Medicare Program; 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: Final Fiscal Year 2010 Wage Indices and Payment Rates Implementing the Affordable Care Act, 31118-31222 [2010-12563]
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
[CMS–1406–N]
RIN 0938–AQ03
Medicare Program; 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: Final Fiscal
Year 2010 Wage Indices and Payment
Rates Implementing the Affordable
Care Act
AGENCY: Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Notice.
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SUMMARY: This notice contains the final
wage indices, hospital reclassifications,
payment rates, impacts, and other
related tables effective for the fiscal year
(FY) 2010 hospital inpatient prospective
payment systems (IPPS) and rate year
2010 long-term care hospital (LTCH)
prospective payment system (PPS). The
rates, tables, and impacts included in
this notice reflect changes required by
or resulting from the implementation of
several provisions of the Patient
Protection and Affordable Care Act and
the Health Care and Education
Reconciliation Act of 2010. These
provisions require the extension of the
expiration date for certain geographic
reclassifications and special exception
wage indices through September 30,
2010; and certain market basket updates
for the IPPS and LTCH PPS.
DATES: Effective Date: The revised
standard Federal rates described in this
notice are effective for payment years
beginning October 1, 2009. Hospitals are
paid based on the rates published in this
notice for discharges on or after April 1,
2010.
FOR FURTHER INFORMATION CONTACT: Tzvi
Hefter, (410) 786–4487.
SUPPLEMENTARY INFORMATION:
I. Background
The final rule setting forth the
Medicare fiscal year (FY) 2010 hospital
inpatient prospective payment systems
(IPPS) for acute care hospitals and the
rate year (RY) 2010 long-term care
hospital (LTCH) prospective payment
system (PPS) final rule (hereinafter
referred to as the FY 2010 IPPS/RY 2010
LTCH PPS final rule) was published in
the August 27, 2009 Federal Register
(74 FR 43754) and subsequently
corrected in an October 7, 2009 notice
(74 FR 51496).
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On March 23, 2010, the Patient
Protection and Affordable Care Act
(Pub. L. 111–148) was enacted.
Following enactment of Public Law
111–148, the Health Care and Education
Reconciliation Act of 2010, Public Law
111–152 (enacted on March 30, 2010),
amended certain provisions of Public
Law 111–148. (These public laws are
collectively known as the Affordable
Care Act.) Several of the provisions of
the Affordable Care Act affect the FY
2010 IPPS and the RY 2010 LTCH PPS.
However, due to the timing of the
passage of the legislation, we noted in
the FY 2011 IPPS and LTCH PPS
proposed rule published in the May 4,
2010 Federal Register (75 FR 23852)
that we would issue separate Federal
Register documents addressing the
provisions of the Affordable Care Act
that affect our final policies and
payment rates for FY 2010 IPPS and the
RY 2010 LTCH PPS and proposed
policies for FY 2011 under the IPPS and
the LTCH PPS.
This notice addresses the provisions
of the Affordable Care Act that impact
the FY 2010 IPPS/RY 2010 LTCH PPS
final wage index tables, rates, and
impacts.
II. Final FY 2010 Wage Indices and
Payment Rates
A. Final FY 2010 Hospital Wage Index
Reclassifications/Redesignations
1. Section 508 Extension
Section 3137(a) of Public Law 111–
148, as amended by section 10317 of
Public Law 111–148, extends through
the end of FY 2010 wage index
reclassifications under section 508 of
the Medicare Prescription Drug
Improvement and Modernization Act of
2003 (MMA) (Pub. L. 108–173) and
certain special exceptions (for example,
those special exceptions contained in
the final rule promulgated in the
Federal Register on August 11, 2004 (69
FR 49105 and 49107) extended under
section 117 of the Medicare, Medicaid,
and SCHIP Extension Act of 2007
(MMSEA) (Pub. L. 110–173)) and further
extended under section 124 of the
Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA) (Pub. L.
110–275).
Under section 508 of Public Law 108–
173, a qualifying hospital could appeal
the wage index classification otherwise
applicable to the hospital and apply for
reclassification to another area of the
State in which the hospital is located
(or, at the discretion of the Secretary), to
an area within a contiguous State. We
implemented this process through
notices published in the Federal
Register on January 6, 2004 (69 FR 661),
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and February 13, 2004 (69 FR 7340).
Such reclassifications were applicable
to discharges occurring during the 3year period beginning April 1, 2004, and
ending March 31, 2007. Section 106(a)
of the Medicare Improvements and
Extension Act, Division B of the Tax
Relief and Health Care Act of 2006
(MIEA–TRHCA) extended any
geographic reclassifications of hospitals
that were made under section 508 and
that would expire on March 31, 2007. In
the March 23, 2007 Federal Register (72
FR 3799), we published a notice that
indicated how we were implementing
section 106(a) of the MIEA–TRHCA
through September 30, 2007. Section
117 of the MMSEA further extended
section 508 reclassifications and certain
special exceptions through September
30, 2008. On February 22, 2008 in the
Federal Register (73 FR 9807), we
published a notice regarding our
implementation of section 117 of the
MMSEA. Section 124 of MIPPA, Public
Law 110–275, then further extended
section 508 reclassifications and certain
special exceptions through September
30, 2009. Final rates incorporating these
MIPPA extensions were published in a
Federal Register notice on October 3,
2008 (73 FR 57888).
Section 3137(a) of Public Law 111–
148, as amended by section 10317 of
Public Law 111–148 has now extended
the hospital reclassification provisions
of section 508 and certain special
exceptions through September 30, 2010
(FY 2010). Furthermore, section
3137(a)(2)(B) of Public Law 111–148
contains a new provision not previously
included in prior mid-year extensions to
section 508 requiring that ‘‘beginning on
April 1, 2010, in determining the wage
index applicable to hospitals that
qualify for wage index reclassification,
the Secretary shall include the average
hourly wage data of hospitals whose
reclassification was extended pursuant
to the amendment made by paragraph
(1) only if including such data results in
a higher applicable reclassified wage
index.’’ Finally, section 3401 of Public
Law 111–148, as amended by section
10319 of Public Law 111–148 and
section 1105 of Public Law 111–152,
imposes a 0.25 percent decrease in the
market basket calculated under section
1886(b)(3)(B) of the Social Security Act.
As a result of these changes, we have
recalculated certain wage indexes,
recalculated the standardized amounts,
and revised budget neutrality factors
(including rural floor budget neutrality)
to account for the new legislation.
For hospitals receiving an extension
of their section 508 reclassifications or
special exceptions, we have used the
rates contained in the August 27, 2009
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Federal Register, and as corrected in the
October 7, 2009 Federal Register, unless
the rates published in this notice result
in a higher applicable wage index.
Those section 508 and special exception
providers that are receiving an
extension through September 30, 2010
are shown in Table 9B of the Addendum
to this notice. Please note we are not
making reclassification decisions on
behalf of hospitals in this extension as
we did with the MIPPA provision.
(Because MIPPA was enacted prior to
the finalization of the FY 2009 rates, we
were able to modify reclassifications
that had not yet taken effect. In contrast,
the Affordable Care Act has been
enacted in the middle of the fiscal year,
and reclassifications are already in
effect). As explained in this notice, the
intervening Affordable Care Act
legislation affects only those labor
market areas including hospitals whose
reclassifications/special exceptions are
extended, or areas to which such
hospitals were reclassified for FY 2010.
When originally implementing
section 508 of the MMA, we required
each hospital to submit a request in
writing by February 15, 2004, to the
Medicare Geographic Classification
Review Board (MGCRB), with a copy to
CMS. We will neither require nor accept
written requests for the extension
required by the Affordable Care Act,
since that legislation simply provides a
1-year continuation through the end of
FY 2010 for any section 508
reclassifications and special exceptions
wage indexes that expired September
30, 2009.
2. FY 2010 Final Wage Indices
The final wage index values for FY
2010 (except those for hospitals
receiving wage index adjustments under
section 505 of Pub. L. 108–173) are
included in Tables 4A, 4B, and 4C of the
Addendum to this notice and are posted
on our Web site at https://
www.cms.hhs.gov/AcuteInpatientPPS/.
For hospitals that are receiving a wage
index adjustment under section 505 of
Public Law 108–173, only one county’s
adjustment factor changed due to the
implementation of section 3137(a)(2)(B)
of Public Law 111–148; therefore only
that revised factor is shown in
abbreviated Table 4J of the Addendum
to this notice. In addition, Table 2 of the
Addendum to this notice includes the
final wage index values and
occupational mix adjusted average
hourly wage (from the FYs 2004, 2005,
and 2006 cost reporting periods) for
each hospital. Table 4D–1 of the
Addendum of this notice lists the State
rural floor budget neutrality factors for
FY 2010. Table 4D–2 of this Addendum
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of this notice lists the urban areas with
hospitals receiving the State rural floor
or imputed rural floor wage index. Table
9B of the Addendum of this notice lists
hospitals that are section 508 and
special exception providers which have
their reclassifications extended until
September 30, 2010.
B. Inpatient Hospital Market Basket
Update
1. FY 2010 Inpatient Hospital Update
In accordance with section
1886(b)(3)(B)(i) of the Act, each year we
update the national standardized
amount for inpatient operating costs by
a factor called the ‘‘applicable
percentage increase.’’ Prior to enactment
of the Affordable Care Act, section
1886(b)(3)(B)(i)(XX) of the Act set the
applicable percentage increase for FY
2007 and each subsequent fiscal year as
equal to the rate-of-increase in the
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 an additional
2.0 percentage points. In accordance
with these statutory provisions, in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43850), we finalized an
applicable percentage increase equal to
the full market basket update of 2.1
percent based on IHS Global Insight,
Inc.’s second quarter 2009 forecast of
the FY 2010 market basket increase,
provided the hospital submits quality
data in accordance with our rules. For
hospitals that do not submit quality
data, the FY 2010 update to the
operating standardized amount equals
0.1 percent (that is, the FY 2010
estimate of the market basket rate-ofincrease minus 2.0 percentage points).
Sections 3401(a) and 10319(a) of
Public Law 111–148 and section 1105 of
Public Law 111–152, amend section
1886(b)(3)(B) of the Act. Specifically,
section 1886(b)(3)(B)(xii)(I) of the Act,
as added and amended by these sections
of the Affordable Care Act, requires the
Secretary to reduce the applicable
percentage increase for FY 2010 by 0.25
percentage point, 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 minus 0.25
percentage point less an additional
2.0 percentage points. Section
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1886(b)(3)(B)(xii) of the Act, as added
and amended by these sections of the
Affordable Care Act, further states that
the application of this adjustment ‘‘may
result in the applicable percentage
increase described in clause (i) being
less than 0.0 for a fiscal year.’’ Although
these amendments modify the
applicable percentage increase
applicable to the FY 2010 rates under
the IPPS, section 3401(p) of Public Law
111–148 states that the amendments
made by section 3401(a) of Public Law
111–148 shall not apply to discharges
occurring prior to April 1, 2010. In other
words, for discharges occurring on or
after October 1, 2009 and prior to April
1, 2010, payment for a hospital’s
inpatient operating costs under the IPPS
will be based on the applicable
percentage increase set forth in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule.
Consistent with section 3401(p) of
Public Law 111–148, for the first half of
FY 2010 (that is, discharges on or after
October 1, 2009 through March 30,
2010), payment will be made based on
the applicable percentage increase
equaling the market basket index for
IPPS hospitals (which is defined in 42
CFR 413.40(a)(3)) in all areas for
hospitals that submit quality data in
accordance with our rules, and the
market basket index for IPPS hospitals
in all areas less 2.0 percentage for
hospitals that fail to submit quality data
in accordance with our rules. As noted
previously, in the FY 2010 IPPS/RY
2010 LTCH PPS final rule, we
calculated that the full market basket
update equals 2.1 percent based on IHS
Global Insight, Inc.’s second quarter
2009 forecast of the FY 2010 market
basket increase. Consistent with section
1886(b)(3)(B)(xii) of the Act, as added
and amended by sections 3401(a) and
10319(a) of Public Law 111–148 and
section 1105 of Public Law 111–152,
and section 3401(p) of Public Law 111–
148, payment for discharges during the
second half of FY 2010 (discharges on
or after April 1, 2010 through September
30, 2010), will reflect the revised FY
2010 rate, which includes the 0.25
percentage point reduction for hospitals
that submit quality data in accordance
with our rules. For those hospitals that
fail to submit quality data in accordance
with our rules, we are reducing the
market basket index for IPPS hospitals
by an additional 2.0 percentage points
(which is in addition to the 0.25
percentage point reduction required by
section 1886(b)(3)(B)(xii) of the Act, as
added and amended by sections 3401(a)
and 10319(a) of Pub. L. 111–148 and
section 1105 of Pub. L. 111–152).
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Therefore, based on IHS Global Insight,
Inc.’s second quarter 2009 forecast of
the FY 2010 market basket increase, the
FY 2010 applicable percentage increase,
on which payment for discharges
occurring in the second half of FY 2010
is based, is 1.85 percent (that is, the FY
2010 estimate of the market basket rateof-increase of 2.1 percent minus 0.25
percentage points) for hospitals in all
areas, provided the hospital submits
quality data in accordance with our
rules. For hospitals that do not submit
quality data, the payment update to the
operating standardized amount is ¥0.15
percent (that is, the adjusted FY 2010
estimate of the market basket rate-ofincrease of 1.85 percent minus 2.0
percentage points). As provided by
these provisions, we are proposing to
revise 42 CFR 412.64(d) in a
supplemental proposed rule published
elsewhere in this Federal Register.
Section 1886(b)(3)(B)(iv)(IV) of the
Act provides that the applicable
percentage increase applicable to the
hospital-specific rates for SCHs and
MDHs equals the applicable percentage
increase 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). Because
the statute defines the applicable
percentage increase for SCHs and MDHs
as equal to the applicable percentage
increase under section 1886(b)(3)(B)(i)
of the Act for other IPPS hospitals, the
update to the hospital specific rates for
SCHs and MDHs is also subject to the
amendments to section 1886(b)(3)(B)(i)
of the Act made by sections 3401(a) and
10319(a) of Public Law 111–148 and
section 1105 of Public Law 111–152, as
well as to section 3401(p) of Public Law
111–148. Accordingly, for hospitals
paid for their inpatient operating costs
on the basis of a hospital-specific rate,
the rates paid to such hospitals for
discharges occurring during the first
half of FY 2010 will be based on an
annual update estimated to be 2.1
percent for hospitals submitting quality
data or 0.1 percent for hospitals that fail
to submit quality data; and the rates
paid to such hospitals for the second
half of FY 2010 will be based on the
revised FY 2010 applicable percentage
increase that is estimated to be 1.85
percent for hospitals submitting quality
data or ¥0.15 percent for hospitals that
fail to submit quality data. Similarly, we
are proposing to revise 42 CFR
412.73(c)(15), 42 CFR 412.75(d), 42 CFR
412.77(e), 42 CFR 412.78(e), and 42 CFR
412.79(d) to reflect the changes made to
section 1886(b)(3)(B) by sections 3401(a)
and 10319(a) of Public Law 111–148
and section 1105 of Public Law 111–
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152, in a supplemental proposed rule
published elsewhere in this Federal
Register.
2. FY 2010 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a
blended rate for their inpatient
operating costs based on 75 percent of
the national standardized amount and
25 percent of the Puerto Rico-specific
standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis
for determining the annual adjustment
to the Puerto Rico-specific standardized
amount. Section 1886(d)(9)(C)(i) of the
Act provides that the Puerto Rico
standardized amount shall be adjusted
in accordance with the final
determination of the Secretary under
section 1886(e)(4) of the Act. Section
1886(e)(4)(A) of the Act in turn directs
the Secretary to recommend an
appropriate change factor for inpatient
hospital services for discharges in that
fiscal year, taking in to account amounts
necessary for the efficient and effective
delivery of medically appropriate and
necessary care of high quality, as well
as the recommendations of MedPAC. In
order to maintain consistency between
the portion of the rates paid to Puerto
Rico hospitals based on the national
standardized amount and the portion
based on the Puerto Rico-specific
standardized rate, beginning in FY 2004
we have set the update to the Puerto
Rico-specific operating standardized
amount equal to the update to the
national operating standardized amount
for all IPPS hospitals. This policy is
reflected in our regulations at 42 CFR
412.211.
The amendments to section
1886(b)(3)(B) of the Act by sections
3401(a) and 10319(a) of Public Law
111–148 and section 1105 of Public Law
111–152, affect only the update factor
applicable to the national standardized
rate for IPPS hospitals and the hospitalspecific rates; they do not mandate any
revisions to the update factor applicable
to the Puerto Rico-specific standardized
amount. Rather, as noted above, sections
1886(d)(9)(C)(i) and (e)(4) of the Act
direct us to adopt an appropriate change
factor for the FY 2010 Puerto Ricospecific standardized amount, which we
did in the FY 2010 IPPS/LTCH PPS final
rule after notice and comment
rulemaking. Therefore, we do not
believe we have the authority to revise
the FY 2010 update factor for the Puerto
Rico-specific operating standardized
amount equal to the update factor
applicable to the national standardized
amount or the hospital-specific rates
(that is the market basket minus 0.25
percentage points). Accordingly, the FY
2010 update to the Puerto Rico-specific
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operating standardized amount remains
2.1 percent (that is, the FY 2010
estimate of the market basket rate-ofincrease).
C. Changes to Payment Rates for IPPS
for Capital-Related Costs for FY 2010
Although the Affordable Care Act
does not directly the amend provisions
regarding payment for the IPPS for
capital-related costs, in section II.E.2. of
this notice we are establishing revised
capital IPPS standard Federal rates for
FY 2010. The revised FY 2010 capital
Federal rates are effective for discharges
occurring on or after April 1, 2010,
consistent with section 3401(p) of
Public Law 111–148. This is necessary
because the operating IPPS market
basket and wage index changes required
by the provisions of this legislation
(discussed above in section II.A. of this
notice) affect the budget neutrality
adjustment factor for changes in DRG
classifications and weights and the
geographic adjustment factor (GAF)
since the GAF values are derived from
the wage index values (see § 412.316(a)).
In addition, these changes necessitate a
revision to the outlier payment
adjustment factor since a single set of
thresholds is used to identify outlier
cases for both inpatient operating and
inpatient capital-related payments (see
§ 412.312(c)). The outlier thresholds are
set so that operating outlier payments
are projected to be 5.1 percent of total
operating IPPS DRG 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 capital-related PPS payments.
The revised capital IPPS standard
Federal rates for FY 2010 (effective for
discharges occurring on or after April 1,
2010) are discussed in section II.E.2. of
this notice.
D. Long-Term Care Hospital Market
Basket Update and Other Changes
1. Background
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule that appeared in the
August 27, 2009 Federal Register (74 FR
43754), we established policies,
payment rates, and factors for
determining payments under the LTCH
PPS for RY 2010 (October 1, 2009
through September 30, 2010). Below we
discuss revised RY 2010 LTCH PPS
rates and factors consistent with the
provisions of section 1886(m)(3) as
added by section 3401(c) of Public Law
111–148, section 1886(m)(4) as added
by section 3401(c) of Public Law 111–
148 and amended by section 10319(b) of
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Public Law 111–148, as further
amended by section 1105(b) of Public
Law 111–152, as well as section 3401(p)
of Public Law 111–148. Section
1886(m)(3)(A) of the Act provides that
in implementing the system described
in paragraph (1) [of 1886(m) of the Act]
for rate year 2010 and each subsequent
rate year, any annual update to the
standard Federal rate for discharges for
the hospital during the rate year, shall
be reduced (i) for rate year 2012 and
each subsequent rate year, by the
productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) [of the Act];
and (ii) for each of the rate years 2010
through 2019, by the other adjustment
described in paragraph (4) [of 1886(m)
of the Act]. Section 1886(m)(3)(A) of the
Act on its face explicitly provides for a
revised annual update to the standard
Federal rate beginning RY 2010, thus
resulting in a single revised RY 2010
standard Federal rate. With respect to
section 3401(p) of Public Law 111–148,
this section provides that,
notwithstanding the previous provisions
of this section, the amendments made
by subsections (a), (c), and (d) shall not
apply to discharges occurring before
April 1, 2010. When read in conjunction
we believe section 1886(m)(3)(A) of the
Act and section 3401(p) of Public Law
111–148 provide for a single revised RY
2010 standard Federal rate; however, for
payment purposes, discharges occurring
on or after October 1, 2009 and before
April 1, 2010, simply will not be based
on the revised RY 2010 standard Federal
rate. In other words, for discharges
occurring on or after October 1, 2009
through March 31, 2010, LTCH PPS
payments will be based on the payment
rates and factors established in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(see (74 FR 43754)).
2. Market Basket Update for LTCHs for
RY 2010
As discussed in section VII.C.2. of the
preamble of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43967
through 43968), we continued to use the
FY 2002-based rehabilitation,
psychiatric, long-term care (RPL)
hospital market basket under the LTCH
PPS for RY 2010. Also, in that final rule,
we stated that at that time, the most
recent estimate of the increase in the
LTCH PPS market basket for RY 2010
was 2.5 percent. This increase is based
on IHS Global Insight, Inc.’s second
quarter 2009 forecast of the FY 2002based RPL market basket increase for RY
2010. We note, as discussed in the FY
2010 IPPS/RY 2010 final rule (74 FR
44022), in determining the update to the
standard Federal rate for RY 2010, in
addition to the full market basket
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increase, we also applied a ¥0.5
percent adjustment to account for the
increase in case-mix due to changes in
documentation and coding practices
that do not reflect increased patient
severity of illness from a prior period
(that is, FY 2007).
As indicated above, section 3401(c) of
Public Law 111–148 adds section
1886(m)(3)(A)(ii) of the Act which
specifies that for RY 2010 and
subsequent rate years, any update to the
standard Federal rate shall be reduced,
for each of RYs 2010 through 2019, by
the other adjustment specified in new
section 1886(m)(4) of the Act.
Specifically, newly added section
1886(m)(4)(A) of the Act requires a 0.25
percentage point reduction to the
annual update for RY 2010.
Consequently, the market basket update
under the LTCH PPS for RY 2010 is 2.25
percent (that is, the second quarter 2009
forecast estimate of the RY 2010 LTCH
PPS market basket increase of 2.5
percent minus the 0.25 percentage
points required by sections
1886(m)(3)(A)(ii) and (m)(4)(A) of the
Act). (We note that to determine the
revised standard Federal rate for RY
2010 in this notice, we applied the
reduced market basket update (2.25
percent) as well as a ¥0.5 percent
adjustment to account for the increase
in case-mix due to changes in
documentation and coding practices
that do not reflect increased patient
severity of illness from a prior period
(FY 2007) that we established in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43972).) In addition, in section
II.F. of the Addendum of this notice,
this revision to the standard Federal rate
for RY 2010 requires us to revise the
high cost outlier fixed-loss amount for
RY 2010, under which the discharges
occurring on or after April 1, 2010 will
be evaluated, in order to maintain the
requirement that 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. (We also note that we
determined that it is not necessary to
revise the FY 2010 MS–LTC–DRG
relative weights as a result of the change
to the RY 2010 LTCH PPS standard
Federal rate resulting from the revision
to the RY 2010 annual update required
by the Affordable Care Act. Although
the standard Federal rate is used in our
established methodology for updating
the annual update to the MS–LTC–DRG
classifications and relative weights in a
manner such that estimated aggregate
LTCH PPS payments would be
unaffected, our payment simulations
using the same budget neutrality
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methodology used in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule (74 FR
43966 through 43967) show that this
revision to the RY 2010 LTCH PPS
standard Federal rate resulting from the
revision to the RY 2010 annual update
required by the Affordable Care Act,
would not change the RY 2010 budget
neutrality factor originally established
in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. Therefore, the FY 2010 MS–
LTC–DRG relative weights remain
unchanged from those established in
Table 11 of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44183
through 44192).)
E. Final FY 2010 Prospective Payment
Systems Payment Rates for Hospital
Inpatient Operating and Capital Related
Costs
1. Final FY 2010 Prospective Payment
Rates for Hospital Inpatient Operating
Costs
In the FY 2010 IPPS and RY 2010
LTCH PPS final rule published in the
Federal Register on August 27, 2009 (74
FR 43754), we established our
methodology to determine the policies,
payment rates and factors for
determining payments under the IPPS
for the entire FY 2010 (74 FR 44002
through 44014). Some of these rates also
were corrected, as reflected in an
October 7, 2009 correction notice (74 FR
51496). Below we establish revised FY
2010 IPPS rates and factors consistent
with the provisions of section 3137(a) of
Public Law 111–148, as amended by
section 10319(a) of Public Law 111–148
and section 1105 of Public Law 111–
152, and section 1886(b)(3)(B), as
amended by sections 3401(a) and
10310(a) of Public Law 111–148 and
section 1105 of Public Law 111–152.
Although these changes modify the FY
2010 rates under the IPPS, in
accordance with section 3401(p) of
Public Law 111–148, the revised IPPS
payment rates and factors do not apply
to discharges occurring prior to April 1,
2010. In other words, for discharges
occurring on or after October 1, 2009
through discharges on or before March
31, 2010, IPPS payments will be based
on the payment rates and factors
established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule, and for
discharges on or after April 1, 2010
through discharges on or before
September 30, 2010 payments will be
based on the FY 2010 payment rates and
factors outlined in this notice.
The 0.25 percentage point reduction
to the applicable percentage increase for
FY 2010 (as required by section
1886(b)(3)(B)(xii), as added and
amended by sections 3401(a) and
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section 10319(a) of Pub. L. 111–148 and
section 1105 of Pub. L. 111–152) affects
all the budget neutrality factors
described below. In general, to compute
the budget neutrality factors that are
applied to the standardized amounts, in
our simulations of FY 2010 payments
we used the standardized amount
updated by the market basket update
percentage (for FY 2010). Because the
statute now requires a reduction to the
FY 2010 market basket update, it is
necessary to recompute the FY 2010
budget neutrality factors applied to the
standardized amount by resimulating
payments with the revised FY 2010
market basket update.
To calculate the FY 2010 revised
payment rates and factors, we used the
same methodology from the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44002 through 44014) incorporating
the additional reduction required by
section 1886(b)(3)(B)(xii) of the Act (as
discussed below). We note that in
calculating the budget neutrality factors
discussed below, we included the wage
data corrections discussed in the FY
2010 IPPS/LTCH PPS final rule
correction notice (74 FR 51497 through
51498).
a. Updating the Average Standardized
Amounts
As explained in section II.B. of this
notice, in accordance with section
3401(p) of Public Law 111–148, for the
first half of FY 2010 (that is, discharges
on or after October 1, 2009 through
March 30, 2010), payments will be
based on an applicable percentage
increase that is equal to the market
basket index for IPPS hospitals (which
is defined in 42 CFR 413.40(a)(3)) in all
areas for hospitals that submit quality
data in accordance with our rules, and
the market basket index for IPPS
hospitals in all areas less 2.0 percentage
for hospitals that fail to submit quality
data in accordance with our rules. In the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 44235), we calculated that
the full market basket update equals 2.1
percent based on IHS Global Insight,
Inc.’s second quarter 2009 forecast of
the FY 2010 market basket increase. For
the second half of FY 2010 (discharges
on or after April 1, 2010 through
September 30, 2010), in accordance
with section 1886(b)(3)(B)(xii) of the
Act, as added and amended by sections
3401(a) and 10319(a) of Public Law
111–148 and section 1105 of Public Law
111–152, as well as section 3401(p) of
Public Law 111–148, hospitals are paid
based on the revised FY 2010 applicable
percentage increase. That amount is
equal to the market basket index for
IPPS hospitals in all areas reduced by
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0.25 percentage points for hospitals that
submit quality data in accordance with
our rules. For those hospitals that fail to
submit quality data in accordance with
our rules, the market basket index for
IPPS hospitals will continue to be
reduced by an additional 2.0 percentage
points (which is in addition to the 0.25
percentage point reduction required by
new section 1886(b)(3)(B)(xii) of the
Act). Therefore, based on IHS Global
Insight, Inc.’s second quarter 2009
forecast of the FY 2010 market basket
increase, the revised FY 2010 applicable
percentage increase is 1.85 percent (that
is, the FY 2010 estimate of the market
basket rate-of-increase of 2.1 percent
minus 0.25 percentage points) for
hospitals in all areas, provided the
hospital submits quality data in
accordance with our rules. For hospitals
that do not submit quality data, the
payment update to the operating
standardized amount is ¥0.15 percent
(that is, the adjusted FY 2010 estimate
of the market basket rate-of-increase of
1.85 percent minus 2.0 percentage
points). Hospitals will be paid based on
these revised payment update amounts
for discharges occurring in the second
half of FY 2010. We note that in order
to implement the requirements of
section 1886(b)(3)(B) of the Act, as
amended by sections 3401(a) and
10319(a) of Public Law 111–148 and
section 1105 of Public Law 111–152, we
are proposing to revise 42 CFR 412.64(d)
in a supplemental proposed rule
published elsewhere in this Federal
Register.
The amendments to section
1886(b)(3)(B) of the Act by sections
3401(a) and 10319(a) of Public Law
111–148 and section 1105 of Public Law
111–152, affect only the update factor
applicable to the national standardized
rate for IPPS hospitals and the hospitalspecific rates; they do not mandate any
revisions to the update factor applicable
to the Puerto Rico-specific standardized
amount. Rather, sections 1886(d)(9)(C)(i)
and (e)(4) of the Act direct us to adopt
an appropriate change factor for the FY
2010 Puerto Rico-specific standardized
amount, which we did in the FY 2010
IPPS/RY 2010 LTCH PPS final rule after
notice and consideration of public
comments. Therefore, we do not believe
that we have the authority to revise the
FY 2010 update factor for the Puerto
Rico-specific operating standardized
amount equal to the update factor
applicable to the national standardized
amount or the hospital-specific rates
(that is the market basket minus 0.25
percentage points). Accordingly, the FY
2010 update to the Puerto Rico-specific
operating standardized amount remains
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2.1 percent (that is, the FY 2010
estimate of the market basket rate-ofincrease).
b. Final FY 2010 Budget Neutrality
Adjustments Factors for Recalibration of
DRG Weights and Updated Wage Index
Using the methodology finalized in
the FY 2010 IPPS/LTCH PPS final rule
for calculating budget neutrality, for FY
2010 (74 FR 44005), we are setting the
following budget neutrality factors in
order to account for the changes made
by the Affordable Care Act: A DRG
reclassification and recalibration factor
of 0.997935 and a budget neutrality
factor of 1.000418 for changes to the
wage index. We multiplied the DRG
reclassification and recalibration budget
neutrality factor of 0.997935 by the
budget neutrality factor of 1.000418 for
changes to the wage index to determine
the DRG reclassification and
recalibration and updated wage index
budget neutrality factor of 0.998352 (as
required by sections 1886(d)(4)(C)(iii)
and 1886(d)(3)(E)(i) of the Act).
Consistent with section 3401(p) of
Public Law 111–148, we applied these
revised factors to the Federal rate on
which payments are made for
discharges occurring on or after April 1,
2010.
c. Final FY 2010 Reclassified HospitalsBudget Neutrality Adjustment
Using the methodology finalized in
the FY 2010 IPPS/LTCH PPS final rule
for calculating reclassification budget
neutrality (74 FR 44005 through 44006),
we computed the following factor in
order to account for the changes made
by the Affordable Care Act: A 0.991985
factor for reclassification budget
neutrality, as required by section
1886(d)(8)(D) of the Act. Consistent with
sections 3137(a) and 3401(p) of the
Public Law 111–148, we applied this
factor to the Federal rate that is applied
in determining payments for FY 2010
discharges occurring on or after April 1,
2010.
We note, as discussed in section II.A.
of this notice, section 3137(a) of Public
Law 111–148, as amended by section
10317 of Public Law 111–148 has now
extended the hospital reclassification
provisions of section 508 and certain
special exceptions through September
30, 2010 (FY 2010). Consistent with
section 106(a) of Public Law 109–432,
payments for providers reclassified
under section 508 and under the special
exception policy are not budget neutral.
However, section 3137(a)(2)(B) of Public
Law 111–148 requires us to also
recalculate the reclassification wage
indices of areas by excluding those
hospitals whose section 508
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reclassifications and special exceptions
wage indices have been extended, if
doing so would increase the
reclassification wage index. These
payments of providers located in section
508 and special exception areas (that are
not section 508 or special exception
providers), as well as hospitals
reclassified to those areas, are subject to
budget neutrality. Therefore, we
included the additional payments
associated with the increased payments
being made to such hospitals as a result
of section 3137(a) of Public Law 111–
148 in our calculation of the reclassified
wage index budget neutrality factor,
pursuant to section 1886(d)(8)(D) of the
Act. This section requires that aggregate
payments under section 1886 of the Act
do not increase as a result of the costs
associated with reclassifications. Our
analysis relied on the most up-to-date
wage data, that is, the corrected wage
indexes from the FY 2010 IPPS/RY 2010
LTCH PPS correction notice (74 FR
51497 through 51498) in the calculation
of the reclassified wage index budget
neutrality factor. Guidance to FIs and
A/B MACs will be issued separate from
this notice for hospital wage indexes
that are increasing as a result of the
extension of section 508
reclassifications and special exceptions.
jlentini on DSKJ8SOYB1PROD with NOTICES2
d. Final FY 2010 Rural and Imputed
Floor Budget Neutrality
We make an adjustment to the wage
index to ensure that aggregate payments
to hospitals are not affected by the rural
floor under section 4410 of the Balanced
Budget Act of 1997 (BBA) (Pub. L. 105–
33) and the imputed floor under
§ 412.64(h)(4) of the regulations. As
discussed in section III.B. of the
preamble to the FY 2009 IPPS final rule
(73 FR 48570 through 48574), we
adopted 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 phased in, over a 3-year
period, the transition from a national
rural floor budget neutrality adjustment
on the wage index to a State-level rural
floor budget neutrality adjustment on
the wage index. For FY 2010, the
blended wage index was 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.
Similar to the budget neutrality
factors above, we included the corrected
wage data from the FY 2010 IPPS/LTCH
PPS final rule correction notice and the
post reclassified wage index changes
that resulted from the extension of the
hospital reclassification provisions of
section 508 and certain special
exceptions in our calculation of the FY
2010 rural and imputed floor budget
neutrality factors. We note that section
3137(a)(2)(B) of Public Law 111–148, as
amended by section 10317 of Public
Law 111–148, requires that beginning
April 1, 2010, we include the average
hourly wage data of hospitals whose
section 508 reclassifications and special
exception wage indices were extended,
only if doing so results in a higher
reclassification wage index. We
interpret this language as referring to the
reclassification wage index that is
calculated pursuant to section
1886(d)(8)(C) of the Act, as that is the
reclassification wage index calculation
that employs average hourly wage data.
We do not interpret the language as
referring to the reclassification wage
index after it is subsequently adjusted
for rural/imputed floor budget
neutrality, as that budget neutrality
adjustment is not based upon average
hourly wage data, and is not made to
adjust for the effects of reclassifications.
Using the methodology finalized in
the FY 2010 IPPS/LTCH PPS final rule
(74 FR 44006), we calculated a national
rural and imputed floor budget
neutrality adjustment factor of 0.996686.
Each State’s rural or imputed floor
budget neutrality adjustment can be
found in table 4D–1 of the Addendum
of this notice. Additionally, in order to
ensure that national payments overall
remain budget neutral after application
of the blended national and state rural
and imputed floors, an additional
adjustment factor of 1.000010 must be
applied to the blended post reclassified,
post-floor (including budget neutrality)
wage indices. Consistent with section
3401(p) of Public Law 111–148, we
applied these factors to the wage
indexes that are applied in determining
payments for FY 2010 discharges
occurring on or after April 1, 2010.
e. Final FY 2010 Rural Community
Hospital Demonstration Program
Adjustment
Using the methodology finalized in
the FY 2010 IPPS/LTCH PPS final rule
and accounting for the projected total
annual impact of $27,141,815 for FY
2010 (74 FR 44012; and reflecting the
provisions of the Affordable Care Act)
we computed a budget neutrality
adjustment of 0.999739 for the rural
community hospital demonstration, in
order to satisfy section 410A(c)(2) of
Public Law 108–173. We note, after resimulating payments reflecting the
provisions of the Affordable Care Act,
the adjustment factor in this notice is
the same as the adjustment factor
computed in the FY 2010 IPPS/LTCH
PPS final rule. Consistent with section
3401(p) of Public Law 111–148, we
applied this factor to the Federal rate
that is applied in determining payments
for FY 2010 discharges occurring on or
after April 1, 2010.
f. Final FY 2010 Outlier Fixed-Loss Cost
Threshold
We are revising the FY 2010 outlier
fixed-loss cost threshold due to the
change in the market basket and other
budget neutrality factors described
above. Using the methodology we
finalized in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44007
through 44011) and taking into account
the provisions of the Affordable Care
Act as discussed above, we are
finalizing 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 $23,135. Consistent
with section 3401(p) of the Public Law
111–148, we are applying this threshold
for FY 2010 discharges occurring on or
after April 1, 2010.
g. Final FY 2010 Outlier Adjustment
Factors
The FY 2010 outlier adjustment
factors that are applied to the FY 2010
standardized amount for the FY 2010
outlier threshold are as follows:
Operating
standardized
amounts
National ............................................................................................................................................................
Puerto Rico ......................................................................................................................................................
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31123
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02JNN2
0.948998
0.957417
Capital federal
rate
0.947766
0.935787
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Consistent with section 3401(p) of
Public Law 111–148, we applied these
revised factors to the Federal rate on
which payments are made for
discharges occurring on or after April 1,
2010.
h. FY 2010 Standardized Amount
We recalculated the FY 2010 final
standardized amounts using the
methodology finalized in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44002 through 44014) and taking
into account the changes required by the
provisions of the Affordable Care Act as
discussed above. Tables 1A and 1B of
the Addendum to this notice contain the
final national standardized amount that
we are applying to all hospitals, except
hospitals in Puerto Rico. The final
Puerto Rico-specific amounts are shown
in Table 1C. The amounts shown in
Tables 1A and 1B differ only in that the
labor-related share applied to the final
standardized amounts in Table 1A is
68.8 percent, and the labor-related share
applied to the final standardized
amounts in Table 1B is 62 percent.
In addition, Tables 1A and 1B include
the final standardized amounts
reflecting the FY 2010 adjusted market
basket update of 1.85 percent update
and final standardized amounts
reflecting the additional 2.0 percentage
point reduction to the update applicable
for hospitals that fail to submit quality
data consistent with section
1886(b)(3)(B)(viii) of the Act (resulting
in a ¥0.15 percent update). Below is a
revised table reflecting the changes
required by the provisions of the
Affordable Care Act that details the
calculation of the final FY 2010
standardized amounts. Consistent with
section 3401(p) of Public Law 111–148,
hospitals are paid based on these rates
for discharges occurring on or after
April 1, 2010.
COMPARISON OF FY 2009 STANDARDIZED AMOUNTS TO THE FY 2010 STANDARDIZED AMOUNT WITH FULL AND REDUCED
UPDATE
Full update
(1.85 percent); wage
index is greater than
1.0000
FY 2009 Base Rate, after removing geographic reclassification
budget neutrality, demonstration budget neutrality and
outlier offset (based on the
labor-related share percentage
for FY 2010).
FY 2010 Update Factor ...............
FY 2010 DRG Recalibration and
Wage Index Budget Neutrality
Factor.
FY 2010 Reclassification Budget
Neutrality Factor.
FY 2010 Outlier Factor ................
Rural
Demonstration
Budget
Neutrality Factor.
Rate for FY 2010 .........................
Full update
(1.85 percent); wage
index is less than or
equal to 1.0000
Reduced update
(¥0.15 percent); wage
index is greater than
1.0000
Labor: $3,748.52 ............
Nonlabor: $1,699.91 .......
Labor: $3,378.03 ............
Nonlabor: $2,070.40 .......
Labor: $3,748.52 ............
Nonlabor: $1,699.91 .......
Labor: $3,378.03.
Nonlabor: $2,070.40.
1.0185 .............................
0.998352 .........................
1.0185 .............................
0.998352 .........................
0.9985 .............................
0.998352 .........................
0.9985.
0.998352.
0.991985 .........................
0.991985 .........................
0.991985 .........................
0.991985.
0.948998 .........................
0.999739 .........................
0.948998 .........................
0.999739 .........................
0.948998 .........................
0.999739 .........................
0.948998.
0.999739.
Labor: $3,587.24 ............
Nonlabor: $1,626.78 .......
Labor: $3,232.69 ............
Nonlabor: $1,981.33 .......
Labor: $3,516.80 ............
Nonlabor: $1,594.84 .......
Labor: $3,169.22.
Nonlabor: $1,942.42.
The labor-related and nonlaborrelated portions of the national average
standardized amounts for Puerto Rico
hospitals for FY 2010 are set forth in
Table 1C in this notice. (The laborrelated share applied to the Puerto Ricospecific standardized amount is either
62.1 percent or 62 percent, depending
on which is more advantageous to the
hospital.)
jlentini on DSKJ8SOYB1PROD with NOTICES2
i. Final FY 2010 Adjustments for Area
Wage Levels
The following wage index tables were
revised in this notice as a result of the
provisions of the Affordable Care Act:
Tables 2, 4A, 4B, 4C, 4D–1, 4D–2, 4J,
and 9B. (These tables can be found in
the Addendum to this notice and are
also available on the CMS Web site at
https://www.cms.gov/
AcuteInpatientPPS/WIFN/
itemdetail.asp?filter
Type=none&filterByDID=
0&sortByDID=3&sortOrder=
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descending&itemID=CMS1234175&int
NumPerPage=10.)
2. FY 2010 Prospective Payment Rates
for Acute Care Hospital Inpatient
Capital-Related Costs
Although the provisions of the
Affordable Care Act do not directly
affect the payment rates and policies for
the IPPS for capital-related costs, as
discussed in section II.C. of this notice,
we are revising the capital IPPS
standard Federal rates for FY 2010. The
revised FY 2010 capital Federal rates are
effective for discharges occurring on or
after April 1, 2010, consistent with
section 3401(p) of Public Law 111–148.
The revision to the FY 2010 capital
Federal rates is necessary because the
operating IPPS market basket and wage
index changes required by the
provisions of the Affordable Care Act
(discussed in section II.A. of this notice)
affect the budget neutrality adjustment
factor for changes in DRG classifications
and weights and the geographic
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Reduced update
(¥0.15 percent); wage
index is less than or
equal to 1.0000
adjustment factor (GAF) since the GAF
values are derived from the wage index
values (see § 412.316(a)). In addition,
the provisions of the Affordable Care
Act also necessitate a revision to the
outlier payment adjustment factor for
FY 2010 since a single set of thresholds
is used to identify outlier cases for both
inpatient operating and inpatient
capital-related payments (see
§ 412.312(c)).
In this notice, we have calculated the
final FY 2010 capital Federal rates,
offsets, and budget neutrality factors
using the same methodology we
adopted in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44014
through 44021), as revised by the FY
2010 IPPS/RY 2010 LTCH PPS
correction notice (October 7, 2009; (74
FR 51496 through 51499)), that was
used to calculate the final rates and
factors included in that rule which did
not reflect the provisions of the
Affordable Care Act. For a complete
description of this methodology, please
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see the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 44014 through
44021), as revised by the FY 2010 IPPS/
RY 2010 LTCH PPS correction notice
(74 FR 51496 through 51499).
a. Capital Standard Federal Rate Update
for FY 2010
The final factors used in the FY 2010
update framework are not affected by
the provisions of the Affordable Care
Act. Therefore, the final update factor
for FY 2010 is not being revised from
the final capital IPPS standard Federal
rate update factor discussed in section
III.A.1. of the FY 2010 IPPS/RY 2010
LTCH PPS final rule, as revised by the
FY 2010 IPPS/RY 2010 LTCH PPS
correction notice and remains at 1.2
percent for FY 2010. A full discussion
of the update framework is provided in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44015 through 44017)
in conjunction with the FY 2010 IPPS/
RY 2010 LTCH PPS correction notice
(74 FR 51498 through 51499).
jlentini on DSKJ8SOYB1PROD with NOTICES2
b. Outlier Payment Adjustment Factor
Based on the thresholds as set forth in
section II.E.2. of this notice, we estimate
that outlier payments for capital-related
costs will equal 5.22 percent for
inpatient capital-related payments based
on the final capital Federal rate in FY
2010. Therefore, we are applying an
outlier adjustment factor of 0.9478 in
determining the FY 2010 capital Federal
rate. For FY 2009, we estimated that
outlier payments for capital will equal
5.35 percent of inpatient capital-related
payments, and we established an outlier
adjustment factor of 0.9465 for FY 2009
based on the capital Federal rate in FY
2009 (73 FR 57891). Thus, we estimate
that the percentage of capital outlier
payments to total capital standard
payments for FY 2010 will be lower
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than the percentage for FY 2009. This
decrease in capital outlier payments is
primarily due to the estimated increase
in capital IPPS payments per discharge.
That is, because capital payments per
discharge are projected to increase in FY
2010 compared to FY 2009, as shown in
Table III. in section IV.C. of this notice,
fewer cases will 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 FY 2010 outlier
adjustment of 0.9478 is a 0.14 percent
change from the FY 2009 outlier
adjustment of 0.9465. Therefore, the net
change in the outlier adjustment to the
capital Federal rate for FY 2010 is
1.0014 (0.9478/0.9465). Thus, the
outlier adjustment increases the FY
2010 capital Federal rate by 0.14 percent
compared to the FY 2009 outlier
adjustment.
A single set of thresholds is used to
identify outlier cases for both inpatient
operating and inpatient capital-related
payments (see § 412.312(c)). The outlier
thresholds are set so that operating
outlier payments are projected to be 5.1
percent of total operating IPPS DRG
payments. The outlier thresholds for FY
2010 are in section II.E.1. of this notice.
For FY 2010, for discharges occurring
on or after April 1, 2010, a case qualifies
as a cost outlier if the cost for the case
plus the IME and DSH payments is
greater than the prospective payment
rate for the MS–DRG plus the fixed-loss
amount of $23,135.
c. Budget Neutrality Adjustment Factor
for Changes in DRG Classifications and
Weights and the GAF
Using the methodology discussed in
section III.A.3. of the FY 2010 IPPS/RY
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31125
2010 LTCH PPS final rule (74 FR 44018
through 44019), for FY 2010, we are
establishing a GAF/DRG budget
neutrality factor of 0.9994, which is the
product of the incremental GAF budget
neutrality factor of 0.9999 and the DRG
budget neutrality factor of 0.9995 (the
DRG budget neutrality factor remains
unchanged from the FY 2010 IPPS/RY
2010 LTCH PPS final rule). 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 adjustment from FY 2009
to FY 2010 is 0.9994. The cumulative
change in the FY 2010 capital Federal
rate due to this adjustment is 0.9911
(the product of the incremental factors
for FYs 1995 though 2009 and the
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,
and the revised FY 2010 factor of 0.9994
that reflect the effect of the provisions
of the Affordable Care Act (as discussed
in section II.C. of this notice) were used
in the calculation of the cumulative
adjustment of 0.9911 for FY 2010.) The
cumulative adjustments for MS–DRG
classifications and changes in relative
weights and for changes in the national
GAFs through FY 2010 is 0.9911. The
following table summarizes the
adjustment factors for each fiscal year:
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BILLING CODE 4120–01–C
The factor accounts for the MS–DRG
reclassifications and recalibration and
for changes in the GAFs, which include
the changes to the operating IPPS
market basket update and wage index as
required by the provisions of the
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Affordable Care Act (as discussed in
section II.A. of this notice). It also
incorporates the effects on the GAFs of
FY 2010 geographic reclassification
decisions made by the MGCRB
compared to FY 2009 decisions.
However, it does not account for
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changes in payments due to changes in
the DSH and IME adjustment factors.
d. Exceptions Payment Adjustment
Factor
The provisions of the Affordable Care
Act have no effect on capital exceptions
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payments. Therefore, the special
exceptions adjustment factor remains at
0.9998 as discussed in section III.A.4. of
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44019).
e. Capital Standard Federal Rate for FY
2010
As a result of the 1.2 percent update
and other budget neutrality factors
discussed above, we are establishing a
national capital Federal rate of $429.56
for FY 2010. As stated above, this rate
will apply to discharges occurring on or
after April 1, 2010, consistent with
section 3401(p) of Public Law 111–148.
We are providing the following chart
that shows how each of the factors and
adjustments for FY 2010 affects the
computation of the FY 2010 national
capital Federal rate in comparison to the
FY 2009 national capital Federal rate.
The FY 2010 update factor has the effect
of increasing the capital Federal rate by
1.2 percent compared to the FY 2009
capital Federal rate. The GAF/DRG
budget neutrality factor of 0.9994 has
the effect of decreasing the capital
Federal rate by 0.06 percent compared
to the FY 2009 capital Federal rate. The
FY 2010 outlier adjustment factor has
the effect of increasing the capital
Federal rate by 0.14 percent compared
to the FY 2009 capital Federal rate. The
FY 2010 exceptions payment
adjustment factor has the effect of
decreasing the capital Federal rate by
0.01 percent compared to the FY 2009
capital Federal rate. As discussed in
section VI.E.1. of the preamble of the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43926 through 43928), we did
not apply an additional adjustment to
the FY 2010 capital Federal rate for
changes in documentation and coding
that do not reflect real changes in
patients’ severity of illness. A
permanent cumulative adjustment of
¥1.5 percent (that is, a factor of 0.985)
was applied in determining 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
changes increase the national capital
Federal rate by approximately 1.27
percent compared to the FY 2009
national capital Federal rate.
COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2009 CAPITAL FEDERAL RATE AND 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
1.0004
0.9465
0.9999
3 0.9850
$424.17
FY 2010
1.0120
0.9994
0.9478
0.9998
3 0.9850
$429.56
Change
1.0120
0.9994
1.0014
0.9999
1.0000
1.0127
Percent
change
1.20
¥0.06
0.14
¥0.01
0.00
1.27
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 0.9994 GAF/DRG budget neutrality factor for FY 2010 is a net change of
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 FY 2010 outlier adjustment factor is 0.9478//0.9465, or 1.0014.
3 The documentation and coding adjustment factor includes the ¥0.6 percent in FY 2008, ¥0.9 percent in FY 2009, and no additional reduction in FY 2010.
We are also providing a chart that
shows how the revised FY 2010 capital
Federal rate, which reflects the effect of
the provisions of the Affordable Care
Act differs from the FY 2010 capital
Federal rate as presented in the FY 2010
IPPS final rule (74 FR 44020), as revised
by the FY 2010 IPPS/RY 2010 LTCH
PPS correction notice (74 FR 52499).
COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2010 CAPITAL FEDERAL RATE PRIOR TO THE ENACTMENT OF THE AFFORDABLE CARE ACT AND REVISED FY 2010 CAPITAL FEDERAL RATE REFLECTING THE EFFECT OF THE PROVISIONS
OF THE AFFORDABLE CARE ACT
FY 2010 *
Update Factor ..................................................................................................................
GAF/DRG Adjustment Factor ..........................................................................................
Outlier Adjustment Factor ................................................................................................
Exceptions Adjustment Factor .........................................................................................
MS–DRG Documentation and Coding Adjustment Factor ..............................................
Capital Federal Rate ........................................................................................................
1.0120
0.9990
0.9475
0.9998
1.0000
$429.26
Revised FY
2010 **
1.0120
0.9994
0.9478
0.9998
1.0000
$429.56
Change
1.0000
1.0004
1.0003
1.0000
1.0000
1.0007
Percent
change
0.00
0.04
0.03
0.00
0.00
0.07
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* FY 2010 capital IPPS rates and factors established in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44020), as revised by the FY
2010 IPPS/RY 2010 LTCH PPS correction notice (74 FR 52499), developed prior to the enactment of the Affordable Care Act.
** Final FY 2010 capital IPPS rates and factors reflecting the effect of the provisions of the Affordable Care Act.
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f. Special Capital Rate for Puerto Rico
Hospitals
Using the methodology discussed in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44020), with the
changes we are making to the factors
used to determine the capital rate, the
FY 2010 special capital rate for
hospitals in Puerto Rico is $203.57. (See
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44015 through 44020)
and FY 2010 IPPS/RY 2010 LTCH PPS
correction notice (74 FR 51499) for
additional information on the
calculation of the FY 2010 capital
Puerto Rico specific rate.)
F. Changes to the Payment Rates for the
LTCH PPS for RY 2010
1. LTCH PPS Standard Federal Rate for
RY 2010
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a. Revision of Certain Market Basket
Updates as Required by the Affordable
Care Act
In section V. of the Addendum of the
FY 2010 IPPS/RY 2010 final rule (74 FR
44021 through 44022), we discuss the
changes to the payment rates and factors
under the LTCH PPS for RY 2010.
Below we establish revised RY 2010
LTCH PPS rates and factors consistent
with the provisions of section
1886(m)(3) of the Act as added by
section 3401(c) of Public Law 111–148,
and section 1886(m)(4) as added by
section 3401(c) of Public Law 111–148
and amended by section 10319(b) of
Public Law 111–148, as further
amended by section 1105(b) of Public
Law 111–152, as well as section 3401(p)
of Public Law 111–148. Section
1886(m)(3)(A) of the Act provides that
in implementing the system described
in paragraph (1) [of 1886(m) of the Act]
for rate year 2010 and each subsequent
rate year, any annual update to the
standard Federal rate for discharges for
the hospital during the rate year, shall
be reduced (i) for rate year 2012 and
each subsequent rate year, by the
productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) [of the Act];
and (ii) for each of the rate years 2010
through 2019, by the other adjustment
described in paragraph (4) [of 1886(m)
of the Act]. As explained above in
section II.D. of this notice, section
1886(m)(3)(A) of the Act on its face
explicitly provides for a revised annual
update to the standard Federal rate
beginning RY 2010, thus resulting in a
single revised RY 2010 standard Federal
rate. Under section 1886(m)(3)(A)(ii),
the annual update to the standard
Federal rate shall be reduced for each of
the rate years 2010 through 2019, by the
other adjustment described in paragraph
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(4) [of 1886(m) of the Act]. Section
1886(m)(4)(A) of the Act provides for a
0.25 percentage point reduction to the
annual update for RY 2010. Therefore,
we are reducing the applicable market
basket update for RY 2010 by 0.25
percentage points, as described in
greater detail below. With respect to
section 3401(p) of Public Law 111–148,
this section provides that,
notwithstanding the previous provisions
of this section, the amendments made
by subsections (a), (c) and (d) shall not
apply to discharges occurring before
April 1, 2010. When read in
conjunction, we believe section
1886(m)(3)(A)(ii) of the Act and section
3401(p) of Public Law 111–148 provide
for a single revised RY 2010 standard
Federal rate; however, for payment
purposes, discharges occurring on or
after October 1, 2009 and before April
1, 2010, simply will not be based on the
revised RY 2010 standard Federal rate.
(In other words, for discharges occurring
on or after October 1, 2009 and on or
before March 31, 2010, the update to the
LTCH PPS Federal rate will be based on
the applicable update factor set forth in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44022).) For discharges
occurring on or after April 1, 2010
through September 30, 2010, payment is
based on the revised RY 2010 standard
Federal rate established below in this
notice.
b. Development of the RY 2010 LTCH
PPS Standard Federal Rate
As discussed in section V.A. of the
Addendum of the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
44022), 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.
As discussed in section II.D. of this
notice, consistent with sections
1886(m)(3)(A)(ii) and (4)(A) of the Act,
the market basket update under the
LTCH PPS for RY 2010 is 2.25 percent
(that is, the second quarter 2009 forecast
estimate of the RY 2010 LTCH PPS
market basket increase of 2.5 percent
minus the 0.25 percentage points
required by sections 1886(m)(3)(A)(ii)
and (4)(A) of the Act. Furthermore, as
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discussed in greater detail in the FY
2010 IPPS/RY 2010 final rule (74 FR
44022), while we continued 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 believed 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. Therefore, in
determining the update to the standard
Federal rate for RY 2010 in that same
final rule, based on an analysis of FY
2007 claims data, we established a ¥0.5
adjustment to account for the increase
in case-mix due to changes in
documentation and coding practices
that do not reflect increased patient
severity of illness from a prior period
(FY 2007).
Consistent with our historical practice
and the methodology used in the FY
2010 IPPS/RY 2010 final rule, in this
notice, we are establishing an update to
the LTCH PPS standard Federal rate for
RY 2010 based on the full forecasted
estimated increase in the LTCH PPS
market basket of 2.5 percent, adjusted
by the 0.25 percentage point reduction
required by sections 1886(m)(3)(A)(ii)
and (4)(A) of the Act and an adjustment
to account for the increase in case-mix
in a prior period (FY 2007) resulting
from changes in documentation and
coding practices of ¥0.5 percent.
Consequently, the update factor to the
standard Federal rate for RY 2010 is
1.74 percent (that is, we are applying a
factor of 1.0174 in determining the
LTCH PPS standard Federal rate for RY
2010, calculated as 1.0225 × 1 divided
by 1.005 = 1.0174 or 1.74 percent).)
Furthermore, consistent with our
historical practice of updating the
standard Federal rate for the previous
rate year, in determining the standard
Federal rate for RY 2010 in this notice,
we are applying the update factor of
1.0174 to the RY 2009 standard Federal
rate of $39,114.36 (established in the RY
2009 LTCH PPS final rule (73 FR
26788)). Furthermore, consistent with
section 3401(p) of Public Law 111–148,
this update factor to the standard
Federal rate for RY 2010 will not be
applied in determining LTCH PPS
payments for discharges occurring prior
to April 1, 2010. In other words, for
discharges occurring on or after October
1, 2009 through March 31, 2010, LTCH
PPS payments will be based on the
standard Federal rate established in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (that is, 2.0 percent).
Therefore, in this notice, under the
authority of sections 1886(m)(3)(A)(ii)
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and (4)(A) of the Act, we are specifying
that the standard Federal rate for the
LTCH PPS rate year beginning October
1, 2009 and ending September 30, 2010,
is the standard Federal rate for the
previous rate year updated by 1.74
percent. In a supplemental proposed
rule published elsewhere in this Federal
Register, we are proposing to revise the
regulations text at § 412.523(c)(3)(vi)
consistent with the 1.74 percent update
for RY 2010 that we are establishing in
this notice. In determining the standard
Federal rate for RY 2010, we are
applying the 1.0174 update factor to the
RY 2009 Federal rate of $39,114.36 (73
FR 26812). Consequently, the standard
Federal rate for RY 2010, developed
consistent with sections
1886(m)(3)(A)(ii) and (4)(A) of the Act is
$39,794.95. Furthermore, consistent
with section 3401(p) of Public Law 111–
148, we are proposing to revise
§ 412.523(c)(3)(vi)(B) in a supplemental
proposed rule published elsewhere in
this Federal Register. Section
412.523(c)(3(vi)(B) would specify that
with respect to discharges occurring on
or after October 1, 2009 and before April
1, 2010, payments are based on the
standard Federal rate in § 412.523(c)(v)
updated by 2.0 percent (that is, a
standard Federal rate of $39,896.65 (see
74 FR 44022).
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2. Adjustment for LTCH PPS High-Cost
Outlier (HCO) Cases
a. Background
When we implemented the LTCH PPS
in the FY 2003 LTCH PPS final rule, 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 (see (67 FR
56022 through 56027)). 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.
Under § 412.525(a) in the regulations
(in conjunction with § 412.503), we
make outlier payments for any
discharges if the estimated cost of a case
exceeds the adjusted LTCH PPS
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payment for the MS–LTC–DRG plus a
fixed-loss amount. Specifically, in
accordance with § 412.525(a)(3) (in
conjunction with § 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 of costs above the
outlier threshold (MS–LTC–DRG
payment plus the fixed-loss 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 hospital’s overall
hospital cost-to-charge ratio (CCR).
Under the LTCH PPS, we determine a
fixed-loss amount, that is, the maximum
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
results 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.
As discussed in section II.F.1.c. of this
notice, various sections of Public Law
111–148 and Public Law 111–152
amended section 1886(m) of the Act by
adding new paragraphs (3) and (4).
Consistent with the provisions of
sections 1886(m)(3)(A)(ii) and (4)(A) of
the Act, we are establishing a revised
standard Federal rate for RY 2010 by
applying the required 0.25 percentage
point reduction to the annual update for
RY 2010. Notwithstanding these
provisions, section 3401(p) of Public
Law 111–148 provides that the
amendments made by subsections (a),
(c) and (d) of section 3401 of of Public
Law 111–148 shall not apply to
discharges occurring before April 1,
2010. When read in conjunction we
believe section 1886(m)(3)(A) of the Act
and section 3401(p) of Public Law 111–
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148 provide for a single revised RY 2010
standard Federal rate; however, for
payment purposes, discharges occurring
on or after October 1, 2009 and before
April 1, 2010, simply will not be based
on the revised RY 2010 standard Federal
rate.
This legislative change to the standard
Federal rate for RY 2010 requires us to
revise the HCO fixed-loss amount for RY
2010 discharges occurring on or after
April 1, 2010. This is necessary in order
to maintain the requirement that the
fixed-loss amount results in estimated
total outlier payments being projected to
be equal to 8 percent of projected total
LTCH PPS payments since projected
total payments LTCH PPS for RY 2010
have changed relative to the projected
total LTCH PPS payments for RY 2010
when we established the original RY
2010 fixed-loss amount in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44029) due to the legislative change
to the standard Federal rate for RY 2010.
Specifically, the original RY 2010 HCO
fixed-loss amount of $18,425 was
determined based on the RY 2010
update of 2.0 percent and the standard
Federal rate of $39,896.65 (as
established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
44022)). However, for RY 2010 LTCH
discharges occurring on or after April 1,
2010, LTCH PPS payments are based on
the revised update of 1.74 percent and
the revised standard Federal rate of
$39,794.95 (as established in this
notice). In order to maintain that
estimated total outlier payments are
projected to be equal to 8 percent of
projected total LTCH PPS payments in
RY 2010, as adopted in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44028 though 44030), we are
revising the HCO fixed-loss amount for
RY 2010 discharges occurring on or after
April 1, 2010 (as discussed below in the
next section). (For an explanation of our
rationale for establishing an HCO
payment ‘‘target’’ of 8 percent of total
estimated LTCH payments, we refer
readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56022 through
56024).) Consistent with section 3401(p)
of Public Law 111–148, the revised HCO
fixed-loss amount established in this
notice will not apply to discharges
occurring prior to April 1, 2010. In other
words, for discharges occurring on or
after October 1, 2009 through March 31,
2010, LTCH PPS payments will be based
on the HCO fixed-loss amount
established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (that is,
$18,425 (see 74 FR 44029)).
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b. The LTCH PPS Fixed-Loss Amount
for RY 2010 Discharges Occurring On or
After April 1, 2010
For this notice, to calculate a fixedloss amount that will maintain
estimated HCO payments at the
projected 8 percent of total estimated
LTCH PPS payments for RY 2010
discharges occurring on or after April 1,
2010, we used the same methodology
and data that we used to establish the
original RY 2010 HCO fixed-loss
amount in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44028).
Specifically, we used LTCH claims data
from the March 2009 update of the FY
2008 MedPAR files and CCRs from the
March 2009 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. In addition, we continued to
use the MS–LTC–DRG classifications
and relative weights from the version of
the GROUPER that is in effect as of the
beginning of RY 2010, that is, Version
27.0 of the GROUPER and the FY 2010
MS–LTC–DRG relative weights
(discussed in section VIII.B. of the
preamble of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43951
through 43967) to determine the revised
fixed-loss amount for RY 2010
discharges occurring on or after April 1,
2010.
In order to maintain estimated HCO
payments at the projected 8 percent of
total estimated LTCH PPS payments for
RY 2010, in this notice, under the broad
authority of section 123(a)(1) of the
BBRA and section 307(b)(1) of BIPA, we
are revising the HCO fixed-loss amount
for RY 2010 from $18,425 (as
established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
44028)) to $18,615 for RY 2010
discharges occurring on or after April 1,
2010 (consistent with section 3401(p) of
Pub. L. 111–148). Thus, for RY 2010
discharges occurring on or after April 1,
2010, we will 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 $18,615). The revised HCO
fixed-loss amount of $18,615 results in
estimated total HCO payments being
projected to be equal to 8 percent of
projected total LTCH PPS payments for
RY 2010 discharges occurring on or after
April 1, 2010.
The revised fixed-loss amount of
$18,615 for RY 2010 discharges
occurring on or after April 1, 2010 is
slightly higher than the original RY
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2010 fixed-loss amount of $18,425
(established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
44029)). Because of the 0.25 percentage
point reduction to the annual update to
the standard Federal rate for RY 2010
required by sections 1886(m)(3)(A)(i)
and (4)(A) of the Act, the slight increase
in the fixed-loss amount for RY 2010 is
necessary to maintain the existing
requirement that estimated outlier
payments would equal 8 percent of
estimated total LTCH PPS payments.
(For further information on the existing
8 percent HCO ‘‘target’’ requirement, we
refer readers to the August 30, 2002
LTCH PPS final rule (67 FR 56022
through 56024.) Maintaining the fixedloss amount at the level established in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule would result in HCO
payments that are greater than the
current 8 percent regulatory
requirement because a lower fixed-loss
amount would result 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. For these reasons, we believe
that raising the fixed-loss amount is
appropriate and necessary to maintain
that estimated outlier payments would
equal 8 percent of estimated total LTCH
PPS payments as required under
§ 412.525(a).
As we noted in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
44030), under some rare circumstances,
a LTCH discharge could qualify as a
SSO case (as defined in the regulations
at § 412.529 in conjunction with
§ 412.503) and also as a HCO case. In
this scenario, a patient could be
hospitalized for less than five-sixths of
the geometric average length of stay for
the specific MS–LTC–DRG, and yet
incur extraordinarily high treatment
costs. If the costs exceeded the HCO
threshold (that is, the SSO payment plus
the fixed-loss amount), the discharge is
eligible for payment as a HCO. Thus,
effective for discharges occurring on or
after April 1, 2010 in RY 2010 for a SSO
case, 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 fixedloss amount of $18,615 and the amount
paid under the SSO policy as specified
in § 412.529).
3. Computing the Adjusted LTCH PPS
Federal Prospective Payments for RY
2010
In accordance with § 412.525, the
standard Federal rate is adjusted to
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account for differences in area wages by
multiplying the labor-related share of
the standard Federal rate by the
appropriate LTCH PPS wage index (as
shown in Tables 12A and 12B of the
Addendum of the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 44192
through 44213)). The standard Federal
rate is also adjusted to account for the
higher costs of hospitals in Alaska and
Hawaii by multiplying the nonlaborrelated share of the standard Federal
rate by the appropriate cost-of-living
factor (shown in the chart in section
V.C.5. of the Addendum of the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44026). In this notice, we are
establishing a standard Federal rate for
RY 2010 of $39,794.95, as discussed
above in section II.F.1.c. of this notice.
(As discussed above in that section,
discharges occurring on or after April 1,
2010 will be paid under the revised RY
2010 standard Federal rate established
in this notice, consistent with section
3401(p) of Pub. L. 111–148.) We
illustrate the methodology to adjust the
LTCH PPS Federal rate for RY 2010 in
the following example:
Example:
During RY 2010, a Medicare patient is
in a LTCH located in Chicago, Illinois
(CBSA 16974). The RY 2010 LTCH PPS
wage index value for CBSA 16974 is
1.0573 (Table 12A of the Addendum of
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule(74 FR 44196)). The Medicare
patient is classified into MS–LTC–DRG
28 (Spinal Procedures with MCC),
which has a relative weight for FY 2010
of 1.0834 (Table 11 of the Addendum of
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44183)).
To calculate the LTCH’s total adjusted
Federal prospective payment for this
Medicare patient, we compute the wageadjusted Federal prospective payment
amount by multiplying the unadjusted
standard Federal rate ($39,794.95) by
the labor-related share (75.779 percent)
and the wage index value (1.0471). This
wage-adjusted amount is then added to
the nonlabor-related portion of the
unadjusted standard Federal rate
(24.221 percent; adjusted for cost of
living, if applicable) to determine the
adjusted Federal rate, which is then
multiplied by the MS–LTC–DRG
relative weight (1.0933) to calculate the
total adjusted Federal LTCH PPS
prospective payment for RY 2010
($45,060.59). The table below illustrates
the components of the calculations in
this example.
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Unadjusted Standard Federal Prospective Payment Rate ..........................................................................................................
Labor-Related Share .....................................................................................................................................................................
Labor-Related Portion of the Federal Rate ..................................................................................................................................
Wage Index (CBSA 16974) ...........................................................................................................................................................
Wage-Adjusted Labor Share of Federal Rate ..............................................................................................................................
Nonlabor-Related Portion of the Federal Rate ($39,794.95 × 0.24221) .....................................................................................
Adjusted Federal Rate Amount ...................................................................................................................................................
MS–LTC–DRG 28 Relative Weight ..............................................................................................................................................
Total Adjusted Federal Prospective Payment .............................................................................................................................
III. Other Required Information
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A. Collection of Information
Requirements
This document does not impose
information collection and
recordkeeping requirements.
Consequently, it need not be reviewed
by the Office of Management and
Budget under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C. Chapter 35).
B. Waiver of Proposed Rulemaking and
Delay of Effective Date
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register and invite public comment
prior to a rule taking effect in
accordance with section 553(b) of the
Administrative Procedure Act (APA)
and section 1871 of the Act. In addition,
in accordance with section 553(d) of the
APA and section 1871(e)(1)(B)(i) of the
Act, we ordinarily provide a 30-day
delay to a substantive rule’s effective
date. For substantive rules that
constitute major rules, in accordance
with 5 U.S.C. 801, we ordinarily provide
a 60-day delay in the effective date.
None of the above processes or
effective date requirements apply,
however, when the rule in question is
interpretive, a general statement of
policy, or a rule of agency organization,
procedure or practice. They also do not
apply, when Congress, itself, has created
the rules that are to be applied, leaving
no discretion or gaps for an agency to
fill in through rulemaking.
In addition, an agency may waive
notice and comment rulemaking, as well
as any delay in effective date, when the
agency for good cause finds that notice
and public comment on the rule as well
the effective date delay are
impracticable, unnecessary, or contrary
to the public interest. In cases where an
agency finds good cause, the agency
must incorporate a statement of this
finding and its reasons in the rule
issued.
The policies being publicized in this
notice do not constitute agency
rulemaking. Rather, Congress, in the
Affordable Care Act, has already
required that the agency make these
changes, and we are simply notifying
the public of certain required revisions
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to standard Federal rates that are
effective for payment years beginning
October 1, 2009 and their implication
on payments made for discharges on or
after April 1, 2010. We also are notifying
the public of the extension of section
508 reclassifications and special
exception wage indexes for FY 2010, as
well as the wage indexes resulting from
Congress’ requirement that certain
reclassification wage indexes be
recalculated (effective April 1, 2010) to
account for such extensions. As this
notice merely informs the public of
these required modifications to the
payment rates under the IPPS and LTCH
PPS, it is not a rule and does not require
any notice and comment rulemaking. To
the extent any of the policies articulated
in this notice constitute interpretations
of Congress’s requirements or
procedures that will be used to
implement Congress’s directive, they are
interpretive rules, general statements of
policy, and/or rules of agency procedure
or practice, which are not subject to
notice-and-comment rulemaking or a
delayed effective date.
However, to the extent that notice and
comment rulemaking or a delay in
effective date or both would otherwise
apply, we find good cause to waive such
requirements. Specifically, we find it
unnecessary to undertake notice and
comment rulemaking in this instance as
this notice does not propose to make
any substantive changes to IPPS or
LTCH PPS policies or methodologies
already in effect as a matter of law, but
simply applies rate adjustments
required by Public Law 111–148 and
Public Law 111–152 to these existing
policies and methodologies. Therefore,
we would be unable to change any of
the policies governing the IPPS for FY
2010 or the LTCH PPS for RY 2010 in
response to public comment on this
notice. As the changes outlined in this
notice have already taken effect, it
would also be impracticable to
undertake notice and comment
rulemaking. For these reasons, we also
find that a waiver of any delay in
effective date, if it were otherwise
applicable, is necessary to comply with
the requirements of sections
1886(b)(3)(B)(xii) and 1886(m)(3)(A)(ii)
and (4), as added and amended by
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$39,794.95
× 0.75779
= $30,156.22
× 1.0471
= $31,576.57
+ $9,638.73
= $41,215.30
× 1.0933
= $45,060.59
Public Law 111–148 and Public Law
111–152, and sections 3137(a) and
3401(p) of Public Law 111–148, which
require that hospitals be paid on the
basis of revised rates for discharges on
or after April 1, 2010. Therefore, we find
good cause to waive notice and
comment procedures as well as any
delay in effective date, if such
procedures or delays are required at all.
IV. Regulatory Impact Analysis
A. Overall Impact
Although this notice merely reflects
the implementation of provisions of the
Affordable Care Act and does not
constitute a substantive rule, we are
nevertheless preparing this impact
analysis in the interest of ensuring that
the impacts of these changes are fully
understood. The changes in this notice
are already in effect with changes made
to PRICER and announced through a
Joint-Signature Memorandum. We have
examined the impacts of this notice as
required by Executive Order 12866 on
Regulatory Planning and Review
(September 30, 1993), the Regulatory
Flexibility Act (RFA) (September 19,
1980, Pub. L. 96–354), section 1102(b) of
the Social Security Act, section 202 of
the Unfunded Mandates Reform Act of
1995 (Pub. L. 104–4), Executive Order
13132 on Federalism (August 4, 1999),
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
the rates announced in this notice are
‘‘economically significant’’ as measured
by the $100 million threshold.
Therefore, although we do not consider
this notice to constitute a substantive
rule, we have prepared a Regulatory
Impact Analysis, that to the best of our
ability, presents the costs and benefits of
this notice.
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The RFA requires agencies to analyze
options for regulatory relief of small
businesses, if a rule has a significant
impact on a substantial number of small
entities. For purposes of the RFA, small
entities include small businesses,
nonprofit organizations, and small
government jurisdictions. We estimate
that most hospitals and most other
providers and supplies are small entities
as that term is used in the RFA. The
great majority of hospitals and most
other health care providers and
suppliers are small entities, either by
being nonprofit organizations or by
meeting the SBA definition of a small
business (having revenues of less than
$34.5 million in any 1 year). (For details
on the latest standard for health care
providers, we refer readers to page 33 of
the Table of Small Business Size
Standards at the Small Business
Administration’s Web site at https://
www.sba.gov/services/
contractingopportunities/
sizestandardstopics/tableofsize/
index.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 this notice will
have a significant impact on small
entities. Because we acknowledge that
many of the affected entities are small
entities, the analysis discussed in this
section would fulfill any requirement
for a final regulatory flexibility analysis.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 604 of the
RFA. 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, we
continue to classify these hospitals as
urban hospitals.
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. In 2010, that
threshold is approximately $135
million. This notice will not mandate
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any requirements for State, local, or
tribal governments, nor will 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.
This notice will not have a substantial
effect on State and local governments.
The following analysis, in
conjunction with the remainder of this
document, demonstrates that this notice
is consistent with the regulatory
philosophy and principles identified in
Executive Order 12866, the RFA, and
section 1102(b) of the Act. The notice
will affect payments to a substantial
number of small rural hospitals, as well
as other classes of hospitals, and the
effects on some hospitals may be
significant.
The FY 2010 IPPS/RY 2010 LTCH
PPS final rule included an impact
analysis for the changes to the IPPS
included in that rule. This notice
updates those impacts to the IPPS
operating payment system as to reflect
certain changes required by the
Affordable Care Act. Because provisions
in the Affordable Care Act were nonbudget neutral, the overall estimates for
hospitals have changed from our
estimate that was published in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44215). We estimate that the
changes in the FY 2010 IPPS/RY 2010
LTCH PPS final rule, in conjunction
with the final IPPS rates and wage index
included in this notice, will result in an
approximate $1.8 billion increase in
operating payments relative to FY 2009
or an additional 0.1 billion relative to
what was projected in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 44215). Capital payments are
estimated to increase by $173 million
relative to FY 2009 due to the changes
under the Affordable Care Act or an
additional 19 million relative to what
was published in the FY 2010 IPPS/RY
2010 LTCH PPS correction notice (74 FR
51507).
B. Revised FY 2010 Impacts on IPPS
Operating Costs
1. Analysis of Table I
Table I displays the results of our
analysis of the payment changes for FY
2010 after implementing provisions of
the Affordable Care Act, which
extended section 508 reclassifications
and special exception wage indices
through FY 2010 and which reduced the
market basket update to the
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standardized amount by 0.25 percent for
discharges occurring on or after April 1,
2010. In this notice, we describe these
revisions to the wage index,
standardized amounts, outlier
thresholds and budget neutrality factors
resulting from implementation of the
Affordable Care Act. Because of these
revisions, we are displaying all of the
impact columns that were affected by
the market basket reduction and the
section 508/special exception extension.
In addition, we are adding a column to
display the impact of the section 508/
special exception extension. These
columns show the impact of the FY
2010 changes in this notice compared to
the FY 2010 impacts as published in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 44216).
Table I displays the results of our
analysis of the changes for FY 2010
resulting from the Affordable Care Act
provisions. 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 3,517 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 2,525
hospitals located in urban areas
included in our analysis. Among these,
there are 1,377 hospitals located in large
urban areas (populations over 1
million), and 1,148 hospitals in other
urban areas (populations of 1 million or
fewer). In addition, there are 992
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
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 sections
1886(d)(8)(B) and (d)(8)(E) of the Act)
are 2,593; 1,422; 1,171; and 924,
respectively.
The next three groupings examine the
impacts of the changes on hospitals
grouped by whether or not they have
GME residency programs (teaching
hospitals that receive an IME
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adjustment) or receive DSH payments,
or some combination of these two
adjustments. There are 2,475
nonteaching hospitals in our analysis,
804 teaching hospitals with fewer than
100 residents, and 238 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
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the IME adjustment, the DSH
adjustment, both, or neither.
The next five rows examine the
impacts of the changes on rural
hospitals by special payment groups
(SCHs, RRCs, and MDHs). There were
187 RRCs, 337 SCHs, 186 MDHs, and
106 hospitals that are both SCHs and
RRCs, and 15 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
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31133
days. These data were taken from the FY
2007 or 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 last row of this
section identifies the 104 section 508
and special exception hospitals.
The final category shows the impact
of the policy changes on the 20 cardiac
hospitals in our analysis.
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1. Effects of the Changes to the MS–DRG
Reclassifications and Relative CostBased Weights With the Application of
Recalibration Budget Neutrality
(Column 1)
Column 1 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 as compared
to the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. The recalibration budget
neutrality factor was revised due to the
0.25 percentage point reduction to the
applicable percentage increase applied
to the Federal standardized amount, as
required by section 1886(b)(3)(B) of the
Act, as amended by the Affordable Care
Act. The recalibration budget neutrality
factor published in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule was
0.997941, which is applied to the
standardized amount as determined in
the final rule. The revised recalibration
budget neutrality is now 0.997935,
applied to the revised FY 2010
standardized amount. Consistent with
section 1886(d)(4)(C)(iii) of the Act, we
have calculated a recalibration budget
neutrality factor to account for the
changes in MS–DRGs and relative
weights to ensure that the overall
payment impact is budget neutral. The
change in the budget neutrality factor
did not change the impact to most
hospital categories as compared to the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule.
2. Effect of the Wage Index Changes
With the Application of the Wage
Budget Neutrality Factor (Column 2)
Column 2 shows the impact of the FY
2010 wage data, FY 2010 labor share
with the application of the wage budget
neutrality factor. For FY 2010, we
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. We refer readers to our FY
2010 final rule (74 FR 44005) for a
discussion of this policy. Because the
market basket update to the
standardized amount was reduced by
0.25 percent as required under the
Affordable Care Act, the wage budget
neutrality factor was revised. The wage
budget neutrality factor published in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule was 1.000407. For this notice, the
wage budget neutrality factor is revised
to 1.000418. This column shows the
impact of the revised wage budget
neutrality factor relative to the impact in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. The change in the budget
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neutrality factor did not change the
impact to most hospital categories as
compared to the FY 2010 IPPS/RY 2010
LTCH PPS final rule.
3. Combined Effects of MS–DRG and
Wage Index Changes (Column 3)
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. The FY
2010 MS–DRG reclassification, relative
weights and wage index have not
changed in this notice. As required by
section 1886(b)(3)(B)(xii), as added by
the Affordable Care Act, the market
basket update was reduced by ¥0.25
percent and applied to the Federal
standardized amount and the hospitalspecific rates for SCHs and MDHs.
Consequentially, the wage and
recalibration budget neutrality factors
were revised. In the FY 2010 IPPS/RY
2010 LTCH PPS final rule, we computed
a wage budget neutrality factor of
1.000411, and a recalibration budget
neutrality factor of 0.997926 (which is
applied to the Puerto Rico specific
standardized amount and the hospitalspecific rates). The product of the two
budget neutrality factors is the
cumulative wage and recalibration
budget neutrality factor. The cumulative
wage and recalibration budget neutrality
adjustment is 0.998347 or
approximately ¥0.2 percent which is
applied to the national standardized
amounts. In this notice, the recalibration
budget neutrality factor is revised to
0.997935 and the wage budget neutrality
factor has been revised to 1.000418, so
the cumulative wage and recalibration
budget neutrality factor has been revised
to 0.998352. This impact column shows
the impact of these changes for FY 2010
relative to the impact of these changes
as published in the FY 2010 IPPS/RY
2010 LTCH PPS final rule.
4. Effects of MGCRB Reclassifications
(Column 4)
Because section 3137(a) of Public Law
111–148 extended certain special
exceptions and section 508
reclassifications through FY 2010, we
analyzed the data of hospitals in labor
market areas affected by legislation,
including hospitals with Lugar
redesignations, and made our best effort
to give those extended hospitals a wage
index value that we believe results in
the highest FY 2010 wage index for
which they are eligible.
The impacts shown in Column 4 of
Table 1 reflect the effects of MGCRB
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reclassifications (and excludes the
effects of extending the section 508
reclassifications and special exception
wage indices). The overall effect of
geographic reclassification is required
by section 1886(d) (8) (D) of the Act to
be budget neutral. For the purposes of
this impact analysis, we apply an
adjustment of 0.991985, which ensures
that the effects of the section 1886(d)
(10) reclassifications are budget neutral.
The number of providers receiving a
geographic reclassification has been
reduced from 807 providers in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
to 766 hospitals because many of the
providers that received geographic
reclassification will now be reclassified
as a section 508 or receive a special
exception wage index. Urban New
England hospitals and rural Pacific
hospitals will experience a ¥0.3 and
¥0.2 percent change in payments,
respectively due to reclassification
changes compared to the FY 2010 IPPS
Final rule because many of the New
England and Pacific hospitals that had
been reclassified in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule are no
longer reclassified, and are instead
section 508 hospitals.
5. Effects of the Rural Floor and
Imputed Floor (Column 5)
As discussed in the FY 2009 IPPS/RY
2010 LTCH PPS final rule (73 FR
49070), for FY 2010, hospitals 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 column compares the revised
post-reclassification FY 2010 wage
index of providers with the rural floor
and imputed floor adjustment with the
transitional rural floor budget neutrality
factors applied to the postreclassification FY 2010 wage index of
providers with the rural floor and
imputed floor adjustment with the
transitional rural floor budget neutrality
factors applied as published in the FY
2010 IPPS final rule. Many of the
section 508 and special exception
providers had been eligible for the rural
floor, but they are no longer eligible for
the rural floor because of the higher
section 508/special exception wage
index they now receive. As a result, the
rural floor budget neutrality figures have
been revised. (The revised figures are
calculated using the corrected wage data
published October 7, 2009). The revised
national rural floor budget neutrality
factor is 0.996686. The revised State
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rural floor budget neutrality factors are
listed in Table 4D–1in this notice. The
budget neutrality factors are blended
where the transitional rural floor budget
neutrality factor is based on 50 percent
of the State rural floor budget neutrality
factor and 50 percent of the national
rural floor budget neutrality factor. A
smoothing factor of 1.000010 is applied
to the blended rural floor budget
neutrality factor to ensure that the
blended budget neutrality factors
achieve overall budget neutrality.
Generally, the decreases in this
column can be attributed to section 508
hospitals that had been receiving the
rural floor in the FY 2010 IPPS/RY 2010
LTCH PPS final no longer needing a
rural floor due to their section 508
reclassification. Urban New England
and Pacific hospitals will experience a
¥0.1 percent decrease in payments
compared to the payment estimates
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule due to the floor
because many of the hospitals in these
regions had been receiving the rural
floor but are now receiving a section 508
reclassification.
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6. Effects of the Application of Section
508 Reclassification (Column 6)
This column displays the impact of
the section 508/special exception
extensions through FY 2010. Because
this provision is not budget neutral,
hospitals, overall, will experience a 0.2
percent increase in payments. All the
hospital categories, depending on
whether section 508 and special
exception providers are represented in
those categories, will either experience
an increase or no change in payments.
Providers in urban New England and
Middle Atlantic can expect increases in
payments by 0.8 and 0.6 percent
respectively because those regions have
section 508 and special exception
providers. Similarly, rural Pacific will
experience a 0.6 percent increase in
payments due to the extensions.
7. Effects of the Wage Index Adjustment
for Out-Migration (Column 7)
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
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, postreclassification, post-floor (including
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budget neutrality), 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. Section 508 providers and
special exception providers that may
have qualified for the out-migration
adjustment in the FY 2010 IPPS/RY
2010 LTCH PPS final rule will now
receive their section 508 reclassification
or special exception wage index instead.
This column shows the impact of the
out-migration adjustment in this notice
compared to the out-migration
adjustment in the FY 2010 IPPS/RY
2010 LTCH PPS final rule. The
provisions in the Affordable Care Act
did not have a significant impact on the
section 505 outmigration adjustment
which is reflected in the 0.0 percent
change in payments compared to the FY
2010 IPPS/RY 2010 LTCH PPS final
rule.
8. Effects of All Changes for FY 2010
(Column 8)
Column 8 compares our estimate of
the percent change in payments per case
for FY 2010 including the provisions in
this notice compared to our percent
change in payments per case for FY
2010 as published in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule. The
average increase for all hospitals is
approximately 0.1 percent compared to
the original estimated increase of
payments per case for FY 2010
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule. This increase
includes the effects of the 0.25 percent
reduction to the market basket update
for FY 2010, which is used for
determining payment for discharges on
or after April 1, 2010, reducing FY 2010
payments by 0.1 percent. This analysis
accounts for the impact of the extension
of certain special exceptions and section
508 reclassifications for FY 2010. This
non-budget neutral provision, which
increases the wage index for 104
providers, results in an estimated
increase in payments by 0.2 percent.
There might also be interactive effects
among the various factors comprising
the payment system that we are not able
to isolate.
The overall change in payments per
case for hospitals in FY 2010 as
specified in this notice is estimated to
increase by 0.1 percent compared to the
payment estimates published in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule. Hospitals in urban areas will
experience an estimated 0.1 percent
increase in payments per case compared
to the estimate published FY 2010 IPPS/
RY 2010 LTCH PPS final rule. Hospital
payments per case in rural areas are
estimated to decrease 0.1 percent. Urban
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hospitals experience increases under the
Affordable Care Act due to the
extension of section 508
reclassifications, which offset the 0.25
market basket reduction; while rural
hospitals experience decreases under
the Affordable Care Act due to the -0.25
market basket reduction.
Among urban census divisions, the
largest estimated payment increases
compared to the FY 2010 IPPS/RY 2010
LTCH PPS final rule will be 0.2 in New
England and 0.3 percent in the Middle
Atlantic region, generally attributed to
section 508 reclassifications and special
exception wage indexes. Urban
hospitals located in the West South
Central, West North Central, and
Mountain region will experience a 0.1
percent decrease in payments compared
to the FY 2010 IPPS/RY 2010 LTCH PPS
final rule because of the 0.25 market
basket reduction applied to the second
half of FY 2010.
Among the rural regions in Column 8,
rural mountain hospitals can expect a
-0.5 percent decrease in payments due
to the market basket reduction and
changes in the outlier estimates under
the Affordable Care Act. Rural Pacific
hospitals can expect a 0.2 percent
increase in payments compared to the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule because of higher wage indexes as
a result of section 508 reclassification.
Among special categories of rural
hospitals in Column 8, the MDHs will
receive an estimated decrease in
payments of 0.2 percent, and the SCHs
will experience an estimated decrease in
payments by 0.3 percent due to the
market basket reduction.
Urban hospitals reclassified for FY
2010 are anticipated to receive an
increase of 0.2 percent, while urban
hospitals that are not reclassified for FY
2010 will not experience a change in
payments. Rural hospitals reclassifying
for FY 2010 are anticipated to receive a
0.1 percent payment decrease and rural
hospitals that are not reclassifying are
estimated to receive a payment decrease
of 0.2 percent compared to the FY 2010
IPPS/RY 2010 LTCH PPS final rule.
9. Analysis of Table II
Table II presents the projected impact
of the changes for FY 2010 for urban
and rural hospitals and for the different
categories shown in Table I. It compares
the estimated payments per case for FY
2010 including the provisions in this
notice with the average estimated
payments per case for FY 2010 as
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule. Thus, the table
presents, in terms of average dollar
amounts paid per discharge, the
combined effects of the changes
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presented in Table I. The percentage
changes shown in the last column of
Table II equal the percentage changes in
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average payments from Column 8 of
Table I.
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D. Effects of Payment Rate Changes and
Policy Changes Under the LTCH PPS
1. Introduction and General
Considerations
In section II.F. of this notice, we are
setting forth the revised payment rates
for the RY 2010 LTCH PPS in
accordance with the Affordable Care
Act. In this section of the notice, we
discuss the impact of the changes to the
payment rates, factors, and other
payment rate policies related to the
LTCH PPS that are presented in the
notice 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 rates, factors,
and policies presented in this notice,
including the revised RY 2010 rate that
accounts for the 0.25 reduction to the
market basket update under which
discharges on or after April 1, 2010 are
paid. As discussed in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule (74 FR
44022), we updated the RY 2009
standard Federal rate by 2.0 percent to
establish the RY 2010 standard Federal
rate at $39,896.65. As required under
Public Law 111–148 and Public Law
111–152, we have reduced the annual
update to the standard Federal rate by
0.25 percentage points such that that RY
2010 standard Federal rate is
$39,794.95. Discharges occurring on or
after April 1, 2010 are paid under the
revised standard Federal rate consistent
with section 3401(p) of Public Law 111–
148. In the FY 2010 IPPS/RY 2010
LTCH final rule (74 FR 44233), we had
estimated that LTCH payments would
increase by 3.3 percent relative to RY
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2009. Because only discharges for half
of RY 2010 (that is, discharges occurring
on or after April 1, 2010) are paid under
the revised RY 2010 standard Federal
rate which incorporates the 0.25
percentage point reduction, we estimate
that LTCH payments will increase by
3.2 percent relative to RY 2009. In other
words, we estimate that LTCH payments
will be reduced by 0.1 percent relative
to our estimates published in the FY
2010 IPPS/RY 2010 LTCH final rule.
In the FY 2010 IPPS/RY 2010 LTCH
final rule (74 FR 44230), we had
estimated RY 2009 LTCH PPS payments
to be approximately $4.609 billion and
RY 2010 LTCH PPS payments to be
approximately $4.762 billion which
resulted in a $153 million projected
increase in estimated aggregate LTCH
PPS payments from RY 2009 to RY
2010. Based on the changes in this
notice, we now estimate RY 2010 LTCH
PPS payments to be approximately
$4.752 billion, which results in a
projected increase in aggregate LTCH
PPS payments of $142 million in RY
2010 relative to RY 2009. Our RY 2010
estimate is approximately $11 million
less than our estimate in the FY 2010
IPPS/RY 2010 LTCH final rule.
Table IV shows the payment impact of
the changes described in this notice
required under the Affordable Care Act
effective for RY 2010. Table IV shows
the impact of the payments as projected
in the FY 2010 IPPS/RY 2010 LTCH
final rule and the change in payments
effective in this notice for RY 2010. We
estimate a 0.1 percent decrease in
payments per discharge in this notice
compared to the RY 2010 estimated
payments per discharge published in
the FY 2010 IPPS/RY 2010 LTCH final
rule. This decrease is attributable to the
0.25 percentage point reduction to the
annual update applied to the standard
Federal rate as required by sections
1886(m)(3)(ii) and (4) of the Act. As
Table IV shows, the change attributable
solely to the standard Federal rate is
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projected to result in a decrease of 0.2
percent in estimated RY 2010 payments
per discharge from the FY 2010 IPPS/RY
2010 LTCH final rule to the revised RY
2010 payments per discharge in this
notice.
The projected change in payments per
discharge from the RY 2010 published
in the FY 2010 IPPS/RY 2010 LTCH
final rule to estimated RY 2010
payments per discharge in this notice is
¥0.1 percent (shown in Column 7).
This projected decrease in payments is
attributable to the impacts of the change
to the standard Federal rate required
under the Affordable Care Act under
which discharges occurring on or after
April 1, 2010 (¥0.2 percent in Column
6) are paid.
2. 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 0.1 decrease in
estimated payments per discharge for
the RY 2010 LTCH as compared to the
RY 2010 estimated payments per
discharge published in the FY 2010
IPPS/RY 2010 LTCH final rule for rural
LTCHs that will result from the changes
presented in this notice (that is, the
revised update to the standard Federal
rate discussed in section II.F.1. of this
notice). This estimated impact is based
on the data for the 26 rural LTCHs in
our database of 399 LTCHs, for which
complete data were available.
3. Anticipated Effects of LTCH PPS
Payment Rate Change and Policy
Changes
We discuss the impact of the 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 II.F. of
this notice.
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a. 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 IV.D.1. of this
notice, we project an increase in
aggregate LTCH PPS payments in RY
2010 of approximately $142 million
based on the 399 LTCHs in our
database.
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b. 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 short-stay outliers (SSOs).
Furthermore, LTCHs may also receive
high cost outlier (HCO) payments for
those cases that qualify based on the
threshold established each rate year.
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:
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• Location: Large urban/other urban/
rural.
• Participation date.
• Ownership control.
• Census region.
• Bed size.
To estimate the impacts of the
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 2010 published in the
FY 2010 IPPS/RY 2010 LTCH final rule
and to estimate revised payments for RY
2010 in accordance with the changes in
this notice for 399 LTCHs.
c. 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 2010 in this notice, we
applied the revised RY 2010 standard
Federal rate (that is, $39,794.95, under
which LTCH discharges occurring on or
after April 1, 2010, and through
September 30, 2010 are paid). For
modeling estimated LTCH PPS
payments for RY 2010 as published in
the FY 2010 IPPS/RY 2010 LTCH final
rule, we applied the published RY 2010
standard Federal rate of $39,896.65,
under which LTCH discharges occurring
on or after October 1, 2009 through
March 31, 2010 are paid).
These impacts reflect the estimated
‘‘losses’’ or ‘‘gains’’ among the various
classifications of LTCHs from the
previously published 2010 LTCH PPS
rate year to the revised 2010 LTCH PPS
rate year based on the payment rates
and policy changes presented in this
notice. Table IV illustrates the estimated
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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 original RY 2010 payment per
discharge (that is, prior to the enactment
of the Affordable Care Act, as described
above).
• The fifth column shows the
estimated revised RY 2010 payment per
discharge (that is, reflecting the
provisions of the Affordable Care Act, as
described above).
• The sixth column shows the
percentage change in estimated
payments per discharge due to changes
to the standard Federal rate (as
discussed in section II.F. of this notice).
It compares the percent change in
estimated payments per discharge in the
originally published FY 2010 IPPS/RY
2010 LTCH PPS final rule (prior to the
enactment of the Affordable Care Act) to
the revised estimated payments per
discharge in this RY 2010 LTCH PPS
notice (reflecting the provisions of the
Affordable Care Act).
• The seventh column shows the
percentage change in estimated
payments per discharge from the
originally published RY 2010 LTCH PPS
(prior to the enactment of the Affordable
Care Act, as shown in Column 4) to the
revised RY 2010 LTCH PPS (reflecting
the provisions of the Affordable Care
Act, as shown in Column 5) for all
changes.
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d. 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 LTCH PPS payment rate
and policy changes presented in this
notice. The impact analysis in Table IV
shows that estimated payments per
discharge are expected to decrease
approximately 0.1 percent, on average,
for all LTCHs comparing the RY 2010
estimated LTCH PPS payments
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule to the RY 2010
estimated LTCH PPS payments as a
result of the payment rate and policy
changes presented in this notice. The
0.1 percent decrease is due to the 0.25
percentage point reduction to the
annual update to the standard Federal
rate required under the Affordable Care
Act. Because only discharges on or after
April 1, 2010 will be paid under the
revised standard Federal rate, which
incorporates the 0.25 percentage point
reduction to the annual update for RY
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2010, the required 0.25 percentage point
reduction will only reduce aggregate RY
2010 payments by 0.1 percent. All
hospital categories are equally affected
by the provision and will all experience
an approximate 0.1 percent decrease in
payments relative to the payment
estimates in the FY 2010 IPPS/RY 2010
LTCH final rule.
4. Effect on the Medicare Program
As noted previously, we project that
the provisions of this notice will result
in an increase in estimated aggregate
LTCH PPS payments in RY 2010 of
approximately $142 million (or about
0.1 percent less than previously
estimated in the FY 2010 IPPS/RY 2010
LTCH final rule) for the 399 LTCHs in
our database.
5. 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
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paying prospectively for LTCH services
would enhance the efficiency of the
Medicare program.
E. Alternatives Considered
This notice provides descriptions of
the statutory provisions that are
addressed, identifies policies, and
presents rationales for our decisions
and, where relevant, alternatives that
were considered.
F. Overall Conclusion
1. Acute Care Hospitals
Table I of section IV.B. of this notice
demonstrates the estimated
distributional impact of the IPPS budget
neutrality requirements for the MS–DRG
and wage index changes, and for the
wage index reclassifications under the
MGCRB. Table I also shows an overall
increase of 0.1 percent in operating
payments in this notice relative to the
operating payments published in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule. We estimate that operating
payments will increase by
approximately $75.7 million in FY 2010
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relative to our published FY 2010
estimate in the FY 2010 IPPS/RY 2010
LTCH PPS final rule. This accounts for
the projected savings associated with
the 0.25 percentage point reduction to
the market basket required by section
1886(b)(3)(B) of the Act, as amended by
the Affordable Care Act, and the
extension of section 508 reclassification
(a non-budget neutral provision)
required under the Affordable Care Act.
We estimate that capital payments will
increase by 1.9 percent per case relative
to FY 2009, as shown in Table III of
section IV.C. of this notice. Therefore,
we project that the increase in capital
payments in FY 2010 compared to FY
2009 will be approximately $173
million, which is $19 million higher
than what was published in the FY 2010
IPPS/RY 2010 LTCH PPS correction
notice (74 FR 51507). The cumulative
operating and capital payments should
result in a net increase of $94.7 million
to IPPS providers under the changes in
this notice relative to our previously
published estimates in the FY 2010
IPPS/RY 2010 LTCH PPS final rule and
correction notice. The discussions
presented in the previous pages, in
combination with the rest of this notice,
constitute a regulatory impact analysis.
2. LTCHs
Overall, LTCHs are projected to
experience an increase in estimated
payments per discharge in RY 2010
relative to RY 2009. However, our
projected increase in estimated
payments per discharge in RY 2010 has
decreased due to the applicable changes
specified under the Affordable Care Act.
Specifically, the decrease in our RY
2010 payment estimates is primarily
due to the ¥0.25 percentage point
reduction to annual update applied to
the standard Federal rate under which
discharges occurring on or after April 1,
2010 are paid. In the impact analysis,
we are using the rates, factors, and
policies presented in this notice 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 $142 million relative to RY
2009, which is a decrease of
approximately $11 million (or about 0.1
percent) relative to the estimates of RY
2010 LTCH PPS payments previously
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule.
G. Accounting Statements
1. 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 notice as they relate
to acute care hospitals. This table
provides our best estimate of the change
in Medicare payments to providers as a
result of the changes to the IPPS
presented in this notice. All
expenditures are classified as transfers
to Medicare providers.
TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS FROM PUBLISHED
FY 2010 TO REVISED FY 2010
Category
Transfers
Annualized Monetized Transfers ..............................................................
From Whom to Whom ..............................................................................
Total ...................................................................................................
2. LTCHs
As discussed in section IV.D. of this
notice, the impact analysis for the
changes under the LTCH PPS for this
notice projects an increase in estimated
aggregate payments of approximately
$142 million compared to RY 2009, a
decrease of $11 million compared our
previously published estimates for the
$94.7 million.
Federal Government to IPPS Medicare Providers.
$94.7 million.
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 below, we
have prepared an accounting statement
showing the classification of the
expenditures associated with the
provisions of this notice as they relate
to changes to the LTCH PPS. Table VI
provides our best estimate of the
increase in Medicare payments under
the LTCH PPS as a result of the
provisions presented in this notice
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 PUBLISHED 2010 LTCH
PPS RATE YEAR TO THE REVISED 2010 LTCH PPS RATE YEAR
Category
Transfers
Annualized Monetized Transfers ..............................................................
From Whom to Whom ..............................................................................
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Positive transfer—Estimated increase in expenditures: $11 million.
LTCH PPS Medicare Providers to Federal Government.
$11 million.
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H. Executive Order 12866
In accordance with the provisions of
Executive Order 12866, the Executive
Office of Management and Budget
reviewed this notice.
Authority: (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare—
Hospital Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: May 13, 2010.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: May 18, 2010.
Kathleen Sebelius,
Secretary.
Addendum
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This addendum includes tables referred to
throughout the notice which contain data
relating to the final FY 2010 wage indices
and the hospital reclassifications and
payment amounts for operating and capitalrelated costs discussed in section II. of this
notice.
Table 1A—National Adjusted Operating
Standardized Amounts, Labor/Nonlabor (69.7
Percent Labor Share/30.3 Percent Nonlabor
Share If Wage Index Is Greater Than 1);
Applicable to payments made for discharges
on or after October 1, 2009 through
discharges on or before September 30, 2010
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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); Applicable to payments made for
discharges on or after October 1, 2009
through discharges on or before September
30, 2010
Table 1C—Adjusted Operating
Standardized Amounts for Puerto Rico,
Labor/Nonlabor; Applicable to payments
made for discharges on or after October 1,
2009 through discharges on or before
September 30, 2010
Table 1D—Capital Standard Federal
Payment Rate: Applicable to payments made
for discharges on or after October 1, 2009
through discharges on or before September
30, 2010
Table 1E.—LTCH Standard Federal
Prospective Payment Rate; Applicable to
payments made for discharges on or after
October 1, 2009 through discharges on or
before September 30, 2010
Table 2.—Hospital Case-Mix Indexes For
Discharges Occurring In Federal Fiscal Year
2008; Hospital Wage Indexes For Federal
Fiscal Year 2010 (April 1, 2010 through
September 30, 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 4A.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
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Urban Areas by CBSA—FY 2010 (April 1,
2010 through September 30, 2010)
Table 4B.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Rural Areas by CBSA—FY 2010 (April 1,
2010 through September 30, 2010)
Table 4C.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Hospitals That Are Reclassified by CBSA—
FY 2010 (April 1, 2010 through September
30, 2010)
Table 4D–1.—State Specific Rural Floor
Budget Neutrality Factors—FY 2010 (April 1,
2010 through September 30, 2010)
Table 4D–2.—Urban Areas with Hospitals
Receiving the Statewide Rural Floor or
Imputed Wage Index— FY 2010 (April 1,
2010 through September 30, 2010)
Table 4J.—Out-Migration Adjustment—FY
2010 (April 1, 2010 through September 30,
2010)
Table 9B.—Hospital Reclassifications and
Redesignations by Individual Hospital Under
Section 508 of Pub. L. 108–173 for FY 2010
(Revised as of April 1, 2010 and Effective
October 1, 2009 through September 30, 2010)
Table 10.—Geometric Mean Plus the Lesser
of 0.75 of the National Adjusted Operating
Standardized Payment Amount (Increased to
Reflect the Difference Between Costs and
Charges) or 0.75 of One Standard Deviation
of Mean Charges by Diagnosis-Related Group
(DRG)—April 2010 (Applicable to
Applications for FY 2011 New Technology
Add-On Payments)
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Agencies
[Federal Register Volume 75, Number 105 (Wednesday, June 2, 2010)]
[Notices]
[Pages 31118-31222]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-12563]
Federal Register / Vol. 75, No. 105 / Wednesday, June 2, 2010 /
Notices
[[Page 31118]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-1406-N]
RIN 0938-AQ03
Medicare Program; 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:
Final Fiscal Year 2010 Wage Indices and Payment Rates Implementing the
Affordable Care Act
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This notice contains the final wage indices, hospital
reclassifications, payment rates, impacts, and other related tables
effective for the fiscal year (FY) 2010 hospital inpatient prospective
payment systems (IPPS) and rate year 2010 long-term care hospital
(LTCH) prospective payment system (PPS). The rates, tables, and impacts
included in this notice reflect changes required by or resulting from
the implementation of several provisions of the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation
Act of 2010. These provisions require the extension of the expiration
date for certain geographic reclassifications and special exception
wage indices through September 30, 2010; and certain market basket
updates for the IPPS and LTCH PPS.
DATES: Effective Date: The revised standard Federal rates described in
this notice are effective for payment years beginning October 1, 2009.
Hospitals are paid based on the rates published in this notice for
discharges on or after April 1, 2010.
FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786-4487.
SUPPLEMENTARY INFORMATION:
I. Background
The final rule setting forth the Medicare fiscal year (FY) 2010
hospital inpatient prospective payment systems (IPPS) for acute care
hospitals and the rate year (RY) 2010 long-term care hospital (LTCH)
prospective payment system (PPS) final rule (hereinafter referred to as
the FY 2010 IPPS/RY 2010 LTCH PPS final rule) was published in the
August 27, 2009 Federal Register (74 FR 43754) and subsequently
corrected in an October 7, 2009 notice (74 FR 51496).
On March 23, 2010, the Patient Protection and Affordable Care Act
(Pub. L. 111-148) was enacted. Following enactment of Public Law 111-
148, the Health Care and Education Reconciliation Act of 2010, Public
Law 111-152 (enacted on March 30, 2010), amended certain provisions of
Public Law 111-148. (These public laws are collectively known as the
Affordable Care Act.) Several of the provisions of the Affordable Care
Act affect the FY 2010 IPPS and the RY 2010 LTCH PPS. However, due to
the timing of the passage of the legislation, we noted in the FY 2011
IPPS and LTCH PPS proposed rule published in the May 4, 2010 Federal
Register (75 FR 23852) that we would issue separate Federal Register
documents addressing the provisions of the Affordable Care Act that
affect our final policies and payment rates for FY 2010 IPPS and the RY
2010 LTCH PPS and proposed policies for FY 2011 under the IPPS and the
LTCH PPS.
This notice addresses the provisions of the Affordable Care Act
that impact the FY 2010 IPPS/RY 2010 LTCH PPS final wage index tables,
rates, and impacts.
II. Final FY 2010 Wage Indices and Payment Rates
A. Final FY 2010 Hospital Wage Index Reclassifications/Redesignations
1. Section 508 Extension
Section 3137(a) of Public Law 111-148, as amended by section 10317
of Public Law 111-148, extends through the end of FY 2010 wage index
reclassifications under section 508 of the Medicare Prescription Drug
Improvement and Modernization Act of 2003 (MMA) (Pub. L. 108-173) and
certain special exceptions (for example, those special exceptions
contained in the final rule promulgated in the Federal Register on
August 11, 2004 (69 FR 49105 and 49107) extended under section 117 of
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub.
L. 110-173)) and further extended under section 124 of the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L.
110-275).
Under section 508 of Public Law 108-173, a qualifying hospital
could appeal the wage index classification otherwise applicable to the
hospital and apply for reclassification to another area of the State in
which the hospital is located (or, at the discretion of the Secretary),
to an area within a contiguous State. We implemented this process
through notices published in the Federal Register on January 6, 2004
(69 FR 661), and February 13, 2004 (69 FR 7340). Such reclassifications
were applicable to discharges occurring during the 3-year period
beginning April 1, 2004, and ending March 31, 2007. Section 106(a) of
the Medicare Improvements and Extension Act, Division B of the Tax
Relief and Health Care Act of 2006 (MIEA-TRHCA) extended any geographic
reclassifications of hospitals that were made under section 508 and
that would expire on March 31, 2007. In the March 23, 2007 Federal
Register (72 FR 3799), we published a notice that indicated how we were
implementing section 106(a) of the MIEA-TRHCA through September 30,
2007. Section 117 of the MMSEA further extended section 508
reclassifications and certain special exceptions through September 30,
2008. On February 22, 2008 in the Federal Register (73 FR 9807), we
published a notice regarding our implementation of section 117 of the
MMSEA. Section 124 of MIPPA, Public Law 110-275, then further extended
section 508 reclassifications and certain special exceptions through
September 30, 2009. Final rates incorporating these MIPPA extensions
were published in a Federal Register notice on October 3, 2008 (73 FR
57888).
Section 3137(a) of Public Law 111-148, as amended by section 10317
of Public Law 111-148 has now extended the hospital reclassification
provisions of section 508 and certain special exceptions through
September 30, 2010 (FY 2010). Furthermore, section 3137(a)(2)(B) of
Public Law 111-148 contains a new provision not previously included in
prior mid-year extensions to section 508 requiring that ``beginning on
April 1, 2010, in determining the wage index applicable to hospitals
that qualify for wage index reclassification, the Secretary shall
include the average hourly wage data of hospitals whose
reclassification was extended pursuant to the amendment made by
paragraph (1) only if including such data results in a higher
applicable reclassified wage index.'' Finally, section 3401 of Public
Law 111-148, as amended by section 10319 of Public Law 111-148 and
section 1105 of Public Law 111-152, imposes a 0.25 percent decrease in
the market basket calculated under section 1886(b)(3)(B) of the Social
Security Act. As a result of these changes, we have recalculated
certain wage indexes, recalculated the standardized amounts, and
revised budget neutrality factors (including rural floor budget
neutrality) to account for the new legislation.
For hospitals receiving an extension of their section 508
reclassifications or special exceptions, we have used the rates
contained in the August 27, 2009
[[Page 31119]]
Federal Register, and as corrected in the October 7, 2009 Federal
Register, unless the rates published in this notice result in a higher
applicable wage index. Those section 508 and special exception
providers that are receiving an extension through September 30, 2010
are shown in Table 9B of the Addendum to this notice. Please note we
are not making reclassification decisions on behalf of hospitals in
this extension as we did with the MIPPA provision. (Because MIPPA was
enacted prior to the finalization of the FY 2009 rates, we were able to
modify reclassifications that had not yet taken effect. In contrast,
the Affordable Care Act has been enacted in the middle of the fiscal
year, and reclassifications are already in effect). As explained in
this notice, the intervening Affordable Care Act legislation affects
only those labor market areas including hospitals whose
reclassifications/special exceptions are extended, or areas to which
such hospitals were reclassified for FY 2010.
When originally implementing section 508 of the MMA, we required
each hospital to submit a request in writing by February 15, 2004, to
the Medicare Geographic Classification Review Board (MGCRB), with a
copy to CMS. We will neither require nor accept written requests for
the extension required by the Affordable Care Act, since that
legislation simply provides a 1-year continuation through the end of FY
2010 for any section 508 reclassifications and special exceptions wage
indexes that expired September 30, 2009.
2. FY 2010 Final Wage Indices
The final wage index values for FY 2010 (except those for hospitals
receiving wage index adjustments under section 505 of Pub. L. 108-173)
are included in Tables 4A, 4B, and 4C of the Addendum to this notice
and are posted on our Web site at https://www.cms.hhs.gov/AcuteInpatientPPS/. For hospitals that are receiving a wage index
adjustment under section 505 of Public Law 108-173, only one county's
adjustment factor changed due to the implementation of section
3137(a)(2)(B) of Public Law 111-148; therefore only that revised factor
is shown in abbreviated Table 4J of the Addendum to this notice. In
addition, Table 2 of the Addendum to this notice includes the final
wage index values and occupational mix adjusted average hourly wage
(from the FYs 2004, 2005, and 2006 cost reporting periods) for each
hospital. Table 4D-1 of the Addendum of this notice lists the State
rural floor budget neutrality factors for FY 2010. Table 4D-2 of this
Addendum of this notice lists the urban areas with hospitals receiving
the State rural floor or imputed rural floor wage index. Table 9B of
the Addendum of this notice lists hospitals that are section 508 and
special exception providers which have their reclassifications extended
until September 30, 2010.
B. Inpatient Hospital Market Basket Update
1. FY 2010 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.'' Prior
to enactment of the Affordable Care Act, section 1886(b)(3)(B)(i)(XX)
of the Act set the applicable percentage increase for FY 2007 and each
subsequent fiscal year as equal to the rate-of-increase in the 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 an additional 2.0 percentage
points. In accordance with these statutory provisions, in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43850), we finalized an
applicable percentage increase equal to the full market basket update
of 2.1 percent based on IHS Global Insight, Inc.'s second quarter 2009
forecast of the FY 2010 market basket increase, provided the hospital
submits quality data in accordance with our rules. For hospitals that
do not submit quality data, the FY 2010 update to the operating
standardized amount equals 0.1 percent (that is, the FY 2010 estimate
of the market basket rate-of-increase minus 2.0 percentage points).
Sections 3401(a) and 10319(a) of Public Law 111-148 and section
1105 of Public Law 111-152, amend section 1886(b)(3)(B) of the Act.
Specifically, section 1886(b)(3)(B)(xii)(I) of the Act, as added and
amended by these sections of the Affordable Care Act, requires the
Secretary to reduce the applicable percentage increase for FY 2010 by
0.25 percentage point, 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 minus 0.25 percentage point less an additional 2.0 percentage
points. Section 1886(b)(3)(B)(xii) of the Act, as added and amended by
these sections of the Affordable Care Act, further states that the
application of this adjustment ``may result in the applicable
percentage increase described in clause (i) being less than 0.0 for a
fiscal year.'' Although these amendments modify the applicable
percentage increase applicable to the FY 2010 rates under the IPPS,
section 3401(p) of Public Law 111-148 states that the amendments made
by section 3401(a) of Public Law 111-148 shall not apply to discharges
occurring prior to April 1, 2010. In other words, for discharges
occurring on or after October 1, 2009 and prior to April 1, 2010,
payment for a hospital's inpatient operating costs under the IPPS will
be based on the applicable percentage increase set forth in the FY 2010
IPPS/RY 2010 LTCH PPS final rule.
Consistent with section 3401(p) of Public Law 111-148, for the
first half of FY 2010 (that is, discharges on or after October 1, 2009
through March 30, 2010), payment will be made based on the applicable
percentage increase equaling the market basket index for IPPS hospitals
(which is defined in 42 CFR 413.40(a)(3)) in all areas for hospitals
that submit quality data in accordance with our rules, and the market
basket index for IPPS hospitals in all areas less 2.0 percentage for
hospitals that fail to submit quality data in accordance with our
rules. As noted previously, in the FY 2010 IPPS/RY 2010 LTCH PPS final
rule, we calculated that the full market basket update equals 2.1
percent based on IHS Global Insight, Inc.'s second quarter 2009
forecast of the FY 2010 market basket increase. Consistent with section
1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401(a)
and 10319(a) of Public Law 111-148 and section 1105 of Public Law 111-
152, and section 3401(p) of Public Law 111-148, payment for discharges
during the second half of FY 2010 (discharges on or after April 1, 2010
through September 30, 2010), will reflect the revised FY 2010 rate,
which includes the 0.25 percentage point reduction for hospitals that
submit quality data in accordance with our rules. For those hospitals
that fail to submit quality data in accordance with our rules, we are
reducing the market basket index for IPPS hospitals by an additional
2.0 percentage points (which is in addition to the 0.25 percentage
point reduction required by section 1886(b)(3)(B)(xii) of the Act, as
added and amended by sections 3401(a) and 10319(a) of Pub. L. 111-148
and section 1105 of Pub. L. 111-152).
[[Page 31120]]
Therefore, based on IHS Global Insight, Inc.'s second quarter 2009
forecast of the FY 2010 market basket increase, the FY 2010 applicable
percentage increase, on which payment for discharges occurring in the
second half of FY 2010 is based, is 1.85 percent (that is, the FY 2010
estimate of the market basket rate-of-increase of 2.1 percent minus
0.25 percentage points) for hospitals in all areas, provided the
hospital submits quality data in accordance with our rules. For
hospitals that do not submit quality data, the payment update to the
operating standardized amount is -0.15 percent (that is, the adjusted
FY 2010 estimate of the market basket rate-of-increase of 1.85 percent
minus 2.0 percentage points). As provided by these provisions, we are
proposing to revise 42 CFR 412.64(d) in a supplemental proposed rule
published elsewhere in this Federal Register.
Section 1886(b)(3)(B)(iv)(IV) of the Act provides that the
applicable percentage increase applicable to the hospital-specific
rates for SCHs and MDHs equals the applicable percentage increase 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). Because the
statute defines the applicable percentage increase for SCHs and MDHs as
equal to the applicable percentage increase under section
1886(b)(3)(B)(i) of the Act for other IPPS hospitals, the update to the
hospital specific rates for SCHs and MDHs is also subject to the
amendments to section 1886(b)(3)(B)(i) of the Act made by sections
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public
Law 111-152, as well as to section 3401(p) of Public Law 111-148.
Accordingly, for hospitals paid for their inpatient operating costs on
the basis of a hospital-specific rate, the rates paid to such hospitals
for discharges occurring during the first half of FY 2010 will be based
on an annual update estimated to be 2.1 percent for hospitals
submitting quality data or 0.1 percent for hospitals that fail to
submit quality data; and the rates paid to such hospitals for the
second half of FY 2010 will be based on the revised FY 2010 applicable
percentage increase that is estimated to be 1.85 percent for hospitals
submitting quality data or -0.15 percent for hospitals that fail to
submit quality data. Similarly, we are proposing to revise 42 CFR
412.73(c)(15), 42 CFR 412.75(d), 42 CFR 412.77(e), 42 CFR 412.78(e),
and 42 CFR 412.79(d) to reflect the changes made to section
1886(b)(3)(B) by sections 3401(a) and 10319(a) of Public Law 111-148
and section 1105 of Public Law 111-152, in a supplemental proposed rule
published elsewhere in this Federal Register.
2. FY 2010 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the annual
adjustment to the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act provides that the Puerto Rico standardized
amount shall be adjusted in accordance with the final determination of
the Secretary under section 1886(e)(4) of the Act. Section
1886(e)(4)(A) of the Act in turn directs the Secretary to recommend an
appropriate change factor for inpatient hospital services for
discharges in that fiscal year, taking in to account amounts necessary
for the efficient and effective delivery of medically appropriate and
necessary care of high quality, as well as the recommendations of
MedPAC. In order to maintain consistency between the portion of the
rates paid to Puerto Rico hospitals based on the national standardized
amount and the portion based on the Puerto Rico-specific standardized
rate, beginning in FY 2004 we have set the update to the Puerto Rico-
specific operating standardized amount equal to the update to the
national operating standardized amount for all IPPS hospitals. This
policy is reflected in our regulations at 42 CFR 412.211.
The amendments to section 1886(b)(3)(B) of the Act by sections
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public
Law 111-152, affect only the update factor applicable to the national
standardized rate for IPPS hospitals and the hospital-specific rates;
they do not mandate any revisions to the update factor applicable to
the Puerto Rico-specific standardized amount. Rather, as noted above,
sections 1886(d)(9)(C)(i) and (e)(4) of the Act direct us to adopt an
appropriate change factor for the FY 2010 Puerto Rico-specific
standardized amount, which we did in the FY 2010 IPPS/LTCH PPS final
rule after notice and comment rulemaking. Therefore, we do not believe
we have the authority to revise the FY 2010 update factor for the
Puerto Rico-specific operating standardized amount equal to the update
factor applicable to the national standardized amount or the hospital-
specific rates (that is the market basket minus 0.25 percentage
points). Accordingly, the FY 2010 update to the Puerto Rico-specific
operating standardized amount remains 2.1 percent (that is, the FY 2010
estimate of the market basket rate-of-increase).
C. Changes to Payment Rates for IPPS for Capital-Related Costs for FY
2010
Although the Affordable Care Act does not directly the amend
provisions regarding payment for the IPPS for capital-related costs, in
section II.E.2. of this notice we are establishing revised capital IPPS
standard Federal rates for FY 2010. The revised FY 2010 capital Federal
rates are effective for discharges occurring on or after April 1, 2010,
consistent with section 3401(p) of Public Law 111-148. This is
necessary because the operating IPPS market basket and wage index
changes required by the provisions of this legislation (discussed above
in section II.A. of this notice) affect the budget neutrality
adjustment factor for changes in DRG classifications and weights and
the geographic adjustment factor (GAF) since the GAF values are derived
from the wage index values (see Sec. 412.316(a)). In addition, these
changes necessitate a revision to the outlier payment adjustment factor
since a single set of thresholds is used to identify outlier cases for
both inpatient operating and inpatient capital-related payments (see
Sec. 412.312(c)). The outlier thresholds are set so that operating
outlier payments are projected to be 5.1 percent of total operating
IPPS DRG 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 capital-related PPS payments. The
revised capital IPPS standard Federal rates for FY 2010 (effective for
discharges occurring on or after April 1, 2010) are discussed in
section II.E.2. of this notice.
D. Long-Term Care Hospital Market Basket Update and Other Changes
1. Background
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule that appeared in
the August 27, 2009 Federal Register (74 FR 43754), we established
policies, payment rates, and factors for determining payments under the
LTCH PPS for RY 2010 (October 1, 2009 through September 30, 2010).
Below we discuss revised RY 2010 LTCH PPS rates and factors consistent
with the provisions of section 1886(m)(3) as added by section 3401(c)
of Public Law 111-148, section 1886(m)(4) as added by section 3401(c)
of Public Law 111-148 and amended by section 10319(b) of
[[Page 31121]]
Public Law 111-148, as further amended by section 1105(b) of Public Law
111-152, as well as section 3401(p) of Public Law 111-148. Section
1886(m)(3)(A) of the Act provides that in implementing the system
described in paragraph (1) [of 1886(m) of the Act] for rate year 2010
and each subsequent rate year, any annual update to the standard
Federal rate for discharges for the hospital during the rate year,
shall be reduced (i) for rate year 2012 and each subsequent rate year,
by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) [of the Act]; and (ii) for each of the rate years
2010 through 2019, by the other adjustment described in paragraph (4)
[of 1886(m) of the Act]. Section 1886(m)(3)(A) of the Act on its face
explicitly provides for a revised annual update to the standard Federal
rate beginning RY 2010, thus resulting in a single revised RY 2010
standard Federal rate. With respect to section 3401(p) of Public Law
111-148, this section provides that, notwithstanding the previous
provisions of this section, the amendments made by subsections (a),
(c), and (d) shall not apply to discharges occurring before April 1,
2010. When read in conjunction we believe section 1886(m)(3)(A) of the
Act and section 3401(p) of Public Law 111-148 provide for a single
revised RY 2010 standard Federal rate; however, for payment purposes,
discharges occurring on or after October 1, 2009 and before April 1,
2010, simply will not be based on the revised RY 2010 standard Federal
rate. In other words, for discharges occurring on or after October 1,
2009 through March 31, 2010, LTCH PPS payments will be based on the
payment rates and factors established in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (see (74 FR 43754)).
2. Market Basket Update for LTCHs for RY 2010
As discussed in section VII.C.2. of the preamble of the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43967 through 43968), we
continued to use the FY 2002-based rehabilitation, psychiatric, long-
term care (RPL) hospital market basket under the LTCH PPS for RY 2010.
Also, in that final rule, we stated that at that time, the most recent
estimate of the increase in the LTCH PPS market basket for RY 2010 was
2.5 percent. This increase is based on IHS Global Insight, Inc.'s
second quarter 2009 forecast of the FY 2002-based RPL market basket
increase for RY 2010. We note, as discussed in the FY 2010 IPPS/RY 2010
final rule (74 FR 44022), in determining the update to the standard
Federal rate for RY 2010, in addition to the full market basket
increase, we also applied a -0.5 percent adjustment to account for the
increase in case-mix due to changes in documentation and coding
practices that do not reflect increased patient severity of illness
from a prior period (that is, FY 2007).
As indicated above, section 3401(c) of Public Law 111-148 adds
section 1886(m)(3)(A)(ii) of the Act which specifies that for RY 2010
and subsequent rate years, any update to the standard Federal rate
shall be reduced, for each of RYs 2010 through 2019, by the other
adjustment specified in new section 1886(m)(4) of the Act.
Specifically, newly added section 1886(m)(4)(A) of the Act requires a
0.25 percentage point reduction to the annual update for RY 2010.
Consequently, the market basket update under the LTCH PPS for RY 2010
is 2.25 percent (that is, the second quarter 2009 forecast estimate of
the RY 2010 LTCH PPS market basket increase of 2.5 percent minus the
0.25 percentage points required by sections 1886(m)(3)(A)(ii) and
(m)(4)(A) of the Act). (We note that to determine the revised standard
Federal rate for RY 2010 in this notice, we applied the reduced market
basket update (2.25 percent) as well as a -0.5 percent adjustment to
account for the increase in case-mix due to changes in documentation
and coding practices that do not reflect increased patient severity of
illness from a prior period (FY 2007) that we established in the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43972).) In addition, in
section II.F. of the Addendum of this notice, this revision to the
standard Federal rate for RY 2010 requires us to revise the high cost
outlier fixed-loss amount for RY 2010, under which the discharges
occurring on or after April 1, 2010 will be evaluated, in order to
maintain the requirement that 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. (We also note that we
determined that it is not necessary to revise the FY 2010 MS-LTC-DRG
relative weights as a result of the change to the RY 2010 LTCH PPS
standard Federal rate resulting from the revision to the RY 2010 annual
update required by the Affordable Care Act. Although the standard
Federal rate is used in our established methodology for updating the
annual update to the MS-LTC-DRG classifications and relative weights in
a manner such that estimated aggregate LTCH PPS payments would be
unaffected, our payment simulations using the same budget neutrality
methodology used in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43966 through 43967) show that this revision to the RY 2010 LTCH PPS
standard Federal rate resulting from the revision to the RY 2010 annual
update required by the Affordable Care Act, would not change the RY
2010 budget neutrality factor originally established in the FY 2010
IPPS/RY 2010 LTCH PPS final rule. Therefore, the FY 2010 MS-LTC-DRG
relative weights remain unchanged from those established in Table 11 of
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44183 through
44192).)
E. Final FY 2010 Prospective Payment Systems Payment Rates for Hospital
Inpatient Operating and Capital Related Costs
1. Final FY 2010 Prospective Payment Rates for Hospital Inpatient
Operating Costs
In the FY 2010 IPPS and RY 2010 LTCH PPS final rule published in
the Federal Register on August 27, 2009 (74 FR 43754), we established
our methodology to determine the policies, payment rates and factors
for determining payments under the IPPS for the entire FY 2010 (74 FR
44002 through 44014). Some of these rates also were corrected, as
reflected in an October 7, 2009 correction notice (74 FR 51496). Below
we establish revised FY 2010 IPPS rates and factors consistent with the
provisions of section 3137(a) of Public Law 111-148, as amended by
section 10319(a) of Public Law 111-148 and section 1105 of Public Law
111-152, and section 1886(b)(3)(B), as amended by sections 3401(a) and
10310(a) of Public Law 111-148 and section 1105 of Public Law 111-152.
Although these changes modify the FY 2010 rates under the IPPS, in
accordance with section 3401(p) of Public Law 111-148, the revised IPPS
payment rates and factors do not apply to discharges occurring prior to
April 1, 2010. In other words, for discharges occurring on or after
October 1, 2009 through discharges on or before March 31, 2010, IPPS
payments will be based on the payment rates and factors established in
the FY 2010 IPPS/RY 2010 LTCH PPS final rule, and for discharges on or
after April 1, 2010 through discharges on or before September 30, 2010
payments will be based on the FY 2010 payment rates and factors
outlined in this notice.
The 0.25 percentage point reduction to the applicable percentage
increase for FY 2010 (as required by section 1886(b)(3)(B)(xii), as
added and amended by sections 3401(a) and
[[Page 31122]]
section 10319(a) of Pub. L. 111-148 and section 1105 of Pub. L. 111-
152) affects all the budget neutrality factors described below. In
general, to compute the budget neutrality factors that are applied to
the standardized amounts, in our simulations of FY 2010 payments we
used the standardized amount updated by the market basket update
percentage (for FY 2010). Because the statute now requires a reduction
to the FY 2010 market basket update, it is necessary to recompute the
FY 2010 budget neutrality factors applied to the standardized amount by
resimulating payments with the revised FY 2010 market basket update.
To calculate the FY 2010 revised payment rates and factors, we used
the same methodology from the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44002 through 44014) incorporating the additional reduction
required by section 1886(b)(3)(B)(xii) of the Act (as discussed below).
We note that in calculating the budget neutrality factors discussed
below, we included the wage data corrections discussed in the FY 2010
IPPS/LTCH PPS final rule correction notice (74 FR 51497 through 51498).
a. Updating the Average Standardized Amounts
As explained in section II.B. of this notice, in accordance with
section 3401(p) of Public Law 111-148, for the first half of FY 2010
(that is, discharges on or after October 1, 2009 through March 30,
2010), payments will be based on an applicable percentage increase that
is equal to the market basket index for IPPS hospitals (which is
defined in 42 CFR 413.40(a)(3)) in all areas for hospitals that submit
quality data in accordance with our rules, and the market basket index
for IPPS hospitals in all areas less 2.0 percentage for hospitals that
fail to submit quality data in accordance with our rules. In the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44235), we calculated that
the full market basket update equals 2.1 percent based on IHS Global
Insight, Inc.'s second quarter 2009 forecast of the FY 2010 market
basket increase. For the second half of FY 2010 (discharges on or after
April 1, 2010 through September 30, 2010), in accordance with section
1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401(a)
and 10319(a) of Public Law 111-148 and section 1105 of Public Law 111-
152, as well as section 3401(p) of Public Law 111-148, hospitals are
paid based on the revised FY 2010 applicable percentage increase. That
amount is equal to the market basket index for IPPS hospitals in all
areas reduced by 0.25 percentage points for hospitals that submit
quality data in accordance with our rules. For those hospitals that
fail to submit quality data in accordance with our rules, the market
basket index for IPPS hospitals will continue to be reduced by an
additional 2.0 percentage points (which is in addition to the 0.25
percentage point reduction required by new section 1886(b)(3)(B)(xii)
of the Act). Therefore, based on IHS Global Insight, Inc.'s second
quarter 2009 forecast of the FY 2010 market basket increase, the
revised FY 2010 applicable percentage increase is 1.85 percent (that
is, the FY 2010 estimate of the market basket rate-of-increase of 2.1
percent minus 0.25 percentage points) for hospitals in all areas,
provided the hospital submits quality data in accordance with our
rules. For hospitals that do not submit quality data, the payment
update to the operating standardized amount is -0.15 percent (that is,
the adjusted FY 2010 estimate of the market basket rate-of-increase of
1.85 percent minus 2.0 percentage points). Hospitals will be paid based
on these revised payment update amounts for discharges occurring in the
second half of FY 2010. We note that in order to implement the
requirements of section 1886(b)(3)(B) of the Act, as amended by
sections 3401(a) and 10319(a) of Public Law 111-148 and section 1105 of
Public Law 111-152, we are proposing to revise 42 CFR 412.64(d) in a
supplemental proposed rule published elsewhere in this Federal
Register.
The amendments to section 1886(b)(3)(B) of the Act by sections
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public
Law 111-152, affect only the update factor applicable to the national
standardized rate for IPPS hospitals and the hospital-specific rates;
they do not mandate any revisions to the update factor applicable to
the Puerto Rico-specific standardized amount. Rather, sections
1886(d)(9)(C)(i) and (e)(4) of the Act direct us to adopt an
appropriate change factor for the FY 2010 Puerto Rico-specific
standardized amount, which we did in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule after notice and consideration of public comments.
Therefore, we do not believe that we have the authority to revise the
FY 2010 update factor for the Puerto Rico-specific operating
standardized amount equal to the update factor applicable to the
national standardized amount or the hospital-specific rates (that is
the market basket minus 0.25 percentage points). Accordingly, the FY
2010 update to the Puerto Rico-specific operating standardized amount
remains 2.1 percent (that is, the FY 2010 estimate of the market basket
rate-of-increase).
b. Final FY 2010 Budget Neutrality Adjustments Factors for
Recalibration of DRG Weights and Updated Wage Index
Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final
rule for calculating budget neutrality, for FY 2010 (74 FR 44005), we
are setting the following budget neutrality factors in order to account
for the changes made by the Affordable Care Act: A DRG reclassification
and recalibration factor of 0.997935 and a budget neutrality factor of
1.000418 for changes to the wage index. We multiplied the DRG
reclassification and recalibration budget neutrality factor of 0.997935
by the budget neutrality factor of 1.000418 for changes to the wage
index to determine the DRG reclassification and recalibration and
updated wage index budget neutrality factor of 0.998352 (as required by
sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E)(i) of the Act).
Consistent with section 3401(p) of Public Law 111-148, we applied these
revised factors to the Federal rate on which payments are made for
discharges occurring on or after April 1, 2010.
c. Final FY 2010 Reclassified Hospitals-Budget Neutrality Adjustment
Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final
rule for calculating reclassification budget neutrality (74 FR 44005
through 44006), we computed the following factor in order to account
for the changes made by the Affordable Care Act: A 0.991985 factor for
reclassification budget neutrality, as required by section
1886(d)(8)(D) of the Act. Consistent with sections 3137(a) and 3401(p)
of the Public Law 111-148, we applied this factor to the Federal rate
that is applied in determining payments for FY 2010 discharges
occurring on or after April 1, 2010.
We note, as discussed in section II.A. of this notice, section
3137(a) of Public Law 111-148, as amended by section 10317 of Public
Law 111-148 has now extended the hospital reclassification provisions
of section 508 and certain special exceptions through September 30,
2010 (FY 2010). Consistent with section 106(a) of Public Law 109-432,
payments for providers reclassified under section 508 and under the
special exception policy are not budget neutral. However, section
3137(a)(2)(B) of Public Law 111-148 requires us to also recalculate the
reclassification wage indices of areas by excluding those hospitals
whose section 508
[[Page 31123]]
reclassifications and special exceptions wage indices have been
extended, if doing so would increase the reclassification wage index.
These payments of providers located in section 508 and special
exception areas (that are not section 508 or special exception
providers), as well as hospitals reclassified to those areas, are
subject to budget neutrality. Therefore, we included the additional
payments associated with the increased payments being made to such
hospitals as a result of section 3137(a) of Public Law 111-148 in our
calculation of the reclassified wage index budget neutrality factor,
pursuant to section 1886(d)(8)(D) of the Act. This section requires
that aggregate payments under section 1886 of the Act do not increase
as a result of the costs associated with reclassifications. Our
analysis relied on the most up-to-date wage data, that is, the
corrected wage indexes from the FY 2010 IPPS/RY 2010 LTCH PPS
correction notice (74 FR 51497 through 51498) in the calculation of the
reclassified wage index budget neutrality factor. Guidance to FIs and
A/B MACs will be issued separate from this notice for hospital wage
indexes that are increasing as a result of the extension of section 508
reclassifications and special exceptions.
d. Final FY 2010 Rural and Imputed Floor Budget Neutrality
We make an adjustment to the wage index to ensure that aggregate
payments to hospitals are not affected by the rural floor under section
4410 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) and the
imputed floor under Sec. 412.64(h)(4) of the regulations. As discussed
in section III.B. of the preamble to the FY 2009 IPPS final rule (73 FR
48570 through 48574), we adopted 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 phased
in, over a 3-year period, the transition from a national rural floor
budget neutrality adjustment on the wage index to a State-level rural
floor budget neutrality adjustment on the wage index. For FY 2010, the
blended wage index was 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.
Similar to the budget neutrality factors above, we included the
corrected wage data from the FY 2010 IPPS/LTCH PPS final rule
correction notice and the post reclassified wage index changes that
resulted from the extension of the hospital reclassification provisions
of section 508 and certain special exceptions in our calculation of the
FY 2010 rural and imputed floor budget neutrality factors. We note that
section 3137(a)(2)(B) of Public Law 111-148, as amended by section
10317 of Public Law 111-148, requires that beginning April 1, 2010, we
include the average hourly wage data of hospitals whose section 508
reclassifications and special exception wage indices were extended,
only if doing so results in a higher reclassification wage index. We
interpret this language as referring to the reclassification wage index
that is calculated pursuant to section 1886(d)(8)(C) of the Act, as
that is the reclassification wage index calculation that employs
average hourly wage data. We do not interpret the language as referring
to the reclassification wage index after it is subsequently adjusted
for rural/imputed floor budget neutrality, as that budget neutrality
adjustment is not based upon average hourly wage data, and is not made
to adjust for the effects of reclassifications.
Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final
rule (74 FR 44006), we calculated a national rural and imputed floor
budget neutrality adjustment factor of 0.996686. Each State's rural or
imputed floor budget neutrality adjustment can be found in table 4D-1
of the Addendum of this notice. Additionally, in order to ensure that
national payments overall remain budget neutral after application of
the blended national and state rural and imputed floors, an additional
adjustment factor of 1.000010 must be applied to the blended post
reclassified, post-floor (including budget neutrality) wage indices.
Consistent with section 3401(p) of Public Law 111-148, we applied these
factors to the wage indexes that are applied in determining payments
for FY 2010 discharges occurring on or after April 1, 2010.
e. Final FY 2010 Rural Community Hospital Demonstration Program
Adjustment
Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final
rule and accounting for the projected total annual impact of
$27,141,815 for FY 2010 (74 FR 44012; and reflecting the provisions of
the Affordable Care Act) we computed a budget neutrality adjustment of
0.999739 for the rural community hospital demonstration, in order to
satisfy section 410A(c)(2) of Public Law 108-173. We note, after re-
simulating payments reflecting the provisions of the Affordable Care
Act, the adjustment factor in this notice is the same as the adjustment
factor computed in the FY 2010 IPPS/LTCH PPS final rule. Consistent
with section 3401(p) of Public Law 111-148, we applied this factor to
the Federal rate that is applied in determining payments for FY 2010
discharges occurring on or after April 1, 2010.
f. Final FY 2010 Outlier Fixed-Loss Cost Threshold
We are revising the FY 2010 outlier fixed-loss cost threshold due
to the change in the market basket and other budget neutrality factors
described above. Using the methodology we finalized in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 44007 through 44011) and taking
into account the provisions of the Affordable Care Act as discussed
above, we are finalizing 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
$23,135. Consistent with section 3401(p) of the Public Law 111-148, we
are applying this threshold for FY 2010 discharges occurring on or
after April 1, 2010.
g. Final FY 2010 Outlier Adjustment Factors
The FY 2010 outlier adjustment factors that are applied to the FY
2010 standardized amount for the FY 2010 outlier threshold are as
follows:
------------------------------------------------------------------------
Operating
standardized Capital federal
amounts rate
------------------------------------------------------------------------
National............................ 0.948998 0.947766
Puerto Rico......................... 0.957417 0.935787
------------------------------------------------------------------------
[[Page 31124]]
Consistent with section 3401(p) of Public Law 111-148, we applied
these revised factors to the Federal rate on which payments are made
for discharges occurring on or after April 1, 2010.
h. FY 2010 Standardized Amount
We recalculated the FY 2010 final standardized amounts using the
methodology finalized in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44002 through 44014) and taking into account the changes
required by the provisions of the Affordable Care Act as discussed
above. Tables 1A and 1B of the Addendum to this notice contain the
final national standardized amount that we are applying to all
hospitals, except hospitals in Puerto Rico. The final Puerto Rico-
specific amounts are shown in Table 1C. The amounts shown in Tables 1A
and 1B differ only in that the labor-related share applied to the final
standardized amounts in Table 1A is 68.8 percent, and the labor-related
share applied to the final standardized amounts in Table 1B is 62
percent.
In addition, Tables 1A and 1B include the final standardized
amounts reflecting the FY 2010 adjusted market basket update of 1.85
percent update and final standardized amounts reflecting the additional
2.0 percentage point reduction to the update applicable for hospitals
that fail to submit quality data consistent with section
1886(b)(3)(B)(viii) of the Act (resulting in a -0.15 percent update).
Below is a revised table reflecting the changes required by the
provisions of the Affordable Care Act that details the calculation of
the final FY 2010 standardized amounts. Consistent with section 3401(p)
of Public Law 111-148, hospitals are paid based on these rates for
discharges occurring on or after April 1, 2010.
Comparison of FY 2009 Standardized Amounts to the FY 2010 Standardized Amount With Full and Reduced Update
----------------------------------------------------------------------------------------------------------------
Reduced update (- Reduced update (-
Full update (1.85 Full update (1.85 0.15 percent); 0.15 percent);
percent); wage percent); wage wage index is wage index is less
index is greater index is less than greater than than or equal to
than 1.0000 or equal to 1.0000 1.0000 1.0000
----------------------------------------------------------------------------------------------------------------
FY 2009 Base Rate, after Labor: $3,748.52... Labor: $3,378.03.. Labor: $3,748.52.. Labor: $3,378.03.
removing geographic Nonlabor: $1,699.91 Nonlabor: Nonlabor: Nonlabor:
reclassification budget $2,070.40. $1,699.91. $2,070.40.
neutrality, demonstration
budget neutrality and outlier
offset (based on the labor-
related share percentage for
FY 2010).
FY 2010 Update Factor.......... 1.0185............. 1.0185............ 0.9985............ 0.9985.
FY 2010 DRG Recalibration and 0.998352........... 0.998352.......... 0.998352.......... 0.998352.
Wage Index Budget Neutrality
Factor.
FY 2010 Reclassification Budget 0.991985........... 0.991985.......... 0.991985.......... 0.991985.
Neutrality Factor.
FY 2010 Outlier Factor......... 0.948998........... 0.948998.......... 0.948998.......... 0.948998.
Rural Demonstration Budget 0.999739........... 0.999739.......... 0.999739.......... 0.999739.
Neutrality Factor.
Rate for FY 2010............... Labor: $3,587.24... Labor: $3,232.69.. Labor: $3,516.80.. Labor: $3,169.22.
Nonlabor: $1,626.78 Nonlabor: Nonlabor: Nonlabor:
$1,981.33. $1,594.84. $1,942.42.
----------------------------------------------------------------------------------------------------------------
The labor-related and nonlabor-related portions of the national
average standardized amounts for Puerto Rico hospitals for FY 2010 are
set forth in Table 1C in this notice. (The labor-related share applied
to the Puerto Rico-specific standardized amount is either 62.1 percent
or 62 percent, depending on which is more advantageous to the
hospital.)
i. Final FY 2010 Adjustments for Area Wage Levels
The following wage index tables were revised in this notice as a
result of the provisions of the Affordable Care Act: Tables 2, 4A, 4B,
4C, 4D-1, 4D-2, 4J, and 9B. (These tables can be found in the Addendum
to this notice and are also available on the CMS Web site at https://www.cms.gov/AcuteInpatientPPS/WIFN/itemdetail.asp?filterType=none&filterByDID=0&sortByDID=3&sortOrder=descending&itemID=CMS1234175&intNumPerPage=10.)
2. FY 2010 Prospective Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs
Although the provisions of the Affordable Care Act do not directly
affect the payment rates and policies for the IPPS for capital-related
costs, as discussed in section II.C. of this notice, we are revising
the capital IPPS standard Federal rates for FY 2010. The revised FY
2010 capital Federal rates are effective for discharges occurring on or
after April 1, 2010, consistent with section 3401(p) of Public Law 111-
148. The revision to the FY 2010 capital Federal rates is necessary
because the operating IPPS market basket and wage index changes
required by the provisions of the Affordable Care Act (discussed in
section II.A. of this notice) affect the budget neutrality adjustment
factor for changes in DRG classifications and weights and the
geographic adjustment factor (GAF) since the GAF values are derived
from the wage index values (see Sec. 412.316(a)). In addition, the
provisions of the Affordable Care Act also necessitate a revision to
the outlier payment adjustment factor for FY 2010 since a single set of
thresholds is used to identify outlier cases for both inpatient
operating and inpatient capital-related payments (see Sec.
412.312(c)).
In this notice, we have calculated the final FY 2010 capital
Federal rates, offsets, and budget neutrality factors using the same
methodology we adopted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44014 through 44021), as revised by the FY 2010 IPPS/RY 2010
LTCH PPS correction notice (October 7, 2009; (74 FR 51496 through
51499)), that was used to calculate the final rates and factors
included in that rule which did not reflect the provisions of the
Affordable Care Act. For a complete description of this methodology,
please
[[Page 31125]]
see the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44014 through
44021), as revised by the FY 2010 IPPS/RY 2010 LTCH PPS correction
notice (74 FR 51496 through 51499).
a. Capital Standard Federal Rate Update for FY 2010
The final factors used in the FY 2010 update framework are not
affected by the provisions of the Affordable Care Act. Therefore, the
final update factor for FY 2010 is not being revised from the final
capital IPPS standard Federal rate update factor discussed in section
III.A.1. of the FY 2010 IPPS/RY 2010 LTCH PPS final rule, as revised by
the FY 2010 IPPS/RY 2010 LTCH PPS correction notice and remains at 1.2
percent for FY 2010. A full discussion of the update framework is
provided in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44015
through 44017) in conjunction with the FY 2010 IPPS/RY 2010 LTCH PPS
correction notice (74 FR 51498 through 51499).
b. Outlier Payment Adjustment Factor
Based on the thresholds as set forth in section II.E.2. of this
notice, we estimate that outlier payments for capital-related costs
will equal 5.22 percent for inpatient capital-related payments based on
the final capital Federal rate in FY 2010. Therefore, we are applying
an outlier adjustment factor of 0.9478 in determining the FY 2010
capital Federal rate. For FY 2009, we estimated that outlier payments
for capital will equal 5.35 percent of inpatient capital-related
payments, and we established an outlier adjustment factor of 0.9465 for
FY 2009 based on the capital Federal rate in FY 2009 (73 FR 57891).
Thus, we estimate that the percentage of capital outlier payments to
total capital standard payments for FY 2010 will be lower than the
percentage for FY 2009. This decrease in capital outlier payments is
primarily due to the estimated increase in capital IPPS payments per
discharge. That is, because capital payments per discharge are
projected to increase in FY 2010 compared to FY 2009, as shown in Table
III. in section IV.C. of this notice, fewer cases will 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 FY 2010 outlier adjustment of
0.9478 is a 0.14 percent change from the FY 2009 outlier adjustment of
0.9465. Therefore, the net change in the outlier adjustment to the
capital Federal rate for FY 2010 is 1.0014 (0.9478/0.9465). Thus, the
outlier adjustment increases the FY 2010 capital Federal rate by 0.14
percent compared to the FY 2009 outlier adjustment.
A single set of thresholds is used to identify outlier cases for
both inpatient operating and inpatient capital-related payments (see
Sec. 412.312(c)). The outlier thresholds are set so that operating
outlier payments are projected to be 5.1 percent of total operating
IPPS DRG payments. The outlier thresholds for FY 2010 are in section
II.E.1. of this notice. For FY 2010, for discharges occurring on or
after April 1, 2010, a case qualifies as a cost outlier if the cost for
the case plus the IME and DSH payments is greater than the prospective
payment rate for the MS-DRG plus the fixed-loss amount of $23,135.
c. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF
Using the methodology discussed in section III.A.3. of the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 44018 through 44019), for FY
2010, we are establishing a GAF/DRG budget neutrality factor of 0.9994,
which is the product of the incremental GAF budget neutrality factor of
0.9999 and the DRG budget neutrality factor of 0.9995 (the DRG budget
neutrality factor remains unchanged from the FY 2010 IPPS/RY 2010 LTCH
PPS final rule). 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 adjustment from FY 2009 to FY 2010 is 0.9994.
The cumulative change in the FY 2010 capital Federal rate due to this
adjustment is 0.9911 (the product of the incremental factors for FYs
1995 though 2009 and the 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, and the revised FY 2010 factor
of 0.9994 that reflect the effect of the provisions of the Affordable
Care Act (as discussed in section II.C. of this notice) were used in
the calculation of the cumulative adjustment of 0.9911 for FY 2010.)
The cumulative adjustments for MS-DRG classifications and changes in
relative weights and for changes in the national GAFs through FY 2010
is 0.9911. The following table summarizes the adjustment factors for
each fiscal year:
BILLING CODE 4120-01-P
[[Page 31126]]
[GRAPHIC] [TIFF OMITTED] TN02JN10.154
BILLING CODE 4120-01-C
The factor accounts for the MS-DRG reclassifications and
recalibration and for changes in the GAFs, which include the changes to
the operating IPPS market basket update and wage index as required by
the provisions of the Affordable Care Act (as discussed in section
II.A. of this notice). It also incorporates the effects on the 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.
d. Exceptions Payment Adjustment Factor
The provisions of the Affordable Care Act have no effect on capital
exceptions
[[Page 31127]]
payments. Therefore, the special exceptions adjustment factor remains
at 0.9998 as discussed in section III.A.4. of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44019).
e. Capital Standard Federal Rate for FY 2010
As a result of the 1.2 percent update and other budget neutrality
factors discussed above, we are establishing a national capital Federal
rate of $429.56 for FY 2010. As stated above, this rate will apply to
discharges occurring on or after April 1, 2010, consistent with section
3401(p) of Public Law 111-148. We are providing the following chart
that shows how each of the factors and adjustments for FY 2010 affects
the computation of the FY 2010 national capital Federal rate in
comparison to the FY 2009 national capital Federal rate. The FY 2010
update factor has the effect of increasing the capital Federal rate by
1.2 percent compared to the FY 2009 capital Federal rate. The GAF/DRG
budget neutrality factor of 0.9994 has the effect of decreasing the
capital Federal rate by 0.06 percent compared to the FY 2009 capital
Federal rate. The FY 2010 outlier adjustment factor has the effect of
increasing the capital Federal rate by 0.14 percent compared to the FY
2009 capital Federal rate. The FY 2010 exceptions payment adjustment
factor has the effect of decreasing the capital Federal rate by 0.01
percent compared to the FY 2009 capital Federal rate. As discussed in
section VI.E.1. of the preamble of the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43926 through 43928), we did not apply an additional
adjustment to the FY 2010 capital Federal rate for changes in
documentation and coding that do not reflect real changes in patients'
severity of illness. A permanent cumulative adjustment of -1.5 percent
(that is, a factor of 0.985) was applied in determining 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 changes increase the national capital Federal rate by
approximately 1.27 percent compared to the FY 2009 national capital
Federal rate.
Comparison of Factors and Adjustments: FY 2009 Capital Federal Rate and FY 2010 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
Percent
FY 2009 FY 2010 Change change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\........................................... 1.0090 1.0120 1.0120 1.20
GAF/DRG Adjustment Factor \1\............................... 1.0004 0.9994 0.9994 -0.06
Outlier Adjustment Factor \2\............................... 0.9465 0.9478 1.0014 0.14
Exceptions Adjustment Factor \2\............................ 0.9999 0.9998 0.9999 -0.01
MS-DRG Documentation and Coding Adjustment Factor........... \3\ 0.9850 \3\ 0.9850 1.0000 0.00
Capital Federal Rate........................................ $424.17 $429.56 1.0127 1.27
----------------------------------------------------------------------------------------------------------------
\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 0.9994
GAF/DRG budget neutrality factor for FY 2010 is a net change of 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 FY 2010 outlier adjustment factor is 0.9478//
0.9465, or 1.0014.
\3\ The documentation and coding adjustment factor includes the -0.6 percent in FY 2008, -0.9 percent in FY
2009, and no additional reduction in FY 2010.
We are also providing a chart that shows how the revised FY 2010
capital Federal rate, which reflects the effect of the provisions of
the Affordable Care Act differs from the FY 2010 capital Federal rate
as presented in the FY 2010 IPPS final rule (74 FR 44020), as revised
by the FY 2010 IPPS/RY 2010 LTCH PPS correction notice (74 FR 52499).
Comparison of Factors and Adjustments: FY 2010 Capital Federal Rate Prior to the Enactment of the Affordable
Care Act and Revised FY 2010 Capital Federal Rate Reflecting the Effect of the Provisions of the Affordable Care
Act
----------------------------------------------------------------------------------------------------------------
Revised FY Percent
FY 2010 \*\ 2010 \**\ Change change
----------------------------------------------------------------------------------------------------------------
Update Factor............................................... 1.0120 1.0120 1.0000 0.00
GAF/DRG Adjustment Factor................................... 0.9990 0.9994 1.0004 0.04
Outlier Adjustment Factor................................... 0.9475 0.9478 1.0003 0.03
Exceptions Adjustment Factor................................ 0.9998 0.9998 1.0000 0.00
MS-DRG Documentation and Coding Adjustment Factor........... 1.0000 1.0000 1.0000 0.00
Capital Federal Rate........................................ $429.26 $429.56 1.0007 0.07
----------------------------------------------------------------------------------------------------------------
* FY 2010 capital IPPS rates and factors established in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
44020), as revised by the FY 2010 IPPS/RY 2010 LTCH PPS correction notice (74 FR 52499), developed prior to
the enactment of the Affordable Care Act.
** Final FY 2010 capital IPPS rates and factors reflecting the effect of the provisions of the Affordable Care
Act.
[[Page 31128]]
f. Special Capital Rate for Puerto Rico Hospitals
Using the methodology discussed in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 44020), with the changes we are making to the
factors used to determine the capital rate, the FY 2010 special capital
rate for hospitals in Puerto Rico is $203.57. (See the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 44015 through 44020) and FY 2010 IPPS/
RY 2010 LTCH PPS correction notice (74 FR 51499) for additional
information on the calculation of the FY 2010 capital Puerto Rico
specific rate.)
F. Changes to the Payment Rates for the LTCH PPS for RY 2010
1. LTCH PPS Standard Federal Rate for RY 2010
a. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
In section V. of the Addendum of the FY 2010 IPPS/RY 2010 final
rule (74 FR 44021 through 44022), we discuss the