Medicare Program; Inpatient Psychiatric Facilities Prospective Payment System Payment-Update for Rate Year Beginning July 1, 2010 (RY 2011), 23106-23149 [2010-9870]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 83 (Friday, April 30, 2010)]
[Notices]
[Pages 23106-23149]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-9870]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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Medicare Program; Inpatient Psychiatric Facilities Prospective Payment 
System Payment--Update for Rate Year Beginning July 1, 2010 (RY 2011); 
Notice

Federal Register / Vol. 75 , No. 83 / Friday, April 30, 2010 / 
Notices

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1424-N]
RIN 0938-AP83


Medicare Program; Inpatient Psychiatric Facilities Prospective 
Payment System Payment--Update for Rate Year Beginning July 1, 2010 (RY 
2011)

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

ACTION: Notice

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SUMMARY: This notice updates the payment rates for the Medicare 
prospective payment system (PPS) for inpatient psychiatric hospital 
services provided by inpatient psychiatric facilities (IPFs). These 
changes are applicable to IPF discharges occurring during the rate year 
beginning July 1, 2010 through June 30, 2011. We are also responding to 
comments on the IPF PPS teaching adjustment and the market basket, 
which we received in response to our May 2009 IPF PPS notice with 
request for comments.

DATES: Effective Date: The updated IPF prospective payment rates are 
effective for discharges occurring on or after July 1, 2010 through 
June 30, 2011.

FOR FURTHER INFORMATION CONTACT:

Dorothy Myrick or Jana Lindquist, (410) 786-4533 (for general 
information).
Mary Carol Barron, (410) 786-7943 (for information regarding the market 
basket and labor-related share).
Theresa Bean, (410) 786-2287 (for information regarding the regulatory 
impact analysis).

SUPPLEMENTARY INFORMATION:

Table of Contents

    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

I. Background
    A. Annual Requirements for Updating the IPF PPS
    B. Overview of the Legislative Requirements of the IPF PPS
    C. IPF PPS--General Overview
II. Transition Period for Implementation of the IPF PPS
III. Updates to the IPF PPS for RY Beginning July 1, 2010
    A. Determining the Standardized Budget-Neutral Federal Per Diem 
Base Rate
    1. Standardization of the Federal Per Diem Base Rate and
    Electroconvulsive Therapy (ECT) Rate
    2. Calculation of the Budget Neutrality Adjustment
    a. Outlier Adjustment
    b. Stop-Loss Provision Adjustment
    c. Behavioral Offset
    B. Update of the Federal Per Diem Base Rate and 
Electroconvulsive Therapy Rate
    1. Market Basket for IPFs Reimbursed under the IPF PPS
    a. Market Basket Index for the IPF PPS
    b. Overview of the RPL Market Basket
    2. Labor-Related Share
    3. Comments on Creating a Stand-Alone IPF Market Basket
    IV. Update of the IPF PPS Adjustment Factors
    A. Overview of the IPF PPS Adjustment Factors
    B. Patient-Level Adjustments
    1. Adjustment for MS-DRG Assignment
    2. Payment for Comorbid Conditions
    3. Patient Age Adjustments
    4. Variable Per Diem Adjustments
    C. Facility-Level Adjustments
    1. Wage Index Adjustment
    a. Background
    b. Wage Index for RY 2011
    c. OMB Bulletins
    2. Adjustment for Rural Location
    3. Teaching Adjustment
    4. Cost of Living Adjustment for IPFs Located in Alaska and 
Hawaii
    5. Adjustment for IPFs With a Qualifying Emergency Department 
(ED)
    D. Other Payment Adjustments and Policies
    1. Outlier Payments
    a. Update to the Outlier Fixed Dollar Loss Threshold Amount
    b. Statistical Accuracy of Cost-to-Charge Ratios
    2. Expiration of the Stop-Loss Provision
V. Comments Beyond the Scope of the May 2009 IPF PPS Notice With 
Request for Comments
VI. Waiver of Proposed Rulemaking
VII. Collection of Information Requirements
VIII. Regulatory Impact Analysis
Addenda

Acronyms

    Because of the many terms to which we refer by acronym in this 
notice, we are listing the acronyms used and their corresponding terms 
in alphabetical order below:

BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance 
Program] Balanced Budget Refinement Act of 1999, (Pub. L. 106-113).
CBSA Core-Based Statistical Area.
CCR Cost-to-charge ratio.
CAH Critical access hospital.
DSM-IV-TR Diagnostic and Statistical Manual of Mental Disorders 
Fourth Edition--Text Revision.
DRGs Diagnosis-related groups.
FY Federal fiscal year.
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification.
IPFs Inpatient psychiatric facilities.
IRFs Inpatient rehabilitation facilities.
LTCHs Long-term care hospitals.
MedPAR Medicare provider analysis and review file.
RY Rate Year.
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, (Pub. L. 97-
248).

I. Background

A. Annual Requirements for Updating the IPF PPS

    In November 2004, we implemented the inpatient psychiatric 
facilities (IPF) prospective payment system (PPS) in a final rule that 
appeared in the November 15, 2004 Federal Register (69 FR 66922). In 
developing the IPF PPS, in order to ensure that the IPF PPS is able to 
account adequately for each IPF's case-mix, we performed an extensive 
regression analysis of the relationship between the per diem costs and 
certain patient and facility characteristics to determine those 
characteristics associated with statistically significant cost 
differences on a per diem basis. For characteristics with statistically 
significant cost differences, we used the regression coefficients of 
those variables to determine the size of the corresponding payment 
adjustments.
    In that final rule, we explained that we believe it is important to 
delay updating the adjustment factors derived from the regression 
analysis until we have IPF PPS data that includes as much information 
as possible regarding the patient-level characteristics of the 
population that each IPF serves. Therefore, we indicated that we did 
not intend to update the regression analysis and recalculate the 
Federal per diem base rate and the patient- and facility-level 
adjustments until we complete that analysis. Until that analysis is 
complete, we stated our intention to publish a notice in the Federal 
Register each spring to update the IPF PPS (71 FR 27041).
    Updates to the IPF PPS as specified in 42 CFR Sec.  412.428 include 
the following:
     A description of the methodology and data used to 
calculate the updated Federal per diem base payment amount.
     The rate of increase factor as described in Sec.  
412.424(a)(2)(iii), which is based on the excluded hospital with 
capital market basket under the update methodology of section 
1886(b)(3)(B)(ii) of the Social Security Act (the Act) for each year 
(effective from the implementation period until June 30, 2006).
     For discharges occurring on or after July 1, 2006, the 
rate of increase factor for the Federal portion of the IPF's payment, 
which is based on the rehabilitation, psychiatric, and long-term care 
(RPL) market basket.
     The best available hospital wage index and information 
regarding whether an adjustment to the Federal

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per diem base rate is needed to maintain budget neutrality.
     Updates to the fixed dollar loss threshold amount in order 
to maintain the appropriate outlier percentage.
     Description of the International Classification of 
Diseases, 9th Revision, Clinical Modification (ICD-9-CM) coding and 
diagnosis-related groups (DRGs) classification changes discussed in the 
annual update to the hospital inpatient prospective payment system 
(IPPS) regulations.
     Update to the electroconvulsive therapy (ECT) payment by a 
factor specified by CMS.
     Update to the national urban and rural cost-to-charge 
ratio medians and ceilings.
     Update to the cost of living adjustment factors for IPFs 
located in Alaska and Hawaii, if appropriate.
    Our most recent annual update occurred in the May 2009 IPF PPS 
notice with request for comments (74 FR 20362) (hereinafter referred to 
as the May 2009 IPF PPS notice) that set forth updates to the IPF PPS 
payment rates for RY 2010. This notice updates the IPF per diem payment 
rates that were published in the May 2009 IPF PPS notice in accordance 
with our established policies.

B. Overview of the Legislative Requirements of the IPF PPS

    Section 124 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999, (Pub. 
L. 106-113) (BBRA) required implementation of the IPF PPS. 
Specifically, section 124 of the BBRA mandated that the Secretary 
develop a per diem PPS for inpatient hospital services furnished in 
psychiatric hospitals and psychiatric units that includes an adequate 
patient classification system that reflects the differences in patient 
resource use and costs among psychiatric hospitals and psychiatric 
units.
    Section 405(g)(2) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF 
PPS to distinct part psychiatric units of critical access hospitals 
(CAHs).
    To implement these provisions, we published various proposed and 
final rules in the Federal Register. For more information regarding 
these rules, see the CMS Web sites https://www.cms.hhs.gov/InpatientPsychFacilPPS/and https://www.cms.hhs.gov/InpatientpsychfacilPPS/02_regulations.asp.
    Section 1886(s)(3)(A) of the Act, which was added by Section 
3401(f) of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) as amended by Section 10319(e) of that Act and by Section 1105 of 
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152), requires the application of an ``Other Adjustment'' that reduces 
any update to the IPF PPS base rate by 0.25 percentage point for the 
rate year beginning in 2010. We are implementing that provision for RY 
2011 in this notice.

C. IPF PPS--General Overview

    The November 2004 IPF PPS final rule (69 FR 66922) established the 
IPF PPS, as authorized under section 124 of the BBRA and codified at 
subpart N of part 412 of the Medicare regulations. The November 2004 
IPF PPS final rule set forth the per diem Federal rates for the 
implementation year (the 18-month period from January 1, 2005 through 
June 30, 2006), and it provided payment for the inpatient operating and 
capital costs to IPFs for covered psychiatric services they furnish 
(that is, routine, ancillary, and capital costs, but not costs of 
approved educational activities, bad debts, and other services or items 
that are outside the scope of the IPF PPS). Covered psychiatric 
services include services for which benefits are provided under the 
fee-for-service Part A (Hospital Insurance Program) Medicare program.
    The IPF PPS established the Federal per diem base rate for each 
patient day in an IPF derived from the national average daily routine 
operating, ancillary, and capital costs in IPFs in FY 2002. The average 
per diem cost was updated to the midpoint of the first year under the 
IPF PPS, standardized to account for the overall positive effects of 
the IPF PPS payment adjustments, and adjusted for budget neutrality.
    The Federal per diem payment under the IPF PPS is comprised of the 
Federal per diem base rate described above and certain patient- and 
facility-level payment adjustments that were found in the regression 
analysis to be associated with statistically significant per diem cost 
differences.
    The patient-level adjustments include age, DRG assignment, 
comorbidities, and variable per diem adjustments to reflect higher per 
diem costs in the early days of an IPF stay. Facility-level adjustments 
include adjustments for the IPF's wage index, rural location, teaching 
status, a cost of living adjustment for IPFs located in Alaska and 
Hawaii, and presence of a qualifying emergency department (ED).
    The IPF PPS provides additional payment policies for: outlier 
cases; stop-loss protection (which was applicable only during the IPF 
PPS transition period); interrupted stays; and a per treatment 
adjustment for patients who undergo ECT.
    A complete discussion of the regression analysis appears in the 
November 2004 IPF PPS final rule (69 FR 66933 through 66936).
    Section 124 of BBRA does not specify an annual update rate strategy 
for the IPF PPS and is broadly written to give the Secretary discretion 
in establishing an update methodology. Therefore, in the November 2004 
IPF PPS final rule, we implemented the IPF PPS using the following 
update strategy:
     Calculate the final Federal per diem base rate to be 
budget neutral for the 18-month period of January 1, 2005 through June 
30, 2006.
     Use a July 1 through June 30 annual update cycle.
     Allow the IPF PPS first update to be effective for 
discharges on or after July 1, 2006 through June 30, 2007.

II. Transition Period for Implementation of the IPF PPS

    In the November 2004 IPF PPS final rule, we provided for a 3-year 
transition period. During this 3-year transition period, an IPF's total 
payment under the PPS was based on an increasing percentage of the 
Federal rate with a corresponding decreasing percentage of the IPF PPS 
payment that is based on reasonable cost concepts. However, effective 
for cost reporting periods beginning on or after January 1, 2008, IPF 
PPS payments are based on 100 percent of the Federal rate.

III. Updates to the IPF PPS for RY Beginning July 1, 2010

    The IPF PPS is based on a standardized Federal per diem base rate 
calculated from IPF average per diem costs and adjusted for budget-
neutrality in the implementation year. The Federal per diem base rate 
is used as the standard payment per day under the IPF PPS and is 
adjusted by the patient- and facility-level adjustments that are 
applicable to the IPF stay. A detailed explanation of how we calculated 
the average per diem cost appears in the November 2004 IPF PPS final 
rule (69 FR 66926).

A. Determining the Standardized Budget-Neutral Federal Per Diem Base 
Rate

    Section 124(a)(1) of the BBRA requires that we implement the IPF 
PPS in a budget neutral manner. In other words, the amount of total 
payments

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under the IPF PPS, including any payment adjustments, must be projected 
to be equal to the amount of total payments that would have been made 
if the IPF PPS were not implemented. Therefore, we calculated the 
budget-neutrality factor by setting the total estimated IPF PPS 
payments to be equal to the total estimated payments that would have 
been made under the Tax Equity and Fiscal Responsibility Act of 1982 
(TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been 
implemented.
    Under the IPF PPS methodology, we calculated the final Federal per 
diem base rate to be budget neutral during the IPF PPS implementation 
period (that is, the 18-month period from January 1, 2005 through June 
30, 2006) using a July 1 update cycle. We updated the average cost per 
day to the midpoint of the IPF PPS implementation period (that is, 
October 1, 2005), and this amount was used in the payment model to 
establish the budget-neutrality adjustment.
    A step-by-step description of the methodology used to estimate 
payments under the TEFRA payment system appears in the November 2004 
IPF PPS final rule (69 FR 66926).
1. Standardization of the Federal Per Diem Base Rate and 
Electroconvulsive Therapy (ECT) Rate
    In the November 2004 IPF PPS final rule, we describe how we 
standardized the IPF PPS Federal per diem base rate in order to account 
for the overall positive effects of the IPF PPS payment adjustment 
factors. To standardize the IPF PPS payments, we compared the IPF PPS 
payment amounts calculated from the FY 2002 Medicare Provider Analysis 
and Review (MedPAR) file to the projected TEFRA payments from the FY 
2002 cost report file updated to the midpoint of the IPF PPS 
implementation period (that is, October 2005). The standardization 
factor was calculated by dividing total estimated payments under the 
TEFRA payment system by estimated payments under the IPF PPS. The 
standardization factor was calculated to be 0.8367.
    As described in detail in the May 2006 IPF PPS final rule (71 FR 
27045), in reviewing the methodology used to simulate the IPF PPS 
payments used for the November 2004 IPF PPS final rule, we discovered 
that due to a computer code error, total IPF PPS payments were 
underestimated by about 1.36 percent. Since the IPF PPS payment total 
should have been larger than the estimated figure, the standardization 
factor should have been smaller (0.8254 vs. 0.8367). In turn, the 
Federal per diem base rate and the ECT rate should have been reduced by 
0.8254 instead of 0.8367.
    To resolve this issue, in RY 2007, we amended the Federal per diem 
base rate and the ECT payment rate prospectively. Using the 
standardization factor of 0.8254, the average cost per day was 
effectively reduced by 17.46 percent (100 percent minus 82.54 percent = 
17.46 percent).
2. Calculation of the Budget Neutrality Adjustment
    To compute the budget neutrality adjustment for the IPF PPS, we 
separately identified each component of the adjustment, that is, the 
outlier adjustment, stop-loss adjustment, and behavioral offset.
    A complete discussion of how we calculate each component of the 
budget neutrality adjustment appears in the November 2004 IPF PPS final 
rule (69 FR 66932 through 66933) and in the May 2006 IPF PPS final rule 
(71 FR 27044 through 27046).
a. Outlier Adjustment
    Since the IPF PPS payment amount for each IPF includes applicable 
outlier amounts, we reduced the standardized Federal per diem base rate 
to account for aggregate IPF PPS payments estimated to be made as 
outlier payments. The outlier adjustment was calculated to be 2 
percent. As a result, the standardized Federal per diem base rate was 
reduced by 2 percent to account for projected outlier payments.
b. Stop-Loss Provision Adjustment
    As explained in the November 2004 IPF PPS final rule, we provided a 
stop-loss payment during the transition from cost-based reimbursement 
to the per diem payment system to ensure that an IPF's total PPS 
payments were no less than a minimum percentage of their TEFRA payment, 
had the IPF PPS not been implemented. We reduced the standardized 
Federal per diem base rate by the percentage of aggregate IPF PPS 
payments estimated to be made for stop-loss payments. As a result, the 
standardized Federal per diem base rate was reduced by 0.39 percent to 
account for stop-loss payments. Since the transition was completed in 
RY 2009, the stop-loss provision is no longer applicable, and for cost 
reporting periods beginning on or after January 1, 2008, IPFs were paid 
100 percent PPS.
c. Behavioral Offset
    As explained in the November 2004 IPF PPS final rule, 
implementation of the IPF PPS may result in certain changes in IPF 
practices, especially with respect to coding for comorbid medical 
conditions. As a result, Medicare may make higher payments than assumed 
in our calculations. Accounting for these effects through an adjustment 
is commonly known as a behavioral offset.
    Based on accepted actuarial practices and consistent with the 
assumptions made in other PPSs, we assumed in determining the 
behavioral offset that IPFs would regain 15 percent of potential 
``losses'' and augment payment increases by 5 percent. We applied this 
actuarial assumption, which is based on our historical experience with 
new payment systems, to the estimated ``losses'' and ``gains'' among 
the IPFs. The behavioral offset for the IPF PPS was calculated to be 
2.66 percent. As a result, we reduced the standardized Federal per diem 
base rate by 2.66 percent to account for behavioral changes. As 
indicated in the November 2004 IPF PPS final rule, we do not plan to 
change adjustment factors or projections until we analyze IPF PPS data.
    If we find that an adjustment is warranted, the percent difference 
may be applied prospectively to the established PPS rates to ensure the 
rates accurately reflect the payment level intended by the statute. In 
conducting this analysis, we will be interested in the extent to which 
improved coding of patients' principal and other diagnoses, which may 
not reflect real increases in underlying resource demands, has occurred 
under the PPS.

B. Update of the Federal Per Diem Base Rate and Electroconvulsive 
Therapy Rate

1. Market Basket for IPFs Reimbursed under the IPF PPS
    As described in the November 2004 IPF PPS final rule (69 FR 66931), 
the average per diem cost was updated to the midpoint of the 
implementation year. This updated average per diem cost of $724.43 was 
reduced by 17.46 percent to account for standardization to projected 
TEFRA payments for the implementation period, by 2 percent to account 
for outlier payments, by 0.39 percent to account for stop-loss 
payments, and by 2.66 percent to account for the behavioral offset. The 
Federal per diem base rate in the implementation year was $575.95. The 
increase in the per diem base rate for RY 2009 included the 0.39 
percent increase due to the removal of the stop-loss provision. We 
indicated in the November 2004 IPF PPS final rule (69 FR 66932) that we 
would remove this 0.39 percent reduction to the Federal per diem base 
rate after the transition. For RY 2009 and beyond, the stop-loss

[[Page 23109]]

provision has ended and is therefore no longer a part of budget 
neutrality.
    Due to new section 1886(s)(3)(A) of the Act, which requires the 
application of an ``Other Adjustment'' that reduces the update to the 
IPF PPS base rate for the rate year beginning in CY 2010, we reduced 
the update to the IPF PPS base rate by 0.25 percent for rate year 2011. 
Applying the market basket increase of 2.4 percent, with the ``Other 
Adjustment'' of -0.25%, and the wage index budget neutrality factor of 
0.9999 to the RY 2010 Federal per diem base rate of $651.76 yields a 
Federal per diem base rate of $665.71 for RY 2011. Similarly, applying 
the market basket increase with the ``Other Adjustment'', and the wage 
index budget neutrality factor to the RY 2010 ECT rate yields an ECT 
rate of $286.60 for RY 2011.
a. Market Basket Index for the IPF PPS
    The market basket index that was used to develop the IPF PPS was 
the excluded hospital with capital market basket. This market basket 
was based on 1997 Medicare cost report data and included data for 
Medicare-participating IPFs, inpatient rehabilitation facilities 
(IRFs), long-term care hospitals (LTCHs), cancer, and children's 
hospitals.
    Beginning with the May 2006 IPF PPS final rule (71 FR 27046 through 
27054), IPF PPS payments were updated using a 2002-based market basket 
reflecting the operating and capital cost structures for IRFs, IPFs, 
and LTCHs (hereafter referred to as the rehabilitation, psychiatric, 
long-term care (RPL) market basket).
    We excluded cancer and children's hospitals from the RPL market 
basket because their payments are based entirely on reasonable costs 
subject to rate-of-increase limits established under the authority of 
section 1886(b) of the Act, which are implemented in regulations at 
Sec.  413.40. They are not reimbursed through a PPS. Also, the FY 2002 
cost structures for cancer and children's hospitals are noticeably 
different than the cost structures of the IRFs, IPFs, and LTCHs. A 
complete discussion of the RPL market basket appears in the May 2006 
IPF PPS final rule (71 FR 27046 through 27054).
    In the May 2009 IPF PPS notice (74 FR 20362), we requested public 
comment on the possibility of creating a stand-alone IPF market basket. 
In this notice, we are responding to those comments in the ``Comments 
on Creating a Stand-Alone IPF Market Basket'' section.
b. Overview of the RPL Market Basket
    The RPL market basket is a fixed weight, Laspeyres-type price 
index. A market basket is described as a fixed-weight index because it 
answers the question of how much it would cost, at another time, to 
purchase the same mix (quantity and intensity) of goods and services 
needed to provide services in a base period. The effects on total 
expenditures resulting from changes in the mix of goods and services 
purchased subsequent to the base period are not measured. In this 
manner, the market basket measures pure price change only. Only when 
the index is rebased would changes in the quantity and intensity be 
captured in the cost weights. Therefore, we rebase the market basket 
periodically so that cost weights reflect recent changes in the mix of 
goods and services that hospitals purchase to furnish patient care 
between base periods.
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. Rebasing means 
moving the base year for the structure of costs of an input price index 
(for example, shifting the base year cost structure from FY 1997 to FY 
2002). Revising means changing data sources, methodology, or price 
proxies used in the input price index. In 2006, we rebased and revised 
the market basket used to update the IPF PPS. Table 1 below sets forth 
the completed FY 2002-based RPL market basket including the cost 
categories, weights, and price proxies.

 Table 1--FY 2002-Based RPL Market Basket Cost Categories, Weights, and
                              Price Proxies
------------------------------------------------------------------------
                                  FY 2002-based
                                   RPL market       FY 2002-based RPL
        Cost categories            basket cost     market basket price
                                     weight              proxies
------------------------------------------------------------------------
TOTAL..........................         100.000  .......................
Compensation...................          65.877  .......................
    Wages and Salaries*........          52.895  ECI--Wages and
                                                  Salaries, Civilian
                                                  Hospital Workers.
    Employee Benefits*.........          12.982  ECI--Benefits, Civilian
                                                  Hospital Workers.
Professional Fees, Non-Medical*           2.892  ECI--Compensation for
                                                  Professional & Related
                                                  occupations.
Utilities......................           0.656  .......................
    Electricity................           0.351  PPI--Commercial
                                                  Electric Power.
    Fuel Oil, Coal, etc........           0.108  PPI--Commercial Natural
                                                  Gas.
    Water and Sewage...........           0.197  CPI--U--Water & Sewage
                                                  Maintenance.
Professional Liability                    1.161  CMS Professional
 Insurance.                                       Liability Premium
                                                  Index.
All Other Products and Services          19.265  .......................
All Other Products.............          13.323  .......................
    Pharmaceuticals............           5.103  PPI Prescription Drugs.
    Food: Direct Purchase......           0.873  PPI Processed Foods &
                                                  Feeds.
    Food: Contract Service.....           0.620  CPI--U Food Away From
                                                  Home.
    Chemicals..................           1.100  PPI Industrial
                                                  Chemicals.
    Medical Instruments........           1.014  PPI Medical Instruments
                                                  & Equipment.
    Photographic Supplies......           0.096  PPI Photographic
                                                  Supplies.
    Rubber and Plastics........           1.052  PPI Rubber & Plastic
                                                  Products.
    Paper Products.............           1.000  PPI Converted Paper &
                                                  Paperboard Products.
    Apparel....................           0.207  PPI Apparel.
    Machinery and Equipment....           0.297  PPI Machinery &
                                                  Equipment.
    Miscellaneous Products**...           1.963  PPI Finished Goods less
                                                  Food & Energy.
All Other Services.............           5.942  .......................
    Telephone..................           0.240  CPI--U Telephone
                                                  Services.
    Postage....................           0.682  CPI--U Postage.
    All Other: Labor Intensive*           2.219  ECI--Compensation for
                                                  Private Service
                                                  Occupations.
    All Other: Non-labor                  2.800  CPI--U All Items.
     Intensive.
Capital-Related Costs***.......          10.149  .......................

[[Page 23110]]

 
Depreciation...................           6.186  .......................
    Fixed Assets...............           4.250  Boeckh Institutional
                                                  Construction 23-year
                                                  useful life.
    Movable Equipment..........           1.937  PPI Machinery &
                                                  Equipment 11-year
                                                  useful life.
Interest Costs.................           2.775  .......................
    Nonprofit..................           2.081  Average yield on
                                                  domestic municipal
                                                  bonds (Bond Buyer 20
                                                  bonds) vintage-
                                                  weighted (23 years).
    For Profit.................           0.694  Average yield on
                                                  Moody's Aaa bond
                                                  vintage-weighted (23
                                                  years).
Other Capital-Related Costs....           1.187  CPI--U Residential
                                                  Rent.
------------------------------------------------------------------------
* Labor-related.
** Blood and blood-related products is included in miscellaneous
  products.
*** A portion of capital costs (0.46) are labor-related.


    Note: Due to rounding, weights may not sum to total.

    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Timeliness implies that the proxy is published regularly 
(preferably at least once a quarter). Availability means that the proxy 
is publicly available. Finally, relevance means that the proxy is 
applicable and representative of the cost category weight to which it 
is applied. The Consumer Price Indexes (CPIs), Producer Price Indexes 
(PPIs), and Employment Cost Indexes (ECIs) used as proxies in this 
market basket meet these criteria.
    We note that the proxies are the same as those used for the FY 
1997-based excluded hospital with capital market basket. Because these 
proxies meet our criteria of reliability, timeliness, availability, and 
relevance, we believe they continue to be the best measure of price 
changes for the cost categories. For further discussion on the FY 1997-
based excluded hospital with capital market basket, see the August 1, 
2002 hospital inpatient prospective payment system (IPPS) final rule 
(67 FR at 50042).
    The RY 2011 (that is, beginning July 1, 2010) update for the IPF 
PPS using the FY 2002-based RPL market basket and Information Handling 
Services (IHS) Global Insight's 1st quarter 2010 forecast for the 
market basket components is 2.4 percent. This includes increases in 
both the operating section and the capital section for the 12-month RY 
period (that is, July 1, 2010 through June 30, 2011). IHS Global 
Insight, Inc. is a nationally recognized economic and financial 
forecasting firm that contracts with CMS to forecast the components of 
the market baskets.
2. Labor-Related Share
    Due to the variations in costs and geographic wage levels, we 
believe that payment rates under the IPF PPS should continue to be 
adjusted by a geographic wage index. This wage index applies to the 
labor-related portion of the Federal per diem base rate, hereafter 
referred to as the labor-related share.
    The labor-related share is determined by identifying the national 
average proportion of operating costs that are related to, influenced 
by, or vary with the local labor market. Using our current definition 
of labor-related, the labor-related share is the sum of the relative 
importance of wages and salaries, fringe benefits, professional fees, 
labor-intensive services, and a portion of the capital share from an 
appropriate market basket. We used the FY 2002-based RPL market basket 
cost weights relative importance to determine the labor-related share 
for the IPF PPS.
    The labor-related share for RY 2011 is the sum of the RY 2011 
relative importance of each labor-related cost category, and reflects 
the different rates of price change for these cost categories between 
the base year (FY 2002) and RY 2011. The sum of the relative importance 
for the RY 2011 operating costs (wages and salaries, employee benefits, 
professional fees, and labor-intensive services) is 71.506 percent, as 
shown in Table 2 below. The portion of capital that is influenced by 
the local labor market is estimated to be 46 percent, which is the same 
percentage used in the FY 1997-based IRF and IPF payment systems.
    Since the relative importance for capital is 8.466 percent of the 
FY 2002-based RPL market basket in RY 2011, we are taking 46 percent of 
8.466 percent to determine the labor-related share of capital for RY 
2011. The result is 3.894 percent, which we added to 71.506 percent for 
the operating cost amount to determine the total labor-related share 
for RY 2011. Thus, the labor-related share that we are using for IPF 
PPS in RY 2011 is 75.400 percent. Table 2 below shows the RY 2011 
labor-related share using the FY 2002-based RPL market basket. We note 
that this labor-related share is determined by using the same 
methodology as employed in calculating all previous IPF labor-related 
shares.
    A complete discussion of the IPF labor-related share methodology 
appears in the November 2004 IPF PPS final rule (69 FR 66952 through 
66954).

   Table 2--Total Labor-Related Share--Relative Importance for RY 2011
------------------------------------------------------------------------
                                                               FY
                                    FY 2002-based RPL   2002[dash]based
                                      market basket    RPL market basket
                                      labor-related      labor-related
           Cost category              share relative     share relative
                                        importance         importance
                                    (percent) RY 2010  (percent) RY 2011
                                            *                  **
------------------------------------------------------------------------
Wages and salaries................             53.062             52.600
Employee benefits.................             13.852             13.935
Professional fees.................              2.895              2.853

[[Page 23111]]

 
All other labor-intensive services              2.126              2.118
                                   -------------------------------------
    Subtotal......................             71.935             71.506
------------------------------------------------------------------------
Labor-related share of capital                  3.954              3.894
 costs (0.46).....................
                                   -------------------------------------
    Total.........................             75.889             75.400
------------------------------------------------------------------------
* Based on 2009 1st Quarter forecast.
** Based on 2010 1st Quarter forecast.

3. Comments on Creating a Stand-Alone IPF Market Basket
    In the May 2009 IPF PPS notice (74 FR 20362), we expressed our 
interest in exploring the possibility of creating a stand-alone IPF 
market basket that reflects the cost structures of only IPF providers. 
Of the available options, one would be to join the Medicare cost report 
data from freestanding IPF providers (presently incorporated into the 
RPL market basket) with data from hospital-based IPF providers. An 
examination of the Medicare cost report data comparing freestanding and 
hospital-based IPFs reveals considerable differences between the two 
with respect to cost levels and cost structures.
    In order to better understand the observed cost differences between 
freestanding and hospital-based IPFs, we reviewed, in detail, several 
explanatory variables such as geographic variation, case mix (including 
DRG, comorbidity, and age), urban or rural status, length of stay, 
teaching status, and the presence of a qualifying emergency department. 
Despite this analysis, we were unable to sufficiently explain the 
differences in costs between these two types of IPF providers. As a 
result, we felt that further research was required and solicited public 
comment on additional information that would help us to better 
understand the reasons for the variations in costs and cost structures, 
as reported by cost report data, between freestanding and hospital-
based IPFs (74 FR 20376).
    We received several timely comments from the public on this issue. 
A summary of the comments and our responses to those comments are 
below.
    Comment: Several commenters recommended that CMS consider creating 
an IPF-specific market basket. These commenters stated that including 
hospital-based IPF data in the market basket and pursuing a greater 
understanding of the differences between freestanding and hospital-
based IPFs are both worthy undertakings. The commenters cited that from 
2005 through 2007, the number of hospital-based IPFs has decreased by 
1.4 percent while the number of freestanding IPFs has increased by 1.0 
percent. The commenters expressed concern that these trends will 
continue, and likely accelerate. Furthermore, the commenters stated 
that in 2007, hospital-based IPFs experienced negative margins while 
freestanding IPF margins were positive. Given that more than 60 percent 
of IPF discharges are from hospital-based units, the commenters believe 
that preserving access to care for these patients (especially those who 
have coexisting physical conditions or experience a crisis and enter 
the emergency department for treatment) is vital. One commenter stated 
that including hospital-based IPF data in the market basket would 
increase transparency and highlight the differences between 
freestanding and hospital-based providers.
    Response: We are actively examining the technical merits of 
creating a stand-alone IPF market basket. Since publication of the May 
2009 IPF PPS notice, we have been reviewing the Medicare cost report 
and claims data for both hospital-based and freestanding IPFs to better 
understand the differences in total Medicare costs per day. Parts of 
our analysis were based on comments received by the public, which we 
address in more detail below. Based on our research to date, which has 
not adequately explained the cost-per-day differences between 
freestanding and hospital-based providers, we do not believe it is 
technically appropriate to move from the RPL market basket to update 
IPF payments at this time.
    Comment: Several commenters supported the ongoing application of 
the RPL market basket to update inpatient psychiatric facility payment 
rates. One commenter recommended we continue this method in order to 
maintain a reasonable population size of facilities to ensure stability 
in the calculation of the market basket. The commenter asserted that if 
the RPL market basket was split into separate market baskets for IRFs, 
IPFs, and LTCHs, there would be much more volatility in the year-to-
year changes, especially for LTCHs.
    Response: We appreciate the comments regarding the continued 
support for using the RPL market basket to update inpatient psychiatric 
facility payment rates. Likewise, we appreciate the comment regarding 
sample size considerations with respect to splitting the RPL market 
basket into its respective pieces. Indeed, sample size and its impact 
on the volatility of the estimates will be extensively scrutinized 
before we would propose to change the mechanism used to update payments 
to inpatient psychiatric facilities, inpatient rehabilitation 
facilities, and long-term care hospitals.
    Comment: One commenter supported the investigation of the 
differences in cost structures between hospital-based and freestanding 
IPFs. Besides determining the source of these differences, the 
commenter also stated it is important for CMS to determine whether the 
differences should be recognized (for example, are higher costs in IPF 
hospital-based facilities due to allocation of overhead to the unit or 
to differences in case mix or patient severity that is not measurable 
using available administrative data). This commenter also acknowledged 
that seeking outside input regarding differences in cost structures 
between hospital-based and freestanding IPFs is appropriate. However, 
the commenter

[[Page 23112]]

recommended that CMS proceed with caution as it may be difficult for 
CMS to confirm that the methods used to collect outside data are sound 
and that the data are representative of the industry as a whole. The 
commenter also stated that CMS should ultimately determine whether the 
market basket should in fact be based on the cost structure of 
hospital-based and freestanding IPFs (instead of just one type of 
facility) if the higher costs cannot be explained by differences in 
case mix and other patient characteristics.
    Response: Although we asked for outside information to help us 
better understand these differences, we agree with the commenter that 
any outside information should be carefully examined.
    As we have stated, we currently do not feel it is appropriate to 
incorporate data from hospital-based IPFs with that of freestanding 
IPFs to create a stand-alone IPF market basket given the observed and 
unexplained differences in cost structures.
    Comment: Several commenters stated that creating a stand-alone IPF 
market basket could be a more accurate index for the costs of 
delivering care incurred by IPFs. However, the commenters stated that 
they did not have any independent data to help CMS in developing a 
stand-alone market basket at this time. The commenters suggested that 
the issue of a stand-alone IPF market basket continue to be analyzed by 
CMS.
    Response: We agree with the commenters and plan to continue to 
analyze costs and Medicare claims data for hospital-based and 
freestanding providers.
    Comment: One commenter supports the development of a stand-alone 
IPF market basket. However, the commenter encourages CMS to avoid 
mixing data from hospital-based and freestanding IPFs. The commenter 
claims that hospital-based IPFs incur higher costs than freestanding 
IPFs in treating Medicare patients for the following reasons:
     The acuity levels and medical needs of psychiatric 
patients that present in a hospital's qualified emergency room will 
result in higher treatment costs and lengths of stay.
     Hospitals provide a greater range of ancillary services.
     Some hospitals operate approved psychiatric residency 
teaching programs.
    Therefore, the commenter is reluctant to support a combined 
hospital-based, freestanding IPF market basket at this time. The 
commenter also offered to assist CMS with any information he or she can 
provide.
    Response: We appreciate the commenter's input on possible reasons 
why hospital-based IPFs have higher costs than freestanding IPFs. As 
stated above, we compared the medical needs of the patients, as 
measured by the adjustments for DRG, comorbidities, and age. Our 
analysis did show that hospital-based providers, on average, treat more 
complex patients; however, the differences in the complexity of the 
patients, as well as other facility-based adjustments, did not 
adequately explain the differences in total Medicare costs per day 
between hospital-based and freestanding providers. In addition, using 
both Medicare cost report and claims data, we found that hospital-based 
providers, on average, had shorter lengths of stay than freestanding 
providers.
    Per the commenter's suggestion, and using MCR data, we also 
compared the Medicare ancillary costs per day of hospital-based and 
freestanding providers. We found that hospital-based facilities, on 
average, tend to have higher Medicare ancillary costs per day than 
freestanding facilities. The differences were mostly attributable to 
higher emergency room and laboratory costs. These higher ancillary 
costs accounted for about ten percent of the overall difference between 
hospital-based and freestanding providers' total Medicare costs per 
day.
    In addition, we compared the average approved teaching costs for 
hospital-based and freestanding providers. We found that hospital-based 
providers have higher teaching-related costs associated with Medicare 
approved programs relative to free standing providers; however, the 
difference accounted for only three percent of the total difference in 
Medicare costs per day for hospital-based and freestanding providers.
    Comment: One commenter simply agreed with CMS that before 
implementation of a new market basket method, the method should be 
fully evaluated and the projected impact known.
    Response: We agree with the commenter's suggestion. Before any 
implementation, CMS will fully evaluate our methodology to ensure that 
any proposed market basket most accurately reflects the cost structures 
associated with providing psychiatric care to Medicare patients.
    Comment: One commenter does not support the adoption of a stand-
alone IPF market basket at this time, pending further study, as the 
commenter is not convinced that CMS has the appropriate level of 
psychiatric cost data available to compile an accurate market basket 
for IPFs alone. These conclusions were based on the following reasons:
     There are a small number of facilities and often limited 
data (for example, only 4 percent of IPFs reported contract labor costs 
for FY 2002).
     Benefits, contract labor, and blood cost weights were 
developed using the FY 2002-based IPPS market basket.
     Other detailed cost categories were derived from the FY 
2002-based IPPS market basket.
     No cost data specific to psychiatry (that is, Wages and 
Salaries--based on Civilian Hospital Workers).
    The commenter stated that without release of both relevant internal 
data available only to CMS on the previously mentioned IPF market 
basket issues, as well as specific data on the types of cost 
differences between the various cost categories of IRF, IPF, and LTCH 
facilities, they are unable to comment on an independent IPF market 
basket at this time. The commenter believes that more detailed analysis 
needs to be conducted and released before they could consider 
supporting any change to the current RPL-based market basket update 
process.
    Response: We are in the process of evaluating multiple years of 
data in order to determine whether a stand-alone IPF market basket 
would be a more appropriate index for updating IPF PPS payments. We 
agree with the commenter that there is a lack of IPF-specific benefit 
and contract labor cost data. Currently, benefit and contract labor 
cost data are collected on Worksheet S-3, part II of the Medicare cost 
report (MCR), but are only required of IPPS hospitals. We proposed 
under separate cover to modify the present-day hospital MCR in order to 
collect benefit and contract labor data on a separate worksheet 
(proposed Worksheet S-3, part V) which would be completed by all 
hospitals (https://www.cms.hhs.gov/PaperworkReductionActof1995/PRAL/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=2&sortOrder=descending&itemID=CMS1224069&intNumPerPage). 
We disagree with the commenter that we are not capturing IPF-specific 
data for wages and salaries since all hospitals are required to report 
this data on the MCRs, which provides the sources of our wages and 
salaries cost weight. We believe the commenter may be referencing the 
Employment Cost Index (ECI) for wages and salaries for hospital 
civilian workers which we use to proxy price changes associated with 
the wages and salary cost weight. This proxy is used because the Bureau 
of Labor

[[Page 23113]]

Statistics does not publish a wages and salaries price index specific 
to IPFs only. However, the ECI for wages and salaries for hospital 
civilian workers does include the price changes of IPFs, as well as 
other hospital-types (including general surgical hospitals).

IV. Update of the IPF PPS Adjustment Factors

A. Overview of the IPF PPS Adjustment Factors

    The IPF PPS payment adjustments were derived from a regression 
analysis of 100 percent of the FY 2002 MedPAR data file, which 
contained 483,038 cases. For this notice, we used the same results of 
the regression analysis used to implement the November 2004 IPF PPS 
final rule. For a more detailed description of the data file used for 
the regression analysis, see the November 2004 IPF PPS final rule (69 
FR 66935 through 66936). While we have since used more recent claims 
data to set the fixed dollar loss threshold amount, we use the same 
results of this regression analysis to update the IPF PPS for RY 2010 
as well as RY 2011.
    As previously stated, we do not plan to update the regression 
analysis until we are able to analyze IPF PPS claims and cost report 
data. However, we continue to monitor claims and payment data 
independently from cost report data to assess issues, to determine 
whether changes in case-mix or payment shifts have occurred among 
freestanding governmental, non-profit and private psychiatric 
hospitals, and psychiatric units of general hospitals, and CAHs and 
other issues of importance to IPFs.

B. Patient-Level Adjustments

    In the May 2008 IPF PPS notice (73 FR 25709) and in the May 2009 
IPF PPS notice (74 FR 20362), we provided payment adjustments for the 
following patient-level characteristics: Medicare Severity diagnosis 
related groups (MS-DRGs) assignment of the patient's principal 
diagnosis, selected comorbidities, patient age, and the variable per 
diem adjustments.
1. Adjustment for MS-DRG Assignment
    The IPF PPS includes payment adjustments for the psychiatric DRG 
assigned to the claim based on each patient's principal diagnosis. The 
IPF PPS recognizes the MS-DRGs. The DRG adjustment factors were 
expressed relative to the most frequently reported psychiatric DRG in 
FY 2002, that is, DRG 430 (psychoses). The coefficient values and 
adjustment factors were derived from the regression analysis.
    In accordance with Sec.  412.27(a), payment under the IPF PPS is 
conditioned on IPFs admitting ``only patients whose admission to the 
unit is required for active treatment, of an intensity that can be 
provided appropriately only in an inpatient hospital setting, of a 
psychiatric principal diagnosis that is listed in Chapter Five 
(``Mental Disorders'') of the International Classification of Diseases, 
Ninth Revision, Clinical Modification (ICD-9-CM)'' or in the Fourth 
Edition, Text Revision of the American Psychiatric Association's 
Diagnostic and Statistical Manual, (DSM-IV-TR). IPF claims with a 
principal diagnosis included in Chapter Five of the ICD-9-CM or the 
DSM-IV-TR are paid the Federal per diem base rate under the IPF PPS and 
all other applicable adjustments, including any applicable DRG 
adjustment. Psychiatric principal diagnoses that do not group to one of 
the designated DRGs still receive the Federal per diem base rate and 
all other applicable adjustments, but the payment would not include a 
DRG adjustment.
    The Standards for Electronic Transaction final rule published in 
the Federal Register on August 17, 2000 (65 FR 50312), adopted the ICD-
9-CM as the designated code set for reporting diseases, injuries, 
impairments, other health related problems, their manifestations, and 
causes of injury, disease, impairment, or other health related 
problems. Therefore, we use the ICD-9-CM as the designated code set for 
the IPF PPS.
    We believe that it is important to maintain the same diagnostic 
coding and DRG classification for IPFs that are used under the IPPS for 
providing the psychiatric care. Therefore, when the IPF PPS was 
implemented for cost reporting periods beginning on or after January 1, 
2005, we adopted the same diagnostic code set and DRG patient 
classification system (that is, the CMS DRGs) that was utilized at the 
time under the hospital inpatient prospective payment system (IPPS). 
Since the inception of the IPF PPS, the DRGs used as the patient 
classification system under the IPF PPS have corresponded exactly with 
the CMS DRGs applicable under the IPPS for acute care hospitals.
    Every year, changes to the ICD-9-CM coding system are addressed in 
the IPPS proposed and final rules. The changes to the codes are 
effective October 1 of each year and must be used by acute care 
hospitals as well as other providers to report diagnostic and procedure 
information. The IPF PPS has always incorporated ICD-9-CM coding 
changes made in the annual IPPS update. We publish coding changes in a 
Transmittal/Change Request, similar to how coding changes are announced 
by the IPPS and LTCH PPS. Those ICD-9-CM coding changes are also 
published in the following IPF PPS RY update, in either the IPF PPS 
proposed and final rules, or in an IPF PPS update notice.
    In the May 2008 IPF PPS notice (73 FR 25714), we discussed CMS' 
effort to better recognize resource use and the severity of illness 
among patients. CMS adopted the new MS-DRGs for the IPPS in the FY 2008 
IPPS final rule with comment period (72 FR 47130). We believe by better 
accounting for patients' severity of illness in Medicare payment rates, 
the MS-DRGs encourage hospitals to improve their coding and 
documentation of patient diagnoses. The MS-DRGs, which are based on the 
CMS DRGs, represent a significant increase in the number of DRGs (from 
538 to 745, an increase of 207). For a full description of the 
development and implementation of the MS-DRGs, see the FY 2008 IPPS 
final rule with comment period (72 FR 47141 through 47175).
    All of the ICD-9-CM coding changes are reflected in the FY 2010 
GROUPER, Version 27.0, effective for IPPS discharges occurring on or 
after October 1, 2009 through September 30, 2010. The GROUPER Version 
27.0 software package assigns each case to an MS-DRG on the basis of 
the diagnosis and procedure codes and demographic information (that is, 
age, sex, and discharge status). The Medicare Code Editor (MCE) 26.0 
uses the new ICD-9-CM codes to validate coding for IPPS discharges on 
or after October 1, 2009. For additional information on the GROUPER 
Version 27.0 and MCE 26.0, see Transmittal 1816 (Change Request 6634), 
dated October 1, 2009. The IPF PPS has always used the same GROUPER and 
Code Editor as the IPPS. Therefore, the ICD-9-CM changes, which were 
reflected in the GROUPER Version 27.0 and MCE 26.0 on October 1, 2009, 
also became effective for the IPF PPS for discharges occurring on or 
after October 1, 2009.
    The impact of the new MS-DRGs on the IPF PPS was negligible. 
Mapping to the MS-DRGs resulted in the current 17 MS-DRGs, instead of 
the original 15 DRGs, for which the IPF PPS provides an adjustment. 
Although the code set is updated, the same associated adjustment 
factors apply now that have been in place since implementation of the 
IPF PPS, with one exception that is unrelated to the update to the 
codes. When DRGs 521 and 522 were consolidated into MS-DRG 895, we 
carried over the adjustment factor of 1.02 from DRG 521 to the newly

[[Page 23114]]

consolidated MS-DRG. This was done to reflect the higher claims volume 
under DRG 521, with more than eight times the number of claims than 
billed under DRG 522. The updates are reflected in Table 5. For a 
detailed description of the mapping changes from the original DRG 
adjustment categories to the current MS-DRG adjustment categories, we 
refer readers to the May 2008 IPF PPS notice (73 FR 25714).
    The official version of the ICD-9-CM is available on CD-ROM from 
the U.S. Government Printing Office. The FY 2009 version can be ordered 
by contacting the Superintendent of Documents, U.S. Government Printing 
Office, Department 50, Washington, DC 20402-9329, telephone number 
(202) 512-1800. Questions concerning the ICD-9-CM should be directed to 
Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination and 
Maintenance Committee, CMS, Center for Medicare Management, Hospital 
and Ambulatory Policy Group, Division of Acute Care, Mailstop C4-08-06, 
7500 Security Boulevard, Baltimore, Maryland 21244-1850.
    Further information concerning the official version of the ICD-9-CM 
can be found in the IPPS final rule with comment period, ``Changes to 
Hospital Inpatient Prospective Payment System and Fiscal Year 2010 
Rates'' in the August 27, 2009 Federal Register (74 FR 43754) and at 
https://www.cms.hhs.gov/AcuteInpatientPPS/IPPS/list.asp#TopOfPage.
    Tables 3 and 4 below list the FY 2010 new and invalid ICD-9-CM 
diagnosis codes that group to one of the 17 MS-DRGs for which the IPF 
PPS provides an adjustment. These tables are only a listing of FY 2010 
changes and do not reflect all of the currently valid and applicable 
ICD-9-CM codes classified in the MS-DRGs. When coded as a principal 
code or diagnosis, these codes receive the correlating MS-DRG 
adjustment.

                  Table 3--FY 2010 New Diagnosis Codes
------------------------------------------------------------------------
       Diagnosis code                Description              MS-DRG
------------------------------------------------------------------------
438.13.....................  Late effects of                    056, 057
                              cerebrovascular disease,
                              dysarthria.
438.14.....................  Late effects of                    056, 057
                              cerebrovascular disease,
                              fluency disorder.
799.21.....................  Nervousness................             880
799.22.....................  Irritability...............             880
799.23.....................  Impulsiveness..............             882
799.24.....................  Emotional lability.........             883
799.25.....................  Demoralization and apathy..             880
799.29.....................  Other signs and symptoms                880
                              involving emotional state.
------------------------------------------------------------------------


                Table 4--FY 2010 Invalid Diagnosis Codes
------------------------------------------------------------------------
       Diagnosis code                   Description             MS-DRG
------------------------------------------------------------------------
799.2.......................  Nervousness...................         880
------------------------------------------------------------------------

    We do not plan to update the regression analysis until we are able 
to analyze IPF PPS data. The MS-DRG adjustment factors (as shown in 
Table 5 below) will continue to be paid for discharges occurring in RY 
2011.

 Table 5--RY 2011 Current MS-DRGs Applicable for the Principal Diagnosis
                               Adjustment
------------------------------------------------------------------------
                                                            Adjustment
           MS-DRG                MS-DRG descriptions          factor
------------------------------------------------------------------------
056........................  Degenerative nervous system            1.05
                              disorders w MCC.
057........................  Degenerative nervous system            1.05
                              disorders w/o MCC.
080........................  Nontraumatic stupor & coma             1.07
                              w MCC.
081........................  Nontraumatic stupor & coma             1.07
                              w/o MCC.
876........................  O.R. procedure w principal             1.22
                              diagnoses of mental
                              illness.
880........................  Acute adjustment reaction &            1.05
                              psychosocial dysfunction.
881........................  Depressive neuroses........            0.99
882........................  Neuroses except depressive.            1.02
883........................  Disorders of personality &             1.02
                              impulse control.
884........................  Organic disturbances &                 1.03
                              mental retardation.
885........................  Psychoses..................            1.00
886........................  Behavioral & developmental             0.99
                              disorders.
887........................  Other mental disorder                  0.92
                              diagnoses.
894........................  Alcohol/drug abuse or                  0.97
                              dependence, left AMA.
895........................  Alcohol/drug abuse or                  1.02
                              dependence w
                              rehabilitation therapy.
896........................  Alcohol/drug abuse or                  0.88
                              dependence w/o
                              rehabilitation therapy w
                              MCC.
897........................  Alcohol/drug abuse or                  0.88
                              dependence w/o
                              rehabilitation therapy w/o
                              MCC.
------------------------------------------------------------------------

2. Payment for Comorbid Conditions
    The intent of the comorbidity adjustments is to recognize the 
increased costs associated with comorbid conditions by providing 
additional payments for certain concurrent medical or psychiatric 
conditions that are expensive to treat. In the May 2009 IPF PPS notice 
(74 FR 20362), we explained that the IPF PPS includes 17 comorbidity 
categories and identified the new, revised, and deleted ICD-9-CM 
diagnosis codes that generate a comorbid condition payment adjustment 
under the IPF PPS for RY 2010 (77 FR 20372).
    Comorbidities are specific patient conditions that are secondary to 
the patient's principal diagnosis and that require treatment during the 
stay.

[[Page 23115]]

Diagnoses that relate to an earlier episode of care and have no bearing 
on the current hospital stay are excluded and must not be reported on 
IPF claims. Comorbid conditions must exist at the time of admission or 
develop subsequently,