rural hospital or the closest urban or rural area for RRCs or SCHs) in order to be reclassified to such urban area. These hospitals must measure to the urban area exclusive of the Lugar County to meet the proximity or nearest urban or rural area requirement. We treat New England deemed counties in a manner consistent with how we treat Lugar counties. (We refer readers to FY 2008 IPPS final rule with comment period (72 FR 47337) for a discussion of this policy.) sroberts on PROD1PC70 with FRONTMATTER 6. Reclassifications Under Section 508 of Public Law 108–173 Section 508 of Public Law 108–173 allowed certain qualifying hospitals to receive wage index reclassifications and assignments that they otherwise would not have been eligible to receive under the law. Although section 508 originally was scheduled to expire after a 3-year period, Congress extended the provision several times, as well as certain special exceptions that would have otherwise expired. For a discussion of the original section 508 provision and its various extensions, we refer readers to the FY 2009 IPPS final rule (73 FR 48443). The most recent extension of the provision was included in section 124 of Public Law 110–275 (MIPPA). Section 124 extended, through FY 2009, section 508 reclassifications as well as certain special exceptions. Because the latest extension of these provisions expires on September 30, 2009, and will not be applicable in FY 2010, in this proposed rule, we are not proposing to make any changes related to these provisions. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 J. Proposed FY 2010 Wage Index Adjustment Based on Commuting Patterns of Hospital Employees In accordance with the broad discretion under section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, beginning with FY 2005, we established a process to make adjustments to the hospital wage index based on commuting patterns of hospital employees (the ‘‘out-migration’’ adjustment). The process, outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county but work in a different county (or counties) with a higher wage index. Such adjustments to the wage index are effective for 3 years, unless a hospital requests to waive the application of the adjustment. A county will not lose its status as a qualifying county due to wage index changes during the 3-year period, and counties will receive the same wage index increase for those 3 years. However, a county that qualifies in any given year may no longer qualify after the 3-year period, or it may qualify but receive a different adjustment to the wage index level. Hospitals that receive this adjustment to their wage index are not eligible for reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. Adjustments under this provision are not subject to the budget neutrality requirements under section 1886(d)(3)(E) of the Act. Hospitals located in counties that qualify for the wage index adjustment are to receive an increase in the wage index that is equal to the average of the differences between the wage indices of the labor market area(s) with higher wage indices and the wage index of the resident county, weighted by the overall percentage of hospital workers residing in the qualifying county who are employed in any labor market area with a higher wage index. Beginning with the FY 2008 wage index, we use postreclassified wage indices when determining the out-migration adjustment (72 FR 47339). For the FY 2010 wage index, we are proposing to calculate the out-migration adjustment using the same formula described in the FY 2005 IPPS final rule (69 FR 49064), with the addition of using the post-reclassified wage indices, to calculate the out-migration adjustment. This adjustment is calculated as follows: Step 1—Subtract the wage index for the qualifying county from the wage PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 24151 index of each of the higher wage area(s) to which hospital workers commute. Step 2—Divide the number of hospital employees residing in the qualifying county who are employed in such higher wage index area by the total number of hospital employees residing in the qualifying county who are employed in any higher wage index area. For each of the higher wage index areas, multiply this result by the result obtained in Step 1. Step 3—Sum the products resulting from Step 2 (if the qualifying county has workers commuting to more than one higher wage index area). Step 4—Multiply the result from Step 3 by the percentage of hospital employees who are residing in the qualifying county and who are employed in any higher wage index area. These adjustments will be effective for each county for a period of 3 fiscal years. For example, hospitals that received the adjustment for the first time in FY 2009 will be eligible to retain the adjustment for FY 2010. For hospitals in newly qualified counties, adjustments to the wage index are effective for 3 years, beginning with discharges occurring on or after October 1, 2009. Hospitals receiving the wage index adjustment under section 1886(d)(13)(F) of the Act are not eligible for reclassification under sections 1886(d)(8) or (d)(10) of the Act unless they waive the out-migration adjustment. Consistent with our FY 2005, 2006, 2007, 2008, and 2009 IPPS final rules, we are specifying that hospitals redesignated under section 1886(d)(8) of the Act or reclassified under section 1886(d)(10) of the Act will be deemed to have chosen to retain their redesignation or reclassification. Section 1886(d)(10) hospitals that wish to receive the out-migration adjustment, rather than their reclassification adjustment, should follow the termination/withdrawal procedures specified in 42 CFR 412.273 and section III.I.3. of the preamble of this proposed rule. Otherwise, they will be deemed to have waived the out-migration adjustment. Hospitals redesignated under section 1886(d)(8) of the Act will be deemed to have waived the outmigration adjustment unless they explicitly notify CMS within 45 days from the publication of this proposed rule that they elect to receive the outmigration adjustment instead. These notifications should be sent to the following address: Centers for Medicare and Medicaid Services, Center for Medicare Management, Attention: Wage Index Adjustment Waivers, Division of E:\FR\FM\22MYP2.SGM 22MYP2 24152 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER Acute Care, room C4–08–06, 7500 Security Boulevard, Baltimore, MD 21244–1850. Table 4J in the Addendum to this proposed rule lists the proposed outmigration wage index adjustments for FY 2010. Hospitals that are not otherwise reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act will automatically receive the listed adjustment. In accordance with the procedures discussed above, redesignated/reclassified hospitals will be deemed to have waived the outmigration adjustment unless CMS is otherwise notified within the necessary timeframe. In addition, hospitals eligible to receive the out-migration wage index adjustment and that withdraw their application for reclassification would automatically receive the wage index adjustment listed in the final Table 4J in the Addendum to this proposed rule. K. Process for Requests for Wage Index Data Corrections The preliminary, unaudited Worksheet S–3 wage data and occupational mix survey data files for the FY 2010 wage index were made available on October 6, 2008, through the Internet on the CMS Web site at: https://www.cms.hhs.gov/ AcuteInpatientPPS/WIFN/ list.asp#TopOfPage. In the interest of meeting the data needs of the public, beginning with the proposed FY 2009 wage index, we post an additional public use file on our Web site that reflects the actual data that are used in computing the proposed wage index. The release of this new file does not alter the current wage index process or schedule. We notified the hospital community of the availability of these data as we do with the current public use wage data files through our Hospital Open Door forum. We encourage hospitals to sign up for automatic notifications of information about hospital issues and the scheduling of the Hospital Open Door forums at: https://www.cms.hhs.gov/ OpenDoorForums/. In a memorandum dated October 6, 2008, we instructed all fiscal intermediaries/MACs to inform the IPPS hospitals they service of the availability of the wage index data files and the process and timeframe for requesting revisions (including the specific deadlines listed below). We also instructed the fiscal intermediaries/ MACs to advise hospitals that these data were also made available directly through their representative hospital organizations. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 If a hospital wished to request a change to its data as shown in the October 6, 2008 wage and occupational mix data files, the hospital was to submit corrections along with complete, detailed supporting documentation to its fiscal intermediary/MAC by December 8, 2008. Hospitals were notified of this deadline and of all other possible deadlines and requirements, including the requirement to review and verify their data as posted on the preliminary wage index data files on the Internet, through the October 6, 2008 memorandum referenced above. In the October 6, 2008 memorandum, we also specified that a hospital requesting revisions to its first and/or second quarter occupational mix survey data was to copy its record(s) from the CY 2007–2008 occupational mix preliminary files posted to our Web site in October, highlight the revised cells on its spreadsheet, and submit its spreadsheet(s) and complete documentation to its fiscal intermediary/MAC no later than December 8, 2008. The fiscal intermediaries/MACs notified the hospitals by mid-February 2009 of any changes to the wage index data as a result of the desk reviews and the resolution of the hospitals’ earlyDecember revision requests. The fiscal intermediaries/MACs also submitted the revised data to CMS by mid-February 2009. CMS published the proposed wage index public use files that included hospitals’ revised wage index data on February 23, 2009. In a memorandum also dated February 23, 2009, we instructed fiscal intermediaries/MACs to notify all hospitals regarding the availability of the proposed wage index public use files and the criteria and process for requesting corrections and revisions to the wage index data. Hospitals had until March 10, 2009, to submit requests to the fiscal intermediaries/MACs for reconsideration of adjustments made by the fiscal intermediaries/MACs as a result of the desk review, and to correct errors due to CMS’s or the fiscal intermediary’s (or, if applicable, the MAC’s) mishandling of the wage index data. Hospitals also were required to submit sufficient documentation to support their requests. After reviewing requested changes submitted by hospitals, fiscal intermediaries/MACs are to transmit any additional revisions resulting from the hospitals’ reconsideration requests by April 15, 2009. The deadline for a hospital to request CMS intervention in cases where the hospital disagrees with the fiscal intermediary’s (or, if PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 applicable, the MAC’s) policy interpretations is April 15, 2009. Hospitals should also examine Table 2 in the Addendum to this proposed rule. Table 2 in the Addendum to this proposed rule contains each hospital’s adjusted average hourly wage used to construct the wage index values for the past 3 years, including the FY 2006 data used to construct the proposed FY 2010 wage index. We noted that the hospital average hourly wages shown in Table 2 only reflect changes made to a hospital’s data and transmitted to CMS by March 2, 2009. We will release the final wage index data public use files in early May 2009 on the Internet at https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. The May 2009 public use files will be made available solely for the limited purpose of identifying any potential errors made by CMS or the fiscal intermediary/MAC in the entry of the final wage index data that resulted from the correction process described above (revisions submitted to CMS by the fiscal intermediaries/MACs by April 15, 2009). If, after reviewing the May 2009 final files, a hospital believes that its wage or occupational mix data are incorrect due to a fiscal intermediary/MAC or CMS error in the entry or tabulation of the final data, the hospital should send a letter to both its fiscal intermediary/MAC and CMS that outlines why the hospital believes an error existed and to provide all supporting information, including relevant dates (for example, when it first became aware of the error). CMS and the fiscal intermediaries (or, if applicable, the MACs) must receive these requests no later than June 8, 2009. Each request also must be sent to the fiscal intermediary/MAC. The fiscal intermediary/MAC will review requests upon receipt and contact CMS immediately to discuss any findings. At this point in the process, that is, after the release of the May 2009 wage index data files, changes to the wage and occupational mix data will only be made in those very limited situations involving an error by the fiscal intermediary/MAC or CMS that the hospital could not have known about before its review of the final wage index data files. Specifically, neither the fiscal intermediary/MAC nor CMS will approve the following types of requests: • Requests for wage index data corrections that were submitted too late to be included in the data transmitted to CMS by fiscal intermediaries or the MACs on or before April 15, 2009. • Requests for correction of errors that were not, but could have been, identified during the hospital’s review E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules of the February 23, 2009 wage index public use files. • Requests to revisit factual determinations or policy interpretations made by the fiscal intermediary or the MAC or CMS during the wage index data correction process. Verified corrections to the wage index data received timely by CMS and the fiscal intermediaries or the MACs (that is, by June 8, 2009) will be incorporated into the final wage index in the FY 2010 IPPS final rule, which will be effective October 1, 2009. We created the processes described above to resolve all substantive wage index data correction disputes before we finalize the wage and occupational mix data for the FY 2010 payment rates. Accordingly, hospitals that did not meet the procedural deadlines set forth above will not be afforded a later opportunity to submit wage index data corrections or to dispute the fiscal intermediary’s (or, if applicable the MAC’s) decision with respect to requested changes. Specifically, our policy is that hospitals that do not meet the procedural deadlines set forth above will not be permitted to challenge later, before the Provider Reimbursement Review Board, the failure of CMS to make a requested data revision. (See W. A. Foote Memorial Hospital v. Shalala, No. 99– CV–75202–DT (E.D. Mich. 2001) and Palisades General Hospital v. Thompson, No. 99–1230 (D.D.C. 2003).) We refer readers also to the FY 2000 final rule (64 FR 41513) for a discussion of the parameters for appealing to the PRRB for wage index data corrections. Again, we believe the wage index data correction process described above provides hospitals with sufficient opportunity to bring errors in their wage and occupational mix data to the fiscal intermediary’s (or, if applicable, the MAC’s) attention. Moreover, because hospitals will have access to the final wage index data by early May 2009, they have the opportunity to detect any data entry or tabulation errors made by the fiscal intermediary or the MAC or CMS before the development and publication of the final FY 2010 wage index by August 1, 2009, and the implementation of the FY 2010 wage index on October 1, 2009. If hospitals availed themselves of the opportunities afforded to provide and make corrections to the wage and occupational mix data, the wage index implemented on October 1 should be accurate. Nevertheless, in the event that errors are identified by hospitals and brought to our attention after June 8, 2009, we retain the right to make midyear changes to the wage index under very limited circumstances. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Specifically, in accordance with 42 CFR 412.64(k)(1) of our existing regulations, we make midyear corrections to the wage index for an area only if a hospital can show that: (1) The fiscal intermediary or the MAC or CMS made an error in tabulating its data; and (2) the requesting hospital could not have known about the error or did not have an opportunity to correct the error, before the beginning of the fiscal year. For purposes of this provision, ‘‘before the beginning of the fiscal year’’ means by the June 8 deadline for making corrections to the wage data for the following fiscal year’s wage index. This provision is not available to a hospital seeking to revise another hospital’s data that may be affecting the requesting hospital’s wage index for the labor market area. As indicated earlier, because CMS makes the wage index data available to hospitals on the CMS Web site prior to publishing both the proposed and final IPPS rules, and the fiscal intermediaries or the MAC notify hospitals directly of any wage index data changes after completing their desk reviews, we do not expect that midyear corrections will be necessary. However, under our current policy, if the correction of a data error changes the wage index value for an area, the revised wage index value will be effective prospectively from the date the correction is made. In the FY 2006 IPPS final rule (70 FR 47385), we revised 42 CFR 412.64(k)(2) to specify that, effective on October 1, 2005, that is, beginning with the FY 2006 wage index, a change to the wage index can be made retroactive to the beginning of the Federal fiscal year only when: (1) The fiscal intermediary (or, if applicable, the MAC) or CMS made an error in tabulating data used for the wage index calculation; (2) the hospital knew about the error and requested that the fiscal intermediary (or if applicable the MAC) and CMS correct the error using the established process and within the established schedule for requesting corrections to the wage index data, before the beginning of the fiscal year for the applicable IPPS update (that is, by the June 8, 2009 deadline for the FY 2010 wage index); and (3) CMS agreed that the fiscal intermediary (or if applicable, the MAC) or CMS made an error in tabulating the hospital’s wage index data and the wage index should be corrected. In those circumstances where a hospital requested a correction to its wage index data before CMS calculates the final wage index (that is, by the June 8, 2009 deadline), and CMS acknowledges that the error in the hospital’s wage index data was caused PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 24153 by CMS’ or the fiscal intermediary’s (or, if applicable, the MAC’s) mishandling of the data, we believe that the hospital should not be penalized by our delay in publishing or implementing the correction. As with our current policy, we indicated that the provision is not available to a hospital seeking to revise another hospital’s data. In addition, the provision cannot be used to correct prior years’ wage index data; and it can only be used for the current Federal fiscal year. In other situations where our policies would allow midyear corrections, we continue to believe that it is appropriate to make prospectiveonly corrections to the wage index. We note that, as with prospective changes to the wage index, the final retroactive correction will be made irrespective of whether the change increases or decreases a hospital’s payment rate. In addition, we note that the policy of retroactive adjustment will still apply in those instances where a judicial decision reverses a CMS denial of a hospital’s wage index data revision request. IV. Proposed Rebasing and Revision of the Hospital Market Baskets for Acute Care Hospitals A. Background Effective for cost reporting periods beginning on or after July 1, 1979, we developed and adopted a hospital input price index (that is, the hospital market basket for operating costs). Although ‘‘market basket’’ technically describes the mix of goods and services used in providing hospital care, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies combined) derived from that market basket. Accordingly, the term ‘‘market basket’’ as used in this document refers to the hospital input price index. The percentage change in the market basket reflects the average change in the price of goods and services hospitals purchase in order to provide inpatient care. We first used the market basket to adjust hospital cost limits by an amount that reflected the average increase in the prices of the goods and services used to provide hospital inpatient care. This approach linked the increase in the cost limits to the efficient utilization of resources. Since the inception of the IPPS, the projected change in the hospital market basket has been the integral component of the update factor by which the prospective payment rates are updated every year. An explanation of the hospital market basket used to develop the prospective payment rates was E:\FR\FM\22MYP2.SGM 22MYP2 24154 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules published in the Federal Register on September 1, 1983 (48 FR 39764). We also refer readers to the FY 2006 IPPS final rule (70 FR 47387) in which we discussed the most recent previous rebasing of the hospital input price index. The hospital market basket is a fixedweight, Laspeyres-type price index that is constructed in three steps. A Laspeyres price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time are not measured. The index itself is constructed in three steps. First, a base period is selected (in this proposed rule, the base period is FY 2006) and total base period expenditures are estimated for a set of mutually exclusive and exhaustive spending categories based upon type of expenditure. Then the proportion of total operating costs that each category represents is determined. These proportions are called cost or expenditure weights. Second, each expenditure category is matched to an appropriate price or wage variable, referred to as a price proxy. In nearly every instance, these price proxies are price levels derived from publicly available statistical series that are published on a consistent schedule (preferably at least on a quarterly basis). Finally, the expenditure weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the expenditure weights multiplied by their price levels) for all cost categories yields the composite index level of the market basket in a given period. Repeating this step for other periods produces a series of market basket levels over time. Dividing an index level for a given period by an index level for an earlier period produces a rate of growth in the input price index over that timeframe. The market basket is described as a fixed-weight index because it represents the change in price over time of the same mix (quantity and intensity) of goods and services purchased 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. For example, shifting a traditionally inpatient type of care to an outpatient setting might affect the volume of inpatient goods and services purchased by the hospital, but would not be factored into the price change measured by a fixed-weight hospital market basket. 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 the cost weights reflect recent changes in the mix of goods and services that hospitals purchase (hospital inputs) to furnish inpatient care between base periods. We last rebased the hospital market basket cost weights effective for FY 2006 (70 FR 47387), with FY 2002 data used as the base period for the construction of the market basket cost weights. We are inviting public comments on our proposed methodological changes to both the IPPS operating market basket and the capital input price index (CIPI). We note that this section addresses only the rebasing and revision of the IPPS market basket and CIPI for acute care hospitals and for children’s and cancer hospitals and RNHCIs, which are excluded from the IPPS. We address the proposed market basket that would be applicable to LTCHs in section VIII.C.2. of the preamble of this proposed rule. Separate documents will address the market basket for other hospitals that are excluded from the IPPS. B. Rebasing and Revising the IPPS Market Basket 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, in this proposed rule, we are shifting the base year cost structure for the IPPS hospital index from FY 2002 to FY 2006). ‘‘Revising’’ means changing data sources, or price proxies, used in the input price index. As published in the FY 2006 IPPS final rule (70 FR 47387), in accordance with section 404 of Public Law 108–173, CMS determined a new frequency for rebasing the hospital market basket. We established a rebasing frequency of every 4 years and, therefore, for the FY 2010 IPPS update, we are proposing to rebase and revise the IPPS market basket and the CIPI. 1. Development of Cost Categories and Weights a. Medicare Cost Reports The major source of expenditure data for developing the rebased and revised hospital market basket cost weights is the FY 2006 Medicare cost reports. As was done in previous rebasings, these cost reports are from IPPS hospitals only (hospitals excluded from the IPPS and CAHs are not included) and are based on IPPS Medicare-allowable operating costs. IPPS Medicare-allowable operating costs are costs that are eligible to be paid for under the IPPS. For example, the IPPS market basket excludes home health agency (HHA) costs as these costs would be paid under the HHA PPS and, therefore, these costs are not IPPS Medicare-allowable costs. The IPPS cost reports yield seven major expenditure or cost categories— the same as in the FY 2002-based hospital market basket: Wages and salaries, employee benefits, contract labor, pharmaceuticals, professional liability insurance (malpractice), blood and blood products, and a residual ‘‘all other.’’ The cost weights that were obtained directly from the Medicare cost reports are reported in Chart 1. These Medicare cost report cost weights are then supplemented with information obtained from other data sources to derive the proposed IPPS market basket cost weights. CHART 1.—MAJOR COST CATEGORIES AND THEIR RESPECTIVE COST WEIGHTS FOUND IN THE MEDICARE COST REPORTS FY 2002-based market basket sroberts on PROD1PC70 with FRONTMATTER Major cost categories Wages and salaries ......................................................................................................................................... Employee benefits ........................................................................................................................................... Contract labor .................................................................................................................................................. Professional liability insurance (malpractice) .................................................................................................. Pharmaceuticals .............................................................................................................................................. Blood and blood products ................................................................................................................................ All other ............................................................................................................................................................ VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 45.590 11.189 3.214 1.589 5.855 1.082 31.481 22MYP2 Proposed 2006based market basket 45.156 11.873 2.598 1.661 5.380 1.078 32.254 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules b. Other Data Sources In addition to the Medicare cost reports, the other data source we used to develop the IPPS market basket cost weights was the Benchmark InputOutput (I–O) Tables created by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce. The BEA Benchmark I–O data are scheduled for publication every 5 years. The most recent data available are for 2002. BEA also produces Annual I-O estimates; however, the 2002 Benchmark I–O data represent a much more comprehensive and complete set of data that are derived from the 2002 Economic Census. The Annual I–O is simply an update of the Benchmark I–O tables. For the FY 2006 market basket rebasing, we used the 1997 Benchmark I–O data. We are proposing to use the 2002 Benchmark I– O data in the FY 2006-based IPPS market basket, to be effective for FY 2010. Instead of using the less detailed, less accurate Annual I–O data, we aged the 2002 Benchmark I–O data forward to FY 2006. The methodology we used to age the data forward involves applying the annual price changes from the respective price proxies to the appropriate cost categories. We repeat this practice for each year. The ‘‘all other’’ cost category obtained directly from the Medicare cost reports is divided into other hospital expenditure category shares using the 2002 Benchmark I-O data. Therefore, the ‘‘all other’’ cost category expenditure shares are proportional to their relationship to ‘‘all other’’ totals in the 2002 Benchmark I–O data. For instance, if the cost for telephone services was to represent 10 percent of the sum of the ‘‘all other’’ Benchmark I–O (see below) hospital expenditures, then telephone services would represent 10 percent of the IPPS market basket’s ‘‘all other’’ cost category. Following publication of this FY 2010 IPPS proposed rule, and in an effort to provide greater transparency, we will be posting on the CMS market basket Web page at https:// www.cms.hhs.gov/ MedicareProgramRatesStats/ 05_MarketBasket Research.asp#TopOfPage an illustrative spreadsheet that shows how the detailed cost weights (that is, those not calculated using Medicare cost reports) are determined using the 2002 Benchmark I-O data. 2. Final Cost Category Computation As stated previously, for this rebasing we used the Medicare cost reports to derive seven major cost categories. The VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 proposed FY 2006-based IPPS market basket includes three additional cost categories that were not broken out separately in the FY 2002-based IPPS market basket. The first is lifted directly from the Medicare cost reports: Blood and blood products. The remaining two are derived using the Benchmark I–O data: Administrative and business support services and financial services. We are proposing to break out the latter two categories so we can better match their respective expenses with price proxies. A thorough discussion of our rationale for each of these cost categories is provided in the section IV.B.3. of this proposed rule. Also, the proposed FY 2006-based IPPS market basket excludes one cost category: Photo supplies. The 2002 Benchmark I–O weight for this category is considerably smaller than the 1997 Benchmark I–O weight, presently accounting for less than one-tenth of one percentage point of the IPPS market basket. Therefore, we are proposing to include the photo supplies costs in the chemical cost category weight with other similar chemical products. We are not proposing to change our definition of the labor-related share. However, we are proposing to rename our aggregate cost categories from ‘‘labor-intensive’’ and ‘‘non-laborintensive’’ services to ‘‘labor-related’’ and ‘‘nonlabor-related’’ services. As discussed in more detail below and similar to the previous rebasing, we classify a cost category as labor-related and include it in the labor-related share if the cost category is defined as being labor-intensive and its cost varies with the local labor market. In previous regulations, we grouped cost categories that met both of these criteria into laborintensive services. We believe the proposed new labels more accurately reflect the concepts that they are intended to convey. We are not proposing to change to our definition of the labor-related share because we continue to classify a cost category as labor-related if the costs are laborintensive and vary with the local labor market. 3. Selection of Price Proxies After computing the FY 2006 cost weights for the proposed rebased hospital market basket, it was necessary to select appropriate wage and price proxies to reflect the rate of price change for each expenditure category. With the exception of the proxy for professional liability, all the proxies are based on Bureau of Labor Statistics PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 24155 (BLS) data and are grouped into one of the following BLS categories: • Producer Price Indexes—Producer Price Indexes (PPIs) measure price changes for goods sold in markets other than the retail market. PPIs are preferable price proxies for goods and services that hospitals purchase as inputs because these PPIs better reflect the actual price changes faced by hospitals. For example, we use a special PPI for prescription drugs, rather than the Consumer Price Index (CPI) for prescription drugs, because hospitals generally purchase drugs directly from a wholesaler. The PPIs that we use measure price changes at the final stage of production. • Consumer Price Indexes— Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by the typical consumer. Because they may not represent the price faced by a producer, we used CPIs only if an appropriate PPI was not available, or if the expenditures were more similar to those faced by retail consumers in general rather than by purchasers of goods at the wholesale level. For example, the CPI for food purchased away from home is used as a proxy for contracted food services. • Employment Cost Indexes— Employment Cost Indexes (ECIs) measure the rate of change in employee wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes and strictly measure the change in wage rates and employee benefits per hour. Appropriately, they are not affected by shifts in employment mix. 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 CPIs, PPIs, and ECIs selected meet these criteria. Chart 2 sets forth the proposed FY 2006-based IPPS market basket including cost categories, weights, and price proxies. For comparison purposes, the corresponding FY 2002-based IPPS market basket is listed as well. A summary outlining the choice of the various proxies follows the chart. E:\FR\FM\22MYP2.SGM 22MYP2 24156 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules CHART 2.—PROPOSED FY 2006-BASED IPPS HOSPITAL MARKET BASKET COST CATEGORIES, WEIGHTS, AND PRICE PROXIES WITH FY 2002-BASED IPPS MARKET BASKET INCLUDED FOR COMPARISON FY 2002based hospital market basket cost weights Cost categories Proposed rebased FY 2006-based hospital market basket cost weights 1. Compensation .......................................................... A. Wages and Salaries (1) .................................... 59.993 48.171 59.627 47.213 B. Employee Benefits (1) ...................................... 2. Utilities ...................................................................... A. Fuel, Oil, and Gasoline ..................................... B. Electricity ........................................................... C. Water and Sewage ........................................... 3. Professional Liability Insurance ................................ 4. All Other ................................................................... A. All Other Products ............................................ (1) Pharmaceuticals .............................................. (2) Food: Direct Purchases ................................... (3) Food: Contract Services .................................. (4) Chemicals (2) ................................................... (5) Blood and Blood Products (3) ......................... (6) Medical Instruments ......................................... (7) Photographic Supplies ..................................... (8) Rubber and Plastics ........................................ (9) Paper and Printing Products ........................... (10) Apparel ........................................................... (11) Machinery and Equipment ............................. (12) Miscellaneous Products (3) ........................... B. Labor-related Services ...................................... (1) Professional Fees: Labor-related (4) ............... 11.822 1.251 0.206 0.669 0.376 1.589 37.167 20.336 5.855 1.664 1.180 2.096 ........................ 1.932 0.183 2.004 1.905 0.394 0.565 2.558 9.738 5.510 12.414 2.180 0.418 1.645 0.117 1.661 36.533 19.473 5.380 3.982 0.575 1.538 1.078 2.762 ........................ 1.659 1.492 0.325 0.163 0.519 7.435 3.616 (2) Administrative and Business Support Services (5). (3) All Other: Labor-Related Services (5) ............. n/a 0.626 4.228 3.193 C. Nonlabor-Related Services ............................... (1) Professional Fees: Nonlabor-Related (4) ........ 7.093 n/a 9.625 5.814 (2) (3) (4) (5) Financial Services (6) ...................................... Telephone Services ......................................... Postage ............................................................ All Other: Nonlabor-Related Services (6) ........ n/a 0.458 1.300 5.335 1.281 0.627 0.963 0.940 Total ............................................................... 100.000 Proposed rebased FY 2006-based hospital market basket price proxies 100.000 ECI for Wages and Salaries, Civilian Hospital Workers. ECI for Benefits, Civilian Hospital Workers. PPI for Petroleum Refineries. PPI for Commercial Electric Power. CPI–U for Water & Sewerage Maintenance. CMS Professional Liability Insurance Premium Index. PPI for Pharmaceutical Preparations (Prescriptions). PPI for Processed Foods & Feeds. CPI–U for Food Away From Home. Blend of Chemical PPIs. PPI for Blood and Organ Banks. PPI for Medical, Surgical, and Personal Aid Devices. PPI PPI PPI PPI PPI for for for for for Rubber & Plastic Products. Converted Paper & Paperboard Products. Apparel. Machinery & Equipment. Finished Goods less Food and Energy. ECI for Compensation for Professional and Related Occupations. ECI for Compensation for Office and Administrative Services. ECI for Compensation for Private Service Occupations. ECI for Compensation for Professional and Related Occupations. ECI for Compensation for Financial Activities. CPI–U for Telephone Services. CPI–U for Postage. CPI–U for All Items less Food and Energy. sroberts on PROD1PC70 with FRONTMATTER Note: Detail may not add to total due to rounding. (1) Contract labor is distributed to wages and salaries and employee benefits based on the share of total compensation that each category represents. (2) To proxy the ‘‘chemicals’’ cost category, we are proposing to use a blended PPI composed of the PPI for industrial gases, the PPI for other basic inorganic chemical manufacturing, the PPI for other basic organic chemical manufacturing, and the PPI for soap and cleaning compound manufacturing. For more detail about this proxy, see section IV.B.3.j. of the preamble of this proposed rule. (3) The ‘‘blood and blood products’’ cost category was contained within ‘‘miscellaneous products’’ cost category in the FY 2002-based IPPS market basket. (4) The ‘‘professional fees: labor-related’’ and ‘‘professional fees: nonlabor-related’’ cost categories were included in one cost category called ‘‘professional fees’’ in the FY 2002-based IPPS market basket. For more detail about how these new categories were derived, we refer readers to sections IV.B.3.s. and v. of the preamble of this proposed rule, on the labor-related share. (5) The ‘‘administrative and business support services’’ cost category was contained within ‘‘all other: labor-intensive services’’ cost category in the FY 2002-based IPPS market basket. The ‘‘all other: labor-intensive services’’ cost category is renamed the ‘‘all other: labor-related services’’ cost category for the proposed FY 2006-based IPPS market basket. (6) The ‘‘financial services’’ cost category was contained within the ‘‘all other: non-labor intensive services’’ cost category in the FY 2002-based IPPS market basket. The ‘‘all other: nonlabor intensive services’’ cost category is renamed the ‘‘all other: nonlabor-related services’’ cost category for the proposed FY 2006-based IPPS market basket. a. Wages and Salaries We are proposing to use the ECI for wages and salaries for hospital workers (all civilian) (series code #CIU1026220000000I) to measure the price growth of this cost category. This VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 same proxy was used in the FY 2002based IPPS market basket. proxy was used in the FY 2002-based IPPS market basket. b. Employee Benefits c. Fuel, Oil, and Gasoline We are proposing to use the ECI for employee benefits for hospital workers (all civilian) to measure the price growth of this cost category. This same For the FY 2002-based market basket, this category only included expenses classified under North American Industry Classification System (NAICS) PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 21 (Mining). We proxied this category using the PPI for commercial natural gas (series code #WPU0552). For the proposed FY 2006-based market basket, we are proposing to add costs to this category that had previously been grouped in other categories. The added costs include petroleum-related expenses under NAICS 324110 (previously captured in the miscellaneous category), as well as petrochemical manufacturing classified under NAICS 325110 (previously captured in the chemicals category). These added costs represent 80 percent of the hospital industry’s fuel, oil, and gasoline expenses (or 80 percent of this category). Because the majority of the industry’s fuel, oil, and gasoline expenses originate from petroleum refineries (NAICS 324110), we are proposing to use the PPI for petroleum refineries (series code #PCU324110) as the proxy for this cost category. d. Electricity We are proposing to use the PPI for commercial electric power (series code #WPU0542). This same proxy was used in the FY 2002-based IPPS market basket. e. Water and Sewage We are proposing to use the CPI for water and sewerage maintenance (all urban consumers) (series code #CUUR0000SEHG01) to measure the price growth of this cost category. This same proxy was used in the FY 2002based IPPS market basket. f. Professional Liability Insurance We are proposing to proxy price changes in hospital professional liability insurance premiums (PLI) using percentage changes as estimated by the CMS Hospital Professional Liability Index. To generate these estimates, we collect commercial insurance premiums for a fixed level of coverage while holding nonprice factors constant (such as a change in the level of coverage). This method is also used to proxy PLI price changes in the Medicare Economic Index (68 FR 63244). This same proxy was used in the FY 2002-based IPPS market basket. sroberts on PROD1PC70 with FRONTMATTER g. Pharmaceuticals We are proposing to use the PPI for pharmaceutical preparations (prescription) (series code #PCU32541DRX) to measure the price growth of this cost category. This is a special index produced by BLS and is the same proxy used in the FY 2002based IPPS market basket. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 h. Food: Direct Purchases We are proposing to use the PPI for processed foods and feeds (series code #WPU02) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. i. Food: Contract Services We are proposing to use the CPI for food away from home (all urban consumers) (series code #CUUR0000SEFV) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. j. Chemicals We are proposing to use a blended PPI composed of the PPI for industrial gases (NAICS 325120), the PPI for other basic inorganic chemical manufacturing (NAICS 325180), the PPI for other basic organic chemical manufacturing (NAICS 325190), and the PPI for soap and cleaning compound manufacturing (NAICS 325610). Using the 2002 Benchmark I–O data, we found that these NAICS industries accounted for approximately 90 percent of the hospital industry’s chemical expenses. Therefore, we are proposing to use this blended index because we believe its composition better reflects the composition of the purchasing patterns of hospitals than does the PPI for industrial chemicals (series code #WPU061), the proxy used in the FY 2002-based IPPS market basket. Chart 3 below shows the weights for each of the four PPIs used to create the blended PPI, which we determined using the 2002 Benchmark I–O data. CHART 3—BLENDED CHEMICAL PPI WEIGHTS Weights (in percent) Name PPI for Industrial Gases ............ PPI for Other Basic Inorganic Chemical Manufacturing ............. PPI for Other Basic Organic Chemical Manufacturing PPI for Soap and Cleaning Compound Manufacturing 35 25 30 10 NAICS Frm 00079 Fmt 4701 Sfmt 4702 products category and used the PPI for finished goods less food and energy to proxy the price changes associated with these expenses. At the time of the rebasing of the FY 2002-based IPPS market basket, we noticed an apparent divergence between the PPI for blood and blood derivatives, the price proxy used in the FY 1997-based IPPS market basket, and blood costs faced by hospitals over the recent time period. A thorough discussion of this analysis is found in the FY 2006 IPPS final rule (70 FR 47390). Since the last rebasing of the market basket, BLS began collecting data and publishing an industry PPI for blood and organ banks (NAICS 621991). For the proposed FY 2006-based IPPS market basket, we are proposing to incorporate this series (series code #PCU621991) into the market basket and use it to proxy the blood and blood products cost category. l. Medical Instruments We are proposing to use the PPI for medical, surgical, and personal aid devices (series code #WPU156) to measure the price growth of this cost category. In the 1997 Benchmark I–O data, approximately half of the expenses classified in this category were for surgical and medical instruments. Thus, we used the PPI for surgical and medical instruments and equipment (series code #WPU1562) to proxy this category in the FY 2002-based IPPS market basket. The 2002 Benchmark I– O data show that this category now represents only 33 percent of these expenses and the largest expense category is surgical appliance and supplies manufacturing (corresponding to series code #WPU1563). Due to this reallocation of costs over time, we are proposing to change the price proxy for this cost category to the more aggregated PPI for medical, surgical, and personal aid devices. m. Photographic Supplies We are proposing to eliminate the cost category specific to photographic supplies for the proposed FY 2006325180 based IPPS market basket. These costs will now be included in the chemicals cost category because the costs are presently reported as all other chemical 325190 products. Notably, although we are eliminating the specific cost category, these costs will still be accounted for within the IPPS market basket. 325610 325120 k. Blood and Blood Products In the FY 2002-based IPPS market basket, we classified blood and blood products into the miscellaneous PO 00000 24157 n. Rubber and Plastics We are proposing to use the PPI for rubber and plastic products (series code #WPU07) to measure price growth of this cost category. This same proxy was E:\FR\FM\22MYP2.SGM 22MYP2 24158 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules used in the FY 2002-based IPPS market basket. o. Paper and Printing Products We are proposing to use the PPI for converted paper and paperboard products (series code #WPU0915) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. p. Apparel We are proposing to use the PPI for apparel (series code #WPU0381) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. q. Machinery and Equipment We are proposing to use the PPI for machinery and equipment (series code #WPU11) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. r. Miscellaneous Products We are proposing to use the PPI for finished goods less food and energy (series code #WPUSOP3500) to measure the price growth of this cost category. Using this index removes the doublecounting of food and energy prices, which are already captured elsewhere in the market basket. This same proxy was used in the FY 2002-based IPPS market basket. s. Professional Fees: Labor-Related We are proposing to use the ECI for compensation for professional and related occupations (private industry) (series code #CIS2020000120000I) to measure the price growth of this category. It includes occupations such as legal, accounting, and engineering services. This same proxy was used in the FY 2002-based IPPS market basket. t. Administrative and Business Support Services We are proposing to use the ECI for compensation for office and administrative support services (private industry) (series code #CIU2010000220000I) to measure the price growth of this category. Previously these costs were included in the ‘‘all other: Labor-intensive cost’’ category (now renamed the ‘‘all other: Laborrelated cost’’ category), and were proxied by the ECI for compensation for service occupations. We believe that this compensation index better reflects the changing price of labor associated with the provision of administrative services and its incorporation represents a technical improvement to the market basket. u. All Other: Labor-Related Services We are proposing to use the ECI for compensation for service occupations (private industry) (series code #CIU2010000300000I) to measure the price growth of this cost category. This same proxy was used in the FY 2002based IPPS market basket. v. Professional Fees: Nonlabor-Related We are proposing to use the ECI for compensation for professional and related occupations (private industry) (series code #CIS2020000120000I) to measure the price growth of this category. This is the same price proxy that we are proposing to use for the professional fees: Labor-related cost category. w. Financial Services We are proposing to use the ECI for compensation for financial activities (private industry) (series code #CIU201520A000000I) to measure the price growth of this cost category. Previously these costs were included in the ‘‘all other: Nonlabor-intensive cost’’ category (now renamed the ‘‘all other: nonlabor-related cost’’ category), and were proxied by the CPI for all items. We believe that this compensation index better reflects the changing price of labor associated with the provision of financial services and its incorporation represents a technical improvement to the market basket. x. Telephone Services We are proposing to use the CPI for telephone services (series code #CUUR0000SEED) to measure the price growth of this cost category. This same proxy was used in the FY 2002-based IPPS market basket. y. Postage We are proposing to use the CPI for postage (series code #CUUR0000SEEC01) to measure the price growth of this cost category. This same proxy was used in the FY 2002based IPPS market basket. z. All Other: Nonlabor-Related Services We are proposing to use the CPI for all items less food and energy (series code #CUUR0000SA0L1E) to measure the price growth of this cost category. Previously these costs were proxied by the CPI for all items in the FY 2002based IPPS market basket. We believe that using the CPI for all items less food and energy will remove any doublecounting of food and energy prices, which are already captured elsewhere in the market basket. Consequently, we believe that the incorporation of this proxy represents a technical improvement to the market basket. Chart 4 compares both the historical and forecasted percent changes in the FY 2002-based IPPS market basket and the proposed FY 2006-based IPPS market basket. CHART 4—FY 2002-BASED AND PROPOSED FY 2006-BASED PROSPECTIVE PAYMENT HOSPITAL OPERATING INDEX PERCENT CHANGE, FY 2004 THROUGH FY 2012 FY 2002-based IPPS market basket operating index percent change sroberts on PROD1PC70 with FRONTMATTER Fiscal year (FY) Historical data: FY 2004 ................................................................................................................................ FY 2005 ................................................................................................................................ FY 2006 ................................................................................................................................ FY 2007 ................................................................................................................................ FY 2008 ................................................................................................................................ Average FYs 2004–2008 ..................................................................................................... Forecast: FY 2009 ................................................................................................................................ FY 2010 ................................................................................................................................ FY 2011 ................................................................................................................................ FY 2012 ................................................................................................................................ VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM Proposed FY 2006based IPPS market basket operating index percent change 4.0 4.3 4.3 3.4 4.3 4.1 2.0 2.3 2.9 3.1 22MYP2 4.0 3.9 4.0 3.6 4.0 3.9 2.5 2.1 2.8 3.0 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24159 CHART 4—FY 2002-BASED AND PROPOSED FY 2006-BASED PROSPECTIVE PAYMENT HOSPITAL OPERATING INDEX PERCENT CHANGE, FY 2004 THROUGH FY 2012—Continued FY 2002-based IPPS market basket operating index percent change Fiscal year (FY) Average FYs 2009–2012 ..................................................................................................... 2.6 Proposed FY 2006based IPPS market basket operating index percent change 2.6 Source: IHS Global Insight, Inc.1st Quarter 2009, USMACRO/CONTROL0209@CISSIM/TL0505.SIM. sroberts on PROD1PC70 with FRONTMATTER The differences between the FY 2002based and the proposed FY 2006-based IPPS market basket increases are mostly stemming from the proposal to revise the proxy used for the chemicals cost category. As stated earlier, we are proposing to adopt a blended chemical index that is comprised of four industrybased chemical price proxies that represent approximately 90 percent of the hospital’s industry chemical expenses. The FY 2002-based IPPS market basket used the PPI for industrial chemicals. The PPI for industrial chemicals attributes more weight to direct petroleum expenses, which is not consistent with a hospital’s most recent purchasing pattern according to the 2002 Benchmark I–O data. The lower weight for direct petroleum expenses in the blended chemical index results in less volatile price movements. We believe the proposed blended index represents a technical improvement because it better reflects the purchasing patterns of hospitals. Also contributing to the differences between the FY 2002-based and the proposed FY 2006-based IPPS market basket increases is the larger weight associated with the professional fees category. In both market baskets, these expenditures are proxied by the ECI for compensation for professional and related services. The weight for professional fees in the FY 2002-based IPPS market basket is 5.5 percent compared to 9.4 percent in the proposed FY 2006-based IPPS market basket. 4. Labor-Related Share Under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are labor-related. ‘‘The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates * * * .’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ The labor-related share is used to determine the proportion of the national PPS base payment rate to which the area VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 wage index is applied. We continue to classify a cost category as labor-related if the costs are labor-intensive and vary with the local labor market. Given this, based on our definition of the laborrelated share, we are proposing to include in the labor-related share the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, the labor-related portion of professional fees, administrative and business support services, and all other: Labor-related services (previously referred to in the FY 2002-based IPPS market basket as labor-intensive). Consistent with previous rebasings, the ‘‘all other: Labor-related services’’ cost category is mostly comprised of building maintenance and security services (including, but not limited to, commercial and industrial machinery and equipment repair, nonresidential maintenance and repair, and investigation and security services). Because these services tend to be laborintensive and are mostly performed at the hospital facility (and, therefore, unlikely to be purchased in the national market), we believe that they meet our definition of labor-related services. For the rebasing of the FY 2002-based IPPS market basket in the FY 2006 IPPS final rule, we included in the laborrelated share the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, professional fees, and labor-intensive services (70 FR 47393). For the proposed FY 2006-based IPPS market basket rebasing, the proposed inclusion of the administrative and business support services cost category into the labor-related share remains consistent with the current labor-related share because this cost category was previously included in the laborintensive cost category. As previously stated, we are proposing to establish a separate administrative and business support service cost category so that we can use the ECI for compensation for office and administrative support services to more precisely proxy these specific expenses. PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 For the FY 2002-based IPPS market basket, we assumed that all nonmedical professional services (including accounting and auditing services, engineering services, legal services, and management and consulting services) were purchased in the local labor market and, therefore, all of their associated fees varied with the local labor market. As a result, we previously included 100 percent of these costs in the labor-related share. In an effort to more accurately determine the share of professional fees that should be included in the labor-related share, we surveyed hospitals regarding the proportion of those fees that go to companies that are located beyond their own local labor market (the results are discussed below). We continue to look for ways to refine our market basket approach to more accurately account for the proportion of costs influenced by the local labor market. To that end, we conducted a survey of hospitals to empirically determine the proportion of contracted professional services purchased by the industry that are attributable to local firms and the proportion that are purchased from national firms. We notified the public of our intent to conduct this survey on December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588). With approval from the OMB, we contacted the industry and received responses to our survey from 108 hospitals. Using data on FTEs to allocate responding hospitals across strata (region of the country and urban/rural status), we calculated poststratification weights. Based on these weighted results, we determined that hospitals purchase, on average, the following portions of contracted professional services outside of their local labor market: • 34 percent of accounting and auditing services; • 30 percent of engineering services; • 33 percent of legal services; and • 42 percent of management consulting services. We applied each of these percentages to its respective Benchmark I–O cost category underlying the professional E:\FR\FM\22MYP2.SGM 22MYP2 24160 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules fees cost category. This is the methodology that we used to separate the FY 2006-based IPPS market basket professional fees category into professional fees: Labor-related and professional fees: Nonlabor-related cost categories. In addition to the professional services listed above, we also classified expenses under NAICS 55, Management of Companies and Enterprises, into the professional fees cost category as was done in previous rebasings. The NAICS 55 data are mostly comprised of corporate, subsidiary, and regional managing offices, or otherwise referred to as home offices. Formerly, all of the expenses within this category were considered to vary with, or be influenced by, the local labor market and were thus included in the labor-related share. Because many hospitals are not located in the same geographic area as their home office, we analyzed data from a variety of sources in order to determine what proportion of these costs should be appropriately included in the labor-related share. Using data primarily from the Medicare cost reports and a CMS database of Home Office Medicare Records (HOMER) (a database that provides city and state information (addresses) for home offices), we were able to determine that 27 percent of hospitals that had home offices had those home offices located in their respective local labor markets—defined as being in the same MSA. The Medicare cost report requires hospitals to report their home office provider numbers. Using the HOMER database to determine the home office location for each home office provider number, we compared the location of the hospital with the location of the hospital’s home office. We then placed hospitals into one of the following three groups: • Group 1—Hospital and home office are located in different States; • Group 2—Hospital and home office are located in the same State and same city; and • Group 3—Hospital and home office are located in the same State and different city. We found that 54 percent of the hospitals with home offices were classified into Group 1 (that is, different State) and, thus, these hospitals were determined to not be located in the same local labor market as their home office. Although there were a very limited number of exceptions (that is, hospitals located in different States but the same MSA as their home office), the 54 percent estimate was unchanged. We found that 13 percent of all hospitals with home offices were classified into Group 2 (that is, same State and same city and, therefore, the same MSA). Consequently, these hospitals were determined to be located in the same local labor market as their home offices. We found that 33 percent of all hospitals with home offices were classified into Group 3 (that is, same State and different city). Using data from the Census Bureau to determine the specific MSA for both the hospital and its home office, we found that 14 percent of all hospitals with home offices were identified as being in the same State, a different city, but the same MSA. Pooling these results, we were able to determine that approximately 27 percent of hospitals with home offices had home offices located within their local labor market (that is, 13 percent of hospitals with home offices had their home offices in the same State and city (and, thus, the same MSA), and 14 percent of hospitals with home offices had their home offices in the same State, a different city, but the same MSA). We are proposing to apportion the NAICS 55 expense data by this percentage. Thus, we are proposing to classify 27 percent of these costs into the professional fees: labor-related cost category and the remaining 73 percent into the professional fees: nonlaborrelated cost category. Below is a chart comparing the proposed FY 2006-based and the FY 2002-based labor-related share. CHART 5—COMPARISON OF THE PROPOSED FY 2006-BASED LABOR-RELATED SHARE AND THE FY 2002-BASED LABORRELATED SHARES FY 2002–based market basket cost weights Proposed FY 2006based market basket cost weights 48.171 11.822 5.510 ........................................ 4.228 47.213 12.414 3.616 0.626 3.193 Total Labor-Related Share ............................................................................................... sroberts on PROD1PC70 with FRONTMATTER Wages and Salaries ................................................................................................................ Employee Benefits ................................................................................................................... Professional Fees: Labor-Related ........................................................................................... Administrative and Business Support Services ....................................................................... All Other: Labor-Related Services ........................................................................................... 69.731 67.062 Using the proposed cost category weights from the proposed FY 2006based IPPS market basket, we calculated a labor-related share of 67.062 percent, approximately 3 percentage points lower than the current labor-related share of 69.731. We continue to believe, as we have stated in the past, that these operating cost categories are related to, influenced by, or vary with the local markets. Therefore, our definition of the laborrelated share continues to be consistent with section 1886(d)(3) of the Act. Using the cost category weights that we determined in section IV.B.1. of this VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 preamble, we calculated a labor-related share of 67.062 percent, using the proposed FY 2006-based IPPS market basket. Accordingly, we are proposing to implement a labor-related share of 67.1 percent for discharges occurring on or after October 1, 2009. We note that section 403 of Public Law 108–173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ 62 percent as the labor-related share unless this employment ‘‘would result in lower payments than would otherwise be made.’’ PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 We also are proposing to update the labor-related share for Puerto Rico. Consistent with our methodology for determining the national labor-related share, we add the Puerto Rico-specific relative weights for wages and salaries, employee benefits, and contract labor. Because there are no Puerto Ricospecific relative weights for professional fees and labor intensive services, we use the national weights. Below is a chart comparing the proposed FY 2006-based Puerto Rico-specific labor-related share and the FY 2002-based Puerto Ricospecific labor-related share. E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24161 CHART 6—COMPARISON OF THE PROPOSED FY 2006-BASED PUERTO RICO-SPECIFIC LABOR-RELATED SHARE AND FY 2002-BASED PUERTO RICO-SPECIFIC LABOR-RELATED SHARE FY 2002-based market basket cost weights Proposed FY 2006based market basket cost weights Wages and Salaries ................................................................................................................ Benefits .................................................................................................................................... Professional Fees: Labor-Related ........................................................................................... Administrative and Business Support Services ....................................................................... All Other: Labor-Related Services ........................................................................................... 40.201 8.782 5.510 ........................................ 4.228 44.221 8.691 3.616 0.626 3.193 Total Labor-Related Share ............................................................................................... 58.721 60.347 represents the cost structure of children’s and cancer hospitals and RNHCIs. Therefore, we believe that the percentage change in the FY 2006-based IPPS operating market basket is the best available measure of the average increase in the prices of the goods and services purchased by cancer and children’s hospitals and RNHCIs in order to provide care. C. Separate Market Basket for Certain Hospitals Presently Excluded from the IPPS sroberts on PROD1PC70 with FRONTMATTER Using the proposed FY 2006-based Puerto Rico cost category weights, we calculated a labor-related share of 60.347 percent, approximately 2 percentage points higher than the current Puerto-Rico specific laborrelated share of 58.721. Accordingly, we are proposing to adopt an updated Puerto Rico labor-related share of 60.3 percent. D. Rebasing and Revising the Capital Input Price Index (CIPI) In the FY 2006 IPPS final rule (70 FR 47396), we adopted the use of the FY 2002-based IPPS operating market basket to update the target amounts for children’s and cancer hospitals and religious nonmedical health care institutions (RNHCIs). Children’s and cancer hospitals and RNHCIs are still reimbursed solely under the reasonable cost-based system, subject to the rate-ofincrease limits. Under these limits, an annual target amount (expressed in terms of the inpatient operating cost per discharge) is set for each hospital based on the hospital’s own historical cost experience trended forward by the applicable rate-of-increase percentages. Under the broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and 1871 of the Act and section 4454 of the BBA, consistent with our use of the IPPS operating market basket percentage increase to update target amounts, we are proposing to use the proposed FY 2006-based IPPS operating market basket percentage increase to update the target amounts for children’s and cancer hospitals and RNHCIs. Due to the small number of children’s and cancer hospitals and RNHCIs that receive, in total, less than 1 percent of all Medicare payments to hospitals and because these hospitals provide limited Medicare cost report data, we are unable to create a separate market basket specifically for these hospitals. Based on the limited data available, we believe that the proposed FY 2006-based IPPS operating market basket most closely VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 The CIPI was originally described in the FY 1993 IPPS final rule (57 FR 40016). There have been subsequent discussions of the CIPI presented in the IPPS proposed and final payment rules. The FY 2006 IPPS final rule (70 FR 47387) discussed the most recent rebasing and revision of the CIPI to a FY 2002 base year, which reflected the capital cost structure of the hospital industry in that year. We are proposing to rebase and revise the CIPI to a FY 2006 base year to reflect the more current structure of capital costs in hospitals. As with the FY 2002based index, we have developed two sets of weights in order to calculate the proposed FY 2006-based CIPI. The first set of weights identifies the proportion of hospital capital expenditures attributable to each expenditure category, while the second set of weights is a set of relative vintage weights for depreciation and interest. The set of vintage weights is used to identify the proportion of capital expenditures within a cost category that is attributable to each year over the useful life of the capital assets in that category. A more thorough discussion of vintage weights is provided later in this section. Both sets of weights are developed using the best data sources available. In reviewing source data, we determined that the Medicare cost reports provided accurate data for all capital expenditure cost categories. We used the FY 2006 Medicare cost reports for IPPS hospitals to determine weights for all three cost PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 categories: depreciation, interest, and other capital expenses. Lease expenses are unique in that they are not broken out as a separate cost category in the CIPI, but rather are proportionally distributed among the cost categories of depreciation, interest, and other, reflecting the assumption that the underlying cost structure of leases is similar to that of capital costs in general. As was done in previous rebasings of the CIPI, we first assumed 10 percent of lease expenses represents overhead and assigned them to the other capital expenses cost category accordingly. The remaining lease expenses were distributed across the three cost categories based on the respective weights of depreciation, interest, and other capital not including lease expenses. Depreciation contains two subcategories: (1) Building and fixed equipment; and (2) movable equipment. The apportionment between building and fixed equipment and movable equipment was determined using the Medicare cost reports. This methodology was also used to compute the apportionment used in the FY 2002based index. The total interest expense cost category is split between government/ nonprofit interest and for-profit interest. The FY 2002-based CIPI allocated 75 percent of the total interest cost weight to government/nonprofit interest and proxied that category by the average yield on domestic municipal bonds. The remaining 25 percent of the interest cost weight was allocated to for-profit interest and was proxied by the average yield on Moody’s Aaa bonds (70 FR 47387). For this rebasing, we derived the split using the relative FY 2006 Medicare cost report data on interest expenses for government/nonprofit and for-profit hospitals. Based on these data, we calculated an 85/15 split between government/nonprofit and for-profit interest. We believe it is important that E:\FR\FM\22MYP2.SGM 22MYP2 24162 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules this split reflects the latest relative cost structure of interest expenses. Chart 7 presents a comparison of the proposed FY 2006-based CIPI cost weights and the FY 2002-based CIPI cost weights. CHART 7—PROPOSED FY 2006-BASED CIPI COST CATEGORIES, WEIGHTS, AND PRICE PROXIES WITH FY 2002-BASED CIPI INCLUDED FOR COMPARISON FY 2002 weights Cost categories Proposed FY 2006 weights 100.00 74.583 36.234 100.00 75.154 35.789 Movable equipment depreciation ...................................... 38.349 39.365 Total interest ..................................................................... Government/nonprofit interest .......................................... 19.863 14.896 17.651 15.076 For-profit interest ............................................................... 4.967 2.575 Other ................................................................................. sroberts on PROD1PC70 with FRONTMATTER Total .................................................................................. Total depreciation ............................................................. Building and fixed equipment depreciation ....................... 5.554 7.195 Because capital is acquired and paid for over time, capital expenses in any given year are determined by both past and present purchases of physical and financial capital. The vintage-weighted CIPI is intended to capture the longterm consumption of capital, using vintage weights for depreciation (physical capital) and interest (financial capital). These vintage weights reflect the proportion of capital purchases attributable to each year of the expected life of building and fixed equipment, movable equipment, and interest. We used the vintage weights to compute vintage-weighted price changes associated with depreciation and interest expense. Following publication of this FY 2010 IPPS proposed rule, and in order to provide greater transparency, we will be posting on the CMS market basket Web page at https://www.cms. hhs.gov/MedicareProgramRatesStats/05 _MarketBasketResearch.asp#TopOfPage an illustrative spreadsheet that contains an example of how the vintage-weighted price indexes are calculated. Vintage weights are an integral part of the CIPI. Capital costs are inherently complicated and are determined by complex capital purchasing decisions, over time, based on such factors as interest rates and debt financing. In addition, capital is depreciated over time instead of being consumed in the same period it is purchased. The CIPI accurately reflects the annual price changes associated with capital costs, and is a useful simplification of the actual capital investment process. By accounting for the vintage nature of capital, we are able to provide an accurate, stable annual measure of price changes. Annual nonvintage price changes for capital are unstable due to VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Price proxy BEA chained price index for nonresidential construction for hospitals and special care facilities—vintage weighted (25 years). PPI for machinery and equipment—vintage weighted (12 years). Average yield on domestic municipal bonds (Bond Buyer 20 bonds)—vintage-weighted (25 years). Average yield on Moody’s Aaa bonds—vintage-weighted (12 years). CPI–U for residential rent. the volatility of interest rate changes and, therefore, do not reflect the actual annual price changes for Medicare capital-related costs. The CIPI reflects the underlying stability of the capital acquisition process and provides hospitals with the ability to plan for changes in capital payments. To calculate the vintage weights for depreciation and interest expenses, we needed a time series of capital purchases for building and fixed equipment and movable equipment. We found no single source that provides a uniquely best time series of capital purchases by hospitals for all of the above components of capital purchases. The early Medicare cost reports did not have sufficient capital data to meet this need. Data we obtained from the American Hospital Association (AHA) do not include annual capital purchases. However, AHA does provide a consistent database back to 1963. We used data from the AHA Panel Survey and the AHA Annual Survey to obtain a time series of total expenses for hospitals. We then used data from the AHA Panel Survey supplemented with the ratio of depreciation to total hospital expenses obtained from the Medicare cost reports to derive a trend of annual depreciation expenses for 1963 through 2006. In order to estimate capital purchases using data on depreciation expenses, the expected life for each cost category (building and fixed equipment, movable equipment, and interest) is needed to calculate vintage weights. We used FY 2006 Medicare cost reports to determine the expected life of building and fixed equipment and of movable equipment. The expected life of any piece of equipment can be determined by PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 dividing the value of the asset (excluding fully depreciated assets) by its current year depreciation amount. This calculation yields the estimated useful life of an asset if depreciation were to continue at current year levels, assuming straight-line depreciation. From the FY 2006 Medicare cost reports, the expected life of building and fixed equipment was determined to be 25 years, and the expected life of movable equipment was determined to be 12 years. The FY 2002-based CIPI was based on an expected life of building and fixed equipment of 23 years. It used 11 years as the expected life for movable equipment. We are proposing to use the building and fixed equipment and movable equipment weights derived from FY 2006 Medicare cost reports to separate the depreciation expenses into annual amounts of building and fixed equipment depreciation and movable equipment depreciation. Year-end asset costs for building and fixed equipment and movable equipment were determined by multiplying the annual depreciation amounts by the expected life calculations from the FY 2006 Medicare cost reports. We then calculated a time series back to 1963 of annual capital purchases by subtracting the previous year asset costs from the current year asset costs. From this capital purchase time series, we were able to calculate the vintage weights for building and fixed equipment and for movable equipment. Each of these sets of vintage weights is explained in more detail below. For building and fixed equipment vintage weights, we used the real annual capital purchase amounts for building and fixed equipment to capture the E:\FR\FM\22MYP2.SGM 22MYP2 24163 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules actual amount of the physical acquisition, net of the effect of price inflation. This real annual purchase amount for building and fixed equipment was produced by deflating the nominal annual purchase amount by the building and fixed equipment price proxy, BEA’s chained price index for nonresidential construction for hospitals and special care facilities. Because building and fixed equipment have an expected life of 25 years, the vintage weights for building and fixed equipment are deemed to represent the average purchase pattern of building and fixed equipment over 25-year periods. With real building and fixed equipment purchase estimates available back to 1963, we averaged nineteen 25year periods to determine the average vintage weights for building and fixed equipment that are representative of average building and fixed equipment purchase patterns over time. Vintage weights for each 25-year period are calculated by dividing the real building and fixed capital purchase amount in any given year by the total amount of purchases in the 25-year period. This calculation is done for each year in the 25-year period, and for each of the nineteen 25-year periods. We used the average of each year across the nineteen 25-year periods to determine the average building and fixed equipment vintage weights for the proposed FY 2006-based CIPI. For movable equipment vintage weights, the real annual capital purchase amounts for movable equipment were used to capture the actual amount of the physical acquisition, net of price inflation. This real annual purchase amount for movable equipment was calculated by deflating the nominal annual purchase amounts by the movable equipment price proxy, the PPI for machinery and equipment. Based on our determination that movable equipment has an expected life of 12 years, the vintage weights for movable equipment represent the average expenditure for movable equipment over a 12-year period. With real movable equipment purchase estimates available back to 1963, thirty-two 12-year periods were averaged to determine the average vintage weights for movable equipment that are representative of average movable equipment purchase patterns over time. Vintage weights for each 12year period are calculated by dividing the real movable capital purchase amount for any given year by the total amount of purchases in the 12-year period. This calculation was done for each year in the 12-year period and for each of the thirty-two 12-year periods. We used the average of each year across the thirty-two 12-year periods to determine the average movable equipment vintage weights for the proposed FY 2006-based CIPI. For interest vintage weights, the nominal annual capital purchase amounts for total equipment (building and fixed, and movable) were used to capture the value of the debt instrument. Because we have determined that hospital debt instruments have an expected life of 25 years, the vintage weights for interest are deemed to represent the average purchase pattern of total equipment over 25-year periods. With nominal total equipment purchase estimates available back to 1963, nineteen 25-year periods were averaged to determine the average vintage weights for interest that are representative of average capital purchase patterns over time. Vintage weights for each 25-year period are calculated by dividing the nominal total capital purchase amount for any given year by the total amount of purchases in the 25-year period. This calculation is done for each year in the 25-year period and for each of the nineteen 25-year periods. We used the average of each year across the nineteen 25-year periods to determine the average interest vintage weights for the proposed FY 2006-based CIPI. The vintage weights for the FY 2002-based CIPI and the proposed FY 2006-based CIPI are presented in Chart 8. CHART 8—FY 2002 VINTAGE WEIGHTS AND PROPOSED FY 2006 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES Building and fixed equipment sroberts on PROD1PC70 with FRONTMATTER Year FY 2002 23 years 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... 6 ............................................................... 7 ............................................................... 8 ............................................................... 9 ............................................................... 10 ............................................................. 11 ............................................................. 12 ............................................................. 13 ............................................................. 14 ............................................................. 15 ............................................................. 16 ............................................................. 17 ............................................................. 18 ............................................................. 19 ............................................................. 20 ............................................................. 21 ............................................................. 22 ............................................................. 23 ............................................................. 24 ............................................................. 25 ............................................................. 0.021 0.022 0.025 0.027 0.029 0.031 0.033 0.035 0.038 0.040 0.042 0.045 0.047 0.049 0.051 0.053 0.056 0.057 0.058 0.060 0.060 0.061 0.061 ........................ ........................ VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00085 Movable equipment Proposed FY 2006 25 years FY 2002 11 years 0.021 0.023 0.025 0.027 0.029 0.031 0.032 0.033 0.036 0.038 0.040 0.042 0.044 0.045 0.046 0.047 0.048 0.050 0.050 0.050 0.048 0.048 0.047 0.049 0.048 Fmt 4701 Interest Proposed FY 2006 12 years FY 2002 23 years 0.065 0.071 0.077 0.082 0.086 0.091 0.095 0.100 0.106 0.112 0.117 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 0.063 0.067 0.071 0.075 0.079 0.082 0.085 0.086 0.090 0.093 0.102 0.106 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 0.010 0.012 0.014 0.016 0.019 0.023 0.026 0.029 0.033 0.036 0.039 0.043 0.048 0.053 0.056 0.059 0.062 0.064 0.066 0.070 0.071 0.074 0.076 ........................ ........................ Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Proposed FY 2006 25 years 0.010 0.012 0.014 0.016 0.018 0.020 0.023 0.025 0.028 0.031 0.034 0.038 0.041 0.044 0.047 0.050 0.053 0.057 0.059 0.060 0.060 0.062 0.063 0.068 0.069 24164 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules CHART 8—FY 2002 VINTAGE WEIGHTS AND PROPOSED FY 2006 VINTAGE WEIGHTS FOR CAPITAL-RELATED PRICE PROXIES—Continued Building and fixed equipment Year Proposed FY 2006 25 years FY 2002 23 years Total .................................................. Movable equipment 1.000 Proposed FY 2006 12 years FY 2002 11 years 1.000 Interest 1.000 Proposed FY 2006 25 years FY 2002 23 years 1.000 1.000 1.000 Note: Detail may not add to total due to rounding. After the capital cost category weights were computed, it was necessary to select appropriate price proxies to reflect the rate-of-increase for each expenditure category. We are proposing to use the same price proxies for the proposed FY 2006-based CIPI that were used in the FY 2002-based CIPI with the exception of the Boeckh Construction Index. We are proposing to replace the Boeckh Construction Index with BEA’s chained price index for nonresidential construction for hospitals and special care facilities. The BEA index represents construction of facilities such as hospitals, nursing homes, hospices, and rehabilitation centers. Although these price indices move similarly over time, we believe that it is more technically appropriate to use an index that is more specific to the hospital industry. We believe these are the most appropriate proxies for hospital capital costs that meet our selection criteria of relevance, timeliness, availability, and reliability. The rationale for selecting the price proxies, excluding the building and fixed equipment price proxy, was explained more fully in the FY 1997 IPPS final rule (61 FR 46196). The price proxies are presented in Chart 7. Chart 9 below compares both the historical and forecasted percent changes in the FY 2002-based CIPI and the proposed FY 2006-based CIPI. CHART 9—COMPARISON OF FY 2002BASED AND PROPOSED FY 2006BASED CAPITAL INPUT PRICE INDEX, PERCENT CHANGE, FY 2004 THROUGH FY 2012—Continued CIPI, FY 2002-based Fiscal year CHART 9—COMPARISON OF FY 2002BASED AND PROPOSED FY 2006BASED CAPITAL INPUT PRICE INDEX, PERCENT CHANGE, FY 2004 THROUGH FY 2012 0.9 1.1 1.6 1.4 FYs 2004– 2009 ........... FYs 2010– 2012 ........... CIPI, FY 2002-based CIPI, proposed FY 2006-based Source: IHS Global Insight, Inc, 1st Quarter 2009; USMACRO/CONTROL0209@CISSIM/ TL0209.SIM. ........ ........ ........ ........ ........ 0.5 0.6 0.9 1.2 1.4 0.8 0.9 1.1 1.3 1.4 ........ ........ ........ ........ 1.6 1.5 1.6 1.6 1.5 1.2 1.5 1.5 IHS Global Insight, Inc. forecasts a 1.2 percent increase in the proposed FY 2006-based CIPI for FY 2010, as shown in Chart 9. The underlying vintageweighted price increases for depreciation (including building and fixed equipment and movable equipment) and interest (including government/nonprofit and for-profit) are included in Chart 10. Fiscal year FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 Forecast: FY 2009 FY 2010 FY 2011 FY 2012 Average: CIPI, proposed FY 2006-based CHART 10—CMS CAPITAL INPUT PRICE INDEX PERCENT CHANGES, TOTAL AND DEPRECIATION AND INTEREST COMPONENTS, FYS 2004 THROUGH 2012 Fiscal year sroberts on PROD1PC70 with FRONTMATTER FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 Forecast: FY 2009 FY 2010 FY 2011 FY 2012 Total Depreciation Interest .................................................................................................................................... .................................................................................................................................... .................................................................................................................................... .................................................................................................................................... .................................................................................................................................... 0.8 0.9 1.1 1.3 1.4 1.5 1.7 2.0 2.1 2.1 ¥2.6 ¥3.1 ¥3.2 ¥3.4 ¥2.6 .................................................................................................................................... .................................................................................................................................... .................................................................................................................................... .................................................................................................................................... 1.5 1.2 1.5 1.5 2.0 1.7 1.8 1.7 ¥1.8 ¥1.7 ¥0.3 ¥0.2 Rebasing the CIPI from FY 2002 to FY 2006 decreased the percent change in the FY 2010 forecast by 0.3 percentage point, from 1.5 to 1.2, as shown in Chart 9. The difference in the forecast of the proposed FY 2010 market basket increase is primarily due to the proposed change in the price proxy for building and fixed equipment as well as the proposed change in the vintage weights applied to the price proxy for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 interest. As mentioned above, we are proposing to change the price proxy used for building and fixed equipment to BEA’s chained price index for nonresidential construction for hospitals and special care facilities. We believe this proposed change represents a technical improvement as the BEA price index is an index that is more representative of the hospital industry. For the proposed FY 2010 update, the PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 result of this proposed change is a forecasted price change in total depreciation of 1.7 percent in the proposed FY 2006-based CIPI compared to 1.9 percent in the FY 2002-based CIPI. The other primary factor contributing to the difference is the proposed change in the vintage weights used to calculate the vintage-weighted price proxy for interest. The forecasted price change in total interest is ¥1.7 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules percent in the proposed FY 2006-based CIPI compared to ¥1.2 percent in the FY 2002-based CIPI. This is a result of changing the expected life of hospital debt instruments from 23 years to 25 years. V. Other Decisions and Proposed Changes to the IPPS for Operating Costs and GME Costs A. Reporting of Hospital Quality Data for Annual Hospital Payment Update 1. Background a. Overview CMS is seeking to promote higher quality and more efficient health care for Medicare beneficiaries. This effort is supported by the adoption of an increasing number of widely-agreed upon quality measures. CMS has worked with relevant stakeholders to define measures of quality in almost every setting and currently measures some aspect of care for almost all Medicare beneficiaries. These measures assess structural aspects of care, clinical processes, patient experiences with care, and, increasingly, outcomes. CMS has implemented quality measure reporting programs for multiple settings of care. The Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program implements a quality reporting program for hospital inpatient services. In addition, CMS has implemented quality reporting programs for hospital outpatient services, the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), and for physicians and other eligible professionals, the Physician Quality Reporting Initiative (PQRI). CMS has also implemented quality reporting programs for home health agencies and skilled nursing facilities that are based on conditions of participation, and an end-stage renal disease quality reporting program that is based on conditions for coverage. sroberts on PROD1PC70 with FRONTMATTER b. Hospital Quality Data Reporting Under Section 501(b) of Public Law 108–173 Section 501(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108–173, added section 1886(b)(3)(B)(vii) of the Act. This section established the authority for the RHQDAPU program and revised the mechanism used to update the standardized payment amount for inpatient hospital operating costs. Specifically, section 1886(b)(3)(B)(vii)(I) of the Act, before it was amended by section 5001(a) of Public Law 109–171, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 provided for a reduction of 0.4 percentage points to the update percentage increase (also known as the market basket update) for FY 2005 through FY 2007 for any subsection (d) hospital that did not submit data on a set of 10 quality indicators established by the Secretary as of November 1, 2003. It also provides that any reduction would apply only to the fiscal year involved, and would not be taken into account in computing the applicable percentage increase for a subsequent fiscal year. The statute thereby established an incentive for IPPS hospitals to submit data on the quality measures established by the Secretary, and also built upon the previously established Voluntary Hospital Quality Data Reporting Program that we described in the FY 2009 IPPS final rule (73 FR 48598). We implemented section 1886(b)(3)(B)(vii) of the Act in the FY 2005 IPPS final rule (69 FR 49078) and codified the applicable percentage change in § 412.64(d) of our regulations. We adopted additional requirements under the RHQDAPU program in the FY 2006 IPPS final rule (70 FR 47420). c. Hospital Quality Data Reporting under Section 5001(a) of Public Law 109–171 Section 5001(a) of the Deficit Reduction Act of 2005 (DRA), Public Law 109–171, further amended section 1886(b)(3)(B) of the Act to revise the mechanism used to update the standardized payment amount for hospital inpatient operating costs, in particular, by adding new section 1886(b)(3)(B)(viii) to the Act. Specifically, sections 1886(b)(3)(B)(viii)(I) and (II) of the Act provide that the payment update for FY 2007 and each subsequent fiscal year be reduced by 2.0 percentage points for any subsection (d) hospital that does not submit quality data in a form and manner, and at a time, specified by the Secretary. Section 1886(b)(3)(B)(viii)(I) of the Act also provides that any reduction in a hospital’s payment update will apply only with respect to the fiscal year involved, and will not be taken into account for computing the applicable percentage increase for a subsequent fiscal year. In the FY 2007 IPPS final rule (71 FR 48045), we amended our regulations at § 412.64(d)(2) to reflect the 2.0 percentage point reduction in the payment update for FY 2007 and subsequent fiscal years for subsection (d) hospitals that do not comply with requirements for reporting quality data, as provided for under section 1886(b)(3)(B)(viii) of the Act. PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 24165 (1) Quality Measures Section 1886(b)(3)(B)(viii)(III) of the Act requires that the Secretary expand the ‘‘starter set’’ of 10 quality measures that was established by the Secretary as of November 1, 2003, as the Secretary determines to be appropriate for the measurement of the quality of care furnished by a hospital in inpatient settings. In expanding this set of measures, section 1886(b)(3)(B)(viii)(IV) of the Act requires that, effective for payments beginning with FY 2007, the Secretary begin to adopt the baseline set of performance measures as set forth in a report issued by the Institute of Medicine (IOM) of the National Academy of Sciences under section 238(b) of Public Law 108–173.6 The IOM measures include: 21 Hospital Quality Alliance (HQA) quality measures (including the ‘‘starter set’’ of 10 quality measures); the Hospital Consumer Assessment of Health Providers and Systems (HCAHPS) patient experience of care survey; and 3 structural measures.7 The structural measures are: (1) Adoption of computerized provider order entry for prescriptions; (2) staffing of intensive care units with intensivists; and (3) evidence-based hospital referrals. These structural measures constitute the Leapfrog Group’s original ‘‘three leaps,’’ and are part of the National Quality Forum’s (NQF’s) 30 Safe Practices for Better Healthcare. Section 1886(b)(3)(B)(viii)(V) of the Act requires that, effective for payments beginning with FY 2008, the Secretary add other quality measures that reflect consensus among affected parties, and to the extent feasible and practicable, have been set forth by one or more national consensus building entities. The NQF is a voluntary consensus standard-setting organization with a diverse representation of consumer, purchaser, provider, academic, clinical, and other health care stakeholder organizations. NQF was established to standardize health care quality measurement and reporting through its consensus development process. We have generally adopted NQF-endorsed 6 Institute of Medicine, ‘‘Performance Measurement: Accelerating Improvement,’’ December 1, 2005, available at: https:// www.iom.edu/CMS/3809/19805/31310.aspx. IOM set forth these baseline measures in a November 2005 report. However, the IOM report was not released until December 1, 2005 on the IOM Web site. 7 Structural measures assess characteristics linked to the capacity of the provider to deliver quality healthcare. Institute of Medicine: Division of Health Care Services. Measuring the Quality of Health Care: A Statement by the National Roundtable on Healthcare Quality. National Academy Press; Washington D.C. 1999. E:\FR\FM\22MYP2.SGM 22MYP2 24166 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules measures. However, we believe that consensus among affected parties also can be reflected by other means, including, consensus achieved during the measure development process, consensus shown through broad acceptance and use of measures, and consensus through public comment. Section 1886(b)(3)(B)(viii)(VI) of the Act authorizes the Secretary to replace any quality measures or indicators in appropriate cases, such as where all hospitals are effectively in compliance with a measure, or the measures or indicators have been subsequently shown to not represent the best clinical practice. Thus, the Secretary is granted broad discretion to replace measures that are no longer appropriate for the RHQDAPU program. In the FY 2007 IPPS final rule, we began to expand the RHQDAPU program measures by adding 11 quality measures to the 10-measure starter set to establish an expanded set of 21 quality measures for the FY 2007 payment determination (71 FR 48033 through 48037, 48045). In the CY 2007 OPPS/ASC final rule (71 FR 68201), we adopted six additional quality measures for the FY 2008 payment determination, for a total of 27 measures. Two of these measures (30-Day Risk Standardized Mortality Rates for Heart Failure and 30-Day Risk Standardized Mortality Rates for AMI) were calculated using existing administrative Medicare claims data; thus, no additional data submission by hospitals was required for these two measures. The measures used for the FY 2008 payment determination included, for the first time, the HCAHPS patient experience of care survey. In the FY 2008 IPPS final rule (72 FR 47348 through 47358) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66875 through 66877), we added three additional process measures to the RHQDAPU program measure set. (These three measures are SCIP-Infection-4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose, SCIPInfection-6: Surgery Patients with Appropriate Hair Removal, and Pneumonia 30-day mortality (Medicare patients).) The addition of these three measures brought the total number of RHQDAPU program measures to be used for the FY 2009 payment determination to 30 (72 FR 66876). The 30 measures used for the FY 2009 annual payment determination are listed in the FY 2009 IPPS final rule (73 FR 48600 through 48601). Topic RHQDAPU program quality measures for the FY 2010 payment determination Acute Myocardial Infarction (AMI) Heart Failure (HF) • AMI–1 Aspirin at arrival. • AMI–2 Aspirin prescribed at discharge. • AMI–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • AMI–4 Adult smoking cessation advice/counseling. • AMI–5 Beta blocker prescribed at discharge. • AMI–6 Beta blocker at arrival. • AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. • AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). • HF–1 Discharge instructions. • HF–2 Left ventricular function assessment. • HF–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • HF–4 Adult smoking cessation advice/counseling. Pneumonia (PN) • • • • • • Surgical Care Improvement Project (SCIP) sroberts on PROD1PC70 with FRONTMATTER For the FY 2010 payment determination, we added 15 new measures to the RHQDAPU program measure set and retired one. Of the new measures, 13 were adopted in the FY 2009 IPPS final rule (73 FR 48602 through 48611) and two additional measures were finalized in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68780 through 68781). This resulted in an expansion of the RHQDAPU program measures from 30 measures for the FY 2009 payment determination to 44 measures for the FY 2010 payment determination. The RHQDAPU program measures for the FY 2010 payment determination consist of: 26 chart-abstracted process measures, which measure care provided for Acute Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), or Surgical Infection Prevention (SCIP); 6 claims-based measures, which evaluate 30-day mortality or 30-day readmission rates for AMI, HF, or PN; 9 AHRQ claims-based patient safety/inpatient quality indicator measures; 1 claimsbased nursing sensitive measure; 1 structural measure that assesses participation in a systematic database for cardiac surgery; and the HCAHPS patient experience of care survey. The measures are listed below. PN–2 Pneumococcal vaccination status. PN–3b Blood culture performed before first antibiotic received in hospital. PN–4 Adult smoking cessation advice/counseling. PN–5c Timing of receipt of initial antibiotic following hospital arrival. PN–6 Appropriate initial antibiotic selection. PN–7 Influenza vaccination status. • • • • • • SCIP–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time. SCIP–VTE–1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patients. SCIP–VTE–2: VTE prophylaxis within 24 hours pre/post surgery. SCIP–Infection–2: Prophylactic antibiotic selection for surgical patients. SCIP–Infection–4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. • SCIP–Infection–6: Surgery Patients with Appropriate Hair Removal. • SCIP–Cardiovascular–2: Surgery Patients on a Beta Blocker Prior to Arrival Who Received a Beta Blocker During the Perioperative Period. Mortality Measures (Medicare Patients) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 • MORT–30–AMI: Acute Myocardial Infarction 30-day mortality—Medicare patients. PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Topic 24167 RHQDAPU program quality measures for the FY 2010 payment determination • MORT–30–HF: Heart Failure 30-day mortality—Medicare patients. • MORT–30–PN: Pneumonia 30-day mortality—Medicare patients. Patients’ Experience of Care • HCAHPS patient survey. Readmission Measure (Medicare Patients) • READ–30–HF: Heart Failure 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–AMI: Acute Myocardial Infarction 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–PN: Pneumonia 30-Day Risk Standardized Readmission Measure (Medicare patients). AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures Nursing Sensitive sroberts on PROD1PC70 with FRONTMATTER • Participation in a Systematic Database for Cardiac Surgery. On December 31, 2008, CMS advised hospitals that they would no longer be required to submit data for the RHQDAPU program measure AMI–6 Beta blocker at arrival, beginning with discharges occurring on April 1, 2009. This change was based on the evolving evidence regarding AMI patient care, as well as changes in the American College of Cardiology/American Heart Association (ACC/AHA) practice guidelines for ST-segment elevation myocardial infarction and non-ST segment elevation myocardial infarction, upon which AMI–6 is based. The new guideline recommends that early intravenous beta-blockers specifically should be avoided in certain patient populations due to increased mortality risk. These patients are identified by a complex set of contraindications that we believe would make revision of the measure impractical and might result in unintended consequences, including harm to patients based on misinterpretation of an overly complex measure in the clinical setting. Based on the new studies, the ACC/AHA Task Force on Performance Measures removed this measure from the set of AMI performance measures as of November 10, 2008 and did not replace the measure. CMS took action to remove the measure from reporting initiatives based on the lack of support by the measure developer and the considerations identified above. We discussed considerations relating to retiring or replacing measures in the 08:10 May 21, 2009 PSI 04: Death among surgical patients with treatable serious complications. PSI 06: Iatrogenic pneumothorax, adult. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Mortality for selected surgical procedures (composite). Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). • Failure to Rescue (Medicare claims only). Cardiac Surgery VerDate Nov<24>2008 • • • • • • • • • Jkt 217001 FY 2008 final rule with comment period and the FY 2009 IPPS final rule, including the ‘‘topping out’’ of hospitals’ performance under a measure (72 FR 47358–47359, and 73 FR 48603– 48604). In this instance, however, the measure no longer ‘‘represent[s] the best clinical practice,’’ an additional basis under section 1886(b)(3)(B)(viii)(VI) of the Act for retiring a measure. For the FY 2010 payment determination and subsequent payment determinations, we have formally retired the AMI–6 measure from the RHQDAPU program. Therefore, hospitals participating in the RHQDAPU program are not required to submit data on the AMI–6 measure beginning with April 1, 2009 discharges. However, we are seeking public comment on the retirement of the AMI– 6 measure. (2) Maintenance of Technical Specifications for Quality Measures The technical specifications for each RHQDAPU program measure are listed in the CMS/Joint Commission Specifications Manual for National Hospital Inpatient Quality Measures (Specifications Manual). This Specifications Manual is posted on the CMS QualityNet Web site at https:// www.QualityNet.org/. We maintain the technical specifications by updating this Specifications Manual semiannually, or more frequently in unusual cases, and include detailed instructions and calculation algorithms for hospitals to use when collecting and submitting data on required measures. We are inviting PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 public comment on our process of notifying the public about the technical specifications for RHQDAPU program quality measures and whether it can be improved to enable more meaningful public comment on our proposed measures. We also are inviting public comment on whether the information posted on the https:// www.QualityNet.org Web site— including the frequency with which this information is updated—provides hospitals enough information and time to implement the collection of data necessary for these required quality measures. (3) Public Display of Quality Measures Section 1886(b)(3)(B)(viii)(VII) of the Act requires that the Secretary establish procedures for making quality data available to the public after ensuring that a hospital has the opportunity to review its data before these data are made public. Data from the RHQDAPU program are included on the Hospital Compare Web site, https:// www.hospitalcompare.hhs.gov. The RHQDAPU program includes process of care measures, risk adjusted outcome measures, the HCAHPS patient experience of care survey, and a structural measure regarding cardiac surgery registry participation. This Web site assists beneficiaries and the general public by providing information on hospital quality of care to consumers who need to select a hospital. It further serves to encourage consumers to work with their doctors and hospitals to E:\FR\FM\22MYP2.SGM 22MYP2 24168 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules discuss the quality of care hospitals provide to patients, thereby providing an additional incentive to hospitals to improve the quality of care that they furnish. 3. Quality Measures for the FY 2011 Payment Determination and Subsequent Years sroberts on PROD1PC70 with FRONTMATTER 2. Retirement of RHQDAPU Program Measures As stated above, we retired AMI–6 from the RHQDAPU program measure set on December 1, 2008 because we believed, based on new evidence, that the continued use of the measure raised specific patient safety concerns. In situations such as this, we do not believe that it is appropriate to wait for the annual rulemaking cycle. Rather, we propose to promptly retire the measure and notify hospitals and the public of the retirement of the measure and the reasons for its retirement through the usual hospital and QIO communication channels used for the RHQDAPU program, which include e-mail blasts to hospitals and the dissemination of Standard Data Processing System (SDPS) memoranda to QIOs, as well as posting the information on the QualityNet Web site. We propose to confirm the retirement of the measure in the next IPPS rulemaking. In other circumstances where we do not believe that continued use of a measure raises specific patient safety concerns, we intend to use the regular rulemaking process to retire a measure. We are inviting public comment on whether any other RHQDAPU program measures should be retired from the RHQDAPU program, as well as on the criteria that should be used in retiring measures. To the extent that performance has improved because of the collection and public display of quality measures, we also are inviting public comment on how performance could be maintained on the topped out measures once they are retired. We note that many of the measures in the existing program have experienced improved performance rates over the years. On our Web site, https:// www.cms.hhs.gov/HospitalQualityInits/, we have posted the performance rates for the existing measures over the years that they have been collected through the RHQDAPU program. However, thus far, only one measure, the pneumonia oxygenation assessment measure, has reached such a high level of compliance (nearly 100 percent for the vast majority of hospitals) that we retired the measure. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 a. Considerations in Expanding and Updating Quality Measures under the RHQDAPU Program In the FY 2009 IPPS proposed rule, we solicited comments on several considerations related to expanding and updating quality measures, including how to reduce the burden on the hospitals participating in the RHQDAPU program and which approaches to measurement and collection would be most useful while minimizing burden (73 FR 23653 through 23654). In the FY 2009 IPPS final rule, we responded to public comments we received on these issues (73 FR 48613 through 48616). We also stated that in future expansions and updates to the RHQDAPU program measure set, we would be taking into consideration several important goals. These goals include: (a) Expanding the types of measures beyond process of care measures to include an increased number of outcome measures, efficiency measures, and patients’ experience-ofcare measures; (b) expanding the scope of hospital services to which the measures apply; (c) considering the burden on hospitals in collecting chartabstracted data; (d) harmonizing the measures used in the RHQDAPU program with other CMS quality programs to align incentives and promote coordinated efforts to improve quality; (e) seeking to use measures based on alternative sources of data that do not require chart abstraction or that utilize data already being reported by many hospitals, such as data that hospitals report to clinical data registries, or all-payer claims data bases; and (f) weighing the relevance and utility of the measures compared to the burden on hospitals in submitting data under the RHQDAPU program. Specifically, we give priority to quality measures that assess performance on: (a) Conditions that result in the greatest mortality and morbidity in the Medicare population; (b) conditions that are high volume and high cost for the Medicare program; and (c) conditions for which wide cost and treatment variations have been reported, despite established clinical guidelines. We have used and continue to use these criteria to guide our decisions regarding what measures to add to the RHQDAPU program measure set. Although RHQDAPU program payment decisions were initially based solely on a hospital’s submission of chart-abstracted quality measure data, in recent years we have adopted measures, PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 including structural and claims-based quality measures that do not require a hospital to submit chart-abstracted clinical data. This supports our stated goal to expand the measures for the RHQDAPU program while minimizing the burden on hospitals and, in particular, without significantly increasing the chart abstraction burden. In addition to claims-based measures, we are considering registries 8 and electronic health records (EHRs) as alternative ways to collect data from hospitals. Many hospitals submit data to and participate in existing registries. In addition, registries often capture outcome information and provide ongoing quality improvement feedback to registry participants. Instead of requiring hospitals to submit the same data to CMS that they are already submitting to registries, we believe that we could collect the data directly from the registries, thereby enabling us to expand the RHQDAPU program measure set without increasing the burden of data collection for those hospitals participating in the registries. Examples of registries actively used by hospitals include the Society of Thoracic Surgeons (STS) Cardiac Surgery Registry (with approximately 90 percent participation by cardiac surgery programs), the AHA Stroke Registry (with approximately 1200 hospitals participating), and the American Nursing Association (ANA) Nursing Sensitive Measures Registry (with approximately 1400 hospitals participating). In the FY 2009 IPPS final rule, we adopted the first RHQDAPU program measure related to registries: Participation in a Systematic Database for Cardiac Surgery. We continue to evaluate whether it is feasible to adopt measures that rely on one or more registries as a source for data collection. We also stated our intention to explore mechanisms for data submission using EHRs (73 FR 48614). Establishing such a system will require interoperability between EHRs and CMS data collection systems, additional infrastructure development on the part of hospitals and CMS and the adoption of standards for the capturing, formatting, and transmission of data elements that make up the measures. However, once these activities are accomplished, the adoption of measures that rely on data obtained directly from EHRs will enable us to expand the RHQDAPU program measure set with less cost and burden to hospitals. 8 A registry is a collection of clinical data for purposes of assessing clinical performance, quality of care, and opportunities for quality improvement. E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules In the FY 2009 IPPS final rule, we adopted nine AHRQ measures for the RHQDAPU program. Although we stated that we would initially calculate the measures using Medicare claims data (73 FR 48608), we also stated that we remained interested in using allpayer claims data to calculate them and that we might propose to collect such data in the future. We invite input and suggestions on how all-payer claims data can be collected and used by CMS to calculate these measures, as well as on additional AHRQ measures that we should consider adopting for future RHQDAPU program payment determinations. We continue to use these criteria to guide our decisions on what measures to propose for the RHQDAPU program measure set. Therefore, in commenting on the new quality measures we have proposed to include in future payment years and on measures to retire, we are inviting public comments on these criteria. 24169 b. Proposed RHQDAPU Program Quality Measures for the FY 2011 Payment Determination (1) Proposed Retention of Existing RHQDAPU Program Quality Measures For the FY 2011 payment determination, we are proposing to retain the following RHQDAPU program quality measures that we are using for the FY 2010 payment determination: RHQDAPU program quality measures for FY 2010 payment determination proposed for FY 2011 payment determination Topic • AMI–1 Aspirin at arrival. • AMI–2 Aspirin prescribed at discharge. • AMI–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • AMI–4 Adult smoking cessation advice/counseling. • AMI–5 Beta blocker prescribed at discharge. • AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. • AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). Acute Myocardial Infarction (AMI) Heart Failure (HF) • HF–1 Discharge instructions. • HF–2 Left ventricular function assessment. • HF–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • HF–4 Adult smoking cessation advice/counseling. Pneumonia (PN) • • • • • • Surgical Care Improvement Project (SCIP) PN–2 Pneumococcal vaccination status. PN–3b Blood culture performed before first antibiotic received in hospital. PN–4 Adult smoking cessation advice/counseling. PN–5c Timing of receipt of initial antibiotic following hospital arrival. PN–6 Appropriate initial antibiotic selection. PN–7 Influenza vaccination status. • • • • • • SCIP–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time. SCIP–VTE–1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patients. SCIP–VTE–2: VTE prophylaxis within 24 hours pre/post surgery. SCIP–Infection-2: Prophylactic antibiotic selection for surgical patients. SCIP–Infection-4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. • SCIP–Infection-6: Surgery Patients with Appropriate Hair Removal. • SCIP–Cardiovascular-2: Surgery Patients on a Beta Blocker Prior to Arrival Who Received a Beta Blocker During the Perioperative Period. Mortality Measures (Medicare Patients) • MORT–30–AMI: Acute Myocardial Infarction 30-day mortality—Medicare patients. • MORT–30–HF: Heart Failure 30-day mortality—Medicare patients. • MORT–30–PN: Pneumonia 30-day mortality—Medicare patients. Patients’ Experience of Care • HCAHPS patient survey. Readmission Measure (Medicare Patients) • READ–30–HF: Heart Failure 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–AMI: Acute Myocardial Infarction 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–PN: Pneumonia 30-Day Risk Standardized Readmission Measure (Medicare patients). sroberts on PROD1PC70 with FRONTMATTER AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures. • • • • • • • • PSI 06: Iatrogenic pneumothorax, adult. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Mortality for selected surgical procedures (composite). Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). Cardiac Surgery VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24170 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules RHQDAPU program quality measures for FY 2010 payment determination proposed for FY 2011 payment determination Topic • Participation in a Systematic Database for Cardiac Surgery. As we discussed above, we retired AMI–6 Beta blocker at arrival from the RHQDAPU program measure set for the FY 2010 payment determination and subsequent years. In addition, as discussed below, we propose to harmonize two current RHQDAPU program measures for the FY 2011 payment determination: PSI 04: Death among surgical patients with treatable serious complications; and Nursing Sensitive—Failure to Rescue. sroberts on PROD1PC70 with FRONTMATTER (2) NQF Harmonization of Two Existing RHQDAPU Program Measures In May 2008, the NQF reviewed the specifications for two of the RHQDAPU program measures that we adopted for the FY 2010 payment determination: PSI 04–Death among surgical patients with treatable serious complications; and Nursing Sensitive—Failure to rescue (Medicare claims only). This was part of an NQF project titled ‘‘National Voluntary Consensus Standards for Hospital Care 2007: Performance Measures.’’ As a result of this project by the NQF, these two measures now have the same name: ‘‘Death among surgical inpatients with serious, treatable complications’’ and share a single set of measure specifications. In order to maintain consistency with national voluntary consensus standards with respect to referencing the measure, we are proposing to combine PSI 04Death among surgical patients with treatable serious complications; and Nursing Sensitive—Failure to rescue (Medicare claims only) into a single measure, Death among surgical inpatients with serious, treatable complications, and to list the measure under proposed topic name—AHRQ PSI and Nursing Sensitive Care. This measure, as well as its specifications, would replace, for purposes of hospital reporting, the two RHQDAPU program measures that we adopted for the FY 2010 payment determination: PSI 04: Death among surgical patients with treatable serious complications; and Nursing Sensitive—Failure to rescue (Medicare claims only). However, we may continue to publicly report the measure in two different topics areas on Hospital Compare—Nursing Sensitive Care and AHRQ PSIs, IQIs and Composite Measures. We are inviting public comment on this proposal. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 (3) Proposed New Chart-Abstracted Measures For the FY 2011 payment determination, we are proposing to add two new chart-abstracted measures. These proposed new measures, SCIPInfection-9 Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2, and SCIP-Infection-10: Perioperative Temperature Management, are additions to the existing SCIP measure set. The SCIP Infection measures are designed to assess practices that reduce the risk of infections that surgical patients could acquire in the hospital. They have high relevance to the Medicare population, and address the growing concern regarding hospital acquired infections.9 Although these two measures require that hospitals abstract data from medical records, they add to the scope of the existing SCIP measurement set. Hospitals currently collect and report data elements for eight SCIP measures. Additional data elements required for these two proposed new SCIP measures are minimal, and would be abstracted from the same records hospitals use to abstract data for the other SCIP measures. Therefore, we expect the additional burden on hospitals to be minimal. The two measures are NQFendorsed. We are inviting public comment on our proposal to include SCIP-Infection-9 and SCIP-Infection-10 as RHQDAPU program measures to be used for the FY 2011 payment determination. The collection of new chart-abstracted measures for the FY 2011 payment determination would begin with 1st calendar quarter 2010 discharges, for which the submission deadline would be August 15, 2010. (4) Proposed New Structural Measures We also are proposing to adopt two additional structural measures for the FY 2011 payment determination. Structural measures assess the characteristics and capacity of the provider to deliver quality health care. We are proposing to add two additional registry participation measures. The two structural measures are: (1) Participation in a Systematic Clinical Database Registry for Stroke Care; and (2) 9 U.S. Government Accountability Office. HealthCare Associated Infections in Hospitals: An Overview of State Reporting Programs and Individual Hospital Initiatives to Reduce Certain Infections. September 2008. PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. These measures are specific applications for the inpatient setting of a structural measure entitled ‘‘Participation by a physician or other clinician in a systematic clinical database registry that includes consensus endorsed measures,’’ which received NQF endorsement under a project titled ‘‘National Voluntary Consensus Standards for Health IT: Structural Measures 2008.’’ The proposed measures are appropriate applications of the NQF-endorsed measure because the NQF has endorsed measures for Stroke Care and Nursing Sensitive Care which are currently being collected by widely used stroke and nursing sensitive care registries. Therefore, we believe that the proposed Stroke Registry Participation structural measure and Nursing Sensitive Care Registry Participation structural measure meet the consensus requirement in section 1886(b)(3)(B)(viii)(V) of the Act. As we have previously stated, we also believe that participation in registries reflects a commitment to assessing the quality of care provided and identifying opportunities for improvement. Many registries also collect outcome data and provide feedback to hospitals about their performance. Moreover, registries offer a potential future data source from which we can collect quality data. The Participation in a Systematic Clinical Database Registry for Stroke structural measure would require each hospital that participates in the RHQDAPU program to indicate whether it is participating in a systematic qualified clinical database registry for inpatient stroke care and, if so, to identify the registry. The Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care structural measure would similarly require each hospital participating in the RHQDAPU program to indicate whether it is participating in a systematic qualified clinical database registry measuring nursing sensitive care quality for inpatient care and, if so, to identify the registry. We are soliciting public comment on these registry structural measures. Specifically, we are inviting public comment on whether ‘‘systematic qualified clinical database registry’’ is adequately defined and, if not, how it should be defined. In defining E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules ‘‘systematic qualified clinical database registry,’’ should registries that do not collect outcome measures and/or do not provide feedback to hospitals about their performance be excluded? Are there other registries that we should consider in future rulemakings, beyond stroke and nursing sensitive registries, particularly for conditions where there is high mortality/morbidity in the Medicare population, high cost to the health care system, and widespread treatment variations despite established clinical guidelines? Finally, we welcome more precise data on what percentage of hospitals already participate in a stroke registry or a nursing sensitive registry.10 Because we also retire measures when performance has reached a sufficiently high level, we are inviting public comment on whether reporting on stroke registry and nursing sensitive care registry structural measures has sufficient relevance and utility to justify the reporting burden, if a substantial proportion of hospitals already participate in these registries. Both proposed structural measures can be submitted using a Web-based collection tool that we will make available on the QualityNet Web site. We are inviting public comment on our proposal to adopt these two structural measures for the FY 2011 payment determination. In summary, we are proposing for the FY 2011 payment determination to retain 41 of the measures we adopted for Topic 24171 the FY 2010 payment determination. With respect to the other three measures we adopted for the FY 2010 payment determination, we retired AMI–6 Beta blocker at arrival measure and are proposing to harmonize an AHRQ measure and a Nursing Sensitive measure by combining these measures into a single measure entitled Death among surgical inpatients with serious, treatable complications. Finally, we are proposing to add four measures (two SCIP Infection measures and two structural measures) to the RHQDAPU program measure set. Set out below are the 46 RHQDAPU program quality measures proposed for the FY 2011 payment determination: Proposed RHQDAPU program quality measures for the FY 2011 payment determination Acute Myocardial Infarction (AMI) • AMI–1 Aspirin at arrival. • AMI–2 Aspirin prescribed at discharge. • AMI–3 Angiotensin Converting Enzyme Inhibitor (ACE–I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • AMI–4 Adult smoking cessation advice/counseling. • AMI–5 Beta blocker prescribed at discharge. • AMI–7a Fibrinolytic (thrombolytic) agent received within 30 minutes of hospital arrival. • AMI–8a Timing of Receipt of Primary Percutaneous Coronary Intervention (PCI). Heart Failure (HF) • HF–1 Discharge instructions. • HF–2 Left ventricular function assessment. • HF–3 Angiotensin Converting Enzyme Inhibitor (ACE-I) or Angiotensin II Receptor Blocker (ARB) for left ventricular systolic dysfunction. • HF–4 Adult smoking cessation advice/counseling. Pneumonia (PN) • • • • • • • • • • • • Surgical Care Improvement Project (SCIP) PN–2 Pneumococcal vaccination status. PN–3b Blood culture performed before first antibiotic received in hospital. PN–4 Adult smoking cessation advice/counseling. PN–5c Timing of receipt of initial antibiotic following hospital arrival. PN–6 Appropriate initial antibiotic selection. PN–7 Influenza vaccination status. SCIP–1 Prophylactic antibiotic received within 1 hour prior to surgical incision. SCIP–3 Prophylactic antibiotics discontinued within 24 hours after surgery end time. SCIP–VTE–1: Venous thromboembolism (VTE) prophylaxis ordered for surgery patients. SCIP–VTE–2: VTE prophylaxis within 24 hours pre/post surgery. SCIP–Infection-2: Prophylactic antibiotic selection for surgical patients. SCIP–Infection-4: Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. SCIP–Infection-6: Surgery Patients with Appropriate Hair Removal. SCIP–Infection-9: Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2.* SCIP–Infection-10: Perioperative Temperature Management.* SCIP–Cardiovascular-2: Surgery Patients on a Beta Blocker Prior to Arrival Who Received a Beta Blocker During the Perioperative Period. • • • • Mortality Measures (Medicare Patients) • MORT–30–AMI: Acute Myocardial Infarction 30-day mortality—Medicare patients. • MORT–30–HF: Heart Failure 30-day mortality—Medicare patients. • MORT–30–PN: Pneumonia 30-day mortality—Medicare patients. Patients’ Experience of Care • HCAHPS patient survey. sroberts on PROD1PC70 with FRONTMATTER Readmission Measure (Medicare Patients) • READ–30–HF: Heart Failure 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–AMI: Acute Myocardial Infarction 30-Day Risk Standardized Readmission Measure (Medicare patients). 10 Examples of registries that we are aware of that are being actively used by hospitals include the Society of Thoracic Surgeons (STS) Cardiac Surgery Registry (with approximately 90 percent VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 participation by cardiac surgery programs), the AHA Stroke Registry (with approximately 1200 hospitals participating), and the American Nursing Association (ANA) Nursing Sensitive Measures PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 Registry (with approximately 1400 hospitals participating). E:\FR\FM\22MYP2.SGM 22MYP2 24172 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Topic Proposed RHQDAPU program quality measures for the FY 2011 payment determination • READ–30–PN: Pneumonia 30-Day Risk Standardized Readmission Measure (Medicare patients). AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures. AHRQ PSI and Nursing Sensitive Care** • • • • • • • • PSI 06: Iatrogenic pneumothorax, adult. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Mortality for selected surgical procedures (composite). Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). • Death among surgical inpatients with serious, treatable complications. Cardiac Surgery • Participation in a Systematic Database for Cardiac Surgery. Stroke Care • Participation in a Systematic Clinical Database Registry for Stroke Care.* Nursing Sensitive Care • Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care.* * Proposed new measure for FY 2011 payment determination. ** Proposed harmonized measure. This measure may be publicly reported under two topics—the AHRQ PSIs, IQIs, and Composite Measures topic and the Nursing Sensitive Care topic. 4. Possible New Quality Measures for the FY 2012 Payment Determination and Subsequent Years topics that we might consider adopting beginning with the FY 2012 payment determination. We also are seeking suggestions and rationales to support the adoption of measures and topics for We are inviting public comment on the following quality measures and the RHQDAPU program that are not included in this list. Measure topic Measure description AMI ................................................................... ED—Throughput ............................................... Statin at discharge. Median time from admit decision time to time of departure from the emergency department for emergency department patients admitted to inpatient status. Median time from emergency department arrival to time of departure from the emergency room for patients admitted to the facility from the emergency department. Lower Extremity Bypass Complications. Comorbidity Adjusted Complication Index. PCI mortality rate for patients without ST segment elevation myocardial infarction (STEMI) and without cardiogenic shock. Patients with an ischemic stroke or a hemorrhagic stroke and who are non-ambulatory should start receiving DVT prophylaxis by end of hospital day two. Patients with an ischemic stroke prescribed antithrombotic therapy at discharge. Patients with an ischemic stroke with atrial fibrillation discharged on anticoagulation therapy. Acute ischemic stroke patients who arrive at the hospital within 120 minutes (2 hours) of time last known well and for whom IV t-PA was initiated at this hospital within 180 minutes (3 hours) of time last known well. Patients with ischemic stroke who receive antithrombotic therapy by the end of hospital day two. Ischemic stroke patients with LDL >/= 100 mg/dL, or LDL not measured, or, who were on cholesterol reducing therapy prior to hospitalization are discharged on a statin medication. Patients with ischemic or hemorrhagic stroke or their caregivers who were given education or educational materials during the hospital stay addressing all of the following: personal risk factors for stroke, warning signs for stroke, activation of emergency. Patients with an ischemic stroke or hemorrhagic stroke who were assessed for rehabilitation services. This measure assesses the number of patients that receive VTE prophylaxis or have documentation why no VTE prophylaxis was given within 24 hours after the initial admission (or transfer) to the Intensive Care Unit (ICU) or surgery end time. Patients who received parenteral and warfarin therapy (overlap therapy): (1) For at least 5 days, with an INR greater than or equal to 2 prior to discontinuation of parenteral therapy OR (2) For more than 5 days, with an INR less than 2, but were discharged on overlap therapy OR (3) Who were discharged in less than five days on overlap therapy. This measure assesses the number of patients receiving intravenous (IV) UFH therapy with documentation that the dosages and platelet counts are monitored by protocol (or nomogram). This measure assesses the number of VTE patients that are discharged home, home care, or home hospice on warfarin with written discharge instructions that addresses all four criteria: Follow-up Monitoring; Compliance Issues; Dietary Restrictions; and, Potential for Adverse Drug Reactions/Interactions. ED—Throughput ............................................... Complications ................................................... Complications ................................................... PCI .................................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... Stroke ............................................................... VTE ................................................................... sroberts on PROD1PC70 with FRONTMATTER VTE ................................................................... VTE ................................................................... VTE ................................................................... VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24173 Measure topic Measure description VTE ................................................................... This measure assesses the number of patients that were diagnosed with VTE during hospitalization (not present at admission) that did not receive VTE prophylaxis. Post-operative Renal Failure. Surgical Re-exploration. Anti-Platelet Medication at Discharge. Beta Blockade at Discharge. Anti-Lipid Treatment Discharge. Risk-Adjusted Operative Mortality for CABG. Risk-Adjusted Operative Mortality for Aortic Valve Replacement (AVR). Risk-Adjusted Operative Mortality for Mitral Valve Replacement/Repair (MVR). Risk-Adjusted Operative Mortality MVR+CABG Surgery. Risk-Adjusted Operative Mortality for AVR+CABG. Pre-Operative Beta Blockade. Duration of Prophylaxis for Cardiac Surgery Patients. Prolonged Intubation (ventilation). Deep Sternal Wound Infection Rate. Stroke/Cerebrovascular Accident. Patient Falls: All documented falls with or without injury, experienced by patients on an eligible unit in a calendar month. Falls with Injury: All documented patient falls with an injury level of minor or greater. Catheter Associated Urinary Tract Infection. Central Line Associated Blood Stream Infection in the ICU and high risk neonatal intensive care unit. Ventilator Associated Pneumonia in the ICU. Pressure Ulcer Prevalence. Restraint Prevalence (vest and limb). Skill Mix: Percentage of hours worked by: RN, LPN/LVN, UAP, Contract/Agency. Hours per patient day worked by RN, LPN, and UAP. Practice Environment Scale-Nursing Work Index. Voluntary turnover for RN, APN, LPN, UAP. PSI 03: Decubitus Ulcer. PSI 07: Infection Due to Medical Care. PSI 08: Post Operative Hip Fracture. PSI 09: Post Operative Hemorrhage or Hematoma*. PSI 10: Post Operative Physiologic Metabolic Derangement*. PSI 11: Post Operative Respiratory Failure. PSI 12: Post Operative PE or DVT. PSI 13: Post Operative Sepsis. IQI 08: In-hospital Mortality for Esophageal Resection. IQI 09: In-hospital Mortality for Pancreatic Resection. IQI 12: In-hospital Mortality for CABG. IQI 13: In-hospital Mortality for Craniotomy*. IQI 14: In-hospital Mortality for Hip Replacement. IQI 15: In-hospital Mortality for AMI. IQI 16: In-hospital Mortality for CHF. IQI 17: In-hospital Mortality for Stroke. IQI 18: In-hospital Mortality for GI Hemorrhage*. IQI 20: In-hospital Mortality for Pneumonia. Short Half-Life prophylactic administered preoperatively redosed within 4 hours after preoperative dose. Hospital-specific 30-day risk-standardized readmission rate following Percutaneous Coronary Intervention (PCI) among patients aged 18 years or older. PCI Mortality for STEMI/shock patients: Hospital-specific 30-day all-cause risk-standardized mortality rate following Percutaneous Coronary Intervention (PCI) among patients aged 18 years or older with ST segment elevation myocardial infarction (STEMI) or cardiogenic shock at the time of procedure. PCI Mortality for non-STEMI/non-shock patients: Hospital-specific 30-day all-cause risk-standardized mortality rate following Percutaneous Coronary Intervention (PCI) among patients aged 18 years or older without ST segment elevation myocardial infarction (STEMI) and without cardiogenic shock at the time of procedure. Hospital-specific risk-standardized complication rate following implantable cardioverter defibrillator (ICD) implantation among patients aged 18 years or older. Methicillin-Resistant Staphylococcus Aureus (MRSA). Clostridium Difficile Associated Diseases (CDAD). Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Cardiac Nursing Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Surgery ................................................ Sensitive .............................................. Nursing Sensitive .............................................. Nursing Sensitive/HAI ....................................... Nursing Sensitive/HAI ....................................... Nursing Sensitive/HAI ....................................... Nursing Sensitive .............................................. Nursing Sensitive .............................................. Nursing Sensitive .............................................. Nursing Sensitive .............................................. Nursing Sensitive .............................................. Nursing Sensitive .............................................. Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... Outcomes ......................................................... SCIP ................................................................. PCI Readmission .............................................. PCI Mortality ..................................................... ICD Complications ............................................ sroberts on PROD1PC70 with FRONTMATTER Hospital Acquired Infections ............................. Hospital Acquired Infections ............................. * AHRQ is currently working with to improve and refine these measures, after which they will be updated to reflect the most current evidence learned as a result of validation efforts and empirical analyses. We are inviting public comment on these measures for potential future use in the RHQDAPU program, as well as suggestions and supporting rationales VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 for additional measures to consider using in the program at a future time. PO 00000 5. Form, Manner, and Timing of Quality Data Submission Section 1886(b)(3)(B)(viii)(I) of the Act requires that subsection (d) Frm 00095 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24174 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER hospitals submit data on measures selected under that clause with respect to the applicable fiscal year. In addition, section 1886(b)(3)(B)(viii)(II) of the Act requires that each subsection (d) hospital submit data on measures selected under that clause to the Secretary in a form and manner, and at a time, specified by the Secretary. The data submission requirements, Specifications Manual, and submission deadlines are posted on the QualityNet Web site at: https://www.QualityNet.org. CMS requires that hospitals submit data in accordance with the specifications for the appropriate discharge periods. Hospitals submit quality data through the secure portion of the QualityNet Web site (formerly known as QualityNet Exchange) (https://www.QualityNet.org). This Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements for security of protected health information. a. Proposed RHQDAPU Program Procedures for the FY 2011 Payment Determination For the FY 2011 payment determination, we are proposing that the following procedures will apply to hospitals participating in the RHQDAPU program. These procedures are, for the most part, the same as the procedures that apply to the FY 2010 payment determination. We identify below where we have proposed to modify a procedure. • Register with QualityNet, before participating hospitals initially begin reporting data, regardless of the method used for submitting data. • Identify a QualityNet Administrator who follows the registration process located on the QualityNet Web site (https://www.qualitynet.org). • Notice of Participation. New subsection (d) hospitals and existing hospitals that wish to participate in the RHQDAPU program for the first time must complete a revised ‘‘Reporting Hospital Quality Data for Annual Payment Update Notice of Participation’’ form (Notice of Participation form) that includes the name and address of each hospital campus that shares the same CMS Certification Number (CCN). We are proposing that any hospital that receives a new CCN on or after October 15, 2009 (including new subsection (d) hospitals and hospitals that have merged) that wishes to participate in the RHQDAPU program and has not otherwise submitted a Notice of Participation form using that CCN must submit a completed Notice of Participation form no later than 180 days from the date identified as the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 ‘‘open date’’ on the approved CMS Online System Certification and Reporting (OSCAR) system. We believe that this deadline will give these hospitals a sufficient amount of time to get their operations up and running while simultaneously providing CMS with clarity regarding whether they intend to participate in the RHQDAPU program for FY 2011. We also are proposing that hospitals having an open date (as noted on the approved CMS OSCAR system) before October 15, 2009 that did not participate in the RHQDAPU program in FY 2010 but that wish to participate in the RHQDAPU program for the FY 2011 payment determination must submit a completed Notice of Participation form to CMS on or before December 31, 2009. These hospitals, unlike hospitals that receive a new CCN, do not need to get their operations up and running. Therefore, we believe this is a reasonable deadline that will enable these hospitals to decide whether they want to participate in the RHQDAPU program while also enabling CMS to collect enough data from them to make an accurate FY 2011 payment determination. We note that under our current requirements, hospitals must begin submitting RHQDAPU program data starting with the first day of the quarter following the date when the hospital registers to participate in the program. For purposes of meeting this requirement, we interpret the registration date to be the date that the hospital submits a completed Notice of Participation form. As proposed previously in this section, hospitals must also register with QualityNet and identify a QualityNet Administrator who follows the QualityNet registration process before submitting RHQDAPU program data. • Collect and report data for each of the quality measures under the topic areas that require chart abstraction. For the FY 2011 payment determination, these topic areas are AMI, HF, PN, and SCIP. Hospitals must report these data by each quarterly deadline. Hospitals must submit the data to the QIO Clinical Warehouse using the CMS Abstraction & Reporting Tool (CART), The Joint Commission ORYX ® Core Measures Performance Measurement System, or another third-party vendor tool that meets the measurement specification requirements for data transmission to QualityNet. All submissions will be executed through My QualityNet, the secure part of the QualityNet Web site. Because the information in the QIO Clinical Warehouse is considered QIO information, it is subject to the stringent PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 QIO confidentiality regulations in 42 CFR Part 480. The QIO Clinical Warehouse will submit the data to CMS on behalf of the hospitals. • Submit complete data for each quality measure that requires chart abstraction in accordance with the joint CMS/Joint Commission sampling requirements located on the QualityNet Web site. These requirements specify that hospitals must submit a random sample or complete population of cases for each of the topics covered by the quality measures. Hospitals must meet the sampling requirements for these quality measures for discharges in each quarter. • Submit to CMS on a quarterly basis aggregate population and sample size counts for Medicare and non-Medicare discharges for the topic areas for which chart-abstracted data must be submitted (currently AMI, HF, PN, and SCIP). However, in order to reduce the burden on hospitals that treat a low number of patients in a RHQDAPU program topic area, a hospital that has five or fewer discharges (Medicare and non-Medicare combined) in a topic area during a quarter in which data must be submitted is not required to submit patient-level data for that topic area for the quarter. The hospital must still submit its aggregate population and sample size counts for Medicare and non-Medicare discharges for the four topic areas each quarter. We also note that hospitals meeting the five or fewer patient discharge exception may voluntarily submit these data. • Continuously collect and submit HCAHPS data in accordance with the HCAHPS Quality Assurance Guidelines, V4.0 (the most current version of the guidelines), located at the Web site https://www.hcahpsonline.org. The QIO Clinical Warehouse will accept zero HCAHPS-eligible discharges. However, in order to reduce the burden on hospitals that treat a low number of patients that would be otherwise covered by the HCAHPS submission requirements, a hospital that has five or fewer HCAHPS-eligible discharges during a month is not required to submit HCAHPS surveys for that month. However, hospitals that meet this exception may voluntarily submit this data. The hospital must still submit its total number of HCAHPS-eligible cases for that month as part of its quarterly HCAHPS data submission. • The quarterly data submission deadline for hospitals to submit patient level data for the proposed measures that require chart abstraction is 41⁄2 months following the last discharge date in the calendar quarter. CMS will post the quarterly submission deadline E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules schedule on the QualityNet Web site (https://www.QualityNet.org). The collection of new chart-abstracted measures for FY 2011 payment determination would begin with 1st calendar quarter 2010 discharges, for which the submission deadline would be August 15, 2010. • The data submission deadline for hospitals to submit aggregate population and sample size count data for the measures requiring chart abstraction is four months following the last discharge date in the calendar quarter. This requirement allows CMS to advise hospitals regarding their submission status in enough time for them to make appropriate revisions before the data submission deadline. We will post the aggregate population and sample size count data submission deadlines on the QualityNet Web site (https:// www.QualityNet.org). CMS strongly recommends that hospitals review the QIO Clinical Warehouse Feedback Reports and the RHQDAPU Program Provider Participation Reports that are available after patient level data are submitted to the QIO Clinical Warehouse. CMS 24175 generally updates these reports on a daily basis to provide accurate information to hospitals about their submissions. These reports enable hospitals to ensure that their data were submitted on time and accepted into the QIO Clinical Warehouse. Hospitals are encouraged to regularly check the QualityNet Web site, https:// www.QualityNet.org for program updates and information. • The following RHQDAPU program claims-based measures will be calculated using Medicare claims: FY 2011 Payment determination: proposed claims-based quality measures (no hospital data submission required) Topic Mortality Measures (Medicare Patients) • MORT–30–AMI Acute Myocardial Infarction 30-day mortality—Medicare patients. • MORT–30–HF Heart Failure 30-day mortality—Medicare patients. • MORT–30–PN Pneumonia 30-day mortality—Medicare patients. Readmission Measures (Medicare Patients) • READ–30–HF Heart Failure (HF) 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–AMI Acute Myocardial Infarction (AMI) 30-Day Risk Standardized Readmission Measure (Medicare patients). • READ–30–PN Pneumonia (PN) 30-Day Risk Standardized Readmission Measure (Medicare patients). AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) and Composite Measures • • • • • • • • PSI 06: Iatrogenic pneumothorax, adult. PSI 14: Postoperative wound dehiscence. PSI 15: Accidental puncture or laceration. IQI 11: Abdominal aortic aneurysm (AAA) mortality rate (with or without volume). IQI 19: Hip fracture mortality rate. Mortality for selected surgical procedures (composite). Complication/patient safety for selected indicators (composite). Mortality for selected medical conditions (composite). AHRQ Patient Safety Indicator (PSI) and Nursing Sensitive Care sroberts on PROD1PC70 with FRONTMATTER • Death among surgical inpatients with serious, treatable complications. For the claims-based RHQDAPU program measures listed in the table above, hospitals are not required to submit the data to the QIO Clinical Warehouse. CMS uses the existing Medicare fee-for-service claims to calculate the measures. For the FY 2011 payment determination, CMS will use three years of discharges from July 1, 2006 through June 30, 2009 for the 30day mortality and 30-day readmission measures. For the AHRQ PSI, IQI and Composite measures (including the AHRQ PSI and Nursing Sensitive Care measure, Death among surgical inpatients with serious, treatable complications), we will use one year of claims from July 1, 2008 through June 30, 2009 to calculate these measures. • We are proposing that hospitals report the information needed to calculate the three proposed structural measures directly onto the QualityNet Web site on a quarterly basis starting with 1st calendar quarter 2010. The quarterly submission deadline for reporting these measures will be 41⁄2 months following the last date in the quarter covered by the data report. For example, the reporting deadline for Topic these structural measures covering 1st calendar quarter 2010 is August 15, 2010. The 41⁄2 month lag between the end of the quarter and the reporting deadline is intended to provide hospitals with sufficient time to collect the information needed to accurately report the proposed structural measures, and aligns with the quarterly submission deadlines for the measures for which chart-abstraction is required. The following is the list of three structural measures proposed for the FY 2011 payment determination: FY 2011 Payment determination: proposed structural measures Cardiac Surgery • Participation in a Systematic Database for Cardiac Surgery. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24176 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Topic FY 2011 Payment determination: proposed structural measures Stroke Care • Participation in a Systematic Clinical Database Registry for Stroke Care. Nursing Sensitive Care • Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. We will add a link on the QualityNet Web site to the Web page(s) hospitals can use to report the proposed structural measures after we issue the FY 2010 IPPS final rule. b. RHQDAPU Program Disaster Extensions and Waivers We are soliciting public comment about rules we could adopt that would enable hospitals to request either an extension or a waiver of various RHQDAPU program requirements in the event of a disaster (such as a hurricane that damages or destroys the hospital). Specifically, we welcome public comment on the following issues: • Recommendations for rules that we could follow when considering whether to grant an extension or waiver of RHQDAPU program requirements in the event of a disaster, including suggested criteria that we should take into account (for example, specific hospital infrastructure damage, hospital closure time period, degree of destruction of medical records, impact on data vendors, long-term evacuation of discharged patients impacting HCAHPS survey participation). • The role that QIOs and QIO support contractors should play in the event of a disaster, including communicating with affected hospitals, communicating with State hospital associations, and collecting information directly from hospitals. • How CMS extension or waiver decisions should be communicated to affected hospitals. • Any other issues commenters deem relevant to a hospital’s request for an extension or waiver of RHQDAPU program requirements in the event of a disaster. sroberts on PROD1PC70 with FRONTMATTER c. HCAHPS Requirements for the FY 2011 Payment Determination We are proposing that, for the FY 2011 payment determination, the RHQDAPU program HCAHPS requirements we adopted for FY 2010 would continue to apply. Under these requirements, a hospital must continuously collect and submit HCAHPS data in accordance with the current HCAHPS Quality Assurance Guidelines and the quarterly data VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 submission deadlines, both of which are posted at https://www.hcahpsonline.org. In order for a hospital to participate in the collection of HCAHPS data, a hospital must either: (1) Contract with an approved HCAHPS survey vendor that will conduct the survey and submit data on the hospital’s behalf to the QIO Clinical Warehouse; or (2) selfadminister the survey without using a survey vendor provided that the hospital attends HCAHPS training and meets Minimum Survey Requirements as specified on the Web site at: https:// www.hcahpsonline.org. A current list of approved HCAHPS survey vendors can be found on the HCAHPS Web site at: https://www.hcahpsonline.org. Every hospital choosing to contract with a survey vendor should provide the sample frame of HCAHPS-eligible discharges to its survey vendor with sufficient time to allow the survey vendor to begin contacting each sampled patient within 6 weeks of discharge from the hospital. (We refer readers to the Quality Assurance Guidelines located at https:// www.hcahpsonline.org for details about HCAHPS eligibility and sample frame creation.) In addition, the hospital must authorize the survey vendor to submit data via My QualityNet, the secure part of the QualityNet Web site, on the hospital’s behalf. After the survey vendor submits the data to the QIO Clinical Warehouse, we strongly recommend that hospitals employing a survey vendor promptly review the two HCAHPS Feedback Reports (the Provider Survey Status Summary Report and the Data Submission Detail Report) that are available. These reports enable a hospital to ensure that its survey vendor has submitted the data on time and the data has been accepted into the QIO Clinical Warehouse. As we stated above, any hospital that has five or fewer HCAHPS-eligible discharges in any month is no longer required to submit HCAHPS surveys for that month, although the hospital may voluntarily choose to submit these data. However, the hospital must still submit its total number of HCAHPS-eligible cases for that month as part of its quarterly HCAHPS data submission. PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 In order to ensure compliance with HCAHPS survey and administration protocols, hospitals and survey vendors must participate in all oversight activities. As part of the oversight process, during the onsite visits or conference calls, the HCAHPS Project Team will review the hospital’s or survey vendor’s survey systems and assess protocols based upon the most recent HCAHPS Quality Assurance Guidelines. All materials relevant to survey administration will be subject to review. The systems and program review includes, but is not limited to: (a) Survey management and data systems; (b) printing and mailing materials and facilities; (c) telephone and IVR materials and facilities; (d) data receipt, entry and storage facilities; and (e) written documentation of survey processes. Organizations will be given a defined time period in which to correct any problems and provide follow-up documentation of corrections for review. As needed, hospitals and survey vendors will be subject to follow-up site visits or conference calls. If CMS determines that a hospital is not compliant with HCAHPS program requirements, CMS may determine that the hospital is not submitting HCAHPS data that meet the requirements of the RHQDAPU program. We continue to strongly recommend that each new hospital participate in an HCAHPS dry run, if feasible, prior to beginning to collect HCAHPS data on an ongoing basis to meet RHQDAPU program requirements. New hospitals can conduct a dry run in the last month of a calendar quarter. We refer readers to the Web site at https:// www.hcahpsonline.org for a schedule of upcoming dry runs. The dry run will give newly participating hospitals the opportunity to gain first-hand experience collecting and transmitting HCAHPS data without the public reporting of results. Using the official survey instrument and the approved modes of administration and data collection protocols, hospitals/survey vendors will collect HCAHPS data and submit the data to My QualityNet, the secure portion of QualityNet. For FY 2011, we are again encouraging hospitals to regularly check E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules the HCAHPS Web site at https:// www.hcahpsonline.org, for program updates and information. 6. Proposed Chart Validation Requirements a. Proposed Chart Validation Requirements and Methods for the FY 2011 Payment Determination For the FY 2011 payment determination, we are proposing to generally continue using the following existing requirements implemented in previous years. We note below where we are proposing to modify a requirement. These requirements, as well as additional information on these requirements, will be posted on the QualityNet Web site after we issue the FY 2010 final rule. • The Clinical Data Abstraction Center (CDAC) contractor will, each quarter, ask every participating hospital to submit five randomly selected medical charts from which the hospital previously abstracted and submitted data to the QIO Clinical Warehouse. We are proposing the following timeline with respect to CDAC contractor requests for paper medical records for the purpose of validating RHQDAPU program data. Beginning with CDAC requests for second calendar quarter 2009 paper medical records, the CDAC will request paper copies of the randomly selected medical charts from each hospital via certified mail, and the hospital will have 45 days from the date of the request (as documented on the request letter) to submit the requested records to the CDAC. If the hospital does not comply within 30 days, the CDAC will send a second certified letter to the hospital, reminding the hospital that it must return paper copies of the requested medical records within 45 calendar days following the date of the initial CDAC medical record request. If the hospital still does not comply, then the CDAC will assign a ‘‘zero’’ score to each data element in each missing record. We are proposing this timeline to provide hospitals with transparent and documented correspondence about RHQDAPU program validation paper medical record requests. Hospitals have submitted numerous questions to CMS about this process, and we believe this timeline will provide hospitals with adequate notice and time to submit paper copies of requested medical records to the CDAC contractor. We also believe that this timeline does not unduly burden hospitals. We remind hospitals that CMS reimburses up to 12 cents per copied page to copy the requested medical records, and CMS also pays United States Postal Service fees for hospitals to mail back a paper copy of the requested medical records. 24177 • Once the CDAC contractor receives the charts, it will reabstract the same data submitted by the hospitals and calculate the percentage of matching RHQDAPU program data element values for all of that data. • The hospital must pass our validation requirement of a minimum of 80 percent reliability. We use appropriate confidence intervals to determine if a hospital has achieved 80 percent reliability. The use of confidence intervals allows us to establish an appropriate range below the 80 percent reliability threshold that demonstrates a sufficient level of reliability to allow the data to still be considered validated. We estimate the percent reliability based upon a review of the sampled charts, and then calculate the upper 95 percent confidence limit for that estimate. If this upper limit is above the required 80 percent reliability, the hospital data are considered validated. • We will pool the quarterly validation estimates for the four most recently validated quarters (except for the SCIP-Cardiovascular-2 measure discussed below). For the FY 2011 payment update, we propose to validate 4th quarter CY 2008 through 3rd quarter 2009 discharge data for the following measures: Topic Quality measures validated using data from 4th quarter CY 2008 through 3rd quarter CY 2009 discharges AMI (Acute Myocardial Infarction) ...................... Aspirin at Arrival .................................................................................................... Aspirin Prescribed at Discharge ........................................................................... ACEI or ARB for LVSD ......................................................................................... Adult Smoking Cessation Advice/Counseling ....................................................... Beta-Blocker Prescribed at Discharge .................................................................. Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival .................. Primary PCI Received Within 90 Minutes of Hospital Arrival .............................. Discharge Instructions .......................................................................................... Evaluation of LVS Function .................................................................................. ACEI or ARB for LVSD ......................................................................................... Adult Smoking Cessation Advice/Counseling ....................................................... Pneumococcal Vaccination ................................................................................... Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital. Adult Smoking Cessation Advice/Counseling ....................................................... Initial Antibiotic Received Within 6 Hours of Hospital Arrival ............................... Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patients. Influenza Vaccination ............................................................................................ Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision ...... AMI–1. AMI–2. AMI–3. AMI–4. AMI–5. AMI–7a. AMI–8a. HF–1. HF–2. HF–3. HF–4. PN–2. PN–3b. Prophylactic Antibiotic Selection for Surgical Patients ......................................... Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time Cardiac Surgery Patients With Controlled 6 A.M. Postoperative Blood Glucose Surgery Patients with Appropriate Hair Removal ................................................. Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery. SCIP–Inf–2. SCIP–Inf–3. SCIP–Inf–4. SCIP–Inf–6. SCIP–VTE– 1. SCIP–VTE– 2. HF (Heart Failure) .............................................. PN (Pneumonia) ................................................. sroberts on PROD1PC70 with FRONTMATTER SCIP (Surgical Care Improvement Project)— named SIP for discharges prior to July 2006 (3Q06). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Measure ID# PN–4. PN–5c. PN–6. PN–7. SCIP–Inf–1. 24178 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules • SCIP-Cardiovascular-2 will be validated using data from 2nd and 3rd calendar quarter 2009 discharges. CMS adopted this measure in the FY 2009 IPPS final rule and hospitals began submitting data for this measure starting with 1st calendar quarter 2009 discharges (73 FR 48605). However, because we generally strive to provide hospitals with ample notice before we add a new measure to the list of measures for which we will validate data, we believe that 2nd quarter discharge data is an appropriate validation starting point for this measure (these data are not due to the QIO Clinical Warehouse until November 15, 2009). • We will continue using the designspecific estimate of the variance for the confidence interval calculation, which, in this case, is a stratified single stage cluster sample, with unequal cluster sizes. (For reference, see Cochran, William G.: Sampling Techniques, John Wiley & Sons, New York, chapter 3, section 3.12 (1977); and Kish, Leslie.: Survey Sampling, John Wiley & Sons, New York, chapter 3, section 3.3 (1964).) Each quarter is treated as a stratum for variance estimation purposes. sroberts on PROD1PC70 with FRONTMATTER b. Proposed Chart Validation Requirements and Methods for the FY 2012 Payment Determination and Subsequent Years RHQDAPU program data are currently validated by re-abstracting on a quarterly basis a random sample of five medical records for each hospital. This quarterly sample generally results in an annual combined sample of 20 patient records across four calendar quarters per hospital, but because each sample is random, it might not include medical records from each of the measure topics (for example, AMI, SCIP, etc.). As a result, data submitted by a hospital for one or more measure topics might not be validated for a given quarter or, in some cases, for an entire year or longer. In the FY 2009 IPPS proposed rule (73 FR 23658), we solicited public comments on the impact of adding measures to the validation process, as well as on modifications to the current validation process that could improve the reliability and validity of the methodology. We specifically requested input concerning the following: • Which of the measures or measure sets should be included in the chart validation process for subsequent years? • What validation challenges are posed by the RHQDAPU program measures and measure sets? What improvements could be made to VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 validation or reporting that might offset or otherwise address those challenges? • Should CMS switch from its current quarterly validation sample of five charts per hospital to randomly selecting a sample of hospitals, and selecting more charts on an annual basis to improve the reliability of hospital level validation estimates? • Should CMS select the validation sample by clinical topic to ensure that all publicly reported measures are covered by the validation sample? In the FY 2009 IPPS final rule, we summarized and responded to commenters’ views on these issues and stated that we will consider the issues raised by these commenters if we decide to make changes to the RHQDAPU program chart validation methodology. Our objective is to validate the accuracy of RHQDAPU program data collected by hospitals using medical record abstraction. Accurate data provide consumers with objective publicly reported information about hospital quality for more informed decision making. Consistent with the public comments we received in response to the FY 2009 IPPS proposed rule (73 FR 23658–9) and discussed in the FY 2009 IPPS final rule (73 FR 48623), we believe that the methodology recommended in the CMS Hospital Value-Based Purchasing Report to Congress is a promising approach worth consideration in the RHQDAPU program. This approach is designed to validate the accuracy of hospital reported quality measure data, and is also directly applicable to validating RHQDAPU program chart-abstracted quality data. We recognize that hospitals need ample notification regarding proposed changes to the current RHQDAPU program validation process. We believe that the FY 2012 RHQDAPU program annual payment determination is the earliest opportunity to make significant modifications to our validation process. Therefore, we are proposing the following modifications to the RHQDAPU program validation methodology beginning with the FY 2012 payment determination. Specifically, we propose to do the following: • Randomly select on an annual basis 800 participating hospitals that submitted chart-abstracted data for at least 100 discharges combined in the measure topics to be validated. To determine whether a hospital meets this ‘‘100 chart threshold,’’ we will look to the discharge data submitted by the hospital during the calendar year three years prior to the fiscal year of the relevant payment determination. For PO 00000 Frm 00100 Fmt 4701 Sfmt 4702 example, if the 100 case threshold applied for the FY 2011 payment determination (which it will not), the applicable measure topics would be AMI, HF, PN, and SCIP, and we would choose 800 hospitals that submitted discharge data for at least 100 cases combined in these topics during calendar year 2008. If a hospital did not submit discharge data for at least 100 cases in these topics during CY 2008, we would not select the hospital for validation. We will announce the topic areas that apply for the FY 2012 payment determination at a later date, and we plan to select the first 800 hospitals in July 2010. We will select hospitals for the FY 2012 validation if they meet the 100 chart threshold during CY 2009. We have proposed this 100-chart threshold because we believe that it strikes the appropriate balance between ensuring that the selected hospitals have a large enough patient population to be able to submit sufficient data to allow us to complete an accurate validation, while not requiring validation for hospitals with a low number of submitted quarterly cases and relatively unreliable measure estimates. Based on previously submitted data, we estimate that 98 percent of participating RHQDAPU program hospitals will meet this threshold and, thus, be eligible for validation. As noted below, we are soliciting comments and suggestions on how we might be able to target the remaining 2 percent of hospitals for validation. • Randomly validate for each of the 800 selected hospitals a stratified sample each quarter of the validation period. Each quarterly sample will include 12 cases, with at least one but no more than three cases per topic for which chart-abstracted data was submitted by the hospital. However, we recognize that some selected hospitals might not have enough cases in all of the applicable topics to submit data (for example, if they have 5 or fewer discharges in a topic area in a quarter). For those hospitals, we would validate measures in only those topic areas for which they have submitted data. We have proposed this 100-chart threshold because we believe that it strikes the appropriate balance between ensuring that the selected hospitals have a large enough patient population to be able to submit sufficient data to allow us to complete an accurate validation, while not requiring validation for hospitals with a low number of submitted quarterly cases and relatively unreliable measure estimates. For the FY 2012 payment determination, we will validate 1st E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules calendar quarter 2010 through 3rd calendar quarter 2010 discharge data. We are proposing to validate 3 quarters of data for FY 2012 in order to provide hospitals with enough time to assess their medical record documentation and abstraction practices, and to take necessary corrective actions to improve these practices, before documenting their 1st calendar quarter 2010 discharges into medical records that may be sampled as part of this proposed validation process. Beginning with the FY 2013 payment determination, we propose validating data submitted by hospitals during the four quarters that make up the fiscal year that occurs two years prior to the year that applies to the payment determination. For example, for FY 2013, we would validate 4th calendar quarter 2010 through 3rd quarter 2011 discharge data. This lag between the time a hospital submits data and the time we can validate that data is necessary because data is not due to the QIO Clinical Warehouse until 41⁄2 months after the end of each quarter, and we need additional time to select hospitals and complete the validation process. • We are proposing that the CDAC contractor will, each quarter that applies to the validation, ask each of the 800 selected hospitals to submit 12 randomly selected medical charts from which data was abstracted and submitted by the hospital to the QIO Clinical Warehouse. We note that, under our current requirements, hospitals must begin submitting RHQDAPU program data starting with the first day of the quarter following the date when the hospital registers to participate in the program. For purposes of meeting this requirement, we interpret the registration date to be the date that the hospital submits a completed Notice of Participation form. As proposed previously in this section, hospitals must also register with QualityNet and identify a QualityNet Administrator who follows the QualityNet registration process before submitting RHQDAPU program data. In addition, we are proposing to continue the following timeline with respect to CDAC contractor requests for paper medical records for the purpose of validating RHQDAPU program data. Beginning with CDAC requests for second calendar quarter 2009 paper medical records, the CDAC will request paper copies of the randomly selected medical charts from each hospital via certified mail, and the hospital will have 45 days from the date of the request (as documented on the request letter) to submit the requested records to VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the CDAC. If the hospital does not comply within 30 days, the CDAC will send a second certified letter to the hospital, reminding the hospital that it must return paper copies of the requested medical records within 45 calendar days following the date of the initial CDAC medical record request. If the hospital still does not comply, then the CDAC will assign a ‘‘zero’’ score to each measure in each missing record. • Once the CDAC contractor receives the charts, it will re-abstract the same data submitted by the hospitals and calculate the percentage of matching RHQDAPU program measure numerators and denominators for each measure within each chart submitted by the hospital. Specifically, we will estimate the accuracy by calculating a match rate percent agreement for all of the variables submitted in all of the charts. For any selected record, a measure’s numerator and denominator can have two possible states, included or excluded, depending on whether the hospital accurately included the cases in the measure numerator(s) and denominator(s). We will count each measure in a selected record as a match if the hospital submitted measure numerator and denominator sets match the measure numerator and denominator states independently abstracted by our contractor. For example, one heart failure case from which data has been abstracted for four RHQDAPU program chart-abstracted measures (that is, HF–1, HF–2, HF–3, and HF–4) would receive a 75 percent match if three out of four of the hospital-reported heart failure measure numerator and denominator states matched the re-abstracted numerator and denominator states. This proposed scoring approach is the same as recommended in the CMS Hospital Value-Based Purchasing Report to Congress, and is illustrated in further detail using an example in pages 83–4 of the report (https://www.cms.hhs.gov/ AcuteInpatientPPS/downloads/Hospital VBPPlan RTCFINALSUBMITTED2007.pdf). We believe that this approach is appropriate, as supported by many commenters’ support in the FY 2009 IPPS final rule to our request for input about the RHQDAPU program validation process (73 FR 48622–3). • Use, as we currently do, each selected case as a cluster comprising one or multiple measures utilized in a validation score estimate. Each selected case will have multiple measures included in the validation score (for example, for the FY 2012 payment determination, a heart failure record will include 4 heart failure measures). PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 24179 Specifically, we propose to continue using the design-specific estimate of the variance for the confidence interval calculation, which, in this case, is a stratified single stage cluster sample, with unequal cluster sizes. (For reference, see Cochran, William G.: Sampling Techniques, John Wiley & Sons, New York, chapter 3, section 3.12 (1977); and Kish, Leslie: Survey Sampling, John Wiley & Sons, New York, chapter 3, section 3.3 (1964).) Each quarter and clinical topic is treated as a stratum for variance estimation purposes. We believe that the proposed clustering approach is a statistically appropriate technique for calculating the annual validation confidence interval. Since CMS will not be validating all hospital records, we need to calculate a confidence interval that incorporates a potential sampling error. Our clustering approach incorporates the degree of correlation at the individual data record level, because our previous validation experience indicates that hospital data mismatch errors tend to be clustered in individual data records. CMS has used this clustering since the inception of the RHQDAPU program validation requirement to calculate variability estimates needed for calculating confidence intervals (70 FR 47423). • Use the upper bound of a one-tailed 95 percent confidence interval to estimate the validation score; and • Require all RHQDAPU program participating hospitals selected for validation to attain at least a 75 percent validation score per quarter to pass the validation requirement. We believe that this proposal incorporates many of the principles supported by the vast majority of commenters in response to our solicitation for public comments in the FY 2009 IPPS proposed rule (73 FR 23658 through 23659). Specifically, we believe that the increased annual sample size per hospital will provide more reliable estimates of validation accuracy. The proposed sample size of 12 records per quarter would provide a total of 36 records across the three sampled quarters for the FY 2012 payment determination, and 48 records in subsequent years. This estimate would improve the reliability of our validation estimate, as compared to the current RHQDAPU program annual validation sample of 20 cases per year. We also believe that modifying the validation score to reflect measure numerator and denominator accuracy will ensure that accurate data are posted on the Hospital Compare Web site. E:\FR\FM\22MYP2.SGM 22MYP2 24180 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER In addition, we believe that stratified quarterly samples by topic will improve the feedback provided to hospitals. CMS would provide validation feedback to hospitals about all sampled topics submitted by the hospitals each quarter. Because all relevant data elements submitted by the hospital must match the independently re-abstracted data elements to count as a match, we have proposed to reduce the passing threshold from 80 percent to 75 percent. We are proposing to use a one-tail confidence interval to calculate the validation score because we strongly believe that a one-tail test most appropriately reflects the pass or fail dichotomous nature of the statistical test regarding whether the confidence interval includes or is completely above the 75 percent passing validation score. We are also proposing to continue to allow hospitals that fail to meet the passing threshold for the quarterly validation an opportunity to appeal the validation results to their State QIO. QIOs are currently tasked by CMS to provide education and technical assistance about RHQDAPU program data abstraction and measures to hospitals, and the quarterly validation appeals process will provide hospitals with an opportunity to both appeal their quarterly results and receive education free of charge from their State QIO. This State QIO quarterly validation appeals process is independent of the proposed RHQDAPU program reconsideration procedures for hospital reconsideration requests involving validation for the FY 2010 payment update proposed below in section V.A.9. of this proposed rule. c. Possible Supplements to the Chart Validation Process for the FY 2013 Payment Determination and Subsequent Years We also are soliciting public comment about criteria we could use to target hospitals for validation in the future. These targeting criteria could include abnormal data patterns identified by analyzing hospital-submitted measure rates and counts for RHQDAPU program measures. For example: • A high number of years a hospital was not randomly selected for annual validation (for example, at least 5 years); • Consistently high measure denominator exclusion rates resulting in unexpectedly low denominator counts; • Consistently high measure rates, relative to national averages; • Small annual submission number of cases in previous years resulting in hospital exclusion from RHQDAPU program validation sample; • Failing multiple previous years’ RHQDAPU program validations. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 7. Data Accuracy and Completeness Acknowledgement Requirements for the FY 2011 Payment Determination and Subsequent Years For the FY 2011 payment determination and subsequent years, we are proposing to require hospitals to electronically acknowledge on an annual basis the completeness and accuracy of the data submitted for the RHQDAPU program payment determination. Hospitals will be able to submit this acknowledgement on the same Web page that they use to submit data necessary to calculate the structural measures, and we believe that this Web page will provide a secure vehicle for hospitals to directly acknowledge that their information is complete and accurate to the best of their knowledge. A single annual electronic acknowledgement will provide us with explicit documentation acknowledging that the hospital’s data is accurate and complete, but will not unduly burden hospitals. We note that commenters generally supported the idea of electronic attestation in the FY 2009 IPPS final rule (73 FR 48625) at the point of data submission to the QIO Clinical Warehouse. In addition, the Government Accountability Office (GAO) recommended in a 2006 report (GAO– 06–54) that hospitals self-report that their data are complete and accurate. Therefore, for the FY 2011 payment determination, we are proposing to require hospitals to electronically acknowledge their data accuracy and completeness once between January 1, 2010, and August 15, 2010. Hospitals will acknowledge that all information that is, or will be, submitted as required by the RHQDAPU program for the FY 2011 payment determination is complete and accurate to the best of their knowledge. 8. Public Display Requirements for the FY 2011 Payment Determination and Subsequent Years For the FY 2011 payment determination, we are proposing to generally continue using the following existing requirements implemented in previous years. Our continued goal for the chart validation requirements is to validate the reliability of RHQDAPU program chart-abstracted data. Accurate data are needed to calculate accurate publicly reported quality measures that are posted on the Hospital Compare Web site. We added the validation requirement in the FY 2006 IPPS final rule (70 FR 47421 through 47422) to ensure that hospitals submit reliable data for RHQDAPU program chart- PO 00000 Frm 00102 Fmt 4701 Sfmt 4702 abstracted measures, based on our experience in FY 2005 that hospitals vastly differed in their data reliability. We modified the validation requirements in the FY 2008 IPPS final rule with comment period (72 FR 47366 and 47367) to update the RHQDAPU program list of validated measures for FY 2008, and pooled multiple quarterly validation estimates into a single annual estimate to improve reliability. We modified these requirements to reflect the changing RHQDAPU list of chartabstracted measures and validate all available RHQDAPU program data. We note below the circumstances under which we are proposing to modify a requirement. We are proposing to update the list of validated RHQDAPU program measures for the FY 2011 payment determination to incorporate changes to our list of required chart-abstracted RHQDAPU program measures for CY 2009 discharges. These requirements, as well as additional information on these requirements, will be posted on the QualityNet Web site after we issue the FY 2010 IPPS final rule. Section 1886(b)(3)(B)(viii)(VII) of the Act provides that the Secretary shall establish procedures for making data submitted under the RHQDAPU program available to the public. The RHQDAPU program quality measures are posted on the Hospital Compare Web site (https:// www.hospitalcompare.hhs.gov). We require that hospitals sign a Notice of Participation form when they first register to participate in the RHQDAPU program. Once a hospital has submitted a form, the hospital is considered to be an active RHQDAPU program participant until such time as the hospital submits a withdrawal form to CMS (72 FR 47360). Hospitals signing this form agree that they will allow CMS to publicly report the quality measures included in the RHQDAPU program. We will continue to display quality information for public viewing as required by section 1886(b)(3)(B)(viii)(VII) of the Act. Before we display this information, hospitals will be permitted to review their information as recorded in the QIO Clinical Warehouse. Currently, hospital campuses that share the same CCN must combine data collection and submission across their multiple campuses (for both clinical measures and HCAHPS). These measures are then publicly reported on Hospital Compare as if they apply to a single hospital. We estimate that approximately 5 to 10 percent of the hospitals reported on the Hospital Compare Web site share CCNs. To E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER increase transparency in public reporting and improve the usefulness of the Hospital Compare Web site, we propose note on the Web site instances where publicly reported measures combine results from two or more hospitals. 9. Proposed Reconsideration and Appeal Procedures for the FY 2010 Payment Determination The general deadline for submitting a request for reconsideration in connection with the FY 2010 payment determination is November 1, 2009. As discussed more fully below, we are proposing that all hospitals submit a request for reconsideration and receive a decision on that request before they can file an appeal with the Provider Reimbursement Review Board (PRRB). For the FY 2010 payment determination, we are proposing to continue utilizing most of the same procedures that we utilized in FY 2009. Under these proposed procedures, the hospital must— • Submit to CMS, via QualityNet, a Reconsideration Request form (available on the QualityNet Web site) containing the following information: —Hospital CMS Certification number (CCN). —Hospital Name. —CMS-identified reason for failure (as provided in the CMS notification of failure letter to the hospital). —Hospital basis for requesting reconsideration. This must identify the hospital’s specific reason(s) for believing it met the RHQDAPU program requirements and should receive the full FY 2010 IPPS annual payment update. —CEO contact information, including name, e-mail address, telephone number, and mailing address (must include the physical address, not just the post office box). We are proposing to no longer require that the hospital’s CEO sign the RHQDAPU program reconsideration request. We have found that this requirement increases the burden for hospitals because it prevents them from electronically submitting the RHQDAPU program reconsideration request forms. In addition, to the extent that a hospital can submit a request for reconsideration on-line, the burden on our staff is reduced and, as a result, we can more quickly review the request. —QualityNet System Administrator contact information, including name, e-mail address, telephone number, and mailing address (must include the physical address, not just the post office box). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 —Paper medical record requirement for reconsideration requests involving validation. We are proposing that if a hospital asks us to reconsider an adverse RHQDAPU program payment decision made because the hospital failed the validation requirement, the hospital must submit paper copies of all the medical records that it submitted to the CDAC contractor each quarter for purposes of the validation. Hospitals must submit this documentation to a CMS contractor, which will redact all patient identifying information and forward the redacted copies to CMS. The contractor will be a QIO support contractor, which has authority to review patient level information under 42 CFR Part 480. We will post the address where hospitals can ship the paper charts on the QualityNet Web site after we issue the FY 2010 IPPS final rule. Hospitals submitting a RHQDAPU program validation reconsideration request will have all mismatched data reviewed by CMS, and not their State QIO. (As discussed in section V.A.6.b. of this preamble, the State QIO is available to conduct a quarterly validation appeal if so requested by a hospital.) For the FY 2010 payment determination, the RHQDAPU program data that will be validated is 4th calendar quarter 2007 through 3rd quarter calendar year 2008 discharge data, except for SCIP-Infection-4 and Infection-6, which will be validated using 2nd and 3rd calendar quarter 2008 discharges (73 FR 48621–2). Hospitals must provide a written justification for each appealed data element classified during the validation process as a mismatch. We will review the data elements that were labeled as mismatched, as well as the written justifications provided by the hospitals, and make a decision on the reconsideration request. As we mentioned above, we are proposing that all hospitals submit a reconsideration request to CMS and receive a decision on that request prior to submitting a PRRB appeal. We believe that the reconsideration process is less costly for both CMS and hospitals, and that this requirement will decrease the number of PRRB appeals by resolving issues earlier in the appeals process. Following receipt of a request for reconsideration, we will— • Provide an e-mail acknowledgement, using the contact information provided in the reconsideration request, to the CEO and the QualityNet Administrator that the request has been received. PO 00000 Frm 00103 Fmt 4701 Sfmt 4702 24181 • Provide written notification to the hospital CEO, using the contact information provided in the reconsideration request, regarding our decision. We expect the process to take approximately 60 to 90 days from the reconsideration request due date of November 1, 2009. If a hospital is dissatisfied with the result of a RHQDAPU program reconsideration decision, the hospital may file a claim under 42 CFR Part 405, Subpart R (a PRRB appeal). We are soliciting public comments on the extent to which these proposed procedures will be less costly for hospitals, and whether they will lead to fewer PRRB appeals. 10. RHQDAPU Program Withdrawal Deadlines We are proposing to accept RHQDAPU program withdrawal forms for the FY 2011 payment determination from hospitals until August 15, 2010. We are proposing this deadline to provide CMS with sufficient time to update the FY 2011 payment to hospitals starting on October 1, 2010. If a hospital withdraws from the program for the FY 2011 payment determination, it will receive a 2.0 percentage point reduction in its FY 2011 annual payment update. We note that once a hospital has submitted a Notice of Participation form, it is considered to be an active RHQDAPU program participant until such time as the hospital submits a withdrawal form to CMS. 11. Electronic Health Records a. Background Starting with the FY 2006 IPPS final rule, we have encouraged hospitals to take steps toward the adoption of EHRs (also referred to in previous rulemaking documents as electronic medical records) that will allow for reporting of clinical quality data from the EHRs directly to a CMS data repository (70 FR 47420 through 47421). We encouraged hospitals that are implementing, upgrading, or developing EHR systems to ensure that the technology obtained, upgraded, or developed conforms to standards adopted by HHS. We suggested that hospitals also take due care and diligence to ensure that the EHR systems accurately capture quality data and that, ideally, such systems provide point-of-care decision support that promotes optimal levels of clinical performance. In the FY 2008 IPPS final rule with comment period (72 FR 47366), we responded to comments we received on EHRs and noted that CMS planned to E:\FR\FM\22MYP2.SGM 22MYP2 24182 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER continue participating in the American Health Information Community (which has now sunset and is replaced by the National eHealth Collaborative) and other entities to explore processes through which an EHR could speed the collection of data and minimize the resources necessary for quality reporting. Recently, we initiated work directed toward enabling EHR submission of quality measures through EHR standards development and adoption. We are working under an inter-agency agreement between CMS and the Office of the National Coordinator for Healthcare Information Technology (ONC) to identify and harmonize standards for the EHR-based submission of Emergency Department Throughput measures, Stroke measures, and Venous Thromboembolism measures. These measures have received NQF endorsement and are potential measures for future inclusion in the RHQDAPU program. Pursuant to this agreement, the Healthcare Information Technology Standards Panel (HITSP) has been tasked with harmonizing the EHR data element standards for the measure sets. The work for these three measure sets began in September 2008 and is due to be completed in a little more than 1 year. It is expected that interoperable standards will be developed and fully vetted by October 2009. When HITSP posts the standards, we anticipate that EHR vendors will be able to code their EHR systems with the new specifications and begin collecting this data electronically. We expect that these standards will be provided to its Certification Commission for Healthcare Information Technology (CCHIT) for inclusion in the criteria for certification of inpatient EHRs. b. EHR Testing of Quality Measures Submission As we have previously stated, we are interested in the reporting of quality measures using EHRs, and we continue to encourage hospitals to adopt and use EHRs that conform to industry standards. We believe that the testing of EHR submission is an important and necessary step to establish the ability of EHRs to report clinical quality measures and the capacity of CMS to receive such data. Through CMS’ interagency agreement with ONC previously described, the interoperable standards for EHR-based submission of the Emergency Department (ED) Throughput, Stroke, and Venous Thromboembolism (VTE) measures are scheduled to be finalized in late 2009 and will be available for review and testing. We anticipate testing VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the components required for the submission of clinical quality data extracted from EHRs for these measures, and are exploring different mechanisms and formats that will aid the submission process, as well as ensure that the summary measure results extracted from the EHRs are reliable. When the interoperable for EHR-based submission standards become available, EHR vendors will be able to employ them in EHR systems and begin testing how they facilitate the electronic collection of these data. We intend to follow similar processes and procedures to those we are using for the PQRI EHR testing being conducted as described in the CY 2009 Medicare Physician Fee Schedule final rule with comment period (73 FR 69828 through 69830). We anticipate moving forward with testing CMS’ technical ability to accept data from EHRs for the ED, Stroke, and VTE measures as early as July 1, 2010. Pursuant to the Paperwork Reduction Act, prior to the beginning of testing EHR-based data submission, we will publish a Federal Register notice seeking public comments on the process we intend to follow to select EHR vendors/hospitals and the methodology we plan to use for testing EHR-based data submissions. The test measures described above are not currently required under the RHQDAPU program. As long as that remains the case, EHR test data that is received for these measures will not be used to make RHQDAPU program payment decisions. In addition, the posting of the electronic specifications for any particular measure should not be interpreted as a signal that we intend to select the measure for inclusion in the RHQDAPU program measure set. We intend to select several EHR vendors/hospitals to develop and test EHR clinical quality data submission. EHR vendors/hospitals that wish to participate in the development and testing process will be able to selfnominate by sending a letter of interest to: ‘‘RHQDAPU Program IT Testing Nomination’’ Centers for Medicare and Medicaid Services, Office of Clinical Standards and Quality, Quality Measurement and Health Assessment Group, 7500 Security Boulevard, Mail Stop S3–02–01, Baltimore, MD 21244– 8532. The letter must be received by CMS by 6 p.m., E.S.T. on December 31, 2009. Vendors/hospitals will be selected based on the following criteria: (1) They are able to submit clinical EHR data using interoperability standards such as Cross Document Sharing (XDS), Cross Community Access (XCA), Clinical Data Architecture (CDA), and Health Level 7 Version 3 to a CMS-designated clinical PO 00000 Frm 00104 Fmt 4701 Sfmt 4702 data repository; and (2) they have established or have applied for a QualityNet account. More information regarding these capabilities will be made available on the Hospital Quality Initiative section of the CMS Web site at: www.cms.hhs.gov/ HospitalQualityInits/. Preference may be given to EHR vendors/hospitals that utilize EHRs that are currently certified by the CCHIT, use the National Health Information Network (NHIN), and/or utilize Health Information Technology Standards Panel (HITSP)/Integrating the Healthcare Environment (IHE) standards. EHR vendors/hospitals that would like to test the submission of inpatient EHR data to the CMS-designated clinical data repository should update their EHR products or otherwise ensure that those products can capture and submit the necessary data elements identified for an EHR-based submission once the standardized format has been determined. We suggest that these entities begin submitting EHR data promptly after CMS announces that the clinical data repository is ready to accept such data so that problems that may complicate or preclude a successful quality measure data submission can be corrected. We welcome comments on this discussion of EHR-based data submission testing. c. HITECH Act EHR Provisions On February 17, 2009, the President signed into law the ARRA, Public Law 111–5. The HITECH Act (Title IV of Division B of the ARRA, together with Title XIII of Division A of the ARRA), authorizes payment incentives under Medicare for the adoption and use of certified EHR technology beginning in FY 2011. Hospitals are eligible for these payment incentives if they meet the following three requirements: meaningful use of certified EHR technology; electronic exchange of health information; and reporting on measures using certified EHR technology (provided the Secretary has the capacity to receive such information electronically). With respect to this requirement, under section 1886(n)(3)(A)(ii) of the Act, as added by section 4102 of the HITECH Act, the Secretary shall select measures, including clinical quality measures, that hospitals must provide to CMS in order to be eligible for the EHR incentive payments. With respect to the clinical quality measures, section 1886(n)(3)(B)(i) of the Act requires the Secretary to give preference to those clinical quality measures that have been selected for the RHQDAPU program E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules under section 1886(b)(3)(B)(viii) of the Act or that have been endorsed by the entity with a contract with the Secretary under section 1890(a) of the Act. Any measures must be proposed for public comment prior to their selection, except in the case of measures previously selected for the RHQDAPU program under section 1886(b)(3)(B)(viii) of the Act. Thus, the RHQDAPU program and the HITECH Act have important areas of overlap and synergy with respect to the reporting of quality measures using EHRs. We believe the financial incentives under the HITECH Act for the adoption and meaningful use of certified EHR technology by hospitals will encourage the adoption and use of certified EHRs for the reporting of clinical quality measures under the RHQDAPU program. Further, these efforts to test the submission of quality data through EHRs may provide a foundation for establishing the capacity of hospitals to send, and for CMS to receive, quality measures via hospital EHRs for future RHQDAPU program measures. We again note that the provisions in this proposed rule do not implicate or implement any HITECH statutory provisions. Those provisions will be implemented in a future rulemaking. sroberts on PROD1PC70 with FRONTMATTER B. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs): Budget Neutrality Adjustment Factors for FY 2002-Based Hospital-Specific Rate for MDHs (§ 412.79(j)) 1. Background Under the IPPS, special payment protections are provided to a sole community hospital (SCH). Section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other like hospitals (as determined by the Secretary) is the sole source of inpatient hospital services reasonably available to Medicare beneficiaries. The regulations that set forth the criteria that a hospital must meet to be classified as an SCH are located at 42 CFR 412.92. Section 1886(d)(5)(D)(iii)(III) of the Act and the regulations at § 412.109 also provide that certain essential access community hospitals (EACHs) will be treated as an SCH for payment purposes under the IPPS. Under the IPPS, separate special payment protections also are provided to a Medicare-dependent, small rural hospital (MDH). Section 1886(d)(5)(G)(iv) of the Act defines an VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 MDH as a hospital that is located in a rural area, has not more than 100 beds, is not an SCH, and has a high percentage of Medicare discharges (not less than 60 percent of its inpatient days or discharges in its 1987 cost reporting year or in two of its most recent three settled Medicare cost reporting years). The regulations that set forth the criteria that a hospital must meet to be classified as an MDH are located at 42 CFR 412.108. Although SCHs and MDHs are paid under special payment methodologies, they are still paid under section 1886(d) of the Act. Like all IPPS hospitals paid under section 1886(d) of the Act, SCHs and MDHs are paid for their discharges based on the DRG weights calculated under section 1886(d)(4) of the Act. For SCHs, effective with hospital cost reporting periods beginning prior to January 1, 2009, section 1886(d)(5)(D)(i) of the Act (as amended by section 6003(e) of Pub. L. 101–239 (OBRA 1989)) and section 1886(b)(3)(I) of the Act (as added by section 405 of Public Law 106–113 (BBRA 1999) and further amended by section 213 of Public Law 106–554 (BIPA 2000) provide that SCHs are paid based on whichever of four statutorily specified rates (listed below) yields the greatest aggregate payment to the hospital for the cost reporting period. For cost reporting periods beginning on or after January 1, 2009, section 122 of Public Law 110–275 (MIPPA 2008) further amended the Act to specify that SCHs will be paid based on a FY 2006 hospital-specific rate (that is, based on their updated costs per discharge from their 12-month cost reporting period beginning during Federal fiscal year 2006), if this results in the greatest payment to the SCH. Therefore, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment to the hospital for the cost reporting period: • The Federal rate applicable to the hospital; • The updated hospital-specific rate based on FY 1982 costs per discharge; • The updated hospital-specific rate based on FY 1987 costs per discharge; • The updated hospital-specific rate based on FY 1996 costs per discharge; or • The updated hospital-specific rate based on FY 2006 costs per discharge. For purposes of payment to SCHs for which the FY 1996 hospital-specific rate yields the greatest aggregate payment, payments for discharges during FYs 2001, 2002, and 2003 were based on a blend of the FY 1996 hospital-specific rate and the greater of the Federal rate or the updated FY 1982 or FY 1987 hospital-specific rate. For discharges PO 00000 Frm 00105 Fmt 4701 Sfmt 4702 24183 during FY 2004 and subsequent fiscal years, payments based on the FY 1996 hospital-specific rate are based on 100 percent of the updated FY 1996 hospital-specific rate. Through and including FY 2006, under section 1886(d)(5)(G) of the Act, MDHs are paid based on the Federal rate or, if higher, the Federal rate plus 50 percent of the amount by which the Federal rate is exceeded by the updated hospital-specific rates based on FY 1982 or FY 1987 costs per discharge, whichever of these hospital-specific rates is higher. Section 5003(b) of Public Law 109–171 (DRA 2005) amended section 1886(d)(5)(G) of the Act to provide that, for discharges occurring on or after October 1, 2006, MDHs are paid based on the Federal rate or, if higher, the Federal rate plus 75 percent of the amount by which the Federal rate is exceeded by the updated hospitalspecific rate based on FY 1982, FY 1987, or FY 2002 costs per discharge, whichever of these hospital-specific rates is the highest. Unlike SCHs, MDHs do not have the option to use their FY 1996 hospital-specific rate. For each cost reporting period, the fiscal intermediary or MAC determines which of the payment options will yield the highest aggregate payment. Interim payments are automatically made at the highest rate using the best data available at the time the fiscal intermediary or MAC makes the determination. However, it may not be possible for the fiscal intermediary or MAC to determine in advance precisely which of the rates will yield the highest aggregate payment by year’s end. In many instances, it is not possible to forecast the outlier payments, or the amount of the DSH adjustment or the IME adjustment, all of which are applicable only to payments based on the Federal rate and not to payments based on the hospital-specific rate. The fiscal intermediary or MAC makes a final adjustment at the close of the cost reporting period after it determines precisely which of the payment rates would yield the highest aggregate payment to the hospital. If a hospital disagrees with the fiscal intermediary’s or the MAC’s determination regarding the final amount of program payment to which it is entitled, it has the right to appeal the fiscal intermediary’s or the MAC’s decision in accordance with the procedures set forth in 42 CFR Part 405, Subpart R, which govern provider payment determinations and appeals. 2. FY 2002-Based Hospital-Specific Rate Acute care hospitals, including MDHs and SCHs, are paid under the IPPS. As mentioned earlier, under the special E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24184 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules payment methodologies for MDHs and SCHs, Medicare payments per discharge are made based on DRG weights, just like all other acute care hospitals paid under the IPPS. (We note that the MS– DRGs are currently used under the IPPS, effective beginning in FY 2008.) As discussed above, although the payment formulas for MDHs and SCHs differ slightly, it is common to both types of hospitals that they may be paid based on an updated hospital-specific rate determined from their costs per discharge in a specified base year. Section 1886(d)(4)(C)(iii) of the Act requires that aggregate IPPS payments be projected to neither increase nor decrease as a result of the annual changes to the DRG classifications and weighting factors. Beginning in FY 1994, in applying the current year’s budget neutrality adjustment factor to both the standard Federal rate and hospital specific rates, we do not remove the prior years’ budget neutrality adjustment factors when applying the current year budget neutrality adjustment factor to assure that estimated aggregate payments after the DRG changes are equal to estimated aggregate payments prior to the changes (48 FR 46345). As we explained, if we were to remove the prior year adjustment(s), we would not satisfy this condition. As we have previously explained (for example, in the FY 2006 IPPS final rule (70 FR 47429)), all section 1886(d) hospitals, including hospitals that are paid based on a hospital-specific rate, are subject to a DRG budget neutrality adjustment factor. As is the case for all other IPPS hospitals, these hospitals are paid based on DRG classification and weighting factors that must be considered when we determine whether aggregate IPPS payments are projected to increase or decrease as a result of the annual changes to the DRG classifications and weighting factors. In order to comply with the statutory requirement that the DRG changes be budget neutral, we compute a budget neutrality adjustment factor based on a comparison of estimated aggregate payments using the current year’s relative weights and factors to aggregate payments using the prior year’s relative weights and factors. This budget neutrality adjustment factor is then applied to the standardized per discharge payment amounts (that is, the Federal rates and the hospital-specific rates). Cumulative budget neutrality factors, beginning with the adjustment factor for FY 1993, apply to all rebased hospital-specific rate amounts derived from base years later than FY 1993. As discussed in the FY 2001 IPPS proposed VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 rule (55 FR 19466), we normalize DRG weights by an adjustment factor in order to ensure that the average case weight after recalibration is equal to the average case weight prior to recalibration. While this adjustment is intended to ensure that recalibration does not affect total payments to hospitals under section 1886(d) of the Act, our analysis has indicated that the normalization adjustment does not achieve budget neutrality with respect to aggregate payments to hospitals under section 1886(d) of the Act. Thus, in order to comply with the requirement of section 1886(d)(4)(C)(iii) of the Act that the DRG reclassification changes and recalibration of the relative weights be budget neutral, we also compute a budget neutrality adjustment factor that applies to both the standardized amounts and the hospital-specific rates. This budget neutrality adjustment ensures that the recalibration process does not inadvertently increase total payments to hospitals. If we were to remove this budget neutrality adjustment factor for years prior to the base year, we believe the normalized DRG weights applied to the hospitalspecific amounts would be artificially high, thus resulting in higher aggregate payments than permitted under the statute. Section 1886(b)(3)(I) of the Act (as added by section 405 of Pub. L. 106–113 (BBRA 1999) and further amended by section 213 of Public Law 106–554 (BIPA 2000)) contains a provision for SCHs to rebase their hospital-specific rate using the hospital’s FY 1996 cost per discharge data. Specifically, beginning in FY 2001, SCHs can use their allowable FY 1996 operating costs for inpatient hospital services as the basis for their hospital-specific rate rather than only their FY 1982 or FY 1987 costs, if using FY 1996 costs would result in higher payments. Effective for cost reporting periods beginning on or after January 1, 2009, SCHs will be paid based on their hospital-specific rate using FY 2006 costs, if this rate yields higher payments (as provided for under section 122 of Pub. L. 110–275 (MIPPA 2008)). For the reasons explained above, the instructions for implementing both the FY 1996 and FY 2006 SCH rebasing provisions direct the fiscal intermediary or MAC to apply cumulative budget neutrality adjustment factors to account for DRG changes since FY 1993 in determining an SCH’s hospital-specific rate based on either FY 1996 or FY 2006 cost data. (The FY 1996 SCH rebasing provision was implemented in Transmittal A–00–66 (Change Request 1331) dated September 18, 2000, and PO 00000 Frm 00106 Fmt 4701 Sfmt 4702 the FY 2006 SCH rebasing provision was implemented in a Joint Signature Memorandum (JSM/TDL–09052), dated November 17, 2008.) As stated previously, section 5003(b) of Public Law 109–171 (DRA 2005) allows MDHs to use the hospital’s FY 2002 costs per discharge (that is, the FY 2002 updated hospital-specific rate) for discharges occurring on or after October 1, 2006, if that results in a higher payment. To implement this provision, CMS issued Transmittal 1067 (Change Request 5276 dated September 25, 2006) with instructions to fiscal intermediaries to determine and update the FY 2002 hospital-specific rate for qualifying MDHs. To calculate an MDH’s FY 2002 hospital-specific rate and update it to FY 2007, the instructions directed fiscal intermediaries to apply cumulative budget adjustment factors for FYs 2003 through 2007. However, the instructions did not include the cumulative budget neutrality adjustment factor to account for changes in the DRGs from FYs 1993 through 2002. Consequently, any MDH that has been paid based on its FY 2002 hospital-specific rate since FY 2007 was paid based on a hospital-specific rate that was computed inconsistent with CMS’ stated policy of applying a cumulative budget neutrality adjustment factor to account for DRG changes as a result of annual updates. As a result, effective beginning in FY 2007, any MDH that was paid based on its FY 2002 hospital-specific rate (calculated in accordance with the instructions provided in Transmittal 1067) has been paid based on a hospitalspecific rate that failed to include a cumulative budget neutrality adjustment factor to account for DRG changes from FYs 1993 through 2002 (a cumulative budget neutrality adjustment factor of 0.982557 (or about ¥1.74 percent)), in addition to the cumulative budget neutrality adjustment factors applied for FYs 2003 through 2007 that have already been applied as specified in the implementing instructions. In order to conduct a meaningful comparison between payments under the Federal rate, which is adjusted by the cumulative budget neutrality factor, and payments based on the hospital-specific rate, consistent with our established policy of applying a cumulative budget neutrality adjustment factor to account for DRG changes since FY 1993, for discharges beginning on or after October 1, 2009, we will include the cumulative budget neutrality adjustment factors for the DRG changes from FYs 1993 through 2002 in addition to the cumulative E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules budget neutrality adjustment factors for FYs 2003 forward. The cumulative budget neutrality adjustment factor of 0.982557 is calculated as the product of the following budget neutrality adjustment factors to account for DRG changes from FYs 1993 through 2002: 0.999851 for FY 1993; 0.999003 for FY 1994; 0.998050 for FY 1995; 0.999306 for FY 1996; 0.998703 for FY 1997; 0.997731 for FY 1998; 0.998978 for FY 1999; 0.997808 for FY 2000; 0.997174 for FY 2001; and 0.995821 for FY 2002. We considered applying a factor of 0.982557 to any MDH’s FY 2002 hospital-specific rate to account for the cumulative budget neutrality adjustment for DRG changes from FYs 1993 through 2002, either effective for discharges occurring on or after October 1, 2006 (the initial effective date of the FY 2002 rebasing) or, alternatively, effective upon the issuance of the correction. However, consistent with the prospective nature of the rates under the IPPS, we are applying the adjustment on a prospective basis only, effective for discharges occurring on or after October 1, 2009 (FY 2010). This effective date would give affected MDHs sufficient notice of the change to their hospitalspecific rate. We estimate that approximately 50 MDHs would be affected by the application of the cumulative budget neutrality adjustment for DRG changes from FYs 1993 through 2002. Based on the current cumulative budget neutrality adjustment factor of 0.982557 to account for DRG changes from FYs 1993 through 2002, we estimate that, in some instances, application of the cumulative budget neutrality adjustment factor would lower the hospital-specific rate to the point that the Federal rate would result in higher payments. sroberts on PROD1PC70 with FRONTMATTER C. Rural Referral Centers (RRCs) (§ 412.96) Under the authority of section 1886(d)(5)(C)(i) of the Act, the regulations at § 412.96 set forth the criteria that a hospital must meet in order to qualify under the IPPS as an RRC. For discharges occurring before October 1, 1994, RRCs received the benefit of payment based on the other urban standardized amount rather than the rural standardized amount (as discussed in the FY 1993 IPPS final rule (59 FR 45404 through 45409). Although the other urban and rural standardized amounts are the same for discharges occurring on or after October 1, 1994, RRCs continue to receive special treatment under both the DSH payment adjustment and the criteria for geographic reclassification. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Section 402 of Public Law 108–173 raised the DSH adjustment for RRCs such that they are not subject to the 12percent cap on DSH payments that is applicable to other rural hospitals. RRCs are also not subject to the proximity criteria when applying for geographic reclassification. In addition, they do not have to meet the requirement that a hospital’s average hourly wage must exceed the average hourly wage of the labor market area where the hospital is located by a certain percentage. Section 4202(b) of Public Law 105–33 states, in part, ‘‘[a]ny hospital classified as an RRC by the Secretary * * * for fiscal year 1991 shall be classified as such an RRC for fiscal year 1998 and each subsequent year.’’ In the August 29, 1997 IPPS final rule with comment period (62 FR 45999), CMS reinstated RRC status for all hospitals that lost the status due to triennial review or MGCRB reclassification. However, CMS did not reinstate the status of hospitals that lost RRC status because they were now urban for all purposes because of the OMB designation of their geographic area as urban. However, subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were revisiting that decision. Specifically, we stated that we would permit hospitals that previously qualified as an RRC and lost their status due to OMB redesignation of the county in which they are located from rural to urban to be reinstated as an RRC. Otherwise, a hospital seeking RRC status must satisfy all of the other applicable criteria. We used the definitions of ‘‘urban’’ and ‘‘rural’’ specified in Subpart D of 42 CFR Part 412. One of the criteria under which a hospital may qualify as an RRC is to have 275 or more beds available for use (§ 412.96(b)(1)(ii)). A rural hospital that does not meet the bed size requirement can qualify as an RRC if the hospital meets two mandatory prerequisites (a minimum CMI and a minimum number of discharges), and at least one of three optional criteria (relating to specialty composition of medical staff, source of inpatients, or referral volume). (We refer readers to § 412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register (53 FR 38513).) With respect to the two mandatory prerequisites, a hospital may be classified as an RRC if— • The hospital’s CMI is at least equal to the lower of the median CMI for urban hospitals in its census region, excluding hospitals with approved teaching programs, or the median CMI for all urban hospitals nationally; and • The hospital’s number of discharges is at least 5,000 per year, or, if fewer, the median number of discharges for urban PO 00000 Frm 00107 Fmt 4701 Sfmt 4702 24185 hospitals in the census region in which the hospital is located. (The number of discharges criterion for an osteopathic hospital is at least 3,000 discharges per year, as specified in section 1886(d)(5)(C)(i) of the Act.) 1. Case-Mix Index Section 412.96(c)(1) provides that CMS establish updated national and regional CMI values in each year’s annual notice of prospective payment rates for purposes of determining RRC status. The methodology we used to determine the national and regional CMI values is set forth in the regulations at § 412.96(c)(1)(ii). The proposed national median CMI value for FY 2010 includes data from all urban hospitals nationwide, and the proposed regional values for FY 2010 are the median CMI values of urban hospitals within each census region, excluding those hospitals with approved teaching programs (that is, those hospitals that train residents in an approved GME program as provided in § 413.75). These proposed values are based on discharges occurring during FY 2008 (October 1, 2007 through September 30, 2008), and include bills posted to CMS’ records through December 2008. We are proposing that, in addition to meeting other criteria, if rural hospitals with fewer than 275 beds are to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2009, they must have a CMI value for FY 2008 that is at least— • 1.4667; or • The median CMI value (not transfer-adjusted) for urban hospitals (excluding hospitals with approved teaching programs as identified in § 413.75) calculated by CMS for the census region in which the hospital is located. The proposed median CMI values by region are set forth in the following table: Region 1. New England (CT, ME, MA, NH, RI, VT) ........................... 2. Middle Atlantic (PA, NJ, NY) 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) .. 4. East North Central (IL, IN, MI, OH, WI) ........................... 5. East South Central (AL, KY, MS, TN) ................................. 6. West North Central (IA, KS, MN, MO, NE, ND, SD) .......... 7. West South Central (AR, LA, OK, TX) ................................. 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ................. E:\FR\FM\22MYP2.SGM 22MYP2 Case-mix index value 1.2609 1.2993 1.4159 1.4013 1.3377 1.4010 1.4667 1.5233 24186 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Region 9. Pacific (AK, CA, HI, OR, WA) ....................................... Case-mix index value 1.4390 The preceding numbers will be revised in the FY 2010 IPPS final rule to the extent required to reflect the updated FY 2008 MedPAR file, which will contain data from additional bills received through March 2009. Hospitals seeking to qualify as RRCs or those wishing to know how their CMI value compares to the criteria should obtain hospital-specific CMI values (not transfer-adjusted) from their fiscal intermediary or MAC. Data are available on the Provider Statistical and Reimbursement (PS&R) System. In keeping with our policy on discharges, these CMI values are computed based on all Medicare patient discharges subject to the IPPS MS–DRG-based payment. 2. Discharges Section 412.96(c)(2)(i) provides that CMS set forth the national and regional numbers of discharges in each year’s annual notice of prospective payment rates for purposes of determining RRC status. As specified in section 1886(d)(5)(C)(ii) of the Act, the national standard is set at 5,000 discharges. We are proposing to update the regional standards based on discharges for urban hospitals’ cost reporting periods that began during FY 2007 (that is, October 1, 2006 through September 30, 2007), which were the latest cost report data available at the time this proposed rule was developed. Therefore, we are proposing that, in addition to meeting other criteria, a hospital, if it is to qualify for initial RRC status for cost reporting periods beginning on or after October 1, 2009, must have as the number of discharges for its cost reporting period that began during FY 2007 a figure that is at least— • 5,000 (3,000 for an osteopathic hospital); or • The median number of discharges for urban hospitals in the census region in which the hospital is located, as indicated in the following table. sroberts on PROD1PC70 with FRONTMATTER Region 1. New England (CT, ME, MA, NH, RI, VT) ........................... 2. Middle Atlantic (PA, NJ, NY) 3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) .. 4. East North Central (IL, IN, MI, OH, WI) ........................... 5. East South Central (AL, KY, MS, TN) ................................. VerDate Nov<24>2008 08:10 May 21, 2009 Number of discharges 8,329 10,655 10,038 9,262 6,311 Jkt 217001 IME adjustment factor is calculated by using a hospital’s ratio of residents to beds, which is represented as r, and a 6. West North Central (IA, KS, formula multiplier, which is MN, MO, NE, ND, SD) .......... 8,764 represented as c, in the following 7. West South Central (AR, LA, equation: c × [{1 + r}.405 ¥ 1]. The OK, TX) ................................. 6,222 formula is traditionally described in 8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ................. 10,452 terms of a certain percentage increase in payment for every 10-percent increase 9. Pacific (AK, CA, HI, OR, WA) ....................................... 8,763 in the resident-to-bed ratio. Section 502(a) of Public Law 108–173 modified the formula multiplier (c) to be These numbers will be revised in the used in the calculation of the IME FY 2010 IPPS final rule based on the adjustment. Prior to the enactment of latest available cost report data. Public Law 108–173, the formula We note that the median number of multiplier was fixed at 1.35 for discharges for hospitals in each census discharges occurring during FY 2003 region is greater than the national standard of 5,000 discharges. Therefore, and thereafter. In the FY 2005 IPPS final rule, we announced the schedule of 5,000 discharges is the minimum formula multipliers to be used in the criterion for all hospitals. calculation of the IME adjustment and We reiterate that, if an osteopathic incorporated the schedule in our hospital is to qualify for RRC status for regulations at § 412.105(d)(3)(viii) cost reporting periods beginning on or through (d)(3)(xii). Section 502(a) after October 1, 2009, the hospital would be required to have at least 3,000 modifies the formula multiplier beginning midway through FY 2004 and discharges for its cost reporting period provides for a new schedule of formula that began during FY 2007. multipliers for FYs 2005 and thereafter D. Indirect Medical Education (IME) as follows: Adjustment (§ 412.105) • For discharges occurring on or after April 1, 2004, and before October 1, 1. Background 2004, the formula multiplier is 1.47. Section 1886(d)(5)(B) of the Act • For discharges occurring during FY provides for an additional payment 2005, the formula multiplier is 1.42. amount under the IPPS for hospitals • For discharges occurring during FY that have residents in an approved 2006, the formula multiplier is 1.37. graduate medical education (GME) • For discharges occurring during FY program in order to reflect the higher 2007, the formula multiplier is 1.32. indirect patient care costs of teaching • For discharges occurring during FY hospitals relative to nonteaching 2008 and fiscal years thereafter, the hospitals. The regulations regarding the formula multiplier is 1.35. calculation of this additional payment, Accordingly, for discharges occurring known as the indirect medical during FY 2010, the formula multiplier education (IME) adjustment, are located is 1.35. We estimate that application of at § 412.105. this formula multiplier for the FY 2010 Public Law 105–33 (BBA 1987) IME adjustment will result in an established a limit on the number of increase in IPPS payment of 5.5 percent allopathic and osteopathic residents that for every approximately 10-percent a hospital may include in its full-time increase in the hospital’s resident-to-bed equivalent (FTE) resident count for ratio. direct GME and IME payment purposes. 3. IME-Related Proposed Changes in Under section 1886(h)(4)(F) of the Act, Other Sections of This Proposed Rule for cost reporting periods beginning on We refer readers to section V.E.2. and or after October 1, 1997, a hospital’s 4. of the preamble of this proposed rule unweighted FTE count of residents for purposes of direct GME may not exceed for a discussion of proposed changes to the hospital’s unweighted FTE count for the policies for counting beds and patient days in relation to the its most recent cost reporting period ending on or before December 31, 1996. calculations for the IME adjustment at § 412.105(b) and the DSH payment Under section 1886(d)(5)(B)(v) of the adjustment at § 412.106(a)(1)(ii). The Act, a similar limit on the FTE resident regulations relating to the DSH payment count for IME purposes is effective for discharges occurring on or after October adjustment at § 412.106(a)(1)(i) crossreference the IME regulation at 1, 1997. § 412.105(b), which specifies how the 2. IME Adjustment Factor for FY 2010 number of beds in a hospital is The IME adjustment to the MS–DRG determined for purposes of calculating a payment is based in part on the teaching hospital’s IME adjustment. applicable IME adjustment factor. The Specifically, we are proposing to change PO 00000 Number of discharges Region Frm 00108 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules our policies with respect to counting bed days for patients receiving observation services. We also refer readers to section V.G.2. of the preamble of this proposed rule for a discussion of our proposed clarification of the definition of a new medical residency training program for purposes of Medicare direct GME payment. This proposed clarification would also apply for purposes of IME payment and could affect IME FTE resident cap adjustments for new medical residency training programs. sroberts on PROD1PC70 with FRONTMATTER E. Payment Adjustment for Medicare Disproportionate Share Hospitals (DSHs) (§ 412.106) 1. Background Section 1886(d)(5)(F) of the Act provides for additional Medicare payments to subsection (d) hospitals that serve a significant disproportionate number of low-income patients. The Act specifies two methods by which a hospital may qualify for the Medicare disproportionate share hospital (DSH) adjustment. Under the first method, hospitals that are located in an urban area and have 100 or more beds may receive a Medicare DSH payment adjustment if the hospital can demonstrate that, during its cost reporting period, more than 30 percent of its net inpatient care revenues are derived from State and local government payments for care furnished to needy patients with low incomes. This method is commonly referred to as the ‘‘Pickle method.’’ The second method for qualifying for the DSH adjustment, which is the most common, is based on a complex statutory formula under which the DSH payment adjustment is based on the hospital’s geographic designation, the number of beds in the hospital, and the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: the ‘‘Medicare fraction’’ and the ‘‘Medicaid fraction.’’ The Medicare fraction is computed by dividing the number of the hospital’s inpatient days that are furnished to patients who were entitled to both Medicare Part A (including patients who are enrolled in a Medicare Advantage (Part C) plan) and Supplemental Security Income (SSI) benefits by the hospital’s total number of patient days furnished to patients entitled to benefits under Medicare Part A (including patients who are enrolled in a Medicare Advantage (Part C) plan). The Medicaid fraction is computed by dividing the hospital’s number of inpatient days furnished to patients who, for such days, were eligible for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Medicaid, but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days in the same period. Because the DSH payment adjustment is part of the IPPS, the DSH statutory references (under section 1886(d)(5)(F) of the Act) to ‘‘days’’ apply only to inpatient days. Regulations located at 42 CFR 412.106 govern the Medicare DSH payment adjustment and specify how the DPP is calculated as well as how beds and patient days are counted in determining the Medicare DSH payment adjustment. Under § 412.106(a)(1)(i), the number of beds for the Medicare DSH payment adjustment is determined in accordance with bed counting rules for the IME adjustment under § 412.105(b). In section V.E.4. of this preamble, we are combining our discussion of proposed changes to the policies for counting beds in relation to the calculations for the IME adjustment at § 412.105(b) and the DSH payment adjustment at § 412.106(a)(1)(ii) because the underlying concepts are similar and we believe they should generally be interpreted in a consistent manner for both purposes. Specifically, we are proposing to change our policies with respect to counting patient days and bed days for patients receiving observation services. 2. Proposed Policy Change Relating to the Inclusion of Labor and Delivery Patient Days in the Medicare DSH Calculation a. Background As discussed in the FY 2004 IPPS final rule (68 FR 45419 through 45420), prior to December 1991, Medicare’s policy on counting days for purposes of allocating costs on the cost report and for purposes of the DSH payment adjustment for maternity patients was to count an inpatient day for an admitted maternity patient in a labor and delivery room at the census-taking hour. This pre-December 1991 policy is consistent with current Medicare policy for counting days for admitted patients in any other ancillary department at the census-taking hour. However, based on decisions in a number of Federal Courts of Appeal, including the United States Court of Appeals for the District of Columbia Circuit, relating to Medicare’s policy for allocating costs, the policy regarding the counting of inpatient days for maternity patients was revised to reflect our current policy for purposes of both cost allocation and the DSH calculation. Under the existing regulations at § 412.106(a)(1)(ii)(B), patient days associated with beds used for ancillary PO 00000 Frm 00109 Fmt 4701 Sfmt 4702 24187 labor and delivery are excluded from the Medicare DSH calculation. This policy, in part, is based on cost allocation rules (that is, rules for counting days for admitted patients in ancillary and routine cost centers for purposes of allocating costs on the Medicare cost report). In particular, section 2205.2 of the Provider Reimbursement Manual (PRM) provides the following: ‘‘a maternity patient in the labor/delivery room ancillary area at midnight is included in the census of the inpatient routine (general or intensive) care area only if the patient has occupied an inpatient routine bed at some time since admission. No days of inpatient routine care are counted for a maternity inpatient who is discharged (or dies) without ever occupying an inpatient routine bed. However, once a maternity patient has occupied an inpatient routine bed, at each subsequent census the patient is included in the census of the inpatient routine care area to which assigned even if the patient is located in an ancillary area (labor/delivery room or another ancillary area) at midnight. In some cases, a maternity patient may occupy an inpatient bed only on the day of discharge, where the day of discharge differs from the day of admission. For purposes of apportioning the cost of inpatient routine care, this single day of routine care is counted as the day of admission (to routine care) and discharge and, therefore, is counted as one day of inpatient routine care.’’ In applying the rules discussed above, if, for example, a Medicaid patient is in the labor room at the census-taking hour and has not yet occupied a routine inpatient bed, the day would not be counted as an inpatient day in the numerator or the denominator of the Medicaid fraction of the Medicare DPP. If, instead, the same patient were in the labor room at the census-taking hour, but had first occupied a routine inpatient bed, the day would be counted as an inpatient patient day in both the numerator and the denominator of the Medicaid fraction of the Medicare DPP for purposes of the DSH payment adjustment (and for apportioning the cost of routine care on the Medicare cost report). We further clarified this policy in the FY 2004 IPPS final rule (68 FR 45419 through 45420), given that hospitals had increasingly begun redesigning their maternity areas from separate labor and delivery rooms and postpartum rooms to single multipurpose labor, delivery, and postpartum (LDP) rooms. In order to appropriately track the days and costs associated with LDP rooms under our existing Medicare DSH policy, we stated E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules that it was necessary to apportion them between the labor and delivery cost center, which is an ancillary cost center, and the routine adults and pediatrics cost center (68 FR 45420). This is done by determining the proportion of a patient’s stay in the LDP room that is associated with the patient receiving ancillary services (labor and delivery), as opposed to routine adult and pediatric services (postpartum). Therefore, under the current policy, days associated with labor and delivery services furnished to patients who did not occupy a routine bed prior to occupying an ancillary labor and delivery bed before the census-taking hour are not included as inpatient days for purposes of the DSH calculation. This policy is applicable whether the hospital maintains separate labor and delivery rooms and postpartum rooms, or whether it maintains ‘‘maternity suites’’ in which labor, delivery, and postpartum services all occur in the same bed. However, in the latter case, patient days are counted proportionally based on the proportion of (routine/ ancillary) services furnished. (We refer readers to the example provided in the FY 2004 IPPS final rule (68 FR 45420) that describes how routine and ancillary days are allocated under this policy.) b. Proposed Policy Change Upon further examination of our existing policy on counting patient days, we no longer believe that it is appropriate to apply the cost allocation rules for purposes of counting labor and delivery patient days in the Medicare DSH calculation. That is, we believe that even if a particular labor and delivery patient day is not included in the inpatient routine care census-taking for purposes of apportioning routine costs, it may still reasonably be considered to be an inpatient day for purposes of determining the DPP, provided that the unit or ward in which the labor and delivery bed is located is generally providing services that are payable under the IPPS. In general, we believe that labor and delivery patient days (regardless of whether they are associated with patients who occupied a routine bed prior to occupying an ancillary labor and delivery bed) are generally payable under the IPPS. Therefore, we believe that such patient days should be included in the DPP as inpatient days once the patient has been admitted to the hospital an as inpatient. Accordingly, for cost reporting periods beginning on or after October 1, 2009, we are proposing to change our existing policy regarding patient days to include, in the DPP calculation, patient days associated with maternity patients who were admitted as inpatients and were receiving ancillary labor and delivery services at the time the inpatient routine census is taken, regardless of whether the patient occupied a routine bed prior to occupying a bed in a distinct ancillary labor and delivery room and regardless of whether the patient occupied a routine bed prior to occupying an ancillary labor and delivery bed and regardless of whether the patient occupies a ‘‘maternity suite’’ in which labor, delivery, recovery, and postpartum care all take place in the same room. This proposed policy would be consistent with our existing policy under section 2205 of the PRM regarding counting patient days associated with other ancillary areas (such as surgery and postanesthesia). We note that we are not proposing to change our policy on patient days for labor and delivery patients who are not admitted to the hospital as inpatients. sroberts on PROD1PC70 with FRONTMATTER Disproportionate Patient Percentage (DPP) = Our existing policy of aggregating days for the Medicare fraction of the DSH calculation is to count days by the date of discharge. This policy, which is specified in the regulations at § 412.106(b)(2)(i)(A), applies to how days are counted in both the numerator and denominator of the Medicare fraction. Under the existing Medicare DSH payment adjustment policy, a hospital is required to report its Medicaid inpatient days (that is, the ‘‘numerator’’ of the Medicaid fraction) in the cost reporting period in which the patient was VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Frm 00110 3. Proposed Policy Change Relating to Calculation of Inpatient Days in the Medicaid Fraction in the Medicare DSH Calculation a. Background As stated under section V.E.1. of this preamble, a hospital can qualify for the Medicare DSH payment adjustment based on its Medicare DPP, which is equal to the sum of the percentage of total Medicare inpatient days attributable to patients entitled to both Medicare Part A (including patients enrolled in Medicare Advantage (Part C)) and SSI and the percentage of total inpatient days attributable to patients eligible for Medicaid, but not entitled for Medicare Part A. Medicare, SSI Days Medicaid, Non-Medicare Days + Total Medicare Days Total Patient Days discharged. However, despite our existing policy to count the days in the numerator of the Medicaid fraction based on the date of discharge, we believe that there may have been confusion about the existing policy that may have led hospitals to vary in the methodology they use to aggregate days in the numerator of the Medicaid fraction for patients who were eligible for Medicaid. In many cases, we have found that hospitals are reporting these days to their fiscal intermediary or MAC based on the method by which their respective State Medicaid agencies have PO 00000 For example, if a woman presents at a hospital for labor and delivery services, but is determined by medical staff to be in false labor and is sent home without ever being admitted to the hospital as an inpatient, any days associated with such services furnished by the hospital would not be included in the DPP for purposes of the Medicare DSH calculation. That is, because the patient would be considered an outpatient, the day (or days) associated with the hospital visit would not be counted for purposes of the Medicare DSH calculation because such days would not be considered inpatient days. In addition, this proposed policy does not affect existing policies relating to the allocation of costs for Medicare cost reporting purposes or for determining the number of available beds under § 412.105(b)(4) or § 412.106(a)(1)(i). In other words, our hospital instructions in the PRM for those purposes remain unchanged and unaffected by this proposed policy. Fmt 4701 Sfmt 4702 chosen to collect and report Medicaideligible days to the hospital. We understand that State Medicaid agencies differ in how they collect and report Medicaid-eligible days. As a result, hospitals may be counting Medicaideligible days in the numerator of the Medicaid fraction of the DPP based on one of several possible methodologies, rather than consistently counting days based on the date of discharge, as required under the existing policy. The various methodologies being used by State Medicaid agencies include date of discharge, date of admission, date of E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.013</MATH> 24188 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER Medicaid payment, and dates of service. With the exception of the methodology that accumulates days in the numerator of the Medicaid fraction by the date of Medicaid payment, we believe that any of these methodologies could appropriately capture all inpatient days in which an individual was Medicaideligible for a hospital for the purpose of counting days in the numerator of the Medicaid fraction used in the DPP. We do not believe that the date of Medicaid payment is appropriate because our policy is to include inpatient days for which the patient was eligible for Medicaid, regardless of whether Medicaid paid for the days. Therefore, we believe that the date of Medicaid payment methodology may not capture all of the days that a hospital would be allowed to include in the numerator of its Medicaid fraction. With respect to the other possible alternatives to counting days in the numerator of the Medicaid fraction, we believe that it becomes problematic when hospitals change the methodology they use to count days in the numerator of the Medicaid fraction from one cost reporting period to the next. Such changes in the methodology of counting days may result in ‘‘double counting’’ of the same patient days in more than one cost reporting period for a hospital. b. Proposed Policy Change To address the issue of hospitals reporting days in the numerator for the Medicaid fraction of the DPP in the Medicare DSH calculation based on data they receive from their respective State Medicaid agency and the fact that the State Medicaid agency may report such days based on one of several different methodologies, we are proposing to revise our existing policy by adding a new paragraph (iv) to § 412.106(b)(4) to allow hospitals to report days in the numerator of the Medicaid fraction of the DPP based on one of three methodologies. Specifically, we are proposing that, effective for cost reporting periods beginning on or after October 1, 2009, a hospital may report Medicaid-eligible days in the numerator of the Medicaid fraction of the DPP of a cost reporting period based on date of admission, date of discharge, or dates of service. However, under the proposed revised policy, a hospital would be required to notify CMS (through the fiscal intermediary or MAC) in writing if the hospital chooses to change its methodology of counting days in the numerator of the Medicaid fraction of the DPP. The written notification would have to be submitted at least 30 days prior to the beginning of the cost reporting period to which the requested VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 change would apply. The written notification must specify the changed methodology the hospital wishes to use and the cost reporting period to which the requested change would apply. A hospital would only be able to make such a change effective on the first day of the beginning of a cost reporting period and the change would have to be effective for the entire cost reporting period; that is, a hospital would not be permitted to change its methodology in the middle of a cost reporting period. This change would also be effective for all subsequent cost reporting periods unless the hospital submits a subsequent notification to change its methodology for a future cost reporting period. We note that we would expect that a hospital would rarely decide to change the methodology it uses to count days in the numerator of the Medicaid fraction of the DPP and that such a change would be prompted out of necessity (for example, the State Medicaid agency changes the methodology it uses to provide patient Medicaid eligibility information to hospitals). In addition, we are proposing that if a hospital changes its methodology for counting days in the numerator of the Medicaid fraction, CMS, or the fiscal intermediary or MAC, would have the authority to adjust the inpatient days reported by the hospital in a cost reporting period to prevent ‘‘double counting’’ of days in the numerator of the Medicaid fraction of the DPP of the Medicare DSH calculation reported in another cost reporting period. 4. Proposed Policy Change Relating to the Exclusion of Observation Beds and Patient Days From the Medicare DSH Calculation a. Background Observation services are defined in the Medicare Benefit Policy Manual (Publication No. 100–02, Chapter 6, section 20.6A) as a ‘‘well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment.’’ Observation services are furnished by a hospital and include the use of a bed and periodic monitoring by a hospital’s nursing or other staff in order to evaluate an outpatient’s condition and/or to determine the need for a possible admission to the hospital as an inpatient. As discussed in section 20.6A of the Medicare Benefit Policy Manual, when a physician orders that a patient be placed under observation care but has not formally admitted him or PO 00000 Frm 00111 Fmt 4701 Sfmt 4702 24189 her as an inpatient, the patient initially is treated as an outpatient. Consequently, the costs incurred for patients receiving observation services are not generally recognized under the IPPS as part of the inpatient operating costs of the hospital. In some circumstances, observation services, although furnished to outpatients, are paid as part of an MS–DRG under the IPPS. In particular, section 1886(d) of the Act sets forth the payment system, based on prospectively determined rates, for the operating costs of inpatient hospital services, which are defined under section 1886(a)(4) of the Act to include ‘‘the costs of all services for which payment may be made under this title that are provided by the hospital (or by an entity wholly owned or operated by the hospital) to the patient during the 3 days immediately preceding the date of the patient’s admission if such services are diagnostic services (including clinical diagnostic laboratory tests) or are other services related to the admission (as defined by the Secretary).’’ As further explained in section 40.3 of Chapter 3 of the Medicare Claims Processing Manual (Publication 100–04), if a hospital outpatient receives diagnostic preadmission services that are related to a patient’s hospital admission such that there is an exact match between the principal diagnosis for both the hospital outpatient claim and the inpatient stay, there is no payment for the diagnostic preadmission services under the hospital OPPS. Rather, these preadmission outpatient services are rolled into the particular MS–DRG and paid under the IPPS. Our policy prior to October 1, 2003, as discussed in the FY 2004 IPPS final rule (68 FR 45418), had been to exclude all observation days from the available bed and the patient day counts. CMS clarified that if a hospital provides observation services in beds that are generally used to provide hospital inpatient services, the days that those beds are used for observation services are to be excluded from the bed day count (even if the patient is ultimately admitted as an acute inpatient). In the FY 2004 IPPS proposed rule (68 FR 27205 through 27206), we also proposed to amend our policy with respect to observation days for patients who are ultimately admitted for inpatient acute care. Specifically, we are proposing that if a patient is admitted as an acute inpatient subsequent to receiving outpatient observation services, the days associated with the observation services would be included in the available bed and patient day counts. We did not finalize this policy E:\FR\FM\22MYP2.SGM 22MYP2 24190 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER until the FY 2005 IPPS final rule (69 FR 49096 through 49098) when we revised our regulations at § 412.105(b)(4) and § 412.106(a)(1)(ii) to specify that observation days are to be excluded from the counts of both available beds and patient days, unless a patient who receives outpatient observation services is ultimately admitted for acute inpatient care, in which case the bed days and patient days would be included in those counts. In implementing this policy, we revised Worksheet S–3, Part I of the Medicare hospital cost report by subscripting columns 5 and 6 to create columns 5.01 and 5.02, and 6.01 and 6.02, to allow for separate reporting of observation days for patients who are subsequently admitted as inpatients and a separate line for observation days for patients not admitted. This policy change applied to all cost reporting periods beginning on or after October 1, 2004. b. Proposed Policy Change As we previously indicated, a patient who is receiving observation services is a hospital outpatient, and the costs associated with those services are paid under the OPPS in most circumstances. If, however, a patient receives observation services from a hospital within 3 days of an inpatient admission and the outpatient observation care that he or she receives is related to the admission such that there is an exact match between the principal diagnosis for both the hospital outpatient claim and the inpatient stay, a payment is not made to the hospital under the OPPS, as explained in section 40.3–C of Chapter 3 of the Medicare Claims Processing Manual. According to section 40.3–C of the Medicare Claims Processing Manual, these preadmission outpatient diagnostic and nondiagnostic services are ‘‘deemed to be inpatient services, and included in the inpatient payment, unless there is no Part A coverage.’’ By this we mean that such preadmission services are considered operating costs of hospital inpatient services for payment purposes only, as described in section 1886(a)(4) of the Act. That is to say that payment for these preadmission services, including observation services furnished to hospital outpatients who are later admitted as inpatients, is included within the per case inpatient payment if the services meet the statutory criteria described in section 1886(a)(4) of the Act, but they are still services furnished to patients who are outpatients of the hospital at the time those services are furnished. We note that although these preadmission services may be considered operating costs for hospital inpatient services for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 payment purposes, such services are not furnished to an inpatient because these services are furnished prior to the patient being formally admitted and, therefore, the associated day is not considered to be an inpatient day. Thus, even if payment for these preadmission services is included in the inpatient payment, the admission date for the inpatient stay begins when the patient is formally admitted. Because observation services are services furnished to outpatients of the hospital, we are proposing that the patient days during which observation services are furnished are not included in the DSH calculation, regardless of whether the patients under observation are later admitted. We believe that patient days during which observation services are furnished, like the days during which all other preadmission diagnostic and nondiagnostic services are furnished, are not inpatient days and, therefore, we are proposing to exclude such patient days from the DPP of the Medicare DSH calculation. In accordance with section 1812(a) of the Act, for a patient day to be considered part of a beneficiary’s spell of illness, the patient must have had ‘‘inpatient hospital services furnished to him during such spell.’’ In addition, section 1861(a) of the Act defines a ‘‘spell of illness’’ as beginning on the first day on which such ‘‘individual is furnished inpatient hospital services.’’ Section 1861(b) of the Act defines ‘‘inpatient hospital services’’ as ‘‘services furnished to an inpatient of the hospital.’’ Thus, with respect to a spell of illness, even if observation services are eventually bundled into the inpatient payment, the patient is not admitted as an inpatient while he or she remains under observation and the days under observation are not considered to be inpatient days that count toward a beneficiary’s spell of illness. In addition, with respect to the 3-day inpatient stay requirement for patients to secure Medicare coverage of SNF benefits, section 20.1 of Chapter 8 of the Medicare Benefit Policy Manual (Publication No. 100–02) states: ‘‘Time spent in observation status or in the emergency room prior to (or in lieu of) an inpatient admission to the hospital does not count toward the 3-day qualifying inpatient hospital stay, as a person who appears at a hospital’s emergency room seeking examination or treatment or is placed on observation has not been admitted to the hospital as an inpatient; instead, the person receives outpatient services. For purposes of the SNF benefit’s qualifying hospital stay requirement, inpatient PO 00000 Frm 00112 Fmt 4701 Sfmt 4702 status commences with the calendar day of hospital admission.’’ Other Medicare policies do not consider observation days to be inpatient days because observation services are outpatient services furnished to outpatients of the hospital. While other Medicare policies do not necessarily dictate how we treat patient days for DSH payment purposes, we believe it is important that patient days be treated consistently among the various Medicare policies. We believe that because observation days are not considered inpatient days for a beneficiary’s spell of illness or for qualifying for SNF benefits, this policy provides additional support for our proposal to no longer include any observation day as an inpatient day in the calculation of the DPP of the Medicare DSH calculation, nor should the associated observation bed days be included in determining the number of available inpatient beds used for purposes of determining a hospital’s IME and DSH payment adjustments. As we indicated above, the DSH regulations at § 412.106 explain how the DPP is calculated. Specifically, the DPP is based on the hospital’s patient days where patient days apply only to inpatient days. Because a patient under observation in the hospital is considered to be an outpatient of the hospital and receives services prior to being admitted as an inpatient, we believe that observation days, even for a patient who is subsequently admitted, should not be considered inpatient days. Accordingly, we are proposing to revise the regulations at § 412.106(a)(1)(ii) to exclude patient days associated with beds used for outpatient observation services, even if the patient is later admitted as an inpatient. We are proposing to exclude all observation patient days from the DPP of the Medicare DSH calculation. This proposal would be effective for cost reporting periods beginning on or after October 1, 2009. For the same reasons, we also are proposing to eliminate from bed counting observation bed days for patients who are subsequently admitted as inpatients for purposes of both the DSH payment adjustment and the IME payment adjustment. The rules for counting hospital beds for the purposes of the IME adjustment are codified in the IME regulations at § 412.105(b), which is cross-referenced in § 412.106(a)(1)(i) for purposes of the DSH payment adjustment. We believe it is important to apply a consistent definition for counting bed days for both the IME and DSH payment adjustments. Therefore, we are proposing to revise § 412.105(b)(4) to state that observation E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER days are excluded from the counts of available beds, regardless of whether or not the patient under observation is ultimately admitted for acute inpatient care. As we stated earlier, when we implemented the policy to include observation days for admitted patients for DSH payment adjustment purposes for FY 2005, we revised the Medicare hospital cost report to include columns for hospitals to report their observation days for patients admitted as inpatients and observation days for patients not admitted. Under the proposal in this proposed rule, hospitals would no longer be required to distinguish on the cost report between observation bed days and patient days for patients who are ultimately admitted and observation bed days and patient days for patients who are not admitted because none of these bed days and patient days would be included in the DSH payment adjustment. We are proposing that, effective for cost reporting periods beginning on or after October 1, 2009, hospitals would be required to report their total observation bed days so that the total observation days can be deducted from the bed day count for IME and DSH payment adjustment purposes. In summary, we are proposing to exclude observation patient days for admitted patients from the patient day count in § 412.106(a)(1)(ii) (for DSH) and the bed day count at § 412.105(b) (for IME), as a cross-reference at § 412.106(a)(1)(i) (for DSH), because observation services are defined as outpatient services furnished to outpatients of the hospital, regardless of whether or not the patient under observation is subsequently admitted. F. Technical Correction to Regulations on Payments for Anesthesia Services Furnished by Hospital or CAH Employed Nonphysician Anesthetists or Obtained Under Arrangements (§ 412.113) Section 412.113(c) of the regulations contain our rules governing payments for anesthesia services furnished by a hospital or CAH by qualified nonphysician anesthetists employed by the hospital or CAH or obtained under arrangements. We have discovered that, under paragraph (c)(2)(i)(B) of § 412.113, there is an incorrect cross-reference to ‘‘§ 410.66’’ for the definition of a qualified nonphysician anesthetist. The correct cross-reference for the definition of a qualified nonphysician anesthetist is ‘‘§ 410.69’’. We are proposing to correct the cross-reference in § 412.113(c)(2)(i)(B) to refer to ‘‘§ 410.69’’. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 G. Payments for Direct Graduate Medical Education (GME) (§§ 413.75 and 413.79) 1. Background Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of hospital inpatient services. Section 1886(h) of the Act, as implemented in regulations at § 413.75 through § 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved GME programs. Section 1886(h)(2) of the Act sets forth a methodology for the determination of a hospital-specific, base-period per resident amount (PRA) that is calculated by dividing a hospital’s allowable direct costs of GME for a base period by its number of residents in the base period. The base period is, for most hospitals, the hospital’s cost reporting period beginning in FY 1984 (that is, the period between October 1, 1983, through September 30, 1984). Medicare direct GME payments are calculated by multiplying the PRA times the weighted number of full-time equivalent (FTE) residents working in all areas of the hospital complex (and nonhospital sites, when applicable), and the hospital’s Medicare share of total inpatient days. The base year PRA is updated annually for inflation. Section 1886(h)(4)(F) of the Act established a limit on the number of allopathic and osteopathic FTE residents that a hospital may include in its FTE resident count for purposes of calculating direct GME payments. For most hospitals, the limit, or cap, is the unweighted number of allopathic and osteopathic FTE residents training in the hospital’s most recent cost reporting period ending on or before December 31, 1996. 2. Clarification of Definition of New Medical Residency Training Program For purposes of determining direct GME and IME payments, the Medicare statute establishes a cap on the number of allopathic and osteopathic FTE residents a hospital may count, which, for most hospitals, is based on the number of allopathic and osteopathic FTE residents the hospital was training in its most recent cost reporting period ending on or before December 31, 1996. Section 1886(h)(4)(H)(i) of the Act requires the Secretary to prescribe rules for the application of the FTE resident cap in the case of medical residency programs that are established on or after January 1, 1995. This statutory provision is also made applicable for purposes of the IME adjustment under PO 00000 Frm 00113 Fmt 4701 Sfmt 4702 24191 the IPPS through section 1886(d)(5)(B)(viii) of the Act. The provision specifies that such rules must be consistent with the principles of the statutory provisions regarding the establishment of the FTE resident caps and regarding application of a 3-year rolling average count of FTE residents. The statute also requires the Secretary to give special consideration in such rules to facilities that meet the needs of underserved rural areas. In accordance with the statute, we issued regulations to permit adjustments to the FTE resident caps, under certain circumstances, for hospitals that establish new medical residency training programs on or after January 1, 1995. Section 413.79(e)(1) of the regulations state that if a hospital had no allopathic or osteopathic residents in the base year, the hospital may receive an adjustment to its FTE resident cap (which would be zero) if it establishes one or more new medical residency training programs, but only for new programs established within 3 academic years after residents begin training in the first program. (Rural hospitals may receive FTE cap adjustments for newly established programs at any time under the regulations at § 413.79(e)(1)(iii). Under § 413.79(e)(2), hospitals that had allopathic or osteopathic residents in the base year were only permitted to receive an adjustment for new programs established on or after January 1, 1995, and before August 5, 1997. Section 413.79(l) defines a new medical residency training program as ‘‘a medical residency that receives initial accreditation by the appropriate accrediting body or begins training residents on or after January 1, 1995.’’ These regulations concerning cap adjustments for newly established medical residency training programs also apply for IME purposes as stated at § 412.105(f)(1)(vii). It has come to our attention that there has been some misinterpretation or misunderstanding of these regulations among some hospitals and Medicare contractors despite previous discussions of the topic in the Federal Register. Specifically, some hospitals or contractors took the regulations to mean that, as long as the relevant accrediting body (either the Accreditation Council on Graduate Medical Education (ACGME) for allopathic programs or the American Osteopathic Association (AOA) for osteopathic programs) grants an ‘‘initial’’ accreditation or reaccredits a program as ‘‘new,’’ the hospital may receive an FTE cap adjustment for that program, regardless of whether that program may have been accredited E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24192 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules previously at another hospital. In other words, some hospitals and contractors appear to have read our regulations to mean that the Secretary would defer, in all circumstances, to the relevant accrediting body’s identification of a particular accreditation as a ‘‘new’’ or ‘‘initial’’ accreditation of a medical residency training program. In the FY 1998 IPPS final rule that established § 413.79(l) of the regulations, we discussed both the meaning of this regulation and the rationale for establishing it: ‘‘For purposes of this provision, a ‘program’ will be considered newly established if it is accredited for the first time, including provisional accreditation on or after January 1, 1995, by the accrediting body. Although the Secretary of the Department of Health and Human Services has broad authority to prescribe rules for counting residents in new programs, the Conference Report for Public Law 105– 33 [House Conference Report No. 105– 217, pp. 821–822] indicates concern that the aggregate number of FTE residents should not increase over current levels.’’ (62 FR 46006) Similarly, in the FY 2000 IPPS final rule (64 FR 41519), we responded to a public comment suggesting that CMS include within the definition of ‘‘new residency program’’ a residency program that may have been in existence at other clinical sites in the past. We replied that ‘‘the language ‘begins training residents on or after January 1, 1995’ [in the regulation at § 413.79(l)] means that the program may have been accredited by the appropriate accrediting body prior to January 1, 1995, but did not begin training in the program until on or after January 1, 1995. The language does not mean that it is the first time a particular hospital began training residents in a program on or after January 1, 1995, but that program was in existence at another hospital prior to January 1, 1995, as the commenter suggests.’’ (Emphasis added.) Accordingly, as we have suggested in discussions in our previous rules, rather than relying solely on the accrediting body’s characterization of whether a program is new, we continue to believe it is appropriate that CMS require a hospital to evaluate whether a particular program is a newly established one for Medicare GME purposes by considering whether a program was initially accredited ‘‘for the first time,’’ and is not a program that existed previously at another hospital. In evaluating whether a program is truly new, as opposed to an existing program that is relocated to a new site, it is important to consider VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 not only the characterization by the accrediting body, but also supporting factors such as (but not limited to) whether there are new program directors and/or new teaching staff, and/ or whether there are only new residents training in the program(s) at the different site. In determining whether a particular program is a newly established one, it may also be necessary to consider factors such as the relationship between hospitals (for example, common ownership or a shared medical school or teaching relationship) and the degree to which the hospital with the original program continues to operate its own program in the same specialty. (Although this discussion of new programs is framed in the context of a hospital operating a program, we note that many programs are operated or sponsored by schools of medicine or other nonhospital entities. This section is intended to address all GME programs that were previously accredited at one operating entity, and that entity ceases to operate the program, but the program is then opened and operated at another entity and is accredited as a new program at the second entity. Such a program would not be treated as new at the second entity.) In any case, we believe it is appropriate to be deliberate in the determinations regarding FTE resident cap adjustments relating to residents in new programs. The statute clearly requires that our rules regarding adjustments to hospitals’ FTE resident caps for newly established programs must adhere to the principles of the statutory provision limiting the count of FTE residents for direct GME and IME payments to the count for the most recent cost reporting period ending on or before December 31, 1996. In addition, as we indicated in our final rule establishing FTE cap adjustments for ‘‘new programs,’’ the Conference Report for the BBA explicitly indicates that the aggregate number of FTE residents should be held to the ‘‘current’’ levels at the time the BBA was enacted (House Conference Report No. 105–217, pp. 821–822). If we were to find that a program at one hospital is a newly established program after it was relocated from another hospital, the result would be that an FTE resident cap adjustment would be granted based on the same program at two different hospitals. Furthermore, as long as both hospitals continue to operate, the FTE resident cap slots that were vacated from the program at the first hospital could potentially be filled with residents from that hospital’s other residency training PO 00000 Frm 00114 Fmt 4701 Sfmt 4702 programs. We do not believe such an increase in the aggregate number of FTE residents and the potential duplication of the FTE resident cap adjustment would be consistent with the statutory mandate to adhere to the principles of the base-year FTE resident caps when devising rules to account for newly established medical residency training programs. Therefore, we are proposing to clarify our policy that a new medical residency program is one that receives initial accreditation for the first time, as opposed to reaccreditation of a program that existed previously at the same or another hospital. Furthermore, we believe it is appropriate and necessary that CMS expect a hospital that wishes to claim an adjustment to its direct GME and IME FTE caps due to a new medical residency program to first evaluate whether the program is ‘‘new’’ for Medicare purposes, rather than to rely exclusively on the characterization of a particular program by the relevant accrediting body. 3. Participation of New Teaching Hospitals in Medicare GME Affiliation Groups Sections 1886(h)(4)(F) and 1886(d)(5)(B)(v) of the Act establish limits on the number of allopathic and osteopathic residents that hospitals may count for purposes of calculating direct GME payments and the IME adjustment, respectively. Accordingly, effective October 1, 1997, we established hospital-specific direct GME and IME FTE resident caps. Furthermore, under the authority granted by section 1886(h)(4)(H)(ii) of the Act, the Secretary issued rules to allow institutions that are members of the same affiliated group to elect to apply their direct GME and IME FTE resident caps on an aggregate basis. Accordingly, as specified in the regulations at §§ 413.79(f) and 412.105(f)(1)(vi), hospitals that are part of the same Medicare GME affiliated group are permitted to apply their direct GME and IME FTE resident caps on an aggregate basis, and to temporarily adjust each hospital’s caps to reflect the rotation of residents among affiliated hospitals during an academic year. Under § 413.75(b), a Medicare GME affiliated group can be formed by two or more hospitals if they are under common ownership, or if they are jointly listed as program sponsors or major participating institutions in the same program. Furthermore, the existing regulations at § 413.79(f)(1) specify that each hospital in a Medicare GME affiliated group must submit a Medicare GME affiliation agreement (as defined under § 413.75(b)) to the CMS fiscal E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules intermediary or MAC servicing the hospital and send a copy to CMS’ Central Office no later than July 1 of the residency program year during which the Medicare GME affiliation agreement will be in effect. For example, in order for a hospital to receive a temporary adjustment to its FTE resident caps to reflect participation in a Medicare GME affiliated group for the academic year beginning July 1, 2009, through June 30, 2010, each hospital in the affiliated group is required to submit a Medicare GME affiliation agreement to the fiscal intermediary or MAC servicing the hospital and to CMS’ Central Office no later than July 1, 2009. It has recently come to CMS’ attention that flexibility in the submission deadline for Medicare GME affiliation agreements due to an unanticipated need is warranted in situations where a hospital opens after July 1 and begins training residents for the first time, after July 1 of an academic year. That is, the new hospital, since it did not train residents in the FTE cap base year, would have FTE resident caps of zero. Currently, if a new hospital begins training residents from another hospital’s existing program, the new hospital would not be able to receive a temporary FTE resident cap adjustment through participation in a Medicare GME affiliated group because the existing regulations do not provide flexibility for a hospital that begins training residents after the start of an academic year to enter into and submit a Medicare GME affiliation agreement after the July 1 submission deadline. That is, a new hospital that opens after July 1 would not be able to enter into a Medicare GME affiliation agreement because the hospital did not exist before the submission deadline. We understand that the new hospital is likely to incur GME costs during the first year of training residents, and we believe it is reasonable to permit the new hospital that receives a new Medicare provider agreement and begins training residents for the first time after July 1 of an academic year to receive an adjustment to its FTE resident caps for IME and direct GME payments through participation in a Medicare GME affiliated group during its first year of training residents, even if the hospital completes and submits the Medicare GME affiliation agreement to CMS after July 1 of the academic year. Accordingly, we are proposing to amend § 413.79(f) by revising paragraph (f)(1) and adding a new paragraph (f)(6) (the existing paragraph (f)(6) would be redesignated as paragraph (f)(7)). The proposed new paragraph (f)(6) would VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 provide that a hospital that is new after July 1 and that begins training residents for the first time prior to the following July 1 would be permitted to receive a temporary adjustment to its FTE resident caps to reflect its participation in an existing Medicare GME affiliated group if the new hospital submits a Medicare GME affiliation agreement prior to the end of the first cost reporting period during which the hospital begins training residents. For this purpose, a new hospital is one for which a new Medicare provider agreement takes effect in accordance with § 489.13. We are proposing to require that the Medicare GME affiliation agreement specify the effective period for the agreement, which in any case would begin no earlier than the date the affiliation agreement is submitted to CMS. Furthermore, we are proposing that each of the other hospitals participating in the Medicare GME affiliated group with the new hospital would be required to submit an amended Medicare GME affiliation agreement that reflects the participation of the new hospital to the CMS contractor servicing the hospital and send a copy to the CMS Central Office no later than June 30 of the residency program year during which the Medicare GME affiliation agreement will be in effect. 4. Technical Corrections to Regulations We have discovered that in the existing § 413.79(k), under the provision on residents training in rural track programs, paragraph (k)(7) incorrectly appears as regulation text after paragraph (l) of § 413.79. To correct this error, we are proposing to move paragraph (l) so that it appears as the last paragraph of the section after paragraph (k)(7). In addition, the regulations at § 413.75(b), paragraph (1), define an ‘‘approved medical residency program’’ as a program that is ‘‘approved by one of the national organizations listed in § 415.152’’. Under § 415.152, in the definition of an ‘‘approved graduate medical education (GME) program’’, we reference a residency program approved by the ‘‘Committee on Hospitals of the Bureau of Professional Education of the American Osteopathic Association’’ (AOA). It has come to our attention that the structure of the AOA has changed and that we should merely refer to a residency program approved by the AOA. Therefore, we are proposing to make a technical change to paragraph (1) of the definition of an ‘‘approved graduate medical education (GME) program’’ under § 415.152, to remove the phrase ‘‘the Committee on Hospitals PO 00000 Frm 00115 Fmt 4701 Sfmt 4702 24193 of the Bureau of Professional Education of’’. H. Hospital Emergency Services Under EMTALA (§ 489.24) 1. Background Sections 1866(a)(1)(I), 1866(a)(1)(N), and 1867 of the Act impose specific obligations on certain Medicareparticipating hospitals and CAHs. (Throughout this section of this proposed rule, when we reference the obligation of a ‘‘hospital’’ under these sections of the Act and in our regulations, we mean to include CAHs as well.) These obligations concern an individual who comes to a hospital emergency department and requests examination or treatment for a medical condition, and apply to all individuals, regardless of whether they are beneficiaries of any program under the Act. The statutory provisions cited above are frequently referred to as the Emergency Medical Treatment and Labor Act (EMTALA), also known as the patient antidumping statute. Section 9121 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Public Law 99–272, incorporated the responsibilities of Medicare hospitals in emergency cases into the Social Security Act. Congress incorporated these antidumping provisions within the Act as a part of the hospital’s provider agreement to ensure that any individual with an emergency medical condition is not denied essential lifesaving services. Under section 1866(a)(1)(I)(i) of the Act, a hospital that fails to fulfill its EMTALA obligations under these provisions may be subject to termination of its Medicare provider agreement, which would result in loss to the hospital of all Medicare and Medicaid payments. Section 1867 of the Act sets forth requirements for medical screening examinations for individuals who come to the hospital and request examination or treatment for a medical condition. The section further provides that if a hospital finds that such an individual has an emergency medical condition, it is obligated to provide that individual with either necessary stabilizing treatment or with an appropriate transfer to another medical facility. The regulations implementing section 1867 of the Act are found at 42 CFR 489.24. The regulations at 42 CFR 489.20(l), (m), (q), and (r) also refer to certain EMTALA requirements outlined in section 1866 of the Act. The Interpretive Guidelines concerning E:\FR\FM\22MYP2.SGM 22MYP2 24194 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER EMTALA are found at Appendix V of the CMS State Operations Manual. 2. Proposed Changes Relating to Applicability of Sanctions Under EMTALA Section 1135 of the Act authorizes the Secretary to temporarily waive or modify the application of several requirements of titles XVIII, XIX, or XXI of the Act (the Medicare, Medicaid, and State Children’s Health Insurance Program provisions), and their implementing regulations in an emergency area during an emergency period. Section 1135(g)(1) of the Act defines an ‘‘emergency area’’ as the geographical area in which there exists an emergency or disaster declared by the President pursuant to the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act (subsection A) and a public health emergency declared by the Secretary pursuant to section 247d of Title 42 of the United States Code. Section 1135(g)(1) of the Act also defines an ‘‘emergency period’’ as the period during which such a disaster or emergency exists. Section 1135(b) of the Act lists the categories of otherwise applicable statutory and regulatory requirements that may be waived or modified. Included among these are the waiver of sanctions under EMTALA for, in subparagraph (b)(3)(A), a transfer of an individual who has not been stabilized (if the transfer arises out of the circumstances of the emergency) in violation of the EMTALA requirements governing transfer of an individual whose emergency medical condition has not been stabilized (section 1867(c) of the Act) and, in subparagraph (b)(3)(B), the direction or relocation of an individual to receive medical screening in an alternate location, pursuant to an appropriate State emergency preparedness plan. Section 1135(b) of the Act further states that, except for certain emergencies involving pandemic infectious disease (described in further detail below), a waiver or modification provided for under section 1135(b)(3) of the Act shall be limited to a 72-hour period beginning upon implementation of a hospital disaster protocol. Section 302(b) of the Pandemic and All-Hazards Preparedness Act, Public Law 109–417, made two specific changes that affect EMTALA implementation in instances where the Secretary has invoked the section 1135 waiver authority in an emergency area during an emergency period. Section 302(b)(1)(A) of Public Law 109–417 amended section 1135(b)(3)(B) of the Act to state that sanctions for the direction or relocation of an individual VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 for screening may be waived where, in the case of a public health emergency that involves a pandemic infectious disease, that direction or relocation occurs pursuant to a State pandemic preparedness plan, or to an appropriate State emergency preparedness plan. In addition, sections 302(b)(1)(B) and (b)(1)(C) of Public Law 109–417 amended section 1135(b) of the Act to further state that ‘‘if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the duration of a waiver or modification for such emergency shall be determined in accordance with section 1135(e) of the Act as such subsection applies to public health emergencies.’’ In the FY 2008 IPPS final rule with comment period (72 FR 47413), we amended the regulations at § 489.24(a)(2) (which refers to the nonapplicability of certain EMTALA provisions in an emergency area during an emergency period) to incorporate the changes made to section 1135 of the Act by the Pandemic and All-Hazards Preparedness Act. We amended the regulations to specify that, under a section 1135 waiver, the sanctions that do not apply are either those for the inappropriate transfer of an individual who has not been stabilized or those for the direction or relocation of an individual to receive medical screening at an alternate location. We also added a second sentence to paragraph (a)(2) to state that a waiver of these sanctions for EMTALA violations is limited to a 72hour period beginning upon the implementation of a hospital disaster protocol, except that if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the duration of the waiver will be determined in accordance with section 1135(e) of the Act as it applies to public health emergencies. In the FY 2009 IPPS final rule (73 FR 28667), we made a technical change to the regulations at § 489.24(a)(2) by adding section 1135 language we had inadvertently left out when we made changes to the regulations at § 489.24(a)(2) in the FY 2008 IPPS final rule with comment period. Specifically, we added the phrases ‘‘pursuant to an appropriate State emergency preparedness plan or, in the case of a public health emergency that includes a pandemic infectious disease, pursuant to a State pandemic preparedness plan’’ and ‘‘during an emergency period,’’ to make the regulatory language consistent with the statutory text. Existing § 489.24(a)(2) states that ‘‘Sanctions under this section for an inappropriate PO 00000 Frm 00116 Fmt 4701 Sfmt 4702 transfer during a national emergency or for the direction or relocation of an individual to receive medical screening at an alternate location pursuant to an appropriate State emergency preparedness plan or, in the case of a public health emergency that involves a pandemic infectious disease, pursuant to a State pandemic preparedness plan do not apply to a hospital with a dedicated emergency department located in an emergency area during an emergency period, as specified in section 1135(g)(1) of the Act. A waiver of these sanctions is limited to a 72-hour period beginning upon the implementation of a hospital disaster protocol, except that, if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the waiver will continue in effect until the termination of the applicable declaration of a public health emergency, as provided for by section 1135(e)(1)(B) of the Act.’’ After further review of the revised regulatory language as compared to the statutory language at section 1135 of the Act, we believe that further revisions to the language of § 489.24(a)(2) are necessary to make the language conform more closely to the language of section 1135 of the Act and better reflect how the section 1135 authority has been used in practice. Specifically, we believe that the regulatory language should be revised to be more consistent with the language in the statute to state that EMTALA sanctions for an inappropriate transfer may be waived only if the inappropriate transfer arises out of the circumstances of the emergency. We are further proposing to amend the regulations to provide that the sanctions waived for both an inappropriate transfer and the redirection or relocation of an individual to receive a medical screening examination at an alternate location are only applicable if the hospital does not discriminate on the basis of an individual’s source of payment or ability to pay. These additional requirements (which are underlined) are currently not included in the regulations text at § 489.24(a)(2). To ensure that the language of the regulations is fully consistent with the statutory language at section 1135 of the Act, we believe the regulations need to be clarified to include these provisions. In addition, we believe the existing regulations do not adequately reflect the Secretary’s authority under section 1135 of the Act to waive or modify requirements for a single health care provider, a class of health care providers, or a geographic subset of health care providers located within an E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules emergency area during an emergency period. The language at section 1135(b) of the Act states: ‘‘To the extent necessary to accomplish the purpose specified in subsection (a), the Secretary is authorized, subject to the provisions of this section, to temporarily waive or modify the application of, with respect to health care items and services furnished by a health care provider (or classes of health care providers) in any emergency area (or portion of such an area) during any portion of an emergency period, the requirements of titles XVIII, XIX, or XXI, or any regulation thereunder (and the requirements of this title other than this section, and regulations thereunder, insofar as they relate to such titles), pertaining to—’’ (emphases added). Thus, it is clear from the emphasized text that waivers under the section 1135 authority may be tailored and applied to one or more hospitals in the emergency area (or portion thereof) during some or all of the emergency period, as necessary. However, the existing regulations may inadvertently imply, contrary to the flexibility clearly contemplated in the statute, that all hospitals in all portions of an emergency area during an entire emergency period automatically receive a waiver of EMTALA sanctions. We are proposing revisions to the regulation text to clarify this issue. We also are proposing to revise the regulations to further clarify that the Secretary has the authority to implement a section 1135 waiver as necessary to ensure that the purpose of section 1135(a) of the Act can be achieved. That is, the Secretary is authorized to apply a section 1135 waiver, for example, to one or more hospitals in the emergency area (or portion thereof) during some or all of the emergency period, as necessary. The Secretary may delegate implementation of a waiver of EMTALA sanctions to CMS (as the Secretary has done in every instance in which the section 1135 waiver authority has been invoked thus far.) In summary, we are proposing to revise the regulations at § 489.24(a)(2) to state that a waiver of EMTALA sanctions pursuant to an inappropriate transfer only applies if the transfer arises out of the circumstances of the emergency. We also are proposing to revise the regulations to provide that the sanctions waived for an inappropriate transfer or for the relocation or redirection of an individual to receive a medical screening examination at an alternate location are only in effect if the hospital to which the waiver applies VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 does not discriminate on the source of an individual’s payment or ability to pay. In addition, we are proposing to revise the regulations to state that the Secretary has the authority to apply the waiver of EMTALA sanctions to one or more hospitals in a portion of an emergency area or a portion of an emergency period. The proposed revised § 489.24(a)(2) reads as follows: ‘‘When a waiver has been issued in accordance with section 1135 of the Act that includes a waiver under section 1135(b)(3) of the Act, sanctions under this section for an inappropriate transfer or for the direction or relocation of an individual to receive medical screening at an alternate location do not apply to a hospital with a dedicated emergency department if the following conditions are met: (i) If relating to an inappropriate transfer, the transfer arises out of the circumstances of the emergency. (ii) If relating to the direction or relocation of an individual to receive medical screening at an alternate location, the direction or relocation is pursuant to an appropriate State emergency preparedness plan or, in the case of a public health emergency that involves a pandemic infectious disease, pursuant to a State pandemic preparedness plan. (iii) The hospital does not discriminate on the basis of an individual’s source of payment or ability to pay. (iv) The hospital is located in an emergency area during an emergency period, as those terms are defined in section 1135(g)(1) of the Act. (v) There is a determination that a waiver of sanctions is necessary. A waiver of these sanctions is limited to a 72-hour period beginning upon the implementation of a hospital disaster protocol, except that, if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the waiver will continue in effect until the termination of the applicable declaration of a public health emergency, as provided under section 1135(e)(1)(B) of the Act.’’ I. Rural Community Hospital Demonstration Program In accordance with the requirements of section 410A(a) of Public Law 108– 173, the Secretary has established a 5year demonstration program (beginning with selected hospitals’ first cost reporting period beginning on or after October 1, 2004) to test the feasibility and advisability of establishing ‘‘rural community hospitals’’ for Medicare payment purposes for covered inpatient hospital services furnished to Medicare PO 00000 Frm 00117 Fmt 4701 Sfmt 4702 24195 beneficiaries. A rural community hospital, as defined in section 410A(f)(1), is a hospital that— • Is located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or is treated as being located in a rural area under section 1886(d)(8)(E) of the Act; • Has fewer than 51 beds (excluding beds in a distinct part psychiatric or rehabilitation unit) as reported in its most recent cost report; • Provides 24-hour emergency care services; and • Is not designated or eligible for designation as a CAH. Section 410A(a)(4) of Public Law 108– 173 states that no more than 15 such hospitals may participate in the demonstration program. As we indicated in the FY 2005 IPPS final rule (69 FR 49078), in accordance with sections 410A(a)(2) and (a)(4) of Public Law 108–173 and using 2002 data from the U.S. Census Bureau, we identified 10 States with the lowest population density from which to select hospitals: Alaska, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Utah, and Wyoming (Source: U.S. Census Bureau Statistical Abstract of the United States: 2003). Thirteen rural community hospitals located within these States are currently participating in the demonstration program. (Of the 13 hospitals that participated in the first 2 years of the demonstration program, 4 hospitals located in Nebraska became CAHs and withdrew from the program.) In a notice published in the Federal Register on February 6, 2008 (73 FR 6971 through 6973), we announced a solicitation for up to six additional hospitals to participate in the demonstration program. The February 6, 2008 notice specified the eligibility requirements for the demonstration program. Four additional hospitals were selected to participate under this solicitation. These four additional hospitals began under the demonstration payment methodology with the hospital’s first cost reporting period starting on or after July 1, 2008. The end date of participation for these hospitals is September 30, 2010. Under the demonstration program, participating hospitals are paid the reasonable costs of providing covered inpatient hospital services (other than services furnished by a psychiatric or rehabilitation unit of a hospital that is a distinct part), applicable for discharges occurring in the first cost reporting period beginning on or after the October 1, 2004 implementation date of the demonstration program (or the July 1, 2008 date for the newly selected hospitals). Payments to the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24196 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules participating hospitals will be the lesser amount of the reasonable cost or a target amount in subsequent cost reporting periods. The target amount in the second cost reporting period is defined as the reasonable costs of providing covered inpatient hospital services in the first cost reporting period, increased by the inpatient prospective payment update factor (as defined in section 1886(b)(3)(B) of the Act) for that particular cost reporting period. The target amount in subsequent cost reporting periods is defined as the preceding cost reporting period’s target amount, increased by the inpatient prospective payment update factor (as defined in section 1886(b)(3)(B) of the Act) for that particular cost reporting period. Covered inpatient hospital services are inpatient hospital services (defined in section 1861(b) of the Act), and include extended care services furnished under an agreement under section 1883 of the Act. Section 410A of Public Law 108–173 requires that, ‘‘in conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ Generally, when CMS implements a demonstration program on a budget neutral basis, the demonstration program is budget neutral in its own terms; in other words, the aggregate payments to the participating hospitals do not exceed the amount that would be paid to those same hospitals in the absence of the demonstration program. This form of budget neutrality is viable when, by changing payments or aligning incentives to improve overall efficiency, or both, a demonstration program may reduce the use of some services or eliminate the need for others, resulting in reduced expenditures for the demonstration program’s participants. These reduced expenditures offset increased payments elsewhere under the demonstration program, thus ensuring that the demonstration program as a whole is budget neutral or yields savings. However, the small scale of this demonstration program, in conjunction with the payment methodology, makes it extremely unlikely that this demonstration program could be viable under the usual form of budget neutrality. Specifically, cost-based payments to participating small rural hospitals are likely to increase Medicare outlays without producing any offsetting reduction in Medicare expenditures elsewhere. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Therefore, a rural community hospital’s participation in this demonstration program is unlikely to yield benefits to the participant if budget neutrality were to be implemented by reducing other payments for these hospitals. In this proposed rule, we are proposing two measures to achieve budget neutrality for the demonstration program for FY 2010, which, when combined, would lead to an adjustment in the national inpatient PPS rates. We are proposing to adjust the national inpatient PPS rates by an amount sufficient to account for the added costs of this demonstration program. We are proposing to apply budget neutrality across the payment system as a whole rather than merely across the participants in this demonstration program. As we discussed in the FY 2005, FY 2006, FY 2007, FY 2008, and FY 2009 IPPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; and 73 FR 48670), we believe that the language of the statutory budget neutrality requirements permits the agency to implement the budget neutrality provision in this manner. First, we are estimating the cost of the demonstration program for FY 2010 for the 13 currently participating hospitals. The estimate of the portion of the budget neutrality adjustment that accounts for the costs of the demonstration for FY 2010 for 9 of the 13 currently participating hospitals (that is, the 9 hospitals that have participated in the demonstration since its inception and that continue to participate in the demonstration) is based on data from their first and second year cost reports— that is, cost reporting periods beginning in CY 2005 and CY 2006. We are proposing to use these cost reports because they are the most recent complete cost reports and, thus, we believe they enable us to estimate FY 2010 costs as accurately as possible. In addition, we estimate the cost of the demonstration for FY 2010 for the 4 hospitals that joined the demonstration in 2008 based on data for their cost reporting periods beginning October 1, 2005, through July 1, 2006 (that is, cost reporting periods that include CY 2006). Cost reports for these periods were included along with the hospitals’ applications for the demonstration program. When we add together the estimated costs of the demonstration for FY 2010 for the 9 hospitals that have participated in the demonstration since its inception and the 4 new hospitals selected in 2008, the total estimated cost is $14,613,632. This estimated amount reflects the difference between the participating hospitals’ estimated costs under the methodology set forth in PO 00000 Frm 00118 Fmt 4701 Sfmt 4702 Public Law 108–173 and the estimated amount the hospitals would have been paid under the IPPS. Second, because the cost reports of all hospitals participating in the demonstration in its first year (that is FY 2005) have been finalized, we are able to determine how much the cost of the demonstration program exceeded the amount that was offset by the budget neutrality adjustment for FY 2005. For all 13 hospitals that participated in the demonstration in FY 2005, the amount is $7,179,461. The total proposed budget neutrality offset amount to be applied for the demonstration for FY 2010 is the sum of these two amounts, or $21,793,093. We discuss the payment rate adjustment that is required to ensure the budget neutrality of the demonstration program for FY 2010 in section II.A.4. of the Addendum to this proposed rule. We are proposing that the budget neutrality offset amount may be different in the FY 2010 IPPS final rule to the extent we have more recent data. J. Technical Correction to Regulations Relating to Calculation of the Federal Rate Under the IPPS Section 412.63 of the regulations specifies the procedures for determining the standardized amounts for inpatient operating costs for Federal fiscal years 1984 through 2004. These standardized amounts included a ‘‘large urban area’’ standardized amount for large urban hospitals and an ‘‘other area’’ standardized amount for hospitals located in other areas. In the FY 1989 IPPS final rule, we established § 412.63(c)(5). Consistent with section 1886(d)(3)(C)(ii) of the Act, § 412.63(c)(5) states that, for FYs 1987 through 2004, CMS calculated the average standardized amounts by excluding an estimate for IME payments. Accordingly, beginning in FY 1989, we updated the standardized amounts using an IME adjustment factor that excludes an estimate of IME payments. For a complete discussion on this adjustment factor for IME, we refer readers to the FY 1989 IPPS final rule (53 FR 38538 through 38539). Section 1886(d)(3)(A)(iv) of the Act, as amended by section 401(a) of Public Law 108–173, requires that, beginning with FY 2004 and thereafter, we compute the standardized amount for all hospitals in any area equal to the standardized amount for the previous fiscal year for large urban hospitals, updated by the applicable percentage update under section 1886(b)(3)(B)(i) of the Act. In other words, beginning in FY 2004, we no longer computed a ‘‘large urban area’’ standardized amount and a E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules separate ‘‘other area’’ standardized amount. As a result of this statutory change, we established new regulations at § 412.64 to specify the computation of the single standardized amount for FY 2005 and subsequent fiscal years (69 FR 49077). With the exception of removing a separate standardized amount for nonlarge urban hospitals, the regulation text at § 412.64 virtually mirrors the regulation text at § 412.63. For FY 2005 and subsequent fiscal years, we excluded an estimate for IME payments from the calculation of the standardized amount in accordance with section 1886(d)(3)(A)(iv) of the Act. However, we inadvertently omitted from § 412.64 the language under paragraph (c)(5) of § 412.63 that implements the exclusion of an estimate for IME payments from the calculation of the standardized amount in accordance with section 1886(d)(3)(A)(iv) of the Act. Therefore, we are proposing to revise § 412.64(c) to include this language so that § 412.64(c) reflects the statutory requirement under section 1886(d)(3)(A)(iv) of the Act that calculation of the standardized amount excludes IME payments. sroberts on PROD1PC70 with FRONTMATTER VI. Proposed Changes to the IPPS for Capital-Related Costs A. Overview Section 1886(g) of the Act requires the Secretary to pay for the capital-related costs of inpatient acute hospital services ‘‘in accordance with a prospective payment system established by the Secretary.’’ Under the statute, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capitalrelated costs. We initially implemented the IPPS for capital-related costs in the Federal fiscal year (FY) 1992 IPPS final rule (56 FR 43358), in which we established a 10-year transition period to change the payment methodology for Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). FY 2001 was the last year of the 10year transition period established to phase in the IPPS for hospital inpatient capital-related costs. For cost reporting periods beginning in FY 2002, capital IPPS payments are based solely on the Federal rate for almost all acute care hospitals (other than hospitals receiving certain exception payments and certain new hospitals). (We refer readers to the FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional information on the methodology used to determine capital IPPS payments to hospitals both during and after the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 transition period.) The basic methodology for determining capital prospective payments using the Federal rate is set forth in § 412.312 of the regulations. For the purpose of calculating payments for each discharge, currently the standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG Weight) × (Geographic Adjustment Factor (GAF)) × (COLA for hospitals located in Alaska and Hawaii) × (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable). As discussed in the FY 2008 IPPS final rule with comment period (72 FR 47393 through 47401), based on our analysis of data on hospital inpatient Medicare capital margins that we obtained through our monitoring and comprehensive review of the adequacy of IPPS payments for capital-related costs, we made changes in the payment structure under the capital IPPS beginning with FY 2008. (We also provided an extended capital IPPS margin analysis discussion in the FY 2009 IPPS final rule (73 FR 48671 through 48675).) Specifically, in the FY 2008 IPPS final rule with comment period, we made two changes to the structure of payments under the capital IPPS: (1) We discontinued the 3.0 percent additional payment that had been provided to hospitals located in large urban areas at § 412.316(b) for FYs 2008 and beyond, (72 FR 47400 and 47412); and (2) we established a phaseout of the capital teaching adjustment (that is, the capital IME adjustment factor) at § 412.322 over a 3-year period beginning in FY 2008 (72 FR 47401 and 47412). Under the established 3-year phaseout of the capital teaching adjustment, we maintained the adjustment for FY 2008 in order to give teaching hospitals an opportunity to plan and make adjustments in correlation to the change. For the second year of the transition (FY 2009), we revised the regulations at § 412.322 by adding paragraph (c), which currently specifies that, for discharges occurring during FY 2009, the formula for determining the amount of the capital IPPS teaching adjustment is half of the amount provided under the previous formula (at § 412.322(b)). Furthermore, for the last year of the transition (FY 2010) and subsequent years, we added paragraph (d) to § 412.322, which specifies that, for discharges occurring during FY 2010 and after, hospitals will no longer receive an adjustment for teaching activity under the capital IPPS. Section 4301(b)(1) of the American Recovery and Reinvestment Act of 2009 PO 00000 Frm 00119 Fmt 4701 Sfmt 4702 24197 (ARRA), Public Law 111–5, enacted on February 17, 2009, directed the Secretary to not apply the 50-percent reduction in the capital IPPS teaching adjustment for FY 2009, thereby restoring the full capital IME adjustment for FY 2009. However, section 4301(b)(2) of Public Law 111–5 specifies that the law will not affect the phase-out of the capital IPPS teaching adjustment for FY 2010 and subsequent fiscal years. The provisions of Public Law 111–5 related to the capital IPPS teaching adjustment are further discussed in section VI.E.2. of the preamble of this proposed rule. B. Exception Payments The regulations at § 412.348(f) provide that a hospital may request an additional payment if the hospital incurs unanticipated capital expenditures in excess of $5 million due to extraordinary circumstances beyond the hospital’s control. This policy was originally established for hospitals during the 10-year transition period, but as we discussed in the FY 2003 IPPS final rule (67 FR 50102), we revised the regulations at § 412.312 to specify that payments for extraordinary circumstances are also made for cost reporting periods after the transition period (that is, cost reporting periods beginning on or after October 1, 2001). Additional information on the exception payment for extraordinary circumstances in § 412.348(f) can be found in the FY 2005 IPPS final rule (69 FR 49185 and 49186). During the transition period, under §§ 412.348(b) through (e), eligible hospitals could receive regular exception payments. These exception payments guaranteed a hospital a minimum payment percentage of its Medicare allowable capital-related costs depending on the class of the hospital (§ 412.348(c)), but were available only during the 10-year transition period. After the end of the transition period, eligible hospitals can no longer receive this exception payment. However, even after the transition period, eligible hospitals receive additional payments under the special exceptions provisions at § 412.348(g), which guarantees all eligible hospitals a minimum payment of 70 percent of its Medicare allowable capital-related costs provided that special exceptions payments do not exceed 10 percent of total capital IPPS payments. Special exceptions payments may be made only for the 10 years from the cost reporting year in which the hospital completes its qualifying project, and the hospital must have completed the project no later than the hospital’s cost reporting period E:\FR\FM\22MYP2.SGM 22MYP2 24198 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules beginning before October 1, 2001. Thus, an eligible hospital may receive special exceptions payments for up to 10 years beyond the end of the capital IPPS transition period. Hospitals eligible for special exceptions payments are required to submit documentation to the fiscal intermediary or MAC indicating the completion date of their project. (For more detailed information regarding the special exceptions policy under § 412.348(g), we refer readers to the FY 2002 IPPS final rule (66 FR 39911 through 39914) and the FY 2003 IPPS final rule (67 FR 50102).) sroberts on PROD1PC70 with FRONTMATTER C. New Hospitals Under the IPPS for capital-related costs, § 412.300(b) of the regulations defines a new hospital as a hospital that has operated (under current or previous ownership) for less than 2 years. For example, the following hospitals are not considered new hospitals: (1) A hospital that builds new or replacement facilities at the same or another location, even if coincidental with a change of ownership, a change in management, or a lease arrangement; (2) a hospital that closes and subsequently reopens; (3) a hospital that has been in operation for more than 2 years but has participated in the Medicare program for less than 2 years; and (4) a hospital that changes its status from a hospital that is excluded from the IPPS to a hospital that is subject to the capital IPPS. For more detailed information, we refer readers to the FY 1992 IPPS final rule (56 FR 43418). During the 10-year transition period, a new hospital was exempt from the capital IPPS for its first 2 years of operation and was paid 85 percent of its reasonable costs during that period. Originally, this provision was effective only through the transition period and, therefore, ended with cost reporting periods beginning in FY 2002. Because, as discussed in the FY 2003 IPPS final rule (67 FR 50101), we believe that special protection to new hospitals is also appropriate even after the transition period, we revised the regulations at § 412.304(c)(2) to provide that, for cost reporting periods beginning on or after October 1, 2002, a new hospital (defined under § 412.300(b)) is paid 85 percent of its Medicare allowable capital-related costs through its first 2 years of operation, unless the new hospital elects to receive full prospective payment based on 100 percent of the Federal rate. (We refer readers to the FY 2003 IPPS final rule (67 FR 50101 through 50102) for a detailed discussion of the special payment provisions for new hospitals under the capital IPPS after the 10-year transition period.) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 D. Hospitals Located in Puerto Rico Section 412.374 of the regulations provides for the use of a blended payment amount for prospective payments for capital-related costs to hospitals located in Puerto Rico. Accordingly, under the capital IPPS, we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capitalrelated costs. In general, hospitals located in Puerto Rico are paid a blend of the applicable capital IPPS Puerto Rico rate and the applicable capital IPPS Federal rate. Prior to FY 1998, hospitals in Puerto Rico were paid a blended capital IPPS rate that consisted of 75 percent of the capital IPPS Puerto Rico specific rate and 25 percent of the capital IPPS Federal rate. However, effective October 1, 1997 (FY 1998), in conjunction with the change to the operating IPPS blend percentage for hospitals located in Puerto Rico required by section 4406 of Public Law 105–33, we revised the methodology for computing capital IPPS payments to hospitals in Puerto Rico to be based on a blend of 50 percent of the capital IPPS Puerto Rico rate and 50 percent of the capital IPPS Federal rate. Similarly, in conjunction with the change in operating IPPS payments to hospitals located in Puerto Rico for FY 2005 required by section 504 of Public Law 108–173, we again revised the methodology for computing capital IPPS payments to hospitals located in Puerto Rico to be based on a blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent of the capital IPPS Federal rate effective for discharges occurring on or after October 1, 2004. E. Proposed Changes 1. Proposed FY 2010 MS–DRG Documentation and Coding Adjustment a. Background on the Prospective MS– DRG Documentation and Coding Adjustments for FY 2008 and FY 2009 In the FY 2008 IPPS final rule with comment period (72 FR 47175 through 47186), we adopted the MS–DRG patient classification system for the IPPS, effective October 1, 2007, to better recognize patients’ severity of illness in Medicare payment rates. Adoption of the MS–DRGs resulted in the expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008 (currently 746, including one additional MS–DRG created in FY 2009). By increasing the number of DRGs and more fully taking into account patients’ severity of illness in Medicare payment rates, the MS– DRGs encourage hospitals to change PO 00000 Frm 00120 Fmt 4701 Sfmt 4702 their documentation and coding of patient diagnoses. In that same final rule with comment period (72 FR 47183), we indicated that we believe the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for changes in documentation and coding. Accordingly, we established adjustments to both the national operating standardized amount and the national capital Federal rate to eliminate the estimated effect of changes in documentation and coding resulting from the adoption of the MS–DRGs that do not reflect real changes in case-mix. Specifically, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010. However, to comply with section 7(a) of Public Law 110–90, enacted on September 29, 2007, in a final rule published in the Federal Register on November 27, 2007 (72 FR 66886 through 66888), we modified the documentation and coding adjustment for FY 2008 to ¥0.6 percent, and consequently revised the FY 2008 IPPS operating and capital payment rates, factors, and thresholds accordingly, with these revisions effective October 1, 2007. For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent instead of the ¥1.8 percent adjustment established in the FY 2008 IPPS final rule with comment period. As discussed in the FY 2008 IPPS final rule with comment period (72 FR 48447 and 48733 through 48774), we applied a documentation and coding adjustment of ¥0.9 percent to the FY 2009 IPPS national standardized amounts and the capital Federal rate. The documentation and coding adjustments established in the FY 2009 IPPS final rule, as amended by Pub. L. 110–90, are cumulative. As a result, the ¥0.9 percent documentation and coding adjustment in FY 2009 was in addition to the ¥0.6 percent adjustment in FY 2008, yielding a combined effect of ¥1.5 percent. (For additional details on the development and implementation of the documentation and coding adjustments for FY 2008 and FY 2009, we refer readers to section II.D. of this preamble and the following rules published in the Federal Register August 22, 2007 (72 FR 47175 through 47186 and 47431 through 47432); November 27, 2007 (72 FR 66886 through 66888); and August 19, 2008 (73 FR 48447 through 48450 and 48773 through 48775).) E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules b. Proposed Prospective MS–DRG Documentation and Coding Adjustment to the National Capital Federal Rate for FY 2010 and Subsequent Years Consistent with the prospective adjustment to the national average operating IPPS standardized amounts (discussed in section II.D. of this preamble), under the capital IPPS we also continue to believe that it is appropriate to make adjustments to the capital IPPS rates to eliminate the effect of any documentation and coding changes as a result of the implementation of the MS–DRGs. These adjustments are intended to ensure that future annual aggregate IPPS payments are the same as payments that otherwise would have been made had the prospective adjustments for documentation and coding applied in FY 2008 and FY 2009 accurately reflected the change due to documentation and coding that occurred in those years. As noted above in section VI.A. of this preamble, under section 1886(g) of the Act, the Secretary has broad authority in establishing and implementing the IPPS for acute care hospital inpatient capital-related costs (that is, the capital IPPS). We have consistently stated since the initial implementation of the MS–DRG system that we do not believe it is appropriate for Medicare expenditures under the capital IPPS to increase due to MS–DRG related changes in documentation and coding. Accordingly, we believe that it is appropriate under the Secretary’s broad authority under section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Public Law 110–90, to make adjustments to the capital Federal rate to eliminate the full effect of the documentation and coding changes resulting from the adoption of the MS– DRGs. We believe that this is appropriate because, in absence of such adjustments, the effect of the documentation and coding changes resulting from the adoption of the MS– DRGs results in inappropriately high capital IPPS payments because that portion of the increase in aggregate payments is not due to an increase patient severity (and costs). We have performed a thorough retrospective evaluation of the most recent available claims data, and the results of this evaluation were used by our actuaries to determine any necessary payment adjustments beyond the cumulative ¥1.5 percent adjustment applied in determining the FY 2009 capital Federal rate to ensure budget neutrality for the implementation of MS–DRGs. Specifically, as discussed in VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 greater detail in section II.D.4. of the preamble of this proposed rule, we performed a retrospective evaluation of the FY 2008 claims data updated through December 2008. Based on this evaluation, our actuaries have determined that the implementation of the MS–DRG system resulted in a 2.5 percent change in case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008. (As noted above, our analysis plan is described in greater detail in section II.D.4. of this preamble. As also noted in that section, the FY 2008 MedPAR files are available to the public to allow independent analysis of the documentation and coding effect, and we are seeking public comment on our methodology and analysis.) The estimated 2.5 percent change in FY 2008 case-mix due to documentation and coding changes that did not reflect real changes in case-mix for discharges occurring during FY 2008 exceeds the ¥0.6 percent prospective documentation and coding adjustment applied to the FY 2008 capital Federal rate (as established in the final rule published in the Federal Register on November 27, 2007 (72 FR 66886 through 66888)) by 1.9 percentage points (2.5 percent minus 0.6 percent). Therefore, in this proposed rule, under the Secretary’s broad authority under section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Public Law 110–90, we are proposing to reduce the capital Federal rate in FY 2010 by ¥1.9 percent to account for the amount by which the 2.5 percent change in FY 2008 exceeds the established ¥0.6 percent adjustment. Furthermore, consistent with our proposal under the operating IPPS, we are proposing to leave that proposed ¥1.9 percent adjustment in place for subsequent fiscal years to account for the effect in FY 2010 and subsequent years of the amount by which the 2.5 percent change in FY 2008 exceeds the established ¥0.6 percent adjustment. We also examined the differences in case-mix between the FY 2008 claims data in which cases were grouped through the FY 2008 GROUPER (Version 25.0) and the FY 2009 GROUPER (Version 26.0). As discussed in section II.D.5. of this preamble, this was to help inform our analysis of the potential for increase in the documentation and coding effect in FY 2009. In FY 2008, we were transitioning to the fully implemented MS–DRG relative weights and the fully implemented cost-based weights. We found that the use of the transition PO 00000 Frm 00121 Fmt 4701 Sfmt 4702 24199 weights mitigated the FY 2008 documentation and coding effect on expenditures. Specifically, our analysis shows that, even assuming no additional changes in documentation and coding in FY 2009, the use of the FY 2009 MS–DRG relative weights (which no longer were based on a blend of the MS–DRGs and the CMS DRGs) results in an additional 0.7 percent documentation and coding effect in FY 2009. Based on these analyses and other factors, our actuaries continue to estimate that the cumulative overall effect of documentation and coding changes under the MS–DRG system will be 4.8 percent. Our actuaries also estimate that these changes will be substantially complete by the end of FY 2009. Therefore, our current estimate of the MS–DRG documentation and coding effect is 2.3 percent for discharges occurring during FY 2009. Consistent with the proposal for the national operating standardized amounts presented in section II.D.4. of this preamble, we will address any differences between the increase in FY 2009 case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied to the FY 2009 capital Federal rate (as established in the FY 2009 IPPS final rule (73 FR 48773 through 48774) in the FY 2011 rulemkaing cycle after an evaluation of the extent of the overall national average changes in case-mix for FY 2009 based on a retrospective evaluation of all FY 2009 claims data. As we stated in section II.D. of this preamble, we are seeking public comment on the proposed ¥1.9 percent prospective adjustments to address the effect of documentation and coding changes unrelated to changes in real case-mix in FY 2008. In addition, as we discussed in section II.D. of the preamble of this proposed rule, we are seeking public comment on addressing in the FY 2011 rulemaking cycle any differences between the increase in FY 2009 case-mix due to documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied in determining the FY 2009 capital Federal rate established in the FY 2009 IPPS final rule. In summary, in this proposed rule, we are proposing to adjust the FY 2010 capital Federal rate by a cumulative prospective reduction of 3.4 percent to account for increased Medicare expenditures resulting from the changes E:\FR\FM\22MYP2.SGM 22MYP2 24200 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER in documentation and coding practices with the adoption of the MS–DRGs. In addition, we are proposing to leave that adjustment in place for subsequent fiscal years to account for the effect in FY 2010 and subsequent years in order to ensure that changes in documentation and coding resulting from adoption of the MS–DRGs do not lead to an increase in aggregate payments not reflective of an increase in real case-mix. (In sections II.D.3. and 6. of this preamble, we discuss section 7(b)(1)(B) of Pub. L. 110–90 and the requirement to make an additional adjustment to the standardized amounts (referred to as recoupment or repayment adjustments in FYs 2010 through 2012 required by Pub. L. 110–90). We note that we are not proposing to apply section 7(b)(1)(B) of Pub. L. 110–90 to the capital Federal rate.) The application of this proposed MS–DRG documentation and coding adjustment in the determination of the proposed FY 2010 capital Federal rate is shown in section III.A.5. of the Addendum of this proposed rule. c. Proposed Documentation and Coding Adjustment to the Puerto Rico-Specific Capital Rate Under § 412.74, Puerto Rico hospitals are currently paid based on 75 percent of the national capital Federal rate and 25 percent of the Puerto Rico-specific capital rate. In the FY 2009 IPPS final rule (73 FR 48775), consistent with our development of the FY 2009 Puerto Rico-specific operating standardized amount, we did not apply the additional ¥0.9 percent documentation and coding adjustment (or the cumulative ¥1.5 percent adjustment) to the FY 2009 Puerto Rico-specific capital rate. However, we discussed that the statute gives broad authority to the Secretary under section 1886(g) of the Act, with respect to the development of and adjustments to a capital PPS, and therefore we would not be outside the authority of section 1886(g) of the Act in applying the documentation and coding adjustment to the Puerto Ricospecific portion of the capital payment rate. As we explained in that same final rule, to date we had not yet applied a documentation and coding adjustment to the Puerto Rico-specific capital rate because we have historically made changes to the capital IPPS consistent with those changes made to the operating IPPS. We also stated that we may propose to apply such an adjustment to the Puerto Rico capital rates in the future. As discussed in section II.D.10. of this preamble, when we performed a retrospective evaluation of the FY 2008 claims data of hospitals located in VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Puerto Rico using the same methodology discussed above, we found that the change in case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 from hospitals located in Puerto Rico is approximately 1.1 percent. Given this case-mix increase due to changes in documentation and coding under the MS–DRGs, consistent with our proposal to adjust the FY 2010 capital Federal rate presented above and consistent with our proposed adjustment to the FY 2010 Puerto Rico-specific standardized amount discussed in section II.D.10.of this preamble, in this proposed rule, under the Secretary’s broad authority under section 1886(g) of the Act, we are proposing to adjust the Puerto Ricospecific capital rate by ¥1.1 percent in FY 2010 for the FY 2008 increase in case-mix due to changes in documentation and coding under the MS–DRGs. In addition, consistent with our other proposals concerning prospective MS–DRG documentation and coding adjustments to the capital Federal rate and operating IPPS standardized amounts presented in this proposed rule, we are proposing to leave that proposed ¥1.1 percent adjustment in place for subsequent fiscal years in order to ensure that changes in documentation and coding resulting from the adoption of the MS–DRGs do not lead to an increase in aggregate payments not reflective of an increase in real case-mix. The proposed 1.1 percent adjustment would be applied to the capital Puerto Rico-specific rate that accounts for 25 percent of payments to hospitals located in Puerto Rico, with the remaining 75 percent based on the national capital Federal rate, which we are proposing to adjust as described above. Consequently, the proposed overall reduction to the FY 2010 payment rates for hospitals located in Puerto Rico to account for documentation and coding changes would be slightly less than the reduction for IPPS hospitals paid based on 100 percent of the national capital Federal rate. As noted above, the Puerto Rico-specific capital rate was not adjusted for the effects of documentation and coding changes in FY 2008 or FY 2009 as were the FY 2008 and FY 2009 national capital Federal rates. Similar to the analysis performed for all IPPS hospitals noted above, we also examined FY 2008 claims data from hospitals located in Puerto Rico to help inform analysis of the potential for increase in the documentation and coding effect in FY 2009. As discussed PO 00000 Frm 00122 Fmt 4701 Sfmt 4702 in greater detail in section II.D.10. of this preamble, based on this analysis, our actuaries estimate that the cumulative overall effect of documentation and coding changes under the MS–DRG system in FY 2009 for hospitals located in Puerto Rico will be 1.3 percent (1.1 percent plus an additional 0.2 percent). Consistent with the proposal for the operating Puerto Rico-specific standardized amounts presented in section II.D.10. of this preamble, we will address any increase in FY 2009 case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009 in the FY 2011 rulemaking cycle. As stated in section II.D.10. of this preamble, we are seeking public comment on the proposed ¥1.1 percent prospective adjustment to the Puerto Rico-specific IPPS rates in FY 2010 for the FY 2008 documentation and coding effect, including the methodology for determining these adjustments. In addition, we are seeking public comment on addressing in the FY 2011 rulemaking cycle any increase in FY 2009 case-mix due to documentation and coding changes that did not reflect real changes in case-mix for discharges occurring during FY 2009. 2. Revision to the FY 2009 IME Adjustment Factor As noted in section VI.A. of this preamble, section 4301(b)(1) of Public Law 111–5 requires that the phase-out of the capital IPPS teaching adjustment specified at § 412.322(c) of the regulations (that is, the 50-percent reduction for FY 2009) shall not be applied, and the Secretary shall apply § 412.322 without regard to paragraph (c) of that section. Furthermore, section 4301(b)(2) of the Pub. L. 111–5 specifies that the law has no effect on § 412.322(d), which eliminates the capital IPPS teaching adjustment for FY 2010 and thereafter. Therefore, in order to reflect the current statutory requirements as specified in section 4301(b)(1) of Public Law 111–5, in this proposed rule, we are proposing to delete § 412.322(c) of the existing regulations. In the absence of existing § 412.322(c), the capital IPPS teaching adjustment for FY 2009 will not be reduced by 50 percent but will be as determined under § 412.322(b) (that is, the full capital IME teaching adjustment). The elimination of the teaching adjustment for FY 2010, as currently specified at § 412.322(d) of the regulations, will remain, consistent with section 4301(b)(2) of Public Law 111–5. We note that we have issued instructions (Change Request 6444 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules dated March 27, 2009) to fiscal intermediaries and MACs to implement the change to the capital teaching adjustment for FY 2009, as specified in section 4301(b)(1) of Public Law 111–5. As noted above, in this proposed rule, we are proposing to revise the existing regulations at § 412.322 by deleting the language of paragraph (c) and labeling the paragraph ‘‘Repealed.’’ We are soliciting public comments on our proposed implementation of section 4301(b) of Public Law 111–5 concerning capital IME payments. 3. Other Proposed Changes for FY 2010 The proposed annual update to the capital IPPS national and Puerto Ricospecific rates, as provided for at § 412.308(c), for FY 2010 is discussed in section III. of the Addendum to this proposed rule. VII. Proposed Changes for Hospitals Excluded From the IPPS sroberts on PROD1PC70 with FRONTMATTER A. Excluded Hospitals Historically, hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-of-increase ceiling. An annual per discharge limit (the target amount as defined in § 413.40(a)) was set for each hospital or hospital unit based on the hospital’s own cost experience in its base year. The target amount was multiplied by the Medicare discharges and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital’s cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to all categories of excluded providers, which included rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children’s hospitals, and cancer hospitals. Payment to children’s hospitals and cancer hospitals that are excluded from the IPPS continues to be subject to the rate-of-increase ceiling based on the hospital’s own historical cost experience. (We note that, in accordance with § 403.752(a) of the regulations, RNHCIs are also subject to the rate-ofincrease limits established under § 413.40 of the regulations.) In this FY 2010 proposed rule, we are proposing that the percentage increase in the rate-of-increase limits for cancer and children’s hospitals and RNHCIs would be the percentage increase in the proposed FY 2010 IPPS operating market basket. In compliance with VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 section 404 of the MMA, in this proposed rule, we are proposing to replace the FY 2002-based IPPS operating and capital market baskets with the revised and rebased FY 2006based IPPS operating and capital market baskets for FY 2010. Therefore, consistent with the current law, based on IHS Global Insight, Inc.’s 2009 first quarter forecast, with historical data through the 2008 fourth quarter, we are estimating that the FY 2010 update to the IPPS operating market basket will be 2.1 percent (that is, the current estimate of the market basket rate-of-increase). Consistent with our historical approach, we calculate the proposed IPPS operating market basket for FY 2010 using the most recent data available. However, if more recent data become available for the final rule, we will use them to calculate the IPPS operating market basket for FY 2010. For cancer and children’s hospitals and RNHCIs, the proposed FY 2010 rate-ofincrease percentage that is applied to FY 2009 target amounts in order to calculate the proposed FY 2010 target amounts is estimated to be 2.1 percent, in accordance with the applicable regulations in 42 CFR 413.40. We note that IRFs, IPFs, and LTCHs, which were paid previously under the reasonable cost methodology, now receive payment under their own prospective payment systems, in accordance with changes made to the statute. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provided transition periods of varying lengths during which time a portion of the prospective payment was based on cost-based reimbursement rules under Part 413. (However, certain providers do not receive a transition period or may elect to bypass the transition period as applicable under 42 CFR Part 412, Subparts N, O, and P.) We note that the various transition periods provided for under the IRF PPS, the IPF PPS, and the LTCH PPS have ended. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section IV. of the Addendum to this proposed rule for the proposed specific update changes to the Federal payment rates for LTCHs under the LTCH PPS for RY 2010. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. B. Criteria for Satellite Facilities of Hospitals The regulations at 42 CFR 412.22(e) specify the criteria that a hospital that occupies space in a building also used by another hospital or in one or more separate buildings located on the same PO 00000 Frm 00123 Fmt 4701 Sfmt 4702 24201 campus as buildings used by another hospital (also known as a hospitalwithin-hospital (HwH)) must meet in order to be excluded from the IPPS. Section 412.22(e)(1)(i) specifies that the HwH must have a governing body that is separate from the governing body of the hospital occupying space in the same building or on the same campus. The HwH’s governing body must not be under the control of the hospital with which it shares space in a building or on a campus, nor can it be under the control of any third entity that controls both hospitals. It has come to our attention that there is an inadvertent inconsistency between the governance and control criteria at § 412.22(h)(2)(iii)(A) that satellite facilities must meet in order to be excluded from the IPPS and the separate governing body criteria at § 412.22(e)(1)(i) that HwHs must meet in order to be excluded from the IPPS. Specifically, the separate governing body requirement for satellite facilities at § 412.22(h)(2)(iii)(A) mistakenly omits language regarding a third entity. In particular, it fails to indicate that the governing body of the hospital of which the satellite facility is a part cannot be under the control of any third entity that controls both the hospital of which the satellite facility is a part and the hospital with which the satellite facility is co-located. As explained in past rulemaking, we believe satellite facilities are similar enough to HwHs to warrant application of more closely related criteria to both types of facilities (67 FR 49982 and 50105 through 50106). Specifically, satellite facilities are like HwHs in that the satellite facilities are also physically located in acute care hospitals that are paid for inpatient services they furnish under the acute care IPPS. Moreover, both satellite facilities and HwHs provide hospital inpatient services that are generally paid for at higher rates than would apply if the facilities were treated by Medicare as part of the acute care hospitals. In view of these facts, we continue to believe that it is important to establish clear criteria for ensuring that a satellite facility is not merely a unit of the acute care hospital with which it is co-located, but rather is organizationally and functionally separate from the hospital. Therefore, we believe the separate governing body requirements for satellite facilities should include requirements that are similar to those we included at § 412.22(e)(1)(i) for HwHs; that is, that the governing body of the hospital of which the satellite facility is a part cannot be under the control of any third entity that controls both the hospital of E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24202 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules which the satellite facility is a part and the hospital with which the satellite facility is co-located. Accordingly, we are proposing to amend the criteria for satellite facilities at § 412.22(h)(2)(iii)(A) by adding language under paragraph (1) to state that, except as provided in proposed paragraph (h)(2)(iii)(A)(2), the governing body of the hospital of which the satellite facility is a part cannot be under the control of any third entity that controls both the hospital of which the satellite facility is a part and the hospital with which the satellite facility is co-located. We are proposing that the revised criteria would be effective with cost reporting periods beginning on or after October 1, 2009. In addition, we are proposing to add a ‘‘grandfathering’’ provision to the regulations at § 412.22(h)(2)(iii)(A)(2). Currently, an IPPS-excluded hospital with a satellite facility that has its governing body under the control of a third entity that controls the hospital of which the satellite facility is a part and the hospital with which the satellite facility is co-located can retain its IPPSexcluded status. An IPPS-excluded hospital that currently has a satellite facility already has its organizational structure and financial systems in place. To require now that a hospital that currently has a satellite facility must meet the proposed new separate governance criteria with respect to that satellite facility could create undue financial and organizational difficulties. This could further result in the closure of the satellite facility and the discontinuation of services because of the inability of the hospital and its satellite facility to meet the proposed new separate governance criteria. Therefore, we are proposing that if a hospital and its satellite facility were excluded from the IPPS under the provision of § 412.22(h) for the most recent cost reporting period beginning before October 1, 2009, the hospital would be required to meet the proposed new separate governance criteria at § 412.22(h)(2)(iii)(A)(1) with respect to that satellite facility in order to retain its IPPS-excluded status (proposed § 412.22(h)(2)(iii)(A)(2)). However, because the proposed new separate governance criteria would be effective for cost reporting periods beginning on or after October 1, 2009, a hospital that establishes an additional satellite facility in a cost reporting period beginning on or after October 1, 2009, will have knowledge of the requirements that must be met in order to retain its IPPS-excluded status prior to establishing the additional satellite facility, and it will be able to plan accordingly. Furthermore, no VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 organizational or financial relationship would already be in place with respect to the additional satellite facility. Thus, there would not be a need for the hospital and its additional satellite facility to be grandfathered. This situation is distinguishable from a hospital with a satellite facility established in the most recent cost reporting period beginning prior to October 1, 2009, as discussed above. Therefore, we are proposing that if a hospital and its satellite facility were excluded from the IPPS under the provision of § 412.22(h) for the most recent cost reporting period prior to October 1, 2009, and the hospital establishes an additional satellite facility in a cost reporting priod beginning on or after October 1, 2009, the hospital would not be required to meet the proposed new separate governance criteria at § 412.22(h)(2)(iii)(A)(1), with respect to the additional satellite facility, in order to be excluded from the IPPS. (We note that the hospital and the new additional satellite facility also would be required to meet the other applicable requirements in § 412.22(h), consistent with our longstanding policies.) We give the following example of how the proposed regulations at § 412.22(h)(2)(iii)(A)(2) and (h)(2)(iii)(A)(3) would work. Hospital A established a satellite facility (s-B) at Hospital B in a cost reporting period beginning prior to October 1, 2009, under the applicable criteria for hospitals and satellite facilities at § 412.22(h), and therefore, the hospital and that satellite facility were excluded from the IPPS in the most recent cost reporting period beginning prior to October 1, 2009. If Hospital A establishes an additional satellite facility (s-C) at Hospital C in a cost reporting period beginning on or after October 1, 2009, Hospital A and its satellite facility at Hospital C must meet the applicable hospital and satellite facility criteria at § 412.22(h), including the proposed new separate governance criteria at paragraph (h)(2)(iii)(A)(1), in order to be excluded from the IPPS. Thus, the governing body of Hospital A cannot be under the control of any third entity that controls both Hospital A and Hospital C. However, Hospital A and sB must continue to meet the other applicable criteria in § 412.22(h) to be excluded from the IPPS. C. Critical Access Hospitals (CAHs) 1. Background Section 1820 of the Act provides for the establishment of Medicare Rural Hospital Flexibility Programs (MRHFPs) PO 00000 Frm 00124 Fmt 4701 Sfmt 4702 under which individual States may designate certain facilities as critical access hospitals (CAHs). Facilities that are so designated and meet the CAH conditions of participation under 42 CFR Part 485, Subpart F, will be certified as CAHs by CMS. Regulations governing payments to CAHs for services to Medicare beneficiaries are located in 42 CFR Part 413. 2. Payment for Clinical Diagnostic Laboratory Tests Furnished by CAHs Section 1834(g)(1) of the Act states that payment for outpatient services furnished by a CAH will be made at 101 percent of the reasonable costs to the CAH in providing those services, except for those CAHs that elect the optional reimbursement method outlined at section 1834(g)(2) of the Act. We refer to payment under the elective methodology described in section 1834(g)(2) of the Act as the ‘‘optional method.’’ (We discuss proposed changes to the CAH optional method of payment regulations below in section VII.C.3. of this preamble.) Section 1834(g)(4) of the Act provides that there is no beneficiary cost-sharing for ‘‘clinical diagnostic laboratory services furnished as an outpatient critical access hospital service.’’ Section 148 of Public Law 110–275 (MIPPA) amended section 1834(g)(4) of the Act, effective for services furnished on or after July 1, 2009. Specifically, section 148(a)(1) of Public Law 110–275 changed the heading of section 1834(g)(4) of the Act to read ‘‘Treatment of Clinical Diagnostic Laboratory Services.’’ Section 148(a)(2) of Public Law 110–275 amended section 1834(g)(4) of the Act by adding, in relevant part, that ‘‘* * * clinical diagnostic laboratory services furnished by a critical access hospital shall be treated as being furnished as part of outpatient critical access services without regard to whether the individual with respect to whom such services are furnished is physically present in the critical access hospital, or in a skilled nursing facility or a clinic (including a rural health clinic) that is operated by a critical access hospital, at the time the specimen is collected.’’ Regulations implementing section 1834(g) of the Act are set forth at § 413.70. Currently, the regulations at § 413.70(b)(2)(iii) state that payment to a CAH for clinical diagnostic laboratory services is made at 101 percent of reasonable cost ‘‘only if the individuals [for whom the tests are performed] are outpatients of the CAH, as defined in § 410.2 * * * and are physically present in the CAH, at the time the specimens are collected.’’ Clinical diagnostic E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules laboratory tests performed for individuals who are not physically present in the CAH when the specimen is collected are paid on the basis of the Clinical Laboratory Fee Schedule (CLFS) in accordance with the provisions of sections 1833(a)(1)(D) and 1833(a)(2)(D) of the Act. In this proposed rule, we are proposing to amend the regulations at § 413.70(b) in order to implement the changes made by section 148(a)(2) of Public Law 110–275. Section 148(a)(2) of Public Law 110–275 mandates that, effective for services furnished on or after July 1, 2009, individuals are no longer required to be physically present in the CAH at the time the specimen is collected in order for the CAH to receive payment based on reasonable cost for furnishing outpatient clinical diagnostic laboratory tests. Specifically, we believe the use of the phrase ‘‘without regard to whether the individual with respect to whom such services are furnished is physically present in the critical access hospital’’ means that as long as the tests are performed for individuals who are CAH outpatients as defined in § 410.2, payment based on reasonable cost must be made regardless of where the specimen is collected, even if the patient is not physically present in the CAH at the time the specimen is collected. Accordingly, we are proposing to implement section 148(a)(2) by revising the existing regulations to reflect our interpretation of the statutory change. We are proposing to amend the regulations at § 413.70(b) by deleting existing § 413.70(b)(2)(iii) and adding a new § 413.70(b)(7) to state that in order for a CAH to be paid for outpatient clinical diagnostic laboratory tests, a CAH outpatient is no longer required to be physically present in the CAH at the time the specimen is collected. However, if the individual is not physically present in the CAH at the time the specimen is collected, the individual must continue to be an outpatient of the CAH, as defined at § 410.2. We consider an individual to be an outpatient of the CAH if the individual is receiving services directly from the CAH. This requirement is consistent with our definition of a CAH outpatient at § 410.2, which states that outpatient ‘‘means a person who has not been admitted as an inpatient but who is registered on the hospital or CAH records as an outpatient and receives services (rather than supplies alone) directly from the hospital or CAH.’’ Consistent with section 1834(g)(4) of the Act, we are proposing, to amend the regulations to provide that, in order to be receiving services directly from the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 CAH, either the individual must be receiving outpatient services in the CAH on the same day the specimen is collected, or the specimen must be collected by an employee of the CAH. Accordingly, where the individual is an outpatient of the CAH as defined above, the individual would not be required to be physically present in the CAH at the time the specimen is collected. In addition, we do not believe that the enactment of section 148 of Public Law 110–275 has any effect on the applicability of the requirements at section 1862(a)(18) of the Act and the implementing regulations at § 411.15(p), which set forth requirements for payment of services furnished to SNF patients. Accordingly, we are proposing that, in cases where Medicare rules otherwise require consolidated billing or bundling of payments (for example, for services furnished to SNF patients during a Medicare Part A covered stay), the CAH laboratory payment provision would only provide for separate payment to the CAH once consolidated billing no longer applies. Where consolidated billing is required by Medicare rules, a separate payment for bundled services furnished by another provider, including a CAH, is prohibited. For example, for purposes of payment to a CAH for performing a clinical laboratory test on a specimen collected from a SNF patient, the proposed new CAH payment rules would apply only once the consolidated billing rules for SNF payments no longer apply. Coverage under Medicare Part A for services furnished to a SNF patient is limited to 100 days in a benefit period. During that period, the collection of a specimen by a CAH employee in the SNF and the CAH’s performance of a laboratory test on the specimen would be bundled into the SNF payment. Once the SNF patient has exhausted his or her Medicare Part A SNF days (that is, after 100 days), payment for the specimen collection by a CAH employee and the test performance by the CAH would no longer be bundled into the SNF payment and the CAH could receive a reasonable cost-based payment for the collection of a specimen by a CAH employee and the performance of the laboratory test by the CAH. In summary, we are proposing that a CAH may receive reasonable cost-based payment for outpatient clinical diagnostic laboratory tests furnished to an individual who is an outpatient of the CAH (and therefore receiving services directly from the CAH) even if the individual with respect to whom the laboratory services are furnished is not physically present in the CAH at the PO 00000 Frm 00125 Fmt 4701 Sfmt 4702 24203 time the specimen is collected. In order for the individual to be determined to be receiving services directly from the CAH, we are proposing that the individual must either have received outpatient services in the CAH on the same day the specimen is collected or the specimen must be collected by an employee of the CAH. In either case, the individual would not need to be physically present in the CAH at the time the specimen is collected. We also note that if the individual is physically present in the CAH or a facility that is provider-based to the CAH when the specimen is collected, the CAH would also receive a reasonable cost-based payment. In this case, the specimen would not need to be collected by an employee of the CAH. (We refer readers to section VII.D. of this preamble for further discussion of CAH providerbased facilities.) Section 148 of Public Law 110–275 applies to all services furnished on or after July 1, 2009. Accordingly, we intend to issue guidance that will instruct Medicare contractors on the implementation of this statutory provision effective July 1, 2009. We expect the instructions in the guidance will parallel the proposed changes to the regulations described above. However, we will consider all public comments received in response to this proposal and make any necessary and appropriate modifications before finalizing revisions to our regulations. We also believe it will be important to develop a modifier that could assist CMS in tracking laboratory services paid to CAHs under this provision. When a modifier is developed, we will issue guidance regarding its use. 3. CAH Optional Method of Payment for Outpatient Services Section 1834(g) of the Act establishes the payment rules for outpatient services furnished by a CAH. Section 403(d) of Public Law 106–113 (BBRA) amended section 1834(g) of the Act to provide for two methods of payment for outpatient services furnished by a CAH. Specifically, section 1834(g)(1) of the Act, as amended by Public Law 106– 113, provided that the amount of payment for outpatient services furnished by a CAH was equal to the reasonable cost of providing such services, unless the CAH made an election, under section 1834(g)(2) of the Act, to receive amounts that were equal to the reasonable cost of the CAH for facility services plus, with respect to the professional services, the amount otherwise paid for professional services under Medicare, less the applicable Medicare deductible and coinsurance E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24204 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules amount. The election made under section 1834(g)(2) of the Act is sometimes referred to as ‘‘Method II.’’ Throughout this section of this preamble, we refer to this election as the ‘‘optional method.’’ Section 202 of Public Law 106–554 (BIPA) amended section 1834(g)(2)(B) of the Act to increase the payment for professional services under the optional method to 115 percent of the amount otherwise paid for professional services under Medicare. In addition, section 405(a)(1) of Public Law 108–173 (MMA) amended section 1834(g)(l) of the Act by inserting the phrase ‘‘equal to 101 percent of’’ before the phrase ‘‘the reasonable costs’’. However, section 405(a)(1) of Public Law 108–173 did not amend the phrase ‘‘reasonable costs’’ under the optional method at section 1834(g)(2)(A) of the Act. Accordingly, section 1834(g) of the Act currently provides for two methods of payment for outpatient CAH services. Under the first method, as specified at section 1834(g)(1) of the Act, a CAH will be paid 101 percent of reasonable costs, unless it elects to be paid under the methodology specified at section 1834(g)(2) of the Act. Under the method specified at section 1834(g)(1) of the Act, facility services are paid at 101 percent of reasonable costs to the CAH through the Medicare fiscal intermediary or the Medicare Part A/B MAC, while payments for physician and other professional services are made to the physician under the Medicare Physician Fee Schedule (MPFS) through the Medicare carriers. However, under section 1834(g)(2) of the Act (the optional method), a CAH submits bills for both the facility and the professional services to its Medicare fiscal intermediary or its Medicare Part A/B MAC. If a CAH chooses this optional method for outpatient services, the physician or other practitioner must reassign his or her billing rights to the CAH to bill the Medicare program for those services. In accordance with section 1834(g)(2)(A) of the Act, under this optional method, the CAH receives reasonable cost payment for its facility costs and, with respect to the professional services, 115 percent of the amount otherwise paid for professional services under Medicare. Regulations implementing section 1834(g) of the Act are set forth at § 413.70(b). Section 413.70(b) states that, unless a CAH elects the optional method, payment for outpatient CAH services is 101 percent of the reasonable costs of the CAH in providing CAH services to its outpatients. However, existing § 413.70(b)(3)(ii)(A) states that a CAH may elect, under the optional VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 method, to be paid at 101 percent of the reasonable costs for facility services. As a result, we believe that the existing regulation is not consistent with the plain reading of section 1834(g)(2) of the Act, which provides for payment under the optional method of reasonable cost for facility services. In order to ensure that the regulations are consistent with the plain reading of section 1834(g)(2)(A) of the Act, we are proposing to revise § 413.70(b)(3)(ii)(A) to state that CAHs that elect the optional method will receive payment based on reasonable cost for outpatient facility services. The proposed change would not affect payment for the professional component as set forth under § 413.70(b)(3)(ii)(B). D. Provider-Based Status of Facilities and Organizations: Proposed Policy Changes 1. Background Since the beginning of the Medicare program, some providers, which we refer to as ‘‘main providers’’, have functioned as a single entity while owning and operating multiple provider-based departments, locations, and facilities that were treated as part of the main provider for Medicare purposes. Therefore, we have maintained that having clear criteria for provider-based status is important because by failing to properly distinguish between a provider-based facility and a freestanding facility, we risk additional program payments and increased beneficiary coinsurance liability with no commensurate benefit to the Medicare program or its beneficiaries. In addition, we jeopardize the delivery of safe and appropriate health care services to beneficiaries. The Medicare policies regarding provider-based status of facilities and organizations are set forth at 42 CFR 413.65. The regulations at § 413.65 have been revised and updated on numerous occasions since they were originally issued on April 7, 2000 (65 FR 18504). We note that the implementation of the April 7, 2000 regulations was delayed by Public Law 106–554 (BIPA) for many providers. Public Law 106–554 also made changes in the criteria for determining provider-based status, which we implemented in a final rule published in the Federal Register on November 30, 2001 (66 FR 59956). The most recent revisions of § 413.65 were included in the FY 2006 IPPS final rule (70 FR 47457 through 47461 and 47487 through 47488) when we updated the rules with respect to the facilities for which provider-based determinations will not be made and clarified some of PO 00000 Frm 00126 Fmt 4701 Sfmt 4702 the provider-based definitions and requirements. Currently, § 413.65(a) specifies the facilities and organizations for which provider-based status may be sought and lists those facilities for which determinations of provider-based status for Medicare payment purposes are not made. Section 413.65(b) describes the procedures for making provider-based determinations, and § 413.65(c) explains the requirements for reporting material changes in relationships between main providers and provider-based facilities and organizations. In § 413.65(d), we specify all of the requirements that any facility or organization for which provider-based status is sought must meet, whether located on or off the campus of a potential main provider. Section 413.65(e) specifies additional requirements applicable to off-campus facilities or organizations. These requirements include: operation under the ownership and control of the main provider; administration and supervision; and location. Sections 413.65(f) through (o) set forth the policies regarding provider-based status for joint ventures, obligations of hospital outpatient departments and hospitalbased entities, management contracts, furnishing of all services under arrangement, inappropriate treatment of a facility or organization as providerbased, temporary treatment as providerbased, correction of errors, status of Indian Health Service and Tribal facilities and organizations, FQHCs and ‘‘look alikes,’’ and effective dates of provider-based status. 2. Proposed Changes to the Scope of the Provider-Based Status Regulations for CAHs (a) CAH-Based Clinical Diagnostic Laboratory Facilities The provider-based status rules generally apply to situations where there is a financial incentive for a facility or organization to claim affiliation with a main provider. The provider-based status rules establish criteria for a facility or organization to demonstrate that it is integrated with the main provider for payment purposes. However, the regulation at § 413.65(a)(1)(ii) lists specific types of facilities and organizations for which CMS will not make provider-based determinations. Included on this list of facilities exempt from provider-based determinations are facilities that furnish only clinical diagnostic laboratory services (§ 413.65(a)(1)(ii)(G)). As we have stated in previously issued rules (that is, the FY 2006 IPPS final rule (70 FR 47457)), the list at E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules § 413.65(a)(1)(ii) was created after we had concluded that ‘‘provider-based determinations should not be made for these facilities because the outcome of the determination (that is, whether a facility, unit, or department is found to be freestanding or provider-based) would not affect the methodology used to make Medicare or Medicaid payment, the scope of benefits available to a Medicare beneficiary in or at the facility, or the deductible or coinsurance liability of a Medicare beneficiary in or at the facility.’’ We note that we excluded a facility that furnishes only clinical diagnostic laboratory services in § 413.65(a)(1)(ii)(G) from the list in § 413.65(a)(1)(ii) because these facilities are generally paid under the Clinical Laboratory Fee Schedule (CLFS), regardless of the setting in which the services are furnished. Consequently, we believed that whether a clinical diagnostic laboratory was freestanding or provider-based would not affect the amount of Medicare payment. However, upon further review of existing § 413.65(a)(1)(ii), we believe that a clinical diagnostic laboratory, when operated as part of a CAH, generates a higher Medicare payment than when operating as a freestanding facility. When a clinical diagnostic laboratory is part of a CAH, the services furnished by the laboratory are generally paid at 101 percent of reasonable cost. Otherwise, clinical diagnostic laboratory services provided by a freestanding diagnostic laboratory are paid under the CLFS. Currently, because the services of a clinical diagnostic laboratory of a CAH are paid at a higher rate by virtue of being provided by a CAH department, we believe they should be subject to the rules under the provider-based status regulations at § 413.65. Therefore, we are proposing to exclude a clinical diagnostic laboratory facility that operates as part of a CAH from the list of facilities for which we do not make provider-based determinations. That is, we are proposing to revise the regulations to require facilities furnishing only clinical diagnostic laboratory tests that operate as part of a CAH to meet the applicable provider-based criteria in § 413.65 in order for the CAH to receive payments for the services furnished at those facilities at 101 percent of reasonable cost. Specifically, we are proposing to revise the language of § 413.65(a)(1)(ii)(G) to state that CMS will not make a determination of provider-based status for payment purposes as to whether the following facilities are provider-based: ‘‘Independent diagnostic testing facilities that furnish only services paid VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 under a fee schedule, such as facilities that furnish only screening mammography services, facilities that furnish only clinical diagnostic laboratory tests, other than those clinical diagnostic laboratory facilities operating as parts of CAHs, or facilities that furnish only some combination of these services’’ (emphasis added). In addition, we would specify that ‘‘Clinical diagnostic laboratories operating as parts of CAHs must meet the applicable provider-based requirements.’’ In proposing this change to the provider-based status rules, we recognize that there may be confusion between this proposal that a clinical diagnostic laboratory facility that is part of a CAH must meet provider-based rules in order to receive the higher reasonable cost-based payment and the proposal discussed in section VII.C.2. of this preamble to implement section 148 of Public Law 110–275. In section VII.C.2. of this preamble, we are proposing to revise the regulations at § 413.70 to specify that CAHs can bill for outpatient clinical diagnostic laboratory services furnished to patients who are outpatients of the CAH, regardless of whether they are physically present in the CAH at the time the specimen is collected. In the proposed revision of § 413.70, we are proposing that, in order for a CAH to bill 101 percent of reasonable costs for outpatient clinical diagnostic laboratory services furnished to an individual, the individual must be an outpatient of the CAH, as defined at § 410.2, and be receiving services directly from the CAH. That is, either the individual must be receiving outpatient services in the CAH on the same day that the specimen is collected or the specimen must be collected by an employee of the CAH. Under the proposed changes to the provider-based status rules under § 413.65 in this section of this proposed rule, if a CAH chooses to own or operate a clinical diagnostic laboratory facility, the facility must meet the providerbased status requirements under § 413.65 in order for the facility to be considered part of the CAH and in order for the CAH to be eligible to be paid based on 101 percent of reasonable cost for the clinical diagnostic laboratory services furnished by the laboratory facility. According to our proposal in section VII.C.2. of this preamble, a CAH would have the option to bill for outpatient clinical diagnostic laboratory services at 101 percent of reasonable cost for patients receiving services in nonprovider-based facilities or locations as long as the patients are outpatients of PO 00000 Frm 00127 Fmt 4701 Sfmt 4702 24205 the CAH as defined above and either the specimen is collected by an employee of the CAH or the individual is receiving outpatient services in the CAH on the same day that the specimen is collected. In addition, under our provider-based status proposal, a CAH can also bill for clinical diagnostic laboratory services at 101 percent of reasonable costs for patients who are furnished services in a clinical diagnostic laboratory facility that is owned and operated by the CAH as long as the clinical diagnostic laboratory facility meets the providerbased status requirements at § 413.65. In summary, we believe that clinical diagnostic laboratory facilities could generate an increase in Medicare payments when they are part of a CAH compared to when they are freestanding or when they are part of a hospital. Therefore, we are proposing that these facilities, which are currently exempt from provider-based determinations, must meet the applicable providerbased status requirements at § 413.65 when they are part of a CAH in order for the CAH to receive payment for their clinical diagnostic laboratory services based on reasonable cost. It is important to note that, in addition to meeting the provider-based status requirements at § 413.65, these provider-based facilities would also have to meet other requirements for provider-based facilities operated by CAHs, including distance requirements under § 485.610(e). Generally, the regulations at § 485.610(e) also provide that an offcampus provider-based department, remote location, or distinct part psychiatric or rehabilitation unit of a CAH that was created or acquired on or after January 1, 2008, cannot be within 35 miles of a hospital or another CAH if the CAH is to continue meeting the location requirements under § 485.610(e). b. CAH-Based Ambulance Services The existing regulations at § 413.70(b)(5) provide that ambulance services are paid at reasonable cost if the services are furnished by a CAH or by an entity owned and operated by a CAH, but only if the CAH or entity is the only supplier or provider of ambulance service within a 35-mile drive of the CAH or entity. We are soliciting public comments regarding whether an ambulance service that is owned and operated by a CAH, and is eligible to receive reasonable cost-based payment should be required to meet the provider-based status rules. It is important to consider that the regulation at § 413.70(b)(5) already specifies proximity criteria that CAH-owned and operated ambulance services must meet E:\FR\FM\22MYP2.SGM 22MYP2 24206 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER in order to be paid at reasonable cost. However, these proximity requirements are used to ensure that CAH-owned and operated ambulance services do not receive higher payments in relation to a competing ambulance service that is not owned and operated by a CAH. It can be argued that CAH-owned and operated ambulance suppliers or providers should also be required to meet the provider-based status requirements to demonstrate that the ambulance services are integrated with the CAH because the CAH ambulance services are paid at a higher Medicare payment level when they are owned and operated by a CAH compared to when they are freestanding. 3. Technical Correction to Regulations Section 413.65(a)(1)(ii)(H) of the regulations specifies, among the facilities for which CMS does not make provider-based determinations for payment purposes, ‘‘Facilities, other than those operating as parts of CAHs, furnishing only physical, occupational, or speech therapy to ambulatory patients, for as long as the $1,500 annual cap on coverage of physical, occupational, or speech therapy, as described in section 1833(g)(2) of the Act, remains suspended by the action of the subsequent legislation.’’ We are proposing two basic changes to the language of § 413.65(a)(1)(ii)(H). First, we are proposing to delete the phrase ‘‘$1,500 annual cap’’ and replace it with the generic phrase ‘‘annual financial cap amount’’. We are proposing this change because we need to update our regulations to reflect that the $1,500 annual financial cap is no longer applicable and has been replaced with the cap amount described in section 1833(g)(2)(B) of the Act. Specifically, the $1,500 cap amount described in section 1833(g)(2)(A) of the Act was limited to 3 years (1999 through 2001). For years after 2001, in general, the amount of the annual cap on payment of physical, occupational, or speech therapy is the amount specified in the preceding year increased by the percentage increase in the Medicare economic index for the current year (section 1833(g)(2)(B) of the Act). However, we note that the annual cap amount did not apply to expenses incurred with respect to such therapy services during various years as set forth in the statute. Second, we are proposing to replace the phrase ‘‘for as long as’’ with the phrase ‘‘throughout any period during which’’ and to replace the phrase ‘‘remains suspended by the action of subsequent legislation’’ with the phrase ‘‘is suspended by legislation’’. We are VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 proposing this change because § 413.65(a)(1)(ii)(H), as currently written, may incorrectly suggest that the annual financial cap amounts on the therapy services described in sections 1833(g)(1) and 1833(g)(3) of the Act continue to be suspended. Although the financial caps on such services were suspended when the provision was added originally, they ceased to be suspended for a portion of 2003 and then beginning January 1, 2006. We believe the proposed change would eliminate any confusion about whether the therapy caps were or were not currently suspended as well as accomplish our goal of exempting facilities, other than those operating as parts of CAHs, that furnish only physical, occupational, or speech therapy to ambulatory patients from complying with the provider-based status requirements any time the annual financial cap amount as described in section 1883(g)(2) of the Act is suspended by legislation. In conclusion, we maintain that we would not make provider-based determinations for nonCAH operated facilities furnishing only physical, occupational, or speech therapy to ambulatory patients when the therapy cap is suspended. VIII. Proposed Changes to the LongTerm Care Hospital Prospective Payment System (LTCH PPS) for RY 2010 A. Background of the LTCH PPS 1. Legislative and Regulatory Authority Section 123 of the Medicare, Medicaid, and SCHIP (State Children’s Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106–113) as amended by section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106–554) provides for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals that are described in section 1886(d)(1)(B)(iv) of the Social Security Act (the Act), effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ‘‘a hospital which has an average inpatient length of stay (as determined by the Secretary) of greater than 25 days.’’ Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs: Specifically, a hospital that first PO 00000 Frm 00128 Fmt 4701 Sfmt 4702 received payment under section 1886(d) of the Act in 1986 and has an average inpatient length of stay (LOS) (as determined by the Secretary of Health and Human Services (the Secretary)) of greater than 20 days and has 80 percent or more of its annual Medicare inpatient discharges with a principal diagnosis that reflects a finding of neoplastic disease in the 12-month cost reporting period ending in FY 1997. Section 123 of the BBRA requires the PPS for LTCHs to be a ‘‘per discharge’’ system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs. Section 307(b)(1) of the BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment. In the August 30, 2002 Federal Register, we issued a final rule that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 55954). This system currently uses information from LTCH patient records to classify patients into distinct MSlong-term care diagnosis-related groups (MS–LTC–DRGs) based on clinical characteristics and expected resource needs. Payments are calculated for each MS–LTC–DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register. The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97–248) for payments for inpatient services provided by a LTCH with a cost reporting period beginning on or after October 1, 2002. (The regulations implementing the TEFRA reasonable cost-based payment provisions are located at 42 CFR Part 413.) With the implementation of the PPS for acute care hospitals authorized by the Social Security Amendments of 1983 (Pub. L. 98–21), which added section 1886(d) to the Act, certain hospitals, including LTCHs, were excluded from the PPS for acute care hospitals and were paid their reasonable costs for inpatient services subject to a per discharge limitation or target amount under the TEFRA system. For each cost reporting period, a hospitalspecific ceiling on payments was determined by multiplying the hospital’s updated target amount by the number of total current year Medicare E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules discharges. (Generally, in section VIII. of this preamble, when we refer to discharges, the intent is to describe Medicare discharges.) The August 30, 2002 final rule further details the payment policy under the TEFRA system (67 FR 55954). In the August 30, 2002 final rule, we provided for a 5-year transition period. During this 5-year transition period, a LTCH’s total payment under the PPS was based on an increasing percentage of the Federal rate with a corresponding decrease in the percentage of the LTCH PPS payment that is based on reasonable cost concepts. However, effective for cost reporting periods beginning on or after October 1, 2006, total LTCH PPS payments are based on 100 percent of the Federal rate. In addition, in the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of the BBRA. The same final rule that established regulations for the LTCH PPS under 42 CFR Part 412, Subpart O also contained LTCH provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements. We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS (67 FR 55954). In the June 6, 2003 Federal Register, we published a final rule that set forth the FY 2004 annual update of the payment rates for the Medicare PPS for inpatient hospital services furnished by LTCHs (68 FR 34122). It also changed the annual period for which the payment rates were to be effective, such that the annual updated rates were effective from July 1 through June 30 instead of from October 1 through September 30. We refer to the July through June time period as a ‘‘longterm care hospital rate year’’ (LTCH PPS rate year). In addition, we changed the publication schedule for the annual update to allow for an effective date of July 1. The payment amounts and factors used to determine the annual update of the LTCH PPS Federal rate are based on a LTCH PPS rate year. While the LTCH payment rate updates were to be effective July 1, the annual update of the DRG classifications and relative weights for LTCHs continued to be linked to the annual adjustments of the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 acute care hospital inpatient DRGs and were effective each October 1. As discussed in detail in section VIII.A.1. of the May 9, 2008 RY 2009 LTCH PPS final rule (73 FR 26788), we again changed the schedule for the annual updates of the LTCH PPS Federal payment rates beginning with RY 2010. We consolidated the rulemaking cycle for the annual update of the LTCH PPS Federal payment rates and description of the methodology and data used to calculate these payment rates with the annual update of the MS– LTC–DRG classifications and associated weighting factors for LTCHs so that the updates to the rates and the weights now occur on the same schedule and appear in the same publication. As a result, the updates to the rates and the weights are now effective on October 1 (on a Federal fiscal year schedule), and the annual updates to the LTCH PPS Federal rates will no longer be published with a July 1 effective date (73 FR 26797 through 26798). Public Law 110–173 (MMSEA), enacted on December 29, 2007, included provisions that have various effects on the LTCH PPS. In addition to amending section 1861 of the Act to add a subsection (ccc) which provided an additional definition of LTCHs and facility criteria, Public Law 110–173 also required that no later than 18 months after the date of enactment of the law, the Secretary conduct a study and submit a report to Congress that included ‘‘recommendations for such legislation and administrative actions, including timelines for the implementation of LTCH patient criteria or other actions, as the Secretary determines appropriate.’’ The payment policy provisions under Public Law 110–173 also have varying timeframes of applicability. First, we note that certain provisions of Public Law 110– 173 provided that the Secretary shall not apply, for cost reporting periods beginning on or after the date of the enactment of Public Law 110–173 (December 29, 2007) for a 3-year period: The extension of payment adjustments at § 412.534 to ‘‘grandfathered LTCHs’’ (a long-term care hospital identified by the amendment made by section 4417(a) of Pub. L. 105–33); and the payment adjustment at § 412.536 to ‘‘freestanding’’ LTCHs. In addition, Public Law 119–173 provided that the Secretary shall not apply, for the 3-year period beginning on the date of enactment of the Act the revision to the short-stay outlier (SSO) policy that was finalized in the RY 2008 LTCH PPS final rule (72 FR 26904 and 26992) and the one-time adjustment to the payment rates provided for in § 412.523(d)(3). PO 00000 Frm 00129 Fmt 4701 Sfmt 4702 24207 The statute also provided that the base rate for RY 2008 be the same as the base rate for RY 2007 (the revised base rate, however, does not apply to discharges occurring on or after July 1, 2007, and before April 1, 2008); for a 3-year moratorium (with specified exceptions) on the establishment of new LTCHs, LTCH satellites, and on the increase in the number of LTCH beds. Public Law 110–173 also revised the threshold percentages for certain co-located LTCHs and LTCH satellites governed under § 412.534. Finally, Public Law 110–173 provided for an expanded review of medical necessity for admission and continued stay at LTCHs. In the RY 2009 LTCH PPS final rule (73 FR 26801 through 26812), we established the applicable Federal rates for RY 2009 consistent with section 1886(m)(2) of the Act as amended by Public Law 110–173. We also revised the regulations at § 412.523(d)(3) to change the methodology for the onetime budget neutrality adjustment and to comply with section 114(c)(4) of Public Law 110–173. Other policy revisions necessitated by the statutory changes of Public Law 110–173 were addressed in separate rulemaking documents (73 FR 24871 and 73 FR 29699). Section 4302 of the American Recovery and Reinvestment Act of 2009 (ARRA), Public Law 111–5, enacted on February 17, 2009, included several amendments to the provisions set forth in section 114 of Public Law 110–173 (MMSEA). We have issued instructions to the fiscal intermediaries and MACs interpreting the provisions of section 4302 of Public Law 111–5 (Change Request 6444). We intend to implement the provisions of section 4302 of Public Law 111–5 in an interim final rule with comment period as part of the FY 2010 IPPS and RY 2010 LTCH PPS final rule. In addition, we intend to finalize the regulatory provisions implementing section 114 of Public Law 110–173, as appropriate, in the same final rule. 2. Criteria for Classification as a LTCH a. Classification as a LTCH Under the existing regulations at § 412.23(e)(1) and (e)(2)(i), which implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to be paid under the LTCH PPS, a hospital must have a provider agreement with Medicare and must have an average Medicare inpatient length of stay (LOS) of greater than 25 days. Alternatively, § 412.23(e)(2)(ii) states that for cost reporting periods beginning on or after August 5, 1997, a hospital that was first excluded from the PPS in 1986 and can E:\FR\FM\22MYP2.SGM 22MYP2 24208 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules demonstrate that at least 80 percent of its annual Medicare inpatient discharges in the 12-month cost reporting period ending in FY 1997 have a principal diagnosis that reflects a finding of neoplastic disease must have an average inpatient length of stay for all patients, including both Medicare and nonMedicare inpatients, of greater than 20 days. sroberts on PROD1PC70 with FRONTMATTER b. Hospitals Excluded From the LTCH PPS The following hospitals are paid under special payment provisions, as described in § 412.22(c), and therefore, are not subject to the LTCH PPS rules: • Veterans’ Administration hospitals. • Hospitals that are reimbursed under State cost control systems approved under 42 CFR Part 403. • Hospitals that are reimbursed in accordance with demonstration projects authorized under section 402(a) of the Social Security Amendments of 1967 (Pub. L. 90–248) (42 U.S.C. 1395b–1) or section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92–603) (42 U.S.C. 1395b–1 (note)) (Statewide all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the Act). • Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries. 3. Limitation on Charges to Beneficiaries In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH PPS (67 FR 55974 through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we clarified that the discussion of beneficiary liability in the August 30, 2002 final rule was not meant to establish rates or payments for, or define Medicare-eligible expenses. Under § 412.507, if the Medicare payment to the LTCH is the full LTC–DRG payment amount, as consistent with other established hospital prospective payment systems, a LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under § 409.82, § 409.83, and § 409.87 and for items and services as specified under § 489.30(a). However, under the LTCH PPS, Medicare will only pay for days for which the beneficiary has coverage until the SSO threshold is exceeded. Therefore, if the Medicare payment was for a SSO case (§ 412.529) that was less than the full LTC–DRG payment amount because the beneficiary had insufficient remaining Medicare days, the LTCH could also charge the beneficiary for services delivered on those uncovered days (§ 412.507). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 4. Administrative Simplification Compliance Act (ASCA) and Health Insurance Portability and Accountability Act (HIPAA) Compliance Claims submitted to Medicare must comply with both the Administrative Simplification Compliance Act (ASCA) (Pub. L. 107–105), and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Pub. L. 104–191). Section 3 of the ASCA requires that the Medicare Program deny payment under Part A or Part B for any expenses incurred for items or services ‘‘for which a claim is submitted other than in an electronic form specified by the Secretary.’’ Section 1862(h) of the Act (as added by section 3(a) of the ASCA) provides that the Secretary shall waive such denial in two specific types of cases and may also waive such denial ‘‘in such unusual cases as the Secretary finds appropriate’’ (68 FR 48805). Section 3 of the ASCA operates in the context of the HIPAA regulations, which include, among other provisions, the transactions and code sets standards requirements codified as 45 CFR parts 160 and 162, subparts A and I through R (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct certain electronic healthcare transactions according to the applicable transactions and code sets standards. B. Proposed Medicare Severity LongTerm Care Diagnosis-Related Group (MS–LTC–DRG) Classifications and Relative Weights 1. Background Section 123 of the BBRA requires that the Secretary implement a PPS for LTCHs (that is, a per discharge system with a diagnosis-related group (DRG)based patient classification system reflecting the differences in patient resources and costs). Section 307(b)(1) of the BIPA modified the requirements of section 123 of the BBRA by requiring that the Secretary examine ‘‘the feasibility and the impact of basing payment under such a system [the longterm care hospital (LTCH) PPS] on the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients, as well as the use of the most recently available hospital discharge data.’’ When the LTCH PPS was implemented for cost reporting periods beginning on or after October 1, 2002, we adopted the same DRG patient classification system (that is, the CMS DRGs) that was utilized at that time PO 00000 Frm 00130 Fmt 4701 Sfmt 4702 under the IPPS. As a component of the LTCH PPS, we refer to this patient classification system as the ‘‘long-term care diagnosis-related groups (LTC– DRGs).’’ As discussed in greater detail below, although the patient classification system used under both the LTCH PPS and the IPPS are the same, the relative weights are different. The established relative weight methodology and data used under the LTCH PPS result in relative weights under the LTCH PPS that reflect ‘‘the differences in patient resource use * * *’’ of LTCH patients (section 123(a)(1) of the BBRA (Pub. L. 106– 113)). As part of our efforts to better recognize severity of illness among patients, in the FY 2008 IPPS final rule with comment period (72 FR 47130), the MS–DRGs and the Medicare severity long-term care diagnosis-related groups (MS–LTC–DRGs) were adopted under the IPPS and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 2008). For a full description of the development and implementation of the MS–DRGs and MS–LTC–DRGs, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 and 47277 through 47299). (We note that, in that same final rule, we revised the regulations at § 412.503 to specify that for LTCH discharges occurring on or after October 1, 2007, when applying the provisions of 42 CFR Part 412, Subpart O applicable to LTCHs for policy descriptions and payment calculations, all references to LTC– DRGs would be considered a reference to MS–LTC–DRGs. For the remainder of this section, we present the discussion in terms of the current MS–LTC–DRG patient classification system unless specifically referring to the previous LTC–DRG patient classification system that was in effect before October 1, 2007.) We believe the MS–DRGs (and by extension, the MS–LTC–DRGs) represent a substantial improvement over the previous CMS DRGs in their ability to differentiate cases based on severity of illness and resource consumption. The MS–DRGs adopted in FY 2008 represent an increase in the number of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). In FY 2009, an additional MS–DRG was adopted for a total of 746 distinct groupings (73 FR 48497). In addition to improving the DRG system’s recognition of severity of illness, we believe the MS–DRGs are responsive to the public comments that were made on the FY 2007 IPPS proposed rule with respect to how we should undertake further DRG reform. The MS–DRGs use E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules the CMS DRGs as the starting point for revising the DRG system to better recognize resource complexity and severity of illness. We have generally retained all of the refinements and improvements that have been made to the base DRGs over the years that recognize the significant advancements in medical technology and changes to medical practice. Consistent with section 123 of the BBRA, as amended by section 307(b)(1) of the BIPA, and § 412.515, we use information derived from LTCH PPS patient records to classify LTCH discharges into distinct MS–LTC–DRGs based on clinical characteristics and estimated resource needs. We then assign an appropriate weight to the MS– LTC–DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs. In a departure from the IPPS, and as discussed in greater detail below in section VIII.B.3.e. of this preamble, we use low-volume MS–LTC–DRGs (that is, MS–LTC–DRGs with less than 25 LTCH cases) in determining the MS–LTC–DRG relative weights because LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. For purposes of determining the relative weights for the large number of lowvolume MS–LTC–DRGs, we group all of the low-volume MS–LTC–DRGs into five quintiles based on average charge per discharge. (A detailed discussion of the application of the Lewin Group ‘‘quintile’’ model that was used to develop the LTC–DRGs appears in the August 30, 2002 LTCH PPS final rule (67 FR 55978).) We also account for adjustments to payments for SSO cases (that is, cases where the covered LOS at the LTCH is less than or equal to fivesixths of the geometric ALOS for the MS–LTC–DRG). Furthermore, we make adjustments to account for nonmonotonically increasing weights, when necessary. That is, theoretically, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges such that, in the severity levels within a base MS–LTC–DRG, the weights should increase monotonically with severity from the lowest to highest severity level. (We discuss nonmonotonicity in greater detail and our proposed methodology to adjust the proposed RY 2010 MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights in section VIII.B.3.f. (Step 6) of this preamble.) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 2. Patient Classifications Into MS–LTC– DRGs a. Background The MS–DRGs (used under the IPPS) and the MS–LTC–DRGs (used under the LTCH PPS) are based on the CMS DRG structure. As noted above in this section, we refer to the DRGs under the LTCH PPS as MS–LTC–DRGs although they are structurally identical to the DRGs used under the IPPS. The MS–DRGs are organized into 25 major diagnostic categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER software program does not recognize all ICD–9–CM procedure codes as procedures affecting DRG assignment. That is, procedures that are not surgical (for example, EKG), or minor surgical procedures (for example, biopsy of skin and subcutaneous tissue (code 86.11)) do not affect the MS–LTC– DRG assignment based on their presence on the claim. Generally, under the LTCH PPS, a Medicare payment is made at a predetermined specific rate for each discharge and that payment varies by the MS–LTC–DRG to which a beneficiary’s stay is assigned. Cases are classified into MS–LTC–DRGs for payment based on the following six data elements: • Principal diagnosis. • Up to eight additional diagnoses. • Up to six procedures performed. • Age. • Sex. • Discharge status of the patient. Upon the discharge of the patient from a LTCH, the LTCH must assign appropriate diagnosis and procedure codes from the most current version of the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD–9–CM). HIPAA Transactions and Code Sets Standards regulations at 45 CFR Parts 160 and 162 require that no later than October 16, 2003, all covered entities must comply with the applicable requirements of Subparts A and I through R of Part 162. Among other requirements, those provisions direct covered entities to use the ASC X12N 837 Health Care Claim: Institutional, Volumes 1 and 2, Version 4010, and the applicable standard medical data code sets for the institutional health care claim or PO 00000 Frm 00131 Fmt 4701 Sfmt 4702 24209 equivalent encounter information transaction (45 CFR 162.1002 and 45 CFR 162.1102). For additional information on the ICD–9–CM Coding System, we refer readers to the FY 2008 IPPS final rule with comment period (72 FR 47241 through 47243 and 47277 through 47281). We also refer readers to the detailed discussion on correct coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 55981 through 55983). Additional coding instructions and examples are published in the Coding Clinic for ICD–9–CM, a product of the American Hospital Association. To create the MS–DRGs (and by extension, the MS–LTC–DRGs), individual DRGs were subdivided according to the presence of specific secondary diagnoses designated as complications or comorbidities (CCs) into three, two, or one level, depending on the impact of the CCs on resources used for those cases. Specifically, there are sets of MS–DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or a major complication and comorbidity (MCC). The original discussion about the creation of MS–DRGs and their severity levels is described in detail in the FY 2008 IPPS final rule with comment period (72 FR 47169). However, to reiterate the development of the CCs and MCCs, two of our major goals were to create DRGs that would more accurately reflect the severity of the cases assigned to them and to create groups that would have sufficient volume so that meaningful and stable payment weights could be developed. In designating an MS–DRG as one that will be divided into subgroups based on the presence of a CC or MCC, we developed a set of criteria to facilitate the decisionmaking process. The subgroup was required to meet all criteria, which are described in detail in the FY 2008 IPPS final rule with comment period (72 FR 47169). As a first step, each of the base MS–DRGs was subdivided into three subgroups: Non-CC, CC, and MCC. Each subgroup was then analyzed in relation to the other two subgroups, and the criteria were applied in the following hierarchical manner. • If a three-way subdivision met the criteria, we divided the base MS–DRG into three CC subgroups. • If only one type of two-way subdivisions met the criteria, we subdivided the base MS–DRG into two CC subgroups based on the type of twoway subdivision that met the criteria. • If both types of two-way subdivisions met the criteria, we subdivided the base MS–DRG into two CC subgroups based on the type of two- E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24210 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules way subdivision with the highest R2 (most explanatory power to explain the difference in average charges). • Otherwise, we did not subdivide the base MS–DRG into CC subgroups. For any given base MS–DRG, our evaluation in some cases showed that a subdivision between a non-CC and a combined CC/MCC subgroup was all that was warranted (that is, there was not a sufficient difference between the CC and MCC subgroups to justify separate CC and MCC subgroups). Conversely, in some cases, even though an MCC subgroup was warranted, there was not a sufficient difference between the non-CC and CC subgroups to justify separate subgroups. Based on this methodology, a base MS–DRG may be subdivided according to the following three alternatives: • DRGs with three subgroups (MCC, CC, and non-CC). • DRGs with two subgroups consisting of an MCC subgroup but with the CC and non-CC subgroups combined. These are referred to as ‘‘with MCC’’ and ‘‘without MCC.’’ • DRGs with two subgroups consisting of a non-CC subgroup but with the CC and MCC subgroups combined. We refer to these two groups as ‘‘with CC/MCC’’ and ‘‘without CC/ MCC.’’ For example, under the MS–LTC– DRG system, multiple sclerosis and cerebellar ataxia with MCC is MS–LTC– DRG 58; multiple sclerosis and cerebellar ataxia with CC is MS–LTC– DRG 59; and multiple sclerosis and cerebellar ataxia without CC/MCC is MS–LTC–DRG 60. For purposes of discussion in this section, the term ‘‘base DRG’’ is used to refer to the DRG category that encompasses all levels of severity for that DRG. For example, when referring to the entire DRG category for multiple sclerosis and cerebellar ataxia, which includes the above three severity levels, we would use the term ‘‘base DRG.’’ (As noted above in this section, further information on the development and implementation of the MS–DRGs and MS–LTC–DRGs can be found in the FY 2008 IPPS final rule with comment period (72 FR 47138 through 47175 and 47277 through 47299).) In developing the first MS–DRG GROUPER program (that is, Version 25.0 effective for FY 2008), the diagnoses comprising the CC list were completely redefined. The revised CC list is primarily comprised of significant acute disease, acute exacerbations of significant chronic diseases, advanced or end stage chronic diseases, and chronic diseases associated with extensive debility. In general, most VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 chronic diseases were not included on the revised CC list. For a patient with a chronic disease, a significant acute manifestation of the chronic disease was required to be present and coded for the patient to be assigned a CC. In addition to the revision of the CC list, each CC was also categorized as an MCC or a CC based on relative resource use. Approximately 12 percent of all diagnoses codes were classified as an MCC, 24 percent as a CC, and 64 percent as a non-CC. Diagnoses closely associated with mortality (ventricular fibrillation, cardiac arrest, shock, and respiratory arrest) were assigned as an MCC if the patient lived, but as a nonCC if the patient died. The MCC, CC, and non-CC categorization was used to subdivide the surgical and medical DRGs into up to three levels, with a case being assigned to the most resource intensive level (for example, a case with two secondary diagnoses that are categorized as an MCC and a CC is assigned to the MCC level). Medicare contractors (that is, fiscal intermediaries and MACs) enter the clinical and demographic information submitted by LTCHs into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a MS–LTC–DRG can be made. During this process, the following types of cases are selected for further development: • Cases that are improperly coded. (For example, diagnoses are shown that are inappropriate, given the sex of the patient. Code 68.69 (Other and unspecified radical abdominal hysterectomy) would be an inappropriate code for a male.) • Cases including surgical procedures not covered under Medicare. (For example, organ transplant in a nonapproved transplant center.) • Cases requiring more information. (For example, ICD–9–CM codes are required to be entered at their highest level of specificity. There are valid 3digit, 4-digit, and 5-digit codes. That is, code 262 (Other severe protein-calorie malnutrition) contains all appropriate digits, but if it is reported with either fewer or more than 3 digits, the claim will be rejected by the MCE as invalid.) After screening through the MCE, each claim is classified into the appropriate MS–LTC–DRG by the Medicare LTCH GROUPER software on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). The GROUPER software used under the LTCH PPS is the same PO 00000 Frm 00132 Fmt 4701 Sfmt 4702 GROUPER software program used under the IPPS. Following the MS–LTC–DRG assignment, the Medicare contractor determines the prospective payment amount by using the Medicare PRICER program, which accounts for hospitalspecific adjustments. Under the LTCH PPS, we provide an opportunity for LTCHs to review the MS–LTC–DRG assignments made by the Medicare contractor and to submit additional information within a specified timeframe as provided in § 412.513(c). The GROUPER software is used both to classify past cases to measure relative hospital resource consumption to establish the MS–LTC–DRG weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible MS–DRG and MS–LTC–DRG classification changes and to recalibrate the MS–DRG and MS– LTC–DRG relative weights during our annual update under both the IPPS (§ 412.60(e)) and the LTCH PPS (§ 412.517), respectively. Although the LTCH PPS RYs 2004 through 2009 annual payment rate update cycles were effective July 1 through June 30 instead of October 1 through September 30 (with the exception of the 15-month RY 2009 payment rate update cycle, which is effective July 1, 2008 through September 30, 2009), because the patient classification system utilized under the LTCH PPS uses the same DRGs as those used under the IPPS for acute care hospitals, the annual update of the LTC–DRG classifications and relative weights continued to remain linked to the annual reclassification and recalibration of the DRGs used under the IPPS. Therefore, the payment rate update to the MS–LTC–DRG classifications and relative weights are effective for discharges occurring on or after October 1 through September 30 of each year (RYs 2004 through 2009), and we published the annual proposed and final update of the MS–LTC–DRGs in the same notice as the proposed and final update for the IPPS (69 FR 34122 through 34125). In the RY 2009 LTCH PPS final rule, we amended the regulations at § 412.503 and § 412.535 in order to consolidate the rate year and fiscal year rulemaking cycles, effective October 1, 2009 (73 FR 26797 through 26798). Specifically, we revised the regulations to shift the payment rate update from a July 1 through June 30 cycle to an October 1 through September 30 cycle. We extended the 2009 rate year period to September 30, 2009, so that RY 2009 is E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 15 months; that is, July 1, 2008, through September 30, 2009. Consequently, after the conclusion of the 15-month RY 2009, both the annual update of the LTCH PPS payment rates (and the description of the methodology and data used to calculate these payment rates) and the annual update of the MS–LTC– DRG classifications and associated weighting factors for LTCHs will be updated on an October 1 through September 30 cycle and, thus, be effective on October 1 of each Federal fiscal year beginning October 1, 2009. Beginning with the RY 2010 LTCH PPS update, both the annual update of the LTCH PPS payment rate, including the annual update of the MS–LTC–DRGs, and policy changes will be presented along with the annual IPPS payment rate and policy changes in a single combined rulemaking document published in the Federal Register as is being done in this proposed rule. Prior to FY 2004, the annual update to the DRGs used under the IPPS had been based on the annual revisions to the ICD–9–CM codes and was effective each October 1. As discussed in past LTCH PPS and IPPS proposed and final rules (most recently in the FY 2009 IPPS final rule (73 FR 48530)), section 503(a) of Public Law 108–173 amended section 1886(d)(5)(K) of the Act by adding a new clause (vii) which states that ‘‘the Secretary shall provide for the addition of new diagnosis and procedure codes in [sic] April 1 of each year, but the addition of such codes shall not require the Secretary to adjust the payment (or diagnosis-related group classification) * * * until the fiscal year that begins after such date.’’ This requirement improves the recognition of new technologies under the IPPS by accounting for those ICD–9–CM codes in the MedPAR claims data earlier than the agency had accounted for new technology in the past. In implementing the statutory change, the agency has provided that ICD–9–CM diagnosis and procedure codes for new medical technology may be created and assigned to existing DRGs in the middle of the Federal fiscal year, on April 1. Therefore, there is the possibility that one feature of the GROUPER software program may be updated twice during a Federal fiscal year (that is, October 1 and April 1). However, we note that as the legislation permits, the DRG relative weights in effect for that fiscal year will continue to be updated only once a year (October 1). The patient classification system used under the LTCH PPS is the same patient classification system that is used under the IPPS. Therefore, the ICD–9–CM codes currently used under both the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 IPPS and the LTCH PPS have the potential of being updated twice a year due to the implementation of section 503(a) of Public Law 108–173 for the IPPS (as explained above). Because we do not publish a midyear IPPS rule, any April 1 ICD–9–CM coding update will not be published in the Federal Register. Rather, consistent with the policy under the IPPS (discussed in section II.G.7. of the preamble of this proposed rule), we will assign any new diagnosis or procedure codes to the same DRG in which its predecessor code was assigned, so that there will be no impact on the DRG assignments. Any coding updates will be available through the Web sites provided in section II.G.7. of the preamble of this proposed rule and through the Coding Clinic for ICD–9–CM. Publishers and software vendors currently obtain code changes through these sources in order to update their code books and software system. If new codes are implemented on April 1, revised code books and software systems, including the GROUPER software program, will be necessary because the most current ICD–9–CM codes must be reported. Therefore, for purposes of the LTCH PPS, because each ICD–9–CM code must be included in the GROUPER algorithm to classify each case under the correct LTCH PPS, the GROUPER software program used under the LTCH PPS would need to be revised to accommodate any new codes. In implementing section 503(a) of Pub. L. 108–173, there will only be an April 1 update if new technology diagnosis and procedure code revisions are requested and approved. We note that any new codes created for April 1 implementation will be limited to those primarily needed to describe new technologies and medical services. However, we reiterate that the process of discussing updates to the ICD–9–CM is an open process through the ICD–9– CM Coordination and Maintenance Committee. Requestors will be given the opportunity to present the merits for a new code and to make a clear and convincing case for the need to update ICD–9–CM codes for purposes of the IPPS new technology add-on payment process through an April 1 update (as also discussed in section II.G.7. of the preamble of this proposed rule). There were no mid-year codes added to the ICD–9–CM coding system as a result of the September 24–25, 2008 meeting of the ICD–9–CM Coordination and Maintenance Committee. The next update to the ICD–9–CM coding system will occur on October 1, 2009 (FY 2010), and the ICD–9–CM coding set implemented on October 1, 2009, will PO 00000 Frm 00133 Fmt 4701 Sfmt 4702 24211 continue through September 30, 2010 (FY 2010). The ICD–9–CM Coordination and Maintenance Committee met again on March 11–12, 2009. Because this meeting was for the purpose of informing the public of proposed changes to the ICD–9–CM code set as well as for requesting comment from the public, no decisions regarding coding changes were made at this meeting. Commenters were requested to submit comments by April 3, 2009, concerning the proposed code revisions discussed at the March 11–12, 2009 meeting. Any new codes or other revisions created as a result of this meeting are not included in this proposed rule because of the short turnaround time required for the publication of the proposed rule. However, new codes and any other revisions will appear in the final rule in Tables 6A through 6F of the Addendum to that final rule. Those codes appearing for the first time in the final rule will be identified with an asterisk leading to the following notation: ‘‘These codes were discussed at the March 11–12, 2009 ICD–9–CM Coordination and Maintenance Committee meeting and were not finalized in time to include in the proposed rule. However, they will be implemented on October 1, 2009.’’ The update to the ICD–9–CM coding system that is effective on October 1, 2009 is discussed in section II.G.7. of the preamble of this proposed rule. b. Proposed Changes to the MS–LTC– DRGs for RY 2010 Consistent with our historical practice of using the same patient classification system under the LTCH PPS as is used under the IPPS, in this proposed rule, we are proposing to modify and revise the MS–LTC–DRG classifications effective October 1, 2009, through September 30, 2010 (RY 2010) consistent with the proposed changes to specific MS–DRG classifications presented above in section II.G. of this proposed rule (that is, proposed GROUPER Version 27.0). Therefore, the proposed MS–LTC–DRGs for RY 2010 presented in this proposed rule are the same as the proposed MS–DRGs that would be used under the IPPS for FY 2010 (that is, GROUPER Version 27.0 as described in section II.G. of the preamble of this proposed rule). In addition, because the proposed MS– LTC–DRGs for RY 2010 are the same as the proposed MS–DRGs for FY 2010, the other proposed changes that would affect MS–DRG (and by extension MS– LTC–DRG) assignments under the proposed Version 27.0 of the GROUPER discussed in section II.G. of the preamble of this proposed rule, including the proposed changes to the E:\FR\FM\22MYP2.SGM 22MYP2 24212 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules MCE software and changes to the ICD– 9–CM coding system, would also be applicable under the LTCH PPS for RY 2010. sroberts on PROD1PC70 with FRONTMATTER 3. Development of the Proposed RY 2010 MS–LTC–DRG Relative Weights a. General Overview of the Development of the MS–LTC–DRG Relative Weights As we stated in the August 30, 2002 LTCH PPS final rule (67 FR 55984), one of the primary goals for the implementation of the LTCH PPS is to pay each LTCH an appropriate amount for the efficient delivery of medical care to Medicare patients. The system must be able to account adequately for each LTCH’s case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly. To accomplish these goals, we have annually adjusted the LTCH PPS standard Federal prospective payment system rate by the applicable relative weight in determining payment to LTCHs for each case. (As we have noted above, we adopted the MS–LTC–DRGs for the LTCH PPS beginning in FY 2008. However, this change in the patient classification system does not affect the basic principles of the development of relative weights under a DRG-based prospective payment system.) Although the adoption of the MS– LTC–DRGs resulted in some modifications of existing procedures for assigning weights in cases of zero volume and/or nonmonotonicity, as discussed in the FY 2008 IPPS final rule with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS final rule (73 FR 48542 through 48550) and as detailed in the following sections, the basic methodology for developing the RY 2010 proposed MS– LTC–DRG relative weights in this proposed rule continues to be determined in accordance with the general methodology established in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991). Under the LTCH PPS, relative weights for each MS–LTC–DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients classified to each MS–LTC–DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each MS– LTC–DRG that represents the resources needed by an average inpatient LTCH case in that MS–LTC–DRG. For example, cases in an MS–LTC–DRG with a relative weight of 2 will, on average, cost twice as much to treat as VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 cases in an MS–LTC–DRG with a weight of 1. b. Data In this proposed rule, to calculate the proposed MS–LTC–DRG relative weights for RY 2010, we are proposing to obtain total Medicare allowable charges from FY 2008 Medicare LTCH bill data from the December 2008 update of the MedPAR file, which are the best available data at this time, and to use the proposed Version 27.0 of the GROUPER to classify LTCH cases (as discussed above). We also are proposing that if more recent data become available, we would use those data and the finalized Version 27.0 of the GROUPER in establishing the RY 2010 MS–LTC–DRG relative weights in the final rule. Consistent with our historical methodology, we have excluded the data from LTCHs that are all-inclusive rate providers and LTCHs that are reimbursed in accordance with demonstration projects authorized under section 402(a) of Public Law 90– 248 or section 222(a) of Public Law 92– 603. (We refer readers to the FY 2009 IPPS final rule (73 FR 48532).) Therefore, in the development of the proposed RY 2010 MS–LTC–DRG relative weights in this proposed rule, we have excluded the data of the 13 allinclusive rate providers and the 2 LTCHs that are paid in accordance with demonstration projects that had claims in the FY 2008 MedPAR file. c. Hospital-Specific Relative Value (HSRV) Methodology By nature, LTCHs often specialize in certain areas, such as ventilatordependent patients and rehabilitation and wound care. Some case types (DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. This nonrandom distribution of cases with relatively high (or low) charges in specific MS–LTC– DRGs has the potential to inappropriately distort the measure of average charges. To account for the fact that cases may not be randomly distributed across LTCHs, in this proposed rule, we are proposing to use a hospital-specific relative value (HSRV) methodology to calculate the proposed MS–LTC–DRG relative weights instead of the methodology used to determine the MS–DRG relative weights under the IPPS described in section II.H. of the preamble of this proposed rule. We believe this method will remove this hospital-specific source of bias in measuring LTCH average charges. Specifically, we are reducing the impact PO 00000 Frm 00134 Fmt 4701 Sfmt 4702 of the variation in charges across providers on any particular proposed MS–LTC–DRG relative weight by converting each LTCH’s charge for a case to a relative value based on that LTCH’s average charge. Under the HSRV methodology, we standardize charges for each LTCH by converting its charges for each case to hospital-specific relative charge values and then adjusting those values for the LTCH’s case-mix. The adjustment for case-mix is needed to rescale the hospital-specific relative charge values (which, by definition, average 1.0 for each LTCH). The average relative weight for a LTCH is its case-mix, so it is reasonable to scale each LTCH’s average relative charge value by its case-mix. In this way, each LTCH’s relative charge value is adjusted by its case-mix to an average that reflects the complexity of the cases it treats relative to the complexity of the cases treated by all other LTCHs (the average case-mix of all LTCHs). In accordance with the methodology established in the August 30, 2002 LTCH PPS final rule (67 FR 55989 through 55991), we continue to standardize charges for each case by first dividing the adjusted charge for the case (adjusted for SSOs under § 412.529 as described in section VIII.B.3.f. (step 3) of the preamble of this proposed rule) by the average adjusted charge for all cases at the LTCH in which the case was treated. SSO cases are cases with a length of stay that is less than or equal to five-sixths the average length of stay of the MS–LTC–DRG (§ 412.529 and § 412.503). The average adjusted charge reflects the average intensity of the health care services delivered by a particular LTCH and the average cost level of that LTCH. The resulting ratio is multiplied by that LTCH’s case-mix index to determine the standardized charge for the case. Multiplying by the LTCH’s case-mix index accounts for the fact that the same relative charges are given greater weight at a LTCH with higher average costs than they would at a LTCH with low average costs, which is needed to adjust each LTCH’s relative charge value to reflect its case-mix relative to the average case-mix for all LTCHs. Because we standardize charges in this manner, we count charges for a Medicare patient at a LTCH with high average charges as less resource intensive than they would be at a LTCH with low average charges. For example, a $10,000 charge for a case at a LTCH with an average adjusted charge of $17,500 reflects a higher level of relative resource use than a $10,000 charge for a case at a LTCH with the same case-mix, but an average adjusted E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER charge of $35,000. We believe that the adjusted charge of an individual case more accurately reflects actual resource use for an individual LTCH because the variation in charges due to systematic differences in the markup of charges among LTCHs is taken into account. d. Treatment of Severity Levels in Developing the Proposed MS–LTC–DRG Relative Weights For purposes of determining the proposed MS–LTC–DRG relative weights, as we discussed in the FY 2009 IPPS final rule (73 FR 48532 through 48533), there are three different categories of DRGs based on volume of cases within specific MS–LTC–DRGs. MS–LTC–DRGs with at least 25 cases are each assigned a unique proposed relative weight; low-volume proposed MS–LTC–DRGs (that is, proposed MS– LTC–DRGs that contain between 1 and 24 cases based on a given year’s claims data) are grouped into quintiles (as described below) and assigned the proposed relative weight of the quintile. No-volume proposed MS–LTC–DRGs (that is, no cases in the given year’s claims data were assigned to those proposed MS–LTC–DRGs) are crosswalked to other proposed MS– LTC–DRGs based on the clinical similarities and assigned the relative weight of the crosswalked MS–LTC– DRG (as described in greater detail below). (We provide in-depth discussions of our policy regarding weight-setting for low-volume MS– LTC–DRGs in section VIII.B.3.e. of the preamble of this proposed rule and for no-volume MS–LTC–DRGs, under Step 5 in section VIII.B.3.f. of the preamble of this proposed rule.) As noted above, in response to the need to account for severity and pay appropriately for cases, we developed a severity-adjusted patient classification system that we adopted for both the IPPS and the LTCH PPS in FY 2008. As described in greater detail above, the MS–LTC–DRG system can accommodate three severity levels: ‘‘With MCC’’ (most severe); ‘‘with CC,’’ and ‘‘without CC/ MCC’’ (the least severe), with each level assigned an individual MS–LTC–DRG number. In cases with two subdivisions, the levels are either ‘‘with CC/MCC’’ and ‘‘without CC/MCC’’ or ‘‘with MCC’’ and ‘‘without MCC.’’ For example, under the MS–LTC–DRG system, multiple sclerosis and cerebellar ataxia with MCC is MS–LTC–DRG 58; multiple sclerosis and cerebellar ataxia with CC is MS–LTC–DRG 59; and multiple sclerosis and cerebellar ataxia without CC/MCC is MS–LTC–DRG 60. For purposes of discussion in this section, the term ‘‘base DRG’’ is used to refer to VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the DRG category that encompasses all levels of severity for that DRG. For example, when referring to the entire DRG category for multiple sclerosis and cerebellar ataxia, which includes the above three severity levels, we would use the term ‘‘base DRG.’’ As also noted above, while the LTCH PPS and the IPPS use the same patient classification system, the methodology that is used to set the DRG relative weights for use in each payment system differs because the overall volume of cases in the LTCH PPS is much less than in the IPPS. As a general rule, consistent with the methodology established when we adopted the MS– LTC–DRGs in the FY 2008 IPPS final rule with comment period (72 FR 47278 through 47281), we are proposing to determine the proposed RY 2010 relative weights for the proposed MS– LTC–DRGs using the following steps: (1) If a proposed MS–LTC–DRG has at least 25 cases, it is assigned its own proposed relative weight; (2) if a proposed MS– LTC–DRG has between 1 and 24 cases, it is assigned to a quintile for which we compute a proposed relative weight for all of the proposed MS–LTC–DRGs assigned to that quintile; and (3) if a proposed MS–LTC–DRG has no cases, it is crosswalked to another proposed MS– LTC–DRG based upon clinical similarities to assign an appropriate proposed relative weight (as described below in detail in Step 5 of section VIII.B.3.f. of this preamble). Furthermore, in determining the proposed RY 2010 MS–LTC–DRG relative weights, when necessary, we are proposing to make adjustments to account for nonmonotonicity, as explained in greater detail below in Step 6 of section VIII.B.3.f. of this preamble. Our methodology for determining relative weights for the MS–LTC–DRGs included an adjustment for nonmonotonicity because, theoretically, cases under the MS–LTC–DRG system that are more severe require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, weights should increase with severity, from lowest to highest. If the weights do not increase (that is, if based on the proposed relative weight methodology outlined above, the proposed MS–LTC–DRG with MCC would have a lower relative weight than one with CC, or the proposed MS–LTC– DRG without CC/MCC would have a higher relative weight than either of the others), there is a problem with monotonicity. Since the start of the LTCH PPS for FY 2003 (67 FR 55990), when determining the LTC–DRG relative weights, we have made PO 00000 Frm 00135 Fmt 4701 Sfmt 4702 24213 adjustments in order to maintain monotonicity by grouping both sets of cases together and establishing a new relative weight for both LTC–DRGs. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because, in a nonmonotonic system, cases that are more severe and require greater expenditure of medical care resources would be paid based on a lower relative weight than cases that are less severe and require lower resource use. The proposed methodology for making adjustments because of nonmonotonicity in determining the proposed RY 2010 MS–LTC–DRG relative weights is discussed in greater detail below in section VIII.B.3.f. (Step 6) of the preamble of this proposed rule. e. Low-Volume MS–LTC–DRGs In order to account for proposed MS– LTC–DRGs with low volume (that is, with fewer than 25 LTCH cases), consistent with the methodology we established when we implemented the LTCH PPS (67 FR 55984 through 55995) and the methodology that we established when we implemented the MS–LTC–DRGs in the FY 2008 IPPS final rule with comment period (72 FR 47283 through 47288), for purposes of determining the MS–LTC–DRG relative weights, we group those ‘‘low-volume MS–LTC–DRGs’’ (that is, MS–LTC– DRGs that contained between 1 and 24 cases annually) into one of five categories (quintiles) based on average charges. In determining the proposed RY 2010 MS–LTC–DRG relative weights in this proposed rule, consistent with the methodology described above and the methodology we used to establish the FY 2009 MS–LTC–DRG relative weights in the FY 2009 IPPS final rule (73 FR 48533 through 48540), we are proposing to continue to employ this quintile methodology for low-volume proposed MS–LTC–DRGs. In addition, in cases where the initial assignment of a low-volume proposed MS–LTC–DRG to quintiles results in nonmonotonicity within a base-DRG, in order to ensure appropriate Medicare payments, consistent with our historical methodology, we are proposing to make adjustments to the treatment of lowvolume proposed MS–LTC–DRGs to preserve monotonicity, as discussed in detail below in section VIII.B.3.f. (Step 6) in this preamble. In this proposed rule, using LTCH cases from the December 2008 update of the FY 2008 MedPAR file, we identified 282 MS–LTC–DRGs that contained between 1 and 24 cases. This list of proposed MS–LTC–DRGs was then E:\FR\FM\22MYP2.SGM 22MYP2 24214 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules divided into one of the 5 low-volume quintiles, each containing a minimum of 56 proposed MS–LTC–DRGs (282/5 = 56 with 2 proposed MS–LTC–DRGs as the remainder). We are proposing to assign a low-volume proposed MS–LTC–DRG to a specific low-volume quintile by sorting the low-volume proposed MS– LTC–DRGs in ascending order by average charge in accordance with our established methodology. Furthermore, because the number of proposed MS– LTC–DRGs with less than 25 cases is not evenly divisible by 5, the average charge of the low-volume quintile was used to determine which of the low-volume quintiles contain the 2 additional lowvolume proposed MS–LTC–DRGs. Specifically, after sorting the 282 lowvolume proposed MS–LTC–DRGs by ascending order by average charge, we are proposing to assign the first fifth (1st through 56th) of low-volume proposed MS–LTC–DRGs (with the lowest average charge) into Quintile 1. The proposed MS–LTC–DRGs with the highest average charge cases would be assigned into Quintile 5. Because the average charge of the 57th low-volume proposed MS– LTC–DRG in the sorted list is closer to the average charge of the 56th lowvolume proposed MS–LTC–DRG (assigned to Quintile 1) than to the average charge of the 58th low-volume proposed MS–LTC–DRG (assigned to Quintile 2), we are proposing to place it into Quintile 1 (such that Quintile 1 would contain 57 low-volume proposed MS–LTC–DRGs before any adjustments for nonmonotonicity, as discussed below). This process was repeated through the remaining low-volume proposed MS–LTC–DRGs so that 2 of the 5 low-volume quintiles contain 57 MS–LTC–DRGs (Quintiles 1 and 2) and 3 of the 5 low-volume quintiles contain 56 MS–LTC–DRGs (Quintiles 3, 4, and 5). Accordingly, in order to determine the proposed RY 2010 relative weights for the proposed MS–LTC–DRGs with low volume, we are proposing to use the five low-volume quintiles described above. The composition of each of the five low-volume quintiles shown in the chart below was used in determining the proposed RY 2010 MS–LTC–DRG relative weights (as shown in Table 11 of the Addendum to this proposed rule). We determined a proposed relative weight and (geometric) average length of stay for each of the 5 low-volume quintiles using the methodology that we applied to the proposed MS–LTC–DRGs (25 or more cases), as described in section VIII.B.3.f. of the preamble of this proposed rule. We are proposing to assign the same proposed relative weight and average length of stay to each of the low-volume proposed MS– LTC–DRGs that make up an individual low-volume quintile. We note that, as this system is dynamic, it is possible that the number and specific type of MS–LTC–DRGs with a low volume of LTCH cases will vary in the future. We use the best available claims data in the MedPAR file to identify low-volume MS–LTC–DRGs and to calculate the proposed relative weights based on our methodology. PROPOSED COMPOSITION OF LOW-VOLUME QUINTILES FOR RY 2010 MS–LTC–DRG (Version 27.0) MS–LTC–DRG Description (Version 27.0) sroberts on PROD1PC70 with FRONTMATTER Proposed Quintile 1 026 053 060 066 068 069 072 078 081 089 090 093 103 115 139 149 184 198 201 203 284 310 313 350 358 370 376 387 437 440 443 446 534 536 544 547 556 578 601 ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... VerDate Nov<24>2008 08:10 May 21, 2009 Craniotomy & endovascular intracranial procedures w CC. Spinal disorders & injuries w/o CC/MCC. Multiple sclerosis & cerebellar ataxia w/o CC/MCC. Intracranial hemorrhage or cerebral infarction w/o CC/MCC. Nonspecific cva & precerebral occlusion w/o infarct w/o MCC. Transient ischemia. Nonspecific cerebrovascular disorders w/o CC/MCC. Hypertensive encephalopathy w CC. Nontraumatic stupor & coma w/o MCC. Concussion w CC. Concussion w/o CC/MCC. Other disorders of nervous system w/o CC/MCC. Headaches w/o MCC. Extraocular procedures except orbit. Salivary gland procedures. Dysequilibrium. Major chest trauma w CC. Interstitial lung disease w/o CC/MCC. Pneumothorax w/o CC/MCC. Bronchitis & asthma w/o CC/MCC. Circulatory disorders w AMI, expired w CC*. Cardiac arrhythmia & conduction disorders w/o CC/MCC. Chest pain. Inguinal & femoral hernia procedures w MCC. Other digestive system O.R. procedures w/o CC/MCC. Major esophageal disorders w/o CC/MCC. Digestive malignancy w/o CC/MCC. Inflammatory bowel disease w/o CC/MCC. Malignancy of hepatobiliary system or pancreas w/o CC/MCC. Disorders of pancreas except malignancy w/o CC/MCC. Disorders of liver except malig, cirr, alc hepa w/o CC/MCC. Disorders of the biliary tract w/o CC/MCC. Fractures of femur w/o MCC. Fractures of hip & pelvis w/o MCC. Pathological fractures & musculoskelet & conn tiss malig w/o CC/MCC. Connective tissue disorders w/o CC/MCC. Signs & symptoms of musculoskeletal system & conn tissue w/o MCC. Skin graft &/or debrid exc for skin ulcer or cellulitis w/o CC/MCC. Non-malignant breast disorders w/o CC/MCC. Jkt 217001 PO 00000 Frm 00136 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules PROPOSED COMPOSITION OF LOW-VOLUME QUINTILES FOR RY 2010—Continued MS–LTC–DRG (Version 27.0) 667 694 696 725 726 730 746 803 826 869 880 881 883 895 897 918 964 965 MS–LTC–DRG Description (Version 27.0) ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... Prostatectomy w/o CC/MCC. Urinary stones w/ot esw lithotripsy w/o MCC. Kidney & urinary tract signs & symptoms w/o MCC. Benign prostatic hypertrophy w MCC. Benign prostatic hypertrophy w/o MCC. Other male reproductive system diagnoses w/o CC/MCC. Vagina, cervix & vulva procedures w CC/MCC*. Other O.R. proc of the blood & blood forming organs w CC. Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC*. Other infectious & parasitic diseases diagnoses w/o CC/MCC. Acute adjustment reaction & psychosocial dysfunction. Depressive neuroses. Disorders of personality & impulse control. Alcohol/drug abuse or dependence w rehabilitation therapy. Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC. Poisoning & toxic effects of drugs w/o MCC. Other multiple significant trauma w CC. Other multiple significant trauma w/o CC/MCC. sroberts on PROD1PC70 with FRONTMATTER Proposed Quintile 2 032 033 042 067 080 083 087 088 096 102 125 156 159 183 257 259 284 285 294 311 379 384 386 390 418 433 436 479 497 535 553 562 598 600 644 645 663 675 685 697 700 722 723 746 747 755 759 802 808 815 816 ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... VerDate Nov<24>2008 08:10 May 21, 2009 Ventricular shunt procedures w CC. Ventricular shunt procedures w/o CC/MCC. Periph & cranial nerve & other nerv syst proc w/o CC/MCC. Nonspecific cva & precerebral occlusion w/o infarct w MCC. Nontraumatic stupor & coma w MCC. Traumatic stupor & coma, coma >1 hr w CC*. Traumatic stupor & coma, coma <1 hr w/o CC/MCC***. Concussion w MCC. Bacterial & tuberculous infections of nervous system w/o CC/MCC. Headaches w MCC. Other disorders of the eye w/o MCC. Nasal trauma & deformity w/o CC/MCC***. Dental & Oral Diseases w/o CC/MCC. Major chest trauma w MCC. Upper limb & toe amputation for circ system disorders w/o CC/MCC. Cardiac pacemaker device replacement w/o MCC. Circulatory disorders w AMI, expired w CC**. Circulatory disorders w AMI, expired w/o CC/MCC. Deep vein thrombophlebitis w CC/MCC. Angina pectoris. G.I. hemorrhage w/o CC/MCC. Uncomplicated peptic ulcer w/o MCC. Inflammatory bowel disease w CC. G.I. obstruction w/o CC/MCC. Laparoscopic cholecystectomy w/o c.d.e. w CC. Cirrhosis & alcoholic hepatitis w CC. Malignancy of hepatobiliary system or pancreas w CC. Biopsies of musculoskeletal system & connective tissue w/o CC/MCC. Local excision & removal int fix devices exc hip & femur w/o CC/MCC. Fractures of hip & pelvis w MCC. Bone diseases & arthropathies w MCC. Fx, sprn, strn & disl except femur, hip, pelvis & thigh w MCC***. Malignant breast disorders w CC. Non-malignant breast disorders w CC/MCC. Endocrine disorders w CC. Endocrine disorders w/o CC/MCC. Minor bladder procedures w CC. Other kidney & urinary tract procedures w/o CC/MCC. Admit for renal dialysis. Urethral stricture. Other kidney & urinary tract diagnoses w/o CC/MCC. Malignancy, male reproductive system w MCC. Malignancy, male reproductive system w CC. Vagina, cervix & vulva procedures w CC/MCC**. Vagina, cervix & vulva procedures w/o CC/MCC. Malignancy, female reproductive system w CC. Infections, female reproductive system w/o CC/MCC. Other O.R. proc of the blood & blood forming organs w MCC. Major hematol/immun diag exc sickle cell crisis & coagul w MCC***. Reticuloendothelial & immunity disorders w CC. Reticuloendothelial & immunity disorders w/o CC/MCC. Jkt 217001 PO 00000 Frm 00137 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24215 24216 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules PROPOSED COMPOSITION OF LOW-VOLUME QUINTILES FOR RY 2010—Continued MS–LTC–DRG (Version 27.0) 837 842 864 882 894 922 976 986 MS–LTC–DRG Description (Version 27.0) ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... Chemo w acute leukemia as sdx or w high dose chemo agent w MCC. Lymphoma & non-acute leukemia w/o CC/MCC. Fever of unknown origin. Neuroses except depressive. Alcohol/drug abuse or dependence, left ama. Other injury, poisoning & toxic effect diag w MCC*. HIV w major related condition w/o CC/MCC. Prostatic O.R. procedure unrelated to principal diagnosis w/o CC/MCC. sroberts on PROD1PC70 with FRONTMATTER Proposed Quintile 3 023 029 030 058 075 083 084 099 121 124 158 182 188 241 290 327 331 348 381 382 383 424 472 476 487 493 499 511 517 555 563 581 582 597 620 643 656 660 666 668 669 687 693 695 749 760 781 809 821 835 843 844 858 866 896 903 905 906 941 ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... VerDate Nov<24>2008 08:10 May 21, 2009 Craniotomy w major device implant or acute complex CNS PDX w MCC. Spinal procedures w CC. Spinal procedures w/o CC/MCC. Multiple sclerosis & cerebellar ataxia w MCC. Viral meningitis w CC/MCC. Traumatic stupor & coma, coma >1 hr w CC**. Traumatic stupor & coma, coma >1 hr w/o CC/MCC**. Non-bacterial infect of nervous sys exc viral meningitis w/o CC/MCC. Acute major eye infections w CC/MCC. Other disorders of the eye w MCC. Dental & Oral Diseases w CC. Respiratory neoplasms w/o CC/MCC***. Pleural effusion w/o CC/MCC***. Amputation for circ sys disorders exc upper limb & toe w/o CC/MCC. Acute & subacute endocarditis w/o CC/MCC. Stomach, esophageal & duodenal proc w CC. Major small & large bowel procedures w/o CC/MCC. Anal & stomal procedures w CC. Complicated peptic ulcer w CC. Complicated peptic ulcer w/o CC/MCC. Uncomplicated peptic ulcer w MCC. Other hepatobiliary or pancreas O.R. procedures w CC. Cervical spinal fusion w CC. Amputation for musculoskeletal sys & conn tissue dis w/o CC/MCC. Knee procedures w pdx of infection w/o CC/MCC. Lower extrem & humer proc except hip, foot, femur w CC. Local excision & removal int fix devices of hip & femur w/o CC/MCC. Shoulder, elbow or forearm proc, exc major joint proc w CC. Other musculoskelet sys & conn tiss O.R. proc w/o CC/MCC. Signs & symptoms of musculoskeletal system & conn tissue w MCC. Fx, sprn, strn & disl except femur, hip, pelvis & thigh w/o MCC***. Other skin, subcut tiss & breast proc w/o CC/MCC. Mastectomy for malignancy w CC/MCC. Malignant breast disorders w MCC. O.R. procedures for obesity w CC. Endocrine disorders w MCC. Kidney & ureter procedures for neoplasm w MCC. Kidney & ureter procedures for non-neoplasm w CC. Prostatectomy w CC. Transurethral procedures w MCC. Transurethral procedures w CC. Kidney & urinary tract neoplasms w CC. Urinary stones w/o esw lithotripsy w MCC. Kidney & urinary tract signs & symptoms w MCC. Other female reproductive system O.R. procedures w CC/MCC. Menstrual & other female reproductive system disorders w CC/MCC. Other antepartum diagnoses w medical complications. Major hematol/immun diag exc sickle cell crisis & coagul w CC***. Lymphoma & leukemia w major O.R. procedure w CC. Acute leukemia w/o major O.R. procedure w CC. Other myeloprolif dis or poorly diff neopl diag w MCC. Other myeloprolif dis or poorly diff neopl diag w CC**. Postoperative or post-traumatic infections w O.R. proc w/o CC/MCC. Viral illness w/o MCC. Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC. Wound debridements for injuries w/o CC/MCC. Skin grafts for injuries w/o CC/MCC. Hand procedures for injuries. O.R. proc w diagnoses of other contact w health services w/o CC/MCC. Jkt 217001 PO 00000 Frm 00138 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules PROPOSED COMPOSITION OF LOW-VOLUME QUINTILES FOR RY 2010—Continued MS–LTC–DRG (Version 27.0) MS–LTC–DRG Description (Version 27.0) Proposed Quintile 4 sroberts on PROD1PC70 with FRONTMATTER 028 077 082 084 131 133 157 237 243 244 254 286 287 304 338 344 347 353 354 369 380 423 466 469 471 480 488 490 502 503 505 510 513 514 516 537 577 584 624 671 691 711 800 814 826 827 829 834 844 855 909 917 922 923 927 928 933 958 963 983 ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... Spinal procedures w MCC. Hypertensive encephalopathy w MCC. Traumatic stupor & coma, coma >1 hr w MCC. Traumatic stupor & coma, coma >1 hr w/o CC/MCC*. Cranial/facial procedures w CC/MCC. Other ear, nose, mouth & throat O.R. procedures w CC/MCC. Dental & Oral Diseases w MCC. Major cardiovascular procedures w MCC. Permanent cardiac pacemaker implant w CC. Permanent cardiac pacemaker implant w/o CC/MCC. Other vascular procedures w/o CC/MCC***. Circulatory disorders except AMI, w card cath w MCC. Circulatory disorders except AMI, w card cath w/o MCC. Hypertension w MCC. Appendectomy w complicated principal diag w MCC. Minor small & large bowel procedures w MCC. Anal & stomal procedures w MCC. Hernia procedures except inguinal & femoral w MCC. Hernia procedures except inguinal & femoral w CC. Major esophageal disorders w CC***. Complicated peptic ulcer w MCC. Other hepatobiliary or pancreas O.R. procedures w MCC. Revision of hip or knee replacement w MCC**. Major joint replacement or reattachment of lower extremity w MCC**. Cervical spinal fusion w MCC. Hip & femur procedures except major joint w MCC**. Knee procedures w/o pdx of infection w CC/MCC. Back & neck procedures except spinal fusion w CC/MCC or disc devices. Soft tissue procedures w/o CC/MCC***. Foot procedures w MCC. Foot procedures w/o CC/MCC***. Shoulder, elbow or forearm proc, exc major joint proc w MCC. Hand or wrist proc, except major thumb or joint proc w CC/MCC. Hand or wrist proc, except major thumb or joint proc w/o CC/MCC. Other musculoskelet sys & conn tiss O.R. proc w CC. Sprains, strains, & dislocations of hip, pelvis & thigh w CC/MCC. Skin graft &/or debrid exc for skin ulcer or cellulitis w CC. Breast biopsy, local excision & other breast procedures w CC/MCC. Skin grafts & wound debrid for endoc, nutrit & metab dis w/o CC/MCC***. Urethral procedures w CC/MCC. Urinary stones w esw lithotripsy w CC/MCC. Testes procedures w CC/MCC. Splenectomy w CC. Reticuloendothelial & immunity disorders w MCC. Myeloprolif disord or poorly diff neopl w maj O.R. proc w MCC**. Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC**. Myeloprolif disord or poorly diff neopl w other O.R. proc w CC/MCC. Acute leukemia w/o major O.R. procedure w MCC. Other myeloprolif dis or poorly diff neopl diag w CC***. Infectious & parasitic diseases w O.R. procedure w/o CC/MCC. Other O.R. procedures for injuries w/o CC/MCC. Poisoning & toxic effects of drugs w MCC. Other injury, poisoning & toxic effect diag w MCC**. Other injury, poisoning & toxic effect diag w/o MCC**. Extensive burns or full thickness burns w MV 96+ hrs w skin graft. Full thickness burn w skin graft or inhal inj w CC/MCC. Extensive burns or full thickness burns w MV 96+ hrs w/o skin graft. Other O.R. procedures for multiple significant trauma w CC. Other multiple significant trauma w MCC. Extensive O.R. procedure unrelated to principal diagnosis w/o CC/MCC. Proposed Quintile 5 011 025 031 037 038 135 148 ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... VerDate Nov<24>2008 08:10 May 21, 2009 Tracheostomy for face, mouth & neck diagnoses w MCC. Craniotomy & endovascular intracranial procedures w MCC. Ventricular shunt procedures w MCC. Extracranial procedures w MCC. Extracranial procedures w CC. Sinus & mastoid procedures w CC/MCC. Ear, nose, mouth & throat malignancy w/o CC/MCC***. Jkt 217001 PO 00000 Frm 00139 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24217 24218 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules PROPOSED COMPOSITION OF LOW-VOLUME QUINTILES FOR RY 2010—Continued MS–LTC–DRG (Version 27.0) 164 168 222 226 227 242 245 250 260 330 335 336 405 406 414 417 420 453 454 456 457 459 466 467 469 470 480 481 485 486 492 498 507 619 642 659 662 709 717 776 823 824 827 848 876 923 957 969 970 984 985 989 MS–LTC–DRG Description (Version 27.0) ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... ............................................... Major chest procedures w CC. Other resp system O.R. procedures w/o CC/MCC. Cardiac defib implant w cardiac cath w AMI/HF/shock w MCC. Cardiac defibrillator implant w/o cardiac cath w MCC. Cardiac defibrillator implant w/o cardiac cath w/o MCC. Permanent cardiac pacemaker implant w MCC. AICD generator procedures. Perc cardiovasc proc w/o coronary artery stent or AMI w MCC. Cardiac pacemaker revision except device replacement w MCC. Major small & large bowel procedures w CC. Peritoneal adhesiolysis w MCC. Peritoneal adhesiolysis w CC. Pancreas, liver & shunt procedures w MCC. Pancreas, liver & shunt procedures w CC. Cholecystectomy except by laparoscope w/o c.d.e. w MCC. Laparoscopic cholecystectomy w/o c.d.e. w MCC. Hepatobiliary diagnostic procedures w MCC. Combined anterior/posterior spinal fusion w MCC. Combined anterior/posterior spinal fusion w CC. Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w MCC. Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w CC. Spinal fusion except cervical w MCC. Revision of hip or knee replacement w MCC**. Revision of hip or knee replacement w CC. Major joint replacement or reattachment of lower extremity w MCC**. Major joint replacement or reattachment of lower extremity w/o MCC. Hip & femur procedures except major joint w MCC**. Hip & femur procedures except major joint w CC. Knee procedures w pdx of infection w MCC. Knee procedures w pdx of infection w CC. Lower extrem & humer proc except hip, foot, femur w MCC. Local excision & removal int fix devices of hip & femur w CC/MCC. Major shoulder or elbow joint procedures w CC/MCC. O.R. procedures for obesity w MCC. Inborn errors of metabolism. Kidney & ureter procedures for non-neoplasm w MCC. Minor bladder procedures w MCC. Penis procedures w CC/MCC. Other male reproductive system O.R. proc exc malignancy w CC/MCC. Postpartum & post abortion diagnoses w/o O.R. procedure. Lymphoma & non-acute leukemia w other O.R. proc w MCC. Lymphoma & non-acute leukemia w other O.R. proc w CC. Myeloprolif disord or poorly diff neopl w maj O.R. proc w CC*. Chemotherapy w/o acute leukemia as secondary diagnosis w/o CC/MCC***. O.R. procedure w principal diagnoses of mental illness. Other injury, poisoning & toxic effect diag w/o MCC*. Other O.R. procedures for multiple significant trauma w MCC. HIV w extensive O.R. procedure w MCC. HIV w extensive O.R. procedure w/o MCC. Prostatic O.R. procedure unrelated to principal diagnosis w MCC. Prostatic O.R. procedure unrelated to principal diagnosis w CC. Non-extensive O.R. proc unrelated to principal diagnosis w/o CC/MCC***. sroberts on PROD1PC70 with FRONTMATTER * One of the original 282 low-volume proposed MS–LTC–DRGs initially assigned to this low-volume quintile; removed from this low-volume quintile in addressing nonmonotonicity (refer to step 6 in section VIII.B.3.f.of the preamble of this proposed rule). ** One of the original 282 low-volume proposed MS–LTC–DRGs initially assigned to a different low-volume quintile but moved to this low-volume quintile in addressing nonmonotonicity (refer to step 6 in section VIII.B.3.f. of the preamble of this proposed rule). *** One of the original 282 low-volume proposed MS–LTC–DRGs initially assigned to this low-volume quintile but moved to a different low-volume quintile in addressing nonmonotonicity (refer to step 6 in section VIII.B.3.f. of the preamble of this proposed rule). We note that we will continue to monitor the volume (that is, the number of LTCH cases) in the low-volume quintiles to ensure that our quintile assignments used in determining the proposed MS–LTC–DRG relative weights result in appropriate payment for such cases and do not result in an unintended financial incentive for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 LTCHs to inappropriately admit these types of cases. f. Steps for Determining the Proposed RY 2010 MS–LTC–DRG Relative Weights In general, we are proposing to determine the RY 2010 MS–LTC–DRG relative weights based on the methodology established in the August PO 00000 Frm 00140 Fmt 4701 Sfmt 4702 30, 2002 LTCH PPS final rule (67 FR 55989 through 55995) and consistent with the methodology we used to determine the FY 2009 MS–LTC–DRG relative weights in the FY 2009 IPPS final rule (73 FR 48540 through 48551). (We note that, for FY 2009, we made a modification to our methodology for determining relative weights for MS– LTC–DRGs with no LTCH cases (73 FR E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 48542 through 48543), which is reflected in the proposed methodology for determining the proposed RY 2010 MS–LTC–DRG relative weights presented below.) In summary, for RY 2010, we are proposing to group LTCH cases to the appropriate proposed MS–LTC–DRG, while taking into account the lowvolume proposed MS–LTC–DRGs (as described above), in order to determine the proposed RY 2010 MS–LTC–DRG relative weights. After grouping the cases to the appropriate MS–LTC–DRG (or low-volume quintile), we calculate the proposed relative weights for RY 2010 by first removing statistical outliers and cases with a length of stay of 7 days or less (as discussed in greater detail below). Next, we adjust the number of cases in each proposed MS– LTC–DRG (or low-volume quintile) for the effect of SSO cases (as also discussed in greater detail below). The SSO adjusted discharges and corresponding charges are then used to calculate ‘‘relative adjusted weights’’ for each proposed MS–LTC–DRG (or lowvolume quintile) using the HSRV method (described above). Below we discuss in detail the steps for calculating the proposed RY 2010 MS–LTC–DRG relative weights. We note that, as we stated above in section VIII.B.3.b. of the preamble of this proposed rule, we have excluded the data of all-inclusive rate LTCHs and LTCHs that are paid in accordance with demonstration projects that had claims in the FY 2008 MedPAR file. Step 1—Remove statistical outliers. The first step in the calculation of the proposed RY 2010 MS–LTC–DRG relative weights is to remove statistical outlier cases. Consistent with our historical relative weight methodology, we are proposing to continue to define statistical outliers as cases that are outside of 3.0 standard deviations from the mean of the log distribution of both charges per case and the charges per day for each MS–LTC–DRG. These statistical outliers are removed prior to calculating the proposed relative weights because we believe that they may represent aberrations in the data that distort the measure of average resource use. Including those LTCH cases in the calculation of the proposed relative weights could result in an inaccurate proposed relative weight that does not truly reflect relative resource use among the MS–LTC–DRGs. Step 2—Remove cases with a length of stay of 7 days or less. The MS–LTC–DRG relative weights reflect the average of resources used on representative cases of a specific type. Generally, cases with a length of stay of VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 7 days or less do not belong in a LTCH because these stays do not fully receive or benefit from treatment that is typical in a LTCH stay, and full resources are often not used in the earlier stages of admission to a LTCH. If we were to include stays of 7 days or less in the computation of the proposed RY 2010 MS–LTC–DRG relative weights, the value of many proposed relative weights would decrease and, therefore, payments would decrease to a level that may no longer be appropriate. We do not believe that it would be appropriate to compromise the integrity of the payment determination for those LTCH cases that actually benefit from and receive a full course of treatment at a LTCH by including data from these very short-stays. Therefore, consistent with our historical relative weight methodology, in determining the proposed RY 2010 MS–LTC–DRG relative weights, we are proposing to remove LTCH cases with a length of stay of 7 days or less. Step 3—Adjust charges for the effects of SSOs. After removing cases with a length of stay of 7 days or less, we are left with cases that have a length of stay of greater than or equal to 8 days. As the next step in the calculation of the proposed RY 2010 MS–LTC–DRG relative weights, consistent with our historical relative weight methodology, we are proposing to adjust each LTCH’s charges per discharge for those remaining cases for the effects of SSOs (as defined in § 412.529(a) in conjunction with § 412.503). We make this adjustment by counting an SSO case as a fraction of a discharge based on the ratio of the length of stay of the case to the average length of stay for the MS–LTC–DRG for non-SSO cases. This has the effect of proportionately reducing the impact of the lower charges for the SSO cases in calculating the average charge for the MS–LTC–DRG. This process produces the same result as if the actual charges per discharge of an SSO case were adjusted to what they would have been had the patient’s length of stay been equal to the average length of stay of the MS–LTC–DRG. Counting SSO cases as full discharges with no adjustment in determining the proposed RY 2010 MS–LTC–DRG relative weights would lower the proposed RY 2010 MS–LTC–DRG relative weight for affected MS–LTC– DRGs because the relatively lower charges of the SSO cases would bring down the average charge for all cases within an MS–LTC–DRG. This would result in an ‘‘underpayment’’ for nonSSO cases and an ‘‘overpayment’’ for PO 00000 Frm 00141 Fmt 4701 Sfmt 4702 24219 SSO cases. Therefore, we are proposing to adjust for SSO cases under § 412.529 in this manner because it results in more appropriate payments for all LTCH cases. Step 4—Calculate the proposed RY 2010 MS–LTC–DRG relative weights on an iterative basis. Consistent with our historical relative weight methodology, we are proposing to calculate the proposed RY 2010 MS– LTC–DRG relative weights using the HSRV methodology, which is an iterative process. First, for each LTCH case, we calculate a hospital-specific relative charge value by dividing the SSO adjusted charge per discharge (see Step 3) of the LTCH case (after removing the statistical outliers (see Step 1)) and LTCH cases with a length of stay of 7 days or less (see Step 2) by the average charge per discharge for the LTCH in which the case occurred. The resulting ratio is then multiplied by the LTCH’s case-mix index to produce an adjusted hospital-specific relative charge value for the case. An initial case-mix index value of 1.0 is used for each LTCH. For each proposed MS–LTC–DRG, the proposed RY 2010 relative weight was calculated by dividing the average of the adjusted hospital-specific relative charge values (from above) for the proposed MS–LTC–DRG by the overall average hospital-specific relative charge value across all cases for all LTCHs. Using these recalculated proposed MS– LTC–DRG relative weights, each LTCH’s average relative weight for all of its cases (that is, its case-mix) is calculated by dividing the sum of all the LTCH’s proposed MS–LTC–DRG relative weights by its total number of cases. The LTCHs’ hospital-specific relative charge values above is multiplied by these hospital-specific case-mix indexes. These hospital-specific case-mix adjusted relative charge values are then used to calculate a new set of proposed MS–LTC–DRG relative weights across all LTCHs. This iterative process is continued until there is convergence between the weights produced at adjacent steps, for example, when the maximum difference is less than 0.0001. Step 5—Determine a proposed RY 2010 relative weight for MS–LTC–DRGs with no LTCH cases. As we stated above, we are proposing to determine the proposed RY 2010 relative weight for each proposed MS– LTC–DRG using total Medicare allowable charges reported in the best available LTCH claims data (that is, the December 2008 update of the FY 2008 MedPAR file for this proposed rule). Of the proposed RY 2010 MS–LTC–DRGs, we identified a number of proposed MS–LTC–DRGs for which there were no E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24220 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules LTCH cases in the database. That is, based on data from the FY 2008 MedPAR file used for this proposed rule, no patients who would have been classified to those proposed MS–LTC– DRGs were treated in LTCHs during FY 2008 and, therefore, no charge data were available for these proposed MS–LTC– DRGs. Thus, in the process of determining the proposed MS–LTC– DRG relative weights, we were unable to calculate proposed relative weights for the proposed MS–LTC–DRGs with no LTCH cases using the methodology described in Steps 1 through 4 above. However, because patients with a number of the diagnoses under these proposed MS–LTC–DRGs may be treated at LTCHs, consistent with our historical methodology, we are proposing to assign a proposed relative weight to each of the no-volume proposed MS–LTC–DRGs based on clinical similarity and relative costliness (with the exception of ‘‘transplant’’ proposed MS–LTC–DRGs and ‘‘error’’ proposed MS–LTC–DRGs, as discussed below). In general, we determine proposed RY 2010 relative weights for the proposed MS–LTC–DRGs with no LTCH cases in the FY 2008 MedPAR file used in this proposed rule (that is, ‘‘novolume’’ proposed MS–LTC–DRGs) by crosswalking each no-volume proposed MS–LTC–DRG to another proposed MS– LTC–DRG with a calculated proposed relative weight (determined in accordance with the methodology described above). Then, the ‘‘novolume’’ MS–LTC–DRG is assigned the same proposed relative weight of the MS–LTC–DRG to which it was crosswalked (as described in greater detail below). Specifically, in this proposed rule, as stated above, we are proposing to determine the proposed relative weight for each proposed MS–LTC–DRG using total Medicare allowable charges reported in the December 2008 update of the FY 2008 MedPAR file. Of the 746 proposed MS–LTC–DRGs for RY 2010, we identified 216 proposed MS–LTC– DRGs for which there were no LTCH cases in the database (including the 8 ‘‘transplant’’ proposed MS–LTC–DRGs and 2 ‘‘error’’ proposed MS–LTC– DRGs). As stated above, we are proposing to assign proposed relative weights for each of the 216 no-volume proposed MS–LTC–DRGs (with the exception of the 8 ‘‘transplant’’ proposed MS–LTC–DRGs and the 2 ‘‘error’’ proposed MS–LTC–DRGs, which are discussed below) based on clinical similarity and relative costliness VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 to one of the remaining 530 (746¥216=530) proposed MS–LTC– DRGs for which we were able to determine proposed relative weights based on FY 2008 LTCH claims data using the steps described above. (For the remainder of this discussion, we refer to one of the 530 proposed MS–LTC–DRGs for which we were able to determine a proposed relative weight as the ‘‘crosswalked’’ proposed MS–LTC– DRG.) Then, we are proposing to assign the no-volume proposed MS–LTC–DRG the proposed relative weight of the crosswalked proposed MS–LTC–DRG. (As explained below in Step 6, when necessary, we made adjustments to account for nonmonotonicity.) In this proposed rule, we are proposing to use the following methodology for determining the proposed RY 2010 relative weights for the no-volume proposed MS–LTC– DRGs: We crosswalk the no-volume proposed MS–LTC–DRG to an proposed MS–LTC–DRG for which there are LTCH cases in the FY 2008 MedPAR file and to which it is similar clinically in intensity of use of resources and relative costliness as determined by criteria such as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. As we explained in the FY 2009 IPPS final rule (73 FR 48543), we evaluate the relative costliness in determining the applicable proposed MS–LTC–DRG to which a novolume proposed MS–LTC–DRG was crosswalked in order to assign an appropriate proposed relative weight for the no-volume proposed MS–LTC–DRGs in RY 2010. In general, most of the novolume proposed MS–LTC–DRGs historically have not had any cases in the LTCH claims data. Therefore, we typically are unable to evaluate relative costliness based on prior years’ LTCH claims data. In evaluating the relative costliness for most of the no-volume proposed MS–LTC–DRGs, a group of CMS medical officers who have extensive knowledge and familiarity with both the IPPS and LTCH DRGbased payment systems used their DRG experience to evaluate the relative costliness of the no-volume proposed MS–LTC–DRGs. Specifically, the relative costliness of each of the novolume proposed MS–LTC–DRGs for RY 2010 was assessed by taking into consideration factors such as relative resource use, clinical cohesiveness, and the comparableness of services provided based on the collective IPPS and LTCH PO 00000 Frm 00142 Fmt 4701 Sfmt 4702 PPS experience of those medical officers. We also note, as discussed above, the no-volume proposed MS– LTC–DRG crosswalks are based on both clinical similarity and relative costliness, including such factors as care provided during the period of time surrounding surgery, surgical approach (if applicable), length of time of surgical procedure, postoperative care, and length of stay. We believe in the rare event that there would be a few LTCH cases grouped to one of the no-volume proposed MS–LTC–DRGs in RY 2010, the proposed relative weights assigned based on the crosswalked proposed MS– LTC–DRGs would result in an appropriate LTCH PPS payment because the proposed crosswalks, which are based on similar clinical similarity and relative costliness, generally require equivalent relative resource use. We then assign the proposed relative weight of the crosswalked proposed MS–LTC– DRG as the proposed relative weight for the no-volume proposed MS–LTC–DRG such that both of these proposed MS– LTC–DRGs (that is, the no-volume proposed MS–LTC–DRG and the crosswalked proposed MS–LTC–DRG) would have the same proposed relative weight for RY 2010. We note that if the crosswalked proposed MS–LTC–DRG has 25 cases or more, its proposed relative weight, which is calculated using the methodology described in steps 1 through 4 above, is assigned to the no-volume proposed MS–LTC–DRG as well. Similarly, if the MS–LTC–DRG to which the no-volume proposed MS– LTC–DRG is crosswalked has 24 or less cases and, therefore, is designated to one of the low-volume quintiles for purposes of determining the proposed relative weights, we assign the proposed relative weight of the applicable lowvolume quintile to the no-volume proposed MS–LTC–DRG such that both of these proposed MS–LTC–DRGs (that is, the no-volume proposed MS–LTC– DRG and the crosswalked proposed MS–LTC–DRG) have the same proposed relative weight for RY 2010. (As we noted above, in the infrequent case where nonmonotonicity involving a novolume proposed MS–LTC–DRG results, additional measures as described in Step 6 are required in order to maintain monotonically increasing proposed relative weights.) For this proposed rule, a list of the novolume MS–LTC–DRGs and the proposed MS–LTC–DRG to which it is crosswalked (that is, the crosswalked MS–LTC–DRG) for RY 2010 is shown in the chart below. E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24221 PROPOSED NO-VOLUME MS–LTC–DRG CROSSWALK FOR RY 2010 Proposed crosswalked MS–LTC–DRG sroberts on PROD1PC70 with FRONTMATTER MS–LTC–DRG (V27.0) MS–LTC–DRG description (version 27) 9 ................................. 12 ............................... 13 ............................... 20 ............................... 21 ............................... 22 ............................... 24 ............................... 27 ............................... 34 ............................... 35 ............................... 36 ............................... 39 ............................... 61 ............................... 62 ............................... 63 ............................... 76 ............................... 79 ............................... 113 ............................. 114 ............................. 116 ............................. 117 ............................. 122 ............................. 123 ............................. 129 ............................. 130 ............................. 132 ............................. 134 ............................. 136 ............................. 137 ............................. 138 ............................. 150 ............................. 151 ............................. 165 ............................. 185 ............................. 215 ............................. 216 ............................. 217 ............................. 218 ............................. 219 ............................. 220 ............................. 221 ............................. 223 ............................. 224 ............................. 225 ............................. 228 ............................. 229 ............................. 230 ............................. 231 ............................. 232 ............................. 233 ............................. 234 ............................. 235 ............................. 236 ............................. 238 ............................. 246 ............................. 247 ............................. 248 ............................. 249 ............................. 251 ............................. 258 ............................. 261 ............................. 262 ............................. 263 ............................. 265 ............................. 295 ............................. 296 ............................. 297 ............................. 298 ............................. 328 ............................. 332 ............................. Bone marrow transplant .............................................................................................................................. Tracheostomy for face, mouth & neck diagnoses w CC ............................................................................ Tracheostomy for face, mouth & neck diagnoses w/o CC/MCC ................................................................ Intracranial vascular procedures w PDX hemorrhage w MCC ................................................................... Intracranial vascular procedures w PDX hemorrhage w CC ...................................................................... Intracranial vascular procedures w PDX hemorrhage w/o CC/MCC .......................................................... Craniotomy w major device implant or acute complex CNS PDX w/o MCC .............................................. Craniotomy & endovascular intracranial procedures w/o CC/MCC ............................................................ Carotid artery stent procedure w MCC ....................................................................................................... Carotid artery stent procedure w CC .......................................................................................................... Carotid artery stent procedure w/o CC/MCC .............................................................................................. Extracranial procedures w/o CC/MCC ........................................................................................................ Acute ischemic stroke w use of thrombolytic agent w MCC ....................................................................... Acute ischemic stroke w use of thrombolytic agent w CC .......................................................................... Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC ............................................................. Viral meningitis w/o CC/MCC ...................................................................................................................... Hypertensive encephalopathy w/o CC/MCC ............................................................................................... Orbital procedures w CC/MCC .................................................................................................................... Orbital procedures w/o CC/MCC ................................................................................................................. Intraocular procedures w CC/MCC ............................................................................................................. Intraocular procedures w/o CC/MCC .......................................................................................................... Acute major eye infections w/o CC/MCC .................................................................................................... Neurological eye disorders .......................................................................................................................... Major head & neck procedures w CC/MCC or major device ...................................................................... Major head & neck procedures w/o CC/MCC ............................................................................................. Cranial/facial procedures w/o CC/MCC ....................................................................................................... Other ear, nose, mouth & throat O.R. procedures w/o CC/MCC ............................................................... Sinus & mastoid procedures w/o CC/MCC ................................................................................................. Mouth procedures w CC/MCC .................................................................................................................... Mouth procedures w/o CC/MCC ................................................................................................................. Epistaxis w MCC ......................................................................................................................................... Epistaxis w/o MCC ...................................................................................................................................... Major chest procedures w/o CC/MCC ......................................................................................................... Major chest trauma w/o CC/MCC ............................................................................................................... Other heart assist system implant ............................................................................................................... Cardiac valve & oth maj cardiothoracic proc w card cath w MCC ............................................................. Cardiac valve & oth maj cardiothoracic proc w card cath w CC ................................................................ Cardiac valve & oth maj cardiothoracic proc w card cath w/o CC/MCC .................................................... Cardiac valve & oth maj cardiothoracic proc w/o card cath w MCC .......................................................... Cardiac valve & oth maj cardiothoracic proc w/o card cath w CC ............................................................. Cardiac valve & oth maj cardiothoracic proc w/o card cath w/o CC/MCC ................................................. Cardiac defib implant w cardiac cath w AMI/HF/shock w/o MCC .............................................................. Cardiac defib implant w cardiac cath w/o AMI/HF/shock w MCC .............................................................. Cardiac defib implant w cardiac cath w/o AMI/HF/shock w/o MCC ........................................................... Other cardiothoracic procedures w MCC .................................................................................................... Other cardiothoracic procedures w CC ....................................................................................................... Other cardiothoracic procedures w/o CC/MCC ........................................................................................... Coronary bypass w PTCA w MCC .............................................................................................................. Coronary bypass w PTCA w/o MCC ........................................................................................................... Coronary bypass w cardiac cath w MCC .................................................................................................... Coronary bypass w cardiac cath w/o MCC ................................................................................................. Coronary bypass w/o cardiac cath w MCC ................................................................................................. Coronary bypass w/o cardiac cath w/o MCC .............................................................................................. Major cardiovascular procedures w/o MCC ................................................................................................ Percutaneous cardiovascular proc w drug-eluting stent w MCC ................................................................ Percutaneous cardiovascular proc w drug-eluting stent w/o MCC ............................................................. Percutaneous cardiovasc proc w non-drug-eluting stent w MCC ............................................................... Percutaneous cardiovasc proc w non-drug-eluting stent w/o MCC ............................................................ Perc cardiovasc proc w/o coronary artery stent or AMI w/o MCC ............................................................. Cardiac pacemaker device replacement w MCC ........................................................................................ Cardiac pacemaker revision except device replacement w CC ................................................................. Cardiac pacemaker revision except device replacement w/o CC/MCC ..................................................... Vein ligation & stripping ............................................................................................................................... AICD lead procedures ................................................................................................................................. Deep vein thrombophlebitis w/o CC/MCC ................................................................................................... Cardiac arrest, unexplained w MCC ........................................................................................................... Cardiac arrest, unexplained w CC .............................................................................................................. Cardiac arrest, unexplained w/o CC/MCC .................................................................................................. Stomach, esophageal & duodenal proc w/o CC/MCC ................................................................................ Rectal resection w MCC .............................................................................................................................. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 823 146 146 31 32 32 23 26 37 38 38 38 70 71 72 75 305 146 147 125 125 125 125 146 148 133 133 133 133 133 152 153 254 184 254 237 253 254 237 254 254 243 242 243 252 253 254 237 254 237 254 237 254 254 252 253 252 253 250 259 259 259 301 259 294 283 284 284 358 356 24222 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules PROPOSED NO-VOLUME MS–LTC–DRG CROSSWALK FOR RY 2010—Continued sroberts on PROD1PC70 with FRONTMATTER MS–LTC–DRG (V27.0) 333 334 337 339 340 341 342 343 345 346 349 351 352 355 407 408 409 410 411 412 413 415 416 419 421 422 425 434 455 458 460 461 462 468 473 482 483 484 489 491 494 506 508 509 512 533 538 583 585 599 614 615 618 621 625 626 627 630 653 654 655 657 658 661 664 665 670 672 688 692 ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. VerDate Nov<24>2008 Proposed crosswalked MS–LTC–DRG MS–LTC–DRG description (version 27) Rectal resection w CC ................................................................................................................................. Rectal resection w/o CC/MCC ..................................................................................................................... Peritoneal adhesiolysis w/o CC/MCC .......................................................................................................... Appendectomy w complicated principal diag w CC .................................................................................... Appendectomy w complicated principal diag w/o CC/MCC ........................................................................ Appendectomy w/o complicated principal diag w MCC .............................................................................. Appendectomy w/o complicated principal diag w CC ................................................................................. Appendectomy w/o complicated principal diag w/o CC/MCC ..................................................................... Minor small & large bowel procedures w CC .............................................................................................. Minor small & large bowel procedures w/o CC/MCC ................................................................................. Anal & stomal procedures w/o CC/MCC ..................................................................................................... Inguinal & femoral hernia procedures w CC ............................................................................................... Inguinal & femoral hernia procedures w/o CC/MCC ................................................................................... Hernia procedures except inguinal & femoral w/o CC/MCC ....................................................................... Pancreas, liver & shunt procedures w/o CC/MCC ...................................................................................... Biliary tract proc except only cholecyst w or w/o c.d.e. w MCC ................................................................. Biliary tract proc except only cholecyst w or w/o c.d.e. w CC .................................................................... Biliary tract proc except only cholecyst w or w/o c.d.e. w/o CC/MCC ........................................................ Cholecystectomy w c.d.e. w MCC ............................................................................................................... Cholecystectomy w c.d.e. w CC .................................................................................................................. Cholecystectomy w c.d.e. w/o CC/MCC ..................................................................................................... Cholecystectomy except by laparoscope w/o c.d.e. w CC ......................................................................... Cholecystectomy except by laparoscope w/o c.d.e. w/o CC/MCC ............................................................. Laparoscopic cholecystectomy w/o c.d.e. w/o CC/MCC ............................................................................. Hepatobiliary diagnostic procedures w CC ................................................................................................. Hepatobiliary diagnostic procedures w/o CC/MCC ..................................................................................... Other hepatobiliary or pancreas O.R. procedures w/o CC/MCC ................................................................ Cirrhosis & alcoholic hepatitis w/o CC/MCC ............................................................................................... Combined anterior/posterior spinal fusion w/o CC/MCC ............................................................................ Spinal fusion exc cerv w spinal curv, malig or 9+ fusions w/o CC/MCC ................................................... Spinal fusion except cervical w/o MCC ....................................................................................................... Bilateral or multiple major joint procs of lower extremity w MCC ............................................................... Bilateral or multiple major joint procs of lower extremity w/o MCC ............................................................ Revision of hip or knee replacement w/o CC/MCC .................................................................................... Cervical spinal fusion w/o CC/MCC ............................................................................................................ Hip & femur procedures except major joint w/o CC/MCC .......................................................................... Major joint & limb reattachment proc of upper extremity w CC/MCC ......................................................... Major joint & limb reattachment proc of upper extremity w/o CC/MCC ...................................................... Knee procedures w/o pdx of infection w/o CC/MCC .................................................................................. Back & neck procedures except spinal fusion w/o CC/MCC ...................................................................... Lower extrem & humer proc except hip, foot, femur w/o CC/MCC ............................................................ Major thumb or joint procedures ................................................................................................................. Major shoulder or elbow joint procedures w/o CC/MCC ............................................................................. Arthroscopy .................................................................................................................................................. Shoulder, elbow or forearm proc, exc major joint proc w/o CC/MCC ........................................................ Fractures of femur w MCC .......................................................................................................................... Sprains, strains, & dislocations of hip, pelvis & thigh w/o CC/MCC ........................................................... Mastectomy for malignancy w/o CC/MCC .................................................................................................. Breast biopsy, local excision & other breast procedures w/o CC/MCC ..................................................... Malignant breast disorders w/o CC/MCC .................................................................................................... Adrenal & pituitary procedures w CC/MCC ................................................................................................. Adrenal & pituitary procedures w/o CC/MCC .............................................................................................. Amputat of lower limb for endocrine, nutrit, & metabol dis w/o CC/MCC .................................................. O.R. procedures for obesity w/o CC/MCC .................................................................................................. Thyroid, parathyroid & thyroglossal procedures w MCC ............................................................................ Thyroid, parathyroid & thyroglossal procedures w CC ............................................................................... Thyroid, parathyroid & thyroglossal procedures w/o CC/MCC ................................................................... Other endocrine, nutrit & metab O.R. proc w/o CC/MCC ........................................................................... Major bladder procedures w MCC .............................................................................................................. Major bladder procedures w CC ................................................................................................................. Major bladder procedures w/o CC/MCC ..................................................................................................... Kidney & ureter procedures for neoplasm w CC ........................................................................................ Kidney & ureter procedures for neoplasm w/o CC/MCC ............................................................................ Kidney & ureter procedures for non-neoplasm w/o CC/MCC ..................................................................... Minor bladder procedures w/o CC/MCC ..................................................................................................... Prostatectomy w MCC ................................................................................................................................. Transurethral procedures w/o CC/MCC ...................................................................................................... Urethral procedures w/o CC/MCC ............................................................................................................... Kidney & urinary tract neoplasms w/o CC/MCC ......................................................................................... Urinary stones w esw lithotripsy w/o CC/MCC ........................................................................................... 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00144 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 357 358 335 372 373 371 372 373 344 344 348 350 350 354 406 424 424 424 418 418 418 418 418 418 424 424 424 433 457 457 459 480 480 480 472 480 480 480 488 490 493 514 507 505 511 480 537 582 584 598 629 629 617 620 628 629 629 629 660 660 660 656 656 660 663 669 669 671 687 694 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24223 PROPOSED NO-VOLUME MS–LTC–DRG CROSSWALK FOR RY 2010—Continued sroberts on PROD1PC70 with FRONTMATTER MS–LTC–DRG (V27.0) 707 708 710 712 713 714 715 716 718 724 734 735 736 737 738 739 740 741 742 743 744 745 748 750 756 761 765 766 767 768 769 770 774 775 777 778 779 780 782 789 790 791 792 793 794 795 799 801 804 810 820 822 825 828 830 836 838 839 845 887 915 916 929 955 956 959 ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. VerDate Nov<24>2008 Proposed crosswalked MS–LTC–DRG MS–LTC–DRG description (version 27) Major male pelvic procedures w CC/MCC .................................................................................................. Major male pelvic procedures w/o CC/MCC ............................................................................................... Penis procedures w/o CC/MCC .................................................................................................................. Testes procedures w/o CC/MCC ................................................................................................................. Transurethral prostatectomy w CC/MCC .................................................................................................... Transurethral prostatectomy w/o CC/MCC ................................................................................................. Other male reproductive system O.R. proc for malignancy w CC/MCC .................................................... Other male reproductive system O.R. proc for malignancy w/o CC/MCC ................................................. Other male reproductive system O.R. proc exc malignancy w/o CC/MCC ................................................ Malignancy, male reproductive system w/o CC/MCC ................................................................................. Pelvic evisceration, rad hysterectomy & rad vulvectomy w CC/MCC ........................................................ Pelvic evisceration, rad hysterectomy & rad vulvectomy w/o CC/MCC ..................................................... Uterine & adnexa proc for ovarian or adnexal malignancy w MCC ........................................................... Uterine & adnexa proc for ovarian or adnexal malignancy w CC .............................................................. Uterine & adnexa proc for ovarian or adnexal malignancy w/o CC/MCC .................................................. Uterine & adnexa proc for non-ovarian/adnexal malig w MCC .................................................................. Uterine & adnexa proc for non-ovarian/adnexal malig w CC ..................................................................... Uterine & adnexa proc for non-ovarian/adnexal malig w/o CC/MCC ......................................................... Uterine & adnexa proc for non-malignancy w CC/MCC ............................................................................. Uterine & adnexa proc for non-malignancy w/o CC/MCC .......................................................................... D&C, conization, laparascopy & tubal interruption w CC/MCC .................................................................. D&C, conization, laparascopy & tubal interruption w/o CC/MCC ............................................................... Female reproductive system reconstructive procedures ............................................................................. Other female reproductive system O.R. procedures w/o CC/MCC ............................................................ Malignancy, female reproductive system w/o CC/MCC .............................................................................. Menstrual & other female reproductive system disorders w/o CC/MCC .................................................... Cesarean section w CC/MCC ..................................................................................................................... Cesarean section w/o CC/MCC .................................................................................................................. Vaginal delivery w sterilization &/or D&C .................................................................................................... Vaginal delivery w O.R. proc except steril &/or D&C .................................................................................. Postpartum & post abortion diagnoses w O.R. procedure ......................................................................... Abortion w D&C, aspiration curettage or hysterotomy ................................................................................ Vaginal delivery w complicating diagnoses ................................................................................................. Vaginal delivery w/o complicating diagnoses .............................................................................................. Ectopic pregnancy ....................................................................................................................................... Threatened abortion .................................................................................................................................... Abortion w/o D&C ........................................................................................................................................ False labor ................................................................................................................................................... Other antepartum diagnoses w/o medical complications ............................................................................ Neonates, died or transferred to another acute care facility ....................................................................... Extreme immaturity or respiratory distress syndrome, neonate ................................................................. Prematurity w major problems ..................................................................................................................... Prematurity w/o major problems .................................................................................................................. Full term neonate w major problems ........................................................................................................... Neonate w other significant problems ......................................................................................................... Normal newborn .......................................................................................................................................... Splenectomy w MCC ................................................................................................................................... Splenectomy w/o CC/MCC .......................................................................................................................... Other O.R. proc of the blood & blood forming organs w/o CC/MCC ......................................................... Major hematol/immun diag exc sickle cell crisis & coagul w/o CC/MCC ................................................... Lymphoma & leukemia w major O.R. procedure w MCC ........................................................................... Lymphoma & leukemia w major O.R. procedure w/o CC/MCC .................................................................. Lymphoma & non-acute leukemia w other O.R. proc w/o CC/MCC .......................................................... Myeloprolif disord or poorly diff neopl w maj O.R. proc w/o CC/MCC ....................................................... Myeloprolif disord or poorly diff neopl w other O.R. proc w/o CC/MCC ..................................................... Acute leukemia w/o major O.R. procedure w/o CC/MCC ........................................................................... Chemo w acute leukemia as sdx or w high dose chemo agent w CC ....................................................... Chemo w acute leukemia as sdx or w high dose chemo agent w/o CC/MCC .......................................... Other myeloprolif dis or poorly diff neopl diag w/o CC/MCC ...................................................................... Other mental disorder diagnoses ................................................................................................................ Allergic reactions w MCC ............................................................................................................................ Allergic reactions w/o MCC ......................................................................................................................... Full thickness burn w skin graft or inhal inj w/o CC/MCC .......................................................................... Craniotomy for multiple significant trauma .................................................................................................. Limb reattachment, hip & femur proc for multiple significant trauma ......................................................... Other O.R. procedures for multiple significant trauma w/o CC/MCC ......................................................... 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00145 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 660 660 709 711 669 669 717 717 717 722 717 717 754 755 755 628 755 755 755 755 749 749 749 749 755 760 629 629 629 629 629 629 629 629 629 759 759 759 781 781 781 781 781 781 781 781 800 800 803 812 823 821 824 827 829 835 837 837 844 881 918 918 934 26 480 958 24224 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules To illustrate this methodology for determining the proposed relative weights for the proposed RY 2010 MS– LTC–DRGs with no LTCH cases, we are providing the following example, which refers to the no-volume proposed MS– LTC–DRGs crosswalk information for RY 2010 provided in the chart above. sroberts on PROD1PC70 with FRONTMATTER Example: There were no cases in the FY 2008 MedPAR file used for this proposed rule for proposed MS–LTC–DRG 61 (Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We determined that proposed MS–LTC–DRG 70 (Nonspecific Cebrovascular Disorders with MCC) was similar clinically and based on resource use to MS–LTC–DRG 61. Therefore, we assigned the same proposed relative weight of proposed MS–LTC–DRG 70 of 0.8612 for RY 2010 to proposed MS–LTC–DRG 61 (we refer readers to Table 11 of the Addendum to this proposed rule). Furthermore, for RY 2010, consistent with our historical relative weight methodology, we are proposing to establish proposed MS–LTC–DRG relative weights of 0.0000 for the following transplant proposed MS– LTC–DRGs: Heart Transplant or Implant of Heart Assist System with MCC (proposed MS–LTC–DRG 1); Heart Transplant or Implant of Heart Assist System without MCC (proposed MS– LTC–DRG 2); Liver Transplant with MCC or Intestinal Transplant (proposed MS–LTC–DRG 5); Liver Transplant without MCC (proposed MS–LTC–DRG 6); Lung Transplant (proposed MS– LTC–DRG 7); Simultaneous Pancreas/ Kidney Transplant (proposed MS–LTC– DRG 8); Pancreas Transplant (proposed MS–LTC–DRG 10); and Kidney Transplant (proposed MS–LTC–DRG 652). This is because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. Based on our research, we found that most LTCHs only perform minor surgeries, such as minor small and large bowel procedures, to the extent any surgeries are performed at all. Given the extensive criteria that must be met to become certified as a transplant center for Medicare, we believe it is unlikely that any LTCHs will become certified as a transplant center. In fact, in the more than 20 years since the implementation of the IPPS, there has never been a LTCH that even expressed an interest in becoming a transplant center. If, in the future, a LTCH applies for certification as a Medicare-approved transplant center, we believe that the application and approval procedure would allow sufficient time for us to determine appropriate weights for the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 MS–LTC–DRGs affected. At the present time, we only include these eight transplant MS–LTC–DRGs in the GROUPER program for administrative purposes only. Because we use the same GROUPER program for LTCHs as is used under the IPPS, removing these MS– LTC–DRGs would be administratively burdensome. Again, we note that, as this system is dynamic, it is entirely possible that the number of MS–LTC–DRGs with no volume of LTCH cases based on the system will vary in the future. We used the most recent available claims data in the MedPAR file to identify no-volume MS–LTC–DRGs and to determine the proposed relative weights in this proposed rule. Step 6—Adjust the proposed RY 2010 MS–LTC–DRG relative weights to account for nonmonotonically increasing relative weights. As discussed above in this section, the MS–DRGs (used under the IPPS) and the MS–LTC–DRGs (used under the LTCH PPS) provide a significant improvement in the DRG system’s recognition of severity of illness and resource usage. The MS–DRGs contain base DRGs that have been subdivided into one, two, or three severity levels. Where there are three severity levels, the most severe level has at least one code that is referred to as an MCC (that is, major complication or comorbidity). The next lower severity level contains cases with at least one code that is a CC (that is, complication or comorbidity). Those cases without an MCC or a CC are referred to as ‘‘without CC/MCC.’’ When data do not support the creation of three severity levels, the base DRG is subdivided into either two levels or the base DRG is not subdivided. The twolevel subdivisions could consist of the with CC/MCC and the without CC/MCC. Alternatively, the other type of twolevel subdivision may consist of the MCC and without MCC. In those base MS–LTC–DRGs that are split into either two or three severity levels, cases classified into the ‘‘without CC/MCC’’ MS–LTC–DRG are expected to have a lower resource use (and lower costs) than the ‘‘with CC/MCC’’ MS– LTC–DRG (in the case of a two-level split) or both the ‘‘with CC’’ and the ‘‘with MCC’’ MS–LTC–DRGs (in the case of a three-level split). That is, theoretically, cases that are more severe typically require greater expenditure of medical care resources and will result in higher average charges. Therefore, in the three severity levels, relative weights should increase by severity, from lowest to highest. If the relative weights decrease as severity decreased (that is, if within a base MS–LTC–DRG, an MS– LTC–DRG with CC has a higher relative PO 00000 Frm 00146 Fmt 4701 Sfmt 4702 weight than one with MCC, or the MS– LTC–DRG without CC/MCC has a higher relative weight than either of the others), they are nonmonotonic. We continue to believe that utilizing nonmonotonic relative weights to adjust Medicare payments would result in inappropriate payments because the payment for the cases in the higher severity level in a base MS–LTC–DRG (which are generally expected to have higher resource use and costs) would be lower than the payment for cases in a lower severity level within the same base MS–LTC–DRG (which are generally expected to have lower resource use and costs). Consequently, in general, consistent with our historical methodology, we are proposing to combine proposed MS–LTC–DRG severity levels within a base MS–LTC– DRG for the purpose of computing a relative weight when necessary to ensure that monotonicity is maintained. Specifically, in determining the proposed RY 2010 MS–LTC–DRG relative weights in this proposed rule, we are proposing to use the same methodology to adjust for nonmonotonicity that we used to determine the RY 2009 MS–LTC–DRG relative weights in the FY 2009 IPPS final rule (73 FR 48549 through 48550). In determining the proposed RY 2010 MS–LTC–DRG relative weights in this proposed rule, under each of the example scenarios provided below, we combine severity levels within a proposed base MS–LTC–DRG as follows: The first example of nonmonotonically increasing relative weights for a proposed MS–LTC–DRG pertains to a proposed base MS–LTC– DRG with a three-level split and each of the three levels has 25 or more LTCH cases and, therefore, none of those proposed MS–LTC–DRGs is assigned to one of the five low-volume quintiles. In this proposed rule, if nonmonotonicity is detected in the proposed relative weights of the proposed MS–LTC–DRGs in adjacent severity levels (for example, the proposed relative weight of the ‘‘with MCC’’ (the highest severity level) is less than the ‘‘with CC’’ (the middle level), or the proposed relative weight ‘‘with CC’’ is less than the ‘‘without CC/ MCC’’ (lowest severity level)), we combine the nonmonotonic adjacent proposed MS–LTC–DRGs and redetermine a proposed relative weight based on the case-weighted average of the combined LTCH cases of the nonmonotonic proposed MS–LTC– DRGs. The case-weighted average charge is calculated by dividing the total charges for all LTCH cases in both E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules severity levels by the total number of LTCH cases for both proposed MS– LTC–DRGs. The same proposed relative weight is assigned to both affected levels of the proposed base MS–LTC– DRG. If nonmonotonicity remains an issue because the above process results in a proposed relative weight that is still nonmonotonic to the proposed relative weight of the remaining proposed MS– LTC–DRG within the proposed base MS–LTC–DRG, we combine all three of the severity levels to redetermine the proposed relative weights based on the case-weighted average charge of the combined severity levels. This same proposed relative weight is then assigned to each of the proposed MS– LTC–DRGs in that proposed base MS– LTC–DRG. A second example of nonmonotonically increasing relative weights for a proposed base MS–LTC– DRG pertains to the situation where there are three severity levels and one or more of the severity levels within a proposed base MS–LTC–DRG has less than 25 LTCH cases (that is, low volume). If nonmonotonicity occurs in the case where either the highest or lowest severity level (‘‘with MCC’’ or ‘‘without CC/MCC’’) has 25 LTCH cases or more and the other two severity levels are low volume (and, therefore, the other two severity levels are otherwise assigned the proposed relative weight of the applicable lowvolume quintile(s)), we combine the data for the cases in the two adjacent low-volume proposed MS–LTC–DRGs for the purpose of determining a proposed relative weight. If the combination results in at least 25 cases, we redetermine one proposed relative weight based on the case-weighted average charge of the combined severity levels and assign this same proposed relative weight to each of the severity levels. If the combination results in less than 25 cases, based on the caseweighted average charge of the combined low-volume proposed MS– LTC–DRGs, both proposed MS–LTC– DRGs are assigned to the appropriate low-volume quintile (discussed above in section VIII.B.3.e. of this preamble) based on the case-weighted average charge of the combined low-volume proposed MS–LTC–DRGs. Then the proposed relative weight of the affected low-volume quintile is redetermined and that proposed relative weight is assigned to each of the affected severity levels (and all of the proposed MS– LTC–DRGs in the affected low-volume quintile). If nonmonotonicity persists, we combine all three severity levels and redetermine one proposed relative VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 weight based on the case-weighted average charge of the combined severity levels and this same proposed relative weight is assigned to each of the three levels within that proposed base MS– LTC–DRG. Similarly, in nonmonotonic cases where the middle level has 25 cases or more but either or both of the lowest or highest severity level has less than 25 cases (that is, low volume), we combine the nonmonotonic low-volume proposed MS–LTC–DRG with the middle severity-level proposed MS– LTC–DRG (the ‘‘with CC’’) of the proposed base MS–LTC–DRG. We redetermine one proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign this same proposed relative weight to each of the affected proposed MS–LTC–DRGs. If nonmonotonicity persists, we combine all three levels for the purpose of redetermining a proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign that proposed relative weight to each of the three severity levels within the proposed base MS– LTC–DRG. In the case where all three severity levels in the proposed base-MS–LTC– DRGs are low-volume proposed MS– LTC–DRGs and two of the severity levels are nonmonotonic in relation to each other, we combine the two adjacent nonmonotonic severity levels. If that combination resulted in less than 25 cases, both low-volume proposed MS–LTC–DRGs are assigned to the appropriate low-volume quintile (discussed above in section VIII.B.3.e. of this preamble) based on the caseweighted average charge of the combined low-volume proposed MS– LTC–DRGs. Then the proposed relative weight of the affected low-volume quintile is redetermined, and that proposed relative weight is assigned to each of the affected severity levels (and all of the proposed MS–LTC–DRGs in the affected low-volume quintile). If the nonmonotonicity persists, we combine all three levels of that proposed base MS–LTC–DRG for the purpose of redetermining a proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign that proposed relative weight to each of the three severity levels. If that combination of all three severity levels results in less than 25 cases, we assign that ‘‘combined’’ base MS–LTC–DRG to the appropriate lowvolume quintile based on the caseweighted average charge of the combined low-volume proposed MS– LTC–DRGs. Then the proposed relative PO 00000 Frm 00147 Fmt 4701 Sfmt 4702 24225 weight of the affected low-volume quintile is redetermined, and that proposed relative weight is assigned to each of the affected severity levels (and all of the MS–LTC–DRGs in the affected low-volume quintile). If the combination of all three severity levels resulted in 25 or more cases, we redetermine one proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign this same proposed relative weight to all three of the severity levels within the proposed base MS–LTC–DRG. Similarly, in the case where all three severity levels in the proposed base MS–LTC–DRGs are low-volume proposed MS–LTC–DRGs and two of the severity levels were nonmonotonic in relation to each other, we combine the two adjacent nonmonotonic severity levels. If the combination resulted in at least 25 cases, we then redetermine one proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign this same proposed relative weight to both of the affected adjacent severity levels within the proposed base MS– LTC–DRG. If the nonmonotonicity persists, we combine all three levels of that proposed base MS–LTC–DRG for the purpose of redetermining a proposed relative weight based on the case-weighted average charge of the combined severity levels, and assign that proposed relative weight to each of the three severity levels within the proposed base MS–LTC–DRG. Another example of nonmonotonicity involves a proposed base MS–LTC–DRG with three severity levels where at least one of the severity levels has no LTCH cases. As discussed above in Step 5, we are proposing to crosswalk a proposed no-volume MS–LTC–DRG to a proposed MS–LTC–DRG that has at least one case based on resource use intensity and clinical similarity. The no-volume proposed MS–LTC–DRG is assigned the same proposed relative weight as the proposed MS–LTC–DRG to which it is crosswalked. For many no-volume proposed MS–LTC–DRGs, as shown in the chart above in Step 5, the application of our methodology results in a crosswalked proposed MS–LTC– DRG that is the adjacent severity level in the same proposed base MS–LTC– DRG. Consequently, in most instances, the no-volume proposed MS–LTC–DRG and the adjacent proposed MS–LTC– DRG to which it is crosswalked do not result in nonmonotonicity because both of these severity levels would have the same proposed relative weight. (In this proposed rule, under our methodology for the treatment of no-volume proposed E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24226 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules MS–LTC–DRGs, in the case where the no-volume proposed MS–LTC–DRG was either the highest or lowest severity level, the crosswalked proposed MS– LTC–DRG is typically the middle level (‘‘with CC’’) within the same proposed base MS–LTC–DRG, and, therefore, the no-volume proposed MS–LTC–DRG (either the ‘‘with MCC’’ or the ‘‘without CC/MCC’’) and the crosswalked proposed MS–LTC–DRG (the ‘‘with CC’’) have the same proposed relative weight. Consequently, no adjustment for monotonicity is necessary.) However, if our methodology for determining proposed relative weights for no-volume proposed MS–LTC–DRGs results in nonmonotonicity with the third severity level in the base MS–LTC–DRG, all three severity levels are combined in order to redetermine one proposed relative weight based on the caseweighted average charge of the combined severity levels. This same proposed relative weight is assigned to each of the three severity levels in the base MS–LTC–DRG. Thus far in the discussion, we have presented examples of nonmonotonicity in a proposed base MS–LTC–DRG that has three severity levels. Under our methodology for the treatment of nonmonotonicity, we are proposing to apply the same process where the proposed base MS–LTC–DRG contains only two severity levels. For example, if nonmonotonicity occurs in a proposed base MS–LTC–DRG with two severity levels (that is, the relative weight of the higher severity level is less than the lower severity level), where both of the MS–LTC–DRGs have at least 25 cases or where one or both of the MS–LTC–DRGs are low volume (that is, less than 25 cases), we combine the two proposed MS–LTC–DRGs of that proposed base MS–LTC–DRG for the purpose of redetermining a proposed relative weight based on the combined caseweighted average charge for both severity levels. This same proposed relative weight is assigned to each of the two severity levels in the proposed base MS–LTC–DRG. Specifically, if the combination of the two severity levels results in at least 25 cases, we redetermine one proposed relative weight based on the case-weighted average charge, and assign that proposed relative weight to each of the two proposed MS–LTC–DRGs. If the combination results in less than 25 cases, we assign both proposed MS– LTC–DRGs to the appropriate lowvolume quintile (discussed above in section VIII.B.3.e. of this preamble) based on their combined case-weighted average charge. Then the proposed VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 relative weight of the affected lowvolume quintile is redetermined, and that proposed relative weight is assigned to each of the two severity levels within the proposed base MS– LTC–DRG (and all of the proposed MS– LTC–DRGs in the affected low-volume quintile). Step 7—Calculate the RY 2010 budget neutrality factor. As we established in the RY 2008 LTCH PPS final rule (72 FR 26882), under the broad authority conferred upon the Secretary under section 123 of Public Law 106–113, as amended by section 307(b) of Public Law 106–554, to develop the LTCH PPS, beginning with the MS–LTC–DRG update for FY 2008, the annual update to the MS–LTC–DRG classifications and relative weights is done in a budget neutral manner such that estimated aggregate LTCH PPS payments would be unaffected, that is, would be neither greater than nor less than the estimated aggregate LTCH PPS payments that would have been made without the MS–LTC–DRG classification and relative weight changes. Specifically, in that same final rule, we established a requirement under § 412.517(b) that the annual update to the MS–LTC–DRG classifications and relative weights be done in a budget neutral manner. (For a detailed discussion on the establishment of the budget neutrality requirement to update the MS–LTC–DRG classifications and relative weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 26880 through 26884).) The MS–LTC– DRG classifications and relative weights are updated annually based on the most recent available LTCH claims data to reflect changes in relative LTCH resource use. Under the budget neutrality requirement, for each annual update, the MS–LTC–DRG relative weights are uniformly adjusted to ensure that estimated aggregate payments under the LTCH PPS would not be affected (that is, decreased or increased). Consistent with that provision, we are proposing to update the proposed MS–LTC–DRG classifications and relative weights for RY 2010 based on the most recent available LTCH data, and to include a budget neutrality adjustment that is applied in determining the proposed RY 2010 MS–LTC–DRG relative weights. To ensure budget neutrality in the proposed update to the MS–LTC–DRG classifications and relative weights under § 412.517(b), consistent with the budget neutrality methodology we established in the FY 2008 IPPS final rule with comment period (72 FR 47295 through 47296), in determining the budget neutrality adjustment for RY PO 00000 Frm 00148 Fmt 4701 Sfmt 4702 2010 in this proposed rule, we are proposing to use a method that is similar to the methodology used under the IPPS. Specifically, for RY 2010, after recalibrating the proposed MS–LTC– DRG proposed relative weights as we do under the methodology as described in detail in Steps 1 through 6 above, we are proposing to calculate and apply a normalization factor to those proposed relative weights to ensure that estimated payments are not influenced by changes in the composition of case types or the changes to the classification system. That is, the normalization adjustment is intended to ensure that the recalibration of the proposed MS–LTC–DRG relative weights (that is, the process itself) neither increases nor decreases total estimated payments. To calculate the normalization factor for RY 2010, we are proposing to use the following steps: (1) We use the most recent available LTCH claims data (FY 2008) and group them using the proposed RY 2010 GROUPER (Version 27.0) and the proposed RY 2010 MS– LTC–DRG relative weights (determined above in Steps 1 through 6 above) to calculate the average case-mix index (CMI); (2) we group the same LTCH claims data (FY 2008) using the FY 2009 GROUPER (Version 26.0) and FY 2009 relative weights (established in the FY 2009 IPPS final rule (73 FR 48528 through 48551)) and calculate the average CMI; and (3) we compute the ratio of these average CMIs by dividing the average CMI for FY 2009 (determined in Step 2) by the average CMI for RY 2010 (determined in Step 1). In determining the proposed MS–LTC– DRG relative weights for RY 2010, based on the latest available LTCH claims data, the normalization factor is estimated as 1.1147455, which is applied in determining each proposed RY 2010 MS–LTC–DRG relative weight. That is, each proposed MS–LTC–DRG relative weight is multiplied by 1.1147455 in the first step of the budget neutrality process. Accordingly, the proposed RY 2010 MS–LTC–DRG relative weights in Table 11 in the Addendum of this proposed rule reflect this normalization factor. We also ensure that estimated aggregate LTCH PPS payments (based on the most recent available LTCH claims data) after reclassification and recalibration (the proposed RY 2010 MS–LTC–DRG classifications and relative weights) are equal to estimated aggregate LTCH PPS payments (for the same most recent available LTCH claims data) before reclassification and recalibration (the existing RY 2009 MS–LTC–DRG classifications and relative weights). E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Therefore, similar to the methodology used to determine the proposed IPPS DRG reclassification and recalibration budget neutrality factor discussed in section II.A.4.a. of the Addendum to this proposed rule, we used FY 2008 discharge data to simulate payments and compare estimated aggregate LTCH PPS payments using the FY 2009 MS– LTC–DRGs and relative weights to estimate aggregate LTCH PPS payments using the proposed RY 2010 MS–LTC– DRGs and relative weights. As noted above, the most recent available LTCH claims data for this proposed rule are from the December 2008 update of the FY 2008 MedPAR file. Consistent with our historical policy of using the best available data, we are proposing to use the most recently available claims data for determining the budget neutrality adjustment factor in the final rule. Specifically, we determined the proposed RY 2010 budget neutrality adjustment factor in this proposed rule using the following steps: (1) We simulate estimated total LTCH PPS payments using the normalized proposed relative weights for RY 2010 and proposed GROUPER Version 27.0 (as described above in this section); (2) we simulate estimated total LTCH PPS payments using the FY 2009 GROUPER (Version 26.0) and FY 2009 MS–LTC– DRG relative weights (as established in the FY 2009 IPPS final rule (73 FR 48528 through 48551)); and (3) we calculate the ratio of these estimated total LTCH PPS payments by dividing the estimated total LTCH PPS payments using the FY 2009 GROUPER (Version 26.0) and the FY 2009 MS–LTC–DRG relative weights (determined in Step 2) by the estimated total LTCH PPS payments using the proposed RY 2010 GROUPER (Version 27.0) and the normalized proposed MS–LTC–DRG relative weights for RY 2010 (determined in Step 1). Then, each of the normalized proposed relative weights is multiplied by the budget neutrality adjustment factor to determine the proposed budget neutral RY 2010 relative weight for each proposed MS–LTC–DRG. Accordingly, in determining the proposed RY 2010 MS–LTC–DRG relative weights in this proposed rule, based on the most recent available LTCH claims data, we are proposing to establish a budget neutrality adjustment factor of 0.993192, which is applied to the normalized proposed relative weights (described above). The proposed RY 2010 MS–LTC–DRG relative weights in Table 11 in the Addendum to this proposed rule reflect this proposed budget neutrality factor. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Table 11 in the Addendum to this proposed rule lists the proposed MS– LTC–DRGs and their respective proposed relative weights, geometric mean length of stay, and five-sixths of the geometric mean length of stay (used in determining SSO payments under § 412.529) for RY 2010. C. Proposed Changes to the LTCH Payment Rates and Other Changes to the RY 2010 LTCH PPS 1. Overview of Development of the LTCH Payment Rates The LTCH PPS was effective beginning with a LTCH’s first cost reporting period beginning on or after October 1, 2002. Effective with that cost reporting period, LTCHs are paid, during a 5-year transition period, a total LTCH prospective payment that is comprised of an increasing proportion of the LTCH PPS Federal rate and a decreasing proportion based on reasonable cost-based principles, unless the hospital makes a one-time election to receive payment based on 100 percent of the Federal rate, as specified in § 412.533. New LTCHs (as defined at § 412.23(e)(4)) are paid based on 100 percent of the Federal rate, with no phase-in transition payments. The basic methodology for determining LTCH PPS Federal prospective payment rates is set forth at § 412.515 through § 412.536. In this section, we discuss the factors that would be used to update the LTCH PPS standard Federal rate for the 2010 LTCH PPS rate year that would be effective for LTCH discharges occurring on or after October 1, 2009 through September 30, 2010. When we implemented the LTCH PPS in the August 30, 2002 LTCH PPS final rule (67 FR 56029 through 56031), we computed the LTCH PPS standard Federal payment rate for FY 2003 by updating the latest available (FY 1998 or FY 1999) Medicare inpatient operating and capital cost data, using the excluded hospital market basket. Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs be budget neutral for the initial year of implementation. Therefore, in calculating the standard Federal rate under § 412.523(d)(2), we set total estimated LTCH PPS payments equal to estimated payments that would have been made under the reasonable costbased payment methodology had the LTCH PPS not been implemented. Section 307(a)(2) of the BIPA specified that the increases to the target amounts and the cap on the target amounts for LTCHs for FY 2002 provided for by section 307(a)(1) of the BIPA shall not be considered in the development and PO 00000 Frm 00149 Fmt 4701 Sfmt 4702 24227 implementation of the LTCH PPS. Section 307(a)(2) of the BIPA also specified that enhanced bonus payments for LTCHs provided for by section 122 of BBRA were not to be taken into account in the development and implementation of the LTCH PPS. Furthermore, as specified at § 412.523(d)(1), the initial standard Federal rate was reduced by an adjustment factor to account for the estimated proportion of outlier payments under the LTCH PPS to total estimated LTCH PPS payments (8 percent). For further details on the development of the FY 2003 standard Federal rate, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56037), and for subsequent updates to the LTCH PPS Federal rate we refer readers to the following final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140), RY 2005 LTCH PPS final rule (69 FR 25682 through 25684), RY 2006 LTCH PPS final rule (70 FR 24179 through 24180), RY 2007 LTCH PPS final rule (71 FR 27819 through 27827), RY 2008 LTCH PPS final rule (72 FR 26870 through 27029), and RY 2009 LTCH PPS final rule (73 FR 26800 through 26804). The proposed update to the LTCH PPS standard Federal rate for RY 2010 is presented in section V.A. of the Addendum to this proposed rule. Two of the components of the proposed update to the LTCH PPS standard Federal rate for RY 2010 are discussed below. 2. Market Basket for LTCHs Reimbursed Under the LTCH PPS a. Overview Historically, the Medicare program has used a market basket to account for price increases in the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. The development of the initial LTCH PPS standard Federal rate for FY 2003, using the excluded hospital with capital market basket, is discussed in further detail in the August 30, 2002 LTCH PPS final rule (67 FR 56027 through 56033). In that final rule (67 FR 56016 through 56017 and 56030), which implemented the LTCH PPS, we established the use of the excluded hospital with capital market basket as the LTCH PPS market basket. The excluded hospital with capital market basket was also used to update the limits on LTCHs’ operating costs for inflation under the TEFRA reasonable E:\FR\FM\22MYP2.SGM 22MYP2 24228 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER cost-based payment system. We explained that we believe the use of the excluded hospital with capital market basket to update LTCHs’ payments for inflation was appropriate because the excluded hospital market basket (with a capital component) measures price increases of the services furnished by excluded hospitals, including LTCHs. For further details on the development of the excluded hospital with capital market basket, we refer readers to the RY 2004 LTCH PPS final rule (68 FR 34134 through 34137). As discussed in the RY 2007 LTCH PPS final rule (71 FR 27810), based on our research, we did not develop a market basket specific to LTCH services. We were unable to create a separate market basket specifically for LTCHs at that time due to the small number of facilities and the limited amount of data that was reported (for instance, only approximately 15 percent of LTCHs reported contract labor cost data for 2002). In that same final rule, under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of the BIPA, we adopted the rehabilitation, psychiatric, long-term care (RPL) market basket as the appropriate market basket of goods and services under the LTCH PPS for discharges occurring on or after July 1, 2006. Specifically, beginning with the 2007 LTCH PPS rate year, for the LTCH PPS, we adopted the use of the RPL market basket which is based on FY 2002 cost report data. We chose to use the FY 2002 Medicare cost report data because those data were the most recent, relatively complete cost data for IRFs, IPFs, and LTCHs available at the time of rebasing. The RPL market basket was determined based on the operating and capital costs of freestanding IRFs, freestanding IPFs, and LTCHs. As we explained in the RY 2007 LTCH PPS final rule, we believed a market basket based on the data of IRFs, IPFs, and LTCHs was appropriate to use under the LTCH PPS because those data were the best available data that reflect the cost structures of LTCHs. For further details on the development of the RPL market basket, including the methodology for determining the operating and capital portions of the RPL market basket, we refer readers to the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817). b. Proposed Market Basket Under the LTCH PPS for RY 2010 When we initially created the FY 2002-based RPL market basket, we were unable to create a separate market basket specifically for LTCHs due, in part, to the small number of facilities VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 and the limited data that were provided in the Medicare cost reports. Over the last several years, however, the number of LTCH facilities submitting valid Medicare cost report data has increased. Based on this development, as well as our desire to move from one RPL market basket to three stand-alone and provider-specific market baskets (for IRFs, IPFs, and LTCHs, respectively), we plan to begin exploring the viability of creating these market baskets for future use. However, as we discussed in the FY 2010 IRF PPS proposed rule, we are conducting further research to assist us in understanding the reasons for the variations in costs and cost structure between freestanding IRFs and hospitalbased IRFs. We also are researching the reasons for similar variations in costs and cost structure between freestanding IPFs and hospital-based IPFs. Therefore, as we continue to explore the development of stand-alone market baskets for LTCHs, IRFs and IPFs, respectively, we believe that it is appropriate to continue to use the FY 2002-based RPL market basket for LTCHs, IRFs and IPFs under their respective PPSs. Accordingly, in this proposed rule, we are proposing to continue to use the FY 2002-based RPL market basket under the LTCH PPS for RY 2010, as we continue to believe it is the best available data that reflect the cost structure of LTCHs. We are hopeful that progress can be made in the near future with respect to creating standalone market baskets for LTCHs, IRFs, and IPFs and, as a result, may propose to rebase the appropriate market basket(s) for subsequent updates in the future. c. Proposed Market Basket Update for LTCHs for RY 2010 Consistent with our historical practice, we estimate the RPL market basket update based on IHS Global Insight, Inc.’s forecast using the most recent available data. IHS Global Insight, Inc. is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of the hospital market baskets. Based on IHS Global Insight Inc.’s first quarter 2009 forecast, the proposed RY 2010 market basket estimate for the LTCH PPS using the FY 2002-based RPL market basket is 2.4 percent. This includes increases in both the operating section and the capital section of the FY 2002-based RPL market basket. In addition, consistent with our historical practice of using market basket estimates based on the most recent available data, we are proposing that if more recent data are available when we develop the final PO 00000 Frm 00150 Fmt 4701 Sfmt 4702 rule, we would use such data, if appropriate. (As discussed in greater detail in section V. of the Addendum to this proposed rule, for RY 2010, we are proposing to update the LTCH PPS standard Federal rate by ¥0.2 percent. The proposed update reflects an adjustment based on the most recent market basket estimate (currently 2.4 percent as discussed above) and adjustments to account for the increase in case-mix in the prior periods (FYs 2007 through 2009) that resulted from changes in documentation and coding practices rather than increases in patients’ severity of illness.) d. Proposed Labor-Related Share Under the LTCH PPS for RY 2010 As discussed in section V.B. of the Addendum to this proposed rule, under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS Federal rate to account for differences in LTCH area wage levels at § 412.525(c). The labor-related portion of the LTCH PPS Federal rate, hereafter referred to as the labor-related share, is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The labor-related share is determined by identifying the national average proportion of operating and capital costs that are related to, influenced by, or vary with the local labor market. We continue to classify a cost category as labor-related if the costs are laborintensive and vary with the local labor market. In addition, as discussed above, we are proposing to continue to use the FY 2002-based RPL market basket under the LTCH PPS for RY 2010. Given this, we are proposing to continue to define the labor-related share as the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, contract labor, professional fees, labor-intensive services, and a labor-related portion of capital based on the FY 2002-based RPL market basket. (Additional information on the development of the FY 2002based RPL market basket used under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 FR 27809 through 27818).) The proposed labor-related share for RY 2010 would be the sum of the proposed RY 2010 relative importance of each labor-related cost category, and would reflect the different rates of price change for these cost categories between the base year (FY 2002) and RY 2010. The sum of the proposed relative importance for RY 2010 for operating costs (wages and salaries, employee E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules account for the changes in documentation and coding practices (rather than patients’ severity of illness) in addition to the estimated increase in the LTCH PPS market basket. Accordingly, we established at § 412.523(c)(3)(iii) of the regulations that the update to the standard Federal rate for the 2007 LTCH PPS rate year was zero percent, based on the most recent estimate of the LTCH PPS market basket increase of 3.4 percent and an equivalent negative adjustment to account for changes in case-mix due to changes in documentation and coding practices in a prior period (FY 2004). In the RY 2008 LTCH PPS final rule (72 FR 26880 through 26890), we continued to monitor and analyze LTCHs’ case-mix and applied an update to the standard Federal rate of 0.71 percent, based on the most recent estimate of the market basket increase (3.2 percent) and an adjustment to account for changes in documentation PROPOSED RY 2010 LABOR-RELATED and coding practices (¥2.49 percent) in SHARE BASED ON THE FY 2002- the prior period, FY 2005. Similarly, for RY 2009, as discussed in the RY 2009 BASED RPL MARKET BASKET final rule (73 FR 26805 through 26812), the standard Federal rate was updated FY 2002-based using an update factor of 2.7 percent, RPL market basket labor-related based on the most recent estimate of the Cost category share relative im- market basket increase (3.6 percent) and portance (percent) an adjustment to account for changes in RY 2010 case-mix due to documentation and Wages and Salaries ....... 53.064 coding practices (¥0.9 percent) in the Employee Benefits .......... 13.880 prior period, FY 2006. benefits, professional fees, and all-other labor-intensive services) would be 71.961 as shown in the chart below. The portion of capital that is influenced by the local labor market is estimated to be 46 percent. Because the relative importance for capital in RY 2010 would be 8.572 percent of the FY 2002based RPL market basket, we are proposing to take 46 percent of 8.572 percent to determine the proposed labor-related share of capital for RY 2010. The result would be 3.943 percent, which we are proposing to add to 71.961 percent for the operating cost amount to determine the total proposed labor-related share for RY 2010. Thus, the labor-related share that we are proposing to use for LTCH PPS in RY 2010 would be 75.904 percent. The chart below shows the proposed RY 2010 relative importance laborrelated share using the FY 2002-based RPL market basket. sroberts on PROD1PC70 with FRONTMATTER Professional Fees ........... All Other Labor-Intensive Services ...................... 2.894 b. Evaluation of FY 2007 Claims Data For RY 2010, we continue to believe that changes in the LTCH PPS payment Subtotal ................... 71.961 rates should accurately reflect changes Labor-Related Share of in LTCHs’ true cost of treating patients, Capital Costs (46 perand should not be influenced by cent) ............................ 3.943 changes in documentation and coding that do not reflect increases in patients’ Total Labor-Related Share ................... 75.904 severity of illness. Accordingly, consistent with previous years, we are proposing to analyze LTCHs’ case-mix 3. Proposed Adjustment for Changes in index (CMI) changes in the prior period, LTCHs’ Case-Mix Due to Changes in FY 2007, and if applicable, determine Documentation and Coding Practices an appropriate adjustment to account That Occurred in a Prior Period for changes in documentation and a. Background coding practices. As we explained in the Beginning in RY 2007, in updating the RY 2007 final rule (71 FR 27819 through standard Federal rate for the LTCH PPS, 27823), a LTCH’s CMI is defined as its we have accounted for increases in case-weighted average LTC–DRG payments from a past period due to relative weight for all its discharges in changes in documentation and coding a given period. Changes in CMI consist practices. Specifically, in the RY 2007 of two components: ‘‘real’’ CMI changes LTCH PPS final rule (71 FR 27820), we and ‘‘apparent’’ CMI changes. Real CMI explained that rather than solely using increase is defined as the increase in the the most recent estimate of the LTCH average LTC–DRG relative weights PPS market basket increase as the basis resulting from the hospital’s treatment of the update factor for the standard of more resource intensive patients. Federal rate for RY 2007, we believed Apparent CMI increase is defined as the that based on our ongoing monitoring of increase in CMI due to changes in LTCHs’ case mix, it was appropriate to documentation and coding practices also adjust the standard Federal rate to (including better documentation of the VerDate Nov<24>2008 08:10 May 21, 2009 2.123 Jkt 217001 PO 00000 Frm 00151 Fmt 4701 Sfmt 4702 24229 medical record by physicians and more complete coding of the medical record by coders). In previous years, analysis of the most recent available LTCH CMI data focused on quantifying the portion of CMI change in a prior period that is attributable to apparent CMI change. However, beginning in RY 2010, we are proposing to revise our methodology to determine the proposed documentation and coding adjustment, consistent with the IPPS proposed methodology for case-mix analysis under the IPPS, which is discussed in detail in section II.D.4 of the preamble of this proposed rule. We note that section II.D.4 of the preamble of this proposed rule discusses the proposed analysis in the context of the MS–DRG documentation and coding adjustments for FY 2008 and FY 2009 authorized by Public Law 110–90 for the IPPS, and we note that the requirements of Public Law 110–90 do not apply to the LTCH PPS. However, section 123(a)(1) of Public Law 106–113 (BBRA), as amended by section 307(b) of Public Law 106–554 (BIPA), provides broad authority to the Secretary in developing the LTCH PPS, including the authority for establishing appropriate adjustments. The stated purpose of the proposed CMI analysis for the IPPS is to measure and corroborate the extent of the overall national average changes in case-mix since the adoption of the MS– DRGs, which we believe is also relevant in determining appropriate adjustments to account for changes in documentation and coding under the LTCH PPS because, as stated above, the same DRG-based patient classification system is used under both the LTCH PPS and the IPPS (referred to as the MS–LTC–DRGs and MS–DRGs, respectively). Accordingly, under the broad authority afforded by the statute to make appropriate adjustments for the LTCH PPS, we believe it is appropriate to propose to use the same methodology that we are proposing to use under the IPPS as described in section II.D.4. of the preamble of this proposed rule and which is discussed in further detail below in this section. Accordingly, consistent with the proposed IPPS CMI analysis methodology, we conducted a thorough evaluation of LTCH claims data in order to assess the case-mix changes that do not reflect real changes in patients’ severity of illness. The results of this evaluation were used by our actuaries to determine if any payment adjustments are necessary to ensure appropriate payments under the LTCH PPS. Specifically, to evaluate the FY 2007 LTCH claims data, we performed the proposed analysis plan in the following E:\FR\FM\22MYP2.SGM 22MYP2 24230 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER manner. We first divided the CMI obtained by grouping the FY 2007 LTCH claims data from the December 2007 update of the MedPAR files through the FY 2007 GROUPER (Version 24.0) by the CMI obtained by grouping these same FY 2007 LTCH claims through the FY 2006 GROUPER (Version 23.0). This results in a value of 0.974. Because these are the same FY 2007 LTCH cases grouped using the two GROUPERs, we attribute this change primarily to two factors: (1) The effect of changes in documentation and coding; and (2) the measurement effect from the calibration of the GROUPER. We estimated the measurement effect from the calibration of the GROUPER by dividing the CMI obtained by grouping the FY 2006 LTCH claims through the FY 2007 GROUPER by the CMI obtained by grouping these same LTCH claims through the FY 2006 GROUPER. This results in a value of 0.969. In order to isolate the documentation and coding effect, we then divided the combined effect of the changes in documentation and coding and measurement (0.974) by the measurement effect (0.969) to yield 1.005. Therefore, our estimate of the documentation and coding increase that occurred in FY 2007 is 0.5 percent. As in prior years, the FY 2006 and FY 2007 MedPAR files are available to the public to allow independent analysis of the documentation and coding effect in FY 2007. We are seeking public comment on our proposed methodology and analysis. c. Evaluation of FY 2008 Claims Data In prior years, we based documentation and coding adjustments on an analysis of the most recent available LTCH data and have established the adjustments in a timely manner, as the data became available, to account for each prior period where LTCHs were paid based on case-mix changes that do not reflect increased patients’ severity of illness. Due to the change in the LTCH update cycle in RY 2010, we now have data available to analyze case-mix changes for FY 2008 as well as FY 2007. Accordingly, we believe it is also appropriate at this time to evaluate documentation and coding changes in FY 2008 based on the most recent available LTCH claims data. Accordingly, analogous to our evaluation of the FY 2007 LTCH claims data as discussed above, we analyzed the FY 2008 LTCH claims data from the December 2008 update of the MedPAR files as well. That is, we first divided the CMI obtained by grouping the FY 2008 LTCH claims through the FY 2008 GROUPER (Version 25.0) by the CMI obtained by grouping these same FY VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 2008 LTCH claims through the FY 2007 GROUPER (Version 24.0). This results in a value of 1.011. We estimated the measurement effect from the calibration of the GROUPER by dividing the CMI obtained by grouping the FY 2007 LTCH claims through the FY 2008 GROUPER by the CMI obtained by grouping these same LTCH claims through the FY 2007 GROUPER. This results in a value of 0.999. We then divided the combined effect of the changes in documentation and coding measurement (1.011) by the measurement effect (0.999) to yield 1.013. Therefore, based on the results of the analysis, the documentation and coding increase that occurred in FY 2008 is 1.3 percent. As noted above, the FY 2007 and FY 2008 MedPAR files are available to the public to allow independent analysis of the documentation and coding effect in FY 2008. We are seeking public comment on our proposed methodology and analysis. 2003 implementation of the LTCH PPS, we have identified behaviors by certain LTCHs that lead to inappropriate Medicare payments and have formulated policies that we believe have resulted in fair and reasonable payments for treatments delivered to Medicare beneficiaries by LTCHs. In the RY 2009 LTCH PPS proposed rule, we summarized policy initiatives that we have issued as a result of our ongoing monitoring program (73 FR 5373 through 5374). While we are not proposing to make any new payment adjustments for RY 2010 as a result of our monitoring activity, we note that we will continue to pursue our ongoing monitoring program that involves the CMS Office of Research and Development (ORDI), existing QIO monitoring, medical review activities conducted by Medicare contractors (that is, fiscal intermediaries or MACs), and studies described in the RY 2006 LTCH PPS final rule (70 FR 24211). d. Proposed RY 2010 Documentation and Coding Adjustment Based on analysis of the most recent available LTCH claims data as described above, we are proposing to apply a cumulative adjustment for changes in documentation and coding that do not reflect an increase in patients’ severity of illness of ¥1.8 percent (that is, ¥0.5 percent for FY 2007 plus ¥1.3 percent for FY 2008 equals ¥1.8 percent). Accordingly, as discussed in section V.A.2. of the Addendum to this proposed rule, we are proposing to update the proposed RY 2010 LTCH PPS standard Federal rate by 0.6 percent, which is based on the most recent estimate of the market basket increase (2.4 percent) and a proposed adjustment to account for changes in documentation and coding practices (¥1.8 percent). We also are proposing that if more recent data are available for the final rule, we would use those data to establish a final update to the RY 2010 LTCH PPS standard Federal rate, if applicable. E. Research Conducted by the Research Triangle Institute, International (RTI) At this time, we are not proposing any additional specific changes to payment policies under the LTCH PPS based on the findings made thus far under our ongoing research contract with the Research Triangle Institute, International (RTI). However, we believe that, in light of continuing concerns regarding RTI’s evaluation of the feasibility of establishing patient-level and facility-level criteria for LTCHs, it is appropriate to provide an update on RTI’s most recent analyses and findings. At the beginning of FY 2005, CMS contracted with RTI for a comprehensive evaluation of the feasibility of developing patient-level and facility-level characteristics for LTCHs that could distinguish LTCH patients from those patients treated in other hospitals. In prior Federal Register notices, we have summarized the results of the ongoing work and posted the reports on both Phase I and Phase II of RTI’s research on the CMS Web site at https://www.cms.hhs.gov/ LongTermCareHospitalPPS/ 02a_RTIReports.asp#TopOfPage. In the RY 2009 LTCH PPS proposed rule, in addition to a description of RTI’s research, we described the results of two technical expert panels held during 2007 (73 FR 5374 through 5376). In these analyses, RTI used CY 2004 Medicare claims data to examine the range of patient types admitted to LTCHs, their characteristics to determine if they were all medically complex, as suggested by many, and their outcomes to examine whether the higher cost LTCH service was D. Monitoring In the August 30, 2002 final rule (67 FR 56014), we described an ongoing monitoring component to the new LTCH PPS. Specifically, we discussed analysis of the various policies that we believe would provide equitable payment for stays that reflect less than the full course of treatment and reduce the incentives for inappropriate admissions, transfers, or premature discharges of patients that are present in a dischargebased PPS. As a result of our ongoing data analysis, we revisited a number of our original policies and since the FY PO 00000 Frm 00152 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules distinguishable from outcomes for similar patients treated in areas without LTCHs. These analyses controlled for case-mix severity and examined the differences between beneficiaries discharged from acute care hospitals to LTCHs compared to those who did not use LTCHs. The results suggested LTCH cases were not uniquely distinguishable from those in other acute care settings, in terms of their severity of illness and reasons for admission. RTI’s findings, which were consistent with the findings of MedPAC that were included in the MedPAC’s June 2004 Report to the Congress (p. 127), indicated that, for a small subset of patients (those that had been in the IPPS for ventilator weaning), LTCHs achieved better outcomes at lower Medicare program costs. RTI’s findings also agreed with MedPAC’s findings that it found no differences in the other populations and that the severity of cases admitted to LTCHs varied. In the earlier reports, RTI also examined whether the average Medicare payment per episode (across the IPPS, LTCH, and any other associated services used during the episode of care) differed when LTCHs were used. The issue under examination was whether the payments per episode were similar and whether the outcomes were similar. To examine this, RTI examined the top 50 types of cases likely to be admitted to an LTCH and broke down the costs across an episode of care. Those patients discharged to the LTCH had average payments per episode that were $20,000 higher and no shorter episodes of care or IPPS lengths of stay. Hospital readmission rates were also higher among the LTCH users. However, it is unclear whether this reflects a more complicated case that was not identified as such—being discharged to the LTCH—or whether higher readmission was needed because the patient was transferred from the IPPS inappropriately and needed more general acute care rather than specialized LTCH services. LTCHs restrict their admissions to patients who are hemodynamically stable, unlike IPPS hospitals which provide intensive care, step-down care, and general medical care. However, the analysis also showed variation in the types of cases admitted to LTCHs. Additional analysis of the differences in post-intensive care IPPS use for these two types of cases is also being completed. In the third phase of this study, RTI presented these findings to a technical expert panel comprised of physicians treating complex cases in LTCHs, IPPS hospitals, IRFs, and SNFs. The technical expert panel members were asked to VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 focus on the more complex cases and consider whether LTCHs treat a unique population or use a unique set of treatment practices. The panel discussed the distinguishing characteristics of their respective populations and found great overlap. The panel, including the LTCH physicians, reached a general consensus that LTCHs do not treat a unique population. The types of cases treated in LTCHs may also be treated in IPPS hospitals or IRFs, depending on the primary condition. The panel noted that these complex cases needed specialized treatments, including higher level nursing and physician oversight, interdisciplinary teams to monitor infections and other complications, as well as adequate numbers of cases to ensure appropriate experience for treating these cases. Many LTCHs have these facility-level characteristics although they were not mandated. Acute care hospitals that treat these types of cases frequently have these characteristics as well. All of the panel members agreed that interdisciplinary teams and higher nurse staffing levels were necessary to meet the needs of these patients. A recommendation was made that Medicare should establish Centers of Excellence for treating the medically complex or critically ill populations. These centers may be LTCHs or other hospitals with the staffing and resources to treat these cases, a critical volume of admissions to ensure experience with these complex cases, and a consistent payment approach for these cases across hospitals. (RTI’s Phase III Report is posted on the CMS Web site at: https://www.cms.hhs.gov.) RTI also examined the adequacy of the payment rates for LTCHs. Medicare cost reports were used to analyze trends in overall profitability and Medicare profitability for some of the more common conditions in LTCHs. Servicespecific CCRs were computed to estimate costs for individual MedPAR claims in CY 2006. Half of these claims were paid under the rules applicable to LTCH PPS RY 2007. Data on costs and payments of claims were then used to reassess patterns in profitability by LTC–DRG. RTI found that aggregate LTCH facility PPS margins declined from 11.7 percent in FY 2004 to 7.1 percent in FY 2006. For the subset of RY 2007 claims, the aggregate margin was 5.4 percent. The median PPS margin in FY 2006 was 8.7 percent among forprofit LTCHs, 7.2 percent for private nonprofits, and ¥5.4 percent in publicly-owned LTCHs. However, RTI found that these differences in facility PO 00000 Frm 00153 Fmt 4701 Sfmt 4702 24231 margins by type of ownership were explained by differences in case-mix. Systematic variation in profitability by type of DRG was even stronger in the FY 2006 data than in the FY 2004 data and publicly owned LTCHs continued to admit a larger proportion of patients with lower weighted (and, therefore, lower paid) DRGs. RTI found that excess LTCH profitability relative to other PPS settings in aggregate appears to have been reduced. However, margins varied substantially for different types of cases. The ratio of PPS payments to PPS costs were more than 30 percent higher than an industry baseline, while cases for aftercare and rehabilitation had payment ratios that were more than 10 percent below the baseline. Persistent concerns regarding appropriate Medicare payments for patients who are treated in LTCHs as well as in other provider settings resulted in the enactment of a statutory provision under section 114(b) of the MMSEA directing the Secretary to conduct a study for purposes of determining medical necessity, appropriateness of admission, and continued stay at, and discharge from, LTCHs and to submit a report to the Congress within 18 months after the date of enactment of the MMSEA (December 29, 2007) on the study, along with recommendations for legislation and administrative actions for implementing national LTCH facility and patient criteria, as the Secretary determines appropriate. The statute further states that ‘‘[I]n conducting the study and preparing the report under this subsection, the Secretary shall consider—(A) recommendations contained in a report to Congress by the Medicare Payment Advisory Commission in June 2004 for long-term care hospital-specific facility and patient criteria to ensure that patients admitted to long-term care hospitals are medically complex and appropriate to receive long-term care hospital services; and (B) ongoing work by the Secretary to evaluate and determine the feasibility of such recommendations.’’ In fulfillment of this statutory mandate, CMS’ Office of Research, Development, and Information awarded a contract to Kennell and Associates and RTI for additional analysis of data on Medicare payments and facility costs for the treatment of similar patients in LTCHs and alternative providers as well as patient outcomes and the range of hospital-level care delivered in each setting. We intend to post this report on the CMS Web site once it has been submitted to Congress. E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24232 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules F. Proposed Technical Corrections of LTCH PPS Regulations While we are not proposing any new payment policy changes at this time, we are taking this opportunity to propose two technical corrections to regulation text that we believe will clarify our existing policy at § 412.525 relating to adjustments to the Federal prospective payment to LTCHs. First, at § 412.525(a)(2), the regulations currently state that ‘‘The fixed-loss amount is determined for the long-term care hospital rate year using the LTC–DRG relative weights that are in effect on July 1 of the rate year.’’ As stated earlier, in the RY 2009 LTCH PPS final rule, we revised the LTCH PPS payment rate update cycle in order to consolidate the timing of the annual update of the payment rates with the update of the MS–LTC–DRG classifications to October 1, beginning October 1, 2009 (73 FR 26792 through 26798). At that time, at § 412.503, we specified a new definition for ‘‘longterm care hospital prospective payment system rate year.’’ Under § 412.503, the term ‘‘long-term care hospital prospective payment system rate year’’ means: (1) From July 1, 2003, and ending on or before June 30, 2008, the 12-month period of July 1 through June 30; (2) from July 1, 2008, and ending on September 30, 2009, the 15-month period of July 1, 2008, through September 30, 2009; and (3) beginning on or after October 1, 2009, the 12month period of October 1 through September 30. At §§ 412.535(b) and (c), we described the resulting new publication schedule of Federal prospective payment rates. However, we neglected to make a conforming change to the regulations at § 412.525(a)(2) to reflect this new schedule. Currently, the language of § 412.525(a)(2) still links the determination of the fixed-loss amount to a July 1 effective date. The annual calculation of the fixed-loss amount, which is the amount used to limit the loss that a hospital will incur under the outlier policy for a case with unusually high costs, is directly linked to the calculation of the annual update of the Federal prospective payment rate (73 FR 26821). When we changed the annual update of the LTCH PPS rate year to coincide with the update in the MS– LTC–DRG relative weights to October 1, we should have changed the language at § 412.525(a)(2) regarding the calculation of the fixed-loss amount to conform with this new schedule. Therefore, in this proposed rule, we are proposing to revise § 412.525(a)(2) to accurately reflect the basis (effective LTC–DRG relative weights) for calculating the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 annual fixed-loss amount for high-cost outlier payments, in order to cover the various update cycles that have been in effect under the LTCH PPS. Specifically, we are proposing to revise § 412.525(a)(2) to specify that the fixedloss amount is determined for the LTCH rate year using the MS–LTC–DRG relative weights that are in effect at the start of the applicable LTCH PPS rate year, as defined in § 412.503. (We note that the regulation text at § 412.525(a)(2) uses the term ‘‘LTC–DRG’’ rather than ‘‘MS–LTC–DRG’’ because the term ‘‘LTC–DRG’’ includes ‘‘MS–LTC–DRG’’ generally applicable to any year. Specifically, in our regulations at § 412.503, we state that ‘‘[a]ny reference to the term ‘LTC–DRG’ shall be considered a reference to the term ‘MS– LTC–DRG’ when applying the provisions of this subpart for policy descriptions and payment calculations for discharges from a long-term care hospital occurring on or after October 1, 2007.’’) We also are proposing to clarify our existing policy at § 412.525(d) so that it more accurately reflects existing policy regarding payment adjustments under the LTCH PPS. In paragraph (d) of § 412.525, we provide that CMS adjusts the Federal prospective payment to account for—(1) short-stay outliers at § 412.529; (2) a 3-day or less interruption of stay and a greater than 3-day interruption of stay, as provided for in § 412.531; (3) patients who are transferred to onsite providers and readmitted to a LTCH as provided for in § 412.532; and (4) long-term care HwHs and satellite facilities of LTCHs as provided in § 412.534. We finalized the policy at § 412.525(d)(4), which refers to the percentage threshold payment adjustment for co-located long-term care HwHs and satellite facilities in the FY 2005 IPPS final rule (69 FR 49191 through 49214), and it was codified in the FY 2007 IPPS final rule (71 FR 48122). We adopted a similar policy in the RY 2008 LTC PPS final rule (72 FR 26910 through 26944) that provides for an adjustment to the LTCH PPS payment for LTCHs and satellite facilities of LTCHs that discharge Medicare patients admitted from hospitals not located in the same building or on the same campus as the LTCH or the satellite facility of the LTCH, as specified at § 412.536. We inadvertently omitted the inclusion of this policy in the regulation text at § 412.525(d). Therefore, in order to ensure that the applicable regulatory text reflects existing policy, we are proposing to add a paragraph (d)(5) to § 412.525 that specifically provides that PO 00000 Frm 00154 Fmt 4701 Sfmt 4702 CMS adjusts the Federal LTCH PPS payment amount for LTCHs and satellite facilities of LTCHs that discharged Medicare patients admitted from a hospital not located in the same building or on the same campus as the LTCH or the satellite facility of the LTCH, as provided in § 412.536. IX. MedPAC Recommendations Under section 1886(e)(4)(B) of the Act, the Secretary must consider MedPAC’s recommendations regarding hospital inpatient payments. Under section 1886(e)(5) of the Act, the Secretary must publish in the annual proposed and final IPPS rules the Secretary’s recommendations regarding MedPAC’s recommendations. We have reviewed MedPAC’s March 2009 ‘‘Report to the Congress: Medicare Payment Policy’’ and have given the recommendations in the report careful consideration in conjunction with the proposed policies set forth in this proposed rule. MedPAC’s Recommendation 2A–1 states that ‘‘[t]he Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.’’ This recommendation is discussed in Appendix B to this proposed rule. MedPAC’s Recommendation 2A–2 states that ‘‘[t]he Congress should reduce the indirect medical education adjustment in 2010 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained by reducing the indirect medical education adjustment should be used to fund a quality incentive payment program.’’ Response to Recommendation 2A–2: Redirecting funds obtained by reducing the IME adjustment to fund a quality incentive payment program is consistent with the value-based purchasing initiatives to improve the quality of care. However, section 502(a) of Public Law 108–173 modified the formula multiplier (c) to be used in the calculation of the IME adjustment beginning midway through FY 2004 and provided for a new schedule of formula multipliers for FYs 2005 and thereafter. Consequently, given the existing statutory requirement regarding the IME formula multiplier, CMS does not have the authority to implement MedPAC’s recommendation to reduce the IME adjustment in FY 2010. For further information relating specifically to the MedPAC reports or to obtain a copy of the reports, contact E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Period Available: FY 2010 IPPS Update. MedPAC at (202) 653–7226, or visit MedPAC’s Web site at: https:// www.medpac.gov. XI. Other Required Information A. Requests for Data From the Public In order to respond promptly to public requests for data related to the prospective payment system, we have established a process under which commenters can gain access to raw data on an expedited basis. Generally, the data are now available on compact disc (CD) format. However, many of the files are available on the Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS. Data files and the cost for each file, if applicable, are listed below. Anyone wishing to purchase CDs should submit a written request along with a company check or money order (payable to CMS– PUF) to cover the cost to the following address: Centers for Medicare & Medicaid Services, Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, MD 21207–0520, (410) 786– 3691. Files on the Internet may be downloaded without charge. 1. CMS Wage Data Public Use File This file contains the hospital hours and salaries from Worksheet S–3, Parts II and III from FY 2006 Medicare cost reports used to create the proposed FY 2010 prospective payment system wage index. Multiple versions of this file are created each year. For a complete schedule on the release of different versions of this file, we refer readers to the wage index schedule in section III.K. of the preamble of this proposed rule. Processing year Wage data year 2009 .................. 2008 .................. 2007 .................. 2006 2005 2004 2008 sroberts on PROD1PC70 with FRONTMATTER 2. CMS Occupational Mix Data Public Use File This file contains the 2007–2008 occupational mix survey data to be used to compute the occupational mix adjustment wage indexes. Multiple versions of this file are created each year. For a complete schedule on the release of different versions of this file, we refer readers to the wage index schedule in section III.K. of the preamble of this proposed rule. 08:10 May 21, 2009 This file contains each hospital’s occupational mix adjustment factors by occupational category. Two versions of these files are created each year. They support the following: • Notice of proposed rulemaking published in the Federal Register. • Final rule published in the Federal Register. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Period Available: FY 2010 IPPS Update. 4. Other Wage Index Files CMS releases other wage index analysis files after each proposed and final rule. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Periods Available: FY 2007 through FY 2010 IPPS Update. 5. FY 2010 IPPS SSA/FIPS CBSA State and County Crosswalk This file contains a crosswalk of State and county codes used by the Social Security Administration (SSA) and the Federal Information Processing Standards (FIPS), county name, and a historical list of Metropolitan Statistical Areas (MSAs). Media: Internet at: https:// PPS fiscal www.cms.hhs.gov/AcuteInpatientPPS/ year FFD/list.asp#TopOfPage. Period Available: FY 2010 IPPS 2010 2009 Update. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ WIFN/list.asp#TopOfPage. Periods Available: FY 2007 through FY 2010 IPPS Update. VerDate Nov<24>2008 3. Provider Occupational Mix Adjustment Factors for Each Occupational Category Public Use File Jkt 217001 6. HCRIS Cost Report Data The data included in this file contain cost reports with fiscal years ending on or after September 30, 1996. These data files contain the highest level of cost report status. Media: Internet at: https:// www.cms.hhs.gov/CostReports/ 02_HospitalCostReport.asp and Compact Disc (CD). File Cost: $100.00 per year. 7. Provider-Specific File This file is a component of the PRICER program used in the fiscal intermediary’s or the MAC’s system to compute DRG/MS–DRG payments for individual bills. The file contains records for all prospective payment system eligible hospitals, including PO 00000 Frm 00155 Fmt 4701 Sfmt 4702 24233 hospitals in waiver States, and data elements used in the prospective payment system recalibration processes and related activities. Beginning with December 1988, the individual records were enlarged to include pass-through per diems and other elements. Media: Internet at: https:// www.cms.hhs.gov/ ProspMedicareFeeSvcPmtGen/ 03_psf_text.asp. Period Available: FY 2010 IPPS Update. 8. CMS Medicare Case-Mix Index File This file contains the Medicare casemix index by provider number as published in each year’s update of the Medicare hospital inpatient prospective payment system. The case-mix index is a measure of the costliness of cases treated by a hospital relative to the cost of the national average of all Medicare hospital cases, using DRG/MS–DRG weights as a measure of relative costliness of cases. Two versions of this file are created each year. They support the following: • Notice of proposed rulemaking published in the Federal Register. • Final rule published in the Federal Register. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 1985 through FY 2010. 9. MS–DRG Relative Weights (Also Table 5—MS–DRGs) This file contains a listing of MS– DRGs, MS–DRG narrative descriptions, relative weights, and geometric and arithmetic mean lengths of stay as published in the Federal Register. There are two versions of this file as published in the Federal Register. • Notice of proposed rulemaking. • Final rule. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 2006 through FY 2010 IPPS Update 10. IPPS Payment Impact File This file contains data used to estimate payments under Medicare’s hospital impatient prospective payment systems for operating and capital-related costs. The data are taken from various sources, including the Provider-Specific File, Minimum Data Sets, and prior impact files. The data set is abstracted from an internal file used for the impact analysis of the changes to the prospective payment systems published in the Federal Register. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ E:\FR\FM\22MYP2.SGM 22MYP2 24234 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules FFD/list.asp#TopOfPage and https:// www.cms.hhs.gov/AcuteInpatientPPS/ HIF/list.asp#TopOfPage. Periods Available: FY 1994 through FY 2010 IPPS Update. 11. AOR/BOR Tables This file contains data used to develop the MS–DRG relative weights. It contains mean, maximum, minimum, standard deviation, and coefficient of variation statistics by MS–DRG for length of stay and standardized charges. The BOR tables are ‘‘Before Outliers Removed’’ and the AOR is ‘‘After Outliers Removed.’’ (Outliers refer to statistical outliers, not payment outliers.) Two versions of this file are created each year. They support the following: • Notice of proposed rulemaking published in the Federal Register. • Final rule published in the Federal Register. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 2006 through FY 2010 IPPS Update. 12. Prospective Payment System (PPS) Standardizing File sroberts on PROD1PC70 with FRONTMATTER This file contains information that standardizes the charges used to calculate relative weights to determine payments under the hospital inpatient operating and capital prospective payment systems. Variables include wage index, cost-of-living adjustment (COLA), case-mix index, indirect medical education (IME) adjustment, disproportionate share, and the CoreBased Statistical Area (CBSA). The file supports the following: • Notice of proposed rulemaking published in the Federal Register. • Final rule published in the Federal Register. Media: Internet at: https:// www.cms.hhs.gov/AcuteInpatientPPS/ FFD/list.asp#TopOfPage. Periods Available: FY 2010 IPPS Update. For further information concerning these data files, contact the CMS Public Use Files Hotline at (410) 786–3691. Commenters interested in discussing any data used in constructing this proposed rule should contact Nisha Bhat at (410) 786–5320. B. Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (PRA), we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. We are soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements (ICRs): A. ICRs Regarding Payment Adjustment for Medicare DSHs (§ 412.106) Proposed § 412.106(b)(4)(iv) would permit hospitals to count Medicaideligible inpatient days in the numerator of the Medicaid fraction of the DPP in the DSH payment adjustment calculation by one of the following methodologies, as long as no such days are counted more than once for any hospital in a cost reporting period: date of discharge; date of admission; or dates of service. To avoid ‘‘double counting,’’ a hospital would be required to report to CMS any changes to the methodology it uses to count days in the numerator of the Medicaid fraction of the DPP. The burden associated with this proposed requirement would be the time and effort necessary for a hospital to report to CMS changes to the methodology it uses to count days in the numerator of its Medicaid fraction of the DPP. This requirement is subject to the PRA. While we believe the burden is minimal, we are unable to accurately quantify the burden because we cannot estimate the number of expected submissions from hospitals reporting changes to their respective methodology for counting days in the numerator of the Medicaid fraction of the DPP for the Medicare DSH payment adjustment calculation. We are soliciting public comments on the possible annual number of submissions pertaining to changes to the methodologies used to count days in the numerator of a hospital’s Medicaid fraction of the DPP, and will reevaluate this issue in the final rule stage of rulemaking. PO 00000 Frm 00156 Fmt 4701 Sfmt 4702 B. ICRs Regarding Payments for GME (§ 413.75) Existing regulations at § 413.75(b) permit hospitals that share residents to elect to form a Medicare GME affiliated group if they are in the same or contiguous urban or rural areas, if they are under common ownership, or if they are jointly listed as program sponsors or major participating institutions in the same program. The purpose of a Medicare GME affiliated group is to provide flexibility to hospitals in structuring rotations under an aggregate FTE resident cap when they share residents. The existing regulations at § 413.79(f)(1) specify that each hospital in a Medicare GME affiliated group must submit a Medicare GME affiliation agreement (as defined under § 413.75(b)) to the Medicare fiscal intermediary or MAC servicing the hospital and send a copy to CMS’ Central Office no later than July 1 of the residency program year during which the Medicare GME affiliation agreement will be in effect. In section V.G. of the preamble of this proposed rule, we discuss our proposed change to specify in regulations that a hospital that is new after July 1 and that begins training residents for the first time after the July 1 start date of that academic year would be permitted to submit a Medicare GME affiliation agreement prior to the end of its cost reporting period in order to participate in an existing Medicare GME affiliated group for the remainder of the academic year. The burden associated with this proposed requirement would be the time and effort it would take for the new hospital to develop and submit the Medicare GME affiliation agreement. It is difficult for us to estimate the annual burden associated with this proposal because we cannot estimate the additional number of hospitals that would be permitted to submit Medicare GME affiliation agreements in any given year as a result of the proposed change. However, we believe the number of affected hospitals would be very small because, under the proposed change, a hospital would not only have to start training residents after July 1, but would also need to be a new hospital after July 1. We note that this proposal would merely apply established procedures to provide increased flexibility to a new hospital to join an existing GME affiliated group such that, in its first year, it may train and receive IME and direct GME payments relating to FTE for residents that could otherwise be counted for purposes of IME and direct GME at another hospital. We believe the proposed expansion of the existing policy regarding the submission of E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Medicare GME affiliation agreements for hospitals that are new after July 1 and that begin to train residents after July 1 would amount to a minimal paperwork burden. Nevertheless, we are soliciting public comments on the possible number of annual submissions of Medicare GME affiliation agreements under this proposed change. C. Additional Information Collection Requirements This proposed rule imposes collection of information requirements as outlined in the regulation text and specified above. However, this proposed rule also makes reference to several associated information collections that are not discussed in the regulation text contained in this document. The following is a discussion of these information collections, some of which have already received OMB approval. sroberts on PROD1PC70 with FRONTMATTER 1. Present on Admission (POA) Indicator Reporting Section II.F.6. of the preamble discusses the POA indicator reporting program. As stated earlier, collection of POA indicator data is necessary to identify which conditions were acquired during hospitalization for the HAC payment provision and for broader public health uses of Medicare data. Through Change Request 5499 dated May 11, 2007, CMS issued instructions that require IPPS hospitals to submit POA indicator data for all diagnosis codes on Medicare claims. The burden associated with this requirement is the time and effort necessary to place the appropriate POA indicator codes on Medicare claims. This requirement is subject to the PRA; however, the associated burden is currently approved under OMB control number 0938–0997 with an expiration date of August 31, 2009. 2. Proposed Add-On Payments for New Services and Technologies Section II.I.1. of the preamble of this proposed rule discusses add-on payments for new services and technologies. Specifically, this section states that applicants for add-on payments for new medical services or technologies for FY 2011 must submit a formal request. A formal request includes a full description of the clinical applications of the medical service or technology and the results of any clinical evaluations demonstrating that the new medical service or technology represents a substantial clinical improvement. In addition, the request must contain a significant sample of the data to demonstrate that the medical service or technology meets VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 the high-cost threshold. We detailed the burden associated with this requirement in the September 7, 2001 IPPS final rule (66 FR 46902). As stated in that final rule, collection of the information for this requirement is conducted on an individual case-by-case basis. We believe the associated burden is thereby exempt from the PRA as stipulated under 5 CFR 1320.3(h)(6). Similarly, we also believe the burden associated with this requirement is exempt from the PRA under 5 CFR 1320.3(c), which defines the agency collection of information subject to the requirements of the PRA as information collection imposed on 10 or more persons within any 12-month period. This information collection does not impact 10 or more entities in a 12-month period. In FYs 2008, 2009, and 2010, we received 1, 4, and 5 applications, respectively. 3. Reporting of Hospital Quality Data for Annual Hospital Payment Update As discussed in section V.A. of the preamble of this proposed rule, the RHQDAPU program was originally established to implement section 501(b) of Public Law 108–173, thereby expanding our voluntary Hospital Quality Initiative (HQI). The RHQDAPU program originally consisted of a ‘‘starter set’’ of 10 quality measures. OMB approved the collection of data associated with the original starter set of quality measures under OMB control number 0938–0918, with a current expiration date of January 31, 2010. As part of our implementation of section 5001(a) of the DRA, we expanded the number of quality measures reported in the RHQDAPU program. Specifically, section 1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the DRA, requires that the Secretary expand the ‘‘starter set’’ of 10 quality measures that were established by the Secretary as of November 1, 2003, to include measures ‘‘that the Secretary determines to be appropriate for the measurement of the quality of care furnished by hospitals in inpatient settings.’’ Under this provision, we established additional program measures to bring the total number of measures to 30. The burden associated with these reporting requirements is currently approved under OMB control number 0938–1022, with a current expiration date of June 30, 2011. In the FY 2009 IPPS proposed rule (73 FR 23527), we solicited public comments on several considerations for expanding and updating quality measures. We responded to the public comments received in the FY 2009 IPPS final rule (73 FR 48433). We also PO 00000 Frm 00157 Fmt 4701 Sfmt 4702 24235 expanded and finalized the RHQDAPU program measure set for FY 2010. As part of the expansion effort, two measures were finalized in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68781). In this FY 2010 IPPS proposed rule, we are proposing to add a total of four new measures, to harmonize two existing measures, and to retire one measure, which would increase the total number of measures in the RHQDAPU program from 42 in FY 2010 to 46 in FY 2011. Specifically, we are proposing to add four new measures, two new chartabstracted measures, and two new structural measures. The new chartabstracted measures include the addition of SCIP-Infection-9: Postoperative Urinary Catheter Removal on Postoperative Day 1 or 2, and SCIPInfection-10: Perioperative Temperature Management to the existing SCIP measure set. As stated in V.A.3. of the preamble of this proposed rule, the new structural measures include (1) Participation in a Systematic Clinical Database Registry for Stroke Care; and (2) Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. We are submitting a revised version of the information collection request approved under OMB control number 0938–1022, to obtain approval for the new measures. Section V.A.9. of the preamble of this proposed rule addresses the reconsideration and appeal procedures for a hospital that we believe did not meet the RHQDAPU program requirements. If a hospital disagrees with our determination, it may submit a written request to CMS to reconsider our decision. The hospital’s letter must explain the reasons why it believes it did meet the RHQDAPU program requirements. While this is a reporting requirement, the burden associated with it is not subject to the PRA under 5 CFR 1320.4(a)(2). The burden associated with information collection requirements imposed subsequent to an administrative action is not subject to the PRA. 4. Occupational Mix Adjustment to the FY 2010 Index (Hospital Wage Index Occupational Mix Survey) Section II.D. of the preamble of this proposed rule discusses the proposed occupational mix adjustment to the FY 2010 wage index. While the preamble does not contain any new ICRs, it is important to note that there is an OMBapproved information collection request associated with the hospital wage index. Section 304(c) of Public Law 106–554 amended section 1886(d)(3)(E) of the Act to require CMS to collect data at E:\FR\FM\22MYP2.SGM 22MYP2 24236 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules least once every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program in order to construct an occupational mix adjustment to the wage index. We collect the data via the occupational mix survey. The burden associated with this information collection requirement is the time and effort required to collect and submit the data in the Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned burden is subject to the PRA; however, it is currently approved under OMB control number 0938–0907, with an expiration date of February 28, 2011. sroberts on PROD1PC70 with FRONTMATTER 5. Hospital Applications for Geographic Reclassifications by the MGCRB Section III.I.3. of the preamble of this proposed rule discusses revisions to the wage index based on hospital redesignations. As stated in that section, under section 1886(d)(10) of the Act, the MGCRB has the authority to accept short-term IPPS hospital applications requesting geographic reclassification for wage index or standardized payment amounts and to issue decisions on these requests by hospitals for geographic reclassification for purposes of payment under the IPPS. The burden associated with this application process is the time and effort necessary for an IPPS hospital to complete and submit an application for reclassification to the MGCRB. While this requirement is subject to the PRA, it is currently approved under OMB control number 0938–0573, with an expiration date of December 31, 2011. If you comment on these information collection and recordkeeping requirements, please do either of the following: 1. Submit your comments electronically as specified in the ADDRESSES section of this proposed rule; or 2. Submit your comments to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, [CMS–1406–P], Fax: (202) 395–6974; or E-mail: OIRA_submission@omb.eop.gov. C. 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 with a subsequent document, we will respond to the comments in the preamble to that document. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 List of Subjects 42 CFR Part 412 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 413 Health facilities, Kidney diseases, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 415 Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 489 Health facilities, Medicare, Reporting and recordkeeping requirements. For the reasons stated in the preamble of this proposed rule, the Centers for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter IV as follows: PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 1. The authority citation for Part 412 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106–113 (113 Stat. 1501A–332). 2. Section 412.22 is amended by revising paragraph (h)(2)(iii)(A) to read as follows: § 412.22 Excluded hospitals and hospital units: General rules. * * * * * (h) * * * (2) * * * (iii) * * * (A) Effective for cost reporting periods beginning on or after October 1, 2002, it is not under the control of the governing body or chief executive officer of the hospital in which it is located, and it furnishes inpatient care through the use of medical personnel who are not under the control of the medical staff or chief medical officer of the hospital in which it is located. (1) Except as provided in paragraph (h)(2)(iii)(A)(2) of this section, effective for cost reporting periods beginning on or after October 1, 2009, the governing body of the hospital of which the satellite facility is a part is not under the control of any third entity that controls both the governing body of the hospital of which the satellite facility is a part and the hospital with which the satellite facility is co-located. (2) If a hospital and its satellite facility were excluded from the PO 00000 Frm 00158 Fmt 4701 Sfmt 4702 inpatient prospective payment system under the provisions of this section for the most recent cost reporting period beginning prior to October 1, 2009, the hospital does not have to meet the requirements of paragraph (h)(2)(iii)(A)(1) of this section, with respect to that satellite facility, in order to retain its IPPS-excluded status. (3) A hospital described in paragraph (h)(2)(iii)(A)(2) of this section that establishes an additional satellite facility in a cost reporting period beginning on or after October 1, 2009, must meet the criteria in this section, including the provisions of paragraph (h)(2)(iii)(A)(1) of this section with respect to the additional satellite facility, in order to be excluded from the inpatient prospective payment system. * * * * * 3. Section 412.64 is amended by revising paragraph (c) to read as follows: § 412.64 Federal rates for inpatient operating costs for Federal fiscal year 2005 and subsequent fiscal years. * * * * * (c) Computing the standardized amount. CMS computes an average standardized amount that is applicable to all hospitals located in all areas, updated by the applicable percentage increase specified in paragraph (d) of this section. CMS standardizes the average standardized amount by excluding an estimate of indirect medical education payments. * * * * * § 412.87 [Amended] 4. In § 412.87, paragraph (b)(1), remove the word ‘‘relating’’ and insert in its place the word ‘‘relative’’. 5. Section 412.105 is amended by revising paragraph (b)(4) to read as follows: § 412.105 Special treatment: Hospitals that incur indirect costs for graduate medical education programs. * * * * * (b) * * * (4) Beds otherwise countable under this section used for outpatient observation services or skilled nursing swing-bed services; * * * * * 6. Section 412.106 is amended by— a. Revising paragraph (a)(1)(ii)(B). b. Adding a new paragraph (b)(4)(iv). The revision and addition read as follows: § 412.106 Special treatment: Hospitals that service a disproportionate share of lowincome patients. (a) * * * (1) * * * E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules (ii) * * * (B) Beds otherwise countable under this section used for outpatient observation services or skilled nursing swing-bed services; * * * * * (b) * * * (4) * * * (iv) For cost reporting periods beginning on or after October 1, 2009, the hospital must report the days in the numerator of the fraction in the second computation in a cost reporting period based on the date of discharge, the date of admission, or the dates of service. If a hospital seeks to change its methodology for reporting days in the numerator of the fraction in the second computation, the hospital must notify CMS, through its fiscal intermediary or MAC, in writing at least 30 days before the beginning of the cost reporting period in which the change would apply. The written notification must specify the methodology the hospital will use and the cost reporting period to which the requested change would apply. Such a change will be effective only on the first day of a cost reporting period. If a hospital changes its methodology for reporting such days, CMS or the fiscal intermediary or MAC may adjust the number of days reported for a cost reporting period if it determines that any of those days have been counted in a prior cost reporting period. * * * * * § 412.113 [Amended] September 30, 2010 is the standard Federal rate for the previous long-term care hospital prospective payment system rate year updated by 0.6 percent. The standard Federal rate is adjusted, as appropriate, as described in paragraph (d) of this section. * * * * * 10. Section 412.525 is amended by— a. Revising paragraph (a)(2). b. Revising paragraph (d)(1). c. Adding a new paragraph (d)(5). The revisions and addition read as follows: § 412.525 Adjustments to the Federal prospective payment. (a) * * * (2) The fixed-loss amount is determined for the long-term care hospital rate year using the LTC–DRG relative weights that are in effect on the start of the applicable long-term care hospital prospective payment system rate year, as defined in § 412.503. * * * * * (d) * * * (1) Short-stay outliers, as provided for in § 412.529. * * * * * (5) Long-term care hospitals and satellites of long-term care hospitals that discharged Medicare patients admitted from a hospital not located in the same building or on the same campus as the long-term care hospital or satellite of the long-term care hospital, as provided in § 412.536. 7. In paragraph (c)(2)(i)(B) of § 412.113, the cross-reference ‘‘§ 410.66’’ is removed and the cross-reference ‘‘§ 410.69’’ is added in its place. 8. Section 412.322 is amended by removing and reserving paragraph (c) to read as follows: PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES § 412.322 Indirect medical education adjustment factor. 11. The authority citation for Part 413 continues to read as follows: * Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Public Law 106–133 (113 Stat. 1501A–332). * * * * (c) [Reserved]. * * * * * 9. Section 412.523 is amended by adding a new paragraph (c)(3)(vi) to read as follows: § 412.523 Methodology for calculating the Federal prospective payment rates. sroberts on PROD1PC70 with FRONTMATTER * * * * * (c) * * * (3) * * * (vi) For long-term care hospital prospective payment system rate year beginning October 1, 2009 and ending September 30, 2010. The standard Federal rate for long-term care hospital prospective payment system rate year beginning October 1, 2009 and ending VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 12. Section 413.65 is amended by— a. Revising paragraph (a)(1)(ii)(G). b. Revising paragraph (a)(1)(ii)(H). The revisions read as follows: § 413.65 Requirements for a determination that a facility or an organization has provider-based status. (a) * * * (1) * * * (ii) * * * PO 00000 Frm 00159 Fmt 4701 Sfmt 4702 24237 (G) Independent diagnostic testing facilities furnishing only services paid under a fee schedule, such as facilities that furnish only screening mammography services (as defined in section 1861(jj) of the Act), facilities that furnish only clinical diagnostic laboratory tests, other than those clinical diagnostic laboratories operating as parts of CAHs, or facilities that furnish only some combination of these services. Clinical diagnostic laboratories operating as parts of CAHs must meet the applicable providerbased requirements. (H) Facilities, other than those operating as parts of CAHs, furnishing only physical, occupational, or speech therapy to ambulatory patients, throughout any period during which the annual financial cap amount on payment for coverage of physical, occupational, or speech therapy, as described in section 1833(g)(2) of the Act, is suspended by legislation. * * * * * 13. Section 413.70 is amended by— a. Revising paragraph (b)(1)(i). b. Removing paragraph (b)(2)(iii). c. Revising the heading of paragraph (b)(3). d. Revising paragraph (b)(3)(ii)(A). e. Adding a new paragraph (b)(7). The revisions and addition read as follows: § 413.70 Payment for services of a CAH. * * * * * (b) * * * (1) * * * (i) Unless the CAH elects to be paid for services to its outpatients under the method specified in paragraph (b)(3) of this section, the amount of payment for outpatient services of a CAH is determined under paragraph (b)(2) of this section. * * * * * (3) Election to be paid reasonable costs for facility services plus fee schedule for professional services. * * * (ii) * * * (A) For facility services not including any services for which payment may be made under paragraph (b)(3)(ii)(B) of this section, the reasonable costs of the services as determined in accordance with the provisions of section 1861(v)(1)(A) of the Act and the applicable principles of cost reimbursement specified in this part and in Part 415 of this subchapter, except that the lesser of costs or charges principle and the RCE payment principle are excluded when determining payment for CAH outpatient services; and * * * * * E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24238 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules (7) Payment for clinical diagnostic laboratory tests included as outpatient CAH services. (i) Payment for clinical diagnostic laboratory tests is not subject to the Medicare Part B deductible and coinsurance amounts. (ii) Subject to the provisions of paragraphs (b)(7)(iii) through (b)(7)(vi) of this section, payment to a CAH for clinical diagnostic laboratory tests will be made at 101 percent of reasonable costs of the services as determined in accordance with paragraph (b)(2)(i) of this section. (iii) For services furnished before July 1, 2009, payment to a CAH for clinical diagnostic laboratory tests will be made under paragraph (b)(7)(ii) of this section only if the individual is an outpatient of the CAH, as defined in § 410.2 of this chapter, and is physically present in the CAH at the time the specimen is collected. (iv) Except as provided in paragraphs (b)(7)(iii) and (b)(7)(v) of this section, payment to a CAH for clinical diagnostic laboratory tests will be made under paragraph (b)(7)(ii) of this section only if the individual is an outpatient of the CAH, as defined in § 410.2 of this chapter, without regard to whether the individual is physically present in the CAH at the time the specimen is collected and at least one of the following conditions is met: (A) The individual is receiving outpatient services in the CAH on the same day the specimen is collected; or (B) The specimen is collected by an employee of the CAH. (v) Notwithstanding paragraph (b)(7)(iv) of this section, payment for outpatient clinical diagnostic laboratory tests will not be made under paragraph (b)(7)(ii) of this section if the billing rules under § 411.15(p) of this chapter apply. (vi) Payment for clinical diagnostic laboratory tests for which payment may not be made under paragraph (b)(7)(iii) or paragraph (b)(7)(iv) of this section will be made in accordance with the provisions of sections 1833(a)(1)(D) and 1833(a)(2)(D) of the Act. * * * * * 14. Section 413.79 is amended by— a. Revising paragraph (f)(1). b. Redesignating paragraph (f)(6) and paragraph (f)(7). c. Adding a new paragraph (f)(6). d. Moving paragraph (l) so that it appears after paragraph (k)(7) and is the last paragraph in the section. The revisions and addition read as follows: VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 § 413.79 Direct GME payments: Determination of the weighted number of FTE residents. * * * * * (f) * * * (1) Except as provided in paragraph (f)(6) of this section, each hospital in the Medicare GME affiliated group must submit the Medicare GME affiliation agreement, as defined under § 413.75(b) of this section, to the CMS fiscal intermediary or MAC servicing the hospital and send a copy to the CMS Central Office no later than July 1 of the residency program year during which the Medicare GME affiliation agreement will be in effect. * * * * * (6) Effective October 1, 2009, a hospital that is new after July 1 and begins training residents for the first time after the July 1 start date of an academic year may receive a temporary adjustment to its FTE resident cap to reflect its participation in an existing Medicare GME affiliated group by submitting the Medicare GME affiliation agreement, as defined under § 413.75(b), to the CMS fiscal intermediary or MAC servicing the hospital and sending a copy to the CMS Central Office prior to the end of the first cost reporting period during which the hospital begins training residents. The Medicare GME affiliation agreement must specify the effective period for the agreement, which may begin no earlier than the date the affiliation agreement is submitted to CMS. Each of the other hospitals participating in the Medicare GME affiliated group must submit an amended Medicare GME affiliation agreement that reflects the participation of the new hospital to the CMS fiscal intermediary or MAC servicing the hospital and send a copy to the CMS Central Office no later than June 30 of the residency program year during which the Medicare GME affiliation agreement will be in effect. For purposes of this paragraph, a new hospital is one for which a new Medicare provider agreement takes effect in accordance with § 489.13 of this chapter. * * * * * PART 415—SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS 15. The authority citation for Part 415 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). PO 00000 Frm 00160 Fmt 4701 Sfmt 4702 § 415.152 [Amended] 16. In § 415.152, under paragraph (1) of the definition of ‘‘Approved graduate medical education (GME) program’’, remove the phrase ‘‘the Committee on Hospitals of the Bureau of Professional Education of’’. PART 489—PROVIDER AGREEMENTS AND SUPPLIER APPROVAL 17. The authority citation for Part 489 continues to read as follows: Authority: Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh). 18. Section 489.24 is amended by revising paragraph (a)(2) to read as follows: § 489.24 Special responsibilities of Medicare hospitals in emergency cases. (a) * * * (2)(i) When a waiver has been issued in accordance with section 1135 of the Act that includes a waiver under section 1135(b)(3) of the Act, sanctions under this section for an inappropriate transfer or for the direction or relocation of an individual to receive medical screening at an alternate location do not apply to a hospital with a dedicated emergency department if the following conditions are met: (A) If relating to an inappropriate transfer, the transfer arises out of the circumstances of the emergency. (B) If relating to the direction or relocation of an individual to receive medical screening at an alternate location, the direction or relocation is pursuant to an appropriate State emergency preparedness plan or, in the case of a public health emergency that involves a pandemic infectious disease, pursuant to a State pandemic preparedness plan. (C) The hospital does not discriminate on the basis of an individual’s source of payment or ability to pay. (D) The hospital is located in an emergency area during an emergency period, as those terms are defined in section 1135(g)(1) of the Act. (E) There has been a determination that a waiver of sanctions is necessary. (ii) A waiver of these sanctions is limited to a 72-hour period beginning upon the implementation of a hospital disaster protocol, except that, if a public health emergency involves a pandemic infectious disease (such as pandemic influenza), the waiver will continue in effect until the termination of the applicable declaration of a public health emergency, as provided under section 1135(e)(1)(B) of the Act. * * * * * E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) Dated: April 17, 2009. Charlene Frizzera, Acting Administrator, Centers for Medicare & Medicaid Services. Dated: May 1, 2009. Kathleen Sebelius, Secretary. Editorial Note: The following Addendum and appendixes will not appear in the Code of Federal Regulations. Addendum—Proposed Schedule of Standardized Amounts, Update Factors, and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning on or After October 1, 2009 sroberts on PROD1PC70 with FRONTMATTER I. Summary and Background In this Addendum, we are setting forth a description of the methods and data we used to determine the proposed prospective payment rates for Medicare hospital inpatient operating costs and Medicare hospital inpatient capitalrelated costs for FY 2010 for acute care hospitals. We also are setting forth the proposed rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS for FY 2010. We note that, because certain hospitals excluded from the IPPS are paid on a reasonable cost basis subject to a rate-of-increase ceiling (and not by the IPPS), these hospitals are not affected by the proposed figures for the standardized amounts, offsets, and budget neutrality factors. Therefore, in this proposed rule, we are proposing the rate-of-increase percentages for updating the target amounts for certain hospitals excluded from the IPPS that are effective for cost reporting periods beginning on or after October 1, 2009. In addition, we are setting forth a description of the methods and data we used to determine the proposed standard Federal rate that would be applicable to Medicare LTCHs for RY 2010. In general, except for SCHs, MDHs, and hospitals located in Puerto Rico, each hospital’s payment per discharge under the IPPS is based on 100 percent of the Federal national rate, also known as the national adjusted standardized amount. This amount reflects the national average hospital cost per case from a base year, updated for inflation. Currently, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate; the updated VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or for cost reporting periods beginning on or after January 1, 2009, the updated hospital-specific rate based on the FY 2006 costs per discharge. Under section 1886(d)(5)(G) of the Act, MDHs historically have been paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 costs per discharge, whichever was higher. (MDHs did not have the option to use their FY 1996 hospital-specific rate.) However, section 5003(a)(1) of Public Law 109–171 extended and modified the MDH special payment provision that was previously set to expire on October 1, 2006, to include discharges occurring on or after October 1, 2006, but before October 1, 2011. Under section 5003(b) of Public Law 109–171, if the change results in an increase to an MDH’s target amount, we must rebase an MDH’s hospital-specific rates based on its FY 2002 cost report. Section 5003(c) of Public Law 109–171 further required that MDHs be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent of the difference between the Federal national rate and the updated hospital-specific rate. Further, based on the provisions of section 5003(d) of Public Law 109–171, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. For hospitals located in Puerto Rico, the payment per discharge is based on the sum of 25 percent of an updated Puerto Rico-specific rate based on average costs per case of Puerto Rico hospitals for the base year and 75 percent of the Federal national rate. (We refer readers to section II.D.3. of this Addendum for a complete description.) As discussed below in section II. of this Addendum, we are proposing to make changes in the determination of the prospective payment rates for Medicare inpatient operating costs for acute care hospitals for FY 2010. In section III. of this Addendum, we discuss our proposed policy changes for determining the prospective payment rates for Medicare inpatient capitalrelated costs for FY 2010. In section IV. of this Addendum, we are setting forth our proposed changes for determining the rate-of-increase limits for certain hospitals excluded from the IPPS for FY 2010. In section V. of this Addendum, we are proposing to make changes in the PO 00000 Frm 00161 Fmt 4701 Sfmt 4702 24239 determination of the standard Federal rate for LTCHs under the LTCH PPS for RY 2010. The tables to which we refer in the preamble of this proposed rule are presented in section VI. of this Addendum. II. Proposed Changes to Prospective Payment Rates for Hospital Inpatient Operating Costs for Acute Care Hospitals for FY 2010 The basic methodology for determining prospective payment rates for hospital inpatient operating costs for acute care hospitals for FY 2005 and subsequent fiscal years is set forth at § 412.64. The basic methodology for determining the prospective payment rates for hospital inpatient operating costs for hospitals located in Puerto Rico for FY 2005 and subsequent fiscal years is set forth at §§ 412.211 and 412.212. Below we discuss the factors used for determining the proposed prospective payment rates for FY 2010. In summary, the proposed standardized amounts set forth in Tables 1A, 1B, and 1C of section VI. of this Addendum reflect— • Equalization of the standardized amounts for urban and other areas at the level computed for large urban hospitals during FY 2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of the Act, updated by the applicable percentage increase required under sections 1886(b)(3)(B)(i)(XX) and 1886(b)(3)(B)(viii) of the Act. • The labor-related share that is applied to the standardized amounts and Puerto Rico-specific standardized amounts to give the hospital the highest payment, as provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. • Proposed updates of 2.1 percent for all areas (that is, the estimated full market basket percentage increase of 2.1 percent), as required by section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a)(1) of Public Law 109–171, and reflecting the requirements of section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a)(3) of Public Law 109– 171, to reduce the applicable percentage increase by 2.0 percentage points for a hospital that fails to submit data, in a form and manner specified by the Secretary, relating to the quality of inpatient care furnished by the hospital. • A proposed update of 2.1 percent to the Puerto Rico-specific standardized amount (that is, the full estimated rateof-increase in the hospital market basket for IPPS hospitals), as provided for under § 412.211(c), which states that we update the Puerto Rico-specific E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24240 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules standardized amount using the percentage increase specified in § 412.64(d)(1), or the percentage increase in the market basket index for prospective payment hospitals for all areas. • An adjustment to the standardized amount to ensure budget neutrality for DRG recalibration and reclassification, as provided for under section 1886(d)(4)(C)(iii) of the Act. • An adjustment to ensure the wage index and labor share update and changes are budget neutral, as provided for under section 1886(d)(3)(E)(i) of the Act. We note that section 1886(d)(3)(E)(i) of the Act requires that we do not consider the labor-related share of 62 percent to compute wage index budget neutrality. • An adjustment to ensure the effects of geographic reclassification are budget neutral, as provided for in section 1886(d)(8)(D) of the Act, by removing the FY 2009 budget neutrality factor and applying a revised factor. • An adjustment to remove the FY 2009 outlier offset and apply an offset for FY 2010, as provided for in section 1886(d)(3)(B) of the Act. • An adjustment to ensure the effects of the rural community hospital demonstration required under section 410A of Public Law 108–173 are budget neutral, as required under section 410A(c)(2) of Public Law 108–173. • As discussed below and in section II.D. of the preamble to this proposed rule, an adjustment to eliminate the effect of documentation and coding changes that do not reflect real changes in case-mix provided for under section 1886(d)(3)(A)(vi) of the Act. We note that, beginning in FY 2008, we applied the budget neutrality adjustment for the rural floor to the hospital wage indices rather than the standardized amount. As we did for FY 2009, for FY 2010, we are proposing to continue to apply the rural floor budget neutrality adjustment to hospital wage indices rather than the standardized amount. In addition, instead of applying the budget neutrality adjustment for the imputed floor adopted under section 1886(d)(3)(E) of the Act to the standardized amount, for FY 2010, we are proposing to continue to apply the imputed floor budget neutrality adjustment to the wage indices. As we did for FY 2009, we also are proposing to continue to apply the budget neutrality adjustments for the rural floor and imputed rural floor at the State level rather than the national level. For a complete discussion of the budget neutrality changes concerning the rural floor and the imputed floor, including the within-State budget neutrality VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 adjustment, we refer readers to section III.B.2.b. of the preamble of the FY 2009 IPPS final rule and this proposed rule. A. Calculation of the Adjusted Standardized Amount 1. Standardization of Base-Year Costs or Target Amounts In general, the national standardized amount is based on per discharge averages of adjusted hospital costs from a base period (section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. For Puerto Rico hospitals, the Puerto Rico-specific standardized amount is based on per discharge averages of adjusted target amounts from a base period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise adjusted in accordance with the provisions of section 1886(d)(9) of the Act. The September 1, 1983 interim final rule (48 FR 39763) contained a detailed explanation of how base-year cost data (from cost reporting periods ending during FY 1981) were established for urban and rural hospitals in the initial development of standardized amounts for the IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates. Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to update base-year per discharge costs for FY 1984 and then standardize the cost data in order to remove the effects of certain sources of cost variations among hospitals. These effects include casemix, differences in area wage levels, cost-of-living adjustments for Alaska and Hawaii, IME costs, and costs to hospitals serving a disproportionate share of low-income patients. In accordance with section 1886(d)(3)(E) of the Act, the Secretary estimates, from time to time, the proportion of hospitals’ costs that are attributable to wages and wage-related costs. In general, the standardized amount is divided into labor-related and nonlabor-related amounts; only the proportion considered to be the laborrelated amount is adjusted by the wage index. Section 1886(d)(3)(E) of the Act requires that 62 percent of the standardized amount be adjusted by the wage index, unless doing so would result in lower payments to a hospital than would otherwise be made. (Section 1886(d)(9)(C)(iv)(II) of the Act extends this provision to the labor-related share for hospitals located in Puerto Rico.) PO 00000 Frm 00162 Fmt 4701 Sfmt 4702 For FY 2010, we are proposing to rebase and revise the national and Puerto Rico-specific labor-related and nonlabor-related shares from the percentages established for FY 2009. Specifically, under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are labor-related: ‘‘The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates. * * *’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ For FY 2010, as discussed in section IV.B.4. of the preamble of this proposed rule, we are proposing a laborrelated share of 67.1 percent for the national standardized amounts and 60.3 percent for the Puerto Rico-specific standardized amount. Consistent with section 1886(d)(3)(E) of the Act, we are proposing to apply the wage index to a labor-related share of 62 percent for all non-Puerto Rico hospitals whose wage indexes are less than or equal to 1.0000. For all non-Puerto Rico hospitals whose wage indices are greater than 1.0000, we are proposing to apply the wage index to a labor-related share of 67.1 percent of the national standardized amount. For hospitals located in Puerto Rico, we are proposing to apply a labor-related share of 60.3 percent if its Puerto Ricospecific wage index is less than or equal to 1.0000. For hospitals located in Puerto Rico whose Puerto Rico-specific wage index values are greater than 1.0000, we are proposing to apply a labor-related share of 62 percent. The proposed standardized amounts for operating costs appear in Tables 1A, 1B, and 1C of the Addendum to this proposed rule. 2. Computing the Average Standardized Amount Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning with FY 2004 and thereafter, an equal standardized amount be computed for all hospitals at the level computed for large urban hospitals during FY 2003, updated by the applicable percentage update. Section 1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific urban and rural area rates. Accordingly, we are proposing to calculate FY 2010 national and Puerto Rico standardized amounts irrespective of whether a hospital is located in an urban or rural location. 3. Updating the Average Standardized Amount In accordance with section 1886(d)(3)(A)(iv)(II) of the Act, we are E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules proposing to update the equalized standardized amount for FY 2010 by the full estimated market basket percentage increase for hospitals in all areas, as specified in section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a)(1) of Public Law 109–171. The percentage increase in the market basket reflects the average change in the price of goods and services comprising routine, ancillary, and special care unit hospital inpatient services. The most recent forecast of the hospital market basket increase for FY 2010 is 2.1 percent. Thus, for FY 2010, the proposed update to the average standardized amount is 2.1 percent for hospitals in all areas. The estimated market basket increase of 2.1 percent is based on Global Insight, Inc.’s 2009 first quarter forecast of the hospital market basket increase (as discussed in Appendix B of this proposed rule). Section 1886(b)(3)(B) of the Act specifies the mechanism to be used to update the standardized amount for payment for inpatient hospital operating costs. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a)(3) of Public Law 109–171, provides for a reduction of 2.0 percentage points from the update percentage increase (also known as the market basket update) for FY 2007 and each subsequent fiscal year for any ‘‘subsection (d) hospital’’ that does not submit quality data, as discussed in section V.A. of the preamble of this proposed rule. The proposed standardized amounts in Tables 1A through 1C of section VI. of this Addendum reflect these differential amounts. Section 412.211(c) states that we update the Puerto Rico-specific standardized amount using the percentage increase specified in § 412.64(d)(1) or the percentage increase in the market basket index for prospective payment hospitals for all areas. We are proposing to apply the full rate-of-increase in the hospital market basket for IPPS hospitals to the Puerto Rico-specific standardized amount. Therefore, the proposed update to the Puerto Rico-specific standardized amount is 2.1 percent. Although the update factors for FY 2010 are set by law, we are required by section 1886(e)(4) of the Act to recommend, taking into account MedPAC’s recommendations, appropriate update factors for FY 2010 for both IPPS hospitals and hospitals and hospital units excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires that we publish our proposed recommendations in the Federal Register for public comment. Our recommendation on the update factors VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 is set forth in Appendix B of this proposed rule. 4. Other Adjustments to the Average Standardized Amount As in the past, we are proposing to adjust the FY 2010 standardized amount to remove the effects of the FY 2009 geographic reclassifications and outlier payments before applying the FY 2010 updates. We then apply budget neutrality offsets for outliers and geographic reclassifications to the standardized amount based on FY 2010 payment policies. We do not remove the prior year’s budget neutrality adjustments for reclassification and recalibration of the DRG weights and for updated wage data because, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate payments after updates in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year’s adjustment, we would not satisfy these conditions. Budget neutrality is determined by comparing aggregate IPPS payments before and after making changes that are required to be budget neutral (for example, changes to DRG classifications, recalibration of the DRG relative weights, updates to the wage index, and different geographic reclassifications). We include outlier payments in the simulations because they may be affected by changes in these parameters. We also are proposing to adjust the standardized amount this year by an estimated amount to ensure that aggregate payments made by the Secretary do not exceed the amount of payments that would have been made in the absence of the rural community hospital demonstration program, as required under section 410A of Public Law 108–173. This demonstration is required to be budget neutral under section 410A(c)(2) of Public Law 108– 173. For FY 2010, we are not proposing to apply budget neutrality for the imputed floor to the standardized amount, but to apply it instead to the wage index, as discussed in section III.B.2. of the preamble to this proposed rule. For FY 2010, we also are proposing to apply an adjustment to eliminate the effect of documentation and coding changes that do not reflect real changes in case-mix using the Secretary’s authority under section 1886(d)(3)(A)(vi) of the Act. PO 00000 Frm 00163 Fmt 4701 Sfmt 4702 24241 a. Proposed Recalibration of DRG Weights and Updated Wage Index— Budget Neutrality Adjustment Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II. of the preamble of this proposed rule, we normalized the recalibrated DRG weights by an adjustment factor so that the average case weight after recalibration is equal to the average case weight prior to recalibration. However, equating the average case weight after recalibration to the average case weight before recalibration does not necessarily achieve budget neutrality with respect to aggregate payments to hospitals because payments to hospitals are affected by factors other than average case weight. Therefore, as we have done in past years, we are proposing to make a budget neutrality adjustment to ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act is met. Section 1886(d)(3)(E)(i) of the Act requires us to update the hospital wage index on an annual basis beginning October 1, 1993. This provision also requires us to make any updates or adjustments to the wage index in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. In addition, under section 1886(d)(3)(E)(i) of the Act, as we established in the FY 2006 final rule (70 FR 47395), we are implementing the revised and rebased labor share in a budget neutral manner. Specifically, section 1886(d)(3)(E)(i) of the Act directs us to determine a laborrelated share that reflects the ‘‘proportion * * * of hospitals’ costs which are attributable to wages and wage-related costs.’’ In addition, section 1886(d)(3)(E)(i) of the Act requires that we implement the wage index adjustment in a budget neutral manner. However, section 1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent for hospitals with a wage index less than or equal to 1.0, and section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall calculate the budget neutrality adjustment for the adjustments or updates made under that provision as if section 1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, these two sections of the statute require that we implement the proposed revision of the labor-related share to 67.1 percent (compared to the prior 69.7 percent) (as well as the wage index updates) in a budget neutral manner, but that our budget neutrality E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24242 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules adjustment should not take into account the requirement that we set the laborrelated share for hospitals with indices less than or equal to 1.0 at the more advantageous level of 62 percent. Therefore, for purposes of this budget neutrality adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from taking into account the fact that hospitals with a wage index less than or equal to 1.0 are paid using a laborrelated share of 62 percent. Consistent with current policy, for FY 2010, we are proposing to adjust 100 percent of the wage index factor for occupational mix. We describe the occupational mix adjustment in section III.D. of the preamble to this proposed rule. For FY 2010, to comply with the requirement that DRG reclassification and recalibration of the relative weights be budget neutral for the Puerto Rico standardized amount and the hospitalspecific rates, we used FY 2008 discharge data to simulate payments and compared aggregate payments using the FY 2009 relative weights to aggregate payments using the proposed FY 2010 relative weights. Based on this comparison, we computed a proposed budget neutrality adjustment factor equal to 0.997663. As discussed in section IV. of this Addendum, we would also apply the DRG reclassification and recalibration budget neutrality factor of 0.997663 to the hospital-specific rates that are to be effective for cost reporting periods beginning on or after October 1, 2009. In order to meet the statutory requirements that we do not take into account the labor-related share of 62 percent when computing wage index budget neutrality and that we budget neutralize any changes in payments as a result of the proposed FY 2010 rebased and revised labor share, it was necessary to use a three-step process to comply with the requirements that DRG reclassification and recalibration of the relative weights and the updated wage index and labor-related share have no effect on aggregate payments for IPPS hospitals. We first determined a proposed DRG reclassification and recalibration budget neutrality factor of 0.997663 by using the same methodology described above to determine the proposed DRG reclassification and recalibration budget neutrality factor for the Puerto Rico standardized amount and hospitalspecific rates. Secondly, to compute a budget neutrality factor for wage index and labor-related share changes, we used FY 2008 discharge data to simulate payments and compared aggregate payments using the proposed FY 2010 relative weights, FY 2009 wage indices, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 and applied the FY 2009 labor share of 69.7 percent to all hospitals (regardless of whether the hospital’s wage index was above or below 1.0) to aggregate payments using the proposed FY 2010 relative weights, proposed FY 2010 wage indices, and applied the proposed rebased and revised labor share for FY 2010 of 67.1 percent to all hospitals (regardless of whether the hospital’s proposed wage index was above or below 1.0). In addition, we applied the proposed DRG reclassification and recalibration budget neutrality factor (derived in the first step) to the rates that were used to simulate payments for this comparison of aggregate payments from FY 2009 to FY 2010. By applying this methodology, we determined a budget neutrality factor for the proposed wage index and labor-related share changes of 1.000404. Finally, we multiplied the proposed DRG reclassification and recalibration proposed budget neutrality factor of 0.997663 (derived in the first step) by the proposed budget neutrality factor for proposed wage index changes of 1.000404 (derived in the second step) to determine the proposed DRG reclassification and recalibration and updated wage index and labor-related share budget neutrality factor of 0.998066. b. Reclassified Hospitals—Proposed Budget Neutrality Adjustment Section 1886(d)(8)(B) of the Act provides that, effective with discharges occurring on or after October 1, 1988, certain rural hospitals are deemed urban. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the wage index. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amount to ensure that aggregate payments under the IPPS after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. We note that the wage index adjustments provided under section 1886(d)(13) of the Act are not budget neutral. Section 1886(d)(13)(H) of the Act provides that any increase in a wage index under section 1886(d)(13) shall not be taken into account ‘‘in applying any budget neutrality adjustment with respect to such index’’ under section 1886(d)(8)(D) of the Act. To calculate the proposed budget neutrality factor for FY 2010, we used FY 2008 discharge PO 00000 Frm 00164 Fmt 4701 Sfmt 4702 data to simulate payments, and compared total IPPS payments prior to any reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act to total IPPS payments after such reclassifications. Based on these simulations, we calculated a proposed adjustment factor of 0.991690 to ensure that the effects of these provisions are budget neutral, consistent with the statute. The proposed FY 2010 budget neutrality adjustment factor is applied to the standardized amount after removing the effects of the FY 2009 budget neutrality adjustment factor. We note that the proposed FY 2010 budget neutrality adjustment reflects FY 2010 wage index reclassifications approved by the MGCRB or the Administrator. c. Proposed Rural Floor and Imputed Floor Budget Neutrality Adjustment As discussed in section III.B.2.b. of the preamble of the FY 2009 IPPS final rule (73 FR 48570 through 48574), we adopted as final State-level budget neutrality for the rural and imputed floors, effective beginning with the FY 2009 wage index. In response to the public’s concerns and taking into account the potentially significant payment cuts that could occur to hospitals in some States if we implemented this change with no transition, we decided to phase in, over a 3-year period, the transition from the national rural floor budget neutrality adjustment on the wage index to the State-level rural floor budget neutrality adjustment on the wage index. In FY 2009, hospitals received a blended wage index that was comprised of 20 percent of the wage index adjusted by applying the State-level rural and imputed floor budget neutrality adjustment and 80 percent of the wage index adjusted by applying the national budget neutrality adjustment. For FY 2010, the blended wage index will be determined by adding 50 percent of the wage index adjusted by applying the State-level rural and imputed floor budget neutrality adjustment and 50 percent of the wage index adjusted by applying the national budget neutrality adjustment. In FY 2011, the adjustment will be completely transitioned to the Statelevel methodology, such that the wage index will be determined by applying 100 percent of the State-level budget neutrality adjustment. As stated earlier, we note that the rural floor budget neutrality adjustment is applied to the wage index and not the standardized amount. However, because these blended wage indices reflecting the 50 percent State-level rural and imputed floor budget neutrality adjustment and E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules the 50 percent national rural and imputed floor budget neutrality adjustment are used in calculating the FY 2010 outlier threshold (as discussed below), we are explaining our calculation of the proposed rural floor budget neutrality adjustments (in this section) below. In order to compute a budget neutral wage index that is a blend of 50 percent of the wage index adjusted by the Statelevel rural and imputed floor budget neutrality adjustment and 50 percent of the wage index adjusted by the national rural and imputed floor budget neutrality adjustment, similar to our calculation of the FY 2009 wage index (73 FR 48570 through 48574), we used FY 2008 discharge data and proposed FY 2010 wage indices to simulate IPPS payments. First, we compared the national simulated payments without the rural and imputed floors applied to national simulated payments with the rural and imputed floors applied to determine the national rural and imputed floor budget neutrality adjustment factor of 0.997466. This national adjustment was then applied to the wage indices to produce a national rural and imputed floor budget neutral wage index, which was used in determining the proposed FY 2010 blended wage indices for the second year of the transition (as described below). We then used the same methodology to determine each State’s rural or imputed floor budget neutrality adjustment by comparing each State’s total simulated payments with and without the rural or imputed floor applied. These State-level rural and imputed floor budget neutrality factors were then applied to the wage indices to produce a State-level rural and imputed floor budget neutral wage index, which was used in determining the proposed FY 2010 blended wage indices for the second year of the transition (as described below). To determine the proposed FY 2010 wage indices for the second year of the transition, we then blended the national and State-level wage index values (computed above) by taking 50 percent of the national rural and imputed floor budget neutral wage index and 50 percent of the State-level rural and imputed floor budget neutral wage index. Because of interactive effects between the payment factors applied under the IPPS and/or rounding issues, the blended wage index calculated above does not necessarily result in overall budget neutrality. That is, aggregate IPPS payments simulated using the blended budget neutral wage index may not be equal to aggregate IPPS payments simulated using the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 wage index prior to the application of the rural and imputed floors. Therefore, in order to ensure that national payments overall remain budget neutral after application of the rural and imputed floors, an additional adjustment factor of 1.00016 must be applied to the blended wage indexes calculated as described above. d. Proposed Case-Mix Budget Neutrality Adjustment (1) Adjustment to the Proposed FY 2010 IPPS Standardized Amount As stated earlier, beginning in FY 2008, we adopted the MS–DRG patient classification system for the IPPS to better recognize patients’ severity of illness in Medicare payment rates. In the FY 2008 IPPS final rule with comment period (73 FR 47175 through 47186), we indicated that we believe the adoption of the MS–DRGs had the potential to lead to increases in aggregate payments without a corresponding increase in actual patient severity of illness due to the incentives for changes in documentation and coding. In that final rule, using the Secretary’s authority under section 1886(d)(3)(A)(vi) of the Act to maintain budget neutrality by adjusting the national standardized amounts to eliminate the effect of changes in documentation and coding that do not reflect real change in case-mix, we established prospective documentation and coding adjustments of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010 (for a total adjustment of ¥4.8 percent). On September 29, 2007, Public Law 110–90 was enacted. Section 7 of Public Law 110–90 included a provision that reduces the documentation and coding adjustment for the MS–DRG system that we adopted in the FY 2008 IPPS final rule with comment period to ¥0.6 percent for FY 2008 and ¥0.9 percent for FY 2009. To comply with the provision of section 7(a) of Public Law 110–90, in a final rule that appeared in the Federal Register on November 27, 2007 (72 FR 66886), we changed the IPPS documentation and coding adjustment for FY 2008 to ¥0.6 percent, and revised the FY 2008 national standardized amounts (as well as other payment factors and thresholds) accordingly, with these revisions being effective as of October 1, 2007. For FY 2009, section 7(a) of Public Law 110–90 required a documentation and coding adjustment of ¥0.9 percent instead of the ¥1.8 percent adjustment specified in the FY 2008 IPPS final rule with comment period. As required by statute, we applied a documentation and coding PO 00000 Frm 00165 Fmt 4701 Sfmt 4702 24243 adjustment of ¥0.9 percent to the FY 2009 IPPS national standardized amounts. The documentation and coding adjustments established in the FY 2008 IPPS final rule with comment period are cumulative. As a result, the ¥0.9 percent documentation and coding adjustment in FY 2009 was in addition to the ¥0.6 percent adjustment in FY 2008, yielding a combined effect of ¥1.5 percent. As discussed in section II.D. of the preamble to this proposed rule, we estimated a 2.5 percent change in FY 2008 case-mix due to changes in documentation and coding that do not reflect real changes in case-mix for discharges occurring during FY 2008, which exceeded the ¥0.6 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90 by 1.9 percentage points. Under section 7(b)(1)(A) of Public Law 119–90, the Secretary is required to make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the Act to the average standardized amounts for subsequent fiscal years so as to eliminate the full effect of the coding and classification changes that do not reflect real changes in case-mix. In addition, we note that the Secretary has the authority to make this prospective adjustment in FY 2010 under section 1886(d)(3)(A)(vi) of the Act. As we have consistently stated since the initial implementation of the MS–DRG system, we do not believe it is appropriate for expenditures under the IPPS to increase due to MS–DRG-related changes in documentation and coding that do not reflect real changes in case-mix. Therefore, we are proposing to reduce the average standardized amounts under section 1886(d) of the Act in FY 2010 by ¥1.9 percent, the difference between changes in documentation and coding that do not reflect real changes in casemix for discharges occurring during FY 2008 and the prospective adjustment applied under Public Law 110–90. We are proposing to leave this adjustment in place for subsequent fiscal years in order to ensure that changes in documentation and coding resulting from the adoption of the MS–DRGs do not lead to an increase in aggregate payments not reflective of an increase in real case-mix. Thus, the proposed cumulative adjustment to the average standardized amounts for FY 2010 is ¥3.4 percent (that is, the existing ¥1.5 percent plus the proposed ¥1.9 percent). We note that because we are proposing to apply a cumulative offset of ¥3.4 percent to the FY 2010 standardized amount, we are proposing to apply a factor of 0.967 (1 divided by E:\FR\FM\22MYP2.SGM 22MYP2 24244 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER 1.034) in determining the FY 2010 standardized amount. We refer readers to section II.D. of the preamble of this proposed rule for a complete discussion of our proposed ¥1.9 percent adjustment to the average standardized amounts under section 1886(d) of the Act in FY 2010. As also discussed in section II.D. of the preamble of this proposed rule, we will address any differences between the increase in FY 2009 case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90 in the FY 2011 rulemaking cycle. Furthermore, we are seeking public comment on the proposed ¥1.9 percent prospective adjustment to the standardized amounts under section 1886(d) of the Act and addressing in the FY 2011 rulemaking cycle any differences between the increase in FY 2009 case-mix due to documentation and coding changes that did not reflect real changes in case-mix for discharges occurring during FY 2009 and the ¥0.9 percent prospective documentation and coding adjustment applied under section 7(a) of Public Law 110–90. We note that we are also seeking public comment on our intent to address the requirements of section 7(b)(1)(B) of Public Law 110–90 through future rulemaking. (2) Proposed Adjustment to the FY 2010 Hospital-Specific Rates for SCHs and MDHs As discussed in section II.D. of the preamble to this proposed rule, because hospitals (SCHs and MDHs) paid based in whole or in part on the hospitalspecific rate use the same MS–DRG system as other hospitals, we believe they have the potential to realize increased payments from documentation and coding changes that do not reflect real increases in patients’ severity of illness. Under section 1886(d)(3)(A)(vi) of the Act, Congress stipulated that hospitals paid based on the standardized amount should not receive additional payments based on the effect of documentation and coding changes that do not reflect real changes in case-mix. Similarly, we believe that hospitals paid based on the hospitalspecific rate should not have the potential to realize increased payments due to documentation and coding changes that do not reflect real increases in patients’ severity of illness. While we continue to believe that section 1886(d)(3)(A)(vi) of the Act does not provide explicit authority for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 application of the documentation and coding adjustment to the hospitalspecific rates, we believe that we have the authority to apply the documentation and coding adjustment to the hospital-specific rates using our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) of the Act. The special exceptions and adjustment authority authorizes us to provide ‘‘for such other exceptions and adjustments to [IPPS] payment amounts * * * as the Secretary deems appropriate.’’ We indicated that, for the FY 2010 rulemaking, we planned to examine our FY 2008 claims data for hospitals paid based on the hospitalspecific rate. We also indicated that if we found evidence of significant increases in case-mix for patients treated in these hospitals that does not reflect real changes in case-mix, we would consider proposing application of the documentation and coding adjustments to the FY 2010 hospitalspecific rates under our authority in section 1886(d)(5)(I)(i) of the Act. We performed a retrospective evaluation of the FY 2008 claims data for SCHs and MDHs using the same methodology described in section II.D of the preamble of this proposed rule for other IPPS hospitals. We found that, independently for both SCHs and MDHs, the change due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2008 slightly exceeded the 2.5 percent result discussed earlier, but did not significantly differ from that result. Therefore, consistent with our statements in prior IPPS rules, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to prospectively adjust the hospitalspecific rates by ¥2.5 percent in FY 2010 for our estimated documentation and coding effect in FY 2008 that does not reflect real changes in case-mix. We are proposing to leave this adjustment in place for subsequent fiscal years in order to ensure that changes in documentation and coding resulting from the adoption of the MS–DRGs do not lead to an increase in aggregate payments for SCHs and MDHs not reflective of an increase in real casemix. This proposed ¥2.5 percent adjustment to the hospital-specific rates exceeds the proposed ¥1.9 percent adjustment to the national standardized amount under section 7(b)(1)(A) of Public Law 110–90 because, unlike the national standardized rates, the FY 2008 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not PO 00000 Frm 00166 Fmt 4701 Sfmt 4702 reflect real changes in case-mix resulting from the adoption of the MS– DRGs. We note that because we are proposing to apply a offset of ¥2.5 percent to the FY 2010 hospital-specific rates, we are proposing to apply a factor of 0.976 (1 divided by 1.025) to adjust the FY 2010 hospital-specific rates. We refer readers to section II.D. of the preamble of this proposed rule for a complete discussion on our proposal to prospectively adjust the hospitalspecific rates by ¥2.5 percent in FY 2010. We will address in the FY 2011 rulemaking cycle any change in FY 2009 case-mix due to documentation and coding that did not reflect real changes in case-mix for discharges occurring during FY 2009. We note that, unlike the national standardized rates, the FY 2009 hospital-specific rates were not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. We are seeking public comment on the proposed ¥2.5 percent prospective adjustment to the hospital-specific rates of SCHs and MDHs and addressing in the FY 2011 rulemaking cycle any changes in FY 2009 case-mix due to changes in documentation and coding that do not reflect real changes in casemix for discharges occurring during FY 2009. We intend to update our analysis with FY 2008 data on claims paid through March 2008 for the FY 2010 IPPS final rule. (3) Proposed Adjustment to the FY 2010 Puerto Rico Standardized Amount As stated in section II.D. of the preamble to this proposed rule, we believe that we have the authority to apply the documentation and coding adjustment to the Puerto Rico-specific standardized amount using our special exceptions and adjustment authority under section 1886(d)(5)(I)(i) of the Act. Similar to SCHs and MDHs that are paid based on the hospital-specific rate, we believe that Puerto Rico hospitals that are paid based on the Puerto Ricospecific standardized amount should not have the potential to realize increased payments due to documentation and coding changes that do not reflect real increases in patients’ severity of illness. Consistent with the approach described for SCHs and MDHs, in the FY 2009 final rule, we indicated that we planned to examine our FY 2008 claims data for hospitals in Puerto Rico. We indicated in the FY 2009 IPPS proposed rule (73 FR 48449) that if we found evidence of significant E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules increases in case-mix for patients treated in these hospitals, we would consider proposing application of the documentation and coding adjustments to the FY 2010 Puerto Rico-specific standardized amount under our authority in section 1886(d)(5)(I)(i) of the Act. We performed a retrospective evaluation of the FY 2008 claims data for Puerto Rico hospitals using the same methodology described in section II.D. of the preamble of this proposed rule for IPPS hospitals paid under the national standardized amounts under section 1886(d) of the Act. We found that, for Puerto Rico hospitals, the increase in payments for discharges occurring during FY 2008 due to documentation and coding changes that did not reflect real changes in case-mix for discharges occurring during FY 2008 was approximately 1.1 percent. Given these documentation and coding increases, consistent with our statements in prior IPPS rules, we are proposing to use our authority under section 1886(d)(5)(I)(i) of the Act to adjust the Puerto Rico-specific standardized amount by ¥1.1 percent in FY 2010 to account for the FY 2008 documentation and coding changes that are not due to changes in real case-mix and to leave that adjustment in place for subsequent fiscal years. As the proposed ¥1.1 percent adjustment will be applied to the Puerto Rico-specific rate that accounts for 25 percent of payment to Puerto Rico hospitals and the other 75 percent is accounted for by the similar proposed adjustment that is applied to the national standardized amount, the overall proposed adjustment for documentation and coding changes will be slightly less for Puerto Rico hospitals as compared to other hospitals that are paid based on 100 percent of the national standardized amount. We note that, as with the hospital-specific rates, the Puerto Ricospecific standardized amount had not previously been reduced based on estimated changes in documentation and coding associated with the adoption of the MS–DRGs. Furthermore, we note that because we are proposing to apply a offset of ¥1.1 percent to the FY 2010 Puerto Rico-specific standardized amount, we are proposing to apply a factor of 0.989 (1 divided by 1.011) to adjust the FY 2010 Puerto Rico-specific standardized amount. We refer readers to section II.D. of the preamble of this proposed rule for a complete discussion on our proposal to adjust the Puerto Rico-specific standardized amount by ¥1.1 percent in FY 2010. We will address in the FY 2011 rulemaking cycle any change in FY 2009 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 case-mix due to documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009. We note that, unlike the national standardized rates, the FY 2009 Puerto Rico-specific standardized amount was not previously reduced in order to account for anticipated changes in documentation and coding that do not reflect real changes in case-mix resulting from the adoption of the MS– DRGs. We are seeking public comment on the proposed ¥1.1 percent prospective adjustment to the Puerto Rico-specific standardized amount under section 1886(d)(5)(I)(i) of the Act and addressing in the FY 2011 rulemaking cycle any changes in FY 2009 case-mix due to documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009. We intend to update our analysis with FY 2008 data on claims paid through March 2008 for the FY 2010 IPPS final rule. e. Proposed Outlier Payments Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for ‘‘outlier’’ cases involving extraordinarily high costs. To qualify for outlier payments, a case must have costs greater than the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the ‘‘outlier threshold’’ or ‘‘fixedloss’’ amount (a dollar amount by which the costs of a case must exceed payments in order to qualify for an outlier payment). We refer to the sum of the prospective payment rate for the DRG, any IME and DSH payments, any new technology add-on payments, and the outlier threshold as the outlier ‘‘fixed-loss cost threshold.’’ To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital’s CCR is applied to the total covered charges for the case to convert the charges to estimated costs. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the estimated costs above the fixed-loss cost threshold. The marginal cost factor for FY 2010 is 80 percent, the same marginal cost factor we have used since FY 1995 (59 FR 45367). In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating DRG payments plus outlier payments. Section 1886(d)(3)(B) of the Act requires the Secretary to reduce the average PO 00000 Frm 00167 Fmt 4701 Sfmt 4702 24245 standardized amount by a factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the average standardized amount applicable to hospitals located in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. More information on outlier payments may be found on the CMS Web site at https://www.cms.hhs.gov/ AcuteInpatientPPS/ 04_outlier.asp#TopOfPage. (1) Proposed FY 2010 Outlier FixedLoss Cost Threshold For FY 2010, we are proposing to continue to use the same methodology used for FY 2009 (73 FR 48763 through 48766) to calculate the outlier threshold. Similar to the methodology used in the FY 2009 IPPS final rule, for FY 2010, we are proposing to apply an adjustment factor to the CCRs to account for cost and charge inflation (as explained below). As we have done in the past, to calculate the proposed FY 2010 outlier threshold we simulated payments by applying proposed FY 2010 rates and policies using cases from the FY 2008 MedPAR files. Therefore, in order to determine the proposed FY 2010 outlier threshold, we inflate the charges on the MedPAR claims by 2 years, from FY 2008 to FY 2010. We are proposing to continue to use a refined methodology that takes into account the lower inflation in hospital charges that are occurring as a result of the outlier final rule (68 FR 34494), which changed our methodology for determining outlier payments by implementing the use of more current CCRs. Our refined methodology uses more recent data that reflect the rate-ofchange in hospital charges under the new outlier policy. Using the most recent data available, we calculated the 1-year average annualized rate-of-change in chargesper-case from the last quarter of FY 2007 in combination with the first quarter of FY 2008 (July 1, 2007 through December 31, 2007) to the last quarter of FY 2008 in combination with the first quarter of FY 2009 (July 1, 2008 through December 31, 2008). This rate of change was 7.29 percent (1.0729) or 15.11 percent (1.1511) over 2 years. As we have done in the past, we established the proposed FY 2010 outlier threshold using hospital CCRs from the December 2008 update to the Provider-Specific File (PSF)—the most recent available data at the time of this proposed rule. This file includes CCRs that reflect implementation of the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24246 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules changes to the policy for determining the applicable CCRs that became effective August 8, 2003 (68 FR 34494). As discussed in the FY 2007 IPPS final rule (71 FR 48150), we worked with the Office of Actuary to derive the methodology described below to develop the CCR adjustment factor. For FY 2010, we are proposing to continue to use the same methodology to calculate the CCR adjustment by using the FY 2008 operating cost per discharge increase in combination with the actual FY 2008 operating market basket percentage increase determined by IHS Global Insight, Inc., as well as the charge inflation factor described above to estimate the adjustment to the CCRs. (We note that the FY 2008 actual (otherwise referred to as ‘‘final’’) operating market basket percentage increase reflects historical data, whereas the published FY 2008 operating market basket update factor was based on IHS Global Insight, Inc.’s 2007 third quarter forecast with historical data through the first quarter of 2008.) By using the operating market basket percentage increase and the increase in the average cost per discharge from hospital cost reports, we are using two different measures of cost inflation. For FY 2010, we determined the adjustment by taking the percentage increase in the operating costs per discharge from FY 2006 to FY 2007 (1.0460) from the cost report and dividing it by the final operating market basket percentage increase from FY 2007 (1.0360). This operation removes the measure of pure price increase (the market basket) from the percentage increase in operating cost per discharge, leaving the nonprice factors in the cost increase (for example, quantity and changes in the mix of goods and services). We repeated this calculation for 2 prior years to determine the 3-year average of the rate of adjusted change in costs between the operating market basket percentage increase and the increase in cost per case from the cost report (the FY 2004 to FY 2005 percentage increase of operating costs per discharge of 1.0584 divided by the FY 2005 final operating market basket percentage increase of 1.0390, the FY 2005 to FY 2006 percentage increase of operating costs per discharge of 1.0578 divided by FY 2006 final operating market basket percentage increase of 1.0400). For FY 2010, we averaged the differentials calculated for FY 2005, FY 2006, and FY 2007, which resulted in a mean ratio of 1.0151. We multiplied the 3-year average of 1.0151 by the FY 2008 final operating market basket percentage increase of 1.0400, which resulted in an operating cost inflation factor of 5.56 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 percent or 1.056. We then divided the operating cost inflation factor by the 1-year average change in charges (1.072893) and applied an adjustment factor of 0.9840 to the operating CCRs from the PSF. As stated in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe it is appropriate to apply only a 1-year adjustment factor to the CCRs. On average, it takes approximately 9 months for a fiscal intermediary or MAC to tentatively settle a cost report from the fiscal year end of a hospital’s cost reporting period. The average ‘‘age’’ of hospitals’ CCRs from the time the fiscal intermediary or the MAC inserts the CCR in the PSF until the beginning of FY 2009 is approximately 1 year. Therefore, as stated above, we believe a 1-year adjustment factor to the CCRs is appropriate. We used the same methodology for the capital CCRs and determined the adjustment by taking the percentage increase in the capital costs per discharge from FY 2006 to FY 2007 (1.0488) from the cost report and dividing it by the final capital market basket percentage increase from FY 2007 (1.0130). We repeated this calculation for 2 prior years to determine the 3-year average of the rate of adjusted change in costs between the capital market basket percentage increase and the increase in cost per case from the cost report (the FY 2004 to FY 2005 percentage increase of capital costs per discharge of 1.0329 divided by the FY 2005 final capital market basket percentage increase of 1.0090, the FY 2005 to FY 2006 percentage increase of capital costs per discharge of 1.0467 divided by the FY 2006 final capital market basket percentage increase of 1.0110). For FY 2010, we averaged the differentials calculated for FY 2005, FY 2006, and FY 2007, which resulted in a mean ratio of 1.0314. We multiplied the 3-year average of 1.0314 by the FY 2008 final capital market basket percentage increase of 1.0140, which resulted in a capital cost inflation factor of 4.59 percent or 1.0459. We then divided the capital cost inflation factor by the 1-year average change in charges (1.072893) and applied an adjustment factor of 0.9748 to the capital CCRs from the PSF. We are proposing to use the same charge inflation factor for the capital CCRs that was used for the operating CCRs. The charge inflation factor is based on the overall billed charges. Therefore, we believe it is appropriate to apply the charge factor to both the operating and capital CCRs. As stated above, for FY 2010, we are applying the proposed FY 2010 rates PO 00000 Frm 00168 Fmt 4701 Sfmt 4702 and policies using cases from the FY 2008 MedPAR files in calculating the proposed outlier threshold. Therefore, for purposes of estimating the proposed outlier threshold for FY 2010, it is necessary to take into account the remaining projected case-mix growth when calculating the outlier threshold that results in outlier payments being 5.1 percent of total payments for FY 2010. As discussed above and in section II.D. of the preamble of this proposed rule, our actuaries estimated that maintaining budget neutrality for changes in case-mix due to the adoption of the MS–DRGs requires an adjustment of ¥4.8 percent to the national standardized amount. For FY 2008, our estimate of the case-mix increase due to documentation and coding in FY 2008 is 2.5 percent, which is already included within the claims data (FY 2008 MedPAR files) used to calculate the proposed FY 2010 threshold. In addition, we stated that, even with our assumption that there will be no continued changes in documentation and coding in FY 2009, the use of the FY 2009 relative weights will result in an additional 0.7 percent case-mix increase due to the documentation and coding effect in FY 2009. Therefore, we project that an additional 1.6 percent case-mix growth occurred since 2008 (4.8 percent ¥ 2.5 percent (case-mix growth in FY 2008) ¥ 0.7 percent (FY 2009 relative weights effect) = 1.6 percent). As a result, we inflated the FY 2008 claims data by an additional 1.6 percent for the additional case-mix growth projected to have occurred since FY 2008. If we did not take into account the remaining 1.6 percent projected case-mix growth, our estimate of total FY 2010 payments would be too low, and as a result, our proposed outlier threshold would be too high, such that estimated outlier payments would be less than our projected 5.1 percent of total payments. While we assume 1.6 percent case-mix growth for IPPS hospitals in our outlier threshold calculations, the proposed FY 2010 national standardized amounts used to calculate the proposed outlier threshold reflect the proposed cumulative adjustment of ¥3.4 percent (as described above in this section). Using this methodology, we are proposing an outlier fixed-loss cost threshold for FY 2010 equal to the prospective payment rate for the DRG, plus any IME and DSH payments, and any add-on payments for new technology, plus $24,240. As we did in establishing the FY 2009 outlier threshold (73 FR 57891), in our projection of FY 2010 outlier payments, we are not proposing to make any E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER adjustments for the possibility that hospitals’ CCRs and outlier payments may be reconciled upon cost report settlement. We continue to believe that, due to the policy implemented in the June 9, 2003 outlier final rule (68 FR 34494), CCRs will no longer fluctuate significantly and, therefore, few hospitals will actually have these ratios reconciled upon cost report settlement. In addition, it is difficult to predict the specific hospitals that will have CCRs and outlier payments reconciled in any given year. We also noted that reconciliation occurs because hospitals’ actual CCRs for the cost reporting period are different than the interim CCRs used to calculate outlier payments when a bill is processed. Our simulations assume that CCRs accurately measure hospital costs based on information available to us at the time we set the outlier threshold. For these reasons, we are not making any assumptions about the effects of reconciliation on the outlier threshold calculation. We also note that there are some factors that contributed to a higher proposed fixed-loss outlier threshold for FY 2010 compared to FY 2009. First, as stated below in section II.A.4.e.(3) of this Addendum, we are currently projecting 5.4 percent of total IPPS payment will be paid as outliers in FY 2009 or 0.3 percentage points greater than the 5.1 percent originally estimated. If we do not increase the FY 2009 threshold in FY 2010, we would continue to make outlier payments in excess of the 5.1 percent target. In addition, because overall payments are projected to be lower in FY 2010 compared to FY 2009, even more cases would qualify for outlier payments. In order to maintain outlier payments at 5.1 percent, the outlier threshold must be further increased to decrease the amount of cases that would qualify as outliers. Together, we believe that the above factors cumulatively contributed to a higher proposed fixed-loss outlier threshold in FY 2010 compared to FY 2009. (2) Other Proposed Changes Concerning Outliers As stated in the FY 1994 IPPS final rule (58 FR 46348), we establish an outlier threshold that is applicable to both hospital inpatient operating costs and hospital inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common threshold resulted in a lower percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 2010 will result in outlier payments that will VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 equal 5.1 percent of operating DRG payments and 5.5 percent of capital payments based on the Federal rate. In accordance with section 1886(d)(3)(B) of the Act, we are proposing to reduce the FY 2010 standardized amount by the same percentage to account for the projected proportion of payments paid as outliers. The outlier adjustment factors that would be applied to the standardized amount for the proposed FY 2010 outlier threshold are as follows: 24247 in Tables 8A and 8B would be used during FY 2010 when hospital-specific CCRs based on the latest settled cost report are either not available or are outside the range noted above. For an explanation of Table 8C, we refer readers to section V. of this Addendum. We finally note that we published a manual update (Change Request 3966) to our outlier policy on October 12, 2005, which updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual update covered an array of topics, including Operating CCRs, reconciliation, and the time value Capital standardized of money. We encourage hospitals that federal rate amounts are assigned the statewide average National ......... 0.948996 0.945405 operating and/or capital CCRs to work Puerto Rico ... 0.952493 0.938327 with their fiscal intermediary or MAC on a possible alternative operating and/ or capital CCR as explained in Change We are proposing to apply the outlier Request 3966. Use of an alternative CCR adjustment factors to the proposed FY developed by the hospital in 2010 rates after removing the effects of conjunction with the fiscal intermediary the FY 2009 outlier adjustment factors or MAC can avoid possible on the standardized amount. To determine whether a case qualifies overpayments or underpayments at cost for outlier payments, we apply hospital- report settlement, thus ensuring better accuracy when making outlier payments specific CCRs to the total covered charges for the case. Estimated operating and negating the need for outlier reconciliation. We also note that a and capital costs for the case are hospital may request an alternative calculated separately by applying operating or capital CCR ratio at any separate operating and capital CCRs. time as long as the guidelines of Change These costs are then combined and Request 3966 are followed. To compared with the outlier fixed-loss download and view the manual cost threshold. The June 9, 2003 outlier final rule (68 instructions on outlier and CCRs, we FR 34494) eliminated the application of refer readers to CMS Web site: https:// the statewide average CCRs for hospitals www.cms.hhs.gov/manuals/downloads/ clm104c03.pdf. with CCRs that fell below 3 standard deviations from the national mean CCR. (3) FY 2008 and FY 2009 Outlier However, for those hospitals for which Payments the fiscal intermediary or MAC In the FY 2009 IPPS final rule (73 FR computes operating CCRs greater than 1.183 or capital CCRs greater than 0.146, 48766), we stated that, based on available data, we estimated that actual or hospitals for whom the fiscal FY 2008 outlier payments would be intermediary or MAC is unable to approximately 4.7 percent of actual total calculate a CCR (as described at § 412.84(i)(3) of our regulations), we still DRG payments. This estimate was computed based on simulations using use statewide average CCRs to the FY 2007 MedPAR file (discharge determine whether a hospital qualifies data for FY 2007 claims). That is, the for outlier payments.11 Table 8A in this estimate of actual outlier payments did Addendum contains the proposed not reflect actual FY 2008 claims, but statewide average operating CCRs for instead reflected the application of FY urban hospitals and for rural hospitals 2008 rates and policies to available FY for which the fiscal intermediary or 2007 claims. MAC is unable to compute a hospitalOur current estimate, using available specific CCR within the above range. FY 2008 claims data, is that actual Effective for discharges occurring on or outlier payments for FY 2008 were after October 1, 2009, these statewide approximately 4.8 percent of actual total average ratios would replace the ratios DRG payments. Thus, the data indicate published in the IPPS final rule for FY that, for FY 2008, the percentage of 2009 (73 FR 48994 through 48995). Table 8B in this Addendum contains the actual outlier payments relative to comparable proposed statewide average actual total payments is higher than we capital CCRs. Again, the proposed CCRs projected before FY 2008. Consistent with the policy and statutory interpretation we have maintained since 11 These figures represent 3.0 standard deviations the inception of the IPPS, we do not from the mean of the log distribution of CCRs for all hospitals. plan to make retroactive adjustments to PO 00000 Frm 00169 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 24248 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER outlier payments to ensure that total outlier payments for FY 2008 are equal to 5.1 percent of total DRG payments. We currently estimate that actual outlier payments for FY 2009 will be approximately 5.4 percent of actual total DRG payments, 0.3 percentage points higher than the 5.1 percent we projected in setting the outlier policies for FY 2009. This estimate is based on simulations using the FY 2008 MedPAR file (discharge data for FY 2008 claims). We used these data to calculate an estimate of the actual outlier percentage for FY 2009 by applying FY 2009 rates and policies, including an outlier threshold of $20,045 to available FY 2008 claims. f. Proposed Rural Community Hospital Demonstration Program Adjustment (Section 410A of Public Law 108–173) Section 410A of Public Law 108–173 requires the Secretary to establish a demonstration that will modify reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) of Public Law 108–173 requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ As discussed in section V.I. of the preamble to this proposed rule, we have satisfied this requirement by proposing an adjustment to the national IPPS rates by a factor that is sufficient to account for the added costs of this demonstration. We estimate that the average additional annual payment that will be made to each participating hospital under the demonstration will be approximately $1,124,126. We based this estimate on the recent historical experience of the difference between inpatient cost and payment for hospitals that are participating in the demonstration program. For 13 participating hospitals, the projected total annual impact of the demonstration program for FY 2010 is $14,613,632. In addition, because the cost reports of all hospitals participating in the demonstration in its first year (that is, FY 2005) have been finalized, we are able to determine how much the cost of the demonstration program exceeded the amount that was offset by the budget neutrality adjustment for FY 2005. For all 13 hospitals that participated in the demonstration in FY 2005, the amount is $7,179,461. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Therefore, the projected total annual impact of the demonstration program for FY 2010 is $21,793,093. The proposed budget neutrality adjustment factor applied to the Federal rate to calculate Medicare inpatient prospective payments as a result of the demonstration is 0.999790. This budget neutrality adjustment factor may be different in the FY 2010 IPPS final rule to the extent that we have more recent data. In order to achieve budget neutrality, we are proposing to adjust the national IPPS rates by an amount sufficient to account for the added costs of this demonstration. In other words, we are proposing to apply budget neutrality across the payment system as a whole rather than merely across the participants of this demonstration, consistent with past practice. We believe that the language of the statutory budget neutrality requirement permits the agency to implement the budget neutrality provision in this manner. The statutory language requires that ‘‘aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration * * * was not implemented,’’ but does not identify the range across which aggregate payments must be held equal. 5. Proposed FY 2010 Standardized Amount The proposed adjusted standardized amount is divided into labor-related and nonlabor-related portions. Tables 1A and 1B of this Addendum contain the national standardized amounts that we are proposing to apply to all hospitals, except hospitals located in Puerto Rico, for FY 2010. The proposed Puerto Ricospecific amounts are shown in Table 1C of this Addendum. The proposed amounts shown in Tables 1A and 1B differ only in that the labor-related share applied to the standardized amounts in Table 1A is the proposed revised laborrelated share of 67.1 percent, and Table 1B is 62 percent. In accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are applying a labor-related share of 62 percent, unless application of that percentage would result in lower payments to a hospital than would otherwise be made. In effect, the statutory provision means that we will apply a labor-related share of 62 percent for all hospitals (other than those in Puerto Rico) whose wage indexes are less than or equal to 1.0000. PO 00000 Frm 00170 Fmt 4701 Sfmt 4702 In addition, Tables 1A and 1B include proposed standardized amounts reflecting the proposed full 2.1 percent update for FY 2010, and the proposed standardized amounts reflecting the 2.0 percentage point reduction to the update (a 0.1 percent update) applicable for hospitals that fail to submit quality data consistent with section 1886(b)(3)(B)(viii) of the Act. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount (this proposed amount is set forth in Table 1A). The proposed laborrelated and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals for FY 2010 are set forth in Table 1C of this Addendum. This table also includes the proposed Puerto Rico standardized amounts. The labor-related share applied to the proposed Puerto Rico specific standardized amount is the proposed labor-related share of 60.3 percent, or 62 percent, depending on which provides higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Pub. L. 108–173, provides that the labor-related share for hospitals located in Puerto Rico be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) The following table illustrates the proposed changes from the FY 2009 national standardized amount. The second column shows the proposed changes from the FY 2009 standardized amounts for hospitals that satisfy the quality data submission requirement for receiving the full update (2.1 percent). The third column shows the proposed changes for hospitals receiving the reduced update (0.1 percent). The first row of the table shows the proposed updated (through FY 2009) average standardized amount after restoring the FY 2008 offsets for outlier payments, demonstration budget neutrality, the geographic reclassification budget neutrality, and the documentation and coding adjustment for FY 2008 and FY 2009. The DRG reclassification and recalibration and wage index budget neutrality factors are cumulative. Therefore, the FY 2009 factor is not removed from this table. We also have added separate rows to this table to reflect the different labor-related shares that apply to hospitals. E:\FR\FM\22MYP2.SGM 22MYP2 24249 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules COMPARISON OF FY 2009 STANDARDIZED AMOUNTS TO THE PROPOSED FY 2010 STANDARDIZED AMOUNT WITH FULL AND REDUCED UPDATE Full update (2.1 percent); wage index is greater than 1.0000 FY 2009 Base Rate, after removing geographic reclassification budget neutrality, demonstration budget neutrality, Actual FY 08 and FY 09 documentation and coding adjustment, and outlier offset (based on the labor-related share percentage for FY 2010). Proposed FY 2010 Update Factor ........... Proposed FY 2010 DRG Recalibration and Wage Index Budget Neutrality Factor. Proposed FY 2010 Reclassification Budget Neutrality Factor. Proposed FY 2010 Outlier Factor ............ Proposed Rural Demonstration Budget Neutrality Factor. Proposed FY 2010 Documentation and Coding Adjustment and Actual FY 2008 and FY 2009 Adjustment and Additional Adjustment for FY 2008. Proposed Rate for FY 2010 ..................... Full update (2.1 percent); wage index is less than or equal to 1.0000 Reduced update (0.1 percent); wage index is greater than 1.0000 Reduced update (0.1 percent); wage index is less than or equal to 1.0000 Labor: $3,711.57 ......... Nonlabor: $1,819.83 ... Labor: $3,429.47 ......... Nonlabor: $2,101.93 ... Labor: $3,711.57 ......... Nonlabor: $1,819.83 ... Labor: $3,429.47. Nonlabor: $2,101.93. 1.021 ........................... 0.998066 ..................... 1.021 ........................... 0.998066 ..................... 1.001 ........................... 0.998066 ..................... 1.001. 0.998066. 0.991690 ..................... 0.991690 ..................... 0.991690 ..................... 0.991690. 0.948996 ..................... 0.999790 ..................... 0.948996 ..................... 0.999790 ..................... 0.948996 ..................... 0.999790 ..................... 0.948996. 0.999790. 0.967 ........................... 0.967 ........................... 0.967 ........................... 0.967. Labor: $3,441.26 ......... Nonlabor: $1,687.30 ... Labor: $3,179.71 ......... Nonlabor: $1,948.85 ... Labor: $3,373.85 ......... Nonlabor: $1,654.25 ... Labor: $3,117.42. Nonlabor: $1,910.68. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national standardized amount (as set forth in Table 1A of this Addendum). The labor-related and nonlabor-related portions of the national average standardized amounts for Puerto Rico hospitals are set forth in Table 1C of this Addendum. This table also includes the Puerto Rico standardized amounts. The proposed labor-related share applied to the Puerto Rico standardized amount is 60.3 percent, or 62 percent, depending on which results in higher payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as amended by section 403(b) of Pub. L. 108–173, provides that the labor-related share for hospitals in Puerto Rico will be 62 percent, unless the application of that percentage would result in lower payments to the hospital.) B. Proposed Adjustments for Area Wage Levels and Cost-of-Living Tables 1A through 1C, as set forth in this Addendum, contain the proposed labor-related and nonlabor-related shares that we are using to calculate the proposed prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico for FY 2010. This section addresses two types of adjustments to the standardized amounts that are made in determining the proposed prospective payment rates as described in this Addendum. 1. Proposed Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that we make an adjustment to the laborrelated portion of the national and Puerto Rico prospective payment rates, respectively, to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III. of the preamble to this proposed rule, we discuss the data and methodology for the proposed FY 2010 wage index. 2. Proposed Adjustment for Cost-ofLiving in Alaska and Hawaii Section 1886(d)(5)(H) of the Act authorizes the Secretary to make an adjustment to take into account the unique circumstances of hospitals in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 2010, we are proposing to adjust the payments for hospitals in Alaska and Hawaii by multiplying the nonlabor-related portion of the standardized amount by the applicable adjustment factor contained in the table below. These proposed factors were obtained from the U.S. Office of Personnel Management (OPM) and are currently also used under the IPPS. In addition, we are proposing that if OPM releases revised COLA factors after publication of this proposed rule, we would use the revised factors for the development of IPPS payments for FY 2010 and publish those revised COLA factors in the final rule. sroberts on PROD1PC70 with FRONTMATTER TABLE OF COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS Cost of living adjustment factor Area Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road ............................................................................................... City of Fairbanks and 80-kilometer (50-mile) radius by road ................................................................................................ City of Juneau and 80-kilometer (50-mile) radius by road .................................................................................................... Rest of Alaska ........................................................................................................................................................................ VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00171 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 1.23 1.23 1.23 1.25 24250 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules TABLE OF COST-OF-LIVING ADJUSTMENT FACTORS: ALASKA AND HAWAII HOSPITALS—Continued Cost of living adjustment factor Area Hawaii: City and County of Honolulu .................................................................................................................................................. County of Hawaii .................................................................................................................................................................... County of Kauai ...................................................................................................................................................................... County of Maui and County of Kalawao ................................................................................................................................ 1.25 1.18 1.25 1.25 (The above factors are based on data obtained from the U.S. Office of Personnel Management Web site at: https://www.opm.gov/oca/cola/ rates.asp.) C. Proposed MS–DRG Relative Weights As discussed in section II.H. of the preamble of this proposed rule, we have developed proposed relative weights for each MS–DRG that reflect the resource utilization of cases in each MS–DRG relative to Medicare cases in other MS– DRGs. Table 5 of this Addendum contains the proposed relative weights that we would apply to discharges occurring in FY 2010. These factors have been recalibrated as explained in section II. of the preamble of this proposed rule. D. Calculation of the Proposed Prospective Payment Rates sroberts on PROD1PC70 with FRONTMATTER General Formula for Calculation of the Proposed Prospective Payment Rates for FY 2010 In general, the operating prospective payment rate for all hospitals paid under the IPPS located outside of Puerto Rico, except SCHs and MDHs, for FY 2010 equals the Federal rate. Currently, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal national rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or for cost reporting periods beginning on or after January 1, 2009, the updated hospital-specific rate based on the FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. The prospective payment rate for SCHs for FY 2010 equals the higher of the applicable Federal rate, or the hospital-specific rate as described below. The prospective payment rate for MDHs for FY 2010 equals the higher of the Federal rate, or the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate as described below. The prospective payment rate for hospitals located in Puerto Rico for FY 2010 equals 25 percent of the Puerto Rico rate plus 75 percent of the applicable national rate. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 1. Federal Rate The Federal rate is determined as follows: Step 1—Select the applicable average standardized amount depending on whether the hospital submitted qualifying quality data (full update for qualifying hospitals, update minus 2.0 percentage points for nonqualifying hospitals). Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—For hospitals in Alaska and Hawaii, multiply the nonlabor-related portion of the standardized amount by the applicable cost-of-living adjustment factor. Step 4—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted, if applicable, under Step 3). Step 5—Multiply the final amount from Step 4 by the relative weight corresponding to the applicable MS– DRG (see Table 5 of this Addendum). The Federal rate as determined in Step 5 may then be further adjusted if the hospital qualifies for either the IME or DSH adjustment. In addition, for hospitals that qualify for a low-volume payment adjustment under section 1886(d)(12) of the Act and 42 CFR 412.101(b), the payment in Step 5 would be increased by 25 percent. 2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs) a. Calculation of Hospital-Specific Rate Section 1886(b)(3)(C) of the Act provides that, for cost reporting periods beginning prior to January 1, 2009, SCHs are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate; the updated hospital-specific rate based on FY 1982 costs per discharge; the updated hospital-specific rate based on FY 1987 costs per discharge; the updated hospital-specific rate based on FY 1996 costs per discharge; or for cost reporting periods beginning on or after PO 00000 Frm 00172 Fmt 4701 Sfmt 4702 January 1, 2009, the updated hospitalspecific rate based on the FY 2006 costs per discharge to determine the rate that yields the greatest aggregate payment. As discussed previously, we are required to rebase MDHs hospitalspecific rates to their FY 2002 cost reports if doing so results in higher payments. In addition, effective for discharges occurring on or after October 1, 2006, MDHs are to be paid based on the Federal national rate or, if higher, the Federal national rate plus 75 percent (changed from 50 percent) of the difference between the Federal national rate and the greater of the updated hospital-specific rates based on either FY 1982, FY 1987 or FY 2002 costs per discharge. Further, MDHs are no longer subject to the 12-percent cap on their DSH payment adjustment factor. Hospital-specific rates have been determined for each of these hospitals based on the FY 1982 costs per discharge, the FY 1987 costs per discharge, or, for SCHs, the FY 1996 costs per discharge or the FY 2006 costs per discharge, and for MDHs, the FY 2002 cost per discharge. For a more detailed discussion of the calculation of the hospital-specific rates, we refer the reader to the FY 1984 IPPS interim final rule (48 FR 39772); the April 20, 1990 final rule with comment (55 FR 15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS final rule (65 FR 47082). In addition, for both SCHs and MDHs, the hospital-specific rate is adjusted by the budget neutrality adjustment factor as discussed in section III. of this Addendum. The resulting rate will be used in determining the payment rate an SCH or MDH will receive for its discharges beginning on or after October 1, 2009. b. Updating the FY 1982, FY 1987, FY 1996, FY 2002, and FY 2006 HospitalSpecific Rates for FY 2010 We are proposing to increase the hospital-specific rates by 2.1 percent (the proposed hospital market basket percentage increase) for FY 2010 for those SCHs and MDHs that submit qualifying quality data and by 0.1 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules percent for SCHs and MDHs that fail to submit qualifying quality data. Section 1886(b)(3)(C)(iv) of the Act provides that the update factor applicable to the hospital-specific rates for SCHs is equal to the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for SCHs in FY 2009, is the market basket percentage increase for hospitals that submit qualifying quality data and the market basket percentage increase minus 2 percent for hospitals that fail to submit qualifying quality data. Section 1886(b)(3)(D) of the Act provides that the update factor applicable to the hospital-specific rates for MDHs also equals the update factor provided for under section 1886(b)(3)(B)(iv) of the Act, which, for FY 2009, is the market basket percentage increase for hospitals that submit qualifying quality data and the market basket percentage increase minus 2 percent for hospitals that fail to submit qualifying quality data. 3. General Formula for Calculation of Proposed Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning On or After October 1, 2009, and Before October 1, 2010 Section 1886(d)(9)(E)(iv) of the Act provides that, effective for discharges occurring on or after October 1, 2004, hospitals located in Puerto Rico are paid based on a blend of 75 percent of the national prospective payment rate and 25 percent of the Puerto Rico-specific rate. sroberts on PROD1PC70 with FRONTMATTER a. Puerto Rico Rate The Puerto Rico prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount considering the applicable wage index (Table 1C of this Addendum). Step 2—Multiply the labor-related portion of the standardized amount by the applicable Puerto Rico-specific wage index. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (Table 5 of this Addendum). Step 5—Multiply the result in Step 4 by 25 percent. b. National Rate The national prospective payment rate is determined as follows: Step 1—Select the applicable average standardized amount. Step 2—Multiply the labor-related portion of the standardized amount by the applicable wage index for the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 geographic area in which the hospital is located or the area to which the hospital is reclassified. Step 3—Add the amount from Step 2 and the nonlabor-related portion of the national average standardized amount. Step 4—Multiply the amount from Step 3 by the applicable MS–DRG relative weight (Table 5 of this Addendum). Step 5—Multiply the result in Step 4 by 75 percent. The sum of the Puerto Rico rate and the national rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico. This rate would then be further adjusted if the hospital qualifies for either the IME or DSH adjustment. III. Proposed Changes to Payment Rates for Acute Care Hospital Inpatient Capital-Related Costs for FY 2010 The PPS for acute care hospital inpatient capital-related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period, hospitals were paid during a 10-year transition period (which extended through FY 2001) to change the payment methodology for Medicare acute care hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective methodology (based fully on the Federal rate). The basic methodology for determining Federal capital prospective rates is set forth in the regulations at 42 CFR 412.308 through 412.352. Below we discuss the factors that we are proposing to use to determine the capital Federal rate for FY 2010, which would be effective for discharges occurring on or after October 1, 2009. The 10-year transition period ended with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002). Therefore, for cost reporting periods beginning in FY 2002, all hospitals (except ‘‘new’’ hospitals under § 412.304(c)(2)) are paid based on the capital Federal rate. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the IPPS by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992, we update the capital standard Federal rate, as provided at § 412.308(c)(1), to account for capital input price increases and other factors. The regulations at § 412.308(c)(2) provide that the capital Federal rate be adjusted annually by a factor equal to the estimated proportion of outlier payments under the capital PO 00000 Frm 00173 Fmt 4701 Sfmt 4702 24251 Federal rate to total capital payments under the capital Federal rate. In addition, § 412.308(c)(3) requires that the capital Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for (regular and special) exceptions under § 412.348. Section 412.308(c)(4)(ii) requires that the capital standard Federal rate be adjusted so that the effects of the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor (GAF) are budget neutral. For FYs 1992 through 1995, § 412.352 required that the capital Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the respective fiscal year. That provision expired in FY 1996. Section 412.308(b)(2) describes the 7.4 percent reduction to the capital Federal rate that was made in FY 1994, and § 412.308(b)(3) describes the 0.28 percent reduction to the capital Federal rate made in FY 1996 as a result of the revised policy for paying for transfers. In FY 1998, we implemented section 4402 of Public Law 105–33, which required that, for discharges occurring on or after October 1, 1997, the budget neutrality adjustment factor in effect as of September 30, 1995, be applied to the unadjusted capital standard Federal rate and the unadjusted hospital-specific rate. That factor was 0.8432, which was equivalent to a 15.68 percent reduction to the unadjusted capital payment rates. An additional 2.1 percent reduction to the rates was effective from October 1, 1997 through September 30, 2002, making the total reduction 17.78 percent. As we discussed in the FY 2003 IPPS final rule (67 FR 50102) and implemented in § 412.308(b)(6), the 2.1 percent reduction was restored to the unadjusted capital payment rates effective October 1, 2002. To determine the appropriate budget neutrality adjustment factor and the regular exceptions payment adjustment during the 10-year transition period, we developed a dynamic model of Medicare inpatient capital-related costs; that is, a model that projected changes in Medicare inpatient capital-related costs over time. With the expiration of the budget neutrality provision, the capital cost model was only used to estimate the regular exceptions payment adjustment and other factors during the transition period. As we explained in the FY 2002 IPPS final rule (66 FR 39911), beginning in FY 2002, an adjustment for regular exception E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24252 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules payments is no longer necessary because regular exception payments were only made for cost reporting periods beginning on or after October 1, 1991, and before October 1, 2001 (see § 412.348(b)). Because payments are no longer made under the regular exception policy effective with cost reporting periods beginning in FY 2002, we discontinued use of the capital cost model. The capital cost model and its application during the transition period are described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099). Section 412.374 provides for blended payments to hospitals located in Puerto Rico under the IPPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto Rico using the same methodology used to compute the national Federal rate for capital-related costs. In accordance with section 1886(d)(9)(A) of the Act, under the IPPS for acute care hospital operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Prior to FY 1998, hospitals located in Puerto Rico were paid a blended operating rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. Similarly, prior to FY 1998, hospitals located in Puerto Rico were paid a blended capital rate that consisted of 75 percent of the applicable capital Puerto Rico-specific rate and 25 percent of the applicable capital Federal rate. However, effective October 1, 1997, in accordance with section 4406 of Pulic. Law 105–33, the methodology for operating payments made to hospitals located in Puerto Rico under the IPPS was revised to make payments based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges occurring on or after October 1, 1997, we also revised the methodology for computing capital payments to hospitals located in Puerto Rico to be based on a blend of 50 percent of the Puerto Rico capital rate and 50 percent of the national capital Federal rate. As we discussed in the FY 2005 IPPS final rule (69 FR 49185), section 504 of Public Law 108–173 increased the national portion of the operating IPPS payments for hospitals located in Puerto Rico from 50 percent to 62.5 percent and decreased the Puerto Rico portion VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 of the operating IPPS payments from 50 percent to 37.5 percent for discharges occurring on or after April 1, 2004 through September 30, 2004 (refer to the March 26, 2004 One-Time Notification (Change Request 3158)). In addition, section 504 of Public Law 108–173 provided that the national portion of operating IPPS payments for hospitals located in Puerto Rico is equal to 75 percent and the Puerto Rico-specific portion of operating IPPS payments is equal to 25 percent for discharges occurring on or after October 1, 2004. Consistent with that change in operating IPPS payments to hospitals located in Puerto Rico, for FY 2005 (as we discussed in the FY 2005 IPPS final rule), we revised the methodology for computing capital payments to hospitals located in Puerto Rico to be based on a blend of 25 percent of the Puerto Ricospecific capital rate and 75 percent of the national capital Federal rate for discharges occurring on or after October 1, 2004. A. Determination of Proposed Federal Hospital Inpatient Capital-Related Prospective Payment Rate Update In the Federal Register notice setting out the final wage indices for FY 2009 (73 FR 57892), we established the final capital Federal rate of $424.17 for FY 2009. In the discussion that follows, we explain the factors that we are proposing to use to determine the proposed capital Federal rate for FY 2010. In particular, we explain why the proposed FY 2010 capital Federal rate would decrease approximately 0.8 percent, compared to the FY 2009 capital Federal rate. Furthermore, we estimate that aggregate capital payments would decrease during this same period (approximately $393 million), primarily due to the estimated decrease in capital IME payments in FY 2010 as compared to FY 2009 provided under current law, in addition to the proposed decrease in the capital Federal rate. Total payments to hospitals under the IPPS are relatively unaffected by changes in the capital prospective payments. Because capital payments constitute about 10 percent of hospital payments, a 1percent change in the capital Federal rate yields only about a 0.1 percent change in actual payments to hospitals. 1. Projected Capital Standard Federal Rate Update a. Description of the Update Framework Under § 412.308(c)(1), the capital standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and several PO 00000 Frm 00174 Fmt 4701 Sfmt 4702 other policy adjustment factors. Specifically, we have adjusted the projected CIPI rate-of-increase as appropriate each year for case-mix index-related changes, for intensity, and for errors in previous CIPI forecasts. The proposed update factor for FY 2010 under that framework is 1.20 percent based on the best data available at this time. The proposed update factor under that framework is based on a projected 1.2 percent increase in the CIPI, a 0.0 percent adjustment for intensity, a 0.0 percent adjustment for case-mix, a 0.0 percent adjustment for the FY 2008 DRG reclassification and recalibration, and a forecast error correction of 0.0 percent. As discussed below in section III.C. of this Addendum, we continue to believe that the CIPI is the most appropriate input price index for capital costs to measure capital price changes in a given year. We also explain the basis for the FY 2010 CIPI projection in that same section of this Addendum. In addition, as also noted below, the proposed capital rates would be further adjusted to account for changes in documentation and coding under the MS–DRGs that do not correspond to changes in real increases in patients’ severity of illness, discussed in section II.D. of the preamble of this proposed rule. Below we describe the policy adjustments that we are proposing to apply in the update framework for FY 2010. The case-mix index is the measure of the average DRG weight for cases paid under the IPPS. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: • The average resource use of Medicare patients changes (‘‘real’’ casemix change); • Changes in hospital documentation and coding of patient records result in higher weight DRG assignments (‘‘coding effects’’); and • The annual DRG reclassification and recalibration changes may not be budget neutral (‘‘reclassification effect’’). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in documentation and coding behavior that result in assignment of cases to higher weighted DRGs but do not reflect higher resource requirements. The capital update framework includes the same case-mix index adjustment used in the former operating IPPS update framework (as E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 28816)). (We no longer use an update framework to make a recommendation for updating the operating IPPS standardized amounts as discussed in section II. of Appendix B in the FY 2006 IPPS final rule (70 FR 47707).) Absent the projected increase in casemix resulting from changes in documentation and coding due to the adoption of the MS–DRGs, for FY 2010, we are projecting a 1.0 percent total increase in the case-mix index. We estimate that the real case-mix increase will also equal 1.0 percent for FY 2010. The net adjustment for change in casemix is the difference between the projected real increase in case-mix and the projected total increase in case-mix. Therefore, the proposed net adjustment for case-mix change in FY 2010 is 0.0 percentage points. The capital update framework also contains an adjustment for the effects of DRG reclassification and recalibration. This adjustment is intended to remove the effect on total payments of prior year’s changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix indexrelated changes other than those due to patient severity. Due to the lag time in the availability of data, there is a 2-year lag in data used to determine the adjustment for the effects of DRG reclassification and recalibration. For example, we are adjusting for the effects of the FY 2008 DRG reclassification and recalibration as part of our proposed update for FY 2010. To adjust for reclassification and recalibration effects, we run the FY 2008 cases through the FY 2007 GROUPER and through the FY 2008 GROUPER. The resulting ratio of the case-mix indices should equate to 1.0. If not, in the update framework for FY 2010, we would make an adjustment to adjust for the reclassification and recalibration effects in FY 2008. As discussed in detail in section II.B. of the preamble, however, when we adopted the MS–DRGs for FY 2008 to better recognize severity of illness in Medicare payment rates, we also recognized that changes in documentation and coding could potentially lead to increases in aggregate payments without a corresponding increase in patients’ severity of illness (that is, increased case-mix index other than real case-mix index increase). To maintain budget neutrality for the adoption of the MS– DRGs as discussed in greater detail in section II.D. of the preamble of this proposed rule, we are proposing to make an adjustment to the proposed capital Federal rates based on actuarial estimates of the documentation and VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 coding effects that occurred in FY 2008 (based on FY 2008 claims data). Therefore, we are not adjusting for reclassification and recalibration effects from FY 2008 in the update framework for FY 2010 because we have already accounted for it in the proposed documentation and coding adjustment to the proposed capital Federal rates. Therefore, we are proposing a 0.0 percent adjustment for DRG reclassification in the proposed update for FY 2010, as discussed above. The capital update framework also contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year, there may be unanticipated price fluctuations that may result in differences between the actual increase in prices and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the change in the capital input price index for any year is off by 0.25 percentage points or more. There is a 2-year lag between the forecast and the availability of data to develop a measurement of the forecast error. A forecast error of 0.1 percentage point was calculated for the FY 2010 update. That is, current historical data indicate that the forecasted FY 2008 CIPI (1.3 percent) used in calculating the FY 2008 update factor slightly understated the actual realized price increases (1.4 percent) by 0.1 percentage point. This slight underprediction was mostly due to the incorporation of newly available source data for fixed asset prices and moveable asset prices into the market basket. However, because this estimation of the change in the CIPI is less than 0.25 percentage points, it is not reflected in the update recommended under this framework. Therefore, we are proposing to make a 0.0 percent adjustment for forecast error in the update for FY 2010. Under the capital IPPS update framework, we also make an adjustment for changes in intensity. We calculate this adjustment using the same methodology and data that were used in the past under the framework for operating IPPS. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, for changes within DRG severity, and for expected modification of practice patterns to remove noncosteffective services. PO 00000 Frm 00175 Fmt 4701 Sfmt 4702 24253 We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI for hospital and related services) and changes in real case-mix. The use of total charges in the calculation of the intensity factor makes it a total intensity factor; that is, charges for capital services are already built into the calculation of the factor. Therefore, we have incorporated the intensity adjustment from the operating update framework into the capital update framework. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and the combination of qualityenhancing new technologies and complexity within the DRG system, we assume that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity, to allow for increases within DRG severity and the adoption of qualityenhancing technology. We have developed a Medicarespecific intensity measure based on a 5year average. Past studies of case-mix change by the RAND Corporation (Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988 by G.M. Carter, J.P. Newhouse, and D.A. Relles, R–4098–HCFA/ProPAC (1991)) suggest that real case-mix change was not dependent on total change, but was usually a fairly steady increase of 1.0 to 1.5 percent per year. However, we used 1.4 percent as the upper bound because the RAND study did not take into account that hospitals may have induced doctors to document medical records more completely in order to improve payment. As we noted above, in accordance with § 412.308(c)(1)(ii), we began updating the capital standard Federal rate in FY 1996 using an update framework that takes into account, among other things, allowable changes in the intensity of hospital services. For FYs 1996 through 2001, we found that case-mix constant intensity was declining, and we established a 0.0 percent adjustment for intensity in each of those years. For FYs 2002 and 2003, we found that case-mix constant intensity was increasing, and we established a 0.3 percent adjustment and 1.0 percent adjustment for intensity, respectively. For FYs 2004 and 2005, we found that the charge data appeared to be skewed (as discussed in greater detail below) as a result of hospitals attempting to maximize outlier payments, while lessening costs, and we E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24254 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules established a 0.0 percent adjustment in each of those years. Furthermore, we stated that we would continue to apply a 0.0 percent adjustment for intensity until any increase in charges can be tied to intensity rather than attempts to maximize outlier payments. On June 9, 2003, we published in the Federal Register revisions to our outlier policy for determining the additional payment for extraordinarily high-cost cases (68 FR 34494 through 34515). These revised policies were effective on August 8, 2003, and October 1, 2003. While it does appear that a response to these policy changes is beginning to occur, that is, the increase in charges for FYs 2004 and 2005 are somewhat less than the previous 4 years, they still show a significant annual increase in charges without a corresponding increase in hospital case-mix. Specifically, the percent change in hospitals’ charges in FY 2004 is approximately 12 percent, which is similar in magnitude to the large increases in charges that we found in the 4 years prior to FY 2004 and before our revisions to the outlier policy in FY 2003. For FY 2005, there is approximately an 8 percent change in charges, which is somewhat lower than the percent change in FY 2004. Nevertheless, the percent change in charges in both FYs 2004 and 2005 are still relatively high as compared to the change in charges prior to FY 2001. Moreover, the percent change in hospitals’ case-mix in those years is not in proportion to the higher charges. The remaining 3 years in the 5-year average indicate that the change in hospitals’ charges appears to be slightly moderating, and is lower than FYs 2004 and 2005. (We refer readers to a discussion regarding the intensity factor in the FY 2004 IPPS final rule (68 FR 45482), the FY 2005 IPPS final rule (69 FR 49285), the FY 2006 IPPS final rule (70 FR 47500), the FY 2007 IPPS final rule (72 FR 47500), the FY 2008 IPPS final rule with comment period (72 FR 47426), and the FY 2009 IPPS final rule (73 FR 48771.) Our intensity measure is based on a 5-year average, and therefore, the proposed intensity adjustment for FY 2010 is based on data from the 5-year period beginning with FY 2004 and extending through FY 2008. Based on the increases in charges for FYs 2004 through 2005 that remain in the 5-year average used for the intensity adjustment, we believe residual effects of hospitals’ charge practices prior to the implementation of the outlier policy revisions established in the June 9, 2003 final rule continue to appear in the data, as it may have taken hospitals some VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 time to adopt changes in their behavior in response to the new outlier policy. Thus, we believe that the FY 2004 and possibly the FY 2005 charge data may still be skewed. The change in hospitals’ charges for FY 2004 and to a somewhat lesser extent, FY 2005, remains similar to the considerable increase in hospitals’ charges that we found when examining hospitals’ charge data in determining the intensity factor in the update recommendations for the past few years. If hospitals were treating new or different types of cases, which would result in an appropriate increase in charges per discharge, then we would expect hospitals’ case-mix to increase proportionally, and it did not. Although it appears that the change in hospitals’ charges is more reasonable compared to data used in recent past rulemaking, using a 5-year average of the data tends to smooth out what might otherwise be more obvious effects of particular years such as FYs 2004 and 2005. Therefore, notwithstanding the gradual effect of the outlier policy over time, we believe the effect from hospitals attempting to maximize outlier payments prior to the implementation of the outlier policy continues, albeit to a smaller degree, to skew the charge data used in determining the intensity adjustment. As we discussed most recently in the FY 2009 IPPS final rule (73 FR 48771), because our intensity calculation relies heavily upon charge data and we believe that these charge data for at least 1 if not 2 years of the 5-year average may be inappropriately skewed, we are proposing to establish a 0.0 percent adjustment for intensity for FY 2010, just as we did for FYs 2004 through 2009. In the past (FYs 1996 through 2001) when we found intensity to be declining, we believed a zero (rather than negative) intensity adjustment was appropriate. Similarly, we believe that it is appropriate to apply a zero intensity adjustment for FY 2010 until any increase in charges during the 5-year period upon which the intensity adjustment is based can be tied to intensity rather than to attempts to maximize outlier payments. Above, we described the basis of the components used to develop the proposed 1.2 percent capital update factor under the capital update framework for FY 2010 as shown in the table below. PO 00000 Frm 00176 Fmt 4701 Sfmt 4702 CMS FY 2010 PROPOSED UPDATE FACTOR TO THE CAPITAL FEDERAL RATE Capital Input Price Index .................... Intensity .............................................. Case-Mix Adjustment Factors: Real Across DRG Change .............. Projected Case-Mix Change ........... 1.2 0.0 ¥1.0 1.0 Subtotal ....................................... Effect of FY 2008 Reclassification and Recalibration ............................ Forecast Error Correction ................... 1.2 Total Update ................................ 1.2 0.0 0.0 b. Comparison of CMS and MedPAC Update Recommendation In its March 2009 Report to Congress, MedPAC did not make a specific update recommendation for capital IPPS payments for FY 2010. However, in that same report, in assessing the adequacy of current payments and costs, MedPAC recommended an update to the hospital inpatient and outpatient PPS rates equal to the increase in the hospital market basket in FY 2010, concurrent with a quality incentive program. (MedPAC’s Report to the Congress: Medicare Payment Policy, March 2009, Section 2A.) 2. Proposed Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier payment methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of capital-related outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating IPPS DRG payments. In the Federal Register notice setting out the final wage indices for FY 2009 (73 FR 57891), we estimated that outlier payments for capital will equal 5.35 percent of inpatient capital-related payments based on the capital Federal rate in FY 2009. Based on the proposed thresholds as set forth in section II.A. of this Addendum, we estimate that outlier payments for capital-related costs would equal 5.46 percent for inpatient capitalrelated payments based on the proposed capital Federal rate in FY 2010. Therefore, we are proposing to apply an outlier adjustment factor of 0.9454 in E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules determining the proposed capital Federal rate. Thus, we estimate that the percentage of capital outlier payments to total capital standard payments for FY 2010 would be higher than the percentage for FY 2009. This increase in capital outlier payments is primarily due to the proposed decrease in estimated aggregate capital IPPS payments. That is, because overall payments are projected to be lower in FY 2010 compared to FY 2009, as discussed in section VIII. of Appendix A to this proposed rule, even more cases would qualify for outlier payments. The outlier reduction factors are not built permanently into the capital rates; that is, they are not applied cumulatively in determining the capital Federal rate. The proposed FY 2010 outlier adjustment of 0.9454 is a ¥0.12 percent change from the FY 2009 outlier adjustment of 0.9465. Therefore, the net change in the outlier adjustment to the proposed capital Federal rate for FY 2010 is 0.9988 (0.9454/0.9465). Thus, the proposed outlier adjustment decreases the proposed FY 2010 capital Federal rate by 0.12 percent compared with the FY 2009 outlier adjustment. sroberts on PROD1PC70 with FRONTMATTER 3. Proposed Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the GAF Section 412.308(c)(4)(ii) requires that the capital Federal rate be adjusted so that aggregate payments for the fiscal year based on the capital Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the capital Federal rate without such changes. Because we VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 implemented a separate GAF for Puerto Rico, we apply separate budget neutrality adjustments for the national GAF and the Puerto Rico GAF. We apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was implemented in FY 1998. In the past, we used the actuarial capital cost model (described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099)) to estimate the aggregate payments that would have been made on the basis of the capital Federal rate with and without changes in the DRG classifications and weights and in the GAF to compute the adjustment required to maintain budget neutrality for changes in DRG weights and in the GAF. During the transition period, the capital cost model was also used to estimate the regular exception payment adjustment factor. As we explain in section III.A. of this Addendum, beginning in FY 2002, an adjustment for regular exception payments is no longer necessary. Therefore, we no longer use the capital cost model. Instead, we are using historical data based on hospitals’ actual cost experiences to determine the exceptions payment adjustment factor for special exceptions payments. To determine the proposed factors for FY 2010, we compared (separately for the national capital rate and the Puerto Rico capital rate) estimated aggregate capital Federal rate payments based on the FY 2009 MS–DRG classifications and relative weights and the FY 2009 GAF to estimated aggregate capital Federal rate payments based on the proposed FY 2010 MS–DRG PO 00000 Frm 00177 Fmt 4701 Sfmt 4702 24255 classifications and relative weights and the proposed FY 2010 GAFs. In making the comparison, we set the exceptions reduction factor to 1.00. To achieve budget neutrality for the proposed changes in the national GAFs, based on calculations using updated data, we are proposing to apply an incremental budget neutrality adjustment of 0.9999 for FY 2010 to the previous cumulative FY 2009 adjustment of 0.9917, yielding a proposed adjustment of 0.9916, through FY 2010. For the Puerto Rico GAFs, we are proposing to apply an incremental budget neutrality adjustment of 1.0015 for FY 2010 to the previous cumulative FY 2009 adjustment of 0.9960 (calculated with unrounded numbers), yielding a proposed cumulative adjustment of 0.9975 through FY 2010. We then compared estimated aggregate capital Federal rate payments based on the FY 2009 DRG relative weights and the proposed FY 2010 GAFs to estimated aggregate capital Federal rate payments based on the cumulative effects of the proposed FY 2010 MS–DRG classifications and relative weights and the proposed FY 2010 GAFs. The proposed incremental adjustment for proposed DRG classifications and proposed changes in relative weights is 0.9995 both nationally and for Puerto Rico. The proposed cumulative adjustments for MS–DRG classifications and changes in relative weights and for proposed changes in the GAFs through FY 2010 are 0.9911 (calculated with unrounded numbers) nationally and 0.9969 for Puerto Rico. The following table summarizes the adjustment factors for each fiscal year: BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules BILLING CODE 4210–01–C VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00178 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.014</GPH> sroberts on PROD1PC70 with FRONTMATTER 24256 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules The methodology used to determine the recalibration and geographic adjustment factor (DRG/GAF) budget neutrality adjustment is similar to the methodology used in establishing budget neutrality adjustments under the IPPS for operating costs. One difference is that, under the operating IPPS, the budget neutrality adjustments for the effect of geographic reclassifications are determined separately from the effects of other changes in the hospital wage index and the DRG relative weights. Under the capital IPPS, there is a single DRG/GAF budget neutrality adjustment factor (the national capital rate and the Puerto Rico capital rate are determined separately) for changes in the GAF (including geographic reclassification) and the DRG relative weights. In addition, there is no adjustment for the effects that geographic reclassification has on the other payment parameters, such as the payments for DSH or IME. For FY 2009, we calculated a final GAF/DRG budget neutrality factor of 1.0015 (73 FR 57892). For FY 2010, we are proposing to establish a GAF/DRG budget neutrality factor of 0.9994. The GAF/DRG budget neutrality factors are built permanently into the capital rates; that is, they are applied cumulatively in determining the capital Federal rate. This follows the requirement that estimated aggregate payments each year be no more or less than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAFs. The incremental change in the proposed adjustment from FY 2009 to FY 2010 is 0.9994. The cumulative change in the proposed capital Federal rate due to this proposed adjustment is 0.9911 (the product of the incremental factors for FYs 1995 though 2009 and the proposed incremental factor of 0.9994 for FY 2010). (We note that averages of the incremental factors that were in effect during FYs 2005 and 2006, respectively, were used in the calculation of the proposed cumulative adjustment of 0.9911 for FY 2010.) The proposed factor accounts for the proposed MS–DRG reclassifications and recalibration and for proposed changes in the GAFs. It also incorporates the effects on the proposed GAFs of FY 2010 geographic reclassification decisions made by the MGCRB compared to FY 2009 decisions. However, it does not account for changes in payments due to changes in the DSH and IME adjustment factors. 4. Exceptions Payment Adjustment Factor Section 412.308(c)(3) of our regulations requires that the capital standard Federal rate be reduced by an VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 adjustment factor equal to the estimated proportion of additional payments for both regular exceptions and special exceptions under § 412.348 relative to total capital PPS payments. In estimating the proportion of regular exception payments to total capital PPS payments during the transition period, we used the actuarial capital cost model originally developed for determining budget neutrality (described in Appendix B of the FY 2002 IPPS final rule (66 FR 40099)) to determine the exceptions payment adjustment factor, which was applied to both the Federal and hospital-specific capital rates. An adjustment for regular exception payments is no longer necessary in determining the proposed FY 2010 capital Federal rate because, in accordance with § 412.348(b), regular exception payments were only made for cost reporting periods beginning on or after October 1, 1991 and before October 1, 2001. Accordingly, as we explained in the FY 2002 IPPS final rule (66 FR 39949), in FY 2002 and subsequent fiscal years, no payments are made under the regular exceptions provision. However, in accordance with § 412.308(c), we still need to compute a budget neutrality adjustment for special exception payments under § 412.348(g). We describe our methodology for determining the proposed exceptions adjustment used in calculating the FY 2010 capital Federal rate below. Under the special exceptions provision specified at § 412.348(g)(1), eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a disproportionate share percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals with a combined Medicare and Medicaid inpatient utilization of at least 70 percent. An eligible hospital may receive special exceptions payments if it meets the following criteria: (1) A project need requirement as described at § 412.348(g)(2), which, in the case of certain urban hospitals, includes an excess capacity test as described at § 412.348(g)(4); (2) an age of assets test as described at § 412.348(g)(3); and (3) a project size requirement as described at § 412.348(g)(5). Based on information compiled from our fiscal intermediaries and MACs, six hospitals have qualified for special exceptions payments under § 412.348(g). One of these hospitals closed in May 2005. Because we have cost reports ending in FY 2006 for all five of these hospitals, we calculated the adjustment based on actual cost experience. Using data from cost reports ending in FY 2006 from the December PO 00000 Frm 00179 Fmt 4701 Sfmt 4702 24257 2008 update of the HCRIS data, we divided the capital special exceptions payment amounts for the five hospitals that qualified for special exceptions by the total capital PPS payment amounts (including special exception payments) for all hospitals. Based on the data from cost reports ending in FY 2006, this ratio is rounded to 0.0001. We also computed the ratio for FY 2005, which rounds to 0.0002, and the ratio for FY 2004, which rounds to 0.0003. Based on these data, we are proposing to make an adjustment of 0.0001. Because special exceptions are budget neutral, we are proposing to offset the proposed capital Federal rate by 0.01 percent for special exceptions payments for FY 2010. Therefore, the proposed exceptions adjustment factor is equal to 0.0001 (1– 0.9999) to account for special exceptions payments in FY 2009. In the FY 2009 IPPS final rule (73 FR 48773), we estimated that total (special) exceptions payments for FY 2009 would equal 0.01 percent of aggregate payments based on the proposed capital Federal rate. Therefore, we applied an exceptions adjustment factor of 0.9999 (1–0.0001) to determine the FY 2009 capital Federal rate. As we stated above, we estimate that exceptions payments in FY 2010 would equal 0.01 percent of aggregate payments based on the proposed FY 2010 capital Federal rate. Therefore, we are proposing to apply an exceptions payment adjustment factor of 0.9999 to the proposed capital Federal rate for FY 2010. The proposed exceptions adjustment factor for FY 2010 is the same as the factor used in determining the FY 2009 capital Federal rate as established in the FY 2009 IPPS final rule. The exceptions reduction factors are not built permanently into the capital rates; that is, the factors are not applied cumulatively in determining the capital Federal rate. Therefore, the net change in the proposed exceptions adjustment factor used in determining the proposed FY 2010 capital Federal rate is 1.0000 (0.9999/0.9999). 5. Proposed Capital Standard Federal Rate for FY 2010 For FY 2009, we established a final capital Federal rate of $424.17 (73 FR 57891). We are proposing an update of 1.2 percent in determining the proposed FY 2010 capital Federal rate for all hospitals. However, as discussed in greater detail in section III.E.1. of the preamble of this proposed rule, under the statutory authority at section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Public Law 110–90, we are proposing an additional 1.9 percent E:\FR\FM\22MYP2.SGM 22MYP2 24258 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules reduction to the national capital Federal payment rate in FY 2010. The proposed 1.9 percent reduction is based on our Actuary’s analysis of the effect of changes in case-mix resulting from documentation and coding changes that do not reflect real changes in the casemix in light of the adoption of MS– DRGs. Accordingly, we are proposing to apply a cumulative documentation and coding adjustment of ¥3.4 percent (that is, the existing ¥1.5 percent adjustment plus the proposed additional ¥1.9 percent adjustment) by applying a factor of 0.967 (that is 1 divided by 1.034) in determining the national capital Federal rate for FY 2010. (As also discussed in greater detail in section III.E.2. of the preamble of this proposed rule, under the statutory authority at section 1886(g) of the Act, in conjunction with section 1886(d)(3)(A)(vi) of the Act and section 7(b) of Pub. L. 110–90, based on an analysis of the change in case-mix after the implementation of the MS–DRGs for hospitals located in Puerto Rico, we are proposing to apply a 1.1 percent reduction in developing the proposed FY 2010 Puerto Rico-specific capital rate.) As a result of the proposed 1.2 percent update and other proposed budget neutrality factors discussed above, we are proposing to establish a national capital Federal rate of $420.67 for FY 2010. The proposed national capital Federal rate for FY 2010 was calculated as follows: • The proposed FY 2010 update factor is 1.0120, that is, the update is 1.2 percent. • The proposed FY 2010 budget neutrality adjustment factor that is applied to the capital standard Federal payment rate for proposed changes in the MS–DRG classifications and relative weights and proposed changes in the GAFs is 0.9994. • The proposed FY 2010 outlier adjustment factor is 0.9454. • The proposed FY 2010 (special) exceptions payment adjustment factor is 0.9999. • The proposed FY 2010 adjustment factor applied to the national capital Federal rate for changes in documentation and coding under the MS–DRGs is 0.967. Because the proposed capital Federal rate has already been adjusted for differences in case-mix, wages, cost-ofliving, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients, we are not proposing to make additional adjustments in the capital standard Federal rate for these factors, other than the budget neutrality factor for proposed changes in the MS–DRG classifications and relative weights and for proposed changes in the GAFs. We are providing the following chart that shows how each of the proposed factors and adjustments for FY 2010 affected the computation of the proposed FY 2010 national capital Federal rate in comparison to the FY 2009 national capital Federal rate. The proposed FY 2010 update factor has the effect of increasing the proposed capital Federal rate by 1.2 percent compared to the FY 2009 capital Federal rate. The proposed GAF/DRG budget neutrality factor has the effect of decreasing the proposed capital Federal rate by 0.06 percent. The proposed FY 2010 outlier adjustment factor has the effect of decreasing the proposed capital Federal rate by 0.12 percent compared to the FY 2009 capital Federal rate. The proposed FY 2010 exceptions payment adjustment factor has no net effect on the proposed capital Federal rate. Furthermore, as shown in the chart below, the resulting cumulative adjustment for changes in documentation and coding that do not reflect real changes in patients’ severity of illness (that is, the proposed cumulative adjustment factor of 0.967) has the net effect of decreasing the proposed FY 2010 national capital Federal rate by 1.83 percent as compared to the FY 2009 national capital Federal rate. (As discussed in section VI.E.1. of the preamble of this proposed rule, a cumulative adjustment of ¥1.5 percent (that is, a factor of 0.985) was applied to the FY 2009 capital Federal rate for changes in documentation and coding that do not reflect real changes in patients’ severity of illness.) The combined effect of all the proposed changes would decrease the national capital Federal rate by approximately 0.83 percent compared to the FY 2009 national capital Federal rate. COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2009 CAPITAL FEDERAL RATE AND PROPOSED FY 2010 CAPITAL FEDERAL RATE FY 2009 Update Factor 1 ................................................................................................ GAF/DRG Adjustment Factor 1 ........................................................................ Outlier Adjustment Factor 2 .............................................................................. Exceptions Adjustment Factor 2 ....................................................................... MS–DRG Documentation and Coding Adjustment Factor .............................. Capital Federal Rate ........................................................................................ 1.0090 1.0015 0.9465 0.9999 0.985 $424.17 FY 2010 1.0120 0.9994 0.9454 0.9999 0.967 $420.67 Change 1.0120 0.9994 0.9988 1.0000 0.9817 0.9917 Percent change 1.20 ¥0.06 ¥0.12 0.00 ¥1.83 ¥0.83 sroberts on PROD1PC70 with FRONTMATTER 1 The update factor and the GAF/DRG budget neutrality factors are built permanently into the capital rates. Thus, for example, the incremental change from FY 2009 to FY 2010 resulting from the application of the proposed 0.9994 GAF/DRG budget neutrality factor for FY 2010 is 0.9994. 2 The outlier reduction factor and the exceptions adjustment factor are not built permanently into the capital rates; that is, these factors are not applied cumulatively in determining the capital rates. Thus, for example, the net change resulting from the application of the proposed FY 2010 outlier adjustment factor is 0.9454/0.9465, or 0.9988. 6. Proposed Special Capital Rate for Puerto Rico Hospitals Section 412.374 provides for the use of a blended payment system for payments to hospitals located in Puerto Rico under the PPS for acute care hospital inpatient capital-related costs. Accordingly, under the capital PPS, we compute a separate payment rate specific to hospitals located in Puerto VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Rico using the same methodology used to compute the national Federal rate for capital-related costs. Under the broad authority of section 1886(g) of the Act, as discussed in section VI. of the preamble of this proposed rule, beginning with discharges occurring on or after October 1, 2004, capital payments to hospitals located in Puerto Rico are based on a blend of 25 percent PO 00000 Frm 00180 Fmt 4701 Sfmt 4702 of the Puerto Rico capital rate and 75 percent of the capital Federal rate. The Puerto Rico capital rate is derived from the costs of Puerto Rico hospitals only, while the capital Federal rate is derived from the costs of all acute care hospitals participating in the IPPS (including Puerto Rico). To adjust hospitals’ capital payments for geographic variations in capital E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules costs, we apply a GAF to both portions of the blended capital rate. The GAF is calculated using the operating IPPS wage index, and varies depending on the labor market area or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital-blended rate and the national wage index to determine the GAF for the national part of the blended capital rate. Because we implemented a separate GAF for Puerto Rico in FY 1998, we also apply separate budget neutrality adjustments for the national GAF and for the Puerto Rico GAF. However, we apply the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. As we stated in section III.A.4. of this Addendum, the proposed national GAF budget neutrality factor is 0.9999, while the DRG adjustment is 0.9995, for a combined proposed cumulative adjustment of 0.9994. In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the capital rate (25 percent) is multiplied by the Puerto Rico-specific GAF for the labor market area in which the hospital is located, and the national portion of the capital rate (75 percent) is multiplied by the national GAF for the labor market area in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico capital rate as a result of Public Law 105–33. In FY 2003, a small part of that reduction was restored. For FY 2009, before application of the GAF, the special capital rate for hospitals located in Puerto Rico is $198.77 for discharges occurring on or after October 1, 2008, through September 30, 2009 (73 FR 57893). Consistent with our development of the FY 2009 Puerto Rico-specific operating standardized amount, we did not apply the additional ¥0.9 percent documentation and coding adjustment (or the cumulative ¥1.5 percent adjustment) to the FY 2009 Puerto Ricospecific capital rate. We also noted in the FY 2009 IPPS final rule (73 FR 48449 through 48550) that we may propose to apply such an adjustment to the Puerto Rico operating and capital rates in the future. With the changes we are proposing to make to the other factors used to determine the proposed capital rate, the proposed FY 2010 special capital rate for hospitals in Puerto Rico is $201.91. As discussed in greater detail in section VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 VI.E.1. of the preamble of this proposed rule, consistent with our development of the proposed Puerto Rico-specific operating standardized amount, we are proposing to reduce the Puerto Ricospecific capital rate by 1.1 percent to account for changes in documentation and coding as a result of the adoption of the MS–DRGs by applying a factor of 0.989 (that is, 1 divided by 1.011) in determining the proposed FY 2010 Puerto Rico-specific capital rate. B. Calculation of the Proposed Inpatient Capital-Related Prospective Payments for FY 2010 Because the 10-year capital PPS transition period ended in FY 2001, all hospitals (except ‘‘new’’ hospitals under § 412.324(b) and under § 412.304(c)(2)) are paid based on 100 percent of the capital Federal rate in FY 2010. For purposes of calculating proposed payments for each discharge during FY 2010, the capital standard Federal rate is adjusted as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor, if applicable). The result is the adjusted capital Federal rate. (As discussed above, under current law, there will no longer be an adjustment for IME under the capital IPPS beginning in FY 2010 (§ 412.322(d).) Hospitals also may receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. The proposed outlier thresholds for FY 2010 are in section II.A. of this Addendum. For FY 2010, a case would qualify as a cost outlier if the cost for the case plus the (operating) IME and DSH payments is greater than the prospective payment rate for the MS–DRG plus the proposed fixed-loss amount of $24,240. An eligible hospital may also qualify for a special exceptions payment under § 412.348(g) up through the 10th year beyond the end of the capital transition period if it meets the following criteria: (1) A project need requirement described at § 412.348(g)(2), which in the case of certain urban hospitals includes an excess capacity test as described at § 412.348(g)(4); and (2) a project size requirement as described at § 412.348(g)(5). Eligible hospitals include SCHs, urban hospitals with at least 100 beds that have a DSH patient percentage of at least 20.2 percent or qualify for DSH payments under § 412.106(c)(2), and hospitals that have a combined Medicare and Medicaid PO 00000 Frm 00181 Fmt 4701 Sfmt 4702 24259 inpatient utilization of at least 70 percent. Under § 412.348(g)(8), the amount of a special exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital PPS to the cumulative minimum payment level. This amount is offset by: (1) Any amount by which a hospital’s cumulative capital payments exceed its cumulative minimum payment levels applicable under the regular exceptions process for cost reporting periods beginning during which the hospital has been subject to the capital PPS; and (2) any amount by which a hospital’s current year operating and capital payments (excluding 75 percent of operating DSH payments) exceed its operating and capital costs. Under § 412.348(g)(6), the minimum payment level is 70 percent for all eligible hospitals. Currently, as provided in § 412.304(c)(2), we pay a new hospital 85 percent of its reasonable costs during the first 2 years of operation unless it elects to receive payment based on 100 percent of the capital Federal rate. Effective with the third year of operation, we pay the hospital based on 100 percent of the capital Federal rate (that is, the same methodology used to pay all other hospitals subject to the capital PPS). C. Capital Input Price Index 1. Background Like the operating input price index, the capital input price index (CIPI) is a fixed-weight price index that measures the price changes associated with capital costs during a given year. The CIPI differs from the operating input price index in one important aspect— the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weightedaverage of past capital purchase prices up to and including the current year. We periodically update the base year for the operating and capital input price indexes to reflect the changing composition of inputs for operating and capital expenses. In this proposed rule, we are proposing to rebase and revise the CIPI to a FY 2006 base year to reflect the more current structure of capital costs in hospitals. A complete E:\FR\FM\22MYP2.SGM 22MYP2 24260 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules discussion of this rebasing is provided in section IV.D. of the preamble of this proposed rule. The CIPI was last rebased to FY 2002 in the FY 2006 IPPS final rule (70 FR 47387). sroberts on PROD1PC70 with FRONTMATTER 2. Forecast of the CIPI for FY 2010 Based on the latest forecast by IHS Global Insight, Inc. (first quarter of 2009), we are forecasting the proposed FY 2006-based CIPI to increase 1.2 percent in FY 2010. This reflects a projected 1.7 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment), and a 2.2 percent increase in other capital expense prices in FY 2010, partially offset by a 1.7 percent decline in vintage-weighted interest expenses in FY 2010. The weighted average of these three factors produces the 1.2 percent increase for the proposed FY 2006-based CIPI as a whole in FY 2010. IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-ofIncrease Percentages Historically, hospitals and hospital units excluded from the prospective payment system received payment for inpatient hospital services they furnished on the basis of reasonable costs, subject to a rate-of-increase ceiling. An annual per discharge limit (the target amount as defined in § 413.40(a)) was set for each hospital or hospital unit based on the hospital’s own cost experience in its base year. The target amount was multiplied by the Medicare discharges and applied as an aggregate upper limit (the ceiling as defined in § 413.40(a)) on total inpatient operating costs for a hospital’s cost reporting period. Prior to October 1, 1997, these payment provisions applied consistently to all categories of excluded providers (rehabilitation hospitals and units (now referred to as IRFs), psychiatric hospitals and units (now referred to as IPFs), LTCHs, children’s hospitals, and cancer hospitals). Payments for services furnished in children’s hospitals and cancer hospitals that are excluded from the IPPS continue to be subject to the rateof-increase ceiling based on the hospital’s own historical cost experience. (We note that, in accordance with § 403.752(a), RNHCIs are also subject to the rate-of-increase limits established under § 413.40 of the regulations.) We are proposing that the FY 2010 rate-of-increase percentage for cancer and children’s hospitals and RNHCIs be the estimated percentage increase in the FY 2010 IPPS operating market basket, estimated to be 2.1 percent, in VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 accordance with applicable regulations at § 413.40. We are proposing to use the most recent data available to determine the estimated FY 2010 IPPS operating market basket based on IHS Global Insight, Inc.’s first quarter 2009 forecast of the IPPS operating market basket increase, which is estimated to be 2.1 percent. (We are proposing to use more recent data when determining the estimated percentage increase for the FY 2010 IPPS operating market basket for the final rule, to the extent these data are available.) IRFs, IPFs, and LTCHs were previously paid under the reasonable cost methodology. However, the statute was amended to provide for the implementation of prospective payment systems for IRFs, IPFs, and LTCHs. In general, the prospective payment systems for IRFs, IPFs, and LTCHs provide transitioning periods of varying lengths of time during which a portion of the prospective payment is based on cost-based reimbursement rules under 42 CFR Part 413 (certain providers do not receive a transitioning period or may elect to bypass the transition as applicable under 42 CFR Part 412, Subparts N, O, and P). We note that all of the various transitioning periods provided for under the IRF PPS, the IPF PPS, and the LTCH PPS have ended. The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We refer readers to section VIII. of the preamble and section V. of the Addendum to this proposed rule for the proposed update changes to the Federal payment rates for LTCHs under the LTCH PPS for RY 2010. The annual updates for the IRF PPS and the IPF PPS are issued by the agency in separate Federal Register documents. V. Proposed Changes to the Payment Rates for the LTCH PPS for RY 2010 A. Proposed LTCH PPS Standard Federal Rate for FY 2010 1. Background In section VIII. of the preamble of this proposed rule, we discuss our proposed changes to the payment rates, factors, and specific policies under the LTCH PPS for RY 2010. At § 412.523(c)(3)(ii) of the regulations, for LTCH PPS rate years beginning RY 2004 through RY 2006, we updated the standard Federal rate by a rate increase factor to adjust for the most recent estimate of the increases in prices of an appropriate market basket of goods and services for LTCHs. We established that policy of annually updating the standard Federal rate because, at that time, we believed that was the most appropriate method for updating the LTCH PPS standard PO 00000 Frm 00182 Fmt 4701 Sfmt 4702 Federal rate annually for years after the initial implementation of the LTCH PPS in FY 2003. When we moved the date of the annual update of the LTCH PPS from October 1 to July 1 in the RY 2004 LTCH PPS final rule (68 FR 34138), we revised § 412.523(c)(3) to specify that, for LTCH PPS rate years beginning on or after July 1, 2003, the annual update to the standard Federal rate for the LTCH PPS would be equal to the previous rate year’s Federal rate updated by the most recent estimate of increases in the appropriate market basket of goods and services included in covered inpatient LTCH services. At that time, we believed that was the most appropriate method for updating the LTCH PPS standard Federal rate annually for years after RY 2004. In the RY 2007 LTCH PPS final rule (71 FR 27818), we explained that rather than solely using the most recent estimate of the LTCH PPS market basket as the basis of the update factor for the standard Federal rate for RY 2007, we believed that, based on our ongoing monitoring activity, it was appropriate to adjust the standard Federal rate to account for the changes in documentation and coding practices (rather than patient severity of illness). We established regulations at § 412.523(c)(3)(iii) to specify that the update to the standard Federal rate for the 2007 LTCH PPS rate year is zero percent. This was based on the most recent estimate of the LTCH PPS market basket at the time, which was offset by an adjustment to account for changes in case-mix in prior periods due to changes in documentation and coding rather than increased patient severity of illness in FY 2004. For the following year, we also considered changes in documentation and coding practices rather than patient severity of illness in establishing the update to the standard Federal rate for the 2008 LTCH PPS rate year. In the RY 2008 LTCH PPS final rule (72 FR 26887 through 27890), we adjusted the standard Federal rate based on the most recent estimate of the increase in the market basket (3.2 percent) and an adjustment to account for changes in documentation and coding practices (2.49 percent) in FY 2005. Accordingly, we established regulations at § 412.523(c)(3)(iv) to specify that the update to the standard Federal rate for RY 2008 was 0.71 percent. However, Public Law 110–173 (MMSEA), enacted on December 29, 2007, contained a provision that addressed the standard Federal rate for RY 2008. Specifically, section 114(e)(1) of Public Law 110–173 provided that under the added section 1886(m)(2) of E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules the Act, the standard Federal rate for RY 2008 shall be the same as the standard Federal rate for RY 2007. In addition, section 114(e)(2) of Public Law 110–173 specifically stated that the revised standard Federal rate provided for under section 114(e)(1) ‘‘shall not apply to discharges occurring on or after July 1, 2007, and before April 1, 2008,’’ effectively resulting in a delay of the application of the updated standard Federal rate for RY 2007 established in the LTCH PPS RY 2008 final rule (72 FR 26890). We implemented these statutory provisions in an interim final rule with comment period (73 FR 24875 through 24877). Accordingly, we revised § 412.523(c)(iv) to provide that: (1) The standard Federal rate for the LTCH PPS RY 2008 is the same as the standard Federal rate for the previous LTCH PPS RY, which is RY 2007; and (2) for discharges occurring on or after July 1, 2007, and before April 1, 2008, payments are based on the standard Federal rate for LTCH PPS RY 2007, updated by 0.71 percent. Thus, effectively, the standard Federal rate used to determine LTCH PPS payments for discharges occurring on or after July 1, 2007, through March 31, 2008 is the standard Federal rate for RY 2007 updated by 0.71 percent, while LTCH PPS payments for discharges occurring from April 1, 2008, through June 30, 2008, are determined based on the standard Federal rate set forth in section 114(e)(1) of Public Law 110–173 (that is, the same standard Federal rate as the previous rate year (RY 2007)). Consistent with our historical practice, in the RY 2009 LTCH PPS final rule (73 FR 26806), we updated the standard Federal rate from the previous year (that is, the standard Federal rate for RY 2008 as established by section 1886(m)(2) of the Act) to determine the standard Federal rate for RY 2009. In that same final rule, under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of the BIPA, we established an annual update to the standard Federal rate for RY 2009 based on the most recent estimate of the increase in the LTCH PPS market basket of 3.6 percent (for the 15-month rate year, which was based on the best available data at that time) and an adjustment of ¥0.9 percent to account for the increase in case-mix in a prior period (FY 2006) due to changes in documentation and coding practices rather than an increase in patient severity of illness. (As noted above, we established a 15-month period for RY 2009 (July 1, 2008 through September 30, 2009) in order to move the LTCH VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PPS annual rate update to an October 1 effective date beginning October 1, 2009. We refer readers to 73 FR 26797 through 26798).) Accordingly, we established regulations at § 412.523(c)(3)(v) to specify that the update to the standard Federal rate for the 2009 LTCH PPS rate year is 2.7 percent. 2. Development of the Proposed RY 2010 LTCH PPS Standard Federal Rate As noted above and as discussed in greater detail in the RY 2007, RY 2008, and RY 2009 LTCH PPS final rules (71 FR 27819 through 27827, 72 FR 26887 through 2689, and 73 FR 26805 through 26812, respectively), while we continue to believe that an update to the LTCH PPS standard Federal rate should be based on the most recent estimate of the increase in the LTCH PPS market basket, we also believe it is appropriate that the standard Federal rate be offset by an adjustment to account for any changes in documentation and coding practices that do not reflect increased patient severity of illness. Such an adjustment protects the integrity of the Medicare Trust Funds by ensuring that the LTCH PPS payment rates better reflect the true costs of treating LTCH patients. Furthermore, as we discussed most recently in the RY 2009 final rule (73 FR 26805), we did not establish a case-mix budget neutrality factor (that is, a documentation and coding adjustment for changes in case-mix that are not due to changes in patient severity of illness) for the adoption of the severity adjusted MS–LTC–DRG patient classification system. Rather, we noted that, consistent with past LTCH payment policy, we would continue to monitor LTCH data and we could propose to make adjustments when updating the LTCH PPS standard Federal rate in the future to account for changes in documentation and coding that do not reflect any real changes in case-mix during these years that we are implementing MS–LTC–DRGs. As we discussed in greater detail in section VIII.C.3. of the preamble of this proposed rule, we performed a case-mix index (CMI) analysis using the most recent available LTCH claims data under both the current MS-LTC-DRG and former CMS LTC–DRG patient classification systems. Based on this evaluation, we have determined that there was a total increase in LTCH CMI of 1.8 percent due to changes in documentation and coding that did not reflect real changes in patient severity of illness for LTCH discharges occurring in FY 2007 and FY 2008. Specifically, our analysis showed an increase in CMI of 0.5 percent in FY 2007 and 1.3 percent PO 00000 Frm 00183 Fmt 4701 Sfmt 4702 24261 in FY 2008 due to changes in documentation and coding that did not reflect increased patient severity of illness (or costs). At this time, the most recent estimate of the proposed increase in the LTCH PPS market basket (that is, the FY 2002based RPL market basket) for RY 2010 is 2.4 percent, as discussed in section VIII.B.2. of the preamble of this proposed rule. Consistent with our historical practice, in this proposed rule, we are proposing to update the LTCH PPS standard Federal rate for RY 2010 based on the full proposed LTCH PPS market basket increase estimate of 2.4 percent and a proposed adjustment to account for the increase in case-mix in prior periods (FYs 2007 and 2008) that resulted from changes in documentation and coding practices of 1.8 percent. Therefore, the proposed update factor to the standard Federal rate for RY 2010 is 0.6 percent (that is, we are proposing to apply a factor of 1.006 in determining the proposed LTCH PPS standard Federal rate for RY 2010, calculated as 1.024 × 1 divided by 1.018 = 1.006 or 0.6 percent). That is, under the broad authority conferred upon the Secretary under the BBRA and the BIPA to determine appropriate updates under the LTCH PPS, we are proposing to specify under § 412.523(c)(3)(vi) that, for LTCH discharges occurring on or after October 1, 2009, and on or before September 30, 2010, the standard Federal rate from the previous year would be updated by 0.6 percent. In determining the proposed standard Federal rate for RY 2010, we are applying the proposed 1.006 update factor to the RY 2009 Federal rate of $39,114.36 (as established in the RY 2009 LTCH PPS final rule (73 FR 26812)). Consequently, the proposed standard Federal rate for RY 2010 is $39,349.05. We also are proposing that if more recent data become available, we would use that data, if appropriate, to determine the update to the standard Federal rate for RY 2010 in the final rule, and, thus, the standard Federal rate update noted in the proposed regulation text at § 412.523(c)(3)(vi) could change. B. Proposed Adjustment for Area Wage Levels under the LTCH PPS for RY 2010 1. Background Under the authority of section 123 of the BBRA as amended by section 307(b) of the BIPA, we established an adjustment to the LTCH PPS standard Federal rate to account for differences in LTCH area wage levels at § 412.525(c). The labor-related share of the LTCH PPS standard Federal rate (discussed in greater detail in section VIII.C.2. of the E:\FR\FM\22MYP2.SGM 22MYP2 24262 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules preamble of this proposed rule), is adjusted to account for geographic differences in area wage levels by applying the applicable LTCH PPS wage index. The applicable LTCH PPS wage index is computed using wage data from inpatient acute care hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56015), when we implemented the LTCH PPS, we established a 5-year transition to the full wage index adjustment. The wage index adjustment was completely phased-in for cost reporting periods beginning in FY 2007. Therefore, for cost reporting periods beginning on or after October 1, 2006, the applicable LTCH wage index values are the full (five-fifths) LTCH PPS wage index values calculated based on acute care hospital inpatient wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. For additional information on the phase-in of the wage index adjustment under the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final rule (67 FR 56017 through 56019) and the RY 2008 LTCH PPS final rule (72 FR 26891). sroberts on PROD1PC70 with FRONTMATTER 2. Proposed Updates to the Geographic Classifications/Labor Market Area Definitions a. Background As discussed in the August 30, 2002 LTCH PPS final rule, which implemented the LTCH PPS (67 FR 56015 through 56019), in establishing an adjustment for area wage levels under § 412.525(c), the labor-related portion of a LTCH’s Federal prospective payment is adjusted by using an appropriate wage index based on the labor market area in which the LTCH is located. In the RY 2006 LTCH PPS final rule (70 FR 24184 through 24185), in regulations at § 412.525(c), we revised the labor market area definitions used under the LTCH PPS effective for discharges occurring on or after July 1, 2005, based on the Executive OMB’s CBSA designations which are based on 2000 Census data. We made this revision because we believe that the CBSA-based labor market area definitions will ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. We note that these are the same CBSA-based designations VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 implemented for acute care hospitals under the IPPS at § 412.64(b), effective October 1, 2004 (69 FR 49026 through 49034). (For further discussion of the CBSA-based labor market area (geographic classification) definitions currently used under the LTCH PPS, we refer readers to the RY 2006 LTCH PPS final rule (70 FR 24182 through 24191).) In the RY 2009 LTCH PPS final rule (73 FR 26814), we codified the definitions of ‘‘urban’’ and ‘‘rural’’ in 42 CFR Part 412, Subpart O (the subpart of the regulations specific to the LTCH PPS). Prior to this codification, the application of the wage index adjustment under § 412.525(c)(2) was made on the basis of the location of the facility in either an urban area or a rural area as defined in § 412.64(b)(1)(ii)(A) through (C) of the regulations, which apply specifically to the IPPS. Under that regulatory construction, existing § 412.525(c) indicated that the terms ‘‘rural area’’ and ‘‘urban area’’ were defined according to the definitions of those terms under the IPPS in 42 CFR Part 412, Subpart D. In that same final rule, we revised § 412.525(c) to specify that the application of the LTCH PPS wage index adjustment is made on the basis of the location of the LTCH in either an urban area or a rural area as defined in § 412.503 because we believe it is administratively simpler to have the LTCH PPS urban and rural labor market area definitions self-contained in the regulations of the subpart specific to the LTCH PPS (§ 412.503) rather than specifying a cross-reference to the definitions of urban area and rural area in the IPPS regulations in 42 CFR Part 412, Subpart D. Thus, under § 412.503, for discharges occurring on or after July 1, 2008, an ‘‘urban area’’ under the LTCH PPS is defined as a Metropolitan Statistical Area, as defined by OMB and a ‘‘rural area’’ is defined as any area outside of an urban area. In addition, in the RY 2009 final rule (73 FR 26813 through 26814), we clarified the change regarding the treatment of Litchfield County, Connecticut (CT), and Merrimack County, New Hampshire (NH) CBSAbased labor market area definitions. Specifically, we discussed that, effective for LTCH PPS discharges occurring on or after July 1, 2008, Litchfield County, CT, and Merrimack County, NH, are considered ‘‘rural’’ and are no longer considered as being part of urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, NH), respectively, as these areas had been in the past as a result of a change to the regulations at § 412.64(b)(1)(ii)(B) established in the FY 2008 IPPS final rule with comment PO 00000 Frm 00184 Fmt 4701 Sfmt 4702 period (72 FR 47337 through 47338). In making this clarification, we noted that this policy is consistent with our policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS. b. Update to the CBSA-Based Labor Market Area Definitions The CBSA-based labor market area definitions used under the LTCH PPS were last updated in the RY 2009 LTCH PPS final rule (73 FR 26812 through 26813) based on the most recent OMB bulletin available at that time (December 18, 2006; OMB Bulletin No. 07–01). Since that time, there have been two OMB bulletins announcing revisions to the CBSA designations. First, on November 20, 2007, OMB announced the revision of titles for eight urban areas (OMB Bulletin No. 08–01). This OMB bulletin is available on the OMB Web site at: https://www.whitehouse.gov/ omb/assets/omb/bulletins/fy2008/b0801.pdf. The revised titles are as follows: • Hammonton, New Jersey qualifies as a new principal city of the Atlantic City, New Jersey CBSA. The new title is Atlantic City-Hammonton, New Jersey CBSA (CBSA 12100). • New Brunswick, New Jersey, located in the Edison, New Jersey Metropolitan Division, qualifies as a new principal city of the New YorkNorthern New Jersey-Long Island, New York, New Jersey, Pennsylvania CBSA. The new title for the Metropolitan Division is Edison-New Brunswick, New Jersey CBSA (CBSA 20764). • Summerville, South Carolina qualifies as a new principal city of the Charleston-North Charleston, South Carolina CBSA. The new title is Charleston-North CharlestonSummerville, South Carolina (CBSA 16700). • Winter Haven, Florida qualifies as a new principal city of the Lakeland, Florida CBSA. The new title is Lakeland-Winter Haven, Florida (CBSA 29460). • Bradenton, Florida replaces Sarasota, Florida as the most populous principal city of the Sarasota-BradentonVenice, Florida CBSA (currently CBSA 42260). The new title is BradentonSarasota-Venice, Florida. The new CBSA code is 14600. • Frederick, Maryland replaces Gaithersburg, Maryland as the second most populous principal city in the Bethesda-Gaithersburg-Frederick, Maryland CBSA. The new title is Bethesda-Frederick-Gaithersburg, Maryland (CBSA 13644). • North Myrtle Beach, South Carolina replaces Conway, South Carolina as the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules second most populous principal city of the Myrtle Beach-Conway-North Myrtle Beach, South Carolina CBSA. The new title is Myrtle Beach-North Myrtle Beach-Conway, South Carolina (CBSA 34820). • Pasco, Washington replaces Richland, Washington as the second most populous principal city of the Kennewick-Richland-Pasco, Washington CBSA. The new title is KennewickPasco-Richland, Washington (CBSA 28420). In this proposed rule, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of BIPA to determine appropriate adjustments under the LTCH PPS, we are proposing to apply these changes to the current CBSAbased labor market area definitions and geographic classifications used under the LTCH PPS effective for discharges occurring on or after October 1, 2009 (to the extent that they are not changed by the later OMB Bulletin No. 90–1 discussed below). We believe these revisions to the LTCH PPS CBSA-based labor market area definitions, which are based on the most recent available data, would ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national average hospital wage level. Accordingly, the proposed RY 2010 LTCH PPS wage index values presented in Tables 12A and 12B in the Addendum of this proposed rule reflect the proposed revisions to the CBSAbased labor market area definitions described above. We note that the eight CBSA title revisions announced in OMB Bulletin No.08–01 do not change the composition (constituent counties) of the affected CBSAs; they only revise the CBSA titles (and do not change the CBSA codes with the exception of the change in CBSA code 42260 to 14600). We also note that these revisions were applicable under the IPPS beginning October 1, 2008 (73 FR 48575). Second, on November 20, 2008, OMB announced three Micropolitan Statistical Areas that now qualify as MSAs and changed the principal cities and titles of a number of CBSAs and a Metropolitan Division (OMB Bulletin No. 09–01). This OMB bulletin is available on the OMB Web site at: https://www.whitehouse.gov/ omb/assets/omb/bulletins/fy2009/0901.pdf. The new urban CBSAs are as follows: • Cape Girardeau-Jackson, MissouriIllinois (CBSA 16020). This CBSA is comprised of the principal cities of Cape Girardeau and Jackson, Missouri; VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Alexander County, Illinois; Bollinger County, Missouri, and Cape Girardeau County, Missouri. • Manhattan, Kansas (CBSA 31740). This CBSA is comprised of the principal city of Manhattan, Kansas in Geary County, Pottawatomie County, and Riley County. • Mankato-North Mankato, Minnesota (CBSA 31860). This CBSA is comprised of the principal cities of Mankato and North Mankato, Minnesota in Blue Earth County and Nicollet County. The changes in the principal cities and the revised titles are as follows: • Broomfield, Colorado qualifies as a new principal city of the DenverAurora, Colorado CBSA. The new title is Denver-Aurora-Broomfield, Colorado (CBSA 19740). • Chapel Hill, North Carolina qualifies as a new principal city of the Durham, North Carolina CBSA. The new title is Durham-Chapel Hill, North Carolina (CBSA 20500). • Chowchilla, California qualifies as a new principal city of the Madera, California CBSA. The new title is Madera-Chowchilla, California (CBSA 31460). • Panama City Beach, Florida qualifies as a new principal city of the Panama City-Lynn Haven, Florida CBSA. The new title is Panama CityLynn Haven-Panama City Beach, Florida (CBSA 37460). • East Wenatchee, Washington qualifies as a new principal city of the Wenatchee, Washington CBSA. The new title is Wenatchee-East Wenatchee, Washington (CBSA 48300). • Rockville, Maryland replaces Gaithersburg, Maryland as the third most populous city of the BethesdaFrederick-Gaithersburg, Maryland Metropolitan Division. The new title is Bethesda-Frederick-Rockville, Maryland Metropolitan Division (CBSA 13644). In this proposed rule, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of BIPA, to determine appropriate adjustments under the LTCH PPS, we are proposing to apply these changes to the current CBSAbased labor market area definitions and geographic classifications used under the LTCH PPS effective for discharges occurring on or after October 1, 2009. We believe these proposed revisions to the LTCH PPS CBSA-based labor market area definitions, which are based on the most recent available data, would ensure that the LTCH PPS wage index adjustment most appropriately accounts for and reflects the relative hospital wage levels in the geographic area of the hospital as compared to the national PO 00000 Frm 00185 Fmt 4701 Sfmt 4702 24263 average hospital wage level. Accordingly, the proposed RY 2010 LTCH PPS wage index values presented in Tables 12A and 12B in the Addendum of this proposed rule reflect the revisions to the CBSA-based labor market area definitions described above. We note that the six CBSA title revisions noted above do not change the composition (constituent counties) of the affected CBSAs; they only revise the CBSA titles (and do not change the CBSA codes). We also note that we are currently aware of only one LTCH located in one of the three new CBSAs (CBSA 16020). As discussed in section III.C. of the preamble of this proposed rule, the revisions to the CBSA-based designations are also proposed for adoption under the IPPS effective beginning October 1, 2009. 3. Proposed LTCH PPS Labor-Related Share As noted above in this section, under the adjustment for difference in area wage levels at § 412.525(c), the laborrelated share of a LTCH’s PPS payment is adjusted by the applicable wage index for the labor market area in which the LTCH is located. Specifically, as discussed in section VIII.C.2.d. of the preamble of this proposed rule, the LTCH PPS labor-related share is determined by our actuaries and is based on data for the labor-related share of operating costs and capital costs of the FY 2002-based RPL market basket. (Additional background information on the historical development of the laborrelated share under the LTCH PPS can be found in the RY 2009 LTCH PPS final rule (73 FR 26815). In the RY 2007 final rule (71 FR 27829 through 27830), we established a labor-related share based on the relative importance of the laborrelated share of operating costs (wages and salaries, employee benefits, professional fees, postal services, and all other labor-intensive services) and capital costs of the RPL market basket based on FY 2002 data, as they are the best available data that reflect the cost structure of LTCHs. For the past 2 years (RYs 2008 and 2009), we updated the LTCH PPS labor-related share annually based on the latest available data for the RPL market basket. For RY 2009, the labor-related share is 75.662 percent, as established in the RY 2009 LTCH PPS final rule (73 FR 26815 through 26816), based on the sum of the relative importance of the labor-related share of operating costs (wages and salaries, employee benefits, professional fees, and all other labor-intensive services) and capital costs of the FY 2002-based RPL market basket from the first quarter E:\FR\FM\22MYP2.SGM 22MYP2 24264 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER of 2008 forecast (the most recent available data at that time). As discussed in section VIII.C. of the preamble of this proposed rule, we are proposing to continue to use the FY 2002-based RPL market basket used under the LTCH PPS for RY 2010. Furthermore, for RY 2010, we are proposing to continue to define the LTCH PPS labor-related share as the national average proportion of operating costs that are attributable to wages and salaries, employee benefits, the laborrelated portion of professional fees, all other labor-intensive services, and a labor-related portion of capital based on the FY 2002-based RPL market basket. (As noted above, additional information on the development of the FY 2002based RPL market basket used under the LTCH PPS can be found in the RY 2007 LTCH PPS final rule (71 FR 27808 through 27818).) Accordingly, consistent with our historical practice of using the best available data, we are proposing to use IHS Global Insight Inc.’s first quarter 2009 forecast of the FY 2002-based RPL market basket for RY 2010 to determine the proposed labor-related share for the LTCH PPS for RY 2010 that would be effective for discharges occurring on or after October 1, 2009, and through September 30, 2010, as these are the most recent available data. As shown in the chart in section VIII.C.2.d. of the preamble of this proposed rule, based on the latest available data (and the authority set forth in section 123 of the BBRA as amended by section 307(b) of the BIPA) we are proposing to establish a laborrelated share of 75.904 percent under the LTCH PPS for the RY 2010. Furthermore, consistent with our historical practice of using the best data available, we also are proposing that if more recent data are available to determine the labor-related share used under the LTCH PPS for RY 2010, we would use these data for determining the RY 2010 LTCH PPS labor-related share in the final rule. 4. Proposed LTCH PPS Wage Index for RY 2010 Historically, under the LTCH PPS, we have established LTCH PPS wage index values calculated from acute care IPPS hospital wage data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act. As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56019), hospitals that are excluded from the IPPS are not required to provide wage-related information on the Medicare cost report. Therefore, we would need to establish instructions for the collection of these LTCH data as VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 well as develop some type of application and determination process before a geographic reclassification adjustment under the LTCH PPS could be implemented. The wage adjustment established under the LTCH PPS is based on a LTCH’s actual location without regard to the urban or rural designation of any related or affiliated provider. Acute care hospital inpatient wage index data are also used to establish the wage index adjustment used in other Medicare PPSs, such as the IRF PPS, the IPF PPS, the HHA PPS, and the SNF PPS. In the RY 2009 LTCH PPS final rule (73 FR 26816 through 26817), we established LTCH PPS wage index values for RY 2009 calculated from the same data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2004 that were used to compute the FY 2008 acute care hospital inpatient wage index data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act because these were the best available data at that time. The LTCH PPS wage index values applicable for discharges occurring on or after July 1, 2008, through September 30, 2009, were shown in Table 1 (for urban areas) and Table 2 (for rural areas) in the Addendum to the RY 2009 LTCH PPS final rule (73 FR 26840 through 26863). In this proposed rule, under the broad authority conferred upon the Secretary by section 123 of the BBRA, as amended by section 307(b) of BIPA, to determine appropriate adjustments under the LTCH PPS for RY 2010, we are proposing to use the same data collected from cost reports submitted by IPPS hospitals for cost reporting periods beginning during FY 2006 that are being used to compute the proposed FY 2010 acute care hospital inpatient wage index data without taking into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act to determine the proposed applicable wage index values under the LTCH PPS in RY 2010 because these data (FY 2006) are the most recent complete data available at this time. (We note that due to the change in the annual LTCH PPS rate year update cycle from July 1 to October 1, effective October 1, 2009, established in the RY 2009 LTCH PPS final rule, there is no longer a lag-time in the availability of the IPPS hospital wage data used to develop the respective wage indices used under the IPPS and LTCH PPS. Consequently, because the annual update to the LTCH PPS and the IPPS now occurs on October 1 of each year, we are able to propose wage index PO 00000 Frm 00186 Fmt 4701 Sfmt 4702 values using the same wage data to develop the proposed LTCH wage index as is used to develop the proposed IPPS wage index in a given year. Under the previous July 1 annual LTCH PPS rate year update cycle, due to the lag-time in the availability of data, there was a 1year lag-time in the best available IPPS wage data to develop the LTCH PPS wage index each year (for example, as noted above, we established RY 2009 LTCH PPS wage index values from the same data collected from FY 2004 IPPS hospital cost reports that were used to compute the FY 2008 IPPS wage index). We are proposing to continue to use IPPS wage data as a proxy to determine the proposed LTCH wage index values for RY 2010 because both LTCHs and acute care hospitals are required to meet the same certification criteria set forth in section 1861(e) of the Act to participate as a hospital in the Medicare program and they both compete in the same labor markets, and therefore, experience similar wage-related costs. We also note that using the IPPS wage data to determine the proposed RY 2010 LTCH wage index values reflects our policy under the IPPS beginning in FY 2008 that apportions the wage data for multicampus hospitals that are located in different labor market areas (CBSAs) to each CBSA where the campuses are located. (For additional information, we refer readers to the FY 2008 IPPS final rule with comment (72 FR 47317 through 47320), the FY 2009 IPPS final rule (73 FR 48582), and section III.C. of the preamble of this proposed rule.) Specifically, for the proposed RY 2010 LTCH PPS wage index values, which are computed from IPPS wage data submitted by hospitals for cost reporting periods beginning in FY 2006 (which are used to determine the proposed FY 2010 IPPS wage index discussed in section III.F. of the preamble of this proposed rule), we allocated salaries and hours to the campuses of three multicampus hospitals with campuses that are located in different labor areas that are located in the following States: Massachusetts, Illinois, and Michigan. Thus, consistent with the proposed FY 2010 IPPS wage index, the proposed RY 2010 LTCH PPS wage index values for the following CBSAs would be affected by this policy: Boston-Quincy, MA (CBSA 14484); Providence-New Bedford-Falls River, RI-MA (CBSA 39300); Chicago-Naperville-Joliet, IL (CBSA 16974); Lake County-Kenosha County, IL-WI (CBSA 29404); DetroitLivonia-Dearborn, MI (CBSA 19804); and Warren-Troy-Farmington-Hills, MI (CBSA 47644) (reflected in Tables 12A E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules and 12B in the Addendum of this proposed rule). The proposed RY 2010 LTCH PPS wage index values are computed consistent with the urban and rural geographic classifications (labor market areas) discussed in section V.B.2. of the Addendum of this proposed rule and consistent with the pre-reclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the LTCH PPS). The proposed RY 2010 wage index values also reflect our methodology for establishing wage index values in urban and rural areas in which there are no IPPS wage data from which to compute a wage index value (as described above in this section). As previously noted, in the RY 2009 LTCH PPS final rule (73 FR 26817 through 26818), we established a methodology for determining a LTCH PPS wage index value for areas that have no IPPS wage data. Under this methodology, we stated that each year we would determine a wage index value for any area in which there is no IPPS wage data based on the methodologies described in that final rule. We believe it is appropriate to establish a methodology for determining LTCH PPS wage index values for areas with no IPPS wage data, if necessary, because IPPS hospitals may open or close at any time, and therefore the number of areas without any IPPS wage data may change from year to year. Even when an IPPS hospital opens in an area where there are currently no IPPS hospitals, there is a lag-time between the time a hospital opens or becomes an IPPS provider and when the hospital’s cost report wage data are available to include in calculating the area wage index. The policies established for determining LTCH PPS wage index values for areas with no IPPS hospital wage data are consistent with the methodologies that have been established under other Medicare postacute care PPSs, such as SNF and HHA, as well as the IPPS. Below we discuss the application of our established methodology for determining a proposed LTCH PPS wage index value for RY 2010 for any areas in which there is no IPPS wage data for cost reporting periods beginning during FY 2006 (that is, for the areas in which there is no data in the IPPS wage data that we are proposing to use to compute the proposed RY 2010 LTCH PPS wage index). In this proposed rule, we are proposing to determine RY 2010 LTCH PPS wage index values for labor market areas in which there is no IPPS hospital wage data from which to compute a VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 wage index value consistent with the methodology we established in the RY 2009 LTCH PPS final rule (73 FR 26817). As was the case in RY 2009, there are no LTCHs located in labor areas where there is no IPPS hospital wage data (or IPPS hospitals) for RY 2010. However, we continue to believe it is appropriate to propose LTCH PPS wage index values for these areas using our established methodology in the event that in the future a LTCH should open in one of those areas. Therefore, we are proposing to continue to determine a LTCH PPS wage index value for urban CBSAs with no IPPS wage data by using an average of all of the urban areas within the State to serve as a reasonable proxy for determining the LTCH PPS wage index for an urban area without specific IPPS hospital wage index data. We believe that an average of all of the urban areas within the State is a reasonable proxy for determining the LTCH PPS wage index for an urban area in the State with no wage data because it is based on prereclassified IPPS wage data, it is easy to evaluate, and it uses the most geographically similar relative wagerelated costs data available. Furthermore, as noted above, this methodology has been adopted by other Medicare PPSs, such as the SNF PPS and the HHA PPS. Based on the FY 2006 IPPS wage data that we are proposing to use to determine the proposed RY 2010 LTCH PPS wage index values, there are no IPPS wage data for the urban area of Hinesville-Fort Stewart, GA (CBSA 25980). Consistent with our methodology for determining a LTCH PPS wage index value for urban areas with no IPPS wage data (discussed above), in this proposed rule, we calculated the proposed RY 2010 wage index value for CBSA 25980 as the average of the proposed wage index values for all of the other urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580) (reflected in Table 12A of the Addendum of this proposed rule). (As noted above, there are currently no LTCHs located in CBSA 25980.) As discussed in the RY 2009 final rule (73 FR 26817), as IPPS wage data are dynamic, it is possible that urban areas without IPPS wage data will vary in the future. We also are proposing to continue to determine a LTCH PPS wage index value for rural areas with no IPPS wage data using the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties PO 00000 Frm 00187 Fmt 4701 Sfmt 4702 24265 of the State to serve as a reasonable proxy in determining the LTCH PPS wage index for a rural area without specific IPPS hospital wage index data. For this purpose, we are defining ‘‘contiguous’’ as sharing a border. We are not able to apply an averaging in rural areas with no wage data similar to what we are doing for urban areas with no wage data because there is no rural hospital data available for averaging on a statewide basis. We believe that using an unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties of the State is a reasonable proxy for determining the wage index for rural areas in a State with no wage data because it is based on pre-reclassified IPPS wage data, it is easy to evaluate, and it uses the most geographically similar relative wage-related costs data available. Based on the FY 2006 IPPS wage data that we are proposing to use to determine the proposed RY 2010 LTCH PPS wage index values, there are no IPPS wage data for the rural area of Massachusetts (CBSA code 11). Consistent with our methodology for determining a LTCH PPS wage index value for rural areas with no IPPS wage data (discussed above), in this proposed rule, we calculated the proposed RY 2010 wage index value for rural Massachusetts by computing the unweighted average of the wage indices from all of the CBSAs that are contiguous to the rural counties in that State. Specifically, in the case of Massachusetts, the entire rural area consists of Dukes and Nantucket counties. We determined that the borders of Dukes and Nantucket counties are ‘‘contiguous’’ with Barnstable County, MA, and Bristol County, MA. Therefore, the proposed RY 2010 LTCH PPS wage index value for rural Massachusetts is computed as the unweighted average of the proposed RY 2010 wage indexes for Barnstable County and Bristol County (reflected in Tables 12A and 12B in the Addendum of this proposed rule). (There are currently no LTCHs located in rural Massachusetts.) As discussed in the RY 2009 final rule (73 FR 26817), as IPPS wage data are dynamic, it is possible that rural areas without IPPS wage data will vary in the future. The proposed RY 2010 LTCH wage index values that would be applicable for LTCH discharges occurring on or after October 1, 2009, through September 30, 2010, are presented in Table 12A (for urban areas) and Table 12B (for rural areas) in the Addendum of this proposed rule. E:\FR\FM\22MYP2.SGM 22MYP2 24266 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 5. Proposed LTCH PPS Cost-of-Living Adjustment for LTCHs Located in Alaska and Hawaii C. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases In the August 30, 2002 final rule (67 FR 56022), we established, under § 412.525(b), a cost-of-living adjustment (COLA) for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States. In the RY 2009 LTCH PPS final rule (73 FR 26819) (under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of BIPA to determine appropriate adjustments under the LTCH PPS, for RY 2009, we applied a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the standard Federal payment rate by the factors listed in Table III of that same rule. For RY 2010, under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of BIPA to determine appropriate adjustments under the LTCH PPS, we are proposing to apply a COLA to payments to LTCHs located in Alaska and Hawaii by multiplying the proposed standard Federal payment rate by the factors listed in the chart below because they are the most recent available data at this time. These proposed factors were obtained from the U.S. Office of Personnel Management (OPM) and are also proposed to be used under the IPPS effective October 1, 2009 (section II.B.2. of the Addendum of this proposed rule). In addition, we are proposing that if OPM releases revised COLA factors before publication of the final rule, we would use the revised factors for the development of LTCH PPS payments for RY 2010 and publish those revised COLA factors in the final rule. sroberts on PROD1PC70 with FRONTMATTER PROPOSED COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS FOR THE 2010 LTCH PPS RATE YEAR Alaska: City of Anchorage and 80-kilometer (50-mile) radius by road .. City of Fairbanks and 80-kilometer (50-mile) radius by road ............ City of Juneau and 80-kilometer (50-mile) radius by road ............ All other areas of Alaska .............. Hawaii: City and County of Honolulu ......... County of Hawaii ........................... County of Kauai ............................ County of Maui and County of Kalawao ..................................... VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 1.23 1.23 1.23 1.25 1.25 1.18 1.25 1.25 1. Background Under the broad authority conferred upon the Secretary by section 123 of the BBRA as amended by section 307(b) of BIPA, in the regulations at § 412.525(a), we established an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. We refer to these cases as high cost outliers (HCOs). Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be incurred when treating patients who require more costly care and, therefore, reduce the incentives to underserve these patients. We set the outlier threshold before the beginning of the applicable rate year so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. Outlier payments under the LTCH PPS are determined consistent with the instructions issued for the IPPS outlier policy. Under § 412.525(a) in the regulations (in conjunction with the revised definition of ‘‘LTC–DRG’’ at § 412.503), we make outlier payments for any discharges if the estimated cost of a case exceeds the adjusted LTCH PPS payment for the MS–LTC–DRG plus a fixed-loss amount. Specifically, in accordance with § 412.525(a)(3) (in conjunction with the revised definition of ‘‘LTC–DRG’’ at § 412.503), we pay outlier cases 80 percent of the difference between the estimated cost of the patient case and the outlier threshold, which is the sum of the adjusted Federal prospective payment for the MS–LTC– DRG and the fixed-loss amount. The fixed-loss amount is the amount used to limit the loss that a hospital will incur under the outlier policy for a case with unusually high costs. This results in Medicare and the LTCH sharing financial risk in the treatment of extraordinarily costly cases. Under the LTCH PPS HCO policy, the LTCH’s loss is limited to the fixed-loss amount and a fixed percentage (currently 80 percent) of costs above the outlier threshold (MS–LTC–DRG payment plus the fixedloss amount). The fixed percentage of costs is called the marginal cost factor. We calculate the estimated cost of a case by multiplying the Medicare allowable covered charge by the overall hospital CCR. Under the LTCH PPS, we determine a fixed-loss amount, that is, the maximum PO 00000 Frm 00188 Fmt 4701 Sfmt 4702 loss that a LTCH can incur under the LTCH PPS for a case with unusually high costs before the LTCH will receive any additional payments. We calculate the fixed-loss amount by estimating aggregate payments with and without an outlier policy. The fixed-loss amount will result in estimated total outlier payments being projected to be equal to 8 percent of projected total LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data from the most recent provider specific file (PSF) (or from the applicable statewide average CCR if a LTCH’s CCR data are faulty or unavailable) are used to establish a fixed-loss threshold amount under the LTCH PPS. 2. Determining LTCH CCRs Under the LTCH PPS a. Background The following is a discussion of CCRs that are used in determining payments for HCO and SSO cases under the LTCH PPS, at § 412.525(a) and § 412.529, respectively. Although this section is specific to HCO cases, because CCRs and the policies and methodologies pertaining to them are used in determining payments for both HCO and SSO cases (to determine the estimated cost of the case at § 412.529(d)(2), we are discussing the determination of CCRs under the LTCH PPS for both of these type of cases simultaneously. In determining both HCO payments (at § 412.525(a)) and SSO payments (at § 412.529), we calculate the estimated cost of the case by multiplying the LTCH’s overall CCR by the Medicare allowable charges for the case. In general, we use the LTCH’s overall CCR, which is computed based on either the most recently settled cost report or the most recent tentatively settled cost report, whichever is from the latest cost reporting period, in accordance with § 412.525(a)(4)(iv)(B) and § 412.529(c)(4)(iv)(B) for HCOs and SSOs, respectively. (We note that, in some instances, we use an alternative CCR, such as the statewide average CCR in accordance with the regulations at § 412.525(a)(4)(iv)(C) and § 412.529(c)(4)(iv)(C), or a CCR that is specified by CMS or that is requested by the hospital under the provisions of the regulations at § 412.525(a)(4)(iv)(A) and § 412.529(c)(4)(iv)(A).) Under the LTCH PPS, a single prospective payment per discharge is made for both inpatient operating and capital-related costs. Therefore, we compute a single ‘‘overall’’ or ‘‘total’’ LTCH-specific CCR based on the sum of LTCH operating and capital costs (as described in E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Chapter 3, section 150.24, of the Medicare Claims Processing Manual (CMS Pub. 100–4)) as compared to total charges. Specifically, a LTCH’s CCR is calculated by dividing a LTCH’s total Medicare costs (that is, the sum of its operating and capital inpatient routine and ancillary costs) by its total Medicare charges (that is, the sum of its operating and capital inpatient routine and ancillary charges). sroberts on PROD1PC70 with FRONTMATTER b. LTCH Total CCR Ceiling Generally, a LTCH is assigned the applicable statewide average CCR if, among other things, a LTCH’s CCR is found to be in excess of the applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This is because CCRs above this threshold are most likely due to faulty data reporting or entry, and, therefore, CCRs based on erroneous data should not be used to identify and make payments for outlier cases. Thus, under our established policy, generally, if a LTCH’s calculated CCR is above the applicable ceiling, the applicable LTCH PPS statewide average CCR is assigned to the LTCH instead of the CCR computed from its most recent (settled or tentatively settled) cost report data. In the FY 2009 IPPS final rule (73 FR 48682), in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(c)(4)(iv)(C)(2) for SSOs, using our established methodology for determining the LTCH total CCR ceiling, based on IPPS total CCR data from the December 2007 update of the Provider Specific File (PSF), we established a total CCR ceiling of 1.262 under the LTCH PPS, effective October 1, 2008, through September 30, 2009. (For further detail on our current methodology for annually determining the LTCH total CCR ceiling, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 through 48121).) In this proposed rule, in accordance with § 412.525(a)(4)(iv)(C)(2) for HCOs and § 412.529(c)(4)(iv)(C)(2) for SSOs, using our established methodology for determining the LTCH total CCR ceiling (described above), based on IPPS total CCR data from the December 2008 update of the PSF, we are proposing to establish a total CCR ceiling of 1.227 under the LTCH PPS that would be effective for discharges occurring on or after October 1, 2009, and on or before September 30, 2010. We also are proposing that if more recent data become available, we would use them to establish the LTCH PPS CCR ceiling for RY 2010 in the final rule. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 c. LTCH Statewide Average CCRs Our general methodology established for determining the statewide average CCRs used under the LTCH PPS is similar to our established methodology for determining the LTCH total CCR ceiling (described above) because it is based on ‘‘total’’ IPPS CCR data. Under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(C) and the SSO policy at § 412.529(c)(4)(iv)(C), the fiscal intermediary may use a statewide average CCR, which is established annually by CMS, if it is unable to determine an accurate CCR for a LTCH in one of the following circumstances: (1) New LTCHs that have not yet submitted their first Medicare cost report (for this purpose, consistent with current policy, a new LTCH is defined as an entity that has not accepted assignment of an existing hospital’s provider agreement in accordance with § 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling (as discussed above); and (3) other LTCHs for whom data with which to calculate a CCR are not available (for example, missing or faulty data). (Other sources of data that the fiscal intermediary may consider in determining a LTCH’s CCR include data from a different cost reporting period for the LTCH, data from the cost reporting period preceding the period in which the hospital began to be paid as a LTCH (that is, the period of at least 6 months that it was paid as a short-term acute care hospital), or data from other comparable LTCHs, such as LTCHs in the same chain or in the same region.) In Table 8C of the Addendum to the FY 2009 IPPS final rule (73 FR 48998), in accordance with the regulations at § 412.525(a)(4)(iv)(C) for HCOs and § 412.529(c)(4)(iv)(C) for SSOs, using our established methodology for determining the LTCH statewide average CCRs, based on using the most recent complete IPPS total CCR data from the March 2008 update of the PSF, we established the LTCH PPS statewide average total CCRs for urban and rural hospitals effective for discharges occurring on or after October 1, 2008, and on or before September 30, 2009. (For further detail on our current methodology for annually determining the LTCH statewide average CCRs, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 through 48121).) In this proposed rule, using our established methodology for determining the LTCH statewide average CCRs, based on the most recent complete IPPS total CCR data from the December 2008 update of the PSF, we are proposing LTCH PPS statewide PO 00000 Frm 00189 Fmt 4701 Sfmt 4702 24267 average total CCRs for urban and rural hospitals that would be effective for discharges occurring on or after October 1, 2009, and through September 30, 2010, in Table 8C of the Addendum to this proposed rule. We also are proposing that if more recent data become available, we would use them to establish LTCH PPS statewide average total CCRs for urban and rural hospitals for RY 2010 in the final rule. We also note that all areas in the District of Columbia, New Jersey, Puerto Rico, and Rhode Island are classified as urban; therefore, there are no rural statewide average total CCRs listed for those jurisdictions in Table 8C of the Addendum to this proposed rule. This policy is consistent with the policy that we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and as is the same as the policy applied under the IPPS. In addition, although Massachusetts has areas that are designated as rural, there are no shortterm acute care IPPS hospitals or LTCHs located in those areas as of March 2009. Therefore, for this proposed rule, there is no rural statewide average total CCR listed for rural Massachusetts in Table 8C of the Addendum of this proposed rule. In addition, as we established when we revised our methodology for determining the applicable LTCH statewide average CCRs in the FY 2007 IPPS final rule (71 FR 48120 through 48121), in determining the urban and rural statewide average total CCRs for Maryland LTCHs paid under the LTCH PPS, in this proposed rule, we use, as a proxy, the national average total CCR for urban IPPS hospitals and the national average total CCR for rural IPPS hospitals, respectively. We use this proxy because we believe that the CCR data on the PSF for Maryland hospitals may not be entirely accurate (as discussed in greater detail in that same final rule (71 FR 48120)). d. Reconciliation of LTCH HCO and SSO Payments We note, under the LTCH PPS HCO policy at § 412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at § 412.529(c)(4)(iv)(D), the payments for HCO and SSO cases, respectively, are subject to reconciliation. Specifically, any reconciliation of outlier payments is based on the CCR that is calculated based on a ratio of CCRs computed from the relevant cost report and charge data determined at the time the cost report coinciding with the discharge is settled. For additional information, we refer E:\FR\FM\22MYP2.SGM 22MYP2 24268 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER readers to the RY 2009 LTCH PPS final rule (73 FR 26820 through 26821). 3. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for RY 2010 When we implemented the LTCH PPS, as discussed in the August 30, 2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad authority of section 123 of the BBRA as amended by section 307(b) of BIPA, we established a fixed-loss amount so that total estimated outlier payments are projected to equal 8 percent of total estimated payments under the LTCH PPS. To determine the fixed-loss amount, we estimate outlier payments and total LTCH PPS payments for each case using claims data from the MedPAR files. Specifically, to determine the outlier payment for each case, we estimate the cost of the case by multiplying the Medicare covered charges from the claim by the LTCH’s hospital specific CCR. Under § 412.525(a)(3) (in conjunction with the revised definition of ‘‘LTC–DRG’’ at § 412.503), if the estimated cost of the case exceeds the outlier threshold (the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount), we pay an outlier payment equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount). In the RY 2009 LTCH PPS final rule (73 FR 26823), we used claims data from the December 2007 update of the FY 2007 MedPAR claims data and CCRs from the December 2007 update of the PSF to determine a fixed-loss amount that would result in estimated outlier payments projected to be equal to 8 percent of total estimated payments for the 2009 LTCH PPS rate year. We determined the RY 2009 fixed-loss amount using the MS–LTC–DRG classifications and relative weights from the version of the GROUPER that was to be in effect as of the beginning of the 2009 LTCH PPS rate year (July 1, 2008), that is, Version 25.0 of the GROUPER (as established in the FY 2008 IPPS final rule (72 FR 47278). Furthermore, in using CCRs from the December 2007 update of the PSF to determine the RY 2009 fixed-loss amount, we used the FY 2008 applicable LTCH ‘‘total’’ CCR ceiling of 1.284 and LTCH statewide average ‘‘total’’ CCRs established in the FY 2008 IPPS final rule (72 FR 47404 and 48126 through 48127) such that the current applicable Statewide average CCR was assigned if, among other things, a LTCH’s CCR exceeded the current ceiling (1.284). VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Therefore, based on the data and policies described and under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, in the RY 2009 LTCH PPS final rule, we established a fixed-loss amount of $22,960 for RY 2009. Thus, for RY 2009, we currently pay an outlier case 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS–LTC–DRG and the fixed-loss amount of $22,960). In this proposed rule, we are proposing to use the same methodology that we used in the RY 2009 final rule to calculate the fixed-loss amount for RY 2010 (using updated data and the proposed rates and policies established in this proposed rule) in order to maintain estimated HCO payments at the projected 8 percent of total estimated LTCH PPS payments. Consistent with our historical practice of using the best data available, in this proposed rule, in determining the proposed fixed-loss amount for RY 2010, we used the most recent available LTCH claims data and CCR data. Specifically, for this proposed rule, we used LTCH claims data from the December 2008 update of the FY 2008 MedPAR files and CCRs from the December 2008 update of the PSF to determine a fixed-loss amount that would result in estimated outlier payments projected to be equal to 8 percent of total estimated payments in RY 2010 because these data are the most recent complete LTCH data currently available. Consistent with our historical practice of using the best data available, we are proposing that if more recent LTCH claims data become available, we will use them for determining the fixedloss amount for the 2010 LTCH PPS rate year in the final rule. We are proposing to determine the proposed RY 2010 fixed-loss amount based on the MS– LTC–DRG classifications and relative weights from the version of the GROUPER that will be in effect as of the beginning of the 2010 LTCH PPS rate year (October 1, 2009), that is, proposed Version 27.0 of the GROUPER (discussed in section VIII.B. of the preamble of this proposed rule). Furthermore, in determining the proposed RY 2010 fixed-loss amount using CCRs from the December 2008 update of the PSF, we used the proposed RY 2010 LTCH ‘‘total’’ CCR ceiling of 1.227 and the applicable proposed LTCH statewide average ‘‘total’’ CCRs presented in Table 8C in the Addendum of this proposed rule such that the proposed applicable PO 00000 Frm 00190 Fmt 4701 Sfmt 4702 statewide average CCR was assigned if, among other things, a LTCH’s CCR exceeded the proposed ceiling (1.227). We note that, in determining the proposed RY 2010 fixed-loss amount in this proposed rule using the CCRs from the December 2008 update of the PSF, there was no need for us to independently assign the applicable proposed statewide average CCR to any LTCHs, as none of the LTCHs’ CCRs in the PSF exceeds the proposed ceiling. In this proposed rule, based on the data and policies described earlier in this proposed rule under the broad authority of section 123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are proposing to establish a fixed-loss amount of $16,059 for the RY 2010. Thus, we would pay an outlier case 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the MS–LTC–DRG and the fixed-loss amount of $16,059). The proposed fixed-loss amount for RY 2010 of $16,059 is significantly lower than the RY 2009 fixed-loss amount of $22,960. The proposed decrease in the fixed-loss amount for RY 2010 is primarily due to the projected 2.8 percent increase in LTCH PPS payments from RY 2009 to RY 2010 (discussed in greater detail in section IX. of the Appendix A (the regulatory impact analysis) to this proposed rule), which includes our current estimate that we are paying less than the required 8 percent of total estimated LTCH PPS payments as HCO payments in RY 2009 (as discussed below). Specifically, an analysis of the most recent available LTCH PPS claims data (that is, FY 2008 claims from the December 2008 update of the MedPAR files) indicates that the RY 2009 fixedloss amount of $22,960 may result in LTCH PPS HCO payments that fall below the estimated 8 percent requirement. Specifically, we currently estimate that HCO payments are approximately 6.1 percent of estimated total LTCH PPS payments in RY 2009. In addition to the estimated increase in LTCH PPS payments in RY 2010 as compared to RY 2009 due to the projected increase in HCO payments, as we discuss in section IX. of Appendix A to this proposed rule, we estimate an increase LTCH PPS payments in RY 2010 due to the proposed update to the standard Federal rate and a projected increase in the payments for SSO cases that are paid based on the estimated cost of the case. For these reasons, we believe that proposing to lower the fixed-loss amount is appropriate and necessary to maintain that estimated outlier payments would equal 8 percent E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules of estimated total LTCH PPS payments as required under § 412.525(a). Maintaining the fixed-loss amount at the current level would result in HCO payments that are significantly less than the current regulatory requirement that estimated outlier payments be projected to equal 8 percent of estimated total LTCH PPS payments. As we explained in past LTCH PPS rules (such as the RY 2006 LTCH PPS final rule (70 FR 24195 through 24196)), proposing to lower the fixed-loss amount results in more cases qualifying as outlier cases as well as increases the amount of the additional payment for a HCO case because the maximum loss that a LTCH must incur before receiving an HCO payment (that is, the fixed-loss amount) would be smaller. Thus, in order to maintain that estimated HCO payments in RY 2010 will be equal to 8 percent of estimated total RY 2010 LTCH PPS payments, we believe it is appropriate to lower the fixed-loss amount. In the August 30, 2002 final rule (67 FR 56022 through 56024), based on our regression analysis, we established the outlier ‘‘target’’ at 8 percent of estimated total LTCH PPS payments to allow us to achieve a balance between the ‘‘conflicting considerations of the need to protect hospitals with costly cases, while maintaining incentives to improve overall efficiency.’’ We continue to believe that a HCO target of 8 percent is appropriate, as discussed in greater detail below. However, we are soliciting public comments on whether we should revisit the regression analysis noted above in this section that was used to establish the existing 8 percent outlier target, using the most recent available data to evaluate whether the current outlier target of 8 percent should be adjusted, and which therefore may mitigate the magnitude of the proposed change in the fixed-loss amount for RY 2010. As an alternative to proposing to lower the fixed-loss amount for RY 2010, we also examined adjusting the marginal cost factor (that is, the percentage that Medicare will pay of the estimated cost of a case that exceeds the sum of the adjusted Federal prospective payment for the MS–LTC–DRG and the fixed-loss amount for LTCH PPS HCO cases as specified in § 412.525(a)(3)), as a means of ensuring that estimated outlier payments would be projected to equal 8 percent of estimated total LTCH PPS payments. As we established in the August 30, 2002 final rule (67 FR 56022 through 56026), under the LTCH PPS HCO policy at § 412.525(a)(3), the marginal cost factor is currently equal to 80 percent. As discussed in the RY 2007 LTCH PPS final rule (71 FR 4677 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 through 4678), a marginal cost factor equal to 80 percent means that, for an outlier case, we pay the LTCH 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal rate for the MS–LTC– DRG PPS payment and the fixed-loss amount). In addition, as we discussed in the August 30, 2002 final rule (67 FR 56023) that implemented the LTCH PPS, the marginal cost factor is designed to ensure ‘‘a balance between the need to protect LTCHs financially, while encouraging them to treat expensive patients and maintaining the incentives of a prospective payment system to improve the efficient delivery of care.’’ Increasing the marginal cost factor from the established 80 percent, without reducing the current fixed-loss amount, would increase total estimated outlier payments because we would pay a larger percentage of the estimated costs that exceed the outlier threshold (the sum of the adjusted Federal rate for the MS–LTC–DRG and the fixed-loss amount). For example, if we were to increase the marginal cost factor to 90 percent without lowering the fixed-loss amount, we would pay outlier cases 10 percent more of the estimated costs that exceed the HCO threshold. While this alternative could ensure that outlier payments are projected to equal 8 percent of estimated total LTCH PPS payments by increasing estimated aggregate HCO payments, it may not maintain the existing balance between providing an incentive for LTCHs to treat expensive patients and improving the efficient delivery of care because a policy such as this would reduce the incentive to provide cost efficient care that is in effect under the current HCO policy (with an 80 percent marginal cost factor). Such a result would be inconsistent with the intent of the LTCH PPS HCO policy (noted above) as stated when we implemented the LTCH PPS in the August 30, 2002 final rule (67 FR56025). As we discussed in that same final rule (67 FR 56023 through 56024), our analysis of payment-to-cost ratios for HCO cases showed that a marginal cost factor of 80 percent appropriately addresses cases that are significantly more expensive than nonoutlier cases, while simultaneously maintaining the integrity of the LTCH PPS. Accordingly, we are not proposing to adjust the marginal cost factor under the LTCH PPS HCO policy at this time. However, we are soliciting public comments on whether we should revisit the regression analysis that was used to establish the existing 80 percent marginal cost factor, using the most recent available data to PO 00000 Frm 00191 Fmt 4701 Sfmt 4702 24269 evaluate whether the current marginal cost factor of 8 percent in the current HCO policy should be adjusted, and therefore may mitigate the proposed change in the fixed-loss amount for RY 2010. We note that, as we discussed in the RY 2009 LTCH PPS final rule (73 FR 26824 through 26825), for the past several rate years, in proposing changes to the fixed-loss amount we solicited public comments on whether we should revisit the regression analysis referenced above that was used to establish the existing 8 percent outlier target and 80 percent marginal cost factor, using the most recent available data to evaluate whether the current outlier target of 8 percent or the 80 percent marginal cost factor should be adjusted and, therefore, could have mitigated the magnitude of the change in the fixed-loss amount for RYs 2007, 2008, and 2009, respectively. In response to these solicitations, we received no public comments in support of any option that would allow us to revisit the regression analysis that was used to establish the existing 80 percent marginal cost factor and existing outlier target of 8 percent, and the commenters agreed that keeping the marginal cost factor at 80 percent and the outlier pool at 8 percent better identifies LTCH patients that are unusually costly cases, and that this policy appropriately addresses HCO cases that are significantly more expensive than nonoutlier cases. In summary, we are proposing to establish a fixed-loss amount of $16,059 for RY 2010 based on the best available LTCH data and the policies presented in this proposed rule because we believe a proposed decrease in the fixed-loss amount for RY 2010 is appropriate and necessary to maintain estimated outlier payments equal to 8 percent of estimated total LTCH PPS payments, as required under § 412.525(a). As explained above in this section, in section IX of Appendix A to this proposed rule, we are projecting an increase in total LTCH PPS payments systemwide. In accordance with § 412.523(d)(1), we reduce the standard Federal rate by 8 percent for the estimated proportion of LTCH PPS HCO payments. Because we are estimating an increase in the average payment per discharge, thereby increasing total estimated LTCH PPS payments, and because we are currently estimating that HCO payments in RY 2009 may fall below the 8 percent target, we believe the fixed-loss amount must be lowered in order to maintain total outlier payments that are projected to equal 8 percent of total payments under the E:\FR\FM\22MYP2.SGM 22MYP2 24270 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules LTCH PPS, in accordance with § 412.525(a). 4. Application of Outlier Policy to SSO Cases As we discussed in the August 30, 2002 final rule (67 FR 56026), under some rare circumstances, a LTCH discharge could qualify as a SSO case (as defined in the regulations at § 412.529 in conjunction with the regulations at § 412.503) and also as a HCO case. In this scenario, a patient could be hospitalized for less than fivesixths of the geometric ALOS for the specific MS–LTC–DRG, and yet incur extraordinarily high treatment costs. If the costs exceeded the high cost outlier threshold (that is, the SSO payment plus the fixed-loss amount), the discharge is eligible for payment as a HCO. Thus, for a SSO case in the 2010 LTCH PPS rate year, the HCO payment would be 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the proposed fixed-loss amount of $16,059 and the amount paid under the SSO policy as specified in § 412.529). D. Computing the Proposed Adjusted LTCH PPS Federal Prospective Payments for RY 2010 In accordance with § 412.525, the proposed standard Federal rate is adjusted to account for differences in area wages by multiplying the proposed labor-related share of the proposed standard Federal rate by the appropriate proposed LTCH PPS wage index (as shown in Tables 12A and 12B of the Addendum of this proposed rule). The proposed standard Federal rate is also adjusted to account for the higher costs of hospitals in Alaska and Hawaii by multiplying the proposed nonlaborrelated share of the proposed standard Federal rate by the appropriate proposed cost-of-living factor (shown in the chart in section V.C.5. of the Addendum of this proposed rule). In this proposed rule, we are proposing to establish a standard Federal rate for the 2010 LTCH PPS rate year of $39,349.05, as discussed in section V.A.2. of the Addendum of this proposed rule. We illustrate the methodology to adjust the proposed Federal rate for the 2010 LTCH PPS rate year in the following example: Example: During the 2010 LTCH PPS rate year, a Medicare patient is in a LTCH located in Chicago, Illinois (CBSA 16974). The proposed RY 2010 LTCH PPS wage index value for CBSA 16974 is 1.0478 (Table 12A of the Addendum of this proposed rule). The Medicare patient is classified into MS–LTC– DRG 28 (Spinal Procedures with MCC), which has a proposed relative weight for RY 2010 of 1.1175 (Table 11 of the Addendum of this proposed rule). To calculate the LTCH’s total adjusted Federal prospective payment for this Medicare patient, we compute the wageadjusted proposed Federal prospective payment amount by multiplying the unadjusted proposed standard Federal rate ($39,349.05) by the proposed labor-related share (75.904 percent) and the proposed wage index value (1.0478). This wageadjusted amount is then added to the proposed nonlabor-related portion of the unadjusted proposed standard Federal rate (24.096 percent; adjusted for cost of living, if applicable) to determine the adjusted proposed Federal rate, which is then multiplied by the proposed MS–LTC–DRG relative weight (1.1175) to calculate the total adjusted proposed Federal prospective payment for the 2010 LTCH PPS rate year ($45,567.98). The table below illustrates the components of the calculations in this example. Unadjusted Proposed Standard Federal Prospective Payment Rate ......................................................................................... Proposed Labor-Related Share ................................................................................................................................................... Labor-Related Portion of the Proposed Federal Rate ................................................................................................................ Proposed Wage Index (CBSA 16974) ........................................................................................................................................ Proposed Wage-Adjusted Labor Share of Proposed Federal Rate ............................................................................................ Proposed Nonlabor-Related Portion of the Proposed Federal Rate ($39,349.05 x 0.24096) .................................................... Adjusted Proposed Federal Rate Amount ................................................................................................................................... Proposed MS–LTC–DRG 9 Relative Weight .............................................................................................................................. Total Adjusted Proposed Federal Prospective Payment ..................................................................................................... sroberts on PROD1PC70 with FRONTMATTER VI. Tables This section contains the tables referred to throughout the preamble to this proposed rule and in this Addendum. Tables 1A, 1B, 1C, 1D, 1E, 2, 3A, 3B, 4A, 4B, 4C, 4D–1, 4D–2, 4F, 4J, 5, 7A, 7B, 8A, 8B, 8C, 9A, 9C, 10, 11, 12A, and 12B are presented below. Table 6G.—Additions to the CC Exclusions List, Table 6H.—Deletions from the CC Exclusions List, Table 6I.— Complete List of Complication and Comorbidity (CC) Exclusions, Table 6J.—Major Complication and Comorbidity (MCC) List, and Table 6K.—Complications and Comorbidity (CC) List are available only through the Internet on the CMS Web site at: https:// www.cms.hhs.gov/AcuteInpatientPPS/. The tables presented below are as follows: Table 1A.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (67.1 Percent Labor Share/32.9 Percent Nonlabor Share If Wage Index Is Greater Than 1) VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Table 1B.—National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Is Less Than or Equal To 1) Table 1C.—Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D.—Capital Standard Federal Payment Rate Table 1E.—LTCH Standard Federal Prospective Payment Rate Table 2.—Acute Care Hospitals Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2008; Hospital Wage Indexes for Federal Fiscal Year 2010; Hospital Average Hourly Wages for Federal Fiscal Years 2008 (2004 Wage Data), 2009 (2005 Wage Data), and 2010 (2006 Wage Data); and 3–Year Average of Hospital Average Hourly Wages Table 3A.—FY 2010 and 3-Year Average Hourly Wage for Acute Care Hospitals in Urban Areas by CBSA Table 3B.—FY 2010 and 3-Year Average Hourly Wage for Acute Care Hospitals in Rural Areas by CBSA Table 4A.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State—FY 2010 PO 00000 Frm 00192 Fmt 4701 Sfmt 4702 $39,349.05 x 0.75904 = 29,867.50 x 1.0478 = 31,295.17 + 9,481.55 = 40,776.72 x 1.1175 = 45,567.98 Table 4B.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State—FY 2010 Table 4C.—Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by State—FY 2010 Table 4D–1.—Rural Floor Budget Neutrality Factors for Acute Care Hospitals—FY 2010 Table 4D–2.—Urban Areas with Acute Care Hospitals Receiving the Statewide Rural Floor or Imputed Floor Wage Index—FY 2010 Table 4E.—Urban CBSAs and Constituent Counties for Acute Care Hospitals—FY 2010 Table 4F.—Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) for Acute Care Hospitals by CBSA— FY 2010 Table 4J.—Out-Migration Adjustment for Acute Care Hospitals—FY 2010 Table 5.—List of Medicare Severity Diagnosis-Related Groups (MS–DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean Length of Stay Table 6A.—New Diagnosis Codes Table 6B.—New Procedure Codes Table 6C.—Invalid Diagnosis Codes E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Table 6D.—Invalid Procedure Codes Table 6E.—Revised Diagnosis Code Titles Table 6F.—Revised Procedure Code Titles Table 7A.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2008 MedPAR Update—December 2008 GROUPER V26.0 MS–DRGs Table 7B.—Medicare Prospective Payment System Selected Percentile Lengths of Stay: FY 2008 MedPAR Update—December 2008 GROUPER V27.0 MS–DRGs Table 8A.—Proposed Statewide Average Operating Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals—March 2009 sroberts on PROD1PC70 with FRONTMATTER BILLING CODE 4210–01–P VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 Table 8B.—Proposed Statewide Average Capital Cost-to-Charge Ratios (CCRs) for Acute Care Hospitals—March 2009 Table 8C.—Proposed Statewide Average Total Cost-to-Charge Ratios (CCRs) for LTCHs—March 2009 Table 9A.—Hospital Reclassifications and Redesignations—FY 2010 Table 9C.—Hospitals Redesignated as Rural under Section 1886(d)(8)(E) of the Act—FY 2010 Table 10.—Geometric Mean Plus the Lesser of .75 of the National Adjusted Operating Standardized Payment Amount (Increased to Reflect the Difference Between Costs and Charges) or .75 of One Standard Deviation of Mean Charges by Medicare Severity PO 00000 Frm 00193 Fmt 4701 Sfmt 4702 24271 Diagnosis-Related Group (MS–DRG)— March 2009 Table 11.—Proposed MS–LTC–DRGs, Relative Weights, Geometric Average Length of Stay, and Short-Stay Outlier (SSO) Threshold for Discharges Occurring from October 1, 2009 through September 30, 2010 under the LTCH PPS Table 12A.—LTCH PPS Wage Index for Urban Areas for Discharges Occurring from October 1, 2009 through September 30, 2010 Table 12B.—LTCH PPS Wage Index for Rural Areas for Discharges Occurring from October 1, 2009 through September 20, 2010 BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00194 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.015</GPH> sroberts on PROD1PC70 with FRONTMATTER 24272 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00195 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24273 EP22MY09.016</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00196 Fmt 4701 Sfmt 4725 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Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00444 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.265</GPH> sroberts on PROD1PC70 with FRONTMATTER 24522 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00445 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24523 EP22MY09.266</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00446 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.267</GPH> sroberts on PROD1PC70 with FRONTMATTER 24524 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00447 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24525 EP22MY09.268</GPH> sroberts on PROD1PC70 with 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Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER Appendix A: Regulatory Impact Analysis I. Overall Impact We have examined the impacts of this proposed rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review) and the Regulatory Flexibility Act (RFA) (September 19, 1980, 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). We have determined that this proposed rule is a major rule as defined in 5 U.S.C. 804(2). We estimate that the proposed changes for FY 2010 acute care hospital operating and capital payments would redistribute in excess of $100 million among different types of inpatient cases. The proposed changes to rebase and revise the market basket for purposes of the market basket update to the IPPS rates required by the statute, in conjunction with other proposed payment changes in this proposed rule, would result in an estimated $586 million decrease in FY 2010 operating payments (or 0.5 percent decrease), and $393 million decrease in FY 2010 capital payments (or 4.8 percent decrease), or a total $979 million decrease in FY 2010 operating and capital payments to acute care hospitals. The impacts analysis of the capital payments can be found in section VIII. of this Appendix. In addition, as described in section IX. of this Appendix, LTCHs are expected to experience an increase in payments by $135 million (or 2.8 percent). Our operating impact estimate includes the proposed ¥2.5 percent documentation and coding adjustment applied to the hospital-specific rates, the ¥1.1 percent documentation and coding adjustment applied to the Puerto Rico-specific rates and the ¥1.9 percent adjustment for documentation and coding changes to the IPPS standardized amounts and capital Federal rates for FY 2010. In addition, our operating impact estimate includes the 2.1 percent market VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 basket update to the standardized amount. The estimates of IPPS operating payments to acute care hospitals do not reflect any changes in hospital admissions or real case-mix intensity, which would also affect overall payment changes. The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small government jurisdictions. Most hospitals and most other providers and suppliers are considered to be small entities, either by being nonprofit organizations or by meeting the Small Business Administration definition of a small business (having revenues of $34.5 million or less in any 1 year). (For details on the latest standards for health care providers, we refer readers to the Table of Small Business Size Standards for NAIC 622 found on the Small Business Administration Office of Size Standards Web site at: https:// www.sba.gov/contractingopportunities/ officials/size/GC-SMALL-BUS-SIZESTANDARDS.html.) For purposes of the RFA, all hospitals and other providers and suppliers are considered to be small entities. Individuals and States are not included in the definition of a small entity. We believe that the provisions of this proposed rule relating to acute care hospitals would have a significant impact on small entities as explained in this Appendix. Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary LTCHs. Therefore, we are assuming that all LTCHs are considered small entities for the purpose of the analysis in section IX. of this Appendix. Medicare fiscal intermediaries and MACs are not considered to be small entities. Because we acknowledge that many of the affected entities are small entities, the analysis discussed throughout the preamble of this proposed rule constitutes our proposed regulatory flexibility analysis. Therefore, we are soliciting public comments on our estimates and analysis of the impact of this proposed rule on those small entities. The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Public Law 104–121, as amended by section 8302 of Public Law 110–28 (enacted on May 25, 2007), requires an agency to provide compliance guides for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis. The compliance guides associated with this proposed rule are available on the CMS IPPS Web page at https:// PO 00000 Frm 00573 Fmt 4701 Sfmt 4702 24651 www.cms.hhs.gov/AcuteInpatientPPS/ 01_overview.asp. We also note that the Hospital Center Web page at https:// www.cms.hhs.gov/center/hospital.asp was developed to assist hospitals in understanding and adapting to changes in Medicare regulations and in billing and payment procedures. This Web page provides hospitals with substantial downloadable explanatory materials. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed or final rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we now define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98–21) designated hospitals in certain New England counties as belonging to the adjacent urban area. Thus, for purposes of the IPPS and the LTCH PPS, we continue to classify these hospitals as urban hospitals. (We refer readers to Table 1 and section VI. of this Appendix for the quantitative effects of the proposed policy changes under the IPPS for operating costs.) Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $133 million. This proposed rule will not mandate any requirements for State, local, or tribal governments, nor would it affect private sector costs. 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. As stated above, this proposed rule would not have a substantial effect on State and local governments. The following analysis, in conjunction with the remainder of this document, demonstrates that this proposed rule is consistent with the regulatory philosophy and principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. The proposed rule would affect payments to a substantial number of E:\FR\FM\22MYP2.SGM 22MYP2 24652 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules small rural hospitals, as well as other classes of hospitals, and the effects on some hospitals may be significant. sroberts on PROD1PC70 with FRONTMATTER II. Objectives of the IPPS The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund. We believe the proposed changes in this proposed rule would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes would ensure that the outcomes of the prospective payment systems are reasonable and equitable while avoiding or minimizing unintended adverse consequences. III. Limitations of Our Analysis The following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes effective for FY 2010, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but, generally, we do not attempt to make adjustments for future changes in such variables as admissions, lengths of stay, or case-mix. However, in the FY 2008 IPPS final rule with comment period, we indicated that we believe that implementation of the MS–DRGs would lead to increases in case-mix that do not reflect actual increases in patients’ severity of illness as a result of more comprehensive documentation and coding. As explained in section II.D. of the preamble of this proposed rule, the FY 2008 IPPS final rule with comment period established a documentation and coding adjustment of ¥1.2 percent for FY 2008, ¥1.8 percent for FY 2009, and ¥1.8 percent for FY 2010 to maintain budget neutrality for the transition to the MS– DRGs. Subsequently, Congress enacted Public Law 110–90. Section 7 of Public Law 110–90 reduced the IPPS documentation and coding adjustment from ¥1.2 percent to ¥0.6 percent for FY 2008 and from ¥1.8 percent to ¥0.9 percent for FY 2009. For FY 2010, we are proposing to reduce the national standardized amount by an additional 1.9 percent. Based on our analysis, described in II.D. of the preamble of this VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 proposed rule, we believe that, in FY 2008, hospitals experienced a documentation and coding effect of 2.5 percent, which exceeds the FY 2008 documentation and coding adjustment of 0.6 percent by 1.9 percent. Therefore, we are proposing to reduce the national standardized amounts in FY 2010 by ¥1.9 percent. We will address in the FY 2011 rulemaking cycle any change in FY 2009 case-mix due to documentation and coding changes that do not reflect real changes in case-mix for discharges occurring during FY 2009. Furthermore, we believe that hospitals that are paid under the hospital-specific payment rate, specifically SCHs and MDHs, experience similar increases in case-mix due to documentation and coding changes that do not reflect real changes in case-mix. Our actuarial office estimates that hospitals paid under the hospital-specific rate experienced a 4.8 percent increase in payments due to documentation and coding changes in FY 2008 and FY 2009. We did not apply a documentation and coding adjustment to the hospital-specific rates when we first implemented the MS–DRG system. For FY 2010, we are proposing to reduce the hospital-specific rate by 2.5 percent in FY 2010 to account for the case-mix increase that occurred in FY 2008 due to changes in documentation and coding under the adoption of MS–DRGs that do not reflect real changes in case-mix. We will address any increase in case-mix in FY 2009 due to changes in documentation and coding that do not reflect real changes in case-mix in the FY 2011 rulemaking cycle. Our analysis, as described in II.D. of the preamble, shows that Puerto Rico hospitals experienced an increase in case-mix by 1.1 percent in FY 2008 due to changes in documentation and coding. We did not apply a documentation and coding adjustment to the Puerto Rico-specific rate when we first implemented the MS–DRG system. For FY 2010, we are proposing to reduce the Puerto Rico-specific standardized amount by 1.1 percent to account for the case-mix increase due to documentation and coding that occurred in FY 2008. We will address any increase in casemix in FY 2009 for Puerto Rico hospitals in the FY 2011 rulemaking cycle. The impacts shown below illustrate the impact of the proposed FY 2010 IPPS changes on acute care hospital operating payments, including the proposed ¥1.9 percent FY 2010 documentation and coding adjustment to the IPPS national standardized amounts, the ¥2.5 percent FY 2010 documentation and coding adjustment PO 00000 Frm 00574 Fmt 4701 Sfmt 4702 to the hospital-specific rates, and the ¥1.1 percent FY 2010 documentation and coding adjustment to the Puerto Rico-specific standardized amount. The proposed documentation and coding adjustment that would be applicable to the Federal rate under the LTCH PPS for RY 2010 is discussed in section IX. of this Appendix. As we have done in the previous rules, we are soliciting public comments and information about the anticipated effects of the proposed changes on acute care hospitals and our methodology for estimating them. IV. Hospitals Included In and Excluded From the IPPS The prospective payment systems for hospital inpatient operating and capitalrelated costs of acute care hospitals encompass most general short-term, acute care hospitals that participate in the Medicare program. There were 33 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment methodology for these hospitals. Among other short-term, acute care hospitals, only the 46 such hospitals in Maryland remain excluded from the IPPS pursuant to the waiver under section 1814(b)(3) of the Act. As of March 2009, there are 3,513 IPPS acute care hospitals to be included in our analysis. This represents about 58 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. There are also approximately 1,306 CAHs. These small, limited service hospitals are paid on the basis of reasonable costs rather than under the IPPS. (We refer readers to section VII. of this Appendix for a further description of the impact of CAH-related proposed policy changes.) There are also 1,228 IPPS-excluded hospitals and 2,209 IPPS-excluded hospital units. These IPPS-excluded hospitals and units include IPFs, IRFs, LTCHs, RNHCIs, children’s hospitals, and cancer hospitals, which are paid under separate payment systems. Changes in the prospective payment systems for IPFs and IRFs are made through separate rulemaking. Payment impacts for these IPPS-excluded hospitals and units are not included in this proposed rule. The impact of the proposed update and policy changes to the LTCH PPS for RY 2010 are discussed in section IX. of this Appendix. V. Effects on Hospitals and Hospital Units Excluded From the IPPS As of March 2009, there were 1,228 hospitals excluded from the IPPS. Of these 1,228 hospitals, 78 children’s E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules hospitals, 11 cancer hospitals, and 16 RNHCIs are being paid on a reasonable cost basis subject to the rate-of-increase ceiling under § 413.40. The remaining providers, 223 IRFs and 406 LTCHs, are paid the Federal prospective per discharge rate under the IRF PPS and the LTCH PPS, respectively, and 1,312 IPFs are paid the Federal per diem amount under the IPF PPS. As stated above, IRFs and IPFs are not affected by rate updates in this proposed rule. The impacts of the proposed changes to LTCHs are discussed in section IX. of this Appendix. In addition, there are 1,312 IPF units located in hospitals otherwise subject to the IPPS. There are 972 IRFs (paid under the IRF PPS) located in hospitals otherwise subject to the IPPS. In the past, certain hospitals and units excluded from the IPPS have been paid based on their reasonable costs subject to limits as established by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). Cancer and children’s hospitals continue to be paid on a reasonable cost basis subject to TEFRA limits for FY 2010. For these hospitals (cancer and children’s hospitals), consistent with the authority provided in section 1886(b)(3)(B)(ii) of the Act, the proposed update is the percentage increase in the FY 2010 IPPS operating market basket. In compliance with section 404 of the MMA, in this proposed rule, we are proposing to replace the FY 2002-based IPPS operating and capital market baskets with the revised and rebased FY 2006based IPPS operating and capital market baskets for FY 2010. Therefore, consistent with current law, based on IHS Global Insight, Inc.’s 2009 first quarter forecast, with historical data through the 2008 fourth quarter, we are estimating that the FY 2010 update to the IPPS operating market basket will be 2.1 percent (that is, the current estimate of the market basket rate-of-increase. In addition, in accordance with § 403.752(a) of the regulations, RNHCIs are paid under § 413.40, which also uses section 1886(b)(3)(B)(ii) of the Act to update target amounts by the rate-ofincrease percentage. For RNHCIs, the proposed update is the percentage increase in the FY 2010 IPPS operating market basket increase, which is estimated to be 2.1 percent, based on IHS Global Insight, Inc.’s 2009 first quarter forecast of the IPPS operating market basket increase. The impact of the proposed update in the rate-of-increase limit on those excluded hospitals depends on the cumulative cost increases experienced by each excluded hospital since its applicable base period. For excluded VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 hospitals that have maintained their cost increases at a level below the rateof-increase limits since their base period, the major effect is on the level of incentive payments these excluded hospitals receive. Conversely, for excluded hospitals with per-case cost increases above the cumulative update in their rate-of-increase limits, the major effect is the amount of excess costs that will not be reimbursed. We note that, under § 413.40(d)(3), an excluded hospital that continues to be paid under the TEFRA system, whose costs exceed 110 percent of its rate-ofincrease limit receives its rate-ofincrease limit plus 50 percent of the difference between its reasonable costs and 110 percent of the limit, not to exceed 110 percent of its limit. In addition, under the various provisions set forth in § 413.40, cancer and children’s hospitals can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. VI. Quantitative Effects of the Policy Changes Under the IPPS for Operating Costs A. Basis and Methodology of Estimates In this proposed rule, we are announcing proposed policy changes and payment rate updates for the IPPS for operating costs of acute care hospitals. Updates to the capital payments to acute care hospitals are discussed in section VIII. of this Appendix. Based on the overall percentage change in payments per case estimated using our payment simulation model, we estimate that total FY 2010 operating payments would decrease by 0.5 percent compared to FY 2009, largely due to the statutorily mandated update to the IPPS rates. This amount also reflects the proposed FY 2010 documentation and coding adjustments described above and in section II.D. of the preamble: ¥1.9 percent for the IPPS national standardized amounts, ¥2.5 percent for the IPPS hospital specific rates, and ¥1.1 percent for the IPPS Puerto Ricospecific standardized amount. The impacts do not illustrate changes in hospital admissions or real case-mix intensity, which would also affect overall payment changes. We have prepared separate impact analyses of the proposed changes to each system. This section deals with changes to the operating prospective payment system for acute care hospitals. Our payment simulation model relies on the most recent available data to enable us to estimate the impacts on payments per case of certain proposed changes in this proposed rule. However, there are PO 00000 Frm 00575 Fmt 4701 Sfmt 4702 24653 other proposed changes for which we do not have data available that would allow us to estimate the payment impacts using this model. For those proposed changes, we have attempted to predict the payment impacts based upon our experience and other more limited data. The data used in developing the quantitative analyses of changes in payments per case presented below are taken from the FY 2008 MedPAR file and the most current Provider-Specific File that is used for payment purposes. Although the analyses of the proposed changes to the operating PPS do not incorporate cost data, data from the most recently available hospital cost report were used to categorize hospitals. Our analysis has several qualifications. First, in this analysis, we do not make adjustments for future changes in such variables as admissions, lengths of stay, or underlying growth in real case-mix. Second, due to the interdependent nature of the IPPS payment components, it is very difficult to precisely quantify the impact associated with each proposed change. Third, we use various sources for the data used to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available source overall. However, for individual hospitals, some miscategorizations are possible. Using cases from the FY 2008 MedPAR file, we simulated payments under the operating IPPS given various combinations of payment parameters. Any short-term, acute care hospitals not paid under the IPPS (Indian Health Service hospitals and hospitals in Maryland) were excluded from the simulations. The impact of payments under the capital IPPS, or the impact of payments for costs other than inpatient operating costs, are not analyzed in this section. Estimated payment impacts of the capital IPPS for FY 2010 are discussed in section VIII. of this Appendix. The changes discussed separately below are the following: • The effects of the annual reclassification of diagnoses and procedures, full implementation of the MS–DRG system and 100 percent costbased MS–DRG relative weights. • The effects of the proposed changes in hospitals’ wage index values reflecting wage data from hospitals’ cost reporting periods beginning during FY 2006, compared to the FY 2005 wage data. • The effects of the proposed changes to the hospital labor-related share, E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24654 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules where the proposed hospital laborrelated share for hospitals with a wage index greater than 1 has been rebased from 69.7 percent to 67.1 percent. Hospitals with a wage index less than or equal to 1 will continue to have a hospital labor-related share of 62 percent. • The effects of the recalibration of the DRG relative weights as required by section 1886(d)(4)(C) of the Act, including the wage and recalibration budget neutrality factors. • The effects of geographic reclassifications by the MGCRB that would be effective in FY 2010. • The effects of the second year of the 3-year transition to apply rural floor budget neutrality adjustment at the State level. In FY 2010, hospitals would receive a blended wage index that is 50 percent of a wage index with the State level rural and imputed floor budget neutrality adjustment and 50 percent of a wage index with the national budget neutrality adjustment. • The effects of section 505 of Public Law 108–173, which provides for an increase in a hospital’s wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute to work at hospitals in counties with higher wage indexes. • The effect of the budget neutrality adjustment being made for the adoption of the MS–DRGs under section 1886(d)(3)(A)(iv) of the Act for the change in aggregate payments that is a result of changes in the documentation and coding of discharges that do not reflect real changes in case-mix. These documentation and coding adjustments include a ¥1.9 percent documentation and coding adjustment for the national standardized amount, a ¥2.5 percent documentation and coding adjustment for the hospital-specific rate, and a ¥1.1 percent documentation and coding adjustment for the Puerto Rico-specific rate. • The total estimated change in payments based on the proposed FY 2010 policies relative to payments based on FY 2009 policies that include the proposed market basket update of 2.1 percent. To illustrate the impacts of the proposed FY 2010 changes, our analysis begins with a FY 2009 baseline simulation model using: the proposed FY 2010 market basket update of 2.1 percent; the FY 2009 MS–DRG GROUPER (Version 26.0); the most current CBSA designations for hospitals based on OMB’s MSA definitions; the FY 2009 wage index; and no MGCRB reclassifications. Outlier payments are VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 set at 5.1 percent of total operating DRG and outlier payments. Section 1886(b)(3)(B)(viii) of the Act, as added by section 5001(a) of Public Law 109–171, provides that, for FY 2007 and subsequent years, the update factor will be reduced by 2.0 percentage points for any hospital that does not submit quality data in a form and manner and at a time specified by the Secretary. At the time this impact was prepared, 94 hospitals did not receive the full market basket rate-of-increase for FY 2009 because they failed the quality data submission process. For purposes of the simulations shown below, we modeled the proposed payment changes for FY 2010 using a reduced update for these 94 hospitals. However, we do not have enough information at this time to determine which hospitals will not receive the full market basket rate-ofincrease for FY 2010. Each policy change, statutorily or otherwise, is then added incrementally to this baseline, finally arriving at an FY 2010 model incorporating all of the proposed changes. This simulation allows us to isolate the effects of each proposed change. Our final comparison illustrates the proposed percent change in payments per case from FY 2009 to FY 2010. Three factors not discussed separately have significant impacts here. The first is the update to the standardized amount. In accordance with section 1886(b)(3)(B)(i) of the Act, we are proposing to update the standardized amounts for FY 2010 using the most recently forecasted hospital market basket increase for FY 2010 of 2.1 percent. (Hospitals that fail to comply with the quality data submission requirements to receive the full update will receive an update reduced by 2.0 percentage points from 2.1 percent to 0.1 percent.) Under section 1886(b)(3)(B)(iv) of the Act, the updates to the hospital-specific amounts for SCHs and for MDHs are also equal to the market basket percentage increase, or 2.1 percent. A second significant factor that affects the proposed changes in hospitals’ payments per case from FY 2010 to FY 2010 is the change in a hospital’s geographic reclassification status from one year to the next. That is, payments may be reduced for hospitals reclassified in FY 2009 that are no longer reclassified in FY 2010. Conversely, payments may increase for hospitals not reclassified in FY 2009 that are reclassified in FY 2010. In addition, section 508 of Public Law 108–173, the special reclassification provision, is set to expire in FY 2010. The section 508 reclassification is a PO 00000 Frm 00576 Fmt 4701 Sfmt 4702 nonbudget neutral provision, so overall payments will be reduced as a result of the expiration of this provision. In the impact analysis for this proposed rule, the expiration of certain special exceptions as well as section 508 of Public Law 108–173 resulted in substantial impacts for a relatively small number of hospitals in a particular category because those providers would have lost their reclassification status resulting in a percentage change in payments for the category to be below the national mean. A third significant factor is that we currently estimate that actual outlier payments during FY 2009 will be 5.4 percent of total DRG payments. When the FY 2008 final rule was published, we projected FY 2009 outlier payments would be 5.1 percent of total DRG plus outlier payments; the average standardized amounts were offset correspondingly. The effects of the higher than expected outlier payments during FY 2010 (as discussed in the Addendum to this proposed rule) are reflected in the analyses below comparing our current estimates of FY 2009 payments per case to estimated FY 2010 payments per case (with outlier payments projected to equal 5.1 percent of total DRG payments). B. Analysis of Table I Table I displays the results of our analysis of the proposed changes for FY 2010. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 3,513 acute care hospitals included in the analysis. The next four rows of Table I contain hospitals categorized according to their geographic location: all urban, which is further divided into large urban and other urban; and rural. There are 2,535 hospitals located in urban areas included in our analysis. Among these, there are 1,386 hospitals located in large urban areas (populations over 1 million), and 1,149 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 978 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals’ FY 2010 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER rows labeled urban, large urban, other urban, and rural show that the numbers of hospitals paid based on these categorizations after consideration of geographic reclassifications (including reclassifications under section 1886(d)(8)(B) and section 1886(d)(8)(E) of the Act that have implications for capital payments) are 2,585, 1,417, 1,168 and 928, respectively. The next three groupings examine the impacts of the proposed changes on hospitals grouped by whether or not they have GME residency programs (teaching hospitals that receive an IME adjustment) or receive DSH payments, or some combination of these two adjustments. There are 2,479 nonteaching hospitals in our analysis, VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 800 teaching hospitals with fewer than 100 residents, and 234 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural for DSH purposes. The next category groups together hospitals considered urban or rural, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next five rows examine the impacts of the proposed changes on rural hospitals by special payment groups (SCHs, RRCs, and MDHs). There were 187 RRCs, 338 SCHs, 181 MDHs, 105 hospitals that are both SCHs and PO 00000 Frm 00577 Fmt 4701 Sfmt 4702 24655 RRCs, and 14 hospitals that are both an MDH and an RRC. The next series of groupings are based on the type of ownership and the hospital’s Medicare utilization expressed as a percent of total patient days. These data were taken from the FY 2006 Medicare cost reports. The next two groupings concern the geographic reclassification status of hospitals. The first grouping displays all urban hospitals that were reclassified by the MGCRB for FY 2010. The second grouping shows the MGCRB rural reclassifications. The final category shows the impact of the proposed policy changes on the 20 cardiac hospitals in our analysis. BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00578 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.394</GPH> sroberts on PROD1PC70 with FRONTMATTER 24656 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00579 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24657 EP22MY09.395</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00580 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.396</GPH> sroberts on PROD1PC70 with FRONTMATTER 24658 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00581 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24659 EP22MY09.397</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00582 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.398</GPH> sroberts on PROD1PC70 with FRONTMATTER 24660 BILLING CODE 4210–01–C sroberts on PROD1PC70 with FRONTMATTER C. Effects of the Proposed Changes to the MS–DRG Reclassifications and Relative Cost-Based Weights (Column 1) In Column 1 of Table I, we present the effects of the proposed DRG reclassifications, as discussed in section II. of the preamble to this proposed rule. Section 1886(d)(4)(C)(i) of the Act requires us annually to make appropriate classification changes in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. As discussed in the preamble of this proposed rule, the proposed FY 2010 DRG relative weights would be 100 percent cost-based and 100 percent MS– DRGs. For FY 2010, the MS–DRGs are calculated using the FY 2008 MedPAR data grouped to the Version 27.0 (FY 2010) DRGs. The methods of calculating the proposed relative weights and the reclassification changes to the GROUPER are described in more detail in section II.H. of the preamble to this proposed rule. The proposed changes to the relative weights and MS–DRGs shown in Column 2 are prior to any offset for budget neutrality. Overall, hospitals would experience a 0.2 percent increase in payments due to the changes in the MS–DRGs and relative weights prior to budget neutrality. Urban hospitals would experience a 0.3 percent increase in payments under the updates to the relative weights and DRGs, while rural hospitals would experience a 0.1 percent decrease in payments. Under the MS–DRG system, rural hospitals would generally experience a decrease in payments from recalibration due to the lower acuity of services provided. D. Effects of the Application of Recalibration Budget Neutrality (Column 2) Column 2 shows the effects of the changes to the MS–DRGs and relative weights with the application of the recalibration budget neutrality factor to the standardized amounts. Consistent with section 1886(d)(4)(C)(iii) of the Act, we are calculating a recalibration VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 budget neutrality factor to account for the changes in MS–DRGs and relative weights to ensure that the overall payment impact is budget neutral. Beginning in FY 2010, we are calculating a budget neutrality factor to account for changes in MS–DRGs and relative weights separately from the budget neutrality factor to account for changes in wage data. The ‘‘All Hospitals’’ line in Column 1 indicates that proposed changes due to MS–DRGs and relative weights would increase payments by 0.2 percent before application of the budget neutrality factor. The proposed recalibration budget neutrality factor is 0.997663, which is applied to the standardized amount. Thus, the impact after accounting only for budget neutrality for proposed changes to the MS–DRG relative weights and classification is somewhat lower than the figures shown in this column (approximately 0.2 percent). Consequentially, urban hospitals would not experience a change in payments when recalibration budget neutrality is applied, while rural hospitals would experience a 0.3 percent decrease in payments due to the lower acuity of services provided. E. Effects of Proposed Wage Index Changes (Column 3) Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for acute care hospitals for FY 2010 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 2005 and before October 1, 2006. The estimated impact of the updated wage data and labor share on hospital payments is isolated in Column 3 by holding the other payment parameters constant in this simulation. That is, Column 3 shows the percentage change in payments when going from a model using the FY 2009 wage index, based on FY 2005 wage data, the current laborrelated share and having a 100-percent occupational mix adjustment applied, to a model using the proposed FY 2010 PO 00000 Frm 00583 Fmt 4701 Sfmt 4702 24661 pre-reclassification wage index with the proposed labor-related share, also having a 100-percent occupational mix adjustment applied, based on FY 2006 wage data (while holding other payment parameters such as use of the Version 26.0 DRG GROUPER constant). The occupational mix adjustment is based on the FY 2007/2008 occupational mix survey. The wage data collected on the FY 2006 cost report include overhead costs for contract labor that were not collected on FY 2005 and earlier cost reports. The impacts below incorporate the effects of the FY 2006 wage data collected on hospital cost reports, including additional overhead costs for contract labor compared to the wage data from FY 2005 cost reports that were used to calculate the FY 2009 wage index. As discussed in section III. of this proposed rule, under section 1886(d)(3)(E) of the Act, the Secretary estimates from time to time the proportion of payments that are laborrelated. ‘‘The Secretary shall adjust the proportion (as estimated by the Secretary from time to time) of hospitals’ costs which are attributable to wages and wage-related costs of the DRG prospective payment rates * * * ’’ We refer to the proportion of hospitals’ costs that are attributable to wages and wage-related costs as the ‘‘labor-related share.’’ The labor-related share is used to determine the proportion of the national IPPS base payment rate to which the area wage index is applied. In this proposed rule, we describe our updated methodology and data sources to calculate the national labor-related share. Using the proposed cost category weights from the FY 2006-based IPPS market basket, we calculated a laborrelated share of 67.1 percent, approximately 3 percentage points lower than the current labor-related share of 69.7 percent. Accordingly, in this proposed rule, we are implementing a national labor-related share of 67.1 percent for discharges occurring on or after October 1, 2009. This proposal only affects hospitals with a wage index greater than 1. According to section E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.399</GPH> Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER 24662 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 1886(d)(3)(E)(ii) of the Act, hospitals with a wage index less than or equal to 1 have their wage index adjusted to 62 percent of the national standardized amount; therefore, these hospitals remain unaffected by the labor-related share proposal. In addition, we are proposing to update the labor-related share for Puerto Rico. Using FY 2006based Puerto Rico cost category weights, we calculated a labor-related share of 60.347 percent, approximately 2 percentage points higher than the current Puerto-Rico specific laborrelated share of 58.721. Accordingly, we are adopting an updated Puerto Rico labor-related share of 60.3 percent. Column 3 shows the impacts of updating the wage data using FY 2006 cost reports and the updated laborrelated share. The payment changes simulated in this column are used to calculate the wage budget neutrality. Beginning in FY 2010, we are calculating separate wage budget neutrality and recalibration budget neutrality factors, in accordance with section 1886(d)(3)(E) of the Act, which specifies that budget neutrality to account for wage changes or updates made under that subparagraph must be made without regard to the 62 percent labor-related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2010, we are calculating the wage budget neutrality factor to ensure that payments under updated wage data and the proposed labor-related share are budget neutral without regard to the lower labor-related share of 62 percent applied to hospitals with a wage index less than or equal to 1. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the higher labor-related share of the standardized amount. Column 3 shows the effects of the new wage data and new labor share before budget neutrality under the assumption that all providers have their wage index adjusted by the same labor-related share. Overall, the new wage data would lead to a 0.0 percent change for all hospitals before being combined with the proposed wage budget neutrality adjustment shown in Column 5. Thus, the figures in this column are estimated to be the same as what they otherwise would be if they also illustrated a budget neutrality adjustment solely for changes to the wage index. Among the regions, the largest increase is in the urban Puerto Rico region, which experiences a 1.8 percent increase before applying an adjustment for budget neutrality. The largest decline from updating the wage VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 data is seen in rural New England (0.5 percent decrease). In looking at the wage data itself, the national average hourly wage increased 3.9 percent compared to FY 2009. Therefore, the only manner in which to maintain or exceed the previous year’s wage index was to match or exceed the national 3.9 percent increase in average hourly wage. Of the 3,469 hospitals with wage data for both FYs 2009 and 2010, 1,682, or 48.5 percent, experienced an average hourly wage increase of 3.9 percent or more. The following chart compares the shifts in proposed wage index values for hospitals for FY 2010 relative to FY 2009. Among urban hospitals, 29 will experience an increase of more than 5 percent and less than 10 percent and 8 will experience an increase of more than 10 percent. Among rural hospitals, 8 will experience an increase of more than 5 percent and less than 10 percent, and none will experience an increase of more than 10 percent. However, 955 rural hospitals will experience increases or decreases of less than 5 percent, while 2,427 urban hospitals will experience increases or decreases of less than 5 percent. Thirty-four urban hospitals will experience decreases in their wage index values of more than 5 percent and less than 10 percent. Eight urban hospitals will experience decreases in their wage index values of greater than 10 percent. No rural hospitals will experience decreases of more than 5 percent. These figures reflect proposed changes in the wage index which is an adjustment to either 67.1 percent or 62 percent of a hospital’s proposed standardized amount, depending upon whether its wage index is greater than 1.0 or less than or equal to 1.0. Therefore, these figures are illustrating a somewhat larger change in the wage index than would occur to the hospital’s total payment. The following chart shows the projected impact for urban and rural hospitals. Percentage change in area wage index values Increase more than 10 percent .......................... Increase more than 5 percent and less than 10 percent .......................... Increase or decrease less than 5 percent ............... Decrease more than 5 percent and less than 10 percent ..................... Decrease more than 10 percent .......................... PO 00000 Frm 00584 Fmt 4701 F. Application of the Wage Budget Neutrality Factor (Column 4) Column 4 shows the impact of the new wage data, new labor share with the application of the wage budget neutrality factor. For FY 2010, we will calculate the wage budget neutrality factor without regard to the lower labor share of 62 percent for hospitals with a wage index less than or equal to 1, in accordance with section 1886(d)(3)(E)(i) of the Act. In other words, the wage budget neutrality is calculated under the assumption that all hospitals receive the proposed labor-related share of 67.1 percent of the standardized amount compared to the current labor-related share of 69.7 percent of the standardized amount. Because the wage data changes did not change overall payments (displayed in Column 3), the wage budget neutrality factor is minimal at 1.000404, and the overall payment change is 0.0 percent. G. Combined Effects of Proposed MS– DRG and Wage Index Changes (Column 5) Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS–DRG reclassifications and the relative weights cannot increase or decrease aggregate payments. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. We computed a proposed wage budget neutrality factor of 1.000404, and a proposed recalibration budget neutrality factor of 0.997663 (which is applied to the Puerto Rico specific standardized amount and the hospital-specific rates). The product of the two budget neutrality factors is the cumulative wage and recalibration budget neutrality factor. The proposed cumulative wage and recalibration budget neutrality adjustment is 0.998066 or approximately ¥0.2 percent which is applied to the national standardized amounts. Because the wage budget neutrality and the recalibration budget neutrality are calculated under different Number of methodologies according to the statute, hospitals when the two budget neutralities are Urban Rural combined and applied to the standardized amount, the cumulative wage and recalibration budget neutrality 8 0 results in a 0.1 percent decrease in payments relative to no budget 29 8 neutrality adjustment at all. In Table I, the combined overall impacts of the 2,427 955 effects of both the proposed MS–DRG reclassifications and the updated wage index are shown in Column 5. The 34 0 estimated changes shown in this column reflect the combined effects of 8 0 the proposed changes in Columns 2, 3, Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER and 4 and the proposed budget neutrality factors discussed previously. We estimate that the combined impact of the proposed changes to the relative weights and DRGs, the proposed updated wage data and proposed changes to the labor share with budget neutrality applied will decrease payments to hospitals located in all urban areas by approximately 0.1 percent. Rural hospitals would generally experience a decrease in payments (¥0.5 percent) primarily due to payment decreases under the MS–DRGs. Among the rural hospital categories, rural hospitals with less than 50 beds and rural New England hospitals will experience the greatest decline in payment (¥0.8 percent) primarily due to the proposed changes to MS–DRGs and the relative cost weights. H. Effects of MGCRB Reclassifications (Column 6) Our impact analysis to this point has assumed acute care hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on other bases than where they are geographically located). The proposed changes in Column 7 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 2010 which affect hospitals’ wage index area assignments. By Spring of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. The MGCRB may approve a hospital’s reclassification request for the purpose of using another area’s wage index value. Hospitals may appeal denials of MGCRB decisions to the CMS Administrator. Further, hospitals have 45 days from publication of the IPPS rule in the Federal Register to decide whether to withdraw or terminate an approved geographic reclassification for the following year. This column reflects all MGCRB decisions, Administrator appeals and decisions of hospitals for FY 2010 geographic reclassifications. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, for the purposes of this impact analysis, we are proposing to apply an adjustment of 0.991690 to ensure that the effects of the section 1886(d)(10) reclassifications are budget neutral. (See section II.A. of the Addendum to this proposed rule.) Geographic reclassification generally benefits hospitals in rural areas. We estimate that geographic reclassification VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 will increase payments to rural hospitals by an average of 1.7 percent. Table 9A of the Addendum to this proposed rule reflects the approved reclassifications for FY 2010. I. Effects of the Rural Floor and Imputed Floor, Including the Transition To Apply Budget Neutrality at the State Level (Column 7) As discussed in section III.B. of the preamble of the FY 2009 IPPS final rule and this proposed rule, section 4410 of Public Law 105–33 established the rural floor by requiring that the wage index for a hospital in any urban area cannot be less than the wage index received by rural hospitals in the same State. In FY 2008, we changed how we applied budget neutrality to the rural floor. Rather than applying a budget neutrality adjustment to the standardized amount, a uniform budget neutrality adjustment is applied to the wage index. In the FY 2009 final rule, we finalized the policy to apply the rural floor budget neutrality at the State level with a 3-year transition. In FY 2009, hospitals received a blended wage index that is 20 percent of a wage index with the State level rural and imputed floor budget neutrality adjustment and 80 percent of a wage index with the national budget neutrality adjustment. As described in FY 2009 IPPS final rule (73 FR 48570), in FY 2010, hospitals will receive a blended wage index that is 50 percent of a wage index with the State level rural and imputed floor budget neutrality and 50 percent of a wage index with the national budget neutrality adjustment. The national rural floor budget neutrality applied to the wage index is 0.997466. The withinState rural floor budget neutrality factors applied to the proposed wage index are shown in Table 4D in the Addendum to this proposed rule. After the wage index is blended, an additional adjustment of 1.000017 is applied to the wage index to ensure that payments before the application of the rural floor are equivalent to the payments under the blended budget neutral rural floor wage index. Furthermore, the FY 2005 IPPS final rule (69 FR 49109) established a temporary imputed floor for all urban States from FY 2005 to FY 2007. The rural floor requires that an urban wage index cannot be lower than the wage index for any rural hospital in that State. Therefore, an imputed floor was established for States that do not have rural areas or rural IPPS hospitals. In the FY 2008 IPPS final rule with comment period (72 FR 47321), we finalized our proposal to extend the imputed floor for 1 additional year. In the FY 2009 IPPS PO 00000 Frm 00585 Fmt 4701 Sfmt 4702 24663 final rule (73 FR 48573), we extended the imputed floor for an additional 3 years through FY 2011. Furthermore, in that final rule, we provided for a 3-year transition to the rural floor budget neutrality adjustment at the State level. Therefore, we also apply the imputed floor budget neutrality adjustment at the State level through a 3-year transition, so that wage indices adjusted for the imputed floor will be blended where 50 percent of the wage index will have the national rural and imputed floor budget neutrality factor applied and 50 percent of the wage index will have the withinState rural and imputed budget neutrality factor applied. The national rural floor budget neutrality factor listed also incorporates the imputed floor in its adjustment to the wage index. Column 7 shows the projected impact of the rural floor and the imputed floor, including the application of the transition to within-State rural and imputed floor budget neutrality. The column compares the proposed postreclassification FY 2010 wage index of providers before the rural floor adjustment and the post-reclassification FY 2010 wage index of providers with the rural floor and imputed floor adjustment. Only urban hospitals can benefit from the rural floor provision. Because the provision is budget neutral, in prior years, all other hospitals (that is, all rural hospitals and those urban hospitals to which the adjustment is not made) had experienced a decrease in payments due to the budget neutrality adjustment applied nationally. However, because, for FY 2010, the rural floor adjusted wage index is based on a blend where 50 percent of the wage index would have a within-State budget neutrality factor applied and 50 percent of the wage index would have a national rural floor budget neutrality factor applied, rural hospitals and urban hospitals that do not benefit from the rural floor will continue to see decreases in payments, to a lesser extent. Conversely, all hospitals in States with hospitals receiving a rural floor will have their wage indices only partly downwardly adjusted to achieve budget neutrality within the State. We project that, in aggregate, rural hospitals will experience a 0.1 percent decrease in payments as a result of the transition to within-State rural floor budget neutrality because these hospitals do not benefit from the rural floor, but have their wage indexes downwardly adjusted to ensure that the application of the rural floor is budget neutral overall. We project hospitals located in other urban areas (populations of 1 million or fewer) will experience a 0.1 percent increase in E:\FR\FM\22MYP2.SGM 22MYP2 24664 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules payments because those providers benefit from the rural floor. Rural hospitals located in the South Atlantic, East South Central and West South Central and Pacific regions can expect the decreases in payments by 0.1 percent. Urban Middle Atlantic hospitals can expect a payment increase of 0.1 percent primarily due to payment increases among urban hospitals in New Jersey, which is the only State that benefits from the imputed floor. sroberts on PROD1PC70 with FRONTMATTER J. Effects of the Proposed Wage Index Adjustment for Out-Migration (Column 8) Section 1886(d)(13) of the Act, as added by section 505 of Public Law 108–173, provides for an increase in the wage index for hospitals located in certain counties that have a relatively high percentage of hospital employees who reside in the county, but work in a different area with a higher wage index. Hospitals located in counties that qualify for the payment adjustment are to receive an increase in the wage index that is equal to a weighted average of the difference between the wage index of the resident county, post-reclassification and the higher wage index work area(s), weighted by the overall percentage of workers who are employed in an area with a higher wage index. With the outmigration adjustment, small rural providers with less than 49 beds and MDHs will experience a 0.2 percent increase in payments in FY 2010 relative to no adjustment at all. We included these additional payments to providers in the impact table shown above, and we estimate the impact of these providers receiving the outmigration increase to be approximately $17 million. K. Effects of All Proposed Changes Prior to Documentation and Coding (or CMI) Adjustment (Column 9) Column 9 shows our estimate of the change in operating payments from FY 2009 and FY 2010 resulting from all proposed changes in this rule other than the proposed documentation and coding adjustment. This column includes a 2.1 percent market basket update to the standardized amount. In addition, it reflects the ¥0.3 percentage point difference between the projected outlier payments in FY 2009 (5.1 percent of total MS–DRG payments) and the current estimate of the percentage of actual outlier payments in FY 2009 (5.4 percent), as described in the introduction to this Appendix and the Addendum to this proposed rule. As a result, payments are projected to be 0.3 percentage points higher in FY 2009 than originally estimated, resulting in a VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 0.3 percentage point decrease for FY 2010 than would otherwise occur. This analysis also accounts for the impact of expiration of certain special exceptions and section 508 reclassification, a nonbudget neutral provision, which results in a decrease in estimated payments by 0.2 percent. In addition, the separate calculation of wage budget neutrality (which does not account for the 62 percent labor-related share) from the recalibration budget neutrality (which does account for the 62 percent labor-related share) results in a 0.2 percent decrease in payments relative to last year. We estimate that overall payments to hospitals paid under the IPPS would increase 1.4 percent prior to the application of the proposed documentation and coding adjustment. For the proposed rule, we are proposing to apply a ¥1.9 percent documentation and coding adjustment to the IPPS national standardized amount, a ¥2.5 documentation and coding adjustment applied to the hospitals-specific rate, and a ¥1.1 documentation and coding adjustment applied to the Puerto Ricospecific rate. Because SCHs and MDHs are paid in whole or in part based on the hospital-specific rate if higher than the rate based on the national standardized amount, these hospitals may switch between these payment rates in Column 9 and Column 10. Without the documentation and coding adjustments, hospitals located in urban areas would experience higher payment increases (1.4 percent) than hospitals in rural areas (0.8 percent) because urban hospitals generally treat patients with higher acuity of illness and have a higher case-mix under the MS–DRGs. L. Effects of All Proposed Changes With CMI Adjustment (Column 10) Column 10 shows our estimate of the changes in payments per discharge from FY 2009 and FY 2010, resulting from all proposed changes reflected in this proposed rule for FY 2010 (including statutory changes). This column includes the proposed FY 2010 documentation and coding adjustment of ¥1.9 percent on the national standardized amount, ¥2.5 percent on the hospital-specific amount and ¥1.1 percent on the Puerto Rico-specific rate, which overall accounts for a 1.9 percent decrease in payments. Because the hospital payment projections are based on FY 2008 Medicare claims data and we believe that case-mix was expected to increase an additional 1.6 percent in FY 2009, the payment models reflect a case-mix growth of 1.6 percent in FY 2009. PO 00000 Frm 00586 Fmt 4701 Sfmt 4702 Column 10 reflects the impact of all proposed FY 2010 changes relative to FY 2009, including those shown in Columns 1 through 9. The average decrease in payments under the IPPS for all hospitals is approximately 0.5 percent. As described in Column 9, this average decrease includes the effects of the 2.1 percent market basket update, the ¥0.3 percentage point difference between the projected outlier payments in FY 2009 (5.1 percent of total DRG payments), the current estimate of the percentage of actual outlier payments in FY 2009 (5.4 percent), the 0.2 percent decrease in payments due to the expiration of section 508 reclassification, and the 0.2 percent decrease in payments due to the calculation of wage and recalibration budget neutrality. There might also be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in Column 10 may not equal the sum of the percentage changes described above. The overall proposed change in payments per discharge for hospitals paid under the IPPS in FY 2010 is estimated to decrease by 0.5 percent. The payment decreases among the hospital categories are largely attributed to the proposed documentation and coding adjustments. Hospitals in urban areas would experience an estimated 0.4 percent decrease in payments per discharge in FY 2010 compared to FY 2009. Hospitals in large urban areas would experience an estimated 0.4 percent decrease and hospitals in other urban areas would experience an estimated 0.5 percent decrease in payments per discharge in FY 2010 as compared to FY 2009. Hospital payments per discharge in rural areas are estimated to decrease by 1.3 percent in FY 2010 as compared to FY 2009. The decreases that are smaller than the national average for larger urban areas and larger than the national average for rural areas are largely attributed to the differential impact of adopting MS– DRGs and due to the ¥1.9 percent documentation and coding adjustment applied to the national standardized amount and the ¥2.5 percent documentation and coding adjustment to the hospital-specific rate, applied to SCHs and MDHs which are generally classified as rural hospitals. Among urban census divisions, the largest estimated payment decreases would be ¥0.9 percent in the Pacific region and ¥0.7 percent in the Middle Atlantic region. Among the rural regions, the providers in the New England region would experience the largest decrease in payments (¥2.5 E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER percent) primarily due to a combination of the MS–DRG changes, the transition to the State rural floor budget neutrality and the documentation and coding adjustment. The rural providers in the East South Central regions would have the smallest decreases among rural regions at ¥0.3 percent because the benefits from the MGCRB reclassification partially offset the documentation and coding adjustments. Among special categories of rural hospitals, MDHs would receive an estimated payment decrease of ¥0.1 percent. MDHs are paid the higher of the IPPS rate based on the national standardized amount, that is, the Federal rate, or, if the hospital-specific rate exceeds the Federal rate, the Federal rate plus 75 percent of the difference between the Federal rate and the hospital-specific rate. MDHs experience a decrease in payments due to the 1.9 percent documentation and coding adjustment applied to the federal rate and the 2.5 percent documentation and coding adjustment applied to the hospital-specific rate. In addition, this payment impact accounts for the corrected wage and recalibration budget neutrality factor, described in section V.B.2. of the preamble of this proposed rule, applied to the hospital-specific rates for MDHs that are paid based on their FY 2002 hospital-specific rate. Overall, SCHs would experience an estimated decrease in payments by ¥2.3 percent largely due to the proposed ¥2.5 percent documentation and coding adjustment applied to the hospital-specific rate. In addition, section 112 of Public Law 110–275 (MIPPA) allowed for SCHs to be paid based on a FY 2006 hospital-specific rate (that is, based on their updated VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 costs per discharge from their 12-month cost reporting period beginning during Federal FY 2006), if this results in the greatest payment to the SCH, effective for cost reporting periods beginning on or after January 1, 2009. We estimated the FY 2006 hospital-specific rate for SCHs that we believed would benefit from the rebased rate and included those rates in our analysis. SCHs are estimated to experience a greater decrease in payments compared to the MDHs because the documentation and coding adjustment applied to the hospital-specific rates impacts SCHs and MDHs differently. SCHs that are paid under the hospital-specific rate have not had their payment rates adjusted for documentation and coding previously and would experience a ¥2.5 percent documentation and coding adjustment to their rates. However, MDHs, which are paid the Federal rate plus 75 percent of the amount by which the hospital-specific rate exceeds the Federal rate, have had the portion of their payment rate based on the Federal rate adjusted in the past (¥0.6 percent adjustment in FY 2008 and ¥0.9 percent adjustment in FY 2009), whereas the ¥2.5 percent documentation and coding adjustment applied to the hospital-specific rate affects a relatively smaller portion of their rate based on the hospital-specific rate (compared to SCHs), thereby resulting in a smaller payment impact. Thus, the change in payment for SCHs relative to last year is more significant than the payment change for MDHs. Urban hospitals reclassified for FY 2010 are anticipated to receive a decrease in payments under the IPPS of 0.6 percent, while urban hospitals that are not reclassified for FY 2010 are PO 00000 Frm 00587 Fmt 4701 Sfmt 4702 24665 expected to receive a decrease of 0.4 percent. Rural hospitals reclassified for FY 2010 are anticipated to receive a ¥1.1 percent payment decrease, and rural hospitals that are not reclassifying are estimated to receive a payment decrease of ¥1.6 percent. Cardiac hospitals are the only category of hospitals under the IPPS expected to experience payment increases in FY 2010 as compared to FY 2009 (an increase of 0.3 percent). M. Effects of Policy on Payment Adjustments for Low-Volume Hospitals For FY 2010, we are proposing to continue to apply the volume adjustment criteria we specified in the FY 2005 IPPS final rule (69 FR 49099). We expect that three providers will receive the low-volume adjustment for FY 2010. We estimate that low-volume hospitals will experience a 3.1 percent decrease in payments in FY 2010 relative to FY 2009. N. Impact Analysis of Table II Table II presents the projected impact of the proposed changes for FY 2010 for urban and rural hospitals and for the different categories of hospitals shown in Table I. It compares the estimated average payments per discharge for FY 2009 with the payments per discharge for FY 2010, as calculated under our models. Thus, this table presents, in terms of the average dollar amounts paid per discharge, the combined effects of the proposed changes presented in Table I. The estimated percentage changes shown in the last column of Table II equal the estimated percentage changes in average payments per discharge from Column 9 of Table I. BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00588 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.400</GPH> sroberts on PROD1PC70 with FRONTMATTER 24666 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00589 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24667 EP22MY09.401</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules BILLING CODE 4210–01–C VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00590 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.402</GPH> sroberts on PROD1PC70 with FRONTMATTER 24668 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules VII. Effects of Other Proposed Policy Changes In addition to those proposed policy changes discussed above that we are able to model using our IPPS payment simulation model, we are proposing to make various other changes in this proposed rule. Generally, we have limited or no specific data available with which to estimate the impacts of these proposed changes. Our estimates of the likely impacts associated with these other proposed changes are discussed below. secondary diagnosis that leads to higher payment is on the claim, the case will continue to be assigned to the higher paying MS–DRG and there will be no Medicare savings from that case. The HAC payment provision went into effect on October 1, 2008. Our savings estimates for the next 5 fiscal years are shown below: Savings (in millions) Year sroberts on PROD1PC70 with FRONTMATTER A. Effects of Proposed Policy on HACs, Including Infections FY FY FY FY FY In section II.F. of the preamble of this proposed rule, we discuss our implementation of section 1886(d)(4)(D) of the Act, which requires the Secretary to identify conditions that are: (1) High cost, high volume, or both; (2) result in the assignment of a case to an MS–DRG that has a higher payment when present as a secondary diagnosis; and (3) could reasonably have been prevented through application of evidence-based guidelines. For discharges occurring on or after October 1, 2008, hospitals will not receive additional payment for cases in which one of the selected conditions was not present on admission, unless based on data and clinical judgment, it cannot be determined at the time of admission whether a condition is present. That is, the case will be paid as though the secondary diagnosis were not present. However, the statute also requires the Secretary to continue counting the condition as a secondary diagnosis that results in a higher IPPS payment when doing the budget neutrality calculations for MS–DRG reclassifications and recalibration. Therefore, we will perform our budget neutrality calculations as though the payment provision did not apply, but Medicare will make a lower payment to the hospital for the specific case that includes the secondary diagnosis. Thus, the provision results in cost savings to the Medicare program. We note that the provision will only apply when one or more of the selected conditions are the only secondary diagnosis or diagnoses present on the claim that will lead to higher payment. Medicare beneficiaries will generally have multiple secondary diagnoses during a hospital stay, such that beneficiaries having one MCC or CC will frequently have additional conditions that also will generate higher payment. Only a small percentage of the cases will have only one secondary diagnosis that would lead to a higher payment. Therefore, if at least one nonselected B. Effects of Proposed Policy Change Relating to New Medical Service and Technology Add-On Payments In section II.I. of the preamble to this proposed rule, we discuss the five applications for add-on payments for new medical services and technologies for FY 2010, as well as the status of the new technology that was approved to receive new technology add-on payments in FY 2009. As explained in that section, add-on payments for new technology under section 1886(d)(5)(K) of the Act are not required to be budget neutral. As discussed in section II.I.4. of the preamble of this proposed rule, we have yet to determine whether any of the five applications we received for consideration for new technology addon payments for FY 2010 will meet the specified criteria. Consequently, it is premature to estimate the potential payment impact of any potential new technology add-on payments for FY 2010. We note that if any of the five applications are found to be eligible for new technology add-on payments for FY 2010 in the final rule, we would discuss the estimated payment impact for FY 2010 in that final rule. However, we are providing an estimate of additional payments for new technology add-on payments because such payments would have an impact on total operating IPPS payments in FY 2010. Because we are proposing to continue to make new technology addon payments in FY 2010 for the Cardiowest TM Temporary Total Artificial Heart System (TAH–t), we are providing an estimate of total payments for the TAH–t in FY 2010. We note that new technology add-on payments per case are limited to the lesser of (1) 50 percent of the costs of the new technology or (2) 50 percent of the amount by which the costs of the case exceed the standard MS–DRG payment for the case. Because it is difficult to predict the actual new technology add- VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 2010 2011 2012 2013 2014 ................................ ................................ ................................ ................................ ................................ Frm 00591 Fmt 4701 Sfmt 4702 $21 21 22 22 22 24669 on payment for each case, our estimate below is based on the increase in addon payments for FY 2010 as if every claim that would qualify for a new technology add-on payments would receive the maximum add-on payment. Therefore, we currently estimate that payments for the TAH–t will increase overall FY 2010 payments by $9.54 million. C. Effects of Proposed Requirements for Hospital Reporting of Quality Data for Annual Hospital Payment Update In section V.A. of the preamble of this proposed rule, we discuss our proposed requirements for hospitals to report quality data under the RHQDAPU program in order to receive the full payment update for FY 2010 and FY 2011. We estimate that 96 hospitals may not receive the full payment update for FY 2010 and that 96 hospitals may not receive the full payment update for FY 2011. Most of these hospitals are either small rural or small urban hospitals. However, at this time, information is not available to determine the hospitals that do not meet the requirements for the full hospital market basket increase for FY 2010 and FY 2011. For the FY 2010 payment update, hospitals must pass our validation requirement of a minimum of 80 percent reliability based upon our chart-audit validation process. For all but two measures (SCIP–Infection–4 and SCIP– Infection–6), this process uses four quarters of data from FY 2008. These data were due to the QIO Clinical Warehouse by May 15, 2008 (fourth quarter CY 2007 discharges), August 15, 2008 (first quarter CY 2008 discharges), November 15, 2008 (second quarter CY 2008 discharges), and February 15, 2009 (third quarter CY 2008 discharges). For the SCIP–Infection–4 and SCIP– Infection–6 measures, the validation process is based on two quarters of data from FY 2008. These data were due to the QIO Clinical Warehouse by November 15, 2008 (second quarter CY 2008 discharges) and February 15, 2009 (third quarter CY 2008 discharges). In section V.A.9. of the preamble of this proposed rule, we are proposing that if we determine that a hospital is not entitled to receive the full FY 2010 payment update because it failed to satisfy the validation requirement, and the hospital asks for a reconsideration of that decision, the hospital must submit complete copies of the medical records that it submitted to the CDAC contractor for purposes of the validation. We estimate that no more than 20 hospitals would fail the validation requirement for the FY 2010 payment update. We estimate that this proposal would cost E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24670 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules hospitals approximately 12 cents per page for copying and approximately $4.00 per chart for postage. We have found, based on experience, that an average sized medical chart is approximately 150 pages. Hospitals would be required to return all 20 sampled medical records for the four quarters of data from FY 2008. We estimate that the total cost to the 20 impacted hospitals would be approximately $8,800, or $440 per hospital. We believe that this cost is minimal, compared with the 2.0 percentage point RHQDAPU program component of the annual payment update at risk. This proposed requirement is necessary so that CMS has all the information it needs to fairly and timely make a decision on the hospital’s reconsideration request. We also anticipate that this requirement will benefit hospitals seeking reconsiderations because it will enable us to resolve potential issues earlier in the appeals process, obviating the need for a hearing before the Provider Reimbursement Review Board (PRRB). We believe that this benefit will greatly outweigh the burden of copying and mailing the requested records. For the FY 2011 payment update, hospitals must pass our validation requirement of a minimum of 80 percent reliability based upon our chart-audit validation process. For all but one measure (SCIP–Cardiovascular–2), this process will use four quarters of data from FY 2009. These data are due to the QIO Clinical Warehouse by May 15, 2009 (fourth quarter CY 2008 discharges), August 15, 2009 (first quarter CY 2009 discharges), November 15, 2009 (second quarter CY 2009 discharges), and February 15, 2010 (third quarter CY 2009 discharges). For the SCIP-Cardiovascular-2 measure, the validation process is based on two quarters of data from FY 2009. SCIPCardiovascular-2 data are due to the QIO Clinical Warehouse by November 15, 2009 (second quarter CY 2009 discharges) and February 15, 2010 (third quarter CY 2009 discharges). We have continued our efforts to ensure that QIOs provide assistance to all hospitals that wish to participate in the RHQDAPU program. The requirement of 5 charts per hospital would result in approximately 21,500 charts per quarter being submitted to CMS for the FY 2010 payment update and for the FY 2011 payment update. We reimburse hospitals for the cost of sending charts to the Clinical Data Abstraction Center (CDAC) contractor at the rate of 12 cents per page for copying and approximately $4.00 per chart for postage. Our experience shows that the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 average chart received by the CDAC contractor is approximately 150 pages. Thus, CMS would have expenditures of approximately $597,600 per quarter to collect the charts. Because we reimburse hospitals for the data collection effort, we believe that a requirement for five charts per hospital per quarter represents a minimal burden to the participating hospital. We are proposing to modify our validation process for the FY 2012 payment update. We believe that our proposal to validate data submitted by 800 hospitals for the FY 2012 RHQDAPU payment determination would not change the number of hospitals that fail the validation requirement for the FY 2012 payment update from previous years. We have proposed to change the way we calculate the validation matches (that is, all relevant data elements submitted by the hospital must match the independently re-abstracted data elements to count as a match), which will make it more difficult for hospitals to satisfy the validation requirement. However, we have also proposed to validate data for a much smaller number of hospitals each year and proposed to reduce the validation score needed to satisfy the validation requirement. In combination, we believe that these proposed revisions will counterbalance each other and result in no additional impact on the number of hospitals failing our validation requirement for the FY 2012 payment update. D. Effects of Correcting the FY 2002– Based Hospital-Specific Rates for MDHs In section V.B. of the preamble of this proposed rule, we discuss the need to correct the calculation of the FY 2002 hospital-specific rates for MDHs and apply a cumulative budget neutrality adjustment factor for DRG changes for FYs 1993 through 2002, in addition to the cumulative budget neutrality adjustment factors for FYs 2003 forward (which have already been applied). The cumulative budget neutrality adjustment factor of 0.982557 is calculated as the product of the following budget neutrality adjustment factors for FYs 1993 through 2002: 0.999851 for FY 1993; 0.999003 for FY 1994; 0.998050 for FY 1995; 0.999306 for FY 1996; 0.998703 for FY 1997; 0.997731 for FY 1998; 0.998978 for FY 1999; 0.997808 for FY 2000; 0.997174 for FY 2001; and 0.995821 for FY 2002. We estimate that there are currently about 195 MDHs. We estimate that approximately 60 percent of MDHs qualified for the rebasing to a FY 2002 hospital-specific rate (that is, their FY 2002 hospital-specific rate was higher PO 00000 Frm 00592 Fmt 4701 Sfmt 4702 than the other hospital-specific rates (FY 1982 or FY 1987)), of which about 46 percent of those MDHs were paid based on their FY 2002 hospital-specific rate because it was higher than the Federal rate. The remaining 54 percent of those MDHs are estimated to have been paid based solely on the Federal rate because the Federal rate was higher than their FY 2002 hospital-specific rate. We estimate that correcting the FY 2002 hospital-specific rate to ensure cumulative budget neutrality for FY 1993 though FY 2002 would result in an estimated decrease in operating IPPS payments in FY 2010 of approximately $6 million. However, this figure may be lower because application of the cumulative budget neutrality adjustment factor will, in some cases, lower the FY 2002 hospital-specific rate to below the Federal rate, thus creating a floor to the potential reduction. E. Effect of Proposed Policy Changes Relating to the Payment Adjustments to Disproportionate Share Hospitals 1. Proposed Change Relating to Inclusion of Labor and Delivery Days in DSH Calculation In section V.E.2. of the preamble of this proposed rule, we discuss our proposal to amend the regulations so that patient days associated with labor and delivery services are included in both the Medicaid and Medicare fractions of the DPP used for calculating the DSH payment adjustment, regardless of whether the patient occupied a routine bed prior to occupying an ancillary labor and delivery bed. We believe that the impact of the proposed inclusion of these days in the Medicare fraction of the DPP would be negligible because, generally, there are not many labor and delivery patient days among the Medicare population. In addition, with regard to the Medicaid fraction, we are not able to provide a detailed analysis of the potential of this proposed policy change because the impact would depend on the proportion of days associated with Medicaideligible patients who occupied an ancillary labor and delivery bed at some point after being admitted as an inpatient, but prior to occupying a routine bed, to days associated with similarly situated non-Medicaid-eligible patients relative to a hospital’s current Medicaid-to-total-days ratio (which would not have included the types of days we are proposing to include in this policy). We expect that the Medicaid fraction for some hospitals would increase while it would decrease for other hospitals. Therefore, we estimate E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules that the impact of this proposed policy change would be negligible. sroberts on PROD1PC70 with FRONTMATTER 2. Proposed Change Relating to Calculation of Inpatient Days in Medicaid Fraction In section V.E.3. of the preamble of this proposed rule, we discuss our proposal to allow a hospital to change its methodology of reporting days in the numerator of the Medicaid fraction of the DPP used in the DSH payment adjustment calculation. Under the proposed change, we would allow a hospital to report the Medicaid days in the numerator of the Medicaid fraction of the DPP based on one of the following: date of discharge; date of admission; or dates of service. Hospitals would be permitted to use only one basis for all of the Medicaid days for the entire cost reporting period. In addition, under the proposal, CMS, or its fiscal intermediaries or MACs, has the authority to make adjustments to the number of Medicaid days reported to avoid counting Medicaid days in one cost reporting period of a hospital that may have been reported in a hospital’s previous cost reporting period. We do not believe that the proposed change in the methodology of counting days in the numerator of the Medicaid fraction of the DPP would result in any increase in aggregate DSH payments. 3. Proposed Change Relating to Exclusion of Observation Beds and Patient Days from DSH Calculation In section V.E.4. of the preamble of this proposed rule, we discuss our proposal to amend the regulations so that patient days associated with beds used for observation services for patients who are subsequently admitted as an inpatient are no longer included in the DPP for calculating the DSH payment adjustment or in the available bed day count for calculating the DSH payment adjustment and IME payments. Some hospitals may receive increased DSH payment adjustments and others may expect to receive lower DSH payment adjustments, depending on how the exclusion of observation patient days affects the hospital’s overall DPP. For IME payment purposes, a decrease in a hospital’s number of available beds results in an increase in the resident-to-bed ratio. The exclusion of observation bed days from the available bed count for IME would reduce the available beds, increase the resident-to-bed ratio, and, consequently, increase IME payments to teaching hospitals. Based on an analysis from our Office of the Actuary, we believe that any savings associated with proposed changes in DSH payment adjustments VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 would be offset by proposed additional spending for IME payments. Therefore, we anticipate the impact of these proposed policy changes to be negligible. F. Effects of Proposed Policy Revisions Related to Payment to Hospitals for Direct GME In section V.G. of the preamble of this proposed rule, we discuss our proposal to clarify the definition of a new medical residency training program in the regulations by specifying that a new medical residency program is one that receives initial accreditation for the first time, as opposed to a reaccreditation of a program that existed previously at the same or another hospital. In addition, we discuss our proposed change to add a provision to the regulations relating to Medicare GME affiliation agreements to specify that a hospital that is new after July 1 and that begins training residents for the first time after the July 1 start date of that academic year would be permitted to submit a Medicare GME affiliation agreement prior to the end of its cost reporting period in order to participate in an existing Medicare GME affiliated group for the remainder of the academic year. With respect to the first proposed provision regarding a new medical residency training program, there is no financial impact on the Medicare program because this is a proposed clarification of existing policy and is not a proposed policy revision or addition of a new policy. Further, there is no financial impact related to the second proposal concerning Medicare GME affiliated groups because it does not provide for an increase in the aggregate number of resident FTEs. Rather, it merely provides increased flexibility for a hospital that is new after July 1 and that begins training residents for the first time after the start date of that academic year to enter into an existing Medicare GME affiliation agreement after July 1, so that, in that academic year, it may train and receive IME and direct GME payments relating to FTE for residents that would otherwise be counted for IME and direct GME at another hospital. G. Effects of Proposed Policy Changes Relating to Hospital Emergency Services under EMTALA In section V.H. of the preamble of this proposed rule, we discuss our proposal to amend the regulations pertaining to the waiver of EMTALA sanctions in an emergency area during an emergency period to make the regulations consistent with the statutory language of section 1135 of the Act. Specifically, we PO 00000 Frm 00593 Fmt 4701 Sfmt 4702 24671 are proposing to revise the existing regulations to reflect the Secretary’s authority under section 1135 of the Act to waive or modify requirements for a single health care provider, a class of health care providers, or a geographic subset of health care providers located within an emergency area during an emergency period or portion of an emergency period. We are proposing to amend the regulations to clarify that, in cases where the Secretary has delegated implementation of a waiver of EMTALA sanctions to CMS, CMS is also authorized to apply a section 1135 waiver to a subset of the emergency area and some or all of the emergency period, as necessary. We also are proposing to make the regulations consistent with the language at section 1135 of the Act to state that a waiver of EMTALA sanctions pursuant to an inappropriate transfer only applies if the transfer arises out of the circumstances of the emergency. We are further proposing to make the regulation text consistent with the language at section 1135 of the Act to provide that the sanctions waived for an inappropriate transfer or for the relocation or redirection of an individual to receive a medical screening examination at an alternate location are only in effect if the hospital to which the waiver applies does not discriminate on the source of an individual’s payment or ability to pay. We estimate that these proposed changes would have no impact on Medicare expenditures and no significant impact on hospitals with emergency departments. H. Effects of Implementation of Rural Community Hospital Demonstration Program In section V.I. of the preamble to this proposed rule, we discuss our implementation of section 410A of Public Law 108–173 that required the Secretary to establish a demonstration that will modify reimbursement for inpatient services for up to 15 small rural hospitals. Section 410A(c)(2) requires that ‘‘[i]n conducting the demonstration program under this section, the Secretary shall ensure that the aggregate payments made by the Secretary do not exceed the amount which the Secretary would have paid if the demonstration program under this section was not implemented.’’ There are currently 13 hospitals participating in the demonstration; 4 of these hospitals were selected to participate in the demonstration as of July 1, 2008, as a result of our February 6, 2008 solicitation (73 FR 6971). As discussed in section V.I. of the preamble to this proposed rule, we are E:\FR\FM\22MYP2.SGM 22MYP2 24672 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER proposing to satisfy this budget neutrality requirement by proposing to adjust the national IPPS rates by a factor that is sufficient to account for the added costs of this demonstration. First, we are estimating the cost of the demonstration program for FY 2010 for the 13 currently participating hospitals. The estimated cost of the demonstration for FY 2010 for 9 of the 13 currently participating hospitals (specifically the 9 hospitals that have participated in the demonstration since its inception and that still are participating in the demonstration) is based on data from their first and second year cost reports— that is, cost reporting periods beginning in CY 2005 and CY 2006. In addition, the estimated cost of the demonstration for FY 2010 for the 4 hospitals selected in 2008 to participate in the demonstration is based on data from their cost reports for cost reporting periods beginning October 1, 2005, through July 1, 2006 (that is, cost reporting periods that include CY 2006). When we add together the estimated costs of the demonstration for FY 2010 for the 9 hospitals that have participated in the demonstration since its inception and the 4 new hospitals selected in 2008, the total estimated cost is $14,613,632. This estimated amount reflects the difference between the participating hospitals’ estimated costs under the methodology set forth in Public Law 108–173 and the amount the hospitals would have been paid if they were paid under the IPPS. Second, because the cost reports of all hospitals participating in the demonstration in its first year (that is, FY 2005) have been finalized, we are able to determine how much the cost of the demonstration program exceeded the amount that was offset by the budget neutrality adjustment for FY 2005. For all 13 hospitals that participated in the demonstration in FY 2005, the amount is $7,179,461. The proposed budget neutrality adjustment factor applied to the IPPS Federal rate to account for the added $21,793,093 in costs for the demonstration is 0.999790. J. Effects of Proposed Policy Changes Relating to Payments to Satellite Facilities In section VII.B. of the preamble of this proposed rule, we discuss our proposed policy change that, effective for cost reporting periods beginning on or after October 1, 2009, in addition to meeting the other criteria in the regulations, to be excluded from the IPPS, the governing body of the hospital of which the satellite facility is a part cannot be under the control of any third VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 entity that controls both the hospital of which the satellite facility is a part and the hospital with which the satellite facility is co-located. We also are proposing that if a hospital and its satellite facility were excluded from the IPPS under § 412.22(h) for the most recent cost reporting period beginning prior to October 1, 2009, the hospital does not have to meet the requirements of proposed § 412.22(h)(2)(iii)(A)(1) with respect to that satellite facility in order to retain its IPPS-excluded status. The creation of any satellite facility that would trigger the hospital of which it is a part to comply with the proposed additional criteria would occur at some point in the future. Therefore, we are unable to quantify the impact of the proposed changes. K. Effects of Proposed Policy Changes Relating to Payments to CAHs In section VII.C.2. of the preamble of this proposed rule, we discuss our proposal to implement section 148 of Public Law 110–275 (MIPPA). We are proposing that a CAH may receive reasonable cost-based payment for outpatient clinical diagnostic laboratory tests furnished to an individual who is an outpatient of the CAH (that is, receiving outpatient services directly from the CAH) even if the individual with respect to whom the laboratory services are furnished is not physically present in the CAH at the time the specimen is collected. In order for an individual who is not physically present in the CAH at the time the specimen is collected to be determined to be receiving services directly from the CAH, we are proposing that the individual must either receive outpatient services in the CAH on the same day the specimen is collected or that the specimen must be collected by an employee of the CAH. We anticipate that, for FY 2009 through FY 2016, the cost of implementing the provisions of section 148 of Public Law 110–275, would be less than $50 million per year. In section VII.C.3. of this preamble of this proposed rule, we discuss our proposal to amend the regulations to make them consistent with the plain reading of section 1834(g)(2)(A) of the Act. Section 1834(g)(2)(A) of the Act requires that CAHs that select the optional method of reimbursement receive reasonable cost payment for outpatient facility services. We are proposing to revise the regulations to state that CAHs that select the optional method would receive reasonable costbased payment for outpatient facility services instead of 101 percent of reasonable cost for outpatient facility services. Therefore, those CAHs that PO 00000 Frm 00594 Fmt 4701 Sfmt 4702 elect the optional method of payment would receive reasonable cost payment for the facility portion of outpatient services. L. Effects of Proposed Policy Changes Relating to Provider-Based Status of Entities and Organizations In section VII.D. of the preamble of this proposed rule, we discuss our proposal to amend the regulations to require facilities that furnish only clinical diagnostic laboratory tests and operate as part of a CAH to meet the provider-based status rules currently in the regulations at § 413.65. If a facility that is part of a CAH and furnishes only clinical diagnostic laboratory tests meets the provider-based status rules, the CAH would be paid for services furnished by the laboratory facility under the CAH payment methodology of reasonable cost. If a facility that furnishes only clinical diagnostic laboratory tests does not meet the provider-based status rules, the services furnished in the facility would be paid under the CLFS, unless the laboratory specimen is collected from an outpatient of the CAH as described in VII.C.2. of the preamble of this proposed rule. We believe it would be difficult to quantify the payment impact of these proposed changes because we cannot estimate the number of CAHs that would be affected by this proposal. We are soliciting public comments on these issues. VIII. Effects of Proposed Changes in the Capital IPPS A. General Considerations Fiscal year (FY) 2001 was the last year of the 10-year transition period established to phase in the PPS for hospital capital-related costs. During the transition period, hospitals were paid under one of two payment methodologies: fully prospective or hold harmless. Under the fully prospective methodology, hospitals were paid a blend of the capital Federal rate and their hospital-specific rate (see § 412.340). Under the hold-harmless methodology, unless a hospital elected payment based on 100 percent of the capital Federal rate, hospitals were paid 85 percent of reasonable costs for old capital costs (100 percent for SCHs) plus an amount for new capital costs based on a proportion of the capital Federal rate (see § 412.344). As we state in section VI. of the preamble of this proposed rule, with the 10-year transition period ending with hospital cost reporting periods beginning on or after October 1, 2001 (FY 2002), payments for most hospitals under the capital IPPS are based solely on the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules capital Federal rate. Therefore, we no longer include information on obligated capital costs or projections of old capital costs and new capital costs, which were factors needed to calculate payments during the transition period, for our impact analysis. The basic methodology for determining a capital IPPS payment is set forth at § 412.312. The basic methodology for calculating capital IPPS payments in FY 2010 is as follows: (Standard Federal Rate) × (DRG weight) × (GAF) × (COLA for hospitals located in Alaska and Hawaii) × (1 + DSH Adjustment Factor, if applicable). In accordance with § 412.322(d), there is no longer an additional payment for indirect teaching medical education (IME adjustment factor) under the capital IPPS costs for FY 2010 and subsequent years, as discussed in section VI.B.2. of the preamble of this proposed rule. However, we note that the 50-percent reduction to capital IME adjustments for FY 2009 in the current regulations at § 412.322(c) was repealed in section 4301(b)(1) of Public Law 111– 5 (ARRA). We discuss below the ramifications of restoring the full IME adjustment in FY 2009 when comparing proposed changes in capital IPPS payments to FY 2010. In addition, hospitals may also receive outlier payments for those cases that qualify under the threshold established for each fiscal year. The data used in developing the impact analysis presented below are taken from the December 2008 update of the FY 2008 MedPAR file and the December 2008 update of the ProviderSpecific File (PSF) that is used for payment purposes. Although the analyses of the changes to the capital prospective payment system do not incorporate cost data, we used the December 2008 update of the most recently available hospital cost report data (FYs 2005 and 2006) to categorize hospitals. Our analysis has several qualifications. We use the best data available and make assumptions about case-mix and beneficiary enrollment as described below. In addition, as discussed in section VI.B.1. of the preamble to this proposed rule, as we established in FYs 2008 and 2009, we are proposing to adjust the national capital rate to account for changes in documentation and coding under the MS–DRGs in FY 2010. As discussed in section VI.B.1.c. of the preamble to this proposed rule, we also are proposing to adjust the Puerto Rico-specific capital rate in FY 2010 to account for changes in documentation and coding resulting from the adoption of the MS–DRGs. Due to the interdependent nature of the VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 IPPS, it is very difficult to precisely quantify the impact associated with each change. We draw upon various sources for the data used to categorize hospitals in the tables. In some cases (for instance, the number of beds), there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available sources overall. However, for individual hospitals, some miscategorizations are possible. Using cases from the December 2008 update of the FY 2008 MedPAR file, we simulated payments under the capital PPS for FY 2009 and FY 2010 for a comparison of total payments per case. Any short-term, acute care hospitals not paid under the general IPPS (Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. The final capital rates and factors for FY 2009 were published in a subsequent notice in the Federal Register (73 FR 57891). As we discuss in section III.A.4. of the Addendum to this proposed rule, payments are no longer made under the regular exceptions provision under §§ 412.348(b) through (e). Therefore, we no longer use the actuarial capital cost model (described in Appendix B of the August 1, 2001 proposed rule (66 FR 40099)). We modeled payments for each hospital by multiplying the capital Federal rate by the GAF and the hospital’s case-mix. We only included estimated payments for the IME adjustment in our modeling of FY 2009 capital IPPS payments because, under current law, capital IME payments are eliminated beginning in FY 2010 in accordance with § 412.322(d) (as discussed in section VI.B.2. of the preamble of this proposed rule). We then added estimated payments for disproportionate share, and outliers, if applicable. For purposes of this impact analysis, the model includes the following assumptions: • We estimate that the Medicare casemix index will increase by 1.0 percent in both FYs 2009 and 2010. (We note that this does not reflect the expected growth in case-mix due to improvement in documentation and coding under the MS–DRGs, as discussed below.) • We estimate that the Medicare discharges will be approximately 13 million in both FY 2009 and FY 2010. • The capital Federal rate was updated beginning in FY 1996 by an analytical framework that considers changes in the prices associated with capital-related costs and adjustments to account for forecast error, changes in the case-mix index, allowable changes in intensity, and other factors. As discussed in section III.A.2.a. of the PO 00000 Frm 00595 Fmt 4701 Sfmt 4702 24673 Addendum to this proposed rule, the proposed FY 2010 update is 1.2 percent. • In addition to the FY 2010 update factor, the proposed FY 2010 capital Federal rate was calculated based on a proposed GAF/DRG budget neutrality factor of 0.9994, a proposed outlier adjustment factor of 0.9454, and a proposed exceptions adjustment factor of 0.9999. • For FY 2010, as discussed in section VI.B.1. of the preamble of this proposed rule, the proposed FY 2010 national capital rate was further adjusted by a factor to account for estimated changes in documentation and coding that result in an increase in case-mix under the MS–DRGs. Specifically, as discussed in greater detail in section VI.B.1. of the preamble of this proposed rule, we are proposing a 1.9 percent reduction in the proposed FY 2010 national capital Federal rate for changes in documentation and coding resulting from the adoption of the MS– DRGs. As also discussed in section VI.A.6. of the preamble to this proposed rule, we also are proposing to adjust the Puerto Rico-specific capital rate to account for changes in documentation and coding under the MS–DRGs in FY 2010. Specifically, we are proposing a 1.1 percent reduction in the proposed FY 2010 Puerto Rico-specific capital rate for changes in documentation and coding resulting from the adoption of the MS–DRGs. B. Results We used the actuarial model described above to estimate the potential impact of our proposed changes for FY 2010 on total capital payments per case, using a universe of 3,513 hospitals. As described above, the individual hospital payment parameters are taken from the best available data, including the December 2008 update of the FY 2008 MedPAR file, the December 2008 update to the PSF, and the most recent cost report data from the December 2008 update of HCRIS. In Table III, we present a comparison of estimated total payments per case for FY 2009 compared to proposed estimated total payments per case for FY 2010 based on the proposed FY 2010 payment rates and policies. Column 2 shows estimates of payments per case under our model for FY 2009. Column 3 shows estimates of payments per case under our model for FY 2010. Column 4 shows the total percentage change in payments from FY 2009 to FY 2010. The change represented in Column 4 includes the proposed 1.2 percent update to the capital Federal rate, other changes in the adjustments to the capital Federal rate (for example, the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24674 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules phase out of the IME adjustment for FY 2010), and the proposed additional 1.9 percent reduction in the national capital rate (and the proposed 1.1 percent reduction in the Puerto Rico-specific capital rate) to account for changes in documentation and coding (or other changes in documentation and coding that do not reflect real changes in casemix) for implementation of the MS– DRGs. For purposes of this impact analysis, we also account for estimated case-mix growth for FYs 2009 and 2010, as determined by the Office of the Actuary, because, as discussed previously, we believe the adoption of the MS–DRGs will result in case-mix growth due to documentation and coding changes that do not reflect real changes in patients’ severity of illness. The comparisons are provided by: (1) Geographic location; (2) region; and (3) payment classification. The simulation results show that capital payments per case in FY 2010 are expected to decrease as compared to capital payments per case in FY 2009. The proposed capital rate for FY 2010 would decrease approximately 0.8 percent as compared to the FY 2009 capital rate, which contributes to the estimated decrease in capital payments. However, the phase-out of the IME adjustment for FY 2010 is the major factor affecting capital payments in FY 2010 as compared to FY 2009; that is, full capital IME payments in FY 2009 as specified by section 4302(b)(1) of Public Law 111–5 as compared to no capital IME payments in FY 2010, as specified under current law (§ 412.322(d) of the regulations). Countering these factors is the projected case-mix growth as a result of changes in documentation and coding (discussed above). The net result of these changes is an estimated 4.8 percent decrease in capital payments per discharge from FY 2009 to FY 2010 for all hospitals (as shown below in Table III). The results of our comparisons by geographic location and by region are consistent with the results we expected with the phase-out of the IME adjustment for FY 2010 (§ 412.322(d)). The majority of the estimated decreases in capital payments from FY 2009 to FY 2010 are not a result of any of the proposed changes to policies presented in this proposed rule. Our policy to phase-out capital IME adjustments, such that there would be no adjustment for capital IME beginning in FY 2010, was established in FY 2008, and was based on analyses of capital margins from the past 10 years for which data were available; that is, FY 1996 through FY 2006. These margins clearly demonstrated that capital IME payment VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 adjustments were contributing to the significantly large positive margins experienced by teaching hospitals. We initially implemented a phase-out of the IME adjustment over a 3-year period which included a 50-percent reduction to the capital IME adjustment in FY 2009 and the elimination of the remaining 50 percent in FY 2010. Under that 3-year phase-out, including the elimination of the capital IME adjustment in FY 2010, we expected that capital margins would decrease and be more in line with other hospitals in the system. As discussed in section VI.B.2 of the preamble of this proposed rule, however, section 4301(b)(1) of Public Law 111–5 restored the capital IME adjustment for FY 2009 (that is, it eliminated the 50-percent reduction to the capital IME adjustment), while section 4301(b)(2) of Public Law 111–5 specified that the law has no effect on the established elimination of the capital IME adjustment in FY 2010. The combination of restoring the full capital IME adjustment in FY 2009 and eliminating it in FY 2010 has resulted in larger estimated decreases in capital payments from FY 2009 to FY 2010 in this impact analysis. While the end results in FY 2010 would have been the same had the 50-percent reduction to capital IME adjustments in FY 2009 not have been restored, and had the remaining 50 percent of the capital IME adjustment been eliminated in FY 2010 as planned, the estimated decrease in capital payments from FY 2009 to FY 2010 would have been moderated, such that the somewhat dramatic decreases reflected in Table III in this impact analysis would not have resulted. To a lesser degree, but nevertheless, a mitigating factor to the estimated decrease in capital payments from FY 2009 to FY 2010 are changes in documentation and coding under the MS–DRGs and the associated adjustments to the capital rates. When we implemented the MS–DRGs in FY 2008, in order to maintain budget neutrality, it was necessary to adjust the capital Federal rate to account for potential increases in aggregate capital payments when there was not a corresponding increase in patients’ severity of illness. As discussed in greater detail in section VI.B.1. of the preamble of this proposed rule, the FY 2009 capital Federal rate includes a cumulative ¥1.5 percent documentation and coding adjustment as determined by our Office of the Actuary. As also discussed in that same section, in this proposed rule, we are proposing to apply an additional documentation and coding adjustment PO 00000 Frm 00596 Fmt 4701 Sfmt 4702 of ¥1.9 percent to the FY 2010 capital Federal rate, yielding a proposed cumulative adjustment of 3.4 perecent. The proposed additional ¥1.9 percent adjustment contributes to the larger decrease in capital payments in FY 2010 when compared to FY 2009. The geographic comparison shows that, on average, all urban hospitals are expected to experience a 5.1 percent decrease in capital IPPS payments per case in FY 2010 as compared to FY 2009, while hospitals in large urban areas are expected to experience a 6.0 percent decrease in capital IPPS payments per case in FY 2010 as compared to FY 2009. Capital IPPS payments per case for rural hospitals are also expected to decrease, but to a lesser degree, that is, 1.9 percent. This variation in the estimated decreases in payments per case by geographic location is mostly due to the elimination of the IME adjustment. Because teaching hospitals generally tend to be located in urban or large urban areas, we expect that the phase-out of the IME adjustment for FY 2010 would have a more significant impact on hospitals in those areas than hospitals located in rural areas. As discussed above, the magnitude of the estimated decreases, however, is attributable to the phase-out of the IME adjustment occurring in 2 years rather than over 3 years. All regions are estimated to experience a decrease in total capital payments per case from FY 2009 to FY 2010. These decreases vary by region and range from a 0.3 percent decrease in the Mountain rural region to a 9.4 percent decrease in the New England rural region. Three urban regions are projected to experience a relatively larger decrease in capital payments, with the difference, again, primarily due to the phase-out of the IME adjustment for FY 2010: ¥8.8 percent in the New England urban region, ¥8.2 percent in the Middle Atlantic urban region, and ¥7.0 percent in the East North Central urban region. By type of ownership, voluntary and government hospitals are estimated to experience a decrease of 5.0 percent and 6.9 percent, respectively. The projected smaller decrease in capital payments per case for proprietary hospitals, 2.0 percent, is mostly because these hospitals are expected to experience a smaller than average decrease in their payments due to the phase-out of the IME adjustment for FY 2010. Section 1886(d)(10) of the Act established the MGCRB. Before FY 2005, hospitals could apply to the MGCRB for reclassification for purposes of the standardized amount, wage index, or both. Section 401(c) of Public Law E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER 108–173 equalized the standardized amounts under the operating IPPS. Therefore, beginning in FY 2005, there is no longer reclassification for the purposes of the standardized amounts; however, hospitals still may apply for reclassification for purposes of the wage index for FY 2010. Reclassification for wage index purposes also affects the GAFs because that factor is constructed from the hospital wage index. To present the effects of the hospitals being reclassified for FY 2010, we show estimated average capital payments per case for reclassified hospitals for FY 2009. All classifications of reclassified hospitals are expected to experience a decrease in payments in FY 2010 as compared to FY 2009. Urban reclassified and urban nonreclassified VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 hospitals are expected to have the largest decreases in capital payments: ¥5.3 percent and ¥5.0 percent, respectively. Rural reclassified and rural nonreclassified are expected to have decreases in capital payments of 1.7 percent and 2.2 percent, respectively. Other reclassified hospitals (that is, hospitals reclassified under section 1886(d)(8)(B) of the Act) are expected to experience the smallest decrease in capital payment from FY 2009 to FY 2010 (¥1.3 percent). As discussed above, the variation in the estimated decreases in payments per case is mostly due to the phase-out of the IME adjustment. Because teaching hospitals generally tend to be located in urban areas, we expect that the phase-out of the IME adjustment for FY 2010 would PO 00000 Frm 00597 Fmt 4701 Sfmt 4702 24675 have a more significant impact on both reclassified and nonreclassified hospitals in those areas than reclassified and nonreclassified hospitals located in rural areas. It is important to note that had our original policy of phasing out the capital IME adjustment over 3 years not been changed by section 4301(b)(1) of Public Law 111–5 subsequent to the implementation of the transition period, the decrease in capital payments from FY 2009 to FY 2010 would not have been as large. Although the end result of the changes to the IME adjustment implemented in FY 2008 would have been the same, the decreases would have occurred over 2 years instead of essentially just 1 year—FY 2010. BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00598 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.403</GPH> sroberts on PROD1PC70 with FRONTMATTER 24676 24677 BILLING CODE 4210–01–C VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00599 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.404</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules 24678 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER IX. Effects of Proposed Payment Rate Changes and Policy Changes under the LTCH PPS A. Introduction and General Considerations In section VIII. of the preamble of this proposed rule, we are setting forth the proposed annual update to the payment rates for the LTCH PPS for RY 2010. In the preamble, we specify the statutory authority for the proposed provisions that are presented, identify those proposed policies where discretion has been exercised, and present rationale for our decisions as well as alternatives that were considered. In this section of Appendix A to this proposed rule, we discuss the impact of the proposed changes to the payment rates, factors, and other payment rate policies related to the LTCH PPS that are presented in the preamble of this proposed rule in terms of their estimated fiscal impact on the Medicare budget and on LTCHs. Currently, our database of 399 LTCHs includes the data for 81 nonprofit (voluntary ownership control) LTCHs and 267 proprietary LTCHs. Of the remaining 51 LTCHs, 12 LTCHs are government-owned and operated and the ownership type of the other 39 LTCHs is unknown. In the impact analysis, we are using the proposed rates, factors and policies presented in this proposed rule, including proposed updated wage index values and the labor-related share, and the best available claims and CCR data to estimate the change in payments for the 2010 LTCH PPS rate year. The standard Federal rate for RY 2009 is $39,114.36. As discussed in section V.A.2. of the Addendum to this proposed rule, consistent with our historical practice, we are proposing to update the standard Federal rate for RY 2009 by 0.6 percent in order to establish the proposed RY 2010 standard Federal rate at $39,349.05. Based on the best available data for the 399 LTCHs in our database, we estimate that the proposed update to the standard Federal rate for RY 2010 (discussed in section VIII. of the preamble of this proposed rule) and the proposed changes to the area wage adjustment (discussed in section V.A. of the Addendum to this proposed rule) for the 2010 LTCH PPS rate year, in addition to an estimated increase in HCO payments and an estimated increase in SSO payments, would result in an increase in estimated payments from the 2009 LTCH PPS rate year of approximately $135 million (or about 2.8 percent). Based on the 399 LTCHs in our database, we estimate RY 2009 LTCH PPS payments to be approximately $4.76 billion and RY VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 2010 LTCH PPS payments to be approximately $4.90 billion. Because the combined distributional effects and estimated changes to the Medicare program payments would be greater than $100 million, this proposed rule is considered a major economic rule, as defined in this section. We note the approximately $135 million for the projected increase in estimated aggregate LTCH PPS payments from RY 2009 to RY 2010 do not reflect changes in LTCH admissions or case-mix intensity in estimated LTCH PPS payments, which would also affect overall payment changes. The projected 2.8 percent increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year is attributable to several factors, including the proposed 0.6 percent increase to the standard Federal rate and projected increases in estimated HCO and SSO payments. As Table IV shows, the proposed change attributable solely to the standard Federal rate is projected to result in an increase of 0.5 percent in estimated payments per discharge from RY 2009 to RY 2010, on average, for all LTCHs, while the proposed changes to the area wage adjustment are projected to result in neither an increase nor decrease in estimated payments, on average, for all LTCHs (Columns 6 and 7 of Table IV, respectively). We note that because payments for cost-based SSO cases and a portion of payments for SSO cases that are paid based on the ‘‘blend’’ option (that is, SSO cases paid under § 412.529(c)(2)(iv)) are not affected by the proposed update to the standard Federal rate, we estimate that the effect of the proposed 0.6 percent update to the standard Federal rate would result in a 0.5 percent increase (as shown in Column 6 of Table IV) on estimated aggregate LTCH PPS payments for all LTCH PPS cases, including SSO cases. While the effects of the estimated increase in SSO and HCO payments and the proposed change to the standard Federal rate are projected to increase estimated payments from RY 2009 to RY 2010, the proposed changes to the area wage adjustment from RY 2009 to RY 2010 are expected to result in neither an increase nor a decrease in estimated aggregate LTCH PPS payments from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year (Column 7 of Table IV). As discussed in section V.B. of the Addendum to this proposed rule, we are proposing to update the wage index values for FY 2010 based on the most recent available data. In addition, we are proposing to increase the labor-related share from 75.662 percent to 75.904 percent under the LTCH PPS for RY PO 00000 Frm 00600 Fmt 4701 Sfmt 4702 2010 based on the most recent available data on the relative importance of the labor-related share of operating and capital costs of the RPL market basket (also discussed in section VIII.C.2. of this proposed rule). We note that the overall percent change in estimated LTCH payments from RY 2009 to RY 2010 for all proposed changes (shown in Column 8) cannot be determined by adding the incremental effect of the proposed standard Federal rate (Column 6) and the proposed area wage adjustment changes (Column 7) on estimated aggregate LTCH PPS payments because each of those two columns are intended to show the isolated impact of the respective change (that is, the proposed change to the standard Federal rate or the proposed change to the area wage adjustment) on estimated payments for RY 2010 as compared to RY 2009, but the interactive effects resulting from both the proposed change to the standard Federal rate and the proposed change to the area wage adjustment, as well as estimated changes to HCO and SSO payments, are not reflected in each of these columns. However, the interactive effects of all proposed changes, including the change in estimated HCO and SSO payments, are reflected in the estimated change in payments for all proposed changes for RY 2010 as compared to RY 2009 (shown in Column 8 of Table IV). Notwithstanding this limitation in comparing the various columns in Table IV, the projected increase in payments per discharge from RY 2009 to RY 2010 is 2.8 percent (shown in Column 8). This projected increase in payments is attributable to the proposed impacts of the proposed change to the standard Federal rate (0.5 percent in Column 6) and the proposed change due to the area wage adjustment (0 percent in Column 7), and is also due to the effect of the estimated increase in payments for HCO cases and SSO cases in RY 2010 as compared to RY 2009. That is, estimated total HCO payments are projected to increase from RY 2009 to RY 2010 in order to ensure that estimated HCO payments will be 8 percent of total estimated LTCH PPS payments in RY 2010. As discussed in detail in section V. of the Addendum to of this proposed rule, an analysis of the most recent available LTCH PPS claims data (that is, FY 2008 claims from the December 2008 update of the MedPAR files) indicates that the RY 2009 HCO threshold of $22,960 may result in HCO payments in RY 2009 that fall below the estimated 8 percent. Specifically, we currently estimate that HCO payments will be approximately 6.1 percent of estimated E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER total LTCH PPS payments in RY 2009. Consequently, it is necessary to propose to decrease the HCO threshold for RY 2010 in order to ensure that estimated HCO payments will be 8 percent of total estimated LTCH PPS payments in RY 2010. We estimate that the impact of the increase HCO payments would result in approximately a 2 percent increase in estimated payments from RY 2009 to RY 2010. Furthermore, in calculating the estimated increase in payments from RY 2009 to RY 2010 for HCO and SSO cases, we increased estimated costs by the applicable market basket percentage increase as projected by our actuaries. We note that estimated payments for SSO cases comprise approximately 15 percent of estimated total LTCH PPS payments, and estimated payments for HCO cases comprise approximately 8 percent of estimated total LTCH PPS payments. Payments for HCO cases are based on 80 percent of the estimated cost above the HCO threshold, while the majority of the payments for SSO cases (over 70 percent) are based on the estimated cost of the SSO case. A thorough discussion of the regulatory impact analysis for the proposed changes presented in this proposed rule can be found below in section V. of the Addendum to this proposed rule. As we discuss in detail throughout this proposed rule, based on the most recent available data, we believe that the proposed provisions of this proposed rule relating to the LTCH PPS would result in an increase in estimated aggregate LTCH PPS payments and that the resulting LTCH PPS payment amounts result in appropriate Medicare payments. B. Impact on Rural Hospitals For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. As shown in Table IV, we are projecting a 4.2 percent increase in estimated payments per discharge for the 2010 LTCH PPS rate year as compared to the 2009 LTCH PPS rate year for rural LTCHs that would result from the proposed changes presented in this proposed rule (that is, the update to the standard Federal rate discussed in section V.A. of the Addendum to this proposed rule and the proposed changes to the area wage adjustment as discussed in section V.B. of the Addendum to this proposed rule) as well as the effect of estimated changes to HCO and SSO payments. This estimated impact is based on the data of the 26 rural LTCHs in our database of 399 LTCHs for which complete data were available. VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 The estimated increase in LTCH PPS payments from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for rural LTCHs is primarily due to the estimated change in HCO payments; that is, our current estimate that HCO payments in RY 2009 will be less than 8 percent of total estimated LTCH PPS payments (as discussed in greater detail in section V.C. of the Addendum to this proposed rule), the proposed change to the standard Federal rate (as discussed in greater detail in section V.A. of the Addendum to this proposed rule), and the proposed change in the area wage adjustment (as discussed in greater detail in section V.B. of the Addendum to this proposed rule). We believe that the proposed changes to the area wage adjustment presented in this proposed rule (that is, the proposed use of updated wage data and the proposed change in the labor-related share) would result in accurate and appropriate LTCH PPS payments in RY 2010 because they are based on the most recent available data. Such updated data appropriately reflect national differences in area wage levels and appropriately identifies the portion of the standard Federal rate that should be adjusted to account for such differences in area wages, thereby resulting in accurate and appropriate LTCH PPS payments. C. Anticipated Effects of Proposed LTCH PPS Payment Rate Change and Policy Changes We discuss the impact of the proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for RY 2010 (in terms of their estimated fiscal impact on the Medicare budget and on LTCHs) in section VIII. of the preamble of this proposed rule. 1. Budgetary Impact Section 123(a)(1) of the BBRA requires that the PPS developed for LTCHs ‘‘maintain budget neutrality.’’ We believe that the statute’s mandate for budget neutrality applies only to the first year of the implementation of the LTCH PPS (that is, FY 2003). Therefore, in calculating the FY 2003 standard Federal rate under § 412.523(d)(2), we set total estimated payments for FY 2003 under the LTCH PPS so that estimated aggregate payments under the LTCH PPS were estimated to equal the amount that would have been paid if the LTCH PPS had not been implemented. As discussed in section IX.A. of this Appendix A, we project an increase in aggregate LTCH PPS payments in RY 2010 of approximately $135 million (or 2.8 percent) based on the 399 LTCHs in our database. PO 00000 Frm 00601 Fmt 4701 Sfmt 4702 24679 2. Impact on Providers The basic methodology for determining a per discharge LTCH PPS payment is set forth in § 412.515 through § 412.536. In addition to the basic MS–LTC–DRG payment (standard Federal rate multiplied by the MS–LTC– DRG relative weight), we make adjustments for differences in area wage levels, COLA for Alaska and Hawaii, and SSOs. Furthermore, LTCHs may also receive HCO payments for those cases that qualify based on the threshold established each rate year. To understand the impact of the proposed changes to the LTCH PPS payments presented in this proposed rule on different categories of LTCHs for the 2010 LTCH PPS rate year, it is necessary to estimate payments per discharge for the 2009 LTCH PPS rate year using the rates, factors and policies established in the RY 2009 LTCH PPS final rule (73 FR 26788 through 26874) and the FY 2009 GROUPER (Version 26.0) and relative weights established in the FY 2009 IPPS final rule (73 FR 23537 through 23617). It is also necessary to estimate the payments per discharge that would be made under the proposed LTCH PPS rates, factors, policies, and GROUPER for the 2010 LTCH PPS rate year (as discussed in VIII. of the preamble and section V. of the Addendum to this proposed rule). These estimates of RY 2009 and RY 2010 LTCH PPS payments are based on the best available LTCH claims data and other factors such as the application of inflation factors to estimate costs for SSO and HCO cases in each year. We also evaluated the change in estimated 2009 LTCH PPS rate year payments to estimated 2010 LTCH PPS rate year payments (on a per discharge basis) for each category of LTCHs. Hospital groups were based on characteristics provided in the OSCAR data, FY 2004 through FY 2006 cost report data in HCRIS, and PSF data. Hospitals with incomplete characteristics were grouped into the ‘‘unknown’’ category. Hospital groups include the following: • Location: large urban/other urban/ rural. • Participation date. • Ownership control. • Census region. • Bed size. To estimate the impacts of the proposed payment rates and policy changes among the various categories of existing providers, we used LTCH cases from the FY 2008 MedPAR file to estimate payments for RY 2009 and to estimate payments for RY 2010 for 399 LTCHs. While currently there are just E:\FR\FM\22MYP2.SGM 22MYP2 24680 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules over 400 LTCHs, the most recent growth is predominantly in for-profit LTCHs that provide respiratory and ventilatordependent patient care. We believe that the discharges based on the FY 2008 MedPAR data for the 399 LTCHs in our database, which includes 267 proprietary LTCHs, provide sufficient representation in the MS–LTC–DRGs containing discharges for patients who received LTCH care for the most commonly treated LTCH patients’ diagnoses. sroberts on PROD1PC70 with FRONTMATTER 3. Calculation of Prospective Payments For purposes of this impact analysis, to estimate per discharge payments under the LTCH PPS, we simulated payments on a case-by-case basis using LTCH claims from the FY 2008 MedPAR files. For modeling estimated LTCH PPS payments for RY 2009, we applied the RY 2009 standard Federal rate (that is, $39,114.36, which is effective for LTCH discharges occurring on or after July 1, 2008, and through September 30, 2009). For modeling estimated LTCH PPS payments for RY 2010, we applied the proposed RY 2010 standard Federal rate of $39,349.05, which would be effective for LTCH discharges occurring on or after October 1, 2009, and through September 30, 2010). Furthermore, in modeling estimated LTCH PPS payments for both RY 2009 and RY 2010 in this impact analysis, we applied the RY 2009 and proposed RY 2010 adjustments for area wage differences and the COLA for Alaska and Hawaii. Specifically, we adjusted for area wage differences for estimated 2009 LTCH PPS rate year payments using the current LTCH PPS laborrelated share of 75.662 percent (73 FR 26815), the wage index values established in the Tables 1 and 2 of the Addendum of the RY 2009 final rule (73 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 FR 26840 through 26863) and the COLA factors established in Table III of the preamble of the RY 2009 final rule (73 FR 26819). Similarly, we adjusted for area wage differences for estimated proposed 2010 LTCH PPS rate year payments using the LTCH PPS proposed RY 2010 labor-related share of 75.904 percent (section VIII.C.2. of the preamble of this proposed rule), the proposed RY 2010 wage index values presented in the Tables 12A and 12B of the Addendum to this proposed rule, and the proposed RY 2010 COLA factors shown in the table in section V. of the Addendum to this proposed rule. As discussed above, our impact analysis reflects an estimated change in payments for SSO cases as well as an estimated increase in payments for HCO cases (as described in section V.C. of the Addendum to this proposed rule). In modeling payments for SSO and HCO cases in RY 2009, we applied an inflation factor of 1.024 percent (determined by OACT) to the estimated costs of each case determined from the charges reported on the claims in the FY 2008 MedPAR files and the best available CCRs from the December 2008 update of the PSF. In modeling proposed payments for SSO and HCO cases in RY 2010, we applied an inflation factor of 1.049 (determined by OACT) to the estimated costs of each case determined from the charges reported on the claims in the FY 2008 MedPAR files and the best available CCRs from the December 2008 update of the PSF. These impacts reflect the estimated ‘‘losses’’ or ‘‘gains’’ among the various classifications of LTCHs from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year based on the proposed payment rates and policy changes PO 00000 Frm 00602 Fmt 4701 Sfmt 4702 presented in this proposed rule. Table IV illustrates the estimated aggregate impact of the LTCH PPS among various classifications of LTCHs. • The first column, LTCH Classification, identifies the type of LTCH. • The second column lists the number of LTCHs of each classification type. • The third column identifies the number of LTCH cases. • The fourth column shows the estimated payment per discharge for the 2009 LTCH PPS rate year (as described above). • The fifth column shows the estimated payment per discharge for the 2010 LTCH PPS rate year (as described above). • The sixth column shows the percentage change in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for proposed changes to the standard Federal rate (as discussed in section V. of the Addendum to this proposed rule). • The seventh column shows the percentage change in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for proposed changes to the area wage adjustment at § 412.525(c) (as discussed in section V.B.4. of the Addendum to this proposed rule). • The eighth column shows the percentage change in estimated payments per discharge from the 2009 LTCH PPS rate year (Column 4) to the 2010 LTCH PPS rate year (Column 5) for all proposed changes (and includes the effect of estimated changes to HCO and SSO payments). BILLING CODE 4210–01–P E:\FR\FM\22MYP2.SGM 22MYP2 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00603 Fmt 4701 Sfmt 4725 E:\FR\FM\22MYP2.SGM 22MYP2 24681 EP22MY09.405</GPH> sroberts on PROD1PC70 with FRONTMATTER Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules BILLING CODE 4210–01–C VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 PO 00000 Frm 00604 Fmt 4701 Sfmt 4702 E:\FR\FM\22MYP2.SGM 22MYP2 EP22MY09.406</GPH> sroberts on PROD1PC70 with FRONTMATTER 24682 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules sroberts on PROD1PC70 with FRONTMATTER 4. Results Based on the most recent available data (as described previously for 399 LTCHs), we have prepared the following summary of the impact (as shown in Table IV) of the proposed LTCH PPS payment rate and policy changes presented in this proposed rule. The impact analysis in Table IV shows that estimated payments per discharge are expected to increase approximately 2.8 percent, on average, for all LTCHs from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year as a result of the proposed payment rate and policy changes presented in this proposed rule as well as estimated increases in HCO and SSO payments. We note that we are proposing a 0.6 percent increase to the standard Federal rate for RY 2010, based on the latest market basket estimate (2.4 percent) and the proposed documentation and coding adjustment (¥1.8 percent). We noted earlier in this section that or most categories of LTCHs, as shown in Table IV (Column 6), the impact of the proposed increase of 0.6 percent to the standard Federal rate is projected to result in a 0.5 percent increase in estimated payments per discharge for all LTCHs from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year. In addition to the proposed 0.6 percent increase to the standard Federal rate for RY 2010, the projected percent increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year of 2.8 percent shown in Table IV (Column 8) reflects the effect of estimated increases in HCO and SSO payments, as discussed previously. Furthermore, as discussed previously in this regulatory impact analysis, the average increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for all LTCHs of approximately 2.8 (as shown in Table IV) was determined by comparing estimated RY 2010 LTCH PPS payments (using the proposed rates and policies discussed in this proposed rule) to estimated RY 2009 LTCH PPS payments (as described above in section IX.C. of this regulatory impact analysis). a. Location Based on the most recent available data, the majority of LTCHs are in urban areas. Approximately 7 percent of the LTCHs are identified as being located in a rural area, and approximately 5 percent of all LTCH cases are treated in these rural hospitals. The impact analysis presented in Table IV shows that the average percent increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 LTCH PPS rate year for all hospitals is 2.8 percent for all proposed changes. For rural LTCHs, the percent change for all proposed changes is estimated to be 4.2 percent, while for urban LTCHs, we estimate this increase to be the average of 2.8 percent. Large urban LTCHs are projected to experience a slightly higher than average increase (2.9 percent) in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year, while other urban LTCHs are projected to experience a slightly lower than average increase (2.6 percent) in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year, as shown in Table IV. b. Participation Date LTCHs are grouped by participation date into four categories: (1) Before October 1983; (2) between October 1983 and September 1993; (3) between October 1993 and September 2002; and (4) after October 2002. Based on the most recent available data, the majority (approximately 51 percent) of the LTCH cases are in hospitals that began participating between October 1993 and September 2002, and are projected to experience about the average increase (3.8 percent) in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year, as shown in Table IV. In the two participation categories where LTCHs began participating in Medicare before October 1983 (that is, the ‘‘Before October 1983’’ category and the ‘‘October 1983 through September 1993’’ category), LTCHs are projected to experience higher than average percent increases (3.7 and 3.4 percent, respectively) in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year, as shown in Table IV, due to proposed changes in the wage index and an estimated increase in HCO payments. Approximately 4 percent of LTCHs began participating in Medicare before October 1983. The LTCHs in this category are projected to experience a higher than average increase in estimated payments because 65 percent of these LTCHs are located in areas where the proposed RY 2010 wage index value is greater than the RY 2009 wage index value, and also because the majority of these LTCHs have a proposed wage index value of greater than 1.0. Approximately 11 percent of LTCHs began participating in Medicare between October 1983 and September 1993. These LTCHs are projected to experience a higher than average increase in estimated payments because the majority (57 percent) are located in PO 00000 Frm 00605 Fmt 4701 Sfmt 4702 24683 areas where the proposed RY 2010 wage index value would be greater than the RY 2009 wage index value. The majority of LTCHs, that is, those that began participating in Medicare since October 1993, are projected to experience near average increases in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year, as shown in Table IV. c. Ownership Control Other than LTCHs whose ownership control type is unknown, LTCHs are grouped into three categories based on ownership control type: voluntary, proprietary, and government. Based on the most recent available data, approximately 20 percent of LTCHs are identified as voluntary (Table IV). We expect that, for these LTCHs in the voluntary category, estimated 2010 LTCH PPS rate year payments per discharge would increase higher than the average (3.3 percent) in comparison to estimated payments in the 2009 LTCH PPS rate year, as shown in Table IV, primarily because the change in estimated HCO payments is projected to be higher than the average for these LTCHs. The majority (67 percent) of LTCHs are identified as proprietary and these LTCHs are projected to experience a near average (2.6 percent) increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year. Finally, government-owned and operated LTCHs (3 percent) are expected to experience a higher than the average increase (3.8 percent) in estimated payments primarily due to larger than the average increase in estimated HCO payments. d. Census Region Estimated payments per discharge for the 2010 LTCH PPS rate year are projected to increase for LTCHs located in all regions in comparison to the 2009 LTCH PPS rate year. Of the 9 census regions, we project that the increase in estimated payments per discharge would have the largest impact on LTCHs in the New England, East South Central, Mountain, and Pacific regions (4.0 percent, 3.2 percent, 4.1 percent, and 3.8 percent, respectively, as shown in Table IV). As explained in greater detail above in section XV.B.4. of this Appendix, the estimated percent increase in payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for most regions is largely attributable to the projected increase in estimated HCO and SSO payments in addition to the proposed increase in the standard Federal rate and the proposed changes to the area wage adjustment. Specifically, for the E:\FR\FM\22MYP2.SGM 22MYP2 sroberts on PROD1PC70 with FRONTMATTER 24684 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules New England region, all the LTCHs located in this region have a proposed wage index value of greater than 1.0; and the majority (87 percent) of these LTCHs are located in areas where the proposed RY 2010 wage index value is greater than the RY 2009 wage index value. The projected increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year for LTCHs in the East South Central region, as shown in Table IV, is due to the estimated increase in HCO payments, while for LTCHs in the Mountain and Pacific regions, the projected increase in payments is due to both the estimated increase in HCO payments and the significantly higher than average estimated impact from the proposed changes to the area wage adjustment. That is, the majority (60 percent) of the LTCHs located in the Mountain region have a proposed wage index value of greater than 1.0, and in addition, most of these LTCHs are located in areas where the proposed RY 2010 wage index value is greater than the RY 2009 wage index value. Furthermore, all the LTCHs located in the Pacific region have a proposed wage index value of greater than 1.0 and are located in areas where the proposed RY 2010 wage index value would be greater than the RY 2009 wage index value. In contrast, LTCHs located in the Middle Atlantic and East North Central regions are projected to experience a lower than average increase in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year. The projected increase in payments of 1.7 percent for LTCHs in the Middle Atlantic region is primarily due to the 59 percent of LTCHs located in areas where the proposed RY 2010 wage index value would be less than the RY 2009 wage index value. In addition, 62 percent of the LTCHs in this category are projected to have a proposed RY 2010 wage index value of greater than 1.0. Similarly, the lower than average increase in payments per discharge for LTCHs in the East North Central region is largely due to the majority of LTCHs in this region that are expected to experience a decrease in estimated payments per discharge due to the proposed changes in the area wage adjustment. For LTCHs in the Middle Atlantic and East North Central regions, the increase in estimated payments is less than the estimated average increase in payments for all providers due to the proposed changes in the area wage adjustment as discussed above. However, we note that the projected increase in estimated HCO payments for VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 LTCHs in this region in addition to the increase in the standard Federal rate results in an overall estimated increase, albeit less than the average increase, in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year. The remaining regions, South Atlantic, West North Central, and West South Central, are expected to experience near the average increases in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year. e. Bed Size LTCHs were grouped into six categories based on bed size: 0–24 beds; 25–49 beds; 50–74 beds; 75–124 beds; 125–199 beds; and greater than 200 beds. We are projecting an increase in estimated 2010 LTCH PPS rate year payments per discharge in comparison to the 2009 LTCH PPS rate year for all bed size categories. Approximately 38 percent of LTCHs are in bed size categories where estimated 2010 LTCH PPS rate year payments per discharge are projected to increase at or near the average increase for all LTCHS in comparison to estimated 2009 LTCH PPS rate year payments per discharge. That is, LTCHs in bed size categories of 50–74 beds, 75–124 beds, and 125–199 beds are projected to experience an overall increase of 2.9 percent. LTCHs in the bed size category of 0–24 beds are projected to experience a higher than the average increase (3.8 percent) in estimated payments per discharge from the 2009 LTCH PPS rate year to the 2010 LTCH PPS rate year due primarily to the estimated increase in HCO payments, while for LTCHs with 200+ beds, the projected increase in estimated payments is largely due to the significantly higher than average impact from the proposed changes to the area wage adjustment. Specifically, 69 percent of LTCHs in this category are expected to have a proposed RY 2010 wage index value of greater than 1.0, and 62 percent of the LTCHs in this category are located in areas where the proposed RY 2010 wage index value is greater than the RY 2009 wage index value. We are projecting a slightly lower than the average increase in estimated 2010 LTCH PPS rate year payments per discharge in comparison to the 2009 LTCH PPS rate year for LTCHs in bed size category 25–49 beds, which is largely due to the 87 percent of LTCHs in this category expected to have a proposed RY 2010 wage index value of less than 1.0. In addition, 54 percent of the LTCHs in this category are located in areas where the proposed RY 2010 PO 00000 Frm 00606 Fmt 4701 Sfmt 4702 wage index value is less than the RY 2009 wage index value. D. Effect on the Medicare Program As noted previously, we project that the provisions of this proposed rule would result in an increase in estimated aggregate LTCH PPS payments in RY 2010 of approximately $135 million (or about 2.8 percent) for the 399 LTCHs in our database. E. Effect on Medicare Beneficiaries Under the LTCH PPS, hospitals receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we expect that paying prospectively for LTCH services would enhance the efficiency of the Medicare program. X. Alternatives Considered This proposed rule contains a range of policies. The preamble of this proposed rule provides descriptions of the statutory provisions that are addressed, identifies implementing policies where discretion has been exercised, and presents rationales for our decisions and, where relevant, alternatives that were considered. XI. Overall Conclusion A. Acute Care Hospitals Table I of section VI. of this Appendix demonstrates the estimated distributional impact of the IPPS budget neutrality requirements for the proposed MS–DRG and wage index changes, and for the wage index reclassifications under the MGCRB. Table I also shows an overall decrease of 0.5 percent in operating payments. We estimate that operating payments will decrease by $586 million in FY 2010. This accounts for the projected savings associated with the HACs policy, which have an estimated savings of $21 million. In addition, this estimate includes the hospital reporting of quality data program costs of $2.39 million, and all proposed operating payment policies as described in section VII. of this Appendix. We estimate that capital payments will decrease by 4.8 percent per case, as shown in Table III of section VIII. of this Appendix. Therefore, we project that the decrease in capital payments in FY 2010 compared to FY 2009 will be approximately $393 million. The proposed cumulative operating and capital payments should result in a net decrease of $979 million to IPPS providers. The discussions presented in the previous pages, in combination with the rest of this E:\FR\FM\22MYP2.SGM 22MYP2 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules proposed rule, constitute a regulatory impact analysis. B. LTCHs Overall, LTCHs are projected to experience an increase in estimated payments per discharge in RY 2010. In the impact analysis, we are using the proposed rates, factors, and policies presented in this proposed rule, including proposed updated wage index values, and the best available claims and CCR data to estimate the change in payments for the 2010 LTCH PPS rate year. Accordingly, based on the best available data for the 399 LTCHs in our database, we estimate that RY 2010 LTCH PPS payments will increase approximately $135 million (or about 2.8 percent). prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule as they relate to proposed changes to the LTCH PPS. Table VI provides our best estimate of the proposed increase in Medicare payments under the LTCH PPS as a result of the proposed provisions presented in this proposed rule based on the data for the 399 LTCHs in our database. All expenditures are classified as transfers to Medicare providers (that is, LTCHs). TABLE VI—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2009 LTCH PPS RATE YEAR TO THE 2010 LTCH PPS RATE YEAR XII. Accounting Statements Category Transfers Annualized Monetized Transfers. Positive transfer—Estimated increase in expenditures: $135 million. Federal Government to LTCH Medicare Providers. A. Acute Care Hospitals As required by OMB Circular A–4 (available at https://www.whitehousegov/ omb/circulars/a004/a-4.pdf), in Table V below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule as they relate to acute care hospitals. This table provides our best estimate of the increase in Medicare payments to providers as a result of the proposed changes to the IPPS presented in this proposed rule. All expenditures are classified as transfers to Medicare providers. TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS FROM FY 2009 TO FY 2010 Category Transfers Annualized Monetized Transfers. From Whom to Whom $¥979 million. Total ................... $¥979 million. Federal Government to IPPS Medicare Providers. sroberts on PROD1PC70 with FRONTMATTER B. LTCHs As discussed in section IX. of this Appendix , the impact analysis for the proposed changes under the LTCH PPS for this proposed rule projects an increase in estimated aggregate payments of approximately $135 million (or about 2.8 percent) for the 399 LTCHs in our database that are subject to payment under the LTCH PPS. Therefore, as required by OMB Circular A–4 (available at https:// www.whitehouse.gov/omb/circulars/ a004/a-4.pdf), in Table VI we have VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 From Whom To Whom. XIII. Executive Order 12866 In accordance with the provisions of Executive Order 12866, the Executive Office of Management and Budget reviewed this proposed rule. Appendix B: Recommendation of Update Factors for Operating Cost Rates of Payment for Inpatient Hospital Services I. Background Section 1886(e)(4)(A) of the Act requires that the Secretary, taking into consideration the recommendations of the MedPAC, recommend update factors for inpatient hospital services for each fiscal year that take into account the amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality. Under section 1886(e)(5) of the Act, we are required to publish update factors recommended by the Secretary in the proposed and final IPPS rules, respectively. Accordingly, this Appendix provides the recommendations for the update factors for the IPPS national standardized amount, the Puerto Rico-specific standardized amount, the hospital-specific rates for SCHs and MDHs, and the rate-of-increase limits for certain hospitals excluded from the IPPS, as well as LTCHs, IPFs, and IRFs. We also discuss our response to MedPAC’s recommended update factors for inpatient hospital services. II. Inpatient Hospital Update for FY 2010 Section 1886(b)(3)(B)(i)(XX) of the Act, as amended by section 5001(a) of Public Law 109–171, sets the FY 2010 percentage increase in the operating cost standardized amount equal to the rate-of-increase in the PO 00000 Frm 00607 Fmt 4701 Sfmt 4702 24685 hospital market basket for IPPS hospitals in all areas, subject to the hospital submitting quality information under rules established by the Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals that do not provide these data, the update is equal to the market basket percentage increase less 2.0 percentage points. In compliance with section 404 of the MMA, in this proposed rule, we are proposing to replace the FY 2002-based IPPS operating and capital market baskets with the revised and rebased FY 2006-based IPPS operating and capital market baskets for FY 2010. In addition to updating the base year to reflect more recent data, we also are proposing to make several changes to the structure of the market basket, including three new expense categories and revising several price proxies. We also are proposing to rebase the laborrelated share to reflect the more recent base year. The current labor-related share, which is based on the FY 2002-based IPPS market basket, is 69.7. We are proposing a laborrelated share of 67.1, which is based on the proposed rebased and revised FY 2006-based IPPS market basket. For a complete discussion on the rebasing of the market basket and labor share, we refer readers to section IV. of the preamble to this proposed rule. Consistent with current law, based on IHS Global Insight, Inc. 2009 first quarter forecast, with historical data through the 2008 fourth quarter, of the proposed rebased and revised FY 2006-based IPPS market basket, we are estimating that the FY 2010 update to the standardized amount will be 2.1 percent (that is, the current estimate of the market basket rate-of-increase) for hospitals in all areas, provided the hospital submits quality data in accordance with our rules. For hospitals that do not submit quality data, we are estimating that the update to the standardized amount will be 0.1 percent (that is, the current estimate of the market basket rate-of-increase minus 2.0 percentage points). Section 1886(d)(9)(C)(i) of the Act is the basis for determining the percentage increase to the Puerto Rico-specific standardized amount. For FY 2010, we are proposing to apply the full rate-of-increase in the hospital market basket for IPPS hospitals to the Puerto Rico-specific standardized amount. Therefore, the update to the Puerto Ricospecific standardized amount is estimated to be 2.1 percent. Section 1886(b)(3)(B)(iv) of the Act sets the FY 2010 percentage increase in the hospitalspecific rates applicable to SCHs and MDHs equal to the rate set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all other hospitals subject to the IPPS, or the rate-of-increase in the market basket). Therefore, the update to the hospital-specific rates applicable to SCHs and MDHs is estimated to be 2.1 or 0.1 percent, depending upon whether the hospital submits quality data. Section 1886(b)(3)(B)(ii) of the Act is used for purposes of determining the percentage increase in the rate-of-increase limits for children’s and cancer hospitals. Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in the rate-of-increase E:\FR\FM\22MYP2.SGM 22MYP2 24686 Federal Register / Vol. 74, No. 98 / Friday, May 22, 2009 / Proposed Rules limits equal to the market basket percentage increase. In accordance with § 403.752(a) of the regulations, RNHCIs are paid under § 413.40, which also uses section 1886(b)(3)(B)(ii) of the Act to update the percentage increase in the rate-of-increase limits. Section 1886(j)(3)(C) of the Act addresses the increase factor for the Federal prospective payment rate of IRFs. Section 123 of Public Law 106–113, as amended by section 307(b) of Pub. L. 106–554, provides the statutory authority for updating payment rates under the LTCH PPS. In addition, section 124 of Public Law 106–113 provides the statutory authority for updating all aspects of the payment rates for IPFs. Currently, children’s hospitals, cancer hospitals, and RNHCIs are the remaining three types of hospitals still reimbursed under the reasonable cost methodology. We are proposing to provide our current estimate of the FY 2010 IPPS operating market basket percentage increase (2.1 percent) to update the target limits for children’s hospitals, cancer hospitals, and RNHCIs. For RY 2010, as discussed in section VIII. of the preamble to this proposed rule, we are proposing an update of 0.6 percent to the LTCH PPS Federal rate, which is based on a proposed market basket increase of 2.4 percent (based on IHS Global Insight, Inc.’s first quarter 2009 forecast of the FY 2002based RPL market basket increase for RY 2010) and a proposed adjustment of ¥1.8 percent to account for the increase in casemix in a prior year that resulted from changes in coding practices rather than an increase in patient severity. Effective for cost reporting periods beginning on or after January 1, 2005, IPFs are paid under the IPF PPS. IPF PPS payments are based on a Federal per diem rate that is derived from the sum of the average routine operating, ancillary, and capital costs for each patient day of psychiatric care in an IPF, adjusted for budget neutrality. IRFs are paid under the IRF PPS for cost reporting periods beginning on or after January 1, 2002. For cost reporting periods beginning on or after October 1, 2002 (FY 2003), and thereafter, the Federal prospective payments to IRFs are based on 100 percent of the adjusted Federal IRF prospective payment amount, updated annually (69 FR 45721). sroberts on PROD1PC70 with FRONTMATTER III. Secretary’s Recommendation MedPAC is recommending an inpatient hospital update equal to the market basket VerDate Nov<24>2008 08:10 May 21, 2009 Jkt 217001 rate of increase for FY 2010. MedPAC’s rationale for this update recommendation is described in more detail below. Based on IHS Global Insight, Inc.’s 2009 first quarter forecast, with historical data through the 2008 fourth quarter, of the proposed rebased and revised FY 2006-based IPPS market basket, we are recommending an update to the standardized amount of 2.1 percent. We are recommending that this same update factor apply to SCHs and MDHs. Section 1886(d)(9)(C)(i) of the Act is the basis for determining the percentage increase to the Puerto Rico-specific standardized amount. For FY 2010, we are proposing to apply the full rate-of-increase in the hospital market basket for IPPS hospitals to the Puerto Rico-specific standardized amount. Therefore, the update to the Puerto Ricospecific standardized amount is estimated to be 2.1 percent. In addition to making a recommendation for IPPS hospitals, in accordance with section 1886(e)(4)(A) of the Act, we are recommending update factors for all other types of hospitals. Using IHS Global Insight, Inc.’s 2009 first quarter forecast, with historical data through the 2008 fourth quarter, of the proposed rebased and revised FY 2006-based IPPS market basket, we are recommending an update based on the IPPS market basket increase for children’s hospitals, cancer hospitals, and RNHCIs of 2.1 percent. Based on IHS Global Insight, Inc.’s first quarter 2009 forecast of the RPL market basket increase, we are recommending an update to the IPF PPS Federal rate for RY 2010 of 2.1 percent for the Federal per diem payment amount. For RY 2010, similar to our proposal in section VIII. of the preamble of this proposed rule, we are recommending an update of 2.4 percent to the LTCH PPS Federal rate, which is based on a proposed market basket increase of 2.4 percent (based on IHS Global Insight, Inc.’s first quarter 2009 forecast of the FY 2002-based RPL market basket increase for RY 2010) and a proposed adjustment of ¥1.8 percent to account for the increase in case-mix in a prior year that resulted from changes in coding practices rather than an increase in patient severity. Finally, based on IHS Global Insight, Inc.’s first quarter 2009 forecast of the RPL market basket increase, we are recommending a 2.4 percent update to the IRF PPS Federal rate for FY 2010. PO 00000 Frm 00608 Fmt 4701 Sfmt 4702 IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating Payments in Traditional Medicare In its March 2009 Report to Congress, MedPAC assessed the adequacy of current payments and costs, and the relationship between payments and an appropriate cost base, utilizing an established methodology used by MedPAC in the past several years. MedPAC recommended an update to the hospital inpatient rates equal to the increase in the hospital market basket in FY 2010, concurrent with implementation of a quality incentive program. Similar to last year, MedPAC also recommended that CMS put pressure on hospitals to control their costs rather than accommodate the current rate of cost growth, which is, in part, caused by a lack of pressure from private payers. MedPAC noted that indicators of payment adequacy are almost uniformly positive. MedPAC expects Medicare margins to remain low in 2010. At the same time though, MedPAC’s analysis finds that hospitals with low non-Medicare profit margins have below average standardized costs and most of these facilities have positive overall Medicare margins. Response: Similar to our response last year, we agree with MedPAC that hospitals should control costs rather than accommodate the current rate of growth. An update equal to less than the market basket will motivate hospitals to control their costs, consistent with MedPAC’s recommendation. As MedPAC noted, the lack of financial pressure at certain hospitals can lead to higher costs and in turn bring down the overall Medicare margin for the industry. As discussed in section II. of the preamble of this proposed rule, CMS implemented the MS–DRGs in FY 2008 to better account for severity of illness under the IPPS and is basing the DRG weights on costs rather than charges. We continue to believe that these refinements will better match Medicare payment of the cost of care and provide incentives for hospitals to be more efficient in controlling costs. We note that, because the operating and capital prospective payment systems remain separate, we are proposing to continue to use separate updates for operating and capital payments. The proposed update to the capital rate is discussed in section III. of the Addendum to this proposed rule. [FR Doc. E9–10458 Filed 5–1–09; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\22MYP2.SGM 22MYP2

Agencies

[Federal Register Volume 74, Number 98 (Friday, May 22, 2009)]
[Proposed Rules]
[Pages 24080-24686]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10458]

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Part II

Book 2 of 2 Books

Pages 24079-24694

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 412, 413, 415 et al.

Medicare Program; Proposed Changes to the Hospital Inpatient
Prospective Payment Systems for Acute Care Hospitals and Fiscal Year
2010 Rates and to the Long-Term Care Hospital Prospective Payment
System and Rate Year 2010 Rates; Proposed Rule

Federal Register / Vol. 74 , No. 98 / Friday, May 22, 2009 / Proposed
Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 415, and 489

[CMS-1406-P]
RIN 0938-AP39

AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals to implement changes arising from our
continuing experience with these systems, and to implement certain
provisions made by the Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA, Pub. L. 110-275) and the American Recovery and
Reinvestment Act of 2009 (ARRA, Pub. L. 111-5). In addition, in the
Addendum to this proposed rule, we describe the proposed changes to the
amounts and factors used to determine the rates for Medicare acute care
hospital inpatient services for operating costs and capital-related
costs. These proposed changes would be applicable to discharges
occurring on or after October 1, 2009. We also are setting forth the
proposed update to the rate-of-increase limits for certain hospitals
excluded from the IPPS that are paid on a reasonable cost basis subject
to these limits. The proposed updated rate-of-increase limits would be
effective for cost reporting periods beginning on or after October 1,
2009.
In addition, we are proposing to update the annual payment rates
for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs). In the
Addendum to this proposed rule, we also set forth the proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for rate year 2010. These proposed changes would be
applicable to discharges occurring on or after October 1, 2009. In this
proposed rule, we also note those provisions of the ARRA that amended
provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(MMSEA, Pub. L. 110-173) relating to payments to LTCHs and new LTCHs
and LTCH satellite facilities, and increases in beds in existing LTCHs
and LTCH satellite facilities under the LTCH PPS that will be
implemented in the final rule issued for this proposed rule.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. E.S.T. on June 30,
2009.

ADDRESSES: When commenting on issues presented in this proposed rule,
please refer to file code CMS-1406-P. 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 this
regulation at https://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code CMS-1406-P to submit
comments on this proposed rule.
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-1406-P, P.O. Box 8011, 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-1406-P, 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) 786-7195 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.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION, CONTACT: Tzvi Hefter, (410) 786-4487,
Operating Prospective Payment, MS-DRGs, Wage Index, New Medical Service
and Technology Add-On Payments, Hospital Geographic Reclassifications,
Capital Prospective Payment, Excluded Hospitals, Direct and Indirect
Graduate Medical Education Payments, EMTALA, Hospital Emergency
Services, and Hospital-Within-Hospital Issues.
Michele Hudson, (410) 786-4487, Long-Term Care Hospital Prospective
Payment System and MS-LTC-DRGs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
Sheila Blackstock, (410) 786-3502, Quality Data for Annual Payment
Update Issues.
Thomas Valuck, (410) 786-7479, Hospital-Acquired Conditions.

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 at
that Web site to view public comments.
Comments received timely will also be available for public
inspection, 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

[[Page 24081]]

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.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web, (the Superintendent of Documents' home Web page
address is https://www.gpoaccess.gov/), by using local WAIS client
software, or by telnet to swais.access.gpo.gov, then log in as guest
(no password required). Dial-in users should use communications
software and modem to call (202) 512-1661; type swais, then log in as
guest (no password required).

Acronyms

3M 3M Health Information System
AAHKS American Association of Hip and Knee Surgeons
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory surgical center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FHA Federal Health Architecture
FIPS Federal information processing standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-Within-a-Hospital
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICR Information collection requirement
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MPN Medicare provider number
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NQF National Quality Forum
NTIS National Technical Information Service
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management

[[Page 24082]]

O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PIP Periodic interim payment
PLI Professional liability insurance
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TJA Total joint arthroplasty
UHDDS Uniform hospital discharge data set
VAP Ventilator-associated pneumonia

Table of Contents

I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
B. Provisions of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)
C. Provisions of the American Recovery and Reinvestment Act of
2009 (ARRA)
D. Major Contents of This Proposed Rule
1. Proposed Changes to MS-DRG Classifications and Recalibrations
of Relative Weights
2. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
3. Proposed Rebasing and Revision of the Hospital Market Basket
for Acute Care Hospitals
4. Other Decisions and Proposed Changes to the IPPS for
Operating Costs and GME Costs
5. FY 2010 Policy Governing the IPPS for Capital-Related Costs
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
7. Proposed Changes to the LTCH PPS
8. Determining Proposed Prospective Payment Operating and
Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals
9. Determining Proposed Prospective Payments Rates for LTCHs
10. Impact Analysis
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
12. Discussion of Medicare Payment Advisory Commission
Recommendations
E. Public Comments Received on Two LTCH PPS Interim Final Rules
with Comment Period Issued in 2008
II. Proposed Changes to Medicare Severity Diagnosis-Related Group
(MS-DRG) Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
1. General
2. Yearly Review for Making MS-DRG Changes
C. Adoption of the MS-DRGs in FY 2008
D. Proposed FY 2010 MS-DRG Documentation and Coding Adjustment,
Including the Applicability to the Hospital-Specific Rates and the
Puerto Rico-Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Prospective Adjustment to the Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public Law 110-90
3. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Public Law 110-90
4. Retrospective Evaluation of FY 2008 Claims Data
5. Proposed Adjustments for FY 2010 and Subsequent Years
Authorized by Section 7(b)(1)(A) of Public Law 110-90 and Section
1886(d)(3)(vi) of the Act
6. Additional Adjustment for FY 2010 Authorized by Section
7(b)(1)(B) of Public Law 110-90
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
8. Proposed Documentation and Coding Adjustment to the Hospital-
Specific Rates for FY 2010 and Subsequent Years
9. Background on the Application of the Documentation and Coding
Adjustment to the Puerto Rico-Specific Standardized Amount
10. Proposed Documentation and Coding Adjustment to the Puerto
Rico-Specific Standardized Amount
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
a. Summary of the RTI Study of Charge Compression and CCR
Refinement
b. Summary of the Rand Corporation Study of Alternative Relative
Weight Methodologies
2. Summary of FY 2009 Changes and Discussion for FY 2010
3. Timeline for Revising the Medicare Cost Report
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Statutory Authority
2. HAC Selection Process
3. Collaborative Process
4. Selected HAC Categories
5. Public Input Regarding Selected and Potential Candidate HACs
6. POA Indicator Reporting
G. Proposed Changes to Specific MS-DRG Classifications
1. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA)
2. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue): Infected Hip and Knee Replacements
3. Proposed Medicare Code Editor (MCE) Changes
a. Diagnoses Allowed for Males Only Edit
b. Manifestation Codes as Principal Diagnosis Edit
c. Invalid Diagnosis or Procedure Code
d. Unacceptable Principal Diagnosis
e. Proposed Creation of New Edit Titled ``Wrong Surgeries''
f. Procedures Allowed for Females Only Edit
4. Surgical Hierarchies
5. Complication or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2010
6. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 to MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
7. Changes to the ICD-9-CM Coding System
H. Recalibration of MS-DRG Weights
I. Proposed Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2010 Status of Technologies Approved for FY 2009 Add-On
Payments
4. FY 2010 Applications for New Technology Add-On Payments
a. The AutoLITT^TM System
b. CLOLAR[supreg] (clofarabine) Injection
c. LipiScan^TM Coronary Imaging System
d. Spiration[supreg] IBV[supreg] Valve System
e. TherOx Downstream[supreg] System
5. Technical Correction
III. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals

[[Page 24083]]

A. Background
B. Requirements of Section 106 of the MIEA-TRHCA
1. Wage Index Study Required Under the MIEA-TRHCA
a. Legislative Requirement
b. Interim and Final Reports on Results of Acumen's Study
2. FY 2009 Policy Changes in Response to Requirements Under
Section 106(b) of the MIEA-TRHCA
a. Reclassification Average Hourly Wage Comparison Criteria
b. Within-State Budget Neutrality Adjustment for the Rural and
Imputed Floors
C. Core-Based Statistical Areas for the Hospital Wage Index
D. Proposed Occupational Mix Adjustment to the Proposed FY 2010
Wage Index
1. Development of Data for the Proposed FY 2010 Occupational Mix
Adjustment Based on the 2007-2008 Occupational Mix Survey
2. Calculation of the Proposed Occupational Mix Adjustment for
FY 2010
E. Worksheet S-3 Wage Data for the Proposed FY 2010 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals Under the IPPS
F. Verification of Worksheet S-3 Wage Data
G. Method for Computing the Proposed FY 2010 Unadjusted Wage
Index
H. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2010 Occupational Mix Adjusted Wage
Index
I. Revisions to the Wage Index Based on Hospital Redesignations
1. General
2. Effects of Reclassification/Redesignation
3. FY 2010 MGCRB Reclassifications
4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of
the Act
5. Reclassifications Under Section 1886(d)(8)(B) of the Act
6. Reclassifications Under Section 508 of Public Law 108-173
J. Proposed FY 2010 Wage Index Adjustment Based on Commuting
Patterns of Hospital Employees
K. Process for Requests for Wage Index Data Corrections
IV. Proposed Rebasing and Revision of the Hospital Market Baskets
for Acute Care Hospitals
A. Background
B. Rebasing and Revising the IPPS Market Basket
1. Development of Cost Categories and Weights
a. Medicare Cost Reports
b. Other Data Sources
2. Final Cost Category Computation
3. Selection of Price Proxies
a. Wages and Salaries
b. Employment Benefits
c. Fuel, Oil, and Gasoline
d. Electricity
e. Water and Sewage
f. Professional Liability Insurance
g. Pharmaceuticals
h. Food: Direct Purchase
i. Food: Contract Services
j. Chemicals
k. Blood and Blood Products
l. Medical Instruments
m. Photographic Supplies
n. Rubber and Plastics
o. Paper and Printing Products
p. Apparel
q. Machinery and Equipment
r. Miscellaneous Products
s. Professional Fees: Labor-Related
t. Administrative and Business Support Services
u. All Other: Labor-Related Services
v. Professional Fees: Nonlabor-Related
w. Financial Services
x. Telephone Services
y. Postage
z. All Other: Nonlabor-Related Services
4. Labor-Related Share
C. Separate Market Basket for Certain Hospitals Presently
Excluded From the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Proposed Changes to the IPPS for Operating
Costs and GME Costs
A. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
a. Overview
b. Hospital Quality Data Reporting Under Section 501(b) of
Public Law 108-173
c. Hospital Quality Data Reporting Under Section 5001(a) of
Public Law 109-171
2. Retirement of RHQDAPU Program Measures
3. Quality Measures for the FY 2011 Payment Determination and
Subsequent Years
a. Considerations in Expanding and Updating Quality Measures
Under the RHQDAPU Program
b. Proposed RHQDAPU Program Quality Measures for the FY 2011
Payment Determination
3. Possible New Quality Measures for the FY 2012 Payment
Determination and Subsequent Years
4. Possible New Quality Measures for the FY 2012 Payment
Determination and Subsequent Years
5. Form, Manner, and Timing of Quality Data Submission
a. Proposed RHQDAPU Program Procedures for the FY 2011 Payment
Determination
b. RHQDAPU Program Disaster Extensions and Waivers
c. HACHPS Requirements for the FY 2011 Payment Determination
6. Proposed Chart Validation Requirements
a. Proposed Chart Validation Requirements and Methods for the FY
2011 Payment Determination
b. Proposed Chart Validation Requirements and Methods for the FY
2012 Payment Determination and Subsequent Years
c. Possible Supplements to the Chart Validation Process for the
FY 2013 Payment Determination and Subsequent Years
7. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2011 Payment Determination and Subsequent Years
8. Public Display Requirements for the FY 2011 Payment
Determination and Subsequent Years
9. Proposed Reconsideration and Appeal Procedures for the FY
2010 Payment Determination
10. RHQDAPU Program Withdrawal Deadlines
11. Electronic Health Records
a. Background
b. EHR Testing of Quality Measures Submission
c. HITECH Act EHR Provisions
B. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small
Rural Hospitals (MDHs): Budget Neutrality Adjustment Factors for FY
2002-Based Hospital-Specific Rate for MDHs
1. Background
2. FY 2002-Based Hospital-Specific Rate
C. Rural Referral Centers (RRCs)
1. Case-Mix Index
2. Discharges
D. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2010
3. IME-Related Proposed Changes in Other Sections of this
Proposed Rule
E. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs)
1. Background
2. Proposed Policy Change Relating to the Inclusion of Labor and
Delivery Patient Days in the Medicare DSH Calculation
a. Background
b. Proposed Policy Change
3. Proposed Policy Change Relating to Calculation of Inpatient
Days in the Medicaid Fraction in the Medicare DSH Calculation
a. Background
b. Proposed Policy Change
4. Proposed Policy Change Relating to the Exclusion of
Observation Beds and Patient Days From the Medicare DSH Calculation
a. Background
b. Proposed Policy Change
F. Technical Correction to Regulations on Payments for
Anesthesia Services Furnished by Hospital or CAH Employed
Nonphysician Anesthetists or Obtained Under Arrangements
G. Payments for Direct Graduate Medical Education (GME) Costs
1. Background
2. Clarification of Definition of New Medical Residency Training
Program
3. Participation of New Teaching Hospitals in Medicare GME
Affiliated Groups
4. Technical Corrections to Regulations
H. Hospital Emergency Services Under EMTALA
1. Background
2. Proposed Changes Relating to Applicability of Sanctions Under
EMTALA
I. Rural Community Hospital Demonstration Program
J. Technical Correction to Regulations Relating to Calculation
of the Federal Rate Under the IPPS
VI. Proposed Changes to the IPPS for Capital-Related Costs

[[Page 24084]]

A. Overview
B. Exception Payments
C. New Hospitals
D. Hospitals Located in Puerto Rico
E. Proposed Changes
1. Proposed FY 2010 MS-DRG Documentation and Coding Adjustment
a. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
b. Proposed Prospective MS-DRG Documentation and Coding
Adjustment to the National Capital Federal Rate for FY 2010 and
Subsequent Years
c. Proposed Documentation and Coding Adjustment to the Puerto
Rico-Specific Capital Rate
2. Revision to the FY 2009 IME Adjustment Factor
3. Other Proposed Changes for FY 2010
VII. Proposed Changes for Hospitals Excluded From the IPPS
A. Excluded Hospitals
B. Criteria for Satellite Facilities of Hospitals
C. Critical Access Hospitals (CAHs)
1. Background
2. Payment for Clinical Diagnostic Laboratory Tests Furnished by
CAHs
3. CAH Optional Method of Payment for Outpatient Services
D. Provider-Based Status of Facilities and Organizations:
Proposed Policy Changes
1. Background
2. Proposed Changes to the Scope of the Provider-Based Status
Regulations for CAHs
a. CAH-Based Clinical Diagnostic Laboratory Facilities
b. CAH-Based Ambulance Services
3. Technical Correction to Regulations
VIII. Proposed Changes to the Long-Term Care Hospital Prospective
Payment System (LTCH PPS) for RY 2010
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Proposed Medicare Severity Long-Term Care Diagnosis-Related
Group (MS-LTC-DRG) Classifications and Relative Weights
1. Background
2. Patient Classifications Into MS-LTC-DRGs
a. Background
b. Proposed Changes to the MS-LTC-DRGs for RY 2010
3. Development of the Proposed RY 2010 MS-LTC-DRG Relative
Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Data
c. Hospital-Specific Relative Value (HSRV) Methodology
d. Treatment of Severity Levels in Developing the Proposed MS-
LTC-DRG Relative Weights
e. Low-Volume MS-LTC-DRGs
f. Steps for Determining the Proposed RY 2010 MS-LTC-DRG
Relative Weights
C. Proposed Changes to the LTCH Payment Rates and Other Changes
to the RY 2010 LTCH PPS
1. Overview of Development of the LTCH Payment Rates
2. Market Basket for LTCHs Reimbursed under the LTCH PPS
a. Overview
b. Proposed Market Basket under the LTCH PPS for RY 2010
c. Proposed Market Basket Update for LTCHs for RY 2010
d. Proposed Labor-Related Share under the LTCH PPS for RY 2010
3. Proposed Adjustment for Changes in LTCHs' Case-Mix Due to
Changes in Documentation and Coding Practices That Occurred in a
Prior Period
a. Background
b. Evaluation of FY 2007 Claims Data
c. Evaluation of FY 2008 Claims Data
d. Proposed RY 2010 Documentation and Coding Adjustment
D. Monitoring
E. Research Conducted by the Research Triangle Institute,
International (RTI)
F. Proposed Technical Corrections of LTCH PPS Regulations
IX. MedPAC Recommendations
X. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
C. Additional Information Collection Requirements
1. Present on Admission (POA) Indicator Reporting
2. Proposed Add-On Payments for New Services and Technologies
3. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
4. Occupational Mix Adjustment to the FY 2010 Index (Hospital
Wage Index Occupational Mix Survey)
5. Hospital Applications for Geographic Reclassifications by the
MGCRB
C. Response to Public Comments

Regulation Text

Addendum--Proposed Schedule of Standardized Amounts, Update
Factors, and Rate-of-Increase Percentages Effective With Cost
Reporting Periods Beginning on or after October 1, 2009
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2010
A. Calculation of the Adjusted Standardized Amount
B. Proposed Adjustments for Area Wage Levels and Cost-of-Living
C. Proposed MS-DRG Relative Weights
D. Calculation of the Proposed Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2010
A. Determination of Proposed Federal Hospital Inpatient Capital-
Related Prospective Payment Rate Update
B. Calculation of the Proposed Inpatient Capital-Related
Prospective Payments for FY 2010
C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
V. Proposed Changes to the Payment Rates for the LTCH PPS for RY
2010
A. Proposed LTCH PPS Standard Federal Rate for RY 2010
B. Proposed Adjustment for Area Wage Levels under the LTCH PPS
for RY 2010
C. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO)
Cases
D. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for RY 2010
VI. Tables
Table 1A.--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (67.1 Percent Labor Share/32.9 Percent Nonlabor Share
If Wage Index Is Greater Than 1)
Table 1B.--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If
Wage Index Is Less Than or Equal to 1)
Table 1C.--Adjusted Operating Standardized Amounts for Puerto
Rico, Labor/Nonlabor
Table 1D.--Capital Standard Federal Payment Rate
Table 1E.--LTCH Standard Federal Prospective Payment Rate
Table 2.--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2008; Hospital Wage Indexes for
Federal Fiscal Year 2010; Hospital Average Hourly Wages for Federal
Fiscal Years 2008 (2004 Wage Data), 2009 (2005 Wage Data), and 2010
(2006 Wage Data); and 3-Year Average of Hospital Average Hourly
Wages
Table 3A.--FY 2010 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA
Table 3B.--FY 2010 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA
Table 4A.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State--
FY 2010
Table 4B.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--
FY 2010
Table 4C.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2010
Table 4D-1.--Rural Floor Budget Neutrality Factors for Acute
Care Hospitals--FY 2010
Table 4D-2.--Urban Areas with Acute Care Hospitals Receiving the
Statewide Rural Floor or Imputed Floor Wage Index--FY 2010
Table 4E.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2010
Table 4F.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2010
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2010

[[Page 24085]]

Table 5.--List of Medicare Severity Diagnosis-Related Groups
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic
Mean Length of Stay--FY 2010
Table 6A.--New Diagnosis Codes
Table 6B.--New Procedure Codes
Table 6C.--Invalid Diagnosis Codes
Table 6D.--Invalid Procedure Codes
Table 6E.--Revised Diagnosis Code Titles
Table 6F.--Revised Procedure Code Titles
Table 6G.--Additions to the CC Exclusions List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6H.--Deletions from the CC Exclusions List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6I.--Complete List of Complication and Comorbidity (CC)
Exclusions (Available only through the Internet on the CMS Web site
at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6J.--Major Complication and Comorbidity (MCC) List
(Available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6K.--Complication and Comorbidity (CC) List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 7A.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2008 MedPAR Update--December 2008
GROUPER V26.0 MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2008 MedPAR Update--December 2008
GROUPER V27.0 MS-DRGs
Table 8A.--Proposed Statewide Average Operating Cost-to-Charge
Ratios (CCRs) for Acute Care Hospitals--March 2009
Table 8B.--Proposed Statewide Average Capital Cost-to-Charge
Ratios (CCRs) for Acute Care Hospitals--March 2009
Table 8C.--Proposed Statewide Average Total Cost-to-Charge
Ratios (CCRs) for LTCHs--March 2009
Table 9A.--Hospital Reclassifications and Redesignations--FY
2010
Table 9C.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2010
Table 10.--Geometric Mean Plus the Lesser of .75 of the National
Adjusted Operating Standardized Payment Amount (Increased to Reflect
the Difference Between Costs and Charges) or .75 of One Standard
Deviation of Mean Charges by Medicare Severity Diagnosis-Related
Groups (MS-DRGs)--March 2009
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric
Average Length of Stay, and Short-Stay Outlier Threshold for
Discharges Occurring from October 1, 2009 through September 30, 2010
under the LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges
Occurring from October 1, 2009 through September 30, 2010
Table 12B.--LTCH PPS Wage Index for Rural Ares for Discharges
Occurring from October 1, 2009 through September 30, 2010

Appendix A--Regulatory Impact Analysis

I. Overall Impact
II. Objectives of the IPPS
III. Limitations of Our Analysis
IV. Hospitals Included in and Excluded From the IPPS
V. Effects on Hospitals Excluded from the IPPS
VI. Quantitative Effects of the Policy Changes under the IPPS for
Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects of the Proposed Changes to the MS-DRG
Reclassifications and Relative Cost-Based Weights (Column 1)
D. Effects of the Application of Recalibration Budget Neutrality
(Column 2)
E. Effects of Proposed Wage Index Changes (Column 3)
F. Application of the Wage Budget Neutrality Factor (Column 4)
G. Combined Effects of Proposed MS-DRG and Wage Index Changes
(Column 5)
H. Effects of MGCRB Reclassifications (Column 6)
I. Effects of the Proposed Rural Floor and Imputed Floor,
Including the Transition To Apply Budget Neutrality at the State
Level (Column 7)
J. Effects of the Proposed Wage Index Adjustment for Out-
Migration (Column 8)
K. Effects of All Proposed Changes Prior to Documentation and
Coding (or CMI) Adjustment (Column 9)
L. Effects of All Proposed Changes With Documentation and Coding
(or CMI) Adjustment (Column 10)
M. Effects of Policy on Payment Adjustments for Low-Volume
Hospitals
N. Impact Analysis of Table II
VII. Effects of Other Proposed Policy Changes
A. Effects of Proposed Policy on HACs, Including Infections
B. Effects of Proposed Policy Change Relating to New Medical
Service and Technology Add-On Payments
C. Effects of Proposed Requirements for Hospital Reporting of
Quality Data for Annual Hospital Payment Update
D. Effects of Correcting the FY 2002-Based Hospital-Specific
Rates for MDHs
E. Effects of Proposed Policy Changes Relating to DSH Payment
Adjustment
F. Effects of Proposed Policy Changes Related to Direct GME
G. Effects of Proposed Policy Changes Relating to Hospital
Emergency Services under EMTALA
H. Effects of Proposed Policy Changes Relating to Payments to
CAHs
I. Effects of Proposed Policy Changes Relating to Provider-Based
Status of Facilities and Organizations
J. Effects of Proposed Policy Changes Relating to Criteria for
Satellite Facilities of Hospitals
K. Effects of Implementation of Rural Community Hospital
Demonstration Program
VIII. Effects of Proposed Changes in the Capital IPPS
A. General Considerations
B. Results
IX. Effects of Proposed Payment Rate Changes and Policy Changes
Under the LTCH PPS
A. Introduction and General Considerations
B. Impact on Rural Hospitals
C. Anticipated Effects of Proposed LTCH PPS Payment Rate Change
and Policy Changes
D. Effect on the Medicare Program
E. Effect on Medicare Beneficiaries
X. Alternatives Considered
XI. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
XII. Accounting Statements
A. Acute Care Hospitals
B. LTCHs
XIII. Executive Order 12866

Appendix B--Recommendation of Update Factors for Operating Cost Rates
of Payment for Inpatient Hospital Services

I. Background
II. Inpatient Hospital Update for FY 2010
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

I. Background

A. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of low-income patients, it
receives a percentage add-on payment applied to the DRG-adjusted base
payment rate.

[[Page 24086]]

This add-on payment, known as the disproportionate share hospital (DSH)
adjustment, provides for a percentage increase in Medicare payments to
hospitals that qualify under either of two statutory formulas designed
to identify hospitals that serve a disproportionate share of low-income
patients. For qualifying hospitals, the amount of this adjustment may
vary based on the outcome of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate based on
their costs in a base year. For example, sole community hospitals
(SCHs) receive the higher of a hospital-specific rate based on their
costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY
2006) or the IPPS Federal rate based on the standardized amount.
Through and including FY 2006, a Medicare-dependent, small rural
hospital (MDH) received the higher of the Federal rate or the Federal
rate plus 50 percent of the amount by which the Federal rate is
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific
rate. As discussed below, for discharges occurring on or after October
1, 2007, but before October 1, 2011, an MDH will receive the higher of
the Federal rate or the Federal rate plus 75 percent of the amount by
which the Federal rate is exceeded by the highest of its FY 1982, FY
1987, or FY 2002 hospital-specific rate. SCHs are the sole source of
care in their areas, and MDHs are a major source of care for Medicare
beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii)
of the Act defines an SCH as a hospital that is located more than 35
road miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of hospital inpatient services reasonably available to Medicare
beneficiaries. In addition, certain rural hospitals previously
designated by the Secretary as essential access community hospitals are
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as
a hospital that is located in a rural area, has no more than 100 beds,
is not an SCH, and has a high percentage of Medicare discharges (not
less than 60 percent of its inpatient days or discharges in its cost
reporting year beginning in FY 1987 or in two of its three most
recently settled Medicare cost reporting years). Both of these
categories of hospitals are afforded this special payment protection in
order to maintain access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. We began phasing out the capital IPPS IME adjustment in
FY 2008, as discussed in section VI.B.2. of this preamble. However,
section 4301(b)(1) of the American Recovery and Reinvestment Act of
2009 (Pub. L. 111-5), enacted on February 17, 2009, requires that the
50-percent reduction in the capital IPPS teaching adjustment for FY
2009 specified in the regulations at Sec. 412.322(c) shall not be
applied. Section 4301(b)(2) of Public Law 111-5 specifies that, for
subsequent years, the change made by section 4301(b)(1) has no effect
on the capital teaching adjustment. Therefore, beginning in FY 2010,
there will no longer be a capital teaching adjustment under the capital
IPPS. The provisions of section 4301(b) of Public Law 111-5 are
discussed in sections VI.A. and E. of this preamble. In addition,
hospitals may receive outlier payments for those cases that have
unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded from the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the proposed annual updates to the LTCH PPS are now included
as part of the IPPS annual update document (for RY 2010, in this
proposed rule). Updates to the IRF PPS and IPF PPS are issued as
separate documents.) Children's hospitals, cancer hospitals, and RNHCIs
continue to be paid solely under a reasonable cost-based system subject
to a rate-of-increase ceiling on inpatient operating costs per
discharge.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) effective for cost
reporting periods beginning on or after October 1, 2002. The LTCH PPS
was established under the authority of sections 123(a) and (c) of
Public Law 106-113 and section 307(b)(1) of Public Law 106-554. During
the 5-year (optional) transition period, a LTCH's payment under the PPS
was based on an increasing proportion of the LTCH Federal rate with a
corresponding decreasing proportion based on reasonable cost
principles. Effective for

[[Page 24087]]

cost reporting periods beginning on or after October 1, 2006, all LTCHs
are paid 100 percent of the Federal rate. The existing regulations
governing payment under the LTCH PPS are located in 42 CFR Part 412,
Subpart O. Beginning with RY 2010, we are issuing the annual updates to
the LTCH PPS in the same documents that update the IPPS (73 FR 26797
through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR Part 413.

B. Provisions of the Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA)

Section 148 of the MIPPA (Pub. L. 110-275) changes the payment
rules regarding outpatient clinical diagnostic laboratory tests
furnished by a CAH. The statutory change applies to services furnished
on or after July 1, 2009. In section VI.C.2. of the preamble of this
proposed rule, we discuss our proposal to codify policies in the
Medicare regulations to implement this provision.

C. Provisions of the American Recovery and Reinvestment Act of 2009
(ARRA)

Section 4301(b) of the American Recovery and Reinvestment Act of
2009 (AARA), Public Law 111-5, enacted on February 17, 2009, requires
that the phase-out of the capital IPPS teaching adjustment at Sec.
412.322(c) (that is, the 50-percent reduction for FY 2009) shall be
applied, as if such paragraph had not been in effect. Section 4301(b)
of Public Law 111-5 also specifies that there will be no effect on the
phase-out of the capital teaching adjustment for subsequent years, such
that, for discharges occurring during FY 2010 and thereafter, there
will no longer be a teaching adjustment under the capital IPPS as is
currently specified at Sec. 412.322(d). We discuss the proposed
implementation of these provisions in section VI.A. and E. of the
preamble of this proposed rule.
Section 4302 of Public Law 111-5 included several amendments to
provisions of section 114 of the MMSEA relating to (1) the 3-year delay
in the application of certain provisions of the payment adjustments for
short-stay outliers and revision to the RY 2008 standard Federal rate
for LTCHs; and (2) the 3-year moratorium on the establishment of new
LTCHs and LTCH satellite facilities and on increases in beds in
existing LTCHs and LTCH satellite facilities. We discuss the proposed
implementation of these provisions in sections I.E. and VIII. of the
preamble of this proposed rule.

D. Major Contents of this Proposed Rule

In this proposed rule, we are setting forth proposed changes to the
Medicare IPPS for operating costs and for capital-related costs of
acute care hospitals in FY 2010. We also are setting forth proposed
changes relating to payments for IME costs and payments to certain
hospitals and units that continue to be excluded from the IPPS and paid
on a reasonable cost basis. In addition, we are setting forth proposed
changes to the payment rates, factors, and other payment rate policies
under the LTCH PPS for RY 2010.
The following is a summary of the major changes that we are
proposing to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we are
including--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment to hospital-specific rates for FY 2010 resulting from
implementation of the MS-DRG system.
A discussion of the Research Triangle International, Inc.
(RTI) and RAND Corporation reports and recommendations relating to
charge compression, including a solicitation of public comments on the
``over'' standardization of hospital charges.
Proposed recalibrations of the MS-DRG relative weights.
We are also presenting a listing and discussion of hospital-
acquired conditions (HACs), including infections, that are subject to
the statutorily required quality adjustment in MS-DRG payments for FY
2010.
We are presenting our evaluation and analysis of the FY 2010
applicants for add-on payments for high-cost new medical services and
technologies (including public input, as directed by Pub. L. 108-173,
obtained in a town hall meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to this proposed rule, we are
proposing revisions to the wage index for acute care hospitals and the
annual update of the wage data. Specific issues addressed include the
following:
Second year of the 3-year transition from national to
within-State budget neutrality for the rural floor and imputed floor.
Final year of the 2-year transition for changes in the
average hourly wage criterion for geographic reclassifications.
Changes to the CBSA designations.
The proposed FY 2010 wage index update using wage data
from cost reporting periods that began during FY 2007.
Analysis and implementation of the proposed FY 2010
occupational mix adjustment to the wage index for acute care hospitals,
including the use of data from the 2007-2008 occupational mix survey.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2010 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2010 wage index for acute care
hospitals.
3. Proposed Rebasing and Revision of the Hospital Market Basket for
Acute Care Hospitals
In section IV. of the preamble of this proposed rule, we are
proposing to rebase and revise the acute care hospital operating and
capital market baskets to be used in developing the FY 2010 update
factor for the operating and capital prospective payment rates and the
FY 2010 update factor for the

[[Page 24088]]

excluded hospital rate-of-increase limits. We also are setting forth
the data sources used to determine the proposed revised market basket
relative weights.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section V. of the preamble of this proposed rule, we discuss a
number of the provisions of the regulations in 42 CFR Parts 412, 413,
and 489, including the following:
The reporting of hospital quality data as a condition for
receiving the full annual payment update increase.
Discussion of applying the correct budget neutrality
adjustment for the FY 2002-based hospital-specific rates for MDHs.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
The statutorily-required IME adjustment factor for FY
2010.
Proposed changes to the policies governing payments to
Medicare disproportionate share hospitals, including proposed policies
relating to the inclusion of labor and delivery patient days in the
calculation of the DSH payment adjustment, calculation of inpatient
days in the Medicaid fraction for the Medicare DSH calculation, and
exclusion of observation beds and patient days from the Medicare DSH
calculation and from the bed count for the IME adjustment.
Proposed changes to the policies governing payment for
direct GME.
Proposed changes to policies on hospital emergency
services under EMTALA relating to the applicability of sanctions under
EMTALA.
Discussion of the implementation of the Rural Community
Hospital Demonstration Program in FY 2010.
Proposed technical correction to the regulations governing
the calculation of the Federal rate under the IPPS.
5. FY 2010 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to this proposed rule, we discuss
the payment policy requirements for capital-related costs and capital
payments to hospitals for FY 2010. We also are proposing to remove a
section of the regulations relating to the phase-out of the capital IME
adjustment for FY 2009 to implement the provisions of section 4301(b)
of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5).
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of this proposed rule, we discuss--
Proposed changes to payments to excluded hospitals.
Proposed changes to the regulations governing satellite
facilities of hospitals.
Proposed changes relating to payments to CAHs, including
payment for clinical laboratory tests furnished by CAHs and payment for
outpatient facility services when a CAH elects the optional payment
method.
Proposed changes to the rules governing provider-based
status of facilities and a proposed technical correction to the
regulations governing provider-based entities.
7. Proposed Changes to the LTCH PPS
In section VIII.A. through C. and F. of the preamble of this
proposed rule, we set forth proposed changes to the payment rates,
factors, and other payment rate policies under the LTCH PPS for RY
2010, including the annual update of the MS-LTC-DRG classifications and
relative weights for use under the LTCH PPS for RY 2010, the proposed
use of the FY 2002-based RPL market basket for LTCHs, and proposed
technical corrections to the LTCH PPS regulations.
In section VIII.D. of the preamble of this proposed rule, we
discuss our ongoing monitoring protocols under the LTCH PPS. In section
VIII.E., we discuss the Research Triangle Institute, International
(RTI) Phase III Report on its evaluation of the feasibility of
establishing facility and patient criteria for LTCHs, as recommended by
MedPAC in its June 2004 Report to Congress.
8. Determining Proposed Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2010
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We also establish the proposed threshold
amounts for outlier cases. In addition, we address the proposed update
factors for determining the rate-of-increase limits for cost reporting
periods beginning in FY 2010 for hospitals excluded from the IPPS.
9. Determining Proposed Prospective Payment Rates for LTCHs
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed RY 2010
prospective standard Federal rate. We also establish the proposed
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
10. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact that the proposed changes would have on affected acute care
hospitals and LTCHs.
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2010 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
12. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 1 of each year, in which MedPAC
reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2008 re

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