Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System Changes and FY2011 Rates; Provider Agreements and Supplier Approvals; and Hospital Conditions of Participation for Rehabilitation and Respiratory Care Services; Medicaid Program: Accreditation for Providers of Inpatient Psychiatric Services, 50042-50677 [2010-19092]
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50042
Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 412, 413, 415, 424, 440,
441, 482, 485, and 489
[CMS–1498–Fand CMS–1498–IFC; CMS–
1406–F]
RIN 0938–AP80; RIN 0938–AP33
Medicare Program; Hospital Inpatient
Prospective Payment Systems for
Acute Care Hospitals and the LongTerm Care Hospital Prospective
Payment System Changes and FY2011
Rates; Provider Agreements and
Supplier Approvals; and Hospital
Conditions of Participation for
Rehabilitation and Respiratory Care
Services; Medicaid Program:
Accreditation for Providers of Inpatient
Psychiatric Services
Centers for Medicare and
Medicaid Services (CMS), HHS.
ACTION: Final rules and interim final
rule with comment period.
AGENCY:
We are revising the Medicare
hospital inpatient prospective payment
systems (IPPS) for operating and capitalrelated costs of acute care hospitals to
implement changes arising from our
continuing experience with these
systems and to implement certain
provisions of the Affordable Care Act
and other legislation. In addition, we
describe the changes to the amounts and
factors used to determine the rates for
Medicare acute care hospital inpatient
services for operating costs and capitalrelated costs. We also are setting forth
the update to the rate-of-increase limits
for certain hospitals excluded from the
IPPS that are paid on a reasonable cost
basis subject to these limits.
We are updating the payment policy
and the annual payment rates for the
Medicare prospective payment system
(PPS) for inpatient hospital services
provided by long-term care hospitals
(LTCHs) and setting forth the changes to
the payment rates, factors, and other
payment rate policies under the LTCH
PPS. In addition, we are finalizing the
provisions of the August 27, 2009
interim final rule that implemented
statutory provisions relating to
payments to LTCHs and LTCH satellite
facilities and increases in beds in
existing LTCHs and LTCH satellite
facilities under the LTCH PPS.
We are making changes affecting the:
Medicare conditions of participation for
hospitals relating to the types of
practitioners who may provide
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rehabilitation services and respiratory
care services; and determination of the
effective date of provider agreements
and supplier approvals under Medicare.
We are also setting forth provisions
that offer psychiatric hospitals and
hospitals with inpatient psychiatric
programs increased flexibility in
obtaining accreditation to participate in
the Medicaid program. Psychiatric
hospitals and hospitals with inpatient
psychiatric programs will have the
choice of undergoing a State survey or
of obtaining accreditation from a
national accrediting organization whose
hospital accreditation program has been
approved by CMS.
We are also issuing an interim final
rule with comment period to implement
a provision of the Preservation of Access
to Care for Medicare Beneficiaries and
Pension Relief Act of 2010 relating to
Medicare payments for outpatient
services provided prior to a Medicare
beneficiary’s inpatient admission.
DATES: Effective Date: These rules are
effective on October 1, 2010, except for
amendments to § 412.2(c)(5)
introductory text, (c)(5)(iii), and
(c)(5)(iv); § 412.405; § 412.521(b)(1);
§ 412.540; § 412.604(f); § 413.40(c)(2)
introductory text, (c)(2)(iii), and
(c)(2)(iv), that are effective on June 25,
2010 and apply to services furnished on
or after June 25, 2010. In accordance
with sections 1871(e)(1)(A)(i) and (ii) of
the Social Security Act, the Secretary
has determined that retroactive
application of these regulatory
amendments is necessary to comply
with the statute and that failure to apply
the changes retroactively would be
contrary to public interest:
Comment Period: To be assured
consideration, comments on the interim
final rule with comment period (CMS–
1498–IFC) that appears as section IV.M.,
of the preamble of this document and
includes amendments to § 412.2(c)(5)
introductory text, (c)(5)(iii), and
(c)(5)(iv); § 412.405; § 412.521(b)(1);
§ 412.540; § 412.604(f); § 413.40(c)(2)
introductory text, (c)(2)(iii), and
(c)(2)(iv) must be received at one of the
addresses provided below, no later than
5 p.m. EST on September 28, 2010.
Comments on other sections of this
document will not be considered.
ADDRESSES: When commenting on
issues presented in the interim final rule
with comment period, please refer to
file code CMS–1498–IFC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
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1. Electronically. You may submit
electronic comments on this regulation
at https://www.regulations.gov. Follow
the instructions for ‘‘Comment or
Submission’’ and enter the file code
CMS–1498–IFC to submit comments on
this interim final rule.
2. By regular mail. You may mail
written comments (one original and two
copies) to the following address ONLY:
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Attention: CMS–
1498–IFC, P.O. Box 8011, Baltimore,
MD 21244–1850.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments (one
original and two copies) to the following
address ONLY:
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Attention: CMS–
1406–IFC, Mail Stop C4–26–05, 7500
Security Boulevard, Baltimore, MD
21244–1850.
4. By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments (one original
and two copies) before the close of the
comment period to either of the
following addresses:
a. Room 445–G, Hubert H. Humphrey
Building, 200 Independence Avenue,
SW., Washington, DC 20201
(Because access to the interior of the
HHH Building is not readily available to
persons without Federal Government
identification, commenters are
encouraged to leave their comments in
the CMS drop slots located in the main
lobby of the building. A stamp-in clock
is available for persons wishing to retain
a proof of filing by stamping in and
retaining an extra copy of the comments
being filed.)
b. 7500 Security Boulevard, Baltimore,
MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call telephone number (410) 786–
7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Tzvi
Hefter, (410) 786–4487, and Ing-Jye
Cheng, (410) 786–4548, Operating
Prospective Payment, MS–DRGs,
Hospital Acquired Conditions (HAC),
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Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules and Regulations
Wage Index, New Medical Service and
Technology Add-On Payments, Hospital
Geographic Reclassifications, Acute
Care Transfers, Capital Prospective
Payment, Excluded Hospitals, Direct
and Indirect Graduate Medical
Education Payments, Disproportionate
Share Hospital (DSH), and Critical
Access Hospital (CAH) Issues.
Michele Hudson, (410) 786–4487, and
Judith Richter, (410) 786–2590, LongTerm Care Hospital Prospective
Payment System and MS–LTC–DRG
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786–
6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786–2261,
Reporting of Hospital Quality Data for
Annual Payment Update—Program
Administration, Validation, and
Reconsideration Issues.
Shaheen Halim (410) 786–0641,
Reporting of Hospital Quality Data for
Annual Payment Update—Measures
Issues Except Hospital Consumer
Assessment of Healthcare Providers and
Systems
Elizabeth Goldstein (410) 786–6665
Reporting of Hospital Quality Data for
Annual Payment Update—Hospital
Consumer Assessment of Healthcare
Providers and Systems Measures Issues.
Marcia Newton, (410–786–5265) and
CDR Scott Cooper (U.S. Public Health
Service), (410) 786–9465, Hospital
Conditions of Participation for
Rehabilitation Services and Respiratory
Therapy Care Issues.
Marilyn Dahl, (410) 786–8665,
Provider Agreement and Supplier
Approval Issues.
Melissa Harris, (410) 786–3397 or
Adrienne Delozier, (410) 786–0278,
Accreditation of Providers of Inpatient
Psychiatric Services to Individuals
under Age 21 Issues.
SUPPLEMENTARY INFORMATION: Inspection
of Public Comments: All comments
received before the close of the
comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: https://www.regulations.
gov. Follow the search instructions at
that Web site to view public comments.
Comments received timely will also
be available for public inspection,
generally beginning approximately 3
weeks after publication of a document,
at the headquarters of the Centers for
Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore,
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Maryland 21244, Monday through
Friday of each week from 8:30 a.m. to
4 p.m. To schedule an appointment to
view public comments, phone 1–800–
743–3951.
Electronic Access
This Federal Register document is
also available from the Federal Register
online database through GPO Access, a
service of the U.S. Government Printing
Office. Free public access is available on
a Wide Area Information Server (WAIS)
through the Internet and via
asynchronous dial-in. Internet users can
access the database by using the World
Wide Web, (the Superintendent of
Documents’ home Web page address is
https://www.gpoaccess.gov/), by using
local WAIS client software, or by telnet
to swais.access.gpo.gov, then login as
guest (no password required). Dial-in
users should use communications
software and modem to call (202) 512–
1661; type swais, then login as guest (no
password required).
Acronyms
3M 3M Health Information System
AAHKS American Association of Hip and
Knee Surgeons
AAMC Association of American Medical
Colleges
ACGME Accreditation Council for Graduate
Medical Education
AHA American Hospital Association
AHIC American Health Information
Community
AHIMA American Health Information
Management Association
AHRQ Agency for Healthcare Research and
Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital
Association
AMA American Medical Association
AMGA American Medical Group
Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis
Related Group System
ARRA American Recovery and
Reinvestment Act of 2009, Public Law
111–5
ASC Ambulatory surgical center
ASCA Administrative Simplification
Compliance Act of 2002, Public Law 107–
105
ASITN American Society of Interventional
and Therapeutic Neuroradiology
BBA Balanced Budget Act of 1997, Public
Law 105–33
BBRA Medicare, Medicaid, and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget Refinement
Act of 1999, Public Law 106–113
BIC Beneficiary Identification Code
BIPA Medicare, Medicaid, and SCHIP [State
Children’s Health Insurance Program]
Benefits Improvement and Protection Act
of 2000, Public Law 106–554
BLS Bureau of Labor Statistics
CAH Critical access hospital
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50043
CARE [Medicare] Continuity Assessment
Record & Evaluation [Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction
Center
CDAD Clostridium difficile-associated
disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid
Services
CMSA Consolidated Metropolitan
Statistical Area
COBRA Consolidated Omnibus
Reconciliation Act of 1985, Public Law 99–
272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified Registered Nurse
Anesthetist
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public
Law 109–171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EMR Electronic medical record
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FHA Federal Health Architecture
FIPS Federal information processing
standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting
Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of
Healthcare Providers and Systems
HCFA Health Care Financing
Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information
System
HHA Home health agency
HHS Department of Health and Human
Services
HICANHealth Insurance Claims Account
Number
HIPAA Health Insurance Portability and
Accountability Act of 1996, Public Law
104–191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring
Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost
Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value
cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
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HwH Hospital-within-a-hospital
ICD–9–CM International Classification of
Diseases, Ninth Revision, Clinical
Modification
ICD–10–CM International Classification of
Diseases, Tenth Revision, Clinical
Modification
ICD–10–PCS International Classification of
Diseases, Tenth Revision, Procedure
Coding System
ICR Information collection requirement
IHS Indian Health Service
IME Indirect medical education
I–O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient
prospective payment system
IRF Inpatient rehabilitation facility
LAMCs Large area metropolitan counties
LOS Length of stay
LTC–DRG Long-term care diagnosis-related
group
LTCH Long-term care hospital
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural
hospital
MedPAC Medicare Payment Advisory
Commission
MedPAR Medicare Provider Analysis and
Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification
Review Board
MIEA–TRHCA Medicare Improvements and
Extension Act, Division B of the Tax Relief
and Health Care Act of 2006, Public Law
109–432
MIPPA Medicare Improvements for Patients
and Providers Act of 2008, Public Law
110–275
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003, Public Law 108–173
MMSEA Medicare, Medicaid, and SCHIP
Extension Act of 2007, Public Law 110–173
MPN Medicare provider number
MRHFP Medicare Rural Hospital Flexibility
Program
MRSA Methicillin-resistant Staphylococcus
aureus
MSA Metropolitan Statistical Area
MS–DRG Medicare severity diagnosisrelated group
MS–LTC–DRG Medicare severity long-term
care diagnosis-related group
NAICS North American Industrial
Classification System
NALTH National Association of Long Term
Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality
Assurance
NCVHS National Committee on Vital and
Health Statistics
NECMA New England County Metropolitan
Areas
NP Nurse practitioner
NQF National Quality Forum
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NTIS National Technical Information
Service
NTTAA National Technology Transfer and
Advancement Act of 1991 (Pub. L. 104–
113)
NVHRI National Voluntary Hospital
Reporting Initiative
OACT [CMS’] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation
Act of 1996, Public Law 99–509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and
Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and
Reporting [System]
PA Physician assistant
PIP Periodic interim payment
PLI Professional liability insurance
PMSAs Primary metropolitan statistical
areas
POA Present on admission
PPACA Patient Protection and Affordable
Care Act, Public Law 111–148
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment
Commission
PRRB Provider Reimbursement Review
Board
PRTFs Psychiatric residential treatment
facilities
PSF Provider-Specific File
PS&R Provider Statistical and
Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data
for annual payment update
RNHCI Religious nonmedical health care
institution
RPL Rehabilitation psychiatric long-term
care (hospital)
RRC Rural referral center
RTI Research Triangle Institute,
International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSN Social Security number
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal
Responsibility Act of 1982, Public Law 97–
248
TEP Technical expert panel
TMA TMA [Transitional Medical
Assistance], Abstinence Education, and QI
[Qualifying Individuals] Programs
Extension Act of 2007, Public Law 110–90
UHDDS Uniform hospital discharge data set
Table of Contents
I. Background
A. Summary
1. Acute Care Hospital Inpatient
Prospective Payment System (IPPS)
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2. Hospitals and Hospital Units Excluded
from the IPPS
3. Long-Term Care Hospital Prospective
Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical
Education (GME)
B. Provisions of the Patient Protection and
Affordable Care Act (Pub. L. 111–148)
and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152)
C. Provisions of the Preservation of Access
to Care for Medicare Beneficiaries and
Pension Relief Act of 2010 (Pub. L. 111–
192)
D. Issuance of Two Notices of Proposed
Rulemaking for FY 2011
1. Issuance of May 4, 2010 IPPS/LTCH PPS
Proposed Rule
a. Proposed Changes to MS–DRG
Classifications and Recalibrations of
Relative Weights
b. Proposed Changes to the Hospital Wage
Index for Acute Care Hospitals
c. Other Decisions and Proposed Changes
to the IPPS for Operating Costs and GME
Costs
d. Proposed FY 2011 Policy Governing the
IPPS for Capital-Related Costs
e. Proposed Changes to the Payment Rates
for Certain Excluded Hospitals: Rate-ofIncrease Percentages
f. Proposed Changes to the LTCH PPS
g. Proposed Changes Relating to Effective
Date of Provider Agreements and
Supplier Approvals
h. Proposed Changes to Medicare
Conditions of Participation Affecting
Hospital Rehabilitation Services and
Respiratory Care Services
i. Proposed Changes to the Accreditation
Requirements for Medicaid Providers of
Inpatient Psychiatric Services for
Individuals under Age 21
j. Determining Proposed Prospective
Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute
Care Hospitals
k. Determining Proposed Prospective
Payments Rates for LTCHs
l. Impact Analysis
m. Recommendation of Update Factors for
Operating Cost Rates of Payment for
Hospital Inpatient Services
n. Discussion of Medicare Payment
Advisory Commission Recommendations
2. Issuance of June 2, 2010 IPPS/LTCH PPS
Proposed Rule
E. Public Comments Received on the FY
2011 IPPS/LTCH Proposed Rule and
Supplemental Proposed Rule
F. Finalization of Interim Final Rule with
Comment Period That Implemented
Certain Provisions of the ARRA Relating
to Payments to LTCHs and LTCH
Satellite Facilities
II. Changes to Medicare Severity DiagnosisRelated Group (MS–DRG) Classifications
and Relative Weights
A. Background
B. MS–DRG Reclassifications
1. General
2. Yearly Review for Making MS–DRG
Changes
C. Adoption of the MS–DRGs in FY 2008
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D. FY 2011 MS–DRG Documentation and
Coding Adjustment, Including the
Applicability to the Hospital-Specific
Rates and the Puerto Rico-Specific
Standardized Amount
1. Background on the Prospective MS–DRG
Documentation and Coding Adjustments
for FY 2008 and FY 2009 Authorized by
Public Law 110–90
2. Prospective Adjustment to the Average
Standardized Amounts Required by
Section 7(b)(1)(A) of Public Law 110–90
3. Recoupment or Repayment Adjustments
in FYs 2010 through 2012 Required by
Public Law 110–90
4. Retrospective Evaluation of FY 2008
Claims Data
5. Retrospective Analysis of FY 2009
Claims Data
6. Prospective Adjustment for FY 2010 and
Subsequent Years Authorized by Section
7(b)(1)(A) of Public Law 110–90 and
Section 1886(d)(3)(vi) of the Act
7. Recoupment or Repayment Adjustment
for FY 2010 Authorized by Section
7(b)(1)(B) of Public Law 110–90
8. Background on the Application of the
Documentation and Coding Adjustment
to the Hospital-Specific Rates
9. Documentation and Coding Adjustment
to the Hospital-Specific Rates for FY
2011 and Subsequent Fiscal Years
10. Background on the Application of the
Documentation and Coding Adjustment
to the Puerto Rico-Specific Standardized
Amount
11. Documentation and Coding Adjustment
to the Puerto Rico-Specific Standardized
Amount
E. Refinement of the MS–DRG Relative
Weight Calculation
1. Background
a. Summary of FY 2009 Changes and
Discussion for FY 2011
b. Summary of the RAND Corporation
Study of Alternative Relative Weight
Methodologies
2. FY 2011 Changes and Timeline for
Changes to the Medicare Cost Report
F. Preventable Hospital-Acquired
Conditions (HACs), Including Infections
1. Background
a. Statutory Authority
b. HAC Selection
c. Collaborative Process
d. Application of HAC Payment Policy to
MS–DRG Classifications
e. Public Input Regarding Selected and
Potential Candidate HACs
f. POA Indicator Reporting
2. HAC Conditions for FY 2011
3. RTI Program Evaluation Summary
a. Background
b. RTI Analysis on POA Indicator
Reporting Across Medicare Discharges
c. RTI Analysis on POA Indicator
Reporting of Current HACs
d. RTI Analysis of Frequency of Discharges
and POA Indicator Reporting for Current
HACs
e. RTI Analysis of Circumstances When
Application of HAC Provisions Would
Not Result in MS–DRG Reassignment for
Current HACs
f. RTI Analysis of Coding Changes for
HAC-Associated Secondary Diagnoses
for Current HACs
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g. RTI Analysis of Estimated Net Savings
for Current HACs
h. Previously Considered Candidate
HACs—RTI Analysis of Frequency of
Discharges and POA Indicator Reporting
i. Current and Previously Considered
Candidate HACs—RTI Report on
Evidence-Based Guidelines
j. Current HACs and Previously Considered
Candidate HACs
G. Changes to Specific MS–DRG
Classifications
1. Pre-Major Diagnostic Categories (MDCs)
a. Postsurgical Hypoinsulinemia (MS–DRG
008 (Simultaneous Pancreas/Kidney
Transplant))
b. Bone Marrow Transplants
2. MDC 1 (Nervous System):
Administration of Tissue Plasminogen
Activator (tPA) (rtPA)
3. MDC 5 (Diseases and Disorders of the
Circulatory System): Intraoperative
Fluorescence Vascular Angiography
(IFVA) and X-Ray Coronary Angiography
in Coronary Artery Bypass Graft Surgery
a. New MS–DRGs for Intraoperative
Fluorescence Vascular Angiography
(IFVA) with CABG
b. New MS–DRG for Intraoperative
Angiography, by any Method, with
CABG
c. New Procedure Codes
d. MS–DRG Reassignment of Intraoperative
Fluorescence Vascular Angiography
(IFVA)
4. MDC 6 (Diseases and Disorders of the
Digestive System): Gastrointestinal
Stenting
5. MDC 8 (Diseases and Disorders of the
Musculoskeletal System and Connective
Tissue): Pedicle-Based Dynamic
Stabilization
6. MDC 15 (Newborns and Other Neonates
with Conditions Originating in the
Perinatal Period)
a. Discharges/Transfers of Neonates to a
Designated Cancer Center or a Children’s
Hospital
b. Vaccination of Newborns
7. Medicare Code Editor (MCE) Changes
a. Unacceptable Principal Diagnosis Edit:
Addition of Code for Gastroparesis
b. Open Biopsy Check Edit
c. Noncovered Procedure Edit
8. Surgical Hierarchies
9. Complication or Comorbidity (CC)
Exclusions List
a. Background
b. CC Exclusions List for FY 2011
10. Review of Procedure Codes in MS–
DRGs 981 through 983, 984 through 986,
and 987 through 989
a. Moving Procedure Codes from MS–DRGs
981 through 983 or MS–DRGs 987
through 989 to MDCs
b. Reassignment of Procedures among MS–
DRGs 981 through 983, 984 through 986,
and 987 through 989
c. Adding Diagnosis or Procedure Codes to
MDCs
11. Changes to the ICD–9–CM Coding
System, Including Discussion of the
Replacement of the ICD–9–CM System
with the ICD–10–CM and ICD–10–PCS
Systems in FY 2014
a. ICD–9–CM Coding System
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50045
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25
Procedure Codes on Hospital Inpatient
Claims
12. Other Issues Not Addressed in the
Proposed Rule
a. Rechargeable Dual Array Deep Brain
Stimulation System
b. IntraOperative Electron RadioTherapy
(IOERT)
c. Brachytherapy
d. Excisional Debridement
H. Recalibration of MS–DRG Weights
I. Add-On Payments for New Services and
Technologies
1. Background
2. Public Input Before Publication of a
Notice of Proposed Rulemaking on AddOn Payments
3. FY 2011 Status of Technologies
Approved for FY 2010 Add-On Payments
a. Spiration® IBV® Valve System
b. CardioWestTM Temporary Total
Artificial Heart System (CardioWestTM
TAH-t)
4. FY 2011 Applications for New
Technology Add-On Payments
a. Auto Laser Interstitial Thermal Therapy
(AutoLITTTM) System
b. LipiScanTM Coronary Imaging System
c. LipiScanTM Coronary Imaging System
with Intravascular Ultrasound (IVUS)
III. Changes to the Hospital Wage Index for
Acute Care Hospitals
A. Background
B. Wage Index Reform
1. Wage Index Study Required under the
MIEA–TRHCA
a. Legislative Requirement
b. Interim and Final Reports on Results of
Acumen’s Study
2. FY 2009 Policy Changes in Response to
Requirements under Section 106(b) of
the MIEA–TRHCA
a. Reclassification Average Hourly Wage
Comparison Criteria
b. Budget Neutrality Adjustment for the
Rural and Imputed Floors
3. Floor for Area Wage Index for Hospitals
in Frontier States
4. Plan for Reforming the Wage Index
under Section 3137(b) of Affordable Care
Act
C. Core-Based Statistical Areas for the
Hospital Wage Index
D. Occupational Mix Adjustment to the FY
2011 Wage Index
1. Development of Data for the FY 2011
Occupational Mix Adjustment Based on
the 2007–2008 Occupational Mix Survey
2. New 2010 Occupational Mix Survey for
the FY 2013 Wage Index
3. Calculation of the Occupational Mix
Adjustment for FY 2011
E. Worksheet S–3 Wage Data for the FY
2011 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers
Other Than Acute Care Hospitals under
the IPPS
F. Verification of Worksheet S–3 Wage
Data
G. Method for Computing the FY 2011
Unadjusted Wage Index
H. Analysis and Implementation of the
Occupational Mix Adjustment and the
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FY 2011 Occupational Mix Adjusted
Wage Index
I. Revisions to the Wage Index Based on
Hospital Redesignations and
Reclassifications
1. General
2. Effects of Reclassification/Redesignation
3. FY 2011 MGCRB Reclassifications
a. FY 2011 Reclassification Requirements
and Approvals
b. Applications for Reclassifications for FY
2012
c. Appeals of MGCRB Denials of
Withdrawals and Terminations
4. Redesignations of Hospitals under
Section 1886(d)(8)(B) of the Act
5. Reclassifications under Section
1886(d)(8)(B) of the Act
6. Reclassifications under Section 508 of
Public Law 108–173
J. FY 2011 Wage Index Adjustment Based
on Commuting Patterns of Hospital
Employees
K. Process for Requests for Wage Index
Data Corrections
L. Labor-Market Share for the FY 2011
Wage Index
IV. Other Decisions and Changes to the IPPS
for Operating Costs and GME Costs
A. Reporting of Hospital Quality Data for
Annual Hospital Payment Update
1. Background
a. Overview
b. Hospital Quality Data Reporting under
Section 501(b) of Public Law 108–173
c. Hospital Quality Data Reporting under
Section 5001(a) of Public Law 109–171
d. Hospital Quality Data Reporting under
Section 3001(a)(2) and 3401(a)(2) of
Public Law 111–148
e. Quality Measures
f. Maintenance of Technical Specifications
for Quality Measures
g. Public Display of Quality Measures
2. Retirement of RHQDAPU Program
Measures
a. Considerations in Retiring Quality
Measures from the RHQDAPU Program
b. Retirement of Quality Measures under
the RHQDAPU Program for the FY 2011
Payment Determination and Subsequent
Years
3. Expansion Plan for Quality Measures for
the FY 2012, FY 2013, and FY 2014
Payment Determinations
a. Considerations in Expanding and
Updating Quality Measures under the
RHQDAPU Program
b. RHQDAPU Program Quality Measures
for the FY 2012 Payment Determination
c. RHQDAPU Program Quality Measures
for the FY 2013 Payment Determination
d. RHQDAPU Program Quality Measures
for the FY 2014 Payment Determination
4. Possible New Quality Measures for
Future Years
5. Form, Manner, and Timing of Quality
Data Submission
a. RHQDAPU Program Requirements for
FY 2012, FY 2013, and FY 2014
b. Additional RHQDAPU Program
Procedural Requirements for FY 2012,
FY 2013, and FY 2014 Payment
Determinations
6. RHQDAPU Program Disaster Extensions
and Waivers
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7. Chart Validation Requirements for
Chart–Abstracted Measures
a. Chart Validation Requirements and
Methods for the FY 2012 Payment
Determination
b. Supplements to the Chart Validation
Process for the FY 2013 Payment
Determination and Subsequent Years
8. Data Accuracy and Completeness
Acknowledgement Requirements for the
FY 2012 Payment Determination and
Subsequent Years
9. Public Display Requirements for the FY
2012 Payment Determination and
Subsequent Years
10. Reconsideration and Appeal
Procedures for the FY 2011 Payment
Determination
11. RHQDAPU Program Withdrawal
Deadlines
12. Electronic Health Records
a. Background
b. EHR Testing of Quality Measures
Submission
c. HITECH Act EHR Provisions
13. Qualification of Registries for
RHQDAPU Data Submission
14. RHQDAPU and Hospital Value-Based
Purchasing
B. Payment for Transfers of Cases from
Medicare Participating Acute Care
Hospitals to Nonparticipating Hospitals
and CAHs
1. Background
2. Policy Change
C. Rural Referral Centers (RRCs)
1. Case-Mix Index (CMI)
2. Discharges
D. Payment Adjustment for Low-Volume
Hospitals
1. Background
2. Temporary Changes for FYs 2011 and
2012
E. Indirect Medical Education (IME)
Adjustment
1. Background
2. IME Adjustment Factor for FY 2011
3. IME-Related Changes in Other Sections
of this Final Rule
F. Payment Adjustment for Medicare
Disproportionate Share Hospitals
(DSHs): Supplemental Security Income
(SSI) Fraction
1. Background
2. CMS’ Current Data Matching Process for
the SSI Fraction
3. Baystate Medical Center v. Leavitt Court
Decision
4. CMS’ Proposed Process for Matching
Medicare and SSI Eligibility Data
a. Inclusion of Stale Records and Forced
Pay Records in the SSI Eligibility Data
Files
b. Use of SSNs in the Revised Match
Process
c. Timing of the Match
5. CMS Ruling 1498–R
6. Clarification of Language on Inclusion of
Medicare Advantage Days in the SSI
Fraction of the Medicare DSH
Calculation
G. Medicare-Dependent, Small Rural
Hospitals (MDHs): Change to Criteria
1. Background
2. Medicare-Dependency: Counting
Medicare Inpatients
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3. Extension of the MDH Program
H. Payments for Direct Graduate Medical
Education (GME) Costs
1. Background
2. Identifying ‘‘Approved Medical
Residency Programs’’
a. Residents in Approved Medical
Residency Programs
b. Determining Whether an Individual Is a
Resident or a Physician
c. Formal Enrollment and Participation in
a Program
3. Electronic Submission of Affiliation
Agreements
I. Certified Registered Nurse Anesthetist
(CRNA) Services Furnished in Rural
Hospitals and CAHs
J. Additional Payments for Qualifying
Hospitals with Lowest Per Enrollee
Medicare Spending
1. Background
2. Eligible Counties
a. Development of Risk Adjustment Model
b. Calculation of County Level Part A and
Part B Spending
3. Application of the Age/Sex/Race
Adjustment to Part A and Part B County
Spending
4. Qualifying Hospitals and Annual
Payment Amounts
5. Payment Determination and Distribution
6. Hospital Weighting Factors
7. Results
8. Finalization of Eligible Counties,
Qualifying Hospitals and Qualifying
Hospitals’ Weighting Factors
K. Rural Community Hospital
Demonstration Program
L. Technical Change to Regulations
M. Interim Final Rule with Comment
Period: Bundling of Payments for
Services Provided to Outpatients Who
Later Are Admitted As Inpatients: 3–Day
Payment Window
1. Introduction
2. Background for Policy
3. Requirements of Section 102 of Public
Law 111–192
4. Application of the Provisions of Section
102 of Public Law 111–192
5. Waiver of Notice of Proposed
Rulemaking
6. Collection of Information Requirements
7. Response to Public Comments
8. Regulatory Impact Analysis
N. Changes in the Inpatient Hospital
Market Basket Update
1. FY 2010 Inpatient Hospital Update
2. FY 2011 Inpatient Hospital Update
3. FY 2010 and FY 2011 Puerto Rico
Hospital Update
V. Changes to the IPPS for Capital-Related
Costs
A. Overview
B. Exception Payments
C. New Hospitals
D. Hospitals Located in Puerto Rico
E. Changes for FY 2011: MS–DRG
Documentation and Coding Adjustment
1. Background on the Prospective MS–DRG
Documentation and Coding Adjustments
for FY 2008 and FY 2009
2. Retrospective Evaluation of FY 2008
Claims Data
3. Retrospective Analysis of FY 2009
Claims Data
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4. Prospective MS–DRG Documentation
and Coding Adjustment to the National
Capital Federal Rate for FY 2011 and
Subsequent Years
5. Documentation and Coding Adjustment
to the Puerto Rico-Specific Capital Rate
F. Other Changes for FY 2011
VI. Changes for Hospitals Excluded from the
IPPS
A. Excluded Hospitals
B. Critical Access Hospitals (CAHs)
1. Background
2. CAH Optional Method Election for
Payment of Outpatient Services
3. Costs of Provider Taxes as Allowable
Costs for CAHs
a. Background and Statutory Basis
b. Clarification of Payment Policy for
Provider Taxes
C. Report of Adjustment (Exceptions)
Payments
VII. Changes to the Long-Term Care Hospital
Prospective Payment System (LTCH PPS)
for FY 2011
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification
Compliance Act (ASCA) and Health
Insurance Portability and Accountability
Act (HIPAA) Compliance
B. Medicare Severity Long-Term Care
Diagnosis-Related Group (MS–LTC–
DRG) Classifications and Relative
Weights
1. Background
2. Patient Classifications into MS–LTC–
DRGs
a. Background
b. Changes to the MS–LTC–DRGs for FY
2011
3. Development of the FY 2011 MS–LTC–
DRG Relative Weights
a. General Overview of the Development of
the MS–LTC–DRG Relative Weights
b. Development of the MS–LTC–DRG
Relative Weights for FY 2011
c. Data
d. Hospital-Specific Relative Value (HSRV)
Methodology
e. Treatment of Severity Levels in
Developing the MS–LTC–DRG Relative
Weights
f. Low-Volume MS–LTC–DRGs
g. Steps for Determining the RY 2011 MS–
LTC–DRG Relative Weights
C. Changes to the LTCH Payment Rates and
Other Changes to the FY 2011 LTCH PPS
1. Overview of Development of the LTCH
Payment Rates
2. Market Basket for LTCHs Reimbursed
under the LTCH PPS
a. Overview
b. Revision of Certain Market Basket
Updates as Required by the Affordable
Care Act
c. Changes to Reflect the Market Basket
Update for LTCHs for RY 2010
d. Market Basket under the LTCH PPS for
FY 2011
e. Market Basket Update for LTCHs for FY
2011
f. Labor-Related Share under the LTCH PPS
for FY 2011
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3. Adjustment for Changes in LTCHs’ CaseMix Due to Changes in Documentation
and Coding Practices That Occurred in a
Prior Period
a. Background
b. Evaluation of FY 2009 Claims Data
c. FY 2011 Documentation and Coding
Adjustment
D. Change in Terminology from ‘‘Rate Year’’
to ‘‘Fiscal Year’’ and Other Changes
E. Finalization of Interim Final Rule with
Comment Period Implementing Section
4302 of the American Recovery and
Reinvestment Act of 2009 (Pub. L. 111–
5) Relating to Payments to LTCHs and
LTCH Satellite Facilities
1. Background
2. Amendments Relating to Payment
Adjustment to LTCHs and LTCH
Satellite Facilities Made by Section 4302
of the ARRA
3. Amendment to the Moratorium on the
Increase in Number of Beds in Existing
LTCHs or LTCH Satellite Facilities Made
by Section 4302 of the ARRA
F. Extension of Certain Payment Rules for
LTCH Services and Moratorium on the
Establishment of Certain Hospitals and
Facilities and the Increase in Number of
Beds in Existing LTCHs and LTCH
Satellite Facilities
VIII. Determination of Effective Date of
Provider Agreements and Supplier
Approvals
A. Background
B. Departmental Appeals Board Decision
C. Revisions to Regulations
IX. Medicare Hospital Conditions of
Participation Affecting Rehabilitation
Services and Respiratory Care Services
X. Changes to the Accreditation
Requirements for Medicaid Providers of
Inpatient Psychiatric Services for
Individuals under Age 21
A. Background
B. Revision of Policy and Regulations
XI. MedPAC Recommendations
XII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Legislative Requirement for Solicitation
of Comments
2. Requirements in Regulation Text
a. ICRs Regarding Withdrawing an
Application, Terminating an Approved 3
Year Reclassification, or Canceling a
Previous Withdrawal or Termination
(Revised § 412.273)
b. ICRs Regarding Condition of
Participation: Respiratory Care Services
(§ 482.57)
3. Additional Information Collection
Requirements
a. Present on Admission (POA) Indicator
Reporting
b. Add-On Payments for New Services and
Technologies
c. Reporting of Hospital Quality Data for
Annual Hospital Payment Update
d. Occupational Mix Adjustment to the FY
2011 Index (Hospital Wage Index
Occupational Mix Survey)
e. Hospital Applications for Geographic
Reclassifications by the MGCRB
f. Direct GME Payments: General
Requirements
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Regulation Text
Addendum—Schedule of Standardized
Amounts, Update Factors, and Rate-ofIncrease Percentages Effective with Cost
Reporting Periods Beginning on or after
October 1, 2010
I. Summary and Background
II. Changes to the Prospective Payment Rates
for Hospital Inpatient Operating Costs for
Acute Care Hospitals for FY 2011
A. Calculation of the Adjusted
Standardized Amount
B. Adjustments for Area Wage Levels and
Cost-of-Living
C. MS–DRG Relative Weights
D. Calculation of the Prospective Payment
Rates
III. Changes to Payment Rates for Acute Care
Hospital Inpatient Capital-Related Costs
for FY 2011
A. Determination of Federal Hospital
Inpatient Capital-Related Prospective
Payment Rate Update
B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY
2011
C. Capital Input Price Index
IV. Changes to Payment Rates for Certain
Excluded Hospitals: Rate-of-Increase
Percentages
V. Changes to the Payment Rates for the
LTCH PPS for FY 2011
A. LTCH PPS Standard Federal Rate for FY
2011
B. Adjustment for Area Wage Levels under
the LTCH PPS for FY 2011
C. Adjustment for LTCH PPS High-Cost
Outlier (HCO) Cases
D. Computing the Adjusted LTCH PPS
Federal Prospective Payments for FY
2011
VI. Tables
Table 1A—National Adjusted Operating
Standardized Amounts, Labor/Nonlabor
(68.8 Percent Labor Share/31.2 Percent
Nonlabor Share If Wage Index Is Greater
Than 1)
Table 1B—National Adjusted Operating
Standardized Amounts, Labor/Nonlabor
(62 Percent Labor Share/38 Percent
Nonlabor Share If Wage Index Is Less
Than or Equal to 1)
Table 1C—Adjusted Operating
Standardized Amounts for Puerto Rico,
Labor/Nonlabor
Table 1D—Capital Standard Federal
Payment Rate
Table 1E—LTCH Standard Federal
Prospective Payment Rate
Table 2—Acute Care Hospitals Case-Mix
Indexes for Discharges Occurring in
Federal Fiscal Year 2009; Hospital Wage
Indexes for Federal Fiscal Year 2011;
Hospital Average Hourly Wages for
Federal Fiscal Years 2009 (2005 Wage
Data), 2010 (2006 Wage Data), and 2011
(2007 Wage Data); and 3-Year Average of
Hospital Average Hourly Wages
Table 3A—FY 2011 and 3-Year Average
Hourly Wage for Acute Care Hospitals in
Urban Areas by CBSA
Table 3B—FY 2011 and 3-Year Average
Hourly Wage for Acute Care Hospitals in
Rural Areas by CBSA
Table 4A.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
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Acute Care Hospitals in Urban Areas by
CBSA and by State—FY 2011
Table 4B.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Acute Care Hospitals in Rural Areas by
CBSA and by State—FY 2011
Table 4C.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Acute Care Hospitals That Are
Reclassified by CBSA and by State—FY
2011
Table 4D–1 (This table is discontinued due
to section 3141 of the Affordable Care
Act returning the rural floor budget
neutrality to a uniform national
adjustment.)
Table 4D–2.—States Designated as
Frontier, with Acute Care Hospitals
Receiving at a Minimum the Frontier
State Floor Wage Index; Urban Areas
with Acute Care Hospitals Receiving the
Statewide Rural Floor or Imputed Floor
Wage Index—FY 2011
Table 4E.—Urban CBSAs and Constituent
Counties for Acute Care Hospitals—FY
2011
Table 4F.—Puerto Rico Wage Index and
Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals by
CBSA—FY 2011
Table 4J.—Out-Migration Adjustment for
Acute Care Hospitals—FY 2011
Table 5.—List of Medicare Severity
Diagnosis-Related Groups (MS–DRGs),
Relative Weighting Factors, and
Geometric and Arithmetic Mean Length
of Stay—FY 2011
Table 6A.—New Diagnosis Codes
Table 6B.—New Procedure Codes
Table 6C.—Invalid Diagnosis Codes
Table 6D.—Invalid Procedure Codes
Table 6E.—Revised Diagnosis Code Titles
Table 6F.—Revised Procedure Code Titles
Table 6G.—Additions to the CC Exclusions
List (Available through the Internet on
the CMS Web site at: https://www.cms.
hhs.gov/AcuteInpatientPPS/)
Table 6H.—Deletions from the CC
Exclusions List (Available through the
Internet on the CMS Web site at: https://
www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6I.—Complete List of Complication
and Comorbidity (CC) Exclusions
(Available only through the Internet on
the CMS Web site at: https://www.cms.
hhs.gov/AcuteInpatientPPS/)
Table 6J.—Major Complication and
Comorbidity (MCC) List (Available
through the Internet on the CMS Web
site at: https://www.cms.hhs.gov/Acute
InpatientPPS/)
Table 6K.—Complication and Comorbidity
(CC) List (Available through the Internet
on the CMS Web site at: https://www.cms.
hhs.gov/AcuteInpatientPPS/)
Table 7A.—Medicare Prospective Payment
System Selected Percentile Lengths of
Stay: FY 2009 MedPAR Update—March
2010 GROUPER V27.0 MS–DRGs
Table 7B.—Medicare Prospective Payment
System Selected Percentile Lengths of
Stay: FY 2009 MedPAR Update—March
2010 GROUPER V28.0 MS–DRGs
Table 8A.—Statewide Average Operating
Cost-to-Charge Ratios (CCRs) for Acute
Care Hospitals—July 2010
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Table 8B.—Statewide Average Capital
Cost-to-Charge Ratios (CCRs) for Acute
Care Hospitals—July 2010
Table 8C.—Statewide Average Total Costto-Charge Ratios (CCRs) for LTCHs—July
2010
Table 9A.—Hospital Reclassifications and
Redesignations—FY 2011
Table 9C.—Hospitals Redesignated as
Rural under Section 1886(d)(8)(E) of the
Act—FY 2011
Table 10.—Geometric Mean Plus the Lesser
of .75 of the National Adjusted Operating
Standardized Payment Amount
(Increased To Reflect the Difference
Between Costs and Charges) or .75 of
One Standard Deviation of Mean Charges
by Medicare Severity Diagnosis-Related
Groups (MS–DRGs)—July 2010
Table 11.—MS–LTC–DRGs, Relative
Weights, Geometric Average Length of
Stay, Short-Stay Outlier Threshold, and
IPPS Comparable Threshold for
Discharges Occurring from October 1,
2010 through September 30, 2011 under
the LTCH PPS
Table 12A.—LTCH PPS Wage Index for
Urban Areas for Discharges Occurring
from October 1, 2010 through September
30, 2011
Table 12B.—LTCH PPS Wage Index for
Rural Areas for Discharges Occurring
from October 1, 2010 through September
30, 2011
Appendix A—Regulatory Impact Analysis
I. Overall Impact
II. Objectives of the IPPS
III. Limitations of Our Analysis
IV. Hospitals Included in and Excluded from
the IPPS
V. Effects on Hospitals and Hospital Units
Excluded from the IPPS
VI. Quantitative Effects of the Policy Changes
under the IPPS for Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects of the Changes to the MS–DRG
Reclassifications and Relative Cost-Based
Weights (Column 1)
D. Effects of the Application of
Recalibration Budget Neutrality (Column
2)
E. Effects of Wage Index Changes (Column
3)
F. Application of the Wage Budget
Neutrality Factor (Column 4)
G. Combined Effects of MS–DRG and Wage
Index Changes (Column 5)
H. Effects of MGCRB Reclassifications
(Column 6)
I. Effects of the Rural Floor and Imputed
Floor, Including Application of Budget
Neutrality at the State Level (Column 7)
J. Effects of the Wage Index Adjustment for
Out-Migration (Column 8)
K. Effects of All Changes Prior to
Documentation and Coding (Or CMI)
Adjustment (Column 9)
L. Effects of All Changes With CMI
Adjustment (Column 10)
M. Effects of Policy on Payment
Adjustments for Low-Volume Hospitals
N. Impact Analysis of Table II
VII. Effects of Other Policy Changes
A. Effects of Policy on HACs, Including
Infections
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B. Effects of Policy Changes Relating to
New Medical Service and Technology
Add-On Payments
C. Effects of Requirements for Hospital
Reporting of Quality Data for Annual
Hospital Payment Update
D. Effects of Policy on Payment for
Transfer Cases from Medicare
Participating Hospitals to
Nonparticipating Hospitals and CAHs
E. Effects of Change in Criteria for MDHs
F. Effects of Change Relating to Payment
Adjustment for Disproportionate Share
Hospitals
G. Effects of Changes Relating to Payments
for IME and Direct GME
1. Background
2. Identifying ‘‘Approved Medical
Residency Programs’’
3. Submission of Electronic Affiliation
Agreements
4. Technical Correction to the Regulations
Relating to the Cost of Approved Nursing
and Allied Health Education Activities
H. Effects of Changes Relating to CRNA
Services Furnished in Rural Hospitals
and CAHs
I. Effects of Implementation of Rural
Community Hospital Demonstration
Program
J. Effects of Changes Relating to CAHs
1. CAH Optional Method of Payment for
Outpatient Services
2. Consideration of Costs of Provider Taxes
as Allowable Costs for CAHs
K. Effects of Policy Relating to Effective
Date of Provider Agreements and
Supplier Approvals
L. Effects of Changes Relating to Hospital
Rehabilitation Services and Respiratory
Care Services Conditions of Participation
VIII. Effects of Changes in the Capital IPPS
A. General Considerations
B. Results
IX. Effects of Payment Rate Changes and
Policy Changes under the LTCH PPS
A. Introduction and General
Considerations
B. Impact on Rural Hospitals
C. Anticipated Effects of LTCH PPS
Payment Rate Change and Policy
Changes
D. Effect on the Medicare Program
E. Effect on Medicare Beneficiaries
X. Effects of Policy Changes Relating to
Accreditation Requirements for
Medicaid Providers of Inpatient
Psychiatric Services to Individuals under
Age 21
XI. Alternatives Considered
XII. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
XIII. Accounting Statements
A. Acute Care Hospitals
B. LTCHs
XIV. Executive Order 12866
Appendix B—Recommendation of Update
Factors for Operating Cost Rates of
Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2011
III. Secretary’s Recommendation
IV. MedPAC Recommendation for Assessing
Payment Adequacy and Updating
Payments in Traditional Medicare
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I. Background
A. Summary
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1. Acute Care Hospital Inpatient
Prospective Payment System (IPPS)
Section 1886(d) of the Social Security
Act (the Act) sets forth a system of
payment for the operating costs of acute
care hospital inpatient stays under
Medicare Part A (Hospital Insurance)
based on prospectively set rates. Section
1886(g) of the Act requires the Secretary
to pay for the capital-related costs of
hospital inpatient stays under a
prospective payment system (PPS).
Under these PPSs, Medicare payment
for hospital inpatient operating and
capital-related costs is made at
predetermined, specific rates for each
hospital discharge. Discharges are
classified according to a list of
diagnosis-related groups (DRGs).
The base payment rate is comprised of
a standardized amount that is divided
into a labor-related share and a
nonlabor-related share. The laborrelated share is adjusted by the wage
index applicable to the area where the
hospital is located. If the hospital is
located in Alaska or Hawaii, the
nonlabor-related share is adjusted by a
cost-of-living adjustment factor. This
base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage
of low-income patients, it receives a
percentage add-on payment applied to
the DRG-adjusted base payment rate.
This add-on payment, known as the
disproportionate share hospital (DSH)
adjustment, provides for a percentage
increase in Medicare payments to
hospitals that qualify under either of
two statutory formulas designed to
identify hospitals that serve a
disproportionate share of low-income
patients. For qualifying hospitals, the
amount of this adjustment may vary
based on the outcome of the statutory
calculations.
If the hospital is an approved teaching
hospital, it receives a percentage add-on
payment for each case paid under the
IPPS, known as the indirect medical
education (IME) adjustment. This
percentage varies, depending on the
ratio of residents to beds.
Additional payments may be made for
cases that involve new technologies or
medical services that have been
approved for special add-on payments.
To qualify, a new technology or medical
service must demonstrate that it is a
substantial clinical improvement over
technologies or services otherwise
available, and that, absent an add-on
payment, it would be inadequately paid
under the regular DRG payment.
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The costs incurred by the hospital for
a case are evaluated to determine
whether the hospital is eligible for an
additional payment as an outlier case.
This additional payment is designed to
protect the hospital from large financial
losses due to unusually expensive cases.
Any eligible outlier payment is added to
the DRG-adjusted base payment rate,
plus any DSH, IME, and new technology
or medical service add-on adjustments.
Although payments to most hospitals
under the IPPS are made on the basis of
the standardized amounts, some
categories of hospitals are paid in whole
or in part based on their hospitalspecific rate based on their costs in a
base year. For example, sole community
hospitals (SCHs) receive the higher of a
hospital-specific rate based on their
costs in a base year (the highest of FY
1982, FY 1987, FY 1996, or FY 2006) or
the IPPS Federal rate based on the
standardized amount. Through and
including FY 2006, a Medicaredependent, small rural hospital (MDH)
received the higher of the Federal rate
or the Federal rate plus 50 percent of the
amount by which the Federal rate is
exceeded by the higher of its FY 1982
or FY 1987 hospital-specific rate. As
discussed below, for discharges
occurring on or after October 1, 2007,
but before October 1, 2012, an MDH will
receive the higher of the Federal rate or
the Federal rate plus 75 percent of the
amount by which the Federal rate is
exceeded by the highest of its FY 1982,
FY 1987, or FY 2002 hospital-specific
rate. SCHs are the sole source of care in
their areas, and MDHs are a major
source of care for Medicare beneficiaries
in their areas. Specifically, section
1886(d)(5)(D)(iii) of the Act defines an
SCH as a hospital that is located more
than 35 road miles from another
hospital or that, by reason of factors
such as isolated location, weather
conditions, travel conditions, or absence
of other like hospitals (as determined by
the Secretary), is the sole source of
hospital inpatient services reasonably
available to Medicare beneficiaries. In
addition, certain rural hospitals
previously designated by the Secretary
as essential access community hospitals
are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an
MDH as a hospital that is located in a
rural area, has not more than 100 beds,
is not an SCH, and has a high
percentage of Medicare discharges (not
less than 60 percent of its inpatient days
or discharges in its cost reporting year
beginning in FY 1987 or in two of its
three most recently settled Medicare
cost reporting years). Both of these
categories of hospitals are afforded this
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special payment protection in order to
maintain access to services for
beneficiaries.
Section 1886(g) of the Act requires the
Secretary to pay for the capital-related
costs of inpatient hospital services ‘‘in
accordance with a prospective payment
system established by the Secretary.’’
The basic methodology for determining
capital prospective payments is set forth
in our regulations at 42 CFR 412.308
and 412.312. Under the capital IPPS,
payments are adjusted by the same DRG
for the case as they are under the
operating IPPS. Capital IPPS payments
are also adjusted for IME and DSH,
similar to the adjustments made under
the operating IPPS. In addition,
hospitals may receive outlier payments
for those cases that have unusually high
costs.
The existing regulations governing
payments to hospitals under the IPPS
are located in 42 CFR part 412, subparts
A through M.
2. Hospitals and Hospital Units
Excluded From the IPPS
Under section 1886(d)(1)(B) of the
Act, as amended, certain hospitals and
hospital units are excluded from the
IPPS. These hospitals and units are:
Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric
hospitals and units; children’s hospitals;
and cancer hospitals. Religious
nonmedical health care institutions
(RNHCIs) are also excluded from the
IPPS. Various sections of the Balanced
Budget Act of 1997 (BBA, Pub. L. 105–
33), the Medicare, Medicaid and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget Refinement
Act of 1999 (BBRA, Pub. L. 106–113),
and the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection
Act of 2000 (BIPA, Pub. L. 106–554)
provide for the implementation of PPSs
for rehabilitation hospitals and units
(referred to as inpatient rehabilitation
facilities (IRFs)), LTCHs, and psychiatric
hospitals and units (referred to as
inpatient psychiatric facilities (IPFs)).
(We note that the annual updates to the
LTCH PPS are now included as part of
the IPPS annual update document.
Updates to the IRF PPS and IPF PPS are
issued as separate documents.)
Children’s hospitals, cancer hospitals,
and RNHCIs continue to be paid solely
under a reasonable cost-based system
subject to a rate-of-increase ceiling on
inpatient operating costs per discharge.
The existing regulations governing
payments to excluded hospitals and
hospital units are located in 42 CFR
parts 412 and 413.
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3. Long-Term Care Hospital Prospective
Payment System (LTCH PPS)
The Medicare prospective payment
system (PPS) for LTCHs applies to
hospitals described in section
1886(d)(1)(B)(iv) effective for cost
reporting periods beginning on or after
October 1, 2002. The LTCH PPS was
established under the authority of
sections 123(a) and (c) of Public Law
106–113 and section 307(b)(1) of Public
Law 106–554 (as codified under section
1886(m)(1) of the Act). During the 5-year
(optional) transition period, a LTCH’s
payment under the PPS was based on an
increasing proportion of the LTCH
Federal rate with a corresponding
decreasing proportion based on
reasonable cost principles. Effective for
cost reporting periods beginning on or
after October 1, 2006, all LTCHs are
paid 100 percent of the Federal rate. The
existing regulations governing payment
under the LTCH PPS are located in 42
CFR part 412, subpart O. Beginning
October 1, 2009, we issue the annual
updates to the LTCH PPS in the same
documents that update the IPPS (73 FR
26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and
1834(g) of the Act, payments are made
to critical access hospitals (CAHs) (that
is, rural hospitals or facilities that meet
certain statutory requirements) for
inpatient and outpatient services are
generally based on 101 percent of
reasonable cost. Reasonable cost is
determined under the provisions of
section 1861(v)(1)(A) of the Act and
existing regulations under 42 CFR parts
413 and 415.
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5. Payments for Graduate Medical
Education (GME)
Under section 1886(a)(4) of the Act,
costs of approved educational activities
are excluded from the operating costs of
inpatient hospital services. Hospitals
with approved graduate medical
education (GME) programs are paid for
the direct costs of GME in accordance
with section 1886(h) of the Act. The
amount of payment for direct GME costs
for a cost reporting period is based on
the hospital’s number of residents in
that period and the hospital’s costs per
resident in a base year. The existing
regulations governing payments to the
various types of hospitals are located in
42 CFR part 413.
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B. Provisions of the Patient Protection
and Affordable Care Act (Pub. L. 111–
148) and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152)
On March 23, 2010, the Patient
Protection and Affordable Care Act
(PPACA), Public Law 111–148 was
enacted. Following the 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 and
certain sections of the Social Security
Act, and, in certain instances, included
certain ‘‘freestanding’’ provisions that
affect implementation of the IPPS and
the LTCH PPS. (Pub. L. 111–148 and
Pub. L. 111–152 are collectively referred
to as the ‘‘Affordable Care Act.’’) A
number of the provisions of the
Affordable Care Act affected the updates
to the IPPS and the LTCH PPS and the
providers and suppliers that were
addressed in the FY 2011 IPPS/LTCH
PPS proposed rule that appeared in the
Federal Register on May 4, 2010 (75 FR
23852). However, due to the timing of
the passage of the legislation, we were
unable to address those provisions in
the May 4, 2010 proposed rule.
Therefore, on June 2, 2010, we issued in
the Federal Register two additional
documents:
1. A supplemental proposed rule (75
FR 30918) to the FY 2010 IPPS/LTCH
PPS proposed rule published on May 4,
2010, that proposed to implement
certain provisions of the Affordable Care
Act. These proposed provisions are
outlined in section I.D.2. of this final
rule, and are being finalized in the
appropriate subject-matter sections of
this final rule.
2. A notice (75 FR 31118) that
contained the final wage indices,
hospital reclassifications, payment rates,
impacts, and other related tables,
effective for the FY 2010 IPPS and the
RY 2010 LTCH PPS, that were required
by or directly resulted from
implementation of provisions of the
Affordable Care Act.
C. Provisions of the Preservation of
Access To Care for Medicare
Beneficiaries and Pension Relief Act of
2010 (Pub. L. 111–192)
On June 25, 2010, the Preservation of
Access to Care for Medicare
Beneficiaries and Pension Relief Act of
2010 (Pub. L. 111–192) was enacted.
Section 102 of Public Law 111–192
amended section 1886(a)(4) and (d)(7) of
the Act affecting Medicare payments for
preadmission services furnished to
outpatients who are later admitted as
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inpatients during a specified payment
window. We are implementing this
legislative provision as discussed under
section IV.M. of the preamble of this
document through an interim final rule
with comment period.
D. Issuance of Two Notices of Proposed
Rulemaking for FY 2011
1. Issuance of May 4, 2010 IPPS/LTCH
PPS Proposed Rule
On May 4, 2010, we issued in the
Federal Register the FY 2011 IPPS/
LLTCH PPS proposed rule (75 FR
23852). In that proposed rule, we set
forth proposed changes to the Medicare
IPPS for operating costs and for capitalrelated costs of acute care hospitals in
FY 2011. We also set forth proposed
changes relating to payments for IME
costs and payments to certain hospitals
and units that continue to be excluded
from the IPPS and paid on a reasonable
cost basis.
In addition, in that proposed rule, we
set forth proposed changes to the
payment rates, factors, and other
payment rate policies under the LTCH
PPS for FY 2011. We note that because
the annual update of payment rates for
the LTCH PPS now takes place on the
same schedule and in the same
publication as for the IPPS, for the sake
of clarity, in section VII.D. of the
proposed rule, we proposed to use
‘‘fiscal year (FY)’’ instead of ‘‘rate year
(RY)’’ when referring to updates and
changes to the LTCH PPS to be effective
October 1, 2010. Therefore, throughout
the proposed rule (and this final rule),
we use the phrase ‘‘fiscal year (FY)’’ in
referring to updates and changes to the
LTCH PPS.
Below is a summary of the major
changes that we proposed to make in
the May 4, 2010 proposed rule:
a. Proposed Changes to MS–DRG
Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the
proposed rule, we included—
• Proposed changes to MS–DRG
classifications based on our yearly
review.
• Proposed application of the
documentation and coding adjustment
for FY 2011 resulting from
implementation of the MS–DRG system.
• A discussion of the Research
Triangle International, Inc. (RTI) and
RAND Corporation reports and
recommendations relating to charge
compression.
• Proposed recalibrations of the MS–
DRG relative weights.
We also presented a listing and
discussion of hospital-acquired
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conditions (HACs), including infections,
that are subject to the statutorily
required quality adjustment in MS–DRG
payments for FY 2011.
We discussed the FY 2011 status of
two new technologies approved for addon payments for FY 2010 and presented
our evaluation and analysis of the FY
2011 applicants for add-on payments for
high-cost new medical services and
technologies (including public input, as
directed by Pub. L. 108–173, obtained in
a town hall meeting).
b. Proposed Changes to the Hospital
Wage Index for Acute Care Hospitals
In section III. of the preamble to the
proposed rule, we proposed revisions to
the wage index for acute care hospitals
and the annual update of the wage data.
Specific issues addressed included the
following:
• Budget neutrality for the rural floor
and imputed floor.
• Changes to titles and principal
cities of CBSA designations.
• The proposed FY 2011 wage index
update using wage data from cost
reporting periods beginning in FY 2007.
• Analysis and implementation of the
proposed FY 2011 occupational mix
adjustment to the wage index for acute
care hospitals, including discussion of
the 2010 occupational mix survey.
• Proposed revisions to the wage
index for acute care hospitals based on
hospital redesignations and
reclassifications.
• The proposed adjustment to the
wage index for acute care hospitals for
FY 2011 based on commuting patterns
of hospital employees who reside in a
county and work in a different area with
a higher wage index.
• The timetable for reviewing and
verifying the wage data used to compute
the proposed FY 2011 hospital wage
index.
• Determination of the labor-related
share for the proposed FY 2011 wage
index.
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c. Other Decisions and Proposed
Changes to the IPPS for Operating Costs
and GME Costs
In section IV. of the preamble of the
proposed rule, we discussed a number
of the provisions of the regulations in 42
CFR parts 412, 413, and 489, including
the following:
• The reporting of hospital quality
data as a condition for receiving the full
annual payment update increase.
• Payment for transfer cases from
Medicare participating hospitals to
nonparticipating hospitals and CAHs.
• A change to the definition criteria
for MDHs.
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• The proposed updated national and
regional case-mix values and discharges
for purposes of determining RRC status.
• The statutorily required IME
adjustment factor for FY 2011.
• The proposed policy change
relating to the determination of the SSI
ratio of the Medicare fraction in the
formula for determining the payment
adjustments for disproportionate share
hospitals.
• A proposed clarification of
‘‘approved medical residency programs’’
policies relating to payment for IME and
direct GME and our proposal to accept
the electronic submission of Medicare
GME affiliation agreements.
• Proposed policy change for
payments for services furnished by
certified registered nurse anesthetists
(CRNAs) in rural hospitals and CAHs.
• Discussion of the status of the Rural
Community Hospital Demonstration
Program.
d. Proposed FY 2011 Policy Governing
the IPPS for Capital-Related Costs
In section V. of the preamble to the
proposed rule, we discussed the
proposed payment policy requirements
for capital-related costs and capital
payments to hospitals for FY 2011 and
the proposed MS–DRG documentation
and coding adjustment for FY 2011.
e. Proposed Changes to the Payment
Rates for Certain Excluded Hospitals:
Rate-of-Increase Percentages
In section VI. of the preamble of the
proposed rule, we discussed—
• Proposed changes to payments to
excluded hospitals.
• Proposed changes relating to the
election by CAHs of the optional
method of payment for outpatient
services
• Proposed clarification of the
policies on costs of provider taxes as
allowable costs for CAHs.
f. Proposed Changes to the LTCH PPS
In section VII. of the preamble of the
proposed rule, we set forth proposed
changes to the payment rates, factors,
and other payment rate policies under
the LTCH PPS for FY 2011, including
the annual update of the MS–LTC–DRG
classifications and relative weights for
use under the LTCH PPS for FY 2011
and the proposed documentation and
coding adjustment under the LTCH PPS
for FY 2011.
g. Proposed Changes Relating to
Effective Date of Provider Agreements
and Supplier Approvals
In section VIII. of the preamble of the
proposed rule, we set forth our
proposed change in the provisions for
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50051
determining the effective date of
provider agreements and supplier
approvals and to make changes to assure
that accredited and nonaccredited
facilities are treated in the same manner
in determining this effective date.
h. Proposed Changes to Medicare
Conditions of Participation Affecting
Hospital Rehabilitation Services and
Respiratory Care Services
In section IX. of the preamble of the
proposed rule, we proposed changes to
the Medicare conditions of participation
regarding which practitioners are
allowed to order rehabilitation and
respiratory care services in the hospital
setting.
i. Proposed Changes to the
Accreditation Requirements for
Medicaid Providers of Inpatient
Psychiatric Services for Individuals
Under Age 21
In section X. of the preamble of the
proposed rule, we proposed to remove
the requirement for accreditation by The
Joint Commission of psychiatric
hospitals and hospitals with inpatient
psychiatric programs. Hospitals with
inpatient psychiatric programs would be
afforded the flexibility in obtaining
accreditation by a national accrediting
organization whose hospital accrediting
program has been approved by CMS.
(We note that we proposed a similar
change for psychiatric rehabilitation
treatment facilities, which we are not
adopting in this final rule.)
j. Determining Proposed Prospective
Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute
Care Hospitals
In the Addendum to the proposed
rule, we set forth proposed changes to
the amounts and factors for determining
the proposed FY 2011 prospective
payment rates for operating costs and
capital-related costs for acute care
hospitals. We also proposed to establish
the threshold amounts for outlier cases.
In addition, we addressed the proposed
update factors for determining the rateof-increase limits for cost reporting
periods beginning in FY 2011 for certain
hospitals excluded from the IPPS.
k. Determining Proposed Prospective
Payment Rates for LTCHs
In the Addendum to the proposed
rule, we set forth proposed changes to
the amounts and factors for determining
the proposed FY 2011 prospective
standard Federal rate. We also proposed
to establish the proposed adjustments
for wage levels, the labor-related share,
the cost-of-living adjustment, and highcost outliers, including the fixed-loss
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amount, and the LTCH cost-to-charge
ratios (CCRs) under the LTCH PPS.
l. Impact Analysis
In Appendix A of the proposed rule,
we set forth an analysis of the impact
that the proposed changes would have
on affected acute care hospitals and
LTCHs.
m. Recommendation of Update Factors
for Operating Cost Rates of Payment for
Hospital Inpatient Services
In Appendix B of the proposed rule,
as required by sections 1886(e)(4) and
(e)(5) of the Act, we provided our
recommendations of the appropriate
percentage changes for FY 2011 for the
following:
• A single average standardized
amount for all areas for hospital
inpatient services paid under the IPPS
for operating costs of acute care
hospitals (and hospital-specific rates
applicable to SCHs and MDHs).
• Target rate-of-increase limits to the
allowable operating costs of hospital
inpatient services furnished by certain
hospitals excluded from the IPPS.
• The standard Federal rate for
hospital inpatient services furnished by
LTCHs.
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n. Discussion of Medicare Payment
Advisory Commission
Recommendations
Under section 1805(b) of the Act,
MedPAC is required to submit a report
to Congress, no later than March 1 of
each year, in which MedPAC reviews
and makes recommendations on
Medicare payment policies. MedPAC’s
March 2010 recommendations
concerning hospital inpatient payment
policies address the update factor for
hospital inpatient operating costs and
capital-related costs under the IPPS, for
hospitals and distinct part hospital units
excluded from the IPPS. We addressed
these recommendations in Appendix B
of the proposed rule. For further
information relating specifically to the
MedPAC March 2008 report or to obtain
a copy of the report, contact MedPAC at
(202) 220–3700 or visit MedPAC’s Web
site at: https://www.medpac.gov.
2. Issuance of June 2, 2010 Proposed
Rule
A number of the provisions of the
Affordable Care Act affected the IPPS
and the LTCH PPS and the applicable
providers and suppliers. Due to the
timing of the passage of the legislation,
we were unable to address these
provisions in the FY 2011 IPPS/LTCH
PPS proposed rule that appeared in the
May 4, 2010 Federal Register (75 FR
23852). Therefore, various proposed
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policies and payment rates in that
proposed rule did not reflect the new
legislation. We noted in that proposed
rule that we would issue separate
Federal Register documents addressing
the provisions of the Affordable Care
Act that affected our proposed policies
and payment rates for FY 2010 and FY
2011 under the IPPS and for RY 2010
and FY 2011 under the LTCH PPS.
On June 2, 2010, we issued a
supplemental proposed rule in the
Federal Register (75 FR 30918) that
addressed the following FY 2011
policies and provisions of the
Affordable Care Act:
• Hospital wage index improvement
related to geographic reclassification
criteria for FY 2011 (section 3137 of
Pub. L. 111–148).
• National budget neutrality in the
calculation of the rural floor for hospital
wage index (section 3141 of Pub. L.
111–148).
• Protections for frontier States
(section 10324 of Pub. L. 111–148).
• Revisions of certain market basket
updates (sections 3401 and 10319 of
Pub. L. 111–148 and section 1105 of
Pub. L. 111–152).
• Temporary improvements to the
low-volume hospital adjustment
(sections 3125 and 10314 of Pub. L.
111–148).
• Extension of Medicare-dependent
hospitals (MDHs) (section 3124 of Pub.
L. 111–148).
• Additional payments in FYs 2011
and 2012 for qualifying hospitals in the
lowest quartile of per capital Medicare
spending (section 1109 of Pub. L. 111–
152).
• Extension of the rural community
hospital demonstration (sections 3123
and 10313 of Pub. L. 111–148).
• Technical correction related to CAH
services (section 3128 of Pub. L. 111–
148).
• Extension of certain payment rules
for LTCH services and of moratorium on
the establishment of certain hospitals
and facilities and increases in beds in
existing LTCHs or LTCH satellite
facilities (sections 3106 and 10312 of
Pub. L. 111–148).
We also noted that we planned to
issue further instructions implementing
the provisions of the Affordable Care
Act that affect the policies and payment
rates for FY 2010 under the IPPS and for
RY 2010 under the LTCH PPS in a
separate document published elsewhere
in June 2, 2010 Federal Register.
In this final rule, we are finalizing
both the provisions of the May 4, 2010
proposed rule and the June 2, 2010
supplemental proposed rule in one
document.
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E. Public Comments Received on the FY
2011 IPPS/LTCH PPS Proposed Rule
and Supplemental Proposed Rule
We received over 700 public
comments on the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule and
approximately 33 public comments on
the June 2, 2010 FY 2011 IPPS/LTCH
PPS supplemental proposed rule. One
comment addressed the comment
period for the supplemental proposed
rule.
Comment: One commenter objected to
our decision to shorten the usual 60-day
comment period for the supplemental
proposed rule. The commenter did not
believe that CMS had the authority to
shorten the comment period and stated
that the period allowed for comment on
the policies in the supplemental
proposed rule was insufficient.
Response: We disagree with the
commenter that the waiver of the full
60-day comment period in the
supplemental proposed rule was
insufficient. As we explained in the
supplemental proposed rule, due to the
timing of the enactment of the
Affordable Care Act, the policies and
payment rates outlined in the FY 2011
IPPS/LTCH proposed rule published in
the Federal Register on May 4, 2010,
did not reflect the changes made by that
law to the IPPS and LTCH PPS. The
supplemental proposed rule addressed
the changes that affect our policies and
payment rates for FY 2011 under the
IPPS and the LTCH PPS. We refer
readers to the waiver of 60-day
comment period discussion in the
supplemental proposed rule (75 FR
30971), and we welcome the
opportunity to provide additional
details regarding our decision to waive
the 60-day comment period.
Our decision to shorten the customary
60-day comment period is consistent
with past agency practice (see, for
example, 74 FR 26603 (June 3, 2009), 74
FR 43952 (August 27, 2009), and 68 FR
34772 (June 10, 2003)), as well as the
language of section 1871(b)(2)(C) of the
Act. We read section 1871(b)(2)(C) of the
Act to permit a waiver of any or all of
the procedures set forth in section
1871(b)(1) of the Act, including the 60day comment period, if good cause
exists.
We believe the commenter’s
description of the period allowed for
comment overstated the inconvenience
that the shortened comment period may
have created. We believe that the
detailed and thoughtful comments that
we received in response to the contents
of the supplemental proposed rule
support our position that there was time
for meaningful public participation in
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the development of these policies. In
addition, as the commenter admits,
parties had 28 days from the posting of
the supplemental proposed rule to
submit comments to CMS, and a
Listserv posting alerted outside parties
to the posting of agency regulations.
The FY 2011 IPPS/LTCH PSS final
rule must be effective as of October 1,
2010, the start of FY 2011. Given this
statutory deadline, we believe it was
necessary to shorten the time period, as
permitted by section 1871(b)(2)(C) of the
Act. As we explained in the waiver of
60-day comment period discussion in
the supplemental proposed rule, unless
we shortened the comment period, there
would have been no opportunity for the
agency to appropriately consider the
comments we received and resolve
whether any of the proposed policies
would be modified in light of comments
received. The comment period set forth
in the supplemental proposed rule
provided the agency with the minimum
time needed for a careful consideration
of the public comments on both the FY
2011 IPPS/LTCH PPS final rules.
Moreover, a full 60-day comment period
from the date of publication in the
Federal Register, which is what the
comment period would be if the
commenter’s reading of section
1871(b)(2)(C) of the Act were adopted by
the agency, would have extended into
August, which would have been
impracticable, given the required
effective date of October 1, 2010.
The remaining public comments we
received on the two proposed rules
addressed issues on multiple topics in
both of the proposed rules. We present
a summary of the public comments and
our responses to them in the applicable
subject-matter sections of this final rule.
F. Finalization of the Interim Final Rule
With Comment Period That
Implemented Certain Provisions of the
ARRA Relating to Payments to LTCHs
and LTCH Satellite Facilities
Section 4302 of the American
Recovery and Reinvestment Act of 2009
(ARRA, Pub. L. 111–5) included several
amendments to section 114 of Public
Law 110–173 (MMSEA) relating to
payments to LTCHs and LTCH satellite
facilities that were discussed under
section X. of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43976
through 43990). These amendments are
effective as if they were enacted as part
of section 114 of Public Law 110–173
(MMSEA). We issued instructions to the
fiscal intermediaries and Medicare
administrative contractors (MACs) to
interpret these amendments (Change
Request 6444). In section XI. of the FY
2010/RY 2010 LTCH PPS final rule (74
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FR 43990), we implemented the
provisions of section 4302 of Public Law
111–5 through an interim final rule with
comment period. Sections 3106 and
10312 of the Affordable Care Act added
an additional 2 years to the 3-year
implementation delay established by
section 114(c) and (d)(1) of MMSEA.
These provisions of the Affordable Care
Act applicable to the LTCH PPS were
discussed in the June 2, 2010
supplemental proposed rule (75 FR
30967).
In section VII.E. of the preamble of
this final rule, we respond to the public
comment that we received in a timely
manner on this interim final rule with
comment period and finalize the interim
final rule.
II. Changes to Medicare Severity
Diagnosis-Related Group (MS–DRG)
Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies
that the Secretary shall establish a
classification system (referred to as
DRGs) for inpatient discharges and
adjust payments under the IPPS based
on appropriate weighting factors
assigned to each DRG. Therefore, under
the IPPS, Medicare pays for inpatient
hospital services on a rate per discharge
basis that varies according to the DRG
to which a beneficiary’s stay is assigned.
The formula used to calculate payment
for a specific case multiplies an
individual hospital’s payment rate per
case by the weight of the DRG to which
the case is assigned. Each DRG weight
represents the average resources
required to care for cases in that
particular DRG, relative to the average
resources used to treat cases in all
DRGs.
Congress recognized that it would be
necessary to recalculate the DRG
relative weights periodically to account
for changes in resource consumption.
Accordingly, section 1886(d)(4)(C) of
the Act requires that the Secretary
adjust the DRG classifications and
relative weights at least annually. These
adjustments are made to reflect changes
in treatment patterns, technology, and
any other factors that may change the
relative use of hospital resources.
B. MS–DRG Reclassifications
1. General
As discussed in the preamble to the
FY 2008 IPPS final rule with comment
period (72 FR 47138), we focused our
efforts in FY 2008 on making significant
reforms to the IPPS consistent with the
recommendations made by MedPAC in
its ‘‘Report to the Congress, PhysicianOwned Specialty Hospitals’’ in March
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2005. MedPAC recommended that the
Secretary refine the entire DRG system
by taking severity of illness into account
and applying hospital-specific relative
value (HSRV) weights to DRGs.1 We
began this reform process by adopting
cost-based weights over a 3-year
transition period beginning in FY 2007
and making interim changes to the DRG
system for FY 2007 by creating 20 new
CMS DRGs and modifying 32 other
DRGs across 13 different clinical areas
involving nearly 1.7 million cases. As
described in more detail below, these
refinements were intermediate steps
towards comprehensive reform of both
the relative weights and the DRG system
as we undertook further study. For FY
2008, we adopted 745 new Medicare
Severity DRGs (MS–DRGs) to replace
the CMS DRGs. We refer readers to
section II.D. of the FY 2008 IPPS final
rule with comment period for a full
detailed discussion of how the MS–DRG
system, based on severity levels of
illness, was established (72 FR 47141).
Currently, cases are classified into
MS–DRGs for payment under the IPPS
based on the following information
reported by the hospital: the principal
diagnosis, up to eight additional
diagnoses, and up to six procedures
performed during the stay. (We refer
readers to section II.G.11.c. of this final
rule for a discussion of our efforts to
increase our internal systems capacity to
process diagnosis and procedures on
hospital claims to 25 diagnosis codes
and 25 procedure codes prior to the use
of the International Classification of
Diseases, 10th Revision, Clinical
Modification (ICD–10–CM) for diagnosis
coding and the International
Classification of Diseases, 10th
Revision, Procedure Coding System
(ICD–10 PCS) for inpatient hospital
procedure coding, effective October 1,
2013.) In a small number of MS–DRGs,
classification is also based on the age,
sex, and discharge status of the patient.
The diagnosis and procedure
information is reported by the hospital
using codes from the International
Classification of Diseases, Ninth
Revision, Clinical Modification (ICD–9–
CM) prior to October 1, 2013. We refer
readers to section II.G.11.b. of this final
rule for a reference to the replacement
of ICD–9–CM, Volumes 1 and 2,
including the Official ICD–9–CM
Guidelines for Coding and Reporting,
Volume 3, with the ICD–10–CM and
ICD–10–PCS, including the Official
ICD–10–CM and ICD–10–PCS
1 Medicare Payment Advisory Commission:
Report to the Congress, Physician-Owned Specialty
Hospitals, March 2005, page viii.
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Guidelines for Coding and Reporting,
effective October 1, 2013 (FY 2014).
The process of developing the MS–
DRGs was begun by dividing all
possible principal diagnoses into
mutually exclusive principal diagnosis
areas, referred to as Major Diagnostic
Categories (MDCs). The MDCs were
formulated by physician panels to
ensure that the DRGs would be
clinically coherent. The diagnoses in
each MDC correspond to a single organ
system or etiology and, in general, are
associated with a particular medical
specialty. Thus, in order to maintain the
requirement of clinical coherence, no
final MS–DRG could contain patients in
different MDCs. For example, MDC 6 is
Diseases and Disorders of the Digestive
System. This approach is used because
clinical care is generally organized in
accordance with the organ system
affected. However, some MDCs are not
constructed on this basis because they
involve multiple organ systems (for
example, MDC 22 (Burns)). For FY 2010,
cases were assigned to one of 746 MS–
DRGs in 25 MDCs. For FY 2011, cases
will be assigned to one of 747 MS–DRGs
in 25 MDCs. The table below lists the 25
MDCs.
MAJOR DIAGNOSTIC CATEGORIES
(MDCS)—Continued
2 ..............
3 ..............
4 ..............
5 ..............
6 ..............
7 ..............
8 ..............
9 ..............
10 ............
11 ............
12 ............
13 ............
14 ............
15 ............
16 ............
MAJOR DIAGNOSTIC CATEGORIES
(MDCS)
17 ............
1 ..............
Diseases and Disorders of the
Nervous System.
Diseases and Disorders of the
Eye.
Diseases and Disorders of the
Ear, Nose, Mouth, and Throat.
Diseases and Disorders of the
Respiratory System.
Diseases and Disorders of the
Circulatory System.
Diseases and Disorders of the
Digestive System.
Diseases and Disorders of the
Hepatobiliary
System
and
Pancreas.
Diseases and Disorders of the
Musculoskeletal System and
Connective Tissue.
Diseases and Disorders of the
Skin, Subcutaneous Tissue
and Breast.
Endocrine, Nutritional and Metabolic Diseases and Disorders.
Diseases and Disorders of the
Kidney and Urinary Tract.
Diseases and Disorders of the
Male Reproductive System.
Diseases and Disorders of the
Female Reproductive System.
Pregnancy, Childbirth, and the
Puerperium.
Newborns and Other Neonates
with Conditions Originating in
the Perinatal Period.
Diseases and Disorders of the
Blood and Blood Forming Organs and Immunological Disorders.
Myeloproliferative Diseases and
Disorders and Poorly Differentiated Neoplasms.
MAJOR DIAGNOSTIC CATEGORIES
(MDCS)—Continued
18 ............
19 ............
20 ............
21 ............
22 ............
23 ............
24 ............
25 ............
Infectious and Parasitic Diseases (Systemic or Unspecified Sites).
Mental Diseases and Disorders.
Alcohol/Drug Use and Alcohol/
Drug Induced Organic Mental
Disorders.
Injuries, Poisonings, and Toxic
Effects of Drugs.
Burns.
Factors Influencing Health Status and Other Contacts with
Health Services.
Multiple Significant Trauma.
Human Immunodeficiency Virus
Infections.
In general, cases are assigned to an
MDC based on the patient’s principal
diagnosis before assignment to an MS–
DRG. However, under the most recent
version of the Medicare GROUPER
(Version 27.0), there are 13 MS–DRGs to
which cases are directly assigned on the
basis of ICD–9–CM procedure codes.
These MS–DRGs are for heart transplant
or implant of heart assist systems; liver
and/or intestinal transplants; bone
marrow transplants; lung transplants;
simultaneous pancreas/kidney
transplants; pancreas transplants; and
tracheostomies. Cases are assigned to
these MS–DRGs before they are
classified to an MDC. The table below
lists the 13 current pre-MDCs.
PRE-MAJOR DIAGNOSTIC CATEGORIES (PRE-MDCS)
001 ..
002 ..
003 ..
MS–DRG
004 ..
MS–DRG
MS–DRG
MS–DRG
MS–DRG
MS–DRG
MS–DRG
MS–DRG
MS–DRG
MS–DRG
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MS–DRG
MS–DRG
MS–DRG
005
006
007
008
009
010
011
012
013
..
..
..
..
..
..
..
..
..
Heart Transplant or Implant of Heart Assist System with MCC.
Heart Transplant or Implant of Heart Assist System without MCC.
ECMO or Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis with Major O.R.
Tracheostomy with Mechanical Ventilation 96+ Hours or Principal Diagnosis Except for Face, Mouth, and Neck Diagnosis
with Major O.R.
Liver Transplant with MCC or Intestinal Transplant.
Liver Transplant without MCC.
Lung Transplant.
Simultaneous Pancreas/Kidney Transplant.
Bone Marrow Transplant.
Pancreas Transplant.
Tracheostomy for Face, Mouth, and Neck Diagnoses with MCC.
Tracheostomy for Face, Mouth, and Neck Diagnoses with CC.
Tracheostomy for Face, Mouth, and Neck Diagnoses without CC/MCC.
Once the MDCs were defined, each
MDC was evaluated to identify those
additional patient characteristics that
would have a consistent effect on
hospital resource consumption. Because
the presence of a surgical procedure that
required the use of the operating room
would have a significant effect on the
type of hospital resources used by a
patient, most MDCs were initially
divided into surgical DRGs and medical
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DRGs. Surgical DRGs are based on a
hierarchy that orders operating room
(O.R.) procedures or groups of O.R.
procedures by resource intensity.
Medical DRGs generally are
differentiated on the basis of diagnosis
and age (0 to 17 years of age or greater
than 17 years of age). Some surgical and
medical DRGs are further differentiated
based on the presence or absence of a
complication or comorbidity (CC) or a
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major complication or comorbidity
(MCC).
Generally, nonsurgical procedures
and minor surgical procedures that are
not usually performed in an operating
room are not treated as O.R. procedures.
However, there are a few non-O.R.
procedures that do affect MS–DRG
assignment for certain principal
diagnoses. An example is extracorporeal
shock wave lithotripsy for patients with
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a principal diagnosis of urinary stones.
Lithotripsy procedures are not routinely
performed in an operating room.
Therefore, lithotripsy codes are not
classified as O.R. procedures. However,
our clinical advisors believe that
patients with urinary stones who
undergo extracorporeal shock wave
lithotripsy should be considered similar
to other patients who undergo O.R.
procedures. Therefore, we treat this
group of patients similar to patients
undergoing O.R. procedures.
Once the medical and surgical classes
for an MDC were formed, each diagnosis
class was evaluated to determine if
complications or comorbidities would
consistently affect hospital resource
consumption. Each diagnosis was
categorized into one of three severity
levels. These three levels include a
major complication or comorbidity
(MCC), a complication or comorbidity
(CC), or a non-CC. Physician panels
classified each diagnosis code based on
a highly iterative process involving a
combination of statistical results from
test data as well as clinical judgment. As
stated earlier, we refer readers to section
II.D. of the FY 2008 IPPS final rule with
comment period for a full detailed
discussion of how the MS–DRG system
was established based on severity levels
of illness (72 FR 47141).
A patient’s diagnosis, procedure,
discharge status, and demographic
information is entered into the Medicare
claims processing systems and subjected
to a series of automated screens called
the Medicare Code Editor (MCE). The
MCE screens are designed to identify
cases that require further review before
classification into an MS–DRG.
After patient information is screened
through the MCE and further
development of the claim is conducted,
the cases are classified into the
appropriate MS–DRG by the Medicare
GROUPER software program. The
GROUPER program was developed as a
means of classifying each case into an
MS–DRG on the basis of the diagnosis
and procedure codes and, for a limited
number of MS–DRGs, demographic
information (that is, sex, age, and
discharge status).
After cases are screened through the
MCE and assigned to an MS–DRG by the
GROUPER, the PRICER software
calculates a base MS–DRG payment.
The PRICER calculates the payment for
each case covered by the IPPS based on
the MS–DRG relative weight and
additional factors associated with each
hospital, such as IME and DSH payment
adjustments. These additional factors
increase the payment amount to
hospitals above the base MS–DRG
payment.
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The records for all Medicare hospital
inpatient discharges are maintained in
the Medicare Provider Analysis and
Review (MedPAR) file. The data in this
file are used to evaluate possible MS–
DRG classification changes and to
recalibrate the MS–DRG weights.
However, in the FY 2000 IPPS final rule
(64 FR 41499 and 41500), we discussed
a process for considering non-MedPAR
data in the recalibration process. We
stated that for use of non-MedPAR data
to be feasible for purposes of DRG
recalibration and reclassification, the
data must, among other things: (1) Be
independently verified; (2) reflect a
complete set of cases (or a
representative sample of cases); and (3)
enable us to calculate appropriate DRG
relative weights and ensure that cases
are classified to the ‘‘correct’’ DRG, and
to one DRG only, in the recalibration
process. Further, in order for us to
consider using particular non-MedPAR
data, we must have sufficient time to
evaluate and test the data. The time
necessary to do so depends upon the
nature and quality of the non-MedPAR
data submitted. Generally, however, a
significant sample of the non-MedPAR
data should be submitted by midOctober for consideration in
conjunction with the next year’s
proposed rule. This date allows us time
to test the data and make a preliminary
assessment as to the feasibility of using
the data. Subsequently, a complete nonMedPAR database should be submitted
by early December for consideration in
conjunction with the next year’s
proposed rule.
As we indicated above, for FY 2008,
we made significant improvements in
the DRG system to recognize severity of
illness and resource usage by adopting
MS–DRGs that were reflected in the FY
2008 GROUPER, Version 25.0, and were
effective for discharges occurring on or
after October 1, 2007. Our MS–DRG
analysis for the FY 2011 proposed rule
was based on data from the September
2009 update of the FY 2009 MedPAR
file, which contained hospital bills
received through September 30, 2009,
for discharges occurring through
September 30, 2009. For this FY 2011
final rule, our MS–DRG analysis is
based on data from the March 2010
update of the FY 2009 MedPAR file,
which contained hospital bills received
through March 31, 2010, for discharges
occurring through September 30, 2009.
2. Yearly Review for Making MS–DRG
Changes
Many of the changes to the MS–DRG
classifications we make annually are the
result of specific issues brought to our
attention by interested parties. We
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50055
encourage individuals with comments
about MS–DRG classifications to submit
these comments no later than early
December of each year so they can be
carefully considered for possible
inclusion in the annual proposed rule
and, if included, may be subjected to
public review and comment. Therefore,
similar to the timetable for interested
parties to submit non-MedPAR data for
consideration in the MS–DRG
recalibration process, comments about
MS–DRG classification issues should be
submitted no later than early December
in order to be considered and possibly
included in the next annual proposed
rule updating the IPPS.
The actual process of forming the
MS–DRGs was, and will likely continue
to be, highly iterative, involving a
combination of statistical results from
test data combined with clinical
judgment. In the FY 2008 IPPS final rule
(72 FR 47140 through 47189), we
described in detail the process we used
to develop the MS–DRGs that we
adopted for FY 2008. In addition, in
deciding whether to make further
modification to the MS–DRGs for
particular circumstances brought to our
attention, we considered whether the
resource consumption and clinical
characteristics of the patients with a
given set of conditions are significantly
different than the remaining patients in
the MS–DRG. We evaluated patient care
costs using average charges and lengths
of stay as proxies for costs and relied on
the judgment of our medical advisors to
decide whether patients are clinically
distinct or similar to other patients in
the MS–DRG. In evaluating resource
costs, we considered both the absolute
and percentage differences in average
charges between the cases we selected
for review and the remainder of cases in
the MS–DRG. We also considered
variation in charges within these
groups; that is, whether observed
average differences were consistent
across patients or attributable to cases
that were extreme in terms of charges or
length of stay, or both. Further, we
considered the number of patients who
will have a given set of characteristics
and generally preferred not to create a
new MS–DRG unless it would include
a substantial number of cases.
C. Adoption of the MS–DRGs in FY 2008
In the FY 2006, FY 2007, and FY 2008
IPPS final rules, we discussed a number
of recommendations made by MedPAC
regarding revisions to the DRG system
used under the IPPS (70 FR 47473
through 47482; 71 FR 47881 through
47939; and 72 FR 47140 through 47189).
As we noted in the FY 2006 IPPS final
rule, we had insufficient time to
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complete a thorough evaluation of these
recommendations for full
implementation in FY 2006. However,
we did adopt severity-weighted cardiac
DRGs in FY 2006 to address public
comments on this issue and the specific
concerns of MedPAC regarding cardiac
surgery DRGs. We also indicated that we
planned to further consider all of
MedPAC’s recommendations and
thoroughly analyze options and their
impacts on the various types of
hospitals in the FY 2007 IPPS proposed
rule.
For FY 2007, we began this process.
In the FY 2007 IPPS proposed rule, we
proposed to adopt Consolidated
Severity DRGs (CS DRGs) for FY 2008 (if
not earlier). Based on public comments
received on the FY 2007 IPPS proposed
rule, we decided not to adopt the CS
DRGs. In the FY 2007 IPPS final rule (71
FR 47906 through 47912), we discussed
several concerns raised by public
commenters regarding the proposal to
adopt CS DRGs. We acknowledged the
many public comments suggesting the
logic of Medicare’s DRG system should
continue to remain in the public domain
as it has since the inception of the PPS.
We also acknowledged concerns about
the impact on hospitals and software
vendors of moving to a proprietary
system. Several commenters suggested
that CMS refine the existing DRG
classification system to preserve the
many policy decisions that were made
over the last 20 years and were already
incorporated into the DRG system, such
as complexity of services and new
device technologies. Consistent with the
concerns expressed in the public
comments, this option had the
advantage of using the existing DRGs as
a starting point (which was already
familiar to the public) and retained the
benefit of many DRG decisions that
were made in recent years. We stated
our belief that the suggested approach of
incorporating severity measures into the
existing DRG system was a viable option
that would be evaluated.
Therefore, we decided to make
interim changes to the existing DRGs for
FY 2007 by creating 20 new DRGs
involving 13 different clinical areas that
would significantly improve the CMS
DRG system’s recognition of severity of
illness. We also modified 32 DRGs to
better capture differences in severity.
The new and revised DRGs were
selected from 40 existing CMS DRGs
that contained 1,666,476 cases and
represented a number of body systems.
In creating these 20 new DRGs, we
deleted 8 existing DRGs and modified
32 existing DRGs. We indicated that
these interim steps for FY 2007 were
being taken as a prelude to more
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comprehensive changes to better
account for severity in the DRG system
by FY 2008.
In the FY 2007 IPPS final rule (71 FR
47898), we indicated our intent to
pursue further DRG reform through two
initiatives. First, we announced that we
were in the process of engaging a
contractor to assist us with evaluating
alternative DRG systems that were
raised as potential alternatives to the
CMS DRGs in the public comments.
Second, we indicated our intent to
review over 13,000 ICD–9–CM diagnosis
codes as part of making further
refinements to the current CMS DRGs to
better recognize severity of illness based
on the work that CMS (then HCFA) did
in the mid-1990’s in connection with
adopting severity DRGs. We describe
below the progress we have made on
these two initiatives and our actions for
FYs 2008, 2009, and 2010, and our
proposed and final actions for FY 2011
based on our continued analysis of
reform of the DRG system. We note that
the adoption of the MS–DRGs to better
recognize severity of illness has
implications for the outlier threshold,
the application of the postacute care
transfer policy, the measurement of real
case-mix versus apparent case-mix, and
the IME and DSH payment adjustments.
We discuss these implications for FY
2011 in other sections of this preamble
and in the Addendum to this final rule.
In the FY 2007 IPPS proposed rule,
we discussed MedPAC’s
recommendations to move to a costbased HSRV weighting methodology
using HSRVs beginning with the FY
2007 IPPS proposed rule for
determining the DRG relative weights.
Although we proposed to adopt the
HSRV weighting methodology for FY
2007, we decided not to adopt the
proposed methodology in the final rule
after considering the public comments
we received on the proposal. Instead, in
the FY 2007 IPPS final rule, we adopted
a cost-based weighting methodology
without the HSRV portion of the
proposed methodology. The cost-based
weights were adopted over a 3-year
transition period in 1⁄3 increments
between FY 2007 and FY 2009. In
addition, in the FY 2007 IPPS final rule,
we indicated our intent to further study
the HSRV-based methodology as well as
other issues brought to our attention
related to the cost-based weighting
methodology adopted in the FY 2007
final rule. There was significant concern
in the public comments that our costbased weighting methodology does not
adequately account for charge
compression—the practice of applying a
higher percentage charge markup over
costs to lower cost items and services
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and a lower percentage charge markup
over costs to higher cost items and
services. Further, public commenters
expressed concern about potential
inconsistencies between how costs and
charges are reported on the Medicare
cost reports and charges on the
Medicare claims. In the FY 2007 IPPS
final rule, we used costs and charges
from the cost reports to determine
departmental level cost-to-charge ratios
(CCRs) which we then applied to
charges on the Medicare claims to
determine the cost-based weights. The
commenters were concerned about
potential distortions to the cost-based
weights that would result from
inconsistent reporting between the cost
reports and the Medicare claims. After
publication of the FY 2007 IPPS final
rule, we entered into a contract with RTI
International (RTI) to study both charge
compression and the extent, if any, to
which our methodology for calculating
DRG relative weights is affected by
inconsistencies between how hospitals
report costs and charges on the cost
reports and how hospitals report
charges on individual claims. Further,
as part of its study of alternative DRG
systems, the RAND Corporation
analyzed the HSRV cost-weighting
methodology. We refer readers to
section II.E. of the preamble of this final
rule for a discussion of the issue of
charge compression and the costweighting methodology for FY 2011.
We believe that revisions to the DRG
system to better recognize severity of
illness and changes to the relative
weights based on costs rather than
charges are improving the accuracy of
the payment rates in the IPPS. We agree
with MedPAC that these refinements
should be pursued. Although we
continue to caution that any prospective
payment system based on grouping
cases will always present some
opportunities for providers to specialize
in cases they believe have higher
margins, we believe that the changes we
have adopted and the continuing
reforms we are making in this final rule
for FY 2011 will improve payment
accuracy and reduce financial
incentives to create specialty hospitals.
We refer readers to section II.D. of the
FY 2008 IPPS final rule with comment
period for a full discussion of how the
MS–DRG system was established based
on severity levels of illness (72 FR
47141).
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D. FY 2011 MS–DRG Documentation
and Coding Adjustment, Including the
Applicability to the Hospital-Specific
Rates and the Puerto Rico-Specific
Standardized Amount
1. Background on the Prospective MS–
DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
Authorized by Public Law 110–90
As we discussed earlier in this
preamble, we adopted the MS–DRG
patient classification system for the
IPPS, effective October 1, 2007, to better
recognize severity of illness in Medicare
payment rates for acute care hospitals.
The adoption of the MS–DRG system
resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in
FY 2008. (Currently, there are 746 MS–
DRGs for FY 2010; there will be 747
MS–DRGs in FY 2011, with the deletion
in this final rule of one MS–DRG and
the creation of two new MS–DRGs.) By
increasing the number of MS–DRGs and
more fully taking into account patient
severity of illness in Medicare payment
rates for acute care hospitals, MS–DRGs
encourage hospitals to improve their
documentation and coding of patient
diagnoses. In the FY 2008 IPPS final
rule with comment period (72 FR 47175
through 47186), we indicated that the
adoption of the MS–DRGs had the
potential to lead to increases in
aggregate payments without a
corresponding increase in actual patient
severity of illness due to the incentives
for additional documentation and
coding. In that final rule with comment
period, we exercised our authority
under section 1886(d)(3)(A)(vi) of the
Act, which authorizes us to maintain
budget neutrality by adjusting the
national standardized amount, to
eliminate the estimated effect of changes
in coding or classification that do not
reflect real changes in case-mix. Our
actuaries estimated that maintaining
budget neutrality required an
adjustment of ¥4.8 percent to the
national standardized amount. We
provided for phasing in this ¥4.8
percent adjustment over 3 years.
Specifically, we established prospective
documentation and coding adjustments
of ¥1.2 percent for FY 2008, ¥1.8
percent for FY 2009, and ¥1.8 percent
for FY 2010.
On September 29, 2007, Congress
enacted the TMA [Transitional Medical
Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs
Extension Act of 2007, Public Law 110–
90. Section 7(a) of Public Law 110–90
reduced the documentation and coding
adjustment made as a result of the MS–
DRG system that we adopted in the FY
2008 IPPS final rule with comment
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period to ¥0.6 percent for FY 2008 and
¥0.9 percent for FY 2009. Section 7(a)
of Public Law 110–90 did not adjust the
FY 2010 ¥1.8 percent documentation
and coding adjustment promulgated in
the FY 2008 IPPS final rule with
comment period. To comply with
section 7(a) of Public Law 110–90, we
promulgated a final rule on November
27, 2007 (72 FR 66886) that modified
the IPPS documentation and coding
adjustment for FY 2008 to ¥0.6 percent,
and revised the FY 2008 payment rates,
factors, and thresholds accordingly.
These revisions were effective on
October 1, 2007.
For FY 2009, section 7(a) of Public
Law 110–90 required a documentation
and coding adjustment of ¥0.9 percent
instead of the ¥1.8 percent adjustment
established in the FY 2008 IPPS final
rule with comment period. As discussed
in the FY 2009 IPPS final rule (73 FR
48447) and required by statute, we
applied a documentation and coding
adjustment of ¥0.9 percent to the FY
2009 IPPS national standardized
amount. The documentation and coding
adjustments established in the FY 2008
IPPS final rule with comment period, as
amended by Public Law 110–90, are
cumulative. As a result, the ¥0.9
percent documentation and coding
adjustment for FY 2009 was in addition
to the ¥0.6 percent adjustment for FY
2008, yielding a combined effect of
¥1.5 percent.
2. Prospective Adjustment to the
Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public
Law 110–90
Section 7(b)(1)(A) of Public Law 110–
90 requires that, if the Secretary
determines that implementation of the
MS–DRG system resulted in changes in
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008 or
FY 2009 that are different than the
prospective documentation and coding
adjustments applied under section 7(a)
of Public Law 110–90, the Secretary
shall make an appropriate adjustment
under section 1886(d)(3)(A)(vi) of the
Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average
standardized amounts for subsequent
fiscal years in order to eliminate the
effect of such coding or classification
changes. These adjustments are
intended to ensure that future annual
aggregate IPPS payments are the same as
the payments that otherwise would have
been made had the prospective
adjustments for documentation and
coding applied in FY 2008 and FY 2009
reflected the change that occurred in
those years.
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3. Recoupment or Repayment
Adjustments in FYs 2010 Through 2012
Required by Public Law 110–90
If, based on a retroactive evaluation of
claims data, the Secretary determines
that implementation of the MS–DRG
system resulted in changes in
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008 or
FY 2009 that are different from the
prospective documentation and coding
adjustments applied under section 7(a)
of Public Law 110–90, section 7(b)(1)(B)
of Public Law 110–90 requires the
Secretary to make an additional
adjustment to the standardized amounts
under section 1886(d) of the Act. This
adjustment must offset the estimated
increase or decrease in aggregate
payments for FYs 2008 and 2009
(including interest) resulting from the
difference between the estimated actual
documentation and coding effect and
the documentation and coding
adjustment applied under section 7(a) of
Public Law 110–90. This adjustment is
in addition to making an appropriate
adjustment to the standardized amounts
under section 1886(d)(3)(A)(vi) of the
Act as required by section 7(b)(1)(A) of
Public Law 110–90. That is, these
adjustments are intended to recoup (or
repay) spending in excess of (or less
than) spending that would have
occurred had the prospective
adjustments for changes in
documentation and coding applied in
FY 2008 and FY 2009 precisely matched
the changes that occurred in those years.
Public Law 110–90 requires that the
Secretary make these recoupment or
repayment adjustments for discharges
occurring during FYs 2010, 2011, and
2012.
4. Retrospective Evaluation of FY 2008
Claims Data
In order to implement the
requirements of section 7 of Public Law
110–90, we indicated in the FY 2009
IPPS final rule (73 FR 48450) that we
planned a thorough retrospective
evaluation of our claims data. We stated
that the results of this evaluation would
be used by our actuaries to determine
any necessary payment adjustments to
the standardized amounts under section
1886(d) of the Act to ensure the budget
neutrality of the MS–DRGs
implementation for FY 2008 and FY
2009, as required by law. In the FY 2009
IPPS proposed rule (73 FR 23541
through 23542), we described our
preliminary plan for a retrospective
analysis of inpatient hospital claims
data and invited public input on our
proposed methodology.
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In that proposed rule, we indicated
that we intended to measure and
corroborate the extent of the overall
national average changes in case-mix for
FY 2008 and FY 2009. We expected that
the two largest parts of this overall
national average change would be
attributable to underlying changes in
actual patient severity of illness and to
documentation and coding
improvements under the MS–DRG
system. In order to separate the two
effects, we planned to isolate the effect
of shifts in cases among base DRGs from
the effect of shifts in the types of cases
within-base DRGs.
The MS–DRGs divide the base DRGs
into three severity levels (with MCC,
with CC, and without CC); the
previously used CMS DRGs had only
two severity levels (with CC and
without CC). Under the CMS DRG
system, the majority of hospital
discharges had a secondary diagnosis
which was on the CC list, which led to
the higher severity level. The MS–DRGs
significantly changed the code lists of
what was classified as an MCC or a CC.
Many codes that were previously
classified as a CC are no longer included
on the MS–DRG CC list because the data
and clinical review showed these
conditions did not lead to a significant
increase in resource use. The addition of
a new level of high severity conditions,
the MCC list, also provided a new
incentive to code more precisely in
order to increase the severity level. We
anticipated that hospitals would
examine the MS–DRG MCC and CC
code lists and then work with
physicians and coders on
documentation and coding practices so
that coders could appropriately assign
codes from the highest possible severity
level. We note that there have been
numerous seminars and training
sessions on this particular coding issue.
The topic of improving documentation
practices in order to code conditions on
the MCC list was also discussed
extensively by participants at the March
11–12, 2009 ICD–9–CM Coordination
and Maintenance Committee meeting.
Participants discussed their hospitals’
efforts to encourage physicians to
provide more precise documentation so
that coders could appropriately assign
codes that would lead to a higher
severity level. Because we expected
most of the documentation and coding
changes under the MS–DRG system
would occur in the secondary
diagnoses, we believed that the shifts
among base DRGs were less likely to be
the result of the MS–DRG system and
the shifts within-base DRGs were more
likely to be the result of the MS–DRG
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system. We also anticipated evaluating
data to identify the specific MS–DRGs
and diagnoses that contributed
significantly to the documentation and
coding payment effect and to quantify
their impact. This step entailed analysis
of the secondary diagnoses driving the
shifts in severity within specific base
DRGs.
In that same proposed rule, we also
stated that, while we believed that the
data analysis plan described previously
would produce an appropriate estimate
of the extent of case-mix changes
resulting from documentation and
coding changes, we might decide, if
feasible, to use historical data from our
Hospital Payment Monitoring Program
(HPMP) to corroborate the within-base
DRG shift analysis. The HPMP is
supported by the Medicare Clinical Data
Abstraction Center (CDAC).
In the FY 2009 IPPS proposed rule,
we solicited public comments on the
analysis plans described above, as well
as suggestions on other possible
approaches for performing a
retrospective analysis to identify the
amount of case-mix changes that
occurred in FY 2008 and FY 2009 that
did not reflect real increases in patient
severity of illness.
A few commenters, including
MedPAC, expressed support for the
analytic approach described in the FY
2009 IPPS proposed rule. A number of
other commenters expressed concerns
about certain aspects of the approach
and/or suggested alternate analyses or
study designs. In addition, one
commenter recommended that any
determination or retrospective
evaluation by the actuaries of the impact
of the MS–DRGs on case-mix be open to
public scrutiny prior to the
implementation of the payment
adjustments beginning in FY 2010.
We took these comments into
consideration as we developed our
proposed analysis plan and in the FY
2010 IPPS/RY 2010 LTCH PPS proposed
rule (74 FR 24092 through 24101)
solicited public comment on our
methodology and analysis. For the FY
2010 IPPS/RY 2010 LTCH PPS proposed
rule, we performed a retrospective
evaluation of the FY 2008 data for
claims paid through December 2008.
Based on this evaluation, our actuaries
determined that implementation of the
MS–DRG system resulted in a 2.5
percent change due to documentation
and coding that did not reflect real
changes in case-mix for discharges
occurring during FY 2008.
In the analysis of data for that
proposed rule, we found that the
within-base DRG increases were almost
entirely responsible for the case-mix
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change, supporting our conclusion that
the 2.5 percent estimate was an accurate
reflection of the FY 2008 effect of
changes in documentation and coding
under the MS–DRG system. In fact,
almost every base DRG that was split
into different severity levels under the
MS–DRG system experienced increases
in the within-base DRGs. We then
further analyzed the changes in the
within-base DRGs to determine which
MS–DRGs had the highest contributions
to this increase. The results of the
analysis for the proposed rule provided
additional support for our conclusion
that the proposed 2.5 percent estimate
accurately reflected the FY 2008
increases in documentation and coding
under the MS–DRG system. While we
attempted to use the CDAC data to
distinguish real increase in case-mix
growth from documentation and coding
in the overall case-mix number, we
found aberrant data and significant
variation across the FY 1999 through FY
2007 analysis period. It was not possible
to distinguish changes in
documentation and coding from
changes in real case-mix in the CDAC
data. Therefore, we concluded that the
CDAC data would not support analysis
of real case-mix growth that could be
used in our retrospective evaluation of
the FY 2008 claims data.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43768 through
43772), we responded to comments on
our methodology for the retrospective
evaluation of FY 2008 claims data.
Commenters raised concerns that our
estimate in the proposed rule did not
fully consider other potential causes of
increased case-mix, such as patients
requiring less complex services
receiving care in other settings and
healthier patients enrolling in Medicare
Advantage plans in increasing numbers.
Other commenters indicated that factors
such as the changes in the CC/MCC
definitions, limitations on the number
of codes used by CMS for payment and
ratesetting, resequencing of secondary
diagnoses, the transition to the costbased weights, less use of not otherwise
specified codes, and increases in real
case-mix due to health care reform
efforts also resulted in an inaccurate
documentation and coding analysis.
One commenter indicated that, of the
overall case-mix increase, 1.0 percent to
1.5 percent is real case-mix increase,
while 1.0 percent to 1.5 percent is due
to documentation and coding or other
increases.
In considering these comments
concerning historical real case-mix, in
the FY 2010 final rule, we calculated
overall increases in case-mix for the
period from FY 2000 to FY 2007 using
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the cases from each year and the
GROUPER and the relative weights
applicable for each year. The results
ranged from ¥0.7 to +1.4 percent.
Overall case-mix growth is
predominately comprised of three
factors: real case-mix growth; a
documentation and coding effect; and a
measurement effect. Under the
reasonable assumption that there has
been a relatively small measurement
effect in those years, the assertion that
there is a historical pattern of steady
annual increases of 1.2 to 1.3 percent in
real case-mix implies that the
documentation and coding effect in
many of the years in the FY 2000 to FY
2007 time period was negative. For
example, as discussed in that rule (74
FR 43769), we estimated a recent
measurement effect of +0.3 percent.
There was an overall case-mix growth of
¥0.2 percent in FY 2007. The overall
case-mix growth of ¥0.2 percent net of
a measurement effect of +0.3 percent
results in growth of +0.1 percent. Had
real case-mix growth been +1.2 percent
in FY 2007, therefore, it would imply a
negative documentation and coding
effect of approximately ¥1.1 percent. It
is not obvious why documentation and
coding would have had such a large
negative effect in FY 2007, or in any
other year where the overall case-mix
change is significantly less than the
average annual trend claimed by the
commenters, calling into question the
assertion that real case-mix growth is a
steady 1.2 to 1.3 percent per year.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43770 through
43771), we indicated that our estimate
of the overall case-mix growth for FY
2008 based on more recent data than the
data used in the FY 2010 proposed rule
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was 2.0 percent, still less than our
actuaries’ estimate of a 2.5 percent
documentation and coding increase.
With respect to the concerns raised by
commenters about our finding of
negative real case-mix growth in FY
2008, a finding of negative real case-mix
growth is consistent with the fact that,
in some years, overall case-mix growth
has been negative.
5. Retrospective Analysis of FY 2009
Claims Data
We performed the same analysis for
FY 2009 claims data using the same
methodology as we did for FY 2008
claims in the FY 2010 final rule. We
note that in the FY 2011 IPPS/LTCH
PPS proposed rule, we performed this
analysis using FY 2009 claims paid
through December 2009. In this FY 2011
IPPS/LTCH PPS final rule, we have
updated the analysis with FY 2009
claims paid through March 2010, as we
discussed in the proposed rule. We note
that, for non-Puerto Rico IPPS hospitals,
the estimates are unchanged from those
in the proposed rule.
We first divided the case-mix index
(CMI) obtained by grouping the FY 2009
claims data through the FY 2009
GROUPER (Version 26.0) by the CMI
obtained by grouping these same FY
2009 claims through the FY 2007
GROUPER (Version 24.0). This resulted
in a value of 1.056. Because these cases
are the same FY 2009 cases grouped
using Versions 24.0 and 26.0 of the
GROUPER, we attribute this increase
primarily to two factors: (1) The effect
of changes in documentation and coding
under the MS–DRG system; and (2) the
measurement effect from the calibration
of the GROUPER. We estimated the
measurement effect from the calibration
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50059
of the GROUPER by dividing the CMI
obtained by grouping cases in the FY
2007 claims data through the FY 2009
GROUPER by the CMI obtained by
grouping cases in these same claims
through the FY 2007 GROUPER. This
resulted in a value of 1.0019. In order
to isolate the documentation and coding
effect, we then divided the combined
effect of the changes in documentation
and coding and measurement (1.056) by
the measurement effect (1.0019) to yield
1.054. Therefore, our estimate of the
documentation and coding increase that
did not reflect real changes in case-mix
for discharges was 5.4 percent.
In parallel to our analysis in the
proposed rule, we then sought to
corroborate this 5.4 percent estimate by
examining the increases in the withinbase DRGs as compared to the increases
in the across base DRGs as described
earlier in our analysis plan. In other
words, we looked for improvements in
code selection that would lead to a
secondary diagnosis increasing the
severity level to either a CC or an MCC
level. We found that the within-base
DRG increases were almost entirely
responsible for the case mix change,
supporting our conclusion that the 5.4
percent estimate was an accurate
reflection of the FY 2009 effect of
changes in documentation and coding
under the MS–DRG system. We then
further analyzed the changes in the
within-base DRGs to determine which
MS–DRGs had the highest contributions
to this increase. The results of the
analysis for the proposed rule provided
additional support for our conclusion
that the proposed 5.4 percent estimate
accurately reflected the FY 2009
increases in documentation and coding
under the MS–DRG system.
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As reflected in the above chart, for
short-term acute care hospitals, SCHs,
and MDHs, there is approximately an 8
percentage point increase in the
discharge severity with MCCs from 20
percent to 28 percent, and a
corresponding decrease of
approximately 8 percentage points in
discharge severity without CC/MCC
from 57 percent to 49 percent.
Consistent with the expectations of
our medical coding experts concerning
areas with potential for documentation
and coding improvements, the top
contributors were heart failure, chronic
obstructive pulmonary disease, and
simple pneumonia and pleurisy. Heart
failure is a very common secondary
diagnosis among Medicare hospital
admissions. The heart failure codes are
assigned to all three severity levels.
Some codes are classified as non-CCs,
while other codes are on the CC and
MCC lists. By changing physician
documentation to more precisely
identify the type of heart failure,
hospitals are able to appropriately
change the severity level of cases from
the lowest level (non-CC) to a higher
severity level (CC or MCC) through
coding. This point was stressed
repeatedly at the March 11–12, 2009
ICD–9–CM Coordination and
Maintenance Committee meeting as
coders discussed their work with
physicians on this coding issue. Many
of the participants indicated that
additional work was still needed with
their physicians in order to document
conditions in the medical record more
precisely.
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The results of this analysis provided
additional support for our conclusion
that the proposed 5.4 percent estimate
accurately reflected the FY 2009
increases in documentation and coding
under the MS–DRG system.
As in prior years, the FY 2008 and FY
2009 MedPAR files are available to the
public to allow independent analysis of
the FY 2008 and FY 2009
documentation and coding effect.
Interested individuals may still order
these files through the Web site at:
https://www.cms.hhs.gov/Limited
DataSets/ by clicking on MedPAR
Limited Data Set (LDS)-Hospital
(National). This Web page describes the
file and provides directions and further
detailed instructions for how to order.
Persons placing an order must send
the following: a Letter of Request, the
LDS Data Use Agreement and Research
Protocol (refer to the Web site for further
instructions), the LDS Form, and a
check for $3,655 to:
Mailing address if using the U.S.
Postal Service: Centers for Medicare &
Medicaid Services, RDDC Account,
Accounting Division, P.O. Box 7520,
Baltimore, MD 21207–0520.
Mailing address if using express mail:
Centers for Medicare & Medicaid
Services, OFM/Division of
Accounting—RDDC, 7500 Security
Boulevard, C3–07–11, Baltimore. MD
21244–1850.
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6. Prospective Adjustment for FY 2010
and Subsequent Years Authorized by
Section 7(b)(1)(A) of Public Law 110–90
and Section 1886(d)(3)(vi) of the Act
Based on our evaluation of FY 2008
Medicare claims data that were most
current at the time of the FY 2010 IPPS/
RY 2010 LTCH PPS proposed rule, the
estimated 2.5 percent change in FY 2008
case-mix due to changes in
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008
exceeded the ¥0.6 percent prospective
documentation and coding adjustment
applied under section 7(a) of Public Law
110–90 by 1.9 percentage points. Under
section 7(b)(1)(A) of Public Law 110–90,
the Secretary is required to make an
appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act to the
average standardized amounts for
subsequent fiscal years in order to
eliminate the full effect of the
documentation and coding changes on
future payments. As we have
consistently stated since the initial
implementation of the MS–DRG system,
we do not believe it is appropriate for
expenditures to increase due to MS–
DRG-related changes in documentation
and coding that do not reflect real
changes in case-mix.
We also estimated in the FY 2010
IPPS/RY 2010 LTCH PPS proposed and
final rules that the additional change in
case-mix due to changes in
documentation and coding that do not
reflect real changes in case-mix for
discharges occurring during FY 2009
was 2.3 percent, which would exceed by
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1.4 percentage points the ¥0.9 percent
prospective documentation and coding
adjustment for FY 2009 applied under
section 7(a) of Public Law 110–90. We
had the statutory authority to adjust the
FY 2010 rates for this estimated 1.4
percentage point increase. However,
given that Public Law 110–90 requires
a retrospective claims evaluation for the
additional adjustments (as described in
section II.D.3. of this preamble), we
stated in the FY 2010 IPPS/RY 2010
LTCH PPS proposed rule and final rule
(74 FR 24096 and 43772, respectively)
that we believed our evaluation of the
extent of the overall national average
changes in case-mix for FY 2009 should
also be based on a retrospective
evaluation of all FY 2009 claims data.
Because we did not receive all FY 2009
claims data prior to publication of the
FY 2010 final rule, we indicated we
would address any difference between
the additional increase in FY 2009 casemix due to changes in documentation
and coding that did not reflect real
changes in case-mix for discharges
occurring during FY 2009 and the ¥0.9
percent prospective documentation and
coding adjustment applied under
section 7(a) of Public Law 110–90 in the
FY 2011 rulemaking cycle.
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24096), we
solicited public comment on the
proposed ¥1.9 percent prospective
adjustment to the standardized amounts
under section 1886(d) of the Act to
address the effects of documentation
and coding changes unrelated to
changes in real case-mix in FY 2008. In
addition, we solicited public comments
on addressing in the FY 2011
rulemaking cycle any differences
between the increase in FY 2009 casemix due to changes in documentation
and coding changes that do not reflect
real changes in case-mix for discharges
occurring during FY 2009 and the ¥0.9
percent prospective documentation and
coding adjustment applied under
section 7(a) of Public Law 110–90. In
response to the proposed rule, MedPAC
summarized its comments on when
CMS should reduce payment rates to
prevent further overpayments and to
recover overpayments occurring in 2008
and 2009 as follows: ‘‘We support CMS’s
proposal to reduce IPPS payments in
2010 by 1.9 percent to prevent further
overpayments. While we and the CMS
actuaries believe that a 1.9 percent
reduction will not fully prevent
overpayments from continuing in 2010,
this is a reasonable first step toward
reducing overpayments.’’ Most of the
other commenters opposed the
proposed ¥1.9 percent prospective FY
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2010 adjustment for FY 2008
documentation and coding increases,
but supported the proposal not to apply
a FY 2010 prospective adjustment for
estimated FY 2009 documentation and
coding increases. Many commenters
expressed concern over the financial
impact of the proposed ¥1.9 percent
adjustment and the methodology for
calculating the adjustment. Other
commenters recommended that CMS
seek to extend the timeframe beyond 2
years to phase in the then-estimated
¥6.6 percent adjustment to the
standardized amount.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule in response to these
commenters, we indicated that we fully
understood that our proposed
adjustment of ¥1.9 percent would
reduce the increase in payments that
affected hospitals would have received
in FY 2009 in the absence of the
adjustment. We explained that, although
we are required to make a prospective
adjustment to eliminate the full effect of
coding or classification changes that did
not reflect real changes in case-mix for
discharges occurring during FY 2008,
we believed we had some discretion
regarding when to implement this
adjustment. Section 7(b)(1)(A) of Public
Law 110–90 requires that if the
Secretary determines that
implementation of the MS–DRG system
resulted in changes in documentation
and coding that did not reflect real
changes in case-mix for discharges
occurring during FY 2008 or FY 2009
that are different than the prospective
documentation and coding adjustments
applied under section 7(a) of Public Law
110–90, the Secretary shall make an
‘‘appropriate’’ adjustment under section
1886(d)(3)(A)(vi) of the Act.
Therefore, we determined that it
would be appropriate to postpone
adopting documentation and coding
adjustments as authorized under section
7(a) of Public Law 110–90 and section
1886(d)(3)(A)(vi) of the Act until a full
analysis of case-mix changes could be
completed. We indicated that, while we
had the statutory authority to make this
¥1.9 percent prospective adjustment
entirely in FY 2010, we believed it
would be prudent to wait until we had
completed data on the magnitude of the
documentation and coding effect in FY
2009. Specifically, we stated that if the
documentation and coding effect were
to be less in FY 2009 than our estimates
at that time, it could lessen the
anticipated adjustment that we had
estimated we would have had to make
for FY 2008 and FY 2009 combined. We
indicated that, in future rulemaking, we
would consider applying a prospective
adjustment based upon a complete
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analysis of FY 2008 and FY 2009 claims
data, beginning in FY 2011. We
indicated that we intended to address
any difference between the increase in
FY 2009 case-mix due to changes in
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2009
and the ¥0.9 percent prospective
documentation and coding adjustment
applied under section 7(a) of Public Law
110–90 in the FY 2011 rulemaking
cycle.
After analysis of the FY 2009 claims
data for this FY 2011 IPPS/LTCH PPS
final rule, we have found a total
prospective documentation and coding
effect of 1.054. After accounting for the
¥0.6 percent and the ¥0.9 percent
documentation and coding adjustments
in FYs 2008 and 2009, we find a
remaining documentation and coding
effect of 3.9 percent. As we have
discussed, an additional cumulative
adjustment of ¥3.9 percent would be
necessary to meet the requirements of
section 7(b)(1)(A) of Public Law 110–90
to make an adjustment to the average
standardized amounts in order to
eliminate the full effect of the
documentation and coding changes on
future payments. Unlike section
7(b)(1)(B) of Public Law 110–90, section
7(b)(1)(A) does not specify when we
must apply the prospective adjustment,
but merely requires us to make an
‘‘appropriate’’ adjustment. Therefore, we
believe we have some discretion as to
the manner in which we apply the
prospective adjustment of ¥3.9 percent.
Applying the full prospective
adjustment of ¥3.9 percent for FY 2011,
in combination with the proposed
recoupment adjustment of ¥2.9
percent, discussed below, would require
an aggregate adjustment of ¥6.8
percent. As we discuss more fully
below, it has been our practice to
moderate payment adjustments when
necessary to mitigate the effects of
significant downward adjustments on
hospitals, to avoid what could be
widespread, disruptive effects of such
adjustments on hospitals. As we also
discuss below, we are required to
implement the adjustment in section
7(b)(1)(B) of Public Law 110–90 no later
than FY 2012, and accordingly, in the
FY 2011 proposed rule, we proposed an
adjustment under that section for FY
2011 (75 FR 23870–23871). Therefore,
we believe it is appropriate to not
implement any or all of the ¥3.9
percent prospective adjustment in FY
2011. Accordingly, we did not propose
a prospective adjustment under section
7(b)(1)(A) of Public Law 110–90 for FY
2011 (75 FR 23868–23870). We note
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that, as a result, payments in FY 2011
(and in each future year until we
implement the requisite adjustment)
will be 3.9 percent higher than they
would have been if we had
implemented an adjustment under
section 7(b)(1)(A) of Public Law 110–90.
Our actuaries estimate that this 3.9
percentage point increase will result in
an aggregate payment of approximately
$4 billion. We also note that payments
in FY 2010 are expected to be 3.9
percent higher than they would have
been if we had implemented an
adjustment under section 7(b)(1)(A) of
Public Law 110–90, which our actuaries
estimate will increase aggregate
payments by approximately $4 billion
in FY 2010.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we sought public
comment on our proposal not to apply
in FY 2011 the ¥3.9 percent
prospective adjustment to the average
standardized amounts required under
section 7(b)(1)(A) of Public Law 110–90
in order to eliminate the full effect of
the documentation and coding changes
on future payments. We note that this
proposal would require us to apply the
¥3.9 percent adjustment in future
payment years, which may be applied
all at once in a single year or phased in
over more than one year. As noted
earlier, we have updated our analysis
with FY 2009 data on claims paid
through March 2010 for this FY 2011
IPPS/LTCH PPS final rule.
MedPAC addressed the issue of
providing for the required ¥3.9 percent
prospective adjustment to the average
standardized amounts required under
section 7(b)(1)(A) of Public Law 110–90.
We discuss its recommendation in the
context of our proposal for a
recoupment adjustment below.
7. Recoupment or Repayment
Adjustment for FY 2010 Authorized by
Section 7(b)(1)(B) of Public Law 110–90
As indicated in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43773), we estimated a 2.5 percent
change (estimated from analysis of more
recent data for the FY 2010 final rule
than the data used for that proposed
rule) due to documentation and coding
that did not reflect real changes in casemix for discharges occurring during FY
2008, exceeding the ¥0.6 percent
prospective documentation and coding
adjustment applied under section 7(a) of
Public Law 110–90 by 1.9 percentage
points. We stated that our actuaries had
estimated that this 1.9 percentage point
increase resulted in an increase in
aggregate payments of approximately
$2.2 billion. As described earlier,
section 7(b)(1)(B) of Public Law 110–90
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requires an adjustment for discharges
occurring in FYs 2010, 2011, and/or
2012 to offset the estimated amount of
this increase in aggregate payments
(including interest). Although section
7(b)(1)(B) of Public Law 110–90 requires
us to make this adjustment in FYs 2010,
2011, and/or 2012, we have discretion
as to when during this 3-year period we
will apply the adjustment.
We did not propose to make an
adjustment to the FY 2010 average
standardized amounts to offset, in
whole or in part, the estimated increase
in aggregate payments for discharges
occurring in FY 2008, but stated in the
proposed rule that we intended to
address this issue in future rulemaking.
That is, we stated that we would
address recouping the additional
expenditures that occurred in FY 2008
as a result of the 1.9 percentage point
difference between the actual changes in
documentation and coding that do not
reflect real changes in case-mix (2.5
percent), and the ¥0.6 percent
adjustment applied under Public Law
110–90 in FY 2011 and/or FY 2012, as
required by law. We indicated that,
while we had the statutory authority to
make this ¥1.9 percent recoupment
adjustment entirely in FY 2010, we were
delaying the adjustment until FY 2011
and FY 2012 because we did not yet
have any data on the magnitude of the
documentation and coding effect in FY
2009. We stated that as we have the
authority to recoup the aggregate effect
of this 1.9 percentage point difference in
FY 2008 IPPS payments in FY 2011 or
FY 2012 (with interest), delaying this
adjustment would have no effect on
Federal budget outlays. We indicated
that we intended to wait until we have
a complete year of data on the FY 2009
documentation and coding effect before
applying a recoupment adjustment for
IPPS spending that occurred in FY 2008
or we estimate will occur in FY 2009.
As discussed above, section 7(b)(1)(B)
of Public Law 110–90 requires the
Secretary to make an adjustment to the
standardized amounts under section
1886(d) of the Act to offset the estimated
increase or decrease in aggregate
payments for FY 2009 (including
interest) resulting from the difference
between the estimated actual
documentation and coding effect and
the documentation and coding
adjustments applied under section 7(a)
of Public Law 110–90. This
determination must be based on a
retrospective evaluation of claims data.
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43774), we stated that
because we would not receive all FY
2009 claims data prior to publication of
the final rule, we would address any
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increase or decrease in FY 2009
payments in future rulemaking for FY
2011 and 2012 after we perform a
retrospective evaluation of the FY 2009
claims data. At that time, our actuaries
estimated that this adjustment would be
approximately ¥3.3 percent. This
reflected the difference between the
estimated 4.8 percent cumulative actual
documentation and coding changes for
FY 2009 (2.5 percent for FY 2008 and
an additional 2.3 percent for FY 2009)
and the cumulative ¥1.5 percent
documentation and coding adjustments
applied under section 7(a) of Public Law
110–90 (¥0.6 percent in FY 2008 and
¥0.9 percent in FY 2009). We noted
that the actual adjustments were
multiplicative and not additive. This
estimated 4.8 percent cumulative actual
documentation and coding changes for
FY 2009 included the impact of the
changes in documentation and coding
first occurring in FY 2008 because we
believed hospitals would continue these
changes in documentation and coding
in subsequent fiscal years.
Consequently, we believed that these
documentation and coding changes
would continue to impact payments
under the IPPS absent a prospective
adjustment to account for the effect of
these changes.
We note that, unlike the adjustment to
the standardized amounts under section
7(b)(1)(A) of Public Law 110–90
described earlier, any adjustment to the
standardized amounts under section
7(b)(1)(B) of Public Law 110–90 would
not be cumulative, but would be
removed for subsequent fiscal years
once we have offset the increase in
aggregate payments for discharges for
FY 2008 expenditures and FY 2009
expenditures, if any.
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24096), we
did not propose to offset the 1.9 percent
increase in aggregate payments
(including interest) for discharges
occurring in FY 2008 resulting from the
adoption of the MS–DRGs, but to
instead address this issue in future
rulemaking for FYs 2011 and 2012.
In response to the FY 2010 proposed
rule, MedPAC stated in its comments on
the adjustment to the standardized
amounts under section 7(b)(1)(B) of
Public Law 110–90: ‘‘In addition, it
would be desirable for CMS to minimize
year-to-year changes in payment
adjustments it must make to recover
overpayments that were made in 2008
and 2009. To achieve this goal, CMS
should consider spreading the recovery
of 2008 overpayments over 3 years,
beginning in 2010.’’ Some commenters
recommended that CMS seek to extend
the timeframe beyond 2 years to phase
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in the estimated ¥6.6 percent
adjustment to the standardized amount.
The commenters asked CMS to seek
necessary legislative action to
accommodate such a policy. Most
commenters expressed concern with the
significant negative financial impacts
that would be incurred by providers if
CMS adopted that proposed ¥1.9
percent documentation and coding
adjustment in FY 2010. The commenters
cited providers’ already small or
negative margins for Medicare
payments, and requested that CMS not
further reduce payments during the
current period of economic instability
and reduced State funding. Other
commenters indicated that it would be
appropriate to delay any adjustment to
the standardized amounts under section
7(b)(1)(B) of Public Law 110–90 until
after CMS has the opportunity to fully
examine the FY 2009 claims data.
In response to these comments in FY
2010, we indicated that we recognized
that any adjustment to account for the
documentation and coding effect
observed in the FY 2008 and FY 2009
claims data may result in significant
future payment reductions for
providers. However, we indicated that
we are required under section 7(b)(1)(B)
of Public Law 110–90 to recapture the
difference of actual documentation and
coding effect in FY 2008 and FY 2009
that is greater than the prior
adjustments. We agreed with the
commenters who requested that CMS
delay any adjustment and, for the
reasons stated above, indicated that we
expect to address this issue in this FY
2011 rulemaking.
As indicated in section II.D.4. of this
preamble, the change due to
documentation and coding that did not
reflect real changes in case mix for
discharges occurring during FY 2008
and FY 2009 exceeded the ¥0.6 and
¥0.9 percent prospective
documentation and coding adjustment
applied under section 7(a) of Public Law
110–90 for those 2 years respectively by
1.9 percentage points in FY 2008 and
3.9 percentage points in FY 2009. In
total, this change exceeded the
cumulative prospective adjustments by
5.8 percentage points. Our actuaries
currently estimate that this 5.8
percentage point increase resulted in an
increase in aggregate payments of
approximately $6.9 billion. We note that
there may be a need to actuarially adjust
the recoupment adjustment to
accurately reflect accumulated interest.
Therefore, an aggregate adjustment of
¥5.8 percent in FYs 2011 and 2012,
subject to actuarial adjustment to reflect
accumulated interest, is necessary in
order to meet the requirements of
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section 7(b)(1)(B) of Public Law 110–90
to adjust the standardized amounts for
discharges occurring in FYs 2010, 2011,
and/or 2012 to offset the estimated
amount of the increase in aggregate
payments (including interest) in FYs
2008 and 2009. In the FY 2011 proposed
rule (75 FR 23871), we stated that we
intend to take into account the need to
reflect accumulated interest in
proposing a recoupment adjustment
under section 7(b)(1)(B) of Public Law
110–90 for FY 2012. We indicated that
we will invite public comments on our
proposal at that time.
It is often our practice to phase in rate
adjustments over more than one year in
order to moderate the effect on rates in
any one year. Therefore, consistent with
the policies we have adopted in many
similar cases, in the FY 2011 proposed
rule, we proposed to make an
adjustment to the standardized amount
of ¥2.9 percent, representing
approximately half of the aggregate
adjustment required under section
7(b)(1)(B) of Public Law 110–90, for FY
2011. An adjustment of this magnitude
allows us to moderate the effects on
hospitals in one year while
simultaneously making it possible to
implement the entire adjustment within
the timeframe required under section
7(b)(1)(B) of Public Law 110–90. As we
have previously noted, unlike the
prospective adjustment to the
standardized amounts under section
7(b)(1)(A) of Public Law 110–90
described earlier, the recoupment or
repayment adjustment to the
standardized amounts under section
7(b)(1)(B) of Public Law 110–90 is not
cumulative, but would be removed for
subsequent fiscal years once we have
offset the increase in aggregate
payments for discharges for FY 2008
expenditures and FY 2009 expenditures.
In keeping with our practice of
moderating payment adjustments when
necessary, we stated that we anticipated
that the proposal will have an
additional, and significant, moderating
effect on implementing the
requirements of section 7(b)(1)(B) of
Public Law 110–90 for FY 2012.
Specifically, we noted an advantage of
the proposal for FY 2011 is that we
anticipate removing the proposed FY
2011 ¥2.9 percent adjustment from the
rates in FY 2012, when it would also be
necessary under current law to apply
the remaining approximately ¥2.9
percent adjustment required by section
7(b)(1)(B) of Public Law 110–90. These
two steps in FY 2012, restoring the FY
2011 ¥2.9 percent adjustment, and
applying the remaining adjustment of
approximately ¥2.9 percent, would
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50063
effectively cancel each other out. The
result would be an aggregate adjustment
of approximately 0.0 percent (subject to
the need to account for accumulated
interest, as discussed above) under
section 7(b)(1)(B) of Public Law 110–90
in FY 2012. However, while we noted
this anticipated effect of the FY 2011
proposal, we did not make a formal
proposal for the further implementation
of section 7(b)(1)(B) of Public Law 110–
90 in FY 2012 in the FY 2011 proposed
rule.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we sought public
comment on our proposal to offset part
of the total 5.8 percent increase in
aggregate payments (including interest)
for discharges occurring in FY 2008 and
FY 2009 resulting from the adoption of
the MS–DRGs in FY 2011, noting that
this proposal would result in a ¥2.9
percent adjustment to the standardized
amount. We noted that we intended to
update our analysis with FY 2009 data
on claims paid through March 2009 (sic)
for this FY 2011 IPPS/LTCH PPS final
rule. (We note that the March 2009
update date for claims data in the
proposed rule should have been March
2010.) As intended, we have updated
our analysis with FY 2009 data on
claims paid through March 2010 in this
FY 2011 IPPS/LTCH PPS final rule.
We received numerous comments on
our proposal, especially from national
and regional hospital associations,
hospital systems, and individual
hospitals. MedPAC also commented on
our proposal.
Comment: One commenter requested
that CMS refrain from using ‘‘negative
terminology’’ to refer the documentation
and coding improvement practices that,
in response to the introduction of MS–
DRGs, resulted in overall case-mix
increase. While CMS frequently refers to
implementing negative payment
adjustments to account for this case-mix
increase, the commenter requested that
CMS we refer to any such adjustment as
a ‘‘budget-neutrality adjustment.’’ The
commenter contended that referring to
‘‘overpayments’’ and ‘‘negative payment
adjustments’’ inaccurately portrays
coding professionals in a poor manner,
and is counterproductive to CMS’ goal
of improving the quality and
consistency of health care data.
Response: When describing the MS–
DRG documentation and coding
adjustment, we have not intended to
suggest that these adjustments are
necessary because coders have acted
inappropriately, unethically, or
otherwise in bad faith by employing
documentation and coding
improvement practices associated with
the adoption of the MS–DRG system.
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Under the previous DRG definitions, it
was possible for high-severity cases not
to be paid more than cases with lower
severity. The MS–DRGs were
introduced as part of the effort to ensure
that the relative Medicare payment rates
that hospitals received more reasonably
matched the resources that hospitals
expended in furnishing care, and CMS
encouraged hospitals to code as
accurately as possible with that goal in
mind.
However, it is our finding that the
systematic effect of changing
documentation and coding in order to
receive the fullest payment for
providing care to beneficiaries under the
MS–DRGs has led to an increase in
aggregate payments that do not reflect
real changes in case-mix severity, and
the statute specifically requires that we
adjust for and recover these associated
overpayments due to such
documentation and coding
improvements. We believe our use of
certain terminology (to which the
commenter took exception) is the most
accurate description of the specific
statutorily required activities that CMS
must pursue.
Comment: Numerous commenters
detailed the potentially severe negative
fiscal impact that would be experienced
by providers if the proposed
documentation and coding
improvement adjustment were to be
implemented. Many commenters
contended that their individual hospital
documentation and coding practices
were not specifically changed or did not
change at the levels shown by our
analysis with the introduction of MS–
DRGs, and that they would be unfairly
penalized by the payment adjustment.
Some of these commenters provided
examples that they believed supported
their claims. Another commenter
requested that CMS implement a more
refined payment adjustment
methodology that would not penalize
hospitals with compliant and ethical
documentation and coding standards.
Response: We understand the
concerns about possible financial
disruption that may be caused by the
proposed documentation and coding
improvement payment adjustment.
However, we are required by section
7(b)(1)(B) of Public Law 110–90 to
implement the appropriate recoupment
or repayment adjustment based on our
analysis no later FY 2012. These
payment adjustments are necessary to
correct past overpayments due to
increases in aggregate payments that do
not reflect real changes in case-mix
severity, but instead are caused solely
by documentation and coding
improvements. We proposed a phase-in
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implementation of the required
adjustments to allow hospitals time to
adjust to future payment differences and
to moderate the effect of this adjustment
in any given year. We do not believe
that it would prudent to postpone
making any recoupment adjustment
beyond FY 2011. A postponement
would require us to make the entire
¥5.8 percent adjustment that is
warranted by our analysis in just one
year (FY 2012) in order to meet the
statutory requirement of section
7(b)(1)(B) of Public Law 110–90. Such a
delay in making the required adjustment
would not be to the financial benefit of
hospitals.
Under Medicare’s prospective
payment systems, it is neither feasible
nor possible to quantify any amount of
case-mix increase due to documentation
and coding improvements by a specific
hospital. Therefore, it is necessary for
CMS to propose a national adjustment
to meet the statutory requirement of
section 7(b)(1)(B) of Public Law 110–90
to calculate and recover any
overpayments caused by documentation
and coding improvements due to the
introduction of the MS–DRG system.
Comment: In its public comment,
MedPAC describes the history and
nature of the documentation and coding
adjustment. MedPAC stated that ‘‘CMS
adopted the MS–DRGs to improve the
distribution of payments.’’ Specifically,
it discussed how, under the DRG
definitions used previously, highseverity cases may have been paid
similarly to cases with low or moderate
severity. MedPAC emphasized that ‘‘the
shift to MS–DRGs was taken to improve
the distribution of payments, not change
the aggregate level of payments.’’
Further, MedPAC described the
financial incentive for hospitals to
improve documentation and coding
under the MS–DRG system, and also the
statutory requirement for CMS to ensure
that changes in the DRGs and relative
weights do not increase or decrease
aggregate IPPS payments absent those
changes, noting that Public Law 110–90
provided for specific requirements
related to payments for FYs 2008 and
2009. MedPAC pointed out that, as a
result of these combined legal
requirements, our proposals ‘‘do not
represent payment cuts, but rather offset
unintended overpayments to hospitals.’’
MedPAC performed an independent
analysis of claims data to determine the
effect of documentation and coding in
FYs 2008 and 2009. MedPAC stated,
‘‘[i]n our judgment, CMS’s analytic
methods are valid. Using similar
methods, our analysis of Medicare
hospital inpatient claims for 2007–2009
confirms all of CMS’s findings.’’ (We
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note that, in line with our evaluation of
claims data in for this final rule,
MedPAC’s retrospective evaluation of
the same claims data yielded nearly
identical results.)
MedPAC’s analysis demonstrated that
the cumulative effect of documentation
and coding in FY 2009 was 5.4 percent
and the cumulative overpayment in FY
2009 was 5.8 percent. Furthermore,
because CMS has already implemented
adjustments of ¥0.6 percent and ¥0.9
percent in FYs 2008 and 2009
respectively, MedPAC concurred that
the necessary adjustment under section
7(b)(1)(B) of Public Law 110–90 requires
CMS to prospectively reduce payment
rates by ¥3.9 percent to prevent further
increases in aggregate spending due to
the change to MS–DRGs. (As we discuss
elsewhere in this section, unlike the
recoupment adjustment, the statute does
not prescribe a specific timeframe
within which we must implement the
prospective adjustment.) In fact,
MedPAC concluded, ‘‘CMS correctly
estimated the effect of documentation
and coding on case mix and patients.’’
However, while acknowledging the
concerns we expressed in opting to
phase in implementing the full
retrospective adjustment (¥5.8 percent)
together with the prospective
adjustment (¥3.9 percent), noting that
this combined adjustment of ¥9.7
percent ‘‘may be financially disruptive’’),
MedPAC expressed concerns that our
proposal to adjust rates by ¥2.9
percent, which is half of the
retrospective adjustment needed to
address the cumulative overpayment in
FY 2011, is insufficient to fully offset
unintended overpayments to hospitals.
Furthermore, MedPAC stated that such
a delay in implementing offsets for the
operating and capital IPPS will cause a
progressive accumulation in
overpayments, which cannot be
recovered based upon current statutory
authority. MedPAC stated plainly that
‘‘CMS will not achieve budget neutrality
unless Congress directs it to recover all
overpayments.’’
As such, MedPAC recommended, for
both the operating and capital IPPS, that
‘‘overpayments should be stopped [and]
all overpayment should be recovered.’’
In making that recommendation,
MedPAC directed CMS to its March
2010 Report to Congress where it
recommended that Congress change the
law to require CMS to recover all
overpayments with interest. It noted
that this would shift our focus to the
prevention of future overpayments in
the operating and capital IPPS. MedPAC
further noted that such a shift might be
implemented as prospective
adjustments and would results in slower
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accumulation of future overpayments.
Specifically, it summarized its
recommendations for both the operating
and capital IPPS as:
• MedPAC’s approach would reduce
payments in increments of no more than
2 percent for 3 years.
• Hospitals would continue to receive
their scheduled updates, which would
offset much of their reduction.
• After 3 years, hospitals would
receive their scheduled updates without
any additional offsets.
• After roughly 6 years, overpayments
would be fully recovered, and hospitals
would see an increase in payments of
roughly 2 percent in addition to their
scheduled update.
In the absence of the changes in law
that would permit such an approach,
MedPAC provided an alternative
multiyear approach in its public
comments in response to our request for
comments on our proposal to offset part
of the cumulative overpayment in FY
2011 and our proposal not to apply the
remaining prospective adjustment in FY
2011. MedPAC recommended that CMS
recover the FY 2008 and 2009
overpayments as quickly as possible to
mitigate the need for further and more
drastic payment corrections. In FY 2012,
MedPAC recommended completing the
retrospective adjustment, with
accumulated interest, to fulfill the
requirements of section 7(b)(1)(B) of
Public Law 110–90 and then making
additional prospective adjustments in
that year of ¥2.0 percent. The nature of
the retrospective adjustment would
moderate the impact of the total
adjustment for FY 2012, and MedPAC
estimated the net effect to be roughly 2.0
percent. (As we discuss below, one
reason for the moderating effect of the
recoupment adjustment is that it is only
a 1-year adjustment, rather than a
permanent and cumulative adjustment.
As a result, the FY 2011 recoupment
adjustment would be removed from the
FY 2012 rate before any new
adjustments are applied. For example,
in FY 2012, the ¥2.9 percent
adjustment from FY 2011 would be
removed by adding 2.9 percent to the
FY 2012 rate before making any
additional adjustments through
rulemaking.) In FY 2013, MedPAC
recommended completing the
prospective adjustment for increases
that occurred in FYs 2008 and 2009,
noting that, again, in FY 2013, the
impact of the prospective adjustment
would be moderated by the expiration
of the retrospective adjustment in the
prior year.
Response: We appreciate MedPAC’s
independent validation and support of
our methodology. We note that MedPAC
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stated that its estimate for the
cumulative documentation and coding
effect for FYs 2008 and 2009 net of
measurement error is 5.4 percent. This
estimate was derived using the same
data sources and analogous
methodologies as the analysis set forth
by CMS in this FY 2011 IPPS/LTCH–
PPS final rule and matches the CMS
estimate in the prior discussion.
Furthermore, we agree with
MedPAC’s conclusions on the overall
financial implications of implementing
our proposed ¥2.9 percent payment
rate adjustment. We share MedPAC’s
concerns about delaying the prevention
of future overpayments in both the
capital and operating IPPS, but we
appreciate its acknowledgment of CMS’
discretion regarding the timing of
implementation of the prospective
adjustment and of the potential
financial disruption from
implementation of the full prospective
reduction in FY 2011 (¥3.9 percent) in
addition to the proposed retroactive
adjustment (¥2.9 percent). We also
appreciate MedPAC’s concerns for
prioritizing the recoupment of FYs
2008–2009 overpayments for the
operating IPPS because CMS lacks the
statutory authority to adjust for further
accumulation of these overpayments
beyond FY 2012. MedPAC appropriately
pointed out the moderating effect of the
multiyear approach to implementing the
retroactive adjustment to recover
overpayments in FYs 2008 and 2009.
The expiration of these adjustments in
the following year mitigates any
negative adjustments made in that
following year. We thank MedPAC for
its specificity in setting forth an
approach for completing the
adjustments prescribed under sections
7(b) and (c) of Public Law 110–90 and
will take these recommendations into
consideration in future rulemaking.
Finally, we concur with MedPAC’s
statement that these adjustments
associated with Public Law 110–90 and
section 1886(d)(3)(vi) of the Act should
not be seen as payment cuts, but as
offsets to unintended overpayments to
hospitals.
Comment: Most commenters,
including the AHA, agreed that there
were documentation and classification
increases that were in excess of the
statutory 0.6 percent and 0.9 percent
adjustments specified in Public Law
110–90. However, as in prior
rulemaking on this issue, most
commenters again questioned the
methodology employed by MedPAC and
our actuaries to determine the
magnitude of the excess. These
comments were generally similar to or
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cited the comment from the AHA,
which stated in summary:
‘‘The AHA believes there is a
fundamental flaw in CMS’ methodology
for determining the effect of
documentation and coding changes on
the FY 2008 and FY 2009 CMIs.
Specifically, in its analysis, CMS states
that the increase in payments it found
could not be due to real case-mix
change because its analysis looks at only
one year of patient claims. However, we
assert that the increase cannot be
deemed documentation and coding
change either, because, again, the
analysis looks at only one year of
patient claims.’’
‘‘Our analysis, which used multiple
years of patient claims, clearly shows
that a significant portion of the change
CMS found is actually the continuation
of historical trends, rather than the
effect of documentation and coding
changes due to implementation of MS–
DRGs. This analysis found a
documentation and coding effect of 0.9
percent for FYs 2008 and 2009.’’
The AHA also submitted trend
analyses in support of its contention
that real case-mix is increasing as
corroboration of its alternative finding
of a documentation and coding effect of
0.9 percent. These materials included a
trend analysis of the percentage of
Medicare discharges involving the ICU,
a trend analysis of data from the
Medical Expenditure Panel Survey
(MEPS), and a trend analysis of data
from the Healthcare Cost and Utilization
Project (HCUP).
Some commenters, including the
AHA, also stated that even without
taking into account the alternative
analyses presented by the AHA, the
CMS methodology overstates the
documentation and classification
growth due to an understatement in the
CMI value obtained when grouping the
FY 2009 claims data through the FY
2007 pre MS–DRG GROUPER. This
assertion was also based on a trend
analysis.
Response: As stated earlier, we agree
with MedPAC’s comment that ‘‘CMS
correctly estimated the effect of DCI on
case mix and payments * * * . In our
judgment, CMS’s analytic methods are
valid. Using similar methods, our
analysis of Medicare hospital inpatient
claims for 2007–2009 confirms all of
CMS’s findings.’’
We also agree with the commenters,
including the AHA, to the extent that
they indicated that there were
documentation and classification
increases that were in excess of the
statutory 0.6 percent and 0.9 percent
adjustments specified in Public Law
110–90. However, we disagree with the
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commenters’ assertion that there is a
fundamental flaw in the analytical
approach used by our actuaries and
MedPAC to determine the magnitude of
the documentation and classification
increase because our methodology
primarily utilizes a single year (FY
2009) of claims data. As stated in prior
rulemaking, most recently in the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 23867), overall case-mix growth is
predominately comprised of three
factors: Real case-mix growth; a
documentation and classification effect;
and a measurement effect. Section
7(b)(1)(B) of Public Law 110–90 requires
that the Secretary make appropriate
adjustment following a determination
that the implementation of the MS–DRG
system ‘‘resulted in changes in coding
and classification that did not reflect
real changes in case mix.’’ Section 7 of
Public Law 110–90 does not require that
we use a specific methodology when
conducting this analysis, and we believe
that the use of the FY 2009 claims data
allows us to directly remove real
changes in case-mix from the
calculation, consistent with the
statutory requirement. Differences in
case-mix calculated using the pre- and
post-MS–DRG GROUPERs on the FY
2009 data, as detailed previously in this
final rule, cannot reflect real case-mix
change, by definition, because the same
set of patients and claims is being
processed under the two GROUPERs.
The corroborative analyses performed
by MedPAC and our actuaries more
directly examine shifts in cases from
lower severity and cost MS–DRGs to
higher severity and cost groups within
the same base DRG than the alternative
approach submitted by the commenters
who asserted that real growth in case
mix follows a historical trend line. The
alternative approach does not
disaggregate the overall growth in case
mix into its three components as does
the methodology we set forth that
MedPAC corroborates. As MedPAC
stated in its comment letter:
‘‘The share of cases without a CC or
MCC declined more than 6 percentage
points in 2008 and an additional 2
percentage points in 2009, while the
shares of cases with a MCC increased by
more than 6 and 3 percentage points,
respectively * * * When we looked at
all 259 base DRGs that are split in some
fashion based on secondary diagnoses,
we found that all but one had
essentially the same pattern of shifts in
2008 and 2009 toward the highest
severity and cost MS–DRG and away
from the lowest severity or cost MS–
DRG. In 68 of these base DRGs, the
cumulative shift from 2007 to 2009 in
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the share of cases toward the highestweighted MS–DRG was at least 10
percentage points.’’
Nevertheless, despite our position
that our methodology more directly
measures the relevant increase, we did
examine the alternative approach
favored by commenters for calculating
the documentation and classification
increase. As a general statement, the
approach of examining historical trends
to estimate what case-mix would have
been in the absence of the adoption of
the MS–DRGs should not necessarily
yield significantly different results from
the analysis done by our actuaries and
MedPAC if an appropriate historical
trend can be determined. We have
concerns about the determination of an
appropriate historical trend.
We believe that the determination of
an appropriate historical trend is less
straightforward than our methodology,
which, as described above, simply
removes real case-mix growth from the
calculation. One issue with the trend
analysis is the determination of the
appropriate time period on which to
base the trend. We note in our
examination of the AHA approach that
it begins with the case-mix change for
FY 2001. MedPAC, in its comment
letter, provided an analysis of the
change in actual case-mix from FY 1998
to FY 2009:
‘‘We calculated the annual percent
change in the national aggregate casemix index (CMI) for the period from
1997 to 2009. These actual CMI values
are based on the DRG version, relative
weights, and transfer policies that were
in effect for each year. To calculate the
percent change for each year, we used
national aggregate average CMIs for the
cohort of hospitals paid under the IPPS
in each pair of adjacent years. We also
excluded all hospitals that had
converted to critical access hospital
status (CAH) by the end of 2009.’’
We created the following table
summarizing the results of MedPAC’s
analysis.
CHANGES IN CASE MIX FOR IPPS
HOSPITALS
Year
1998
1999
2000
2001
2002
2003
2994
2005
2006
2007
2008
2009
PO 00000
Percent
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
......................................
Frm 00026
Fmt 4701
Sfmt 4700
¥0.5
¥0.7
¥0.8
¥0.7
0.7
1.0
0.9
0.6
0.4
¥0.2
2.0
2.6
We note that the sustained negative
changes in actual CMI from FY 1998
through FY 2000 are not reflected in the
AHA analysis. If included, they would
significantly increase the AHA estimate
of documentation and coding growth
because the slope of the AHA trend line
would be significantly less.
A second critical issue with the AHA
approach is the determination of the
appropriate cohort of hospitals to
include in the calculation. For example,
if a hospital converts to CAH status,
decisions with respect to the inclusion
or exclusion of data from the time
period before the conversion will
influence the trend analysis. In FY 2000,
there were approximately 300 CAHs,
but, by FY 2007, there were
approximately 1,300 CAHs. We note
that MedPAC excluded all hospitals that
had converted to CAH status by the end
of 2009. It was not apparent how the
data from these hospitals was treated in
the AHA approach. CAHs tend to have
lower than average case-mix values;
therefore, including the data from one or
more years before the conversion and
then excluding the data after the
conversion artificially increases the
trend line and decreases the magnitude
of the documentation and classification
estimate.
Given these concerns about the
appropriateness of the AHA historical
trend, it follows that we are concerned
about extrapolating the AHA historical
trend into FY 2009. AHA’s extrapolation
assumes that changes in case-mix
increase at a linear and, therefore,
consistent rate, when, in fact, changes in
case-mix do not necessarily follow a
consistent pattern over time, as
MedPAC’s case-mix analysis pointed
out.
After a careful review of the
comments, we continue to find the
methodology used by our actuaries and
MedPAC to determine the magnitude of
the changes in coding and classification
that did not reflect real changes in case
mix to be the most appropriate
methodology because it directly
removes real changes in case-mix from
the calculation consistent with the
statutory requirement. We also question
the time period and cohort selections
made by the AHA in its analysis and the
appropriateness of extrapolating this
AHA trend to FY 2009 when a much
more straightforward methodology
exists for estimating documentation and
coding growth.
Comment: One commenter, while
supporting the proposed FY 2011
adjustment of ¥2.9 percent, stated that
CMS should not implement any further
adjustment in FY 2012 without a more
detailed quantification of the factors
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contributing to case-mix growth so that
CMS can separate the factors that
should be included in the adjustment
from the factors that should be
excluded. For example, the commenter
appears to believe that the effect of
resequencing the diagnosis codes on a
claim (as opposed to the addition of
new or different diagnosis codes) should
not be included in the section 7
adjustments because the commenter
believes this is not a documentation and
coding change, even if the resequencing
results in classification to a higher MS–
DRG. Other factors cited by the
commenter included new diagnosis
codes and certain definitional changes
to the base-DRGs.
Response: Section 7 of Public Law
110–90 requires us to adjust for changes
in ‘‘coding and classification’’ that do
not reflect real changes in case-mix. We
believe that the reclassifications cited by
the commenter are properly accounted
for in the documentation and coding
adjustment; these factors may affect the
MS–DRG classification and affect
payment without a corresponding real
increase in patient severity of illness.
For this reason, we believe that the
effects of these factors are appropriately
included in the section 7 adjustments,
consistent with section 7(b)(1)(B) of
Public Law 110–90, which requires
adjustments to the extent that
‘‘implementation’’ of the MS–DRG
system results in ‘‘coding and
classification that did not reflect real
change in case-mix.’’
After consideration of the public
comments we received, as well as
MedPAC’s detailed analysis, we have
decided to finalize our proposal to make
an adjustment to the standardized
amount of ¥2.9 percent, representing
approximately half of the aggregate
recoupment adjustment required under
section 7(b)(1)(B) of Public Law 110–90,
for FY 2011. We are persuaded by
MedPAC’s analysis, and by our own
review of the methodologies
recommended by various commenters,
that the methodology we have employed
to determine the required recoupment
adjustment is sound. We understand the
concerns expressed by many
commenters about the potential adverse
financial effects on hospitals. However,
we are required by the statute to
implement this adjustment no later than
FY 2012. We do not believe that it
would be in the interest of hospitals to
delay this required adjustment entirely
until FY 2012. Rather, we have sought,
as we commonly do, to moderate the
potential impact on hospitals by
phasing in the required adjustment over
more than one year. The adjustment to
the standardized amount of ¥2.9
percent that we are finalizing represents
approximately half of the aggregate
adjustment required under section
7(b)(1)(B) of Public Law 110–90 for FY
2011. As we noted in making the
proposal, there is a distinct advantage to
phasing in the required adjustment in
this manner. As we stated above, a
50067
major advantage of making the ¥2.9
percent adjustment to the standardized
amount in FY 2011 is that, because the
required recoupment adjustment is not
cumulative, we can anticipate removing
the FY 2011 ¥2.9 percent adjustment
from the rates in FY 2012, when it
would also be necessary under current
law to apply the remaining
approximately ¥2.9 percent adjustment
required by section 7(b)(1)(B) of Public
Law 110–90. These two steps in FY
2012, restoring the FY 2011 ¥2.9
percent adjustment and then applying
the remaining adjustment of
approximately ¥2.9 percent, would
effectively cancel each other out. The
result would be an aggregate adjustment
of approximately 0.0 percent (subject to
the need to account for accumulated
interest, as discussed above) under
section 7(b)(1)(B) of Public Law 110–90
in FY 2012. However, while we again
note this anticipated effect of the FY
2011 policy, we have not yet made a
formal proposal for the further
implementation of section 7(b)(1)(B) of
Public Law 110–90 in FY 2012.
Nevertheless, this anticipated
consequence of adopting a ¥2.9 percent
adjustment for FY 2011 should
substantially reduce the potential
financial impact of this required
adjustment on hospitals. We believe that
this is a reasonable and fair approach
which satisfies the requirements of the
statute while substantially moderating
the impact on hospitals.
FY 2011 MS–DRG DOCUMENTATION AND CODING ADJUSTMENT
Required prospective adjustment for
FYs 2008–
2009
Required
recoupment
adjustment for
FYs 2008–
2009
¥3.9%
¥5.8%
Level of adjustments ............................................................
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8. Background on the Application of the
Documentation and Coding Adjustment
to the Hospital-Specific Rates
Under section 1886(d)(5)(D)(i) of the
Act, SCHs are paid based on whichever
of the following rates yields the greatest
aggregate payment: the Federal rate; the
updated hospital-specific rate based on
FY 1982 costs per discharge; the
updated hospital-specific rate based on
FY 1987 costs per discharge; the
updated hospital-specific rate based on
FY 1996 costs per discharge; or the
updated hospital-specific rate based on
FY 2006 costs per discharge. Under
section 1886(d)(5)(G) of the Act, MDHs
are paid based on the Federal national
rate or, if higher, the Federal national
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rate plus 75 percent of the difference
between the Federal national rate and
the updated hospital-specific rate based
on the greatest of the FY 1982, FY 1987,
or FY 2002 costs per discharge. In the
FY 2008 IPPS final rule with comment
period (72 FR 47152 through 47188), we
established a policy of applying the
documentation and coding adjustment
to the hospital-specific rates. In that
final rule with comment period, we
indicated that because SCHs and MDHs
use the same DRG system as all other
hospitals, we believe they should be
equally subject to the budget neutrality
adjustment that we are applying for
adoption of the MS–DRGs to all other
hospitals. In establishing this policy, we
PO 00000
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Total adjustment
¥9.7%
Recoupment
adjustment to
FY 2011 payments
Remaining adjustment
¥2.9%
¥6.8%
relied on section 1886(d)(3)(A)(vi) of the
Act, which provides us with the
authority to adjust ‘‘the standardized
amount’’ to eliminate the effect of
changes in coding or classification that
do not reflect real change in case-mix.
However, in the final rule that
appeared in the Federal Register on
November 27, 2007 (72 FR 66886), we
rescinded the application of the
documentation and coding adjustment
to the hospital-specific rates retroactive
to October 1, 2007. In that final rule, we
indicated that, while we still believe it
would be appropriate to apply the
documentation and coding adjustment
to the hospital-specific rates, upon
further review, we decided that the
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application of the documentation and
coding adjustment to the hospitalspecific rates is not consistent with the
plain meaning of section
1886(d)(3)(A)(vi) of the Act, which only
mentions adjusting ‘‘the standardized
amount’’ under section 1886(d) of the
Act and does not mention adjusting the
hospital-specific rates.
In the FY 2009 IPPS proposed rule (73
FR 23540), we indicated that we
continued to have concerns about this
issue. Because hospitals paid based on
the hospital-specific rate use the same
MS–DRG system as other hospitals, we
believe they have the potential to realize
increased payments from
documentation and coding changes that
do not reflect real increases in patients’
severity of illness. In section
1886(d)(3)(A)(vi) of the Act, Congress
stipulated that hospitals paid based on
the standardized amount should not
receive additional payments based on
the effect of documentation and coding
changes that do not reflect real changes
in case-mix. Similarly, we believe that
hospitals paid based on the hospitalspecific rates should not have the
potential to realize increased payments
due to documentation and coding
changes that do not reflect real increases
in patient severity of illness. While we
continue to believe that section
1886(d)(3)(A)(vi) of the Act does not
provide explicit authority for
application of the documentation and
coding adjustment to the hospitalspecific rates, we believe that we have
the authority to apply the
documentation and coding adjustment
to the hospital-specific rates using our
special exceptions and adjustment
authority under section 1886(d)(5)(I)(i)
of the Act. The special exceptions and
adjustment provision authorizes us to
provide ‘‘for such other exceptions and
adjustments to [IPPS] payment amounts
* * * as the Secretary deems
appropriate.’’ In the FY 2009 IPPS final
rule (73 FR 48448 through 48449), we
indicated that, for the FY 2010
rulemaking, we planned to examine our
FY 2008 claims data for hospitals paid
based on the hospital-specific rate. We
further indicated that if we found
evidence of significant increases in casemix for patients treated in these
hospitals that do not reflect real changes
in case-mix, we would consider
proposing application of the
documentation and coding adjustments
to the FY 2010 hospital-specific rates
under our authority in section
1886(d)(5)(I)(i) of the Act.
In response to public comments
received on the FY 2009 IPPS proposed
rule, we stated in the FY 2009 IPPS final
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rule that we would consider whether
such a proposal is warranted for FY
2010. To gather information to evaluate
these considerations, we indicated that
we planned to perform analyses on FY
2008 claims data to examine whether
there has been a significant increase in
case-mix for hospitals paid based on the
hospital-specific rate. If we found that
application of the documentation and
coding adjustment to the hospitalspecific rates for FY 2010 is warranted,
we indicated that we would include a
proposal to do so in the FY 2010 IPPS
proposed rule.
9. Documentation and Coding
Adjustment to the Hospital-Specific
Rates for FY 2011 and Subsequent
Fiscal Years
In the FY 2010 IPPS/RY 2010 LTCH
proposed rule and final rule (74 FR
24098 through 24100 and 74 FR 43775
through 43776, respectively), we
discussed our performance of a
retrospective evaluation of the FY 2008
claims data for SCHs and MDHs using
the same methodology described earlier
for other IPPS hospitals. We found that,
independently for both SCHs and
MDHs, the change due to
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008
slightly exceeded the proposed 2.5
percent result discussed earlier, but did
not significantly differ from that result.
Again, for the FY 2010 proposed rule,
we found that the within-base DRG
increases were almost entirely
responsible for the case-mix change. In
that proposed rule, we presented two
Figures to display our results.
Therefore, consistent with our
statements in prior IPPS rules, we
proposed to use our authority under
section 1886(d)(5)(I)(i) of the Act to
prospectively adjust the hospitalspecific rates by the proposed ¥2.5
percent in FY 2010 to account for our
estimated documentation and coding
effect in FY 2008 that does not reflect
real changes in case-mix. We proposed
to leave this adjustment in place for
subsequent fiscal years in order to
ensure that changes in documentation
and coding resulting from the adoption
of the MS–DRGs do not lead to an
increase in aggregate payments for SCHs
and MDHs not reflective of an increase
in real case-mix. The proposed ¥2.5
percent adjustment to the hospitalspecific rates exceeded the ¥1.9 percent
adjustment to the national standardized
amount under section 7(b)(1)(A) of
Public Law 110–90 because, unlike the
national standardized rates, the FY 2008
hospital-specific rates were not
PO 00000
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Fmt 4701
Sfmt 4700
previously reduced in order to account
for anticipated changes in
documentation and coding that do not
reflect real changes in case-mix
resulting from the adoption of the
MS–DRGs.
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24100), we
solicited public comment on the
proposed ¥2.5 percent prospective
adjustment to the hospital-specific rates
under section 1886(d)(5)(I)(i) of the Act
and our proposal to address in the FY
2011 rulemaking cycle any changes in
FY 2009 case-mix due to changes in
documentation and coding that do not
reflect real changes in case-mix for
discharges occurring during FY 2009.
We also indicated that we intended to
update our analysis with FY 2008 data
on claims paid through March 2008 [sic]
for the FY 2010 IPPS final rule. (We
note that the March 2008 update claims
paid data date in the proposed rule
should have been March 2009.)
Consistent with our approach for IPPS
hospitals discussed earlier, in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule, we also delayed adoption of a
documentation and coding adjustment
to the hospital-specific rate until FY
2011. Similar to our approach for IPPS
hospitals, we indicated that we would
consider, through future rulemaking,
phasing in the documentation and
coding adjustment over an appropriate
period. We also indicated that we would
address, through future rulemaking, any
changes in documentation and coding
that do not reflect real changes in casemix for discharges occurring during FY
2009. We noted that, unlike the national
standardized rates, the FY 2009
hospital-specific rates were not
previously reduced in order to account
for anticipated changes in
documentation and coding that do not
reflect real changes in case-mix
resulting from the adoption of the
MS–DRGs. However, as we noted earlier
with regard to IPPS hospitals, if the
estimated documentation and coding
effect determined based on a full
analysis of FY 2009 claims data is more
or less than our current estimates, it
would change, possibly lessen, the
anticipated cumulative adjustments that
we currently estimate we would have to
make for the FY 2008 and FY 2009
combined adjustment. Therefore, we
believed that it would be more prudent
to delay implementation of the
documentation and coding adjustment
to allow for a more complete analysis of
FY 2009 claims data for hospitals
receiving hospital-specific rates.
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BILLING CODE 4120–01–C
Consistent with our analysis of IPPS
hospitals, the two charts above show
that we found after analysis of FY 2009
discharge data that the distribution of
severity discharges for MDHs and SCHs
both proportionally shifted from the
without CC/MCC to with MCC category.
This analysis was updated to include
data for FY 2009 claims paid through
March 2010. Similarly, we found using
a methodology consistent with our
analysis of IPPS hospitals that the
change due to documentation and
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coding that did not reflect real changes
in case-mix for discharges occurring
during FY 2009 slightly exceeded the
proposed 2.5 percent result discussed
earlier, but did not significantly differ
from that result.
As we have noted above, because
SCHs and MDHs use the same MS–DRG
system as all other hospitals, we believe
they have the potential to realize
increased payments from
documentation and coding changes that
do not reflect real increases in patient
severity of illness. Therefore, we believe
PO 00000
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Fmt 4701
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50069
they should be equally subject to a
prospective budget neutrality
adjustment that we are applying for
adoption of the MS–DRGs to all other
hospitals. We believe the
documentation and coding estimates for
all subsection (d) hospitals should be
the same. While the findings for the
documentation and coding effect for all
IPPS hospitals are similar to the effect
for SCHs and slightly different to the
effect for MDHs, we continue to believe
that this is the appropriate policy so as
to neither advantage or disadvantage
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different types of providers. As we have
also discussed above, our best estimate,
based on the most recently available
data, is that a cumulative adjustment of
¥5.4 percent is required to eliminate
the full effect of the documentation and
coding changes on future payments.
Unlike the case of standardized amounts
paid to IPPS hospitals, we have not
made any previous adjustments to the
hospital-specific rates paid to SCHs and
MDHs to account for documentation
and coding changes. Therefore, the
entire ¥5.4 percent adjustment remains
to be implemented.
As discussed above, in the FY 2011
IPPS/LTCH PPS proposed rule, we
proposed to make an adjustment to the
standardized amount for IPPS hospitals
of ¥2.9 percent under section 7(b)(1)(B)
of Public Law 110–90, for FY 2011. As
we also discussed above, it has been our
practice to moderate payment
adjustments when necessary to mitigate
the effects of significant downward
adjustments on hospitals, to avoid what
could be widespread, disruptive effects
of such adjustments on hospitals.
Because payments for non-SCH and
non-MDH IPPS hospitals and SCHs and
MDHs are determined on the basis of
the same MS–DRG system, SCHs and
MDHs have the potential to realize
increased payments from
documentation and coding changes that
do not reflect real increases in patient
severity of illness. Therefore, in
determining the level and pace of
adjustments to account for such
documentation and coding changes, we
believe that it is important to maintain,
as much as possible, both consistency
and equity among these classes of
hospitals. In addition, as in the case of
the documentation and coding
adjustment for non-SCH and non-MDH
IPPS hospitals, we also believe that it is
important to provide as much as
possible for moderating the effects of
adjustments on hospital payments.
Therefore, we proposed an adjustment
of ¥2.9 percent in FY 2011 to the
hospital-specific rates paid to SCHs and
MDHs. This proposal is consistent with
our proposed adjustment for IPPS
hospitals in two ways. First, as in the
case of the IPPS adjustment, we did not
propose to implement the entire
adjustment that is warranted by our data
(in this case, 5.4 percent) in one year.
Second, we proposed to maintain
consistency by proposing the same
numerical level of adjustment for both
groups of hospitals in FY 2011. While
this proposed adjustment to the
hospital-specific rates represented
somewhat over half of the entire
adjustment that is appropriate for SCHs
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and MDHs, it would allow us to
maintain complete consistency, at least
for FY 2011, in the effects on the
relevant classes of hospitals. Although
the proposed adjustment for SCHs and
MDHs is cumulative and prospective, as
opposed to the noncumulative
recoupment adjustment we proposed for
other IPPS hospitals, we believe that
proposing equal numerical adjustments
in this first year is the most appropriate
means to maintain such consistency and
equity at this time. We indicated in the
proposed rule that we will continue, as
much as possible, consistent with
sections 7(b)(1) of Public Law 110–90
and section 1886(d)(5)(I)(i) of the Act, to
take such consistency and equity into
account in developing future proposals
for implementing documentation and
coding adjustments.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we sought public
comment on the proposed ¥2.9 percent
prospective adjustment to hospitalspecific rates under section
1886(d)(5)(I)(i) of the Act and
addressing in future rulemaking cycles
changes in FY 2008 and FY 2009 casemix due to changes in documentation
and coding that do not reflect real
changes in case-mix for discharges
occurring during FY 2008 and FY 2009,
noting that our current estimates of the
remaining adjustment is ¥2.5 percent.
We stated that we intended to update
our analysis with FY 2009 data on
claims paid through March 2009 (sic)
for this FY 2011 IPPS/LTCH PPS final
rule and have updated our analysis with
FY 2009 data on claims paid through
March 2010 in this FY 2011 IPPS/LTCH
PPS final rule. (We note that the March
2009 update date for claims paid data in
the proposed rule should have been
March 2010.)
Comment: Numerous commenters
requested that CMS withdraw its
proposal to apply the documentation
and coding adjustment to SCHs and
MDHs and questioned CMS’ statutory
authority to apply this adjustment to
providers receiving a hospital-specific
rate. The commenters argued that
because section 1886(d)(3)(A)(vi) of the
Act only authorizes application of a
documentation and coding adjustment
to the standardized amount, Congress’
specific instruction as to the
applicability of this type of adjustment
makes it impermissible for CMS to
apply the adjustment to the hospitalspecific rates. Furthermore, commenters
contend that, due to their critical role in
isolated communities, any negative
documentation and coding adjustment
to SCHs and MDHs would endanger
their ability to provide the type of care
that Congress specifically sought to
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Fmt 4701
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protect by establishing their special
Medicare payment systems.
Response: We continue to disagree
with the commenters that the
Secretary’s broad authority to make
exceptions and adjustment to payment
amounts under section 1886(d)(3)(A)(vi)
of the Act cannot be applied in this
instance. We have discussed the basis
for applying such an adjustment in prior
rules (in the FY 2009 proposed rule (73
FR 23540), the FY 2009 final rule (73 FR
48448), and the FY 2010 proposed rule
(74 FR 24098)) and do not agree that the
language in section 1886(d)(3)(A)(vi) of
the Act limits our authority under
section 1886(d)(5)(I)(i) of the Act to
make such an adjustment. We recognize
that SCHs and MDHs are entitled,
through legislation, to receive the
hospital-specific rate in order to
compensate for their unique service
requirements in the provider
community. Similar to our approach
with IPPS hospitals, we are
implementing a phase-in of the
documentation and coding adjustment
over an appropriate period, beginning in
FY 2011. We will continue to separately
analyze SCH and MDH claims data to
ensure than any future adjustment is
appropriate for these provider types.
Comment: MedPAC responded to our
request for comments regarding the
level of adjustment for special categories
of hospitals, such as hospitals paid
under the hospital-specific payment
rate, by pointing out that these hospitals
have the same financial incentives for
documentation and coding
improvements and the same ability to
benefit from increased payments that do
not reflect real changes in case-mix
severity of illness levels. Therefore,
MedPAC recommended that ‘‘all IPPS
hospitals should be treated the same.’’
At the same time, MedPAC also stated
that ‘‘delaying prevention of
overpayments * * * creates a problem
because overpayments will continue to
accumulate in 2010 and later years until
the effect of documentation and coding
improvement is fully offset in the
payment rates.’’ In setting forward its
multiyear recommendation to CMS for
complying with the requirements of
section 7 of Public Law 110–90,
MedPAC emphasized ‘‘minimizing the
accumulation of overpayments.’’
Response: We thank MedPAC for its
comments and agree that it is
appropriate to conclude that hospitals
paid under the hospital-specific rate
have experienced a 5.4 percent increase
in documentation and coding in FYs
2008 and 2009, insofar as these
hospitals had the same financial
incentives to improve documentation
and coding as other IPPS hospitals, as
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confirmed by the analysis we have
described above. We further agree with
MedPAC that it is appropriate to focus
on minimizing the accumulation of
overpayments; we interpret this
statement to mean that MedPAC
recommends that CMS move forward as
quickly as possible with appropriate
prospective adjustments. We appreciate
MedPAC’s guidance that ‘‘all hospitals
be treated the same,’’ and we agree that
it is important to treat various classes of
similarly situated hospitals in our
payment policy determinations in a
consistent manner.
Therefore, we are finalizing our
proposal to apply an adjustment of ¥2.9
percent in FY 2011 to the hospitalspecific rates paid to SCHs and MDHs.
This adjustment is prospective in
nature. We continue to believe that such
an adjustment is appropriate because, as
MedPAC noted, all hospitals have the
same financial incentives for
documentation and coding
improvements, and the same ability to
benefit from the resulting increase in
aggregate payments that do not reflect
real change in case-mix severity of
illness levels. As we describe above, our
analysis of claims data shows that the
documentation and coding effect for all
IPPS hospitals is similar to the effect for
SCHs and slightly different to the effect
for MDHs, and we believe the
documentation and coding estimates for
all subsection (d) hospitals should be
the same. This adjustment also
maintains, as much as possible,
consistency in the treatment of various
classes of hospitals that are similarly
situated with respect to their ability to
adjust their documentation and coding
practices. Specifically, this adjustment
is consistent with our adjustment for
other IPPS hospitals in two ways. First,
as in the case of the IPPS adjustment,
we are not implementing the entire
adjustment that is warranted by our data
(in this case, 5.4 percent) in 1 year.
Second, we are treating hospitals in a
consistent manner by applying the same
numerical level of adjustment for both
groups of hospitals in FY 2011. While
this adjustment to the hospital-specific
rates represents somewhat over half of
the entire adjustment that is appropriate
for SCHs and MDHs, it would allow us
to maintain complete consistency, at
least for FY 2011, in the effects on the
relevant classes of hospitals. Although
the proposed adjustment for SCHs and
MDHs is cumulative and prospective, as
opposed to the noncumulative
recoupment adjustment we proposed for
other IPPS hospitals, we believe that
applying equal numerical adjustments
in this first year is the most appropriate
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means to maintain such consistency and
equity at this time. As we indicated in
the proposed rule, we will continue, as
much as possible, consistent with
sections 7(b)(1) of Public Law 110–90
and section 1886(d)(5)(I)(i) of the Act, to
take such consistency and equity into
account in developing future proposals
for implementing documentation and
coding adjustments.
10. Application of the Documentation
and Coding Adjustment to the Puerto
Rico-Specific Standardized Amount
a. Background
Puerto Rico hospitals are paid based
on 75 percent of the national
standardized amount and 25 percent of
the Puerto Rico-specific standardized
amount. As noted previously, the
documentation and coding adjustment
we adopted in the FY 2008 IPPS final
rule with comment period relied upon
our authority under section
1886(d)(3)(A)(vi) of the Act, which
provides the Secretary the authority to
adjust ‘‘the standardized amounts
computed under this paragraph’’ to
eliminate the effect of changes in coding
or classification that do not reflect real
changes in case-mix. Section
1886(d)(3)(A)(vi) of the Act applies to
the national standardized amounts
computed under section 1886(d)(3) of
the Act, but does not apply to the Puerto
Rico-specific standardized amount
computed under section 1886(d)(9)(C) of
the Act. In calculating the FY 2008
payment rates, we made an inadvertent
error and applied the FY 2008 ¥0.6
percent documentation and coding
adjustment to the Puerto Rico-specific
standardized amount, relying on our
authority under section
1886(d)(3)(A)(vi) of the Act. However,
section 1886(d)(3)(A)(vi) of the Act
authorizes application of a
documentation and coding adjustment
to the national standardized amount and
does not apply to the Puerto Rico
specific standardized amount. In the FY
2009 IPPS final rule (73 FR 48449), we
corrected this inadvertent error by
removing the ¥0.6 percent
documentation and coding adjustment
from the FY 2008 Puerto Rico-specific
rates.
While section 1886(d)(3)(A)(vi) of the
Act is not applicable to the Puerto Ricospecific standardized amount, we
believe that we have the authority to
apply the documentation and coding
adjustment to the Puerto Rico-specific
standardized amount using our special
exceptions and adjustment authority
under section 1886(d)(5)(I)(i) of the Act.
Similar to SCHs and MDHs that are paid
based on the hospital-specific rate, we
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50071
believe that Puerto Rico hospitals that
are paid based on the Puerto Ricospecific standardized amount should
not have the potential to realize
increased payments due to
documentation and coding changes that
do not reflect real increases in patient
severity of illness. Consistent with the
approach described for SCHs and
MDHs, in the FY 2009 IPPS final rule
(73 FR 48449), we indicated that we
planned to examine our FY 2008 claims
data for hospitals in Puerto Rico. We
indicated in the FY 2009 IPPS proposed
rule (73 FR 23541) that if we found
evidence of significant increases in casemix for patients treated in these
hospitals, we would consider proposing
application of the documentation and
coding adjustments to the FY 2010
Puerto Rico-specific standardized
amount under our authority in section
1886(d)(5)(I)(i) of the Act.
b. Documentation and Coding
Adjustment to the Puerto Rico-Specific
Standardized Amount
For the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule, we performed a
retrospective evaluation of the FY 2008
claims data for Puerto Rico hospitals
using the same methodology described
earlier for IPPS hospitals paid under the
national standardized amounts under
section 1886(d) of the Act. We found
that, for Puerto Rico hospitals, the
increase in payments for discharges
occurring during FY 2008 due to
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008
was approximately 1.1 percent. When
we calculated the within-base DRG
changes and the across-base DRG
changes for Puerto Rico hospitals, we
found that responsibility for the casemix change between FY 2007 and FY
2008 is much more evenly shared.
Across-base DRG shifts accounted for 44
percent of the changes, and within-base
DRG shifts accounted for 56 percent.
Thus, the change in the percentage of
discharges with an MCC was not as
large as that for other IPPS hospitals. In
Figure 4 in the FY 2010 proposed rule,
we showed that, for Puerto Rico
hospitals, there was a 3 percentage point
increase in the discharges with an MCC
from 22 percent to 25 percent and a
corresponding decrease of 3 percentage
points from 58 percent to 55 percent in
discharges without a CC or an MCC.
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24101), we
solicited public comment on the
proposed ¥1.1 percent prospective
adjustment to the hospital-specific rates
under section 1886(d)(5)(I)(i) of the Act
and our intent to address in the FY 2011
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for Puerto Rico hospitals to account for
documentation and coding changes will
be slightly less than the reduction for
IPPS hospitals paid based on 100
percent of the national standardized
amount. We noted that, as with the
hospital-specific rates, the Puerto Ricospecific standardized amount had not
previously been reduced based on
estimated changes in documentation
and coding associated with the adoption
of the MS–DRGs. However, as we note
earlier for IPPS hospitals and hospitals
receiving hospital-specific rates, if the
estimated documentation and coding
effect determined based on a full
analysis of FY 2009 claims data is more
or less than our current estimates, it
would change, possibly lessen, the
anticipated cumulative adjustments that
we currently estimate we would have to
make for the FY 2008 and FY 2009
combined adjustment. Therefore, we
believed that it would be more prudent
to delay implementation of the
documentation and coding adjustment
to allow for a more complete analysis of
FY 2009 claims data for Puerto Rico
hospitals.
Consistent with our approach for IPPS
hospitals for FY 2010, we indicated that
we would address in the FY 2011
rulemaking cycle any change in FY 2009
case-mix due to documentation and
coding that did not reflect real changes
in case-mix for discharges occurring
during FY 2009. We noted that, unlike
the national standardized rates, the FY
2009 hospital-specific rates were not
previously reduced in order to account
for anticipated changes in
documentation and coding that do not
reflect real changes in case-mix
resulting from the adoption of the MS–
DRGs.
As we have noted above, similar to
SCHs and MDHs, hospitals in Puerto
Rico use the same MS–DRG system as
all other hospitals and we believe they
have the potential to realize increased
payments from documentation and
coding changes that do not reflect real
increases in patient severity of illness.
Therefore, we believe they should be
equally subject to the prospective
budget neutrality adjustment that we
intend to apply to prospective payment
rates for IPPS hospitals including SCHs
and MDHs in order to eliminate the full
effect of the documentation and coding
changes associated with implementation
of the MS–DRG system.
In the above chart, consistent with our
findings for IPPS hospitals, for Puerto
Rico hospitals, there is a corresponding
increase in the discharge severity with
MCCs compared to a decrease in
discharge severity in the without CC/
MCC category. This analysis reflects FY
2009 claims paid through March 2010.
Using the same methodology we
applied to estimate documentation and
coding changes under IPPS for nonPuerto Rico hospitals, as we have also
discussed above, our best estimate,
based on the most recently available
data (FY 2009 claims paid through
March 2010), is that a cumulative
adjustment of ¥2.6 percent is required
to eliminate the full effect of the
documentation and coding changes on
future payments from the Puerto Rico-
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rulemaking cycle any changes in FY
2009 case-mix due to changes in
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2009.
We also stated that we intended to
update our analysis with FY 2008 data
on claims paid through March 2009 for
the FY 2010 IPPS final rule.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43777), we
indicated that, given these
documentation and coding increases,
consistent with our statements in prior
IPPS rules, we would use our authority
under section 1886(d)(5)(I)(i) of the Act
to adjust the Puerto Rico-specific rate.
However, in parallel to our decision to
postpone adjustments to the Federal
standardized amount, we indicated that
we were adopting a similar policy for
the Puerto Rico-specific rate for FY 2010
and would consider the phase-in of this
adjustment over an appropriate time
period through future rulemaking. The
adjustment would be applied to the
Puerto Rico-specific rate that accounts
for 25 percent of payments to Puerto
Rico hospitals, with the remaining 75
percent based on the national
standardized amount. Consequently, the
overall reduction to the payment rates
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specific rate. Unlike the case of
standardized amounts paid to IPPS
hospitals, we have not made any
previous adjustments to the hospitalspecific rates paid to Puerto Rico
hospitals to account for documentation
and coding changes. Therefore, the
entire ¥2.6 percent adjustment remains
to be implemented.
As we stated above, we believe it
important to maintain both consistency
and equity among all hospitals paid on
the basis of the same MS–DRG system.
At the same time, however, we
recognize that the estimated cumulative
impact on aggregate payment rates
resulting from implementation of the
MS–DRG system was smaller for Puerto
Rico hospitals as compared to IPPS
hospitals and SCHs and MDHs.
Therefore, in the FY 2011 IPPS LTCH
PPS proposed rule (75 FR 23876), we
proposed an adjustment of ¥2.4 percent
in FY 2011 to Puerto Rico-specific rate
that accounts for 25 percent of payments
to Puerto Rico hospitals, with the
remaining 75 percent based on the
national standardized amount, which
we proposed to adjust as described
above. Consequently, the overall
reduction to rates for Puerto Rico
hospitals to account for the
documentation and coding changes will
be slightly less than the reduction for
IPPS hospitals based on 100 percent of
the national standardized amount. We
noted that the proposed prospective
adjustment would have eliminated the
full effect of the documentation and
coding changes (as estimated at the
time) on the portion of future payments
to Puerto Rico hospitals based on the
Puerto Rico-specific rate. We believe
that this a full prospective adjustment is
the most appropriate means to take into
full account the effect of documentation
and coding changes on payments, and to
maintain equity as much as possible
between hospitals paid on the basis of
different prospective rates. (As
discussed below, the estimated ¥2.4
percent adjustment that we calculated
in the proposed rule no longer
represents a ‘‘full prospective
adjustment.’’) One reason for proposing
the full prospective adjustment for the
Puerto Rico-specific rate in FY 2011 was
to maintain equity as much as possible
in the documentation and coding
adjustments applied to various hospital
rates in FY 2011. Because our proposal
was to make an adjustment that
represents the full adjustment that is
warranted for the Puerto Rico-specific
rate, we indicated that we do not
anticipate proposing any additional
adjustments to the this rate for
documentation and coding effects.
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In the FY 2011 proposed rule, we
sought public comment on the proposed
full prospective adjustment, which we
estimated at that time to be ¥2.4
percent, to the Puerto Rico-specific
standardized amount under section
1886(d)(5)(I)(i) of the Act. We stated that
we intended to update our analysis with
FY 2009 data on claim paid through
March 2009 (sic) for this FY 2011 IPPS/
LTCH PPS final rule. (We note that the
March 2009 update date for claims paid
data in the proposed rule should have
been March 2010.) We have updated our
analysis, as planned, with FY 2009 data
on claims paid through March 2010 in
this FY 2011 IPPS/LTCH PPS final rule.
This updated data analysis shows that a
cumulative adjustment of ¥2.6 percent
is required to eliminate the full effect of
the document and coding changes on
future payments from the Puerto Ricospecific rate.
Comment: MedPAC responded to our
request for comments regarding the
level of adjustment for special categories
of hospitals, such as Puerto Rico
hospitals, by pointing out that these
hospitals have the same financial
incentives for documentation and
coding improvements and the same
ability to benefit from increased
payments that do not reflect real change
in case-mix severity of illness levels.
Therefore, MedPAC recommended that
‘‘all IPPS hospitals should be treated the
same.’’ At the same time, MedPAC also
stated that ‘‘delaying prevention of
overpayments * * * creates a problem
because overpayments will continue to
accumulate in 2010 and later years until
the effect of documentation and coding
improvement is fully offset in the
payment rates.’’ In setting forward its
multiyear recommendation to CMS for
complying with the requirements of
section 7 of Public Law 110–90,
MedPAC emphasizes ‘‘minimizing the
accumulation of overpayments.’’
Response: We thank MedPAC for its
comments and agree that Puerto Rico
hospitals have had the same financial
incentives to improve documentation
and coding as other IPPS hospitals. We
further agree with MedPAC that it is
appropriate to focus on minimizing the
accumulation of overpayments; we
interpret this statement to mean that
MedPAC recommends that CMS move
forward as quickly as possible with
appropriate prospective adjustments.
We appreciate MedPAC’s guidance that
‘‘all hospitals be treated the same,’’ and
we agree that it is important for our
payment policy determinations to treat
various classes of hospitals that are
similarly situated with respect to the
ability to adjust their documentation
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50073
and coding practices in as consistent a
manner as possible.
Therefore, we are finalizing our
proposal to apply an adjustment to the
Puerto Rico specific rate in FY 2011
using our authority under section
1886(d)(5)(I)(i) of the Act as proposed
(that is, a full prospective adjustment).
We note that our updated data analysis
shows that this adjustment will be ¥2.6
percent. We continue to believe that
such an adjustment is appropriate
because, as MedPAC found, all hospitals
have the same financial incentives for
documentation and coding
improvements and the same ability to
benefit from the resulting change in
case-mix. As we indicated in the
proposed rule, we will continue, as
much as possible, consistent with
sections 7(b)(1) of Public Law 110–90
and section 1886(d)(5)(I)(i) of the Act, to
take such consistency and equity into
account in developing future proposals
for implementing documentation and
coding adjustments.
E. Refinement of the MS–DRG Relative
Weight Calculation
1. Background
In the FY 2009 IPPS final rule (73 FR
48450), we continued to implement
significant revisions to Medicare’s
inpatient hospital rates by completing
our 3-year transition from charge-based
relative weights to cost-based relative
weights. Beginning in FY 2007, we
implemented relative weights based on
cost report data instead of based on
charge information. We had initially
proposed to develop cost-based relative
weights using the hospital-specific
relative value cost center (HSRVcc)
methodology as recommended by
MedPAC. However, after considering
concerns expressed in the public
comments we received on the proposal,
we modified MedPAC’s methodology to
exclude the hospital-specific relative
weight feature. Instead, we developed
national CCRs based on distinct hospital
departments and engaged a contractor to
evaluate the HSRVcc methodology for
future consideration. To mitigate
payment instability due to the adoption
of cost-based relative weights, we
decided to transition cost-based weights
over 3 years by blending them with
charge-based weights beginning in FY
2007. (We refer readers to the FY 2007
IPPS final rule for details on the
HSRVcc methodology and the 3-year
transition blend from charge-based
relative weights to cost-based relative
weights (71 FR 47882 through 47898).)
In FY 2008, we adopted severitybased MS–DRGs, which increased the
number of DRGs from 538 to 745. Many
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commenters raised concerns as to how
the transition from charge-based weights
to cost-based weights would continue
with the introduction of new MS–DRGs.
We decided to implement a 2-year
transition for the MS–DRGs to coincide
with the remainder of the transition to
cost-based relative weights. In FY 2008,
50 percent of the relative weight for
each DRG was based on the CMS DRG
relative weight and 50 percent was
based on the MS–DRG relative weight.
In FY 2009, the third and final year
of the transition from charge-based
weights to cost-based weights, we
calculated the MS–DRG relative weights
based on 100 percent of hospital costs.
We refer readers to the FY 2007 IPPS
final rule (71 FR 47882) for a more
detailed discussion of our final policy
for calculating the cost-based DRG
relative weights and to the FY 2008
IPPS final rule with comment period (72
FR 47199) for information on how we
blended relative weights based on the
CMS DRGs and MS–DRGs.
a. Summary of the RTI Study of Charge
Compression and CCR Refinement
As we transitioned to cost-based
relative weights, some public
commenters raised concerns about
potential bias in the weights due to
‘‘charge compression,’’ which is the
practice of applying a higher percentage
charge markup over costs to lower cost
items and services, and a lower
percentage charge markup over costs to
higher cost items and services. As a
result, the cost-based weights would
undervalue high-cost items and
overvalue low-cost items if a single CCR
is applied to items of widely varying
costs in the same cost center. To address
this concern, in August 2006, we
awarded a contract to RTI to study the
effects of charge compression in
calculating the relative weights and to
consider methods to reduce the
variation in the CCRs across services
within cost centers. RTI issued an
interim draft report in January 2007
with its findings on charge compression
(which was posted on the CMS Web site
at: https://www.cms.hhs.gov/reports/
downloads/Dalton.pdf). In that report,
RTI found that a number of factors
contribute to charge compression and
affect the accuracy of the relative
weights. RTI’s findings demonstrated
that charge compression exists in
several CCRs, most notably in the
Medical Supplies and Equipment CCR.
In its interim draft report, RTI offered
a number of recommendations to
mitigate the effects of charge
compression, including estimating
regression-based CCRs to disaggregate
the Medical Supplies Charged to
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Patients, Drugs Charged to Patients, and
Radiology cost centers, and adding new
cost centers to the Medicare cost report,
such as adding a ‘‘Devices, Implants and
Prosthetics’’ line under ‘‘Medical
Supplies Charged to Patients’’ and a ‘‘CT
Scanning and MRI’’ subscripted line
under ‘‘Radiology-Diagnostics’’. Despite
receiving public comments in support of
the regression-based CCRs as a means to
immediately resolve the problem of
charge compression, particularly within
the Medical Supplies and Equipment
CCR, we did not adopt RTI’s
recommendation to create additional
regression-based CCRs. (For more
details on RTI’s findings and
recommendations, we refer readers to
the FY 2009 IPPS final rule (73 FR
48452).) RTI subsequently expanded its
analysis of charge compression beyond
inpatient services to include a
reassessment of the regression-based
CCR models using both outpatient and
inpatient charge data. This interim
report was made available in April 2008
during the public comment period on
the FY 2009 IPPS proposed rule and can
be found on RTI’s Web site at: https://
www.rti.org/reports/cms/HHSM-5002005-0029I/PDF/Refining_Cost_to_
Charge_Ratios_200804.pdf. The IPPSspecific chapters, which were separately
displayed in the April 2008 interim
report, as well as the more recent OPPS
chapters, were included in the July 3,
2008 RTI final report entitled, ‘‘Refining
Cost-to-Charge Ratios for Calculating
APC [Ambulatory Payment
Classification] and DRG Relative
Payment Weights,’’ that became
available at the time of the development
of the FY 2009 IPPS final rule. The RTI
final report can be found on RTI’s Web
site at: https://www.rti.org/reports/cms/
HHSM-500-2005-0029I/PDF/Refining_
Cost_to_Charge_Ratios_200807_
Final.pdf.
RTI’s final report found that, under
the IPPS and the OPPS, accounting
improvements to the cost reporting data
reduce some of the sources of
aggregation bias without having to use
regression-based adjustments. In
general, with respect to the regressionbased adjustments, RTI confirmed the
findings of its March 2007 report that
regression models are a valid approach
for diagnosing potential aggregation bias
within selected services for the IPPS
and found that regression models are
equally valid for setting payments under
the OPPS.
RTI also noted that cost-based weights
are only one component of a final
prospective payment rate. There are
other rate adjustments (wage index,
IME, and DSH) to payments derived
from the revised cost-based weights, and
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the cumulative effect of these
components may not improve the ability
of final payment to reflect resource cost.
RTI endorsed short-term regressionbased adjustments, but also concluded
that more refined and accurate
accounting data are the preferred longterm solution to mitigate charge
compression and related bias in hospital
cost-based weights. For a more detailed
summary of RTI’s findings,
recommendations, and public
comments we received on the report, we
refer readers to the FY 2009 IPPS final
rule (73 FR 48452 through 48453).
b. Summary of the RAND Corporation
Study of Alternative Relative Weight
Methodologies
One of the reasons that we did not
implement regression-based CCRs at the
time of the FY 2008 IPPS final rule with
comment period was our inability to
investigate how regression-based CCRs
would interact with the implementation
of MS–DRGs. In the FY 2008 final rule
with comment period (72 FR 47197), we
stated that we engaged the RAND
Corporation as the contractor to evaluate
the HSRV methodology in conjunction
with regression-based CCRs, and that we
would consider its analysis as we
prepared for the FY 2009 IPPS
rulemaking process.
RAND evaluated six different
methods that could be used to establish
relative weights; CMS’ current relative
weight methodology of 15 national
CCRs and 5 alternatives, including a
method in which the 15 national CCRs
are disaggregated using the regressionbased methodology, and a method using
hospital-specific CCRs for the 15 cost
center groupings. In addition, RAND
analyzed our standardization
methodologies that account for
systematic cost differences across
hospitals. The purpose of
standardization is to eliminate
systematic facility-specific differences
in cost so that these cost differences do
not influence the relative weights.
Overall, RAND found that none of the
methods it studied of calculating the
relative weights represented a marked
improvement in payment accuracy over
the current method, and there was little
difference across methods in their
ability to predict cost at either the
discharge-level or the hospital-level. In
their regression analysis, RAND found
that, after controlling for hospital
payment factors, the relative weights are
compressed (that is, understated).
However, RAND also found that the
hospital payment factors are overstated
and increase more rapidly than cost.
Therefore, while the relative weights are
compressed, these payment factors
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offset the compression such that total
payments to hospitals increase more
rapidly than hospitals’ costs.
In the FY 2009 IPPS final rule (73 FR
48453 through 48457), we provided a
summary of the RAND report and the
public comments we received in
response to the FY 2009 IPPS proposed
rule. The report may be found on
RAND’s Web site at: https://www.rand.
org/pubs/working_papers/WR560/.
2. Proposed and Final Policy Changes
for FY 2011 and Timeline for Changes
to the Medicare Cost Report
In the FY 2009 IPPS final rule (73 FR
48458 through 48467), in response to
the RTI’s recommendations concerning
cost report refinements, and because of
RAND’s finding that regression-based
adjustments to the CCRs do not
significantly improve payment
accuracy, we discussed our decision to
pursue changes to the cost report to split
the cost center for Medical Supplies
Charged to Patients into one line for
‘‘Medical Supplies Charged to Patients’’
and another line for ‘‘Implantable
Devices Charged to Patients.’’ We
acknowledged, as RTI had found, that
charge compression occurs in several
cost centers that exist on the Medicare
cost report. However, as we stated in the
final rule, we focused on the CCR for
Medical Supplies and Equipment
because RTI found that the largest
impact on the MS–DRG relative weights
could result from correcting charge
compression for devices and implants.
In determining what should be reported
in these respective cost centers, we
adopted the commenters’
recommendation that hospitals should
use revenue codes established by AHA’s
National Uniform Billing Committee to
determine what should be reported in
the ‘‘Medical Supplies Charged to
Patients’’ and the ‘‘Implantable Devices
Charged to Patients’’ cost centers.
When we developed the FY 2009 IPPS
final rule, we considered all of the
public comments we received both for
and against adopting regression-based
CCRs. Also noteworthy is RAND’s belief
that regression-based CCRs may not
significantly improve payment
accuracy, and that it is equally, if not
more, important to consider revisions to
the current IPPS hospital payment factor
standardization method in order to
improve payment accuracy. For FY
2010, we solicited comments on
improving the standardization process,
although we did not make any changes
to the standardization process for FY
2010. We also stated that we continued
to believe that, ultimately, improved
and more precise cost reporting is the
best way to minimize charge
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compression and improve the accuracy
of the cost weights. Accordingly, a new
subscripted line 55.30 for Implantable
Devices Charged to Patients was created
in July 2009 as part of CMS’ Transmittal
20 update to the existing cost report
Form CMS–2552–96. This new
subscripted cost center is available for
use for cost reporting periods beginning
on or after May 1, 2009.
With respect to the initiative to
reform, update, and streamline the
Medicare cost report, which has been
the subject of many comments and our
responses in the IPPS (and OPPS)
Federal Register notices of rulemaking
over the past several years, CMS is
continuing to work on this project. The
new draft hospital cost report Form
CMS–2552–10 was published in the
Federal Register on July 2, 2009, and
was subject to a 60-day review and
comment period, which ended August
31, 2009. CMS received numerous
comments on the draft hospital cost
report Form CMS–2552–10, specifically
regarding the creation of new cost
centers from which data would be
ultimately used in the relative weights
calculation. The public comments on
the July 2, 2009 Federal Register notice
were incorporated in a Federal Register
notice that was issued on April 30, 2010
(75 FR 22810). We now plan to issue the
final hospital cost report Form CMS–
2552–10 later this summer. However, in
part, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23878 through
23880), we provided a summary of the
public comments received on the July 2,
2009 notice that specifically related to
the relative weights and responded to
those comments. Our responses to the
comments in the FY 2011 IPPS/LTCH
PPS proposed rule constituted our
proposals for FY 2011 regarding the
relative weights.
Several commenters asked that CMS
create cost centers to house the costs of
magnetic resonance imaging (MRI),
Computed Tomography (CT), nuclear
medicine services, cardiac
catheterization, drugs that require
detailed coding, and
magnetoencephalography (MEG). One
commenter indicated, that in RTI’s July
2008 report (https://www.rti.org/reports/
cms/), RTI made an argument that CMS
should create new standard cost centers
in which hospitals would report the
costs of MRI scans, CT scans, cardiac
catheterization, and drugs that require
detailed coding, in addition to the new
cost center for ‘‘Implantable Devices
Charged to Patients.’’ The commenter
stated that these additional lines are
needed to distinguish items and services
that hospitals tend to markup differently
within existing revenue centers, citing
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RTI’s finding that CT scans have a
significantly higher markup than most
other radiology services. The
commenter indicated that when CMS
uses the overall radiology department
CCR to convert charges for CT scans to
costs, it overestimates the cost of these
services, resulting in overstated relative
weights for MS–DRGs under the IPPS
and for APCs under the OPPS that
incorporate CT scanning. The
commenter argued that having a
separate cost center for each of these
services would resolve the problem. The
commenter also stated that, while CMS
has done something similar with the
creation of the cost center for high cost
medical devices, making cost center
changes for some services, but not
others, where such changes are
warranted could create additional
distortion in the relative weights. The
commenter further argued that cost
center changes should be made for all
service areas with significant volume
where services with sizable differences
in markup are currently combined in a
single cost center. The commenter
asserted that creating these cost centers
should not create reporting burden for
hospitals because the RTI report
indicated that roughly one-third of the
hospitals are already reporting costs for
CT scans, MRI scans, and cardiac
catheterization under the specific
nonstandard cost centers currently
available in the cost report.
Another commenter also
recommended the creation of the cost
centers for CT scans, MRI scans, and
nuclear medicine services, but for
different reasons than the first
commenter. Specifically, this
commenter believed these new cost
centers are necessary in order for the
high capital costs to be appropriately
allocated to these services and to be
correctly reflected in the CCRs that are
used in the establishment of the MS–
DRG and APC payment rates for the
services. The commenter stated that,
under the existing cost report structure,
some providers are allocating high
capital costs for these services in a
single radiology line, diluting the high
capital costs associated with CT scans,
MRI scans, and nuclear medicine
services across all radiology services,
including low cost services. Therefore,
the commenter concluded that the
resulting radiology CCRs that CMS
applies to charges for CT scans, MRI
scans, and nuclear medicine services to
arrive at the relative costs used to set
payment rates for both the IPPS and
OPPS understate the cost of high cost
radiology services and overstate the cost
of low cost radiology services, resulting
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in payments that are too low for the
high cost services. The commenter
indicated that CMS should not only
create these new cost centers but should
also require all hospitals to use them,
and should issue explicit instructions
on how to report the costs of these
services in the new standard cost
centers.
We agree that it is appropriate to
create standard cost centers for CT
scans, MRI scans, and cardiac
catheterization and to require that
hospitals report the costs and charges
for these services under new cost
centers on the revised Medicare cost
report Form CMS 2552–10. As we
discussed in the FY 2009 IPPS and CY
2009 OPPS proposed and final rules,
RTI found that the costs and charges of
CT scans, MRI scans, and cardiac
catheterization differ significantly from
the costs and charges of other services
included in the standard associated cost
center. RTI also concluded that both the
IPPS and OPPS relative weights would
better estimate the costs of those
services if CMS were to add standard
costs centers for CT scanning, MRIs, and
cardiac catheterization in order for
hospitals to report separately the costs
and charges for those services and in
order for CMS to calculate unique CCRs
to estimate the cost from charges on
claims data.
In its analysis, RTI concluded that the
estimated costs for CT scanning and
MRI scans would decline significantly
and that the estimated cost for cardiac
catheterization would increase modestly
if specific standard cost centers were
used. RTI found that cardiac
catheterization has very different cost
inputs from most cardiac testing (for
example, electrocardiograms or cardiac
stress testing) captured in the 5300
‘‘Electrocardiology’’ cost center and that
the accuracy of the CCR for both types
of services, cardiac catheterization and
other cardiac testing, would improve
with creation of a standard cost center
for cardiac catheterization. RTI also
found that one-third of hospitals already
report cardiac catheterization costs and
charges separately through the available
nonstandard cost center or through
subscripted lines to the
‘‘Electrocardiology’’ cost center.
Similarly, RTI found that approximately
one-third of hospitals already separately
report the costs for CT scanning and
MRI scans on their Medicare cost report
through subscripted lines and the
available nonstandard cost centers. We
believe the current prevalence of
reporting for the nonstandard cost
centers for these three services suggests
a modest hospital burden required to
adopt these cost centers.
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We discussed the possibility of
creating standard cost centers for these
three different services in our CY 2009
OPPS proposed and final rule with
comment period (73 FR 41432 and 73
FR 68525) and solicited general
comments on RTI’s recommendations.
The commenters who objected to the
creation of the standard cost centers for
CT scanning and MRI scans largely did
so based on RTI projected lower
estimated costs for these services if CMS
created these cost centers. The
commenters suggested that the current
CCRs for advanced imaging may reflect
a misallocation of capital costs and
requested that CMS not adopt separate
cost centers or statistical adjustment
simulating lower CCRs for CT scanning
and MRI until CMS could understand
how providers are allocating the
extensive capital costs for these services
to the revenue producing cost centers.
We also received comments suggesting
that the accuracy of estimated costs
would improve with better allocation,
potentially increasing the CCR as more
capital cost would be appropriately
allocated to both CT scanning and MRI
and not spread across all services in the
radiology cost center. We noted in the
CY 2009 OPPS/ASC final rule with
comment period (73 FR 68525) that our
recommended allocation of moveable
equipment costs in Worksheet B of the
Medicare cost report is based on dollar
value, and that it would be important to
encourage improved accuracy of capital
allocation through dollar value or direct
assignment if we were to make these
cost centers standard cost centers.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23879), we stated
that, at that time, we did not know the
impact on CCRs and estimated costs of
adopting standard cost centers specific
to CT scanning and MRI. However, we
stated our belief that these areas
constitute significant payment under
both the IPPS and OPPS and that these
are common imaging services already
widely reported by hospitals. Therefore,
in the proposed rule, we proposed to
adopt new standard cost centers for CT
scanning and MRI. We agreed with
those commenters who asserted that
creation of standard cost centers for CT
scanning and MRI would improve the
accuracy of cost estimation for these
services, in part by creating incentives
for hospitals to more accurately allocate
the capital and equipment associated
with these services.
With regard to cardiac catheterization,
we received one comment on the CY
2009 OPPS/ASC proposed rule
suggesting that hospitals might find it
difficult to allocate costs for these
services to specific cost centers,
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especially for cardiac catheterization,
and that allocated overhead costs
would, in most cases, be an estimate (73
FR 68527). However, given the number
of hospitals already reporting the
nonstandard cost center for cardiac
catheterization and the number
subscripting these costs and charges
(approximately 50 percent, according to
RTI’s July 2008 report (pages 71 and 72)
at: https://www.rti.org/reports/cms/
HHSM-500-2005-0029I/PDF/Refining_
Cost_to_Charge_Ratios_200807
_Final.pdf), we believe that hospitals do
allocate overhead costs to a cardiac
catheterization-specific cost center.
We also received public comments on
the cost report notice urging us to create
standard cost centers for nuclear
medicine services, for drugs that require
detailed coding, and for MEG. In the
proposed rule, we indicated that we
continue to believe that it is not
appropriate to create standard cost
centers for these three services. The
Medicare cost report already contains
standard cost center 4300 (Radioisotope)
to capture the costs and charges for the
radioisotopes used in nuclear medicine
services, the items that may have
significantly different costs and hospital
markup than the supplies and
equipment used in other radiology
services. Moreover, the cost report
already contains standard cost center
4100 (Diagnostic Radiology) in which
the costs of staff, minor equipment, and
supplies for diagnostic nuclear
medicine services can be reported.
Major moveable equipment should be
allocated to this cost center on
Worksheet B unless the provider
received approval from its contractor for
direct assignment of the costs (Provider
Reimbursement Manual (PRM), Part I,
Section 2307). Therefore, we continue to
believe that creating a new standard cost
center for nuclear medicine services is
not necessary. We also continue to
believe that it is not appropriate to
create a standard cost center for drugs
that require detailed coding. We refer
readers to the CY 2009 OPPS/ASC final
rule with comment period (73 FR
68655) for a detailed discussion on our
final decision not to create this cost
center. Finally, with respect to MEG
services, the extremely low volume of
claims for MEG services furnished to
Medicare beneficiaries in the hospital
outpatient setting and the extremely low
number of hospitals that report these
codes relative to the volumes we
typically have considered in adding
both standard and nonstandard cost
centers to the cost report lead us to
conclude that a specific cost center for
MEG is not justified at this time.
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Comment: Commenters both
supported and opposed our proposal to
establish standard cost centers for the
reporting of costs for CT scanning and
for MRI. Some commenters supported
the proposal because they agree with
RTI’s finding that there is aggregation
bias in the radiology cost centers. RTI
found that CT and MRI scans have a
significantly higher markup in their
respective nonstandard cost centers or
subscripted standard cost center lines
than most other radiology services. The
commenters indicated that when CMS
uses the overall radiology department
CCR that ‘‘ignores’’ costs and charges
reported in the CT and MRI
nonstandard cost centers and other
subscripted cost centers to convert
charges to costs for CT and MRI scans,
it overestimates the cost of these
services, resulting in overstated relative
weights for MS–DRGs under the IPPS
and for APCs under the OPPS that
incorporate CT scanning. These
commenters believed that the creation
of standard cost centers for CT scanning
and MRI services will result in more
accurate estimation of the cost of these
services.
Some commenters who objected to
the proposal believed that it is
premature to establish these new
standard cost centers without
understanding the payment
implications of these changes on both
IPPS relative weights and OPPS
payments. The commenters were
concerned that adoption of these cost
centers would result in very low CCRs
for these services, as already observed in
the nonstandard cost centers and
estimated by RTI in its July 2008 report.
Some commenters stated that if the
proposal were finalized, they believe
that a chest CT scan would be paid at
the same level as a routine chest X-ray
under the OPPS. Commenters also were
concerned that estimating costs on
claims data using CCRs based on cost
and charge data from standard cost
centers for CT scanning and MRI
services would adversely impact
payment for the technical component of
imaging services paid under the
Medicare Physician Fee Schedule
(MPFS), which is capped at the level
paid under the OPPS fee schedule.
Commenters suggested that CMS
examine all the costs incorporated into
CT scans and MRI services before
accepting very low CCRs for these
services. Some commenters suggested
that CMS should analyze the CCR
methodology by performing specific
procedure cost comparisons of low
value versus high value diagnostic
imaging equipment for both inpatient
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and outpatient settings to ensure that
the CCRs accurately reflect the cost of
capital equipment used in the procedure
cost.
Response: After consideration of these
comments, we continue to believe that
the creation of standard cost centers for
CT scanning and MRI services is
necessary because of the potentially
significant improvement in the accuracy
of estimated costs, as recommended by
RTI. We understand the commenters’
concerns that the final CCRs for CT
scans and MRI maybe low in light of
current cost report data findings and
that this may result in lower payment
for CT scans and MRI services. We do
not believe that we can assess whether
inappropriate payments would result
with our current data and, for that
reason, we believe that we should
collect standard cost center cost and
charge data for these areas, using those
data to assess the resulting CCRs
specific to CT scanning and MRI
services as a means of eliminating
aggregation bias for these and other
radiology services in the IPPS and
OPPS. Therefore, we are establishing
standard cost centers for CT scanning
and MRI services in hospital cost
reports for cost report periods beginning
on or after May 1, 2010. We believe that
establishing these standard cost centers
is necessary to improving the accuracy
of estimating costs for imaging services
and will allow us to perform the impact
assessment that some commenters want
us to do.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23880), we also
noted that there is typically a 3-year lag
between the availability of the cost
report data that we use to calculate the
relative weights both under the IPPS
and the OPPS and a given fiscal or
calendar year, and therefore, the data
from the proposed standard cost centers
for CT scans, MRI, and cardiac
catheterization respectively, should they
be finalized, would not even be
available for possible use in calculating
the relative weights earlier than 3 years
after Form CMS–2552–10 becomes
available. We stated that at that time, we
would analyze the data and determine
if it is appropriate to use those data to
create distinct CCRs from these cost
centers for use in the relative weights
for the respective payment systems.
Therefore, we wish to reassure the
commenters that there is no need for
immediate concern regarding possible
negative payment impacts on MRI and
CT scans under the IPPS and OPPS
because the cost report data that would
be used for the calculation of the
relative weights is at least 3 years from
being available. We will first thoroughly
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analyze and run impacts on the data and
provide the public with the opportunity
to comment, as usual, before distinct
CCRs for MRI and CT scans would be
finalized for use in the calculation of the
relative weights. Our decision to finalize
our proposal regarding cost centers for
these services is only the first step to a
longer process during which we will
continue to consider public comment.
In this final rule, we are finalizing our
proposal to create standard cost centers
for MRI and CT scans on the new
Medicare cost report Form CMS–2552–
10, and urge all hospitals to properly
report their costs and charges for MRI,
CT scans, and all other services so that,
in several years’ time, we will have
reliable data from all hospitals on which
to base a decision as to whether to
incorporate additional CCRs into the
relative weight calculation. We note that
the impact on physician payment for the
technical component of these services
that results from changes to payment to
hospitals is not within scope of the
proposed rule.
Comment: Some commenters stated
that the current reporting of the high
cost of CT and MRI equipment results
in inaccurate estimates of the cost of
these services. Specifically, they
asserted that some hospitals consider
CT and MRI equipment costs to be
capital costs, which are spread across
various cost centers based on square
footage or another allocation
methodology, resulting in an
underallocation of capital costs to the
radiology department and CT and MRI
nonstandard cost centers and
inappropriately low CCRs for these
services. In addition, the commenters
believed that some hospitals report CT
and MRI equipment costs as part of
hospital fixtures and not as moveable
equipment, allocating their direct
capital costs across the whole hospital,
rather than to the radiology cost center.
One commenter stated the revised
Medicare cost report Form 2552–10
recommended using a simplified cost
allocation methodology where movable
equipment is allocated on a square
footage basis, which appeared contrary
to the IPPS proposed rule that discussed
that a dollar value could be used as the
statistical basis for cost allocation.
Finally, some commenters stated that
hospitals do not have an incentive to
report these costs accurately in
disaggregated cost centers, given the
time and resources to do the cost
allocation. They believed that hospitals
have a modest incentive to spread their
capital cost across all services rather
than allocating imaging equipment costs
in the imaging cost centers. One
commenter argued that because many
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non-Medicare third party payers
continue to pay hospitals on the basis of
a percentage of charges and, to the
extent that specific allocation of
equipment and other capital costs to
MRI and CT scans reduces the charges
for other services, hospital may have a
financial disincentive to specifically
allocate those costs. The commenter
also pointed out that, in some States,
cost reporting practices are required to
conform to State regulatory
requirements, which may be
inconsistent with specific allocation of
capital costs.
Response: Section 104 of the PRM–1
contains definitions of buildings
(section 104.2), building equipment
(section 104.3), major moveable
equipment (section 104.4), and minor
equipment (section 104.5) that apply for
purposes of cost report completion. We
believe that it is clear that CT and MRI
equipment are ‘‘major moveable
equipment’’ and are neither a building
cost nor a building equipment cost.
Specifically, section 104.4 of the PRM–
1 defines ‘‘major moveable equipment’’
as follows: ‘‘The general characteristics
of this equipment are: (a) A relatively
fixed location in the building; (b)
capable of being moved, as
distinguished from building equipment;
(c) a unit cost sufficient to justify ledger
control; (d) sufficient size and identity
to make control feasible by means of
identification tags; and (e) a minimum
life of approximately three years. Major
moveable equipment includes such
items as accounting machines, beds,
wheelchairs, desks, vehicles, x-ray
machines, etc.’’ In addition to this
longstanding instruction, we believe
that our view that CT scanning and MRI
equipment are major moveable
equipment is supported by the 2008
edition of ‘‘Estimated Useful Lives of
Depreciable Hospital Assets,’’ which
states that the estimated useful life of a
CT scanner is 5 years, an MRI is 5 years,
and an X-ray unit is 7 years. Therefore,
we believe that our longstanding policy
makes it clear that CT scanning and MRI
equipment is major moveable
equipment and should be reported as
such on the cost report. As major
moveable equipment, the costs should
be reported together with the rest of the
hospital’s major moveable equipment
cost in the ‘‘Capital Related Cost—
Moveable Equipment’’ cost center(s) on
Worksheet A (lines 2 and 4). The costs
in this cost center are allocated to all the
hospital’s cost centers that use major
moveable equipment (including CT and
MRI) using ‘‘dollar value’’ or ‘‘square
feet’’ if the provider obtained the
contractor’s approval under Provider
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Reimbursement Manual, Part II (PRM–
II), Section 3617, to use the simplified
cost allocation methodology. However, a
hospital that is concerned that this
method of allocation may result in
inaccurate CCRs (on Worksheet C, Part
I) for the CT scan, MRI, and other
ancillary cost centers may request
contractor approval under section 2307
of the PRM–I to directly assign the cost
of moveable equipment to all of the
hospital’s cost centers that use moveable
equipment, including CT scans and
MRI. If the hospital meets all of the
criteria in section 2307 of the PRM–I,
the contractor may approve the direct
assignment method. This would ensure
that the high cost of the CT scanning
and MRI equipment would be reflected
in the CCR that would be calculated for
those departments and that would be
used to estimate the cost of CT scanning
and MRI services. In any case, hospitals
with accounting systems that include
the cost of CT scanning and MRI
equipment in the ‘‘Capital Related
Costs—Building and Fixtures’’ cost
center should correct their cost
reporting practices to come into
compliance with CMS longstanding
policy in this regard. Reporting of costs
and charges on the Medicare cost report
must be compliant with Medicare cost
reporting principles, regardless of
differing payment structures and
incentives of other payers or State
reporting requirements.
Comment: Commenters raised
concerns about rural hospitals being
unable to accurately report costs in CT
scanning, MRI and cardiac
catheterization cost centers. One
commenter noted that rural hospitals,
like CAHs, provide some of these
radiology services internally or through
arrangement, and that it is difficult for
them to track the costs for these cost
centers. The commenter requested that
CAHs be exempt from the requirement
to report their costs in the proposed
standard cost centers. Other
commenters noted that the proposed
creation of a standard cardiac
catheterization cost center would pose a
significant burden to hospitals to change
their cost reporting to allocate costs to
this cost center. In particular, they
stated that smaller hospitals may have
fewer resources to be able to separate
their costs and charges for these cost
centers, which would pose a significant
burden. The commenters indicated that,
for example, while revenue code 481
‘‘Cardiology-Catheterization Lab’’
contains cardiac catheterization charges,
there are some revenue codes that
contain other charges for cardiac
catheterization, like revenue codes 360
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and 361, ‘‘Operating Room-General’’ and
‘‘Operating Room-Minor,’’ respectively.
Response: As we stated in the CY
2009 OPPS final rule (73 FR 68522),
with regard to creation of new cost
centers, hospitals that do not currently
maintain distinct departments or
accounts in their internal accounting
systems for CT scanning, MRI, or
cardiac catheterization are not required
to create distinct departments or
accounts. We do not expect additional
burden for reporting under these new
standard cost centers to be significant
because hospitals that provide these
services and maintain a separate
account for these services in their
internal accounting records to capture
the costs and charges are currently
required in accordance with
§ 413.53(a)(1) to report these cost
centers in the cost report, even if CMS
does not identify a cost center code for
the department(s). Specifically, under
those regulations defining the
departmental method of cost
apportionment, the hospital must
separately apportion the cost of each
ancillary department. CMS defines a
cost center in PRM–I, Section 2302.8, as
an organizational unit, generally a
department or its subunit, having a
common functional purpose for which
direct and indirect costs are
accumulated, allocated, and
apportioned. With respect to the
comments regarding the revenue codes
for cardiac catheterization, if the
hospital operates a separate department
for cardiac catheterization and
maintains a separate General Ledger
account for this department, the
hospital would be expected to report the
costs and charges in the new cardiac
catheterization standard cost center and
ensure that the charges are billed under
appropriate UB revenue codes.
Comment: Some commenters
supported the proposal to create a
standard cost center for cardiac
catheterization services. However, some
commenters objected to the proposal to
create a standard cost center for Cardiac
Catheterization. Some commenters were
uncertain whether it would have a
significant impact on charge
compression and believed that it may
not be necessary to secure more accurate
estimated costs. Commenters were
concerned that RTI’s analysis of charge
compression in the cardiology cost
centers may be flawed; when RTI
analyzed the costs and charges included
in the current nonstandard cardiac
catheterization cost center, RTI
hypothesized that the nonstandard
cardiac catheterization cost center
contains costs from services that were
not cardiac catheterization. As such,
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commenters believed that hospitals may
not be reporting their costs
appropriately for this cost center.
Response: We continue to believe that
it is appropriate to create a standard cost
center to capture the cost and charges of
cardiac catheterization services in
hospitals that maintain the cost of such
services in distinct departments or
accounts, and that standardizing where
hospitals report their costs and charges
for cardiac catheterization will improve
the estimation of the cost of this high
volume Medicare service for both the
IPPS and the OPPS. Moreover, once the
information from a standard cardiac
catheterization cost center is available,
we will carefully evaluate the effect on
the CCRs that are derived from these
data and will make the decision
regarding whether to implement the
resulting CCRs, as usual, through our
public Federal Register proposed and
final notice process. However, in this
final rule, we are finalizing our proposal
to add a standard cost center to the cost
report for cardiac catheterization.
Comment: Commenters opposed a
regression-based approach for
addressing charge compression in the
relative weights where CMS would use
regression-based CCRs in the relative
weights methodology. The commenters
preferred more accurate and uniform
cost reporting, to mitigate charge
compression in the cost-based relative
weights.
Response: We agree that more
accurate cost reporting is a better means
of mitigating charge compression than
applying regression-based adjustments
and, for this reason, have proposed to
create certain cost centers that we
believe will ultimately result in more
refined CCRs, thereby leading to better
estimates of hospital cost for MRI, CT
scanning, and cardiac catheterization
services about which the public has
repeatedly raised concerns due to the
hospital practice of setting charges for
low cost services at a much higher
percentage of cost than the percentage
by which the charge for high cost
services exceeds the cost of those
services.
Comment: One commenter stated that
CMS should work closely with the
hospital industry for comprehensive
cost report reform rather than have
piecemeal changes to the cost report.
The commenter believed that CMS’
collaboration with the industry would
promote cost report simplification.
Response: We have just completed a
major redesign of the hospital cost
report in which the public had multiple
opportunities to provide input to the
specific proposed revisions. However,
that larger redesign, reassessment, and
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revision effort does not negate the need
to make additional targeted changes as
appropriate to resolve particular
identified problems, such as aggregation
bias in the payment for devices, CT
scanning, MRI services and cardiac
catheterization. As discussed above, the
proposal to create standard cost centers
for CT scanning, MRI services and
cardiac catheterization evolved from the
findings of the RTI report of aggregation
bias in the payment of several types of
services paid under the IPPS and OPPS,
including, but not limited to, high cost
medical devices for which CMS created
a standard cost center for cost report
periods beginning on and after May 1,
2009. We believe that the creation of
standard cost centers for CT scanning,
MRI services, and cardiac
catheterization is both appropriate and
that CMS has provided numerous
opportunities for public input.
Comment: One commenter
recommended that CMS issue explicit,
unambiguous guidance to hospitals on
how to improve allocation of large
capital costs to the radiology cost center.
The commenter noted that the draft
Medicare cost report Form 2552–10 did
not provide any mandatory reporting
guidance to hospitals on how to
improve the accuracy of cost allocation
for imaging equipment.
Response: We believe that the current
instructions on allocation of the cost of
major moveable equipment needed to
provide CT scans, MRIs, and other
radiology services are clear. We refer
readers to the regulations at 42 CFR
413.24(b) and 413.24(f) and CMS
instructions in Sections 2304 through
2320 of the PRM–I and Sections 3617
and 3618 of the PRM–II.
Comment: One commenter raised a
number of concerns about what CT and
MRI information hospitals should report
in these cost centers. Those concerns
include whether equipment installation
or de-installation or equipment
maintenance costs are reported in this
cost center and whether costs associated
with supplies related to MRI and CT
equipment (like diagnostic contrast
agents) are reported in this cost center.
The commenter speculated whether
each new item of advanced diagnostic
equipment warranted a new cost center.
The commenter requested that CMS
provide guidance to the hospital
industry on what types of costs should
be reported in these cost centers.
Response: As with any other ancillary
cost center, the providers would report
the direct cost accumulated in the CT
scanning or MRI departmental accounts
that are reflected in the general ledger
working trial balance.
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Comment: One commenter
recommended that CMS work with the
Medicare contractors to simplify the
cost allocation process, which the
commenter found to be lengthy and
burdensome. The commenter stated that
if hospitals want to change the order of
allocation or their allocation statistics,
they must make a written request to
their fiscal intermediary or MAC 90
days prior to the end of the cost
reporting period. The commenter stated
that the hospital must demonstrate that
the change more accurately allocates
costs and provide supporting
documentation. The fiscal intermediary
or MAC has 60 days to decide whether
or not to approve or deny the request,
while the provider must maintain both
sets of cost allocation statistics in the
meantime. The commenter requested
that CMS simplify this process.
Response: We believe that the current
process provides Medicare contractors
with the minimum time needed to
evaluate a contractor request to change
the order of allocation or their allocation
statistics, given the importance of the
decision and the need for the contractor
to assess whether the change would
result in a more valid determination of
hospital costs.
Comment: Commenters encouraged
CMS to ensure that hospitals are
appropriately allocating costs to the
Implantable Devices Charged to Patients
cost center, which was a standard cost
center that we added for cost report
periods beginning on and after May 1,
2009, as a result of the findings of the
RTI report that there is aggregation bias
in our estimates of the cost of expensive
medical devices.
Response: Hospitals are expected to
comply with our regulations at 42 CFR
413.24(b)(1) and 413.24(f) and to follow
the instructions in Sections 2304
through 2320 of the PRM–I and Sections
3617 and 3618 of the PRM–II, as well as
all other related instructions when
allocating cost to the Implantable
Devices Charged to Patients cost center.
Medicare contractors review how
hospitals allocate costs on the Medicare
cost report for all cost centers, including
the Implantable Devices Charged to
Patients cost center, in accordance with
their audit plans.
Comment: One commenter opposed
the HSRV methodology for
standardization of the relative weights.
The commenter found this methodology
to be inappropriate in a cost-based
relative weight methodology and only
appropriate for removing the effects of
different markup practices in a chargebased relative weight methodology.
Response: We appreciate the
comment but note that we did not
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propose any changes with respect to the
HSRV methodology for standardizing
the relative weights.
In summary, we are establishing
standard cost centers for CT scanning,
MRI services, and cardiac
catheterization in hospital cost reports
for cost report periods beginning on or
after May 1, 2010.
F. Preventable Hospital-Acquired
Conditions (HACs), Including Infections
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1. Background
a. Statutory Authority
Section 1886(d)(4)(D) of the Act
addresses certain hospital-acquired
conditions (HACs), including infections.
Section 1886(d)(4)(D) of the Act
specifies that by October 1, 2007, the
Secretary was required to select, in
consultation with the Centers for
Disease Control and Prevention (CDC),
at least two conditions that: (a) Are high
cost, high volume, or both; (b) are
assigned to a higher paying MS–DRG
when present as a secondary diagnosis
(that is, conditions under the MS–DRG
system that are CCs or MCCs); and (c)
could reasonably have been prevented
through the application of evidencebased guidelines. Section 1886(d)(4)(D)
of the Act also specifies that the list of
conditions may be revised, again in
consultation with CDC, from time to
time as long as the list contains at least
two conditions.
Section 1886(d)(4)(D)(iii) of the Act
requires that hospitals, effective with
discharges occurring on or after October
1, 2007, submit information on
Medicare claims specifying whether
diagnoses were present on admission
(POA). Section 1886(d)(4)(D)(i) of the
Act specifies that effective for
discharges occurring on or after October
1, 2008, Medicare no longer assigns an
inpatient hospital discharge to a higher
paying MS–DRG if a selected condition
is not POA. Thus, if a selected condition
that was not POA manifests during the
hospital stay, it is considered a HAC
and the case is paid as though the
secondary diagnosis was not present.
However, even if a HAC manifests
during the hospital stay, if any
nonselected CC/MCC appears on the
claim, the claim will be paid at the
higher MS–DRG rate. Under the HAC
payment policy, all CCs/MCCs on the
claim must be HACs in order to generate
a lower MS–DRG payment. In addition,
Medicare continues to assign a
discharge to a higher paying MS–DRG if
a selected condition is POA.
The POA indicator reporting
requirement and the HAC payment
provision apply to IPPS hospitals only.
Non-IPPS hospitals, including CAHs,
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LTCHs, IRFs, IPFs, cancer hospitals,
children’s hospitals, hospitals in
Maryland operating under waivers, rural
health clinics, federally qualified health
centers, RNHCIs, and Department of
Veterans Affairs/Department of Defense
hospitals, are exempt from POA
reporting and the HAC payment
provision. Throughout this section, the
term ‘‘hospital’’ refers to an IPPS
hospital.
The HAC provision found in section
1886(d)(4)(D) of the Act is part of an
array of Medicare value-based
purchasing (VBP) tools that we are using
to promote increased quality and
efficiency of care. Those tools include
measuring performance, using payment
incentives, publicly reporting
performance results, applying national
and local coverage policy decisions,
enforcing conditions of participation,
and providing direct support for
providers through Quality Improvement
Organization (QIO) activities. The
application of VBP tools, such as this
HAC provision, is transforming
Medicare from a passive payer to an
active purchaser of higher value health
care services. We are applying these
strategies for inpatient hospital care and
across the continuum of care for
Medicare beneficiaries.
These VBP tools are highly
compatible with the underlying
purposes as well as existing structural
features of Medicare’s IPPS. Under the
IPPS, hospitals are encouraged to treat
patients efficiently because they receive
the same DRG payment for stays that
vary in length and in the services
provided, which gives hospitals an
incentive to avoid unnecessary costs in
the delivery of care. In some cases,
conditions acquired in the hospital do
not generate higher payments than the
hospital would otherwise receive for
cases without these conditions. To this
extent, the IPPS encourages hospitals to
avoid complications.
However, the treatment of certain
conditions can generate higher Medicare
payments in two ways. First, if a
hospital incurs exceptionally high costs
treating a patient, the hospital stay may
generate an outlier payment. Because
the outlier payment methodology
requires that hospitals experience large
losses on outlier cases before outlier
payments are made, hospitals have an
incentive to prevent outliers. Second,
under the MS–DRGs system that took
effect in FY 2008 and that has been
refined through rulemaking in
subsequent years, certain conditions can
generate higher payments even if the
outlier payment requirements are not
met. Under the MS–DRG system, there
are currently 259 sets of MS–DRGs that
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are split into 2 or 3 subgroups based on
the presence or absence of a CC or an
MCC. The presence of a CC or an MCC
generally results in a higher payment.
However, since we implemented the
HAC provisions, if a secondary
diagnosis acquired during a hospital
stay is a HAC and no other CCs or MCCs
are present, the hospital receives a
payment under the MS–DRGs as if the
HACs were not present. (We refer
readers to section II.D. of the FY 2008
IPPS final rule with comment period for
a discussion of DRG reforms (72 FR
47141).)
b. HAC Selection
Beginning in FY 2007, we have
proposed, solicited, and responded to
public comments and have
implemented section 1886(d)(4)(D) of
the Act through the IPPS annual
rulemaking process. For specific
policies addressed in each rulemaking
cycle, we direct readers to the following
publications: the FY 2007 IPPS
proposed rule (71 FR 24100) and final
rule (71 FR 48051 through 48053); the
FY 2008 IPPS proposed rule (72 FR
24716 through 24726) and final rule
with comment period (72 FR 47200
through 47218); the FY 2009 IPPS
proposed rule (73 FR 23547), and final
rule (73 FR 48471); and the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24106) and final rule (74 FR
43782). A complete list of the 10 current
categories of HACs is included in
section II.F.2. of this preamble.
In the FY 2011 IPPS/LTCH proposed
rule (75 FR 23880 through 23898), we
did not propose any additional HACs or
changes to policies already established
under the authority of section
1886(d)(4)(D) of the Act.
c. Collaborative Process
As noted in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23881), in
establishing the HAC payment policy
under section 1886(d)(4)(D) of the Act,
our experts have worked closely with
public health and infectious disease
professionals from across the
Department of Health and Human
Services, including CDC, the Agency for
Healthcare Research and Quality
(AHRQ), and the Office of Public Health
and Science (OPHS), to identify the
candidate preventable HACs, review
comments, and select HACs. CMS and
CDC have also collaborated on the
process for hospitals to submit a POA
indicator for each diagnosis listed on
IPPS hospital Medicare claims and on
the payment implications of the various
POA reporting options. As discussed
below, we have also used rulemaking
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50081
and Listening Sessions to obtain public
input.
d. Application of HAC Payment Policy
to MS–DRG Classifications
As described above, in certain cases
application of the HAC payment policy
provisions can result in MS–DRG
reassignment to a lower paying MS–
DRG. The following diagram portrays
the logic of the HAC payment policy
provision as adopted in the FY 2008
IPPS final rule with comment period (72
FR 47200) and in the FY 2009 IPPS final
rule (73 FR 48471):
e. Public Input Regarding Selected and
Potential Candidate HACs
f. POA Indicator Reporting
Collection of POA indicator data is
necessary to identify which conditions
were acquired during hospitalization for
the HAC payment provision as well as
for broader public health uses of
Medicare data. In the FY 2011 IPPS/
LTCH PPS proposed rule, we listed the
instructions and change requests that
were issued to IPPS hospitals and also
to non-IPPS hospitals regarding the
submission of POA indicator data for all
diagnosis codes on Medicare claims and
the processing of non-PPS claims (75 FR
23381) We also indicated that specific
instructions on how to select the correct
POA indicator for each diagnosis code
were included in the ICD–9–CM Official
Guidelines for Coding and Reporting,
available on the CDC Web site at:
https://www.cdc.gov/nchs/data/icd9/
icdguide09.pdf. We reiterate that
additional information regarding POA
indicator reporting and application of
the POA reporting options is available
on the CMS Web site at: https://www.
cms.hhs.gov/HospitalAcqCond
although, historically we have not
provided coding advice. Rather, we
collaborate with the American Hospital
Association (AHA) through the Coding
Clinic for ICD–9–CM. We continue to
collaborate with the AHA to promote
the Coding Clinic for ICD–9–CM as the
source for coding advice about the POA
indicator.
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23882)
as well as in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43784),
there are five POA indicator reporting
options, as defined by the ICD–9–CM
Official Guidelines for Coding and
Reporting:
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23880 through
23898), we did not propose to add or
remove categories of HACs, nor did we
propose any changes to previously
established policies.
Given the timeliness of the HAC
discussion, particularly when
considered within the context of recent
legislative health care reform initiatives,
however, we remain eager to engage in
an ongoing public dialogue about the
various aspects of this policy. We plan
to continue to include updates and
findings from the RTI evaluation on
CMS’ Hospital-Acquired Conditions and
Present on Admission Indicator Web
site available at: https://
www.cms.hhs.gov/HospitalAcqCond/.
Indicates that the condition was present on admission.
Affirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the
onset of the condition occurred.
Indicates that the condition was not present on admission.
Indicates that the documentation is insufficient to determine if the condition was present at the time of admission.
Signifies exemption from POA reporting. CMS established this code as a workaround to blank reporting on the electronic
4010A1. A list of exempt ICD–9–CM diagnosis codes is available in the ICD–9–CM Official Guidelines for Coding and Reporting.
N ........................
U ........................
1 .........................
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Descriptor
Y ........................
W .......................
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In the FY 2009 IPPS final rule (73 FR
48486 through 48487), we adopted final
payment policies to: (1) Pay the CC/
MCC MS–DRGs for those HACs coded
with ‘‘Y’’ and ‘‘W’’ indicators; and (2) not
pay the CC/MCC MS–DRGs for those
HACs coded with ‘‘N’’ and ‘‘U’’
indicators.
On or after January 1, 2011, hospitals
are required to begin reporting POA
indicators using the 5010 electronic
transmittal standards format. The 5010
format removes the need to report a
POA indicator of ‘‘1’’ for codes that are
exempt from POA reporting. The POA
indicator of ‘‘1’’ is currently being used
because of reporting restrictions from
the use of the 4010 electronic
transmittal standards format.
Comment: Several commenters
supported CMS’ plans to no longer
require a POA indicator of ‘‘1’’ for codes
exempt from the POA reporting
requirement with the implementation of
the new 5010 electronic transaction
standards.
Response: We appreciate the
commenters’ support of our efforts to
move to the new 5010 electronic
transaction standards format. We agree
that the use of this format will prove
beneficial for a number of reasons,
including POA indicator reporting as
well as facilitating the move to the use
of ICD–10 coding systems.
Hospitals reporting with the 5010
format on and after January 1, 2011, will
no longer report a POA indicator of ‘‘1’’
for POA exempt codes. The POA field
will instead be left blank for codes
exempt from POA reporting. We plan to
issue CMS instructions on this reporting
change.
2. HAC Conditions for FY 2011
As changes to diagnosis codes and
new diagnosis codes are proposed and
finalized for the list of CCs and MCCs,
we modify the list of selected HACs to
reflect these changes. In Table 6A in the
Addendum to the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 24207), we
Code Descriptor
Proposed
CC/MCC
esignation
ABO incompatibility reaction, unspecified ............................................................................................................
ABO incompatibility with hemolytic transfusion reaction not specified as acute or delayed ...............................
ABO incompatibility with acute hemolytic transfusion reaction ............................................................................
ABO incompatibility with delayed hemolytic transfusion reaction ........................................................................
Other ABO incompatibility reaction ......................................................................................................................
CC
CC
CC
CC
CC
ICD–9–CM
Code
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999.60
999.61
999.62
999.63
999.69
...............
...............
...............
...............
...............
We invited public comments on the
proposed adoption of the five ICD–9–
CM diagnosis codes as CCs that are
listed above which, if finalized, would
be added to the current HAC Blood
Incompatibility category.
Comment: Several commenters
supported CMS’ proposal to add new
ICD–9–CM codes 999.60, 999.61,
999.62, 999.63, and 999.69, to replace
code 999.6, to specify ABO
incompatibility reaction for FY 2011
and their classification as CCs.
Response: We appreciate the support
of the commenters. We are finalizing
our proposal to make code 999.6 an
invalid code and to add codes 999.60,
999.61, 999.62, 999.63, and 999.69 as
CCs to the HAC blood incompatibility
category for FY 2011.
Comment: Some commenters
questioned why the five ICD–9–CM
codes (999.60, 999.61, 999.62, 999.63,
and 999.69) were being proposed to
replace the existing code (999.6) to
identify blood incompatibility when the
analysis indicated that only an
extremely low volume of discharges (23)
reported this condition as a secondary
diagnosis.
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listed the proposed addition of five new
ICD–9–CM diagnosis codes to replace
existing ICD–9–CM code 999.6 (ABO
incompatibility reaction) for FY 2011.
ICD–9–CM code 999.6 is currently the
only code identified under the Blood
Incompatibility HAC category. We
proposed to delete code 999.6 and form
a new subcategory of code 999.6 to
identify new diagnoses relating to ABO
incompatibility reaction due to
transfusion of blood or blood products.
These diagnoses meet the criteria for the
Blood Incompatibility HAC category
based on the predecessor code 999.6
being a selected HAC.
As shown in Table 6C in the
Addendum to the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 24210), we
proposed that code 999.6 become
invalid as a diagnosis code in FY 2011
with the creation of this new ICD–9–CM
subcategory. This proposed new
subcategory would allow room for
expansion and the creation of the
following new diagnosis codes:
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Response: The five ICD–9–CM codes
listed above were proposed and
finalized through the ICD–9–CM
Coordination and Maintenance
Committee meeting process. Further
information regarding the diagnosis
coding proposal for Hemolytic
Transfusion Reactions (HTR) from the
September 17, 2009 meeting can be
located at the following CDC Web site:
https://www.cdc.gov/nchs/icd/icd9cm_
maintenance.htm.
For the reasons set forth in the
proposed rule, we are finalizing our
proposal to make code 999.6 an invalid
code and to add codes 999.60, 999.61,
999.62, 999.63, and 999.69 as CCs to the
HAC blood incompatibility category for
FY 2011.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23882 and 23883),
we also invited public comment on our
proposal that the current list of HAC
categories and the ICD–9–CM codes that
had been finalized through FY 2010
continue to be subject to the HAC
payment provision for FY 2011. We also
indicated that the final FY 2011 list of
HAC conditions would include the
proposed five new refinement codes to
identify blood incompatibility as CCs if
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these codes were finalized. We received
public comments on our proposal that
the listed conditions continue to be
subject to the HAC payment provisions
which are summarized below.
Comment: One commenter stated that
the current HAC categories and codes
finalized through FY 2010 are, for the
most part, rational based on the
statutory criteria that HACs must be
high cost, high volume, or both and
reasonably preventable through the
application of evidence based
guidelines. However, the commenter
expressed reservations regarding the
inclusion of deep vein thrombosis
(DVT) and pulmonary embolism (PE)
following certain orthopedic
procedures. The commenter stated that
the proportion of these events that can
be prevented with evidence-based
guidelines is unclear, given that there is
uncertainty about the ideal length of
time DVT prophylaxis should be
continued postoperatively, differing
practices and guidelines for DVT
prophylaxis, and patient-specific factors
(that is, thrombophilia) that can impact
risk of postoperative venous
thromboembolism. The commenter
stated that an unintended consequence
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of this HAC category could be excess
bleeding occurrences from longer
prescriptions of anticoagulation in
attempts to comply with the measure.
The commenter stated that, rather than
including DVTs and PEs under the HAC
provision, these conditions may be more
appropriately managed as a measure
under the RHQDAPU, as is being
proposed for reducing avoidable
readmissions.
Response: We appreciate the
commenter’s support for the current
HAC categories. We also appreciate the
commenter’s concern regarding whether
DVTs and PEs following certain
orthopedic procedures are reasonably
preventable, given evidence-based
guidelines. We are providing data on the
frequency of our 10 categories of HACs
for the first time in this year’s
rulemaking. As the public reviews these
data and evaluates the effectiveness of
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the HAC program, we will be soliciting
recommendations for refinements to this
list. As discussed earlier, section
1886(d)(4)(D) of the Act specifies that
the HAC list of conditions may be
revised, in consultation with CDC, from
time to time as long as the list contains
at least two conditions. We did not
propose any modification to the HAC
list in the proposed rule. We instead
shared data on the HACs, which we
have discussed earlier. As we move
forward, we will be working with the
health care industry to refine and
update the HAC list. Therefore, we will
not remove DVTs and PEs following
certain orthopedic procedures from the
HAC list at this time.
Comment: One commenter requested
that CMS clarify how a hospital can
appeal a decision under which a
particular patient falls under the HAC
policy and is ineligible for a higher DRG
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50083
payment. The commenter believed that
an appeals process is essential to ensure
accountability.
Response: As we explained in the FY
2008 IPPS final rule (72 FR 47216),
under 42 CFR 412.60(d), a hospital has
60 days after the date of the notice of the
initial assignment of a discharge to an
MS–DRG to request a review of that
assignment. The hospital may submit
additional information as part of its
request. A hospital that believes a
discharge was assigned to the incorrect
MS–DRG as a result of the payment
adjustment for HACs may request
review of the MS–DRG assignment by
its fiscal intermediary or MAC
consistent with § 412.60(d) of the
regulations.
As final policy for FY 2011, the
following conditions will continue to be
subject to the HAC payment provision:
BILLING CODE 4120–01–P
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We refer readers to section II.F.6. of
the FY 2008 IPPS final rule with
comment period (72 FR 47202 through
47218) and to section II.F.7. of the FY
2009 IPPS final rule (73 FR 48474
through 48486) for detailed analyses
supporting the selection of each of the
HACs selected through FY 2010.
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3. RTI Program Evaluation Summary
a. Background
On September 30, 2009, a contract
was awarded to Research Triangle
Incorporated (RTI) to evaluate the
impact of the Hospital-Acquired
Condition-Present on Admission (HAC–
POA) provisions on the changes in the
incidence of selected conditions, effects
on Medicare payments, impacts on
coding accuracy, unintended
consequences, and infection and event
rates. This is an intra-agency project
with funding and technical support
coming from CMS, OPHS, AHRQ, and
CDC. The evaluation will also examine
the implementation of the program and
evaluate additional conditions for future
selection.
RTI’s evaluation of the HAC–POA
provisions is divided into several parts,
only some of which were completed
prior to the publication date of the FY
2011 IPPS/LTCH PPS proposed rule. In
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23883 through 23898), we
summarized the analyses that were
completed. RTI’s analyses of POA
indicator reporting, frequencies and net
savings associated with current HACs,
and frequencies of previously
considered candidate HACs reflect
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MedPAR claims from October 2008
through June 2009.
We received a number of public
comments regarding the evaluation
conducted by RTI, despite the fact that
we did not propose any new policies or
policy revisions based on the
evaluation. Several of these public
comments are addressed later in another
section of this preamble, but we believe
that it is appropriate to acknowledge the
following issues here.
Comment: Several commenters
expressed concern that the RTI
evaluation did not include an analysis
on the costs of complying with the
HAC–POA provision. According to the
commenters, compliance with our
HAC–POA policy results in additional
costs to providers and individuals, as
well as to the Medicare program by
necessitating additional expensive
preadmission screening tests in order to
achieve more accurate admission
documentation. The commenters also
stated that the estimated savings to
Medicare is not accurate if providers are
utilizing additional resources to perform
these expensive tests on their patients.
Response: We understand the
seriousness of this concern and refer to
our original discussion of HAC–POA
issues in the FY 2009 IPPS final rule (73
FR 23547 through 23559) in which we
included a comprehensive discussion of
what we understood to be the full
impact of this policy. We will continue
to evaluate the financial costs of
compliance with our HAC–POA
program, as well as its impact on our
overall goal of providing the highest
quality of care for Medicare
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beneficiaries at the most reasonable
costs.
Comment: Several commenters
commended CMS for making the early
findings of the RTI study, as well as
HAC–POA data, available to the public.
The commenters encouraged CMS to
continue to make additional findings
available.
Response: We agree with the
commenters that it continues to be
important to make HAC–POA data and
findings available to the public prior to
proposing any significant updates to the
HAC list. As RTI continues its work, we
will share the findings and additional
HAC–POA data.
Comment: Several commenters
expressed interest in seeing data on the
most common secondary diagnoses on
the CC and MCC list that are reported
along with an HAC code.
Response: We have asked RTI to
include a list of the most commonly
reported secondary CC and MCC
diagnoses and display this list along
with the other HAC–POA data on its
Web site at: https://www.rti.org/reports/
cms.
In this final rule, we are updating our
summary of the analyses with
additional data that have become
available since issuance of the proposed
rule.
b. RTI Analysis on POA Indicator
Reporting Across Medicare Discharges
To better understand the impact of
HACs on the Medicare program, it is
necessary to first examine the incidence
of POA indicator reporting across all
eligible Medicare discharges. As
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analysis on claims data from October
2008 through June 2009. Since
publication of that proposed rule, an
additional 3 months of data for FY 2009
that include claims from July 2009
through September 2009 have become
available. Below we present the
cumulative results of RTI’s findings for
FY 2009.
Using MedPAR claims data from
October 2008 through September 2009,
RTI found a total of approximately 65.22
million secondary diagnoses across
approximately 9.3 million discharges.
As shown in Chart A below, the
majority of all secondary diagnoses
(83.69 percent) were reported with a
POA indicator of ‘‘Y,’’ meaning the
condition was POA.
c. RTI Analysis on POA Indicator
Reporting of Current HACs
Following the initial analysis of POA
indicator reporting for all secondary
diagnoses, RTI then evaluated POA
indicator reporting for specific HACassociated secondary diagnoses. The
term ‘‘HAC-associated secondary
diagnosis’’ refers to those diagnoses that
are on the selected HAC list and were
reported as a secondary diagnosis. Chart
B below shows a summary of the HAC
categories with the frequency in which
each HAC was reported as a secondary
diagnosis and the corresponding POA
indicators assigned on the claims. It is
important to note that, because more
than one HAC-associated diagnosis code
can be reported per discharge (that is,
on a single claim), the frequency of
HAC-associated diagnosis codes may be
more than the actual number of
discharges that have a HAC-associated
diagnosis code reported as a secondary
diagnosis. Below we discuss the
frequency of each HAC-associated
diagnosis code and the POA indicators
assigned to those claims.
RTI analyzed the frequency of each
reported HAC-associated secondary
diagnosis (across all 9.3 million
discharges) and the POA indicator
assigned to the claim. Chart B below
shows that the most frequently reported
conditions were in the Falls and Trauma
HAC category, with a total of 153,284
HAC-associated diagnosis codes being
reported for that HAC category. Of these
153,284 diagnoses, 5,684 reported a
POA indicator of ‘‘N’’ for not POA and
147,257 diagnoses reported a POA
indicator of ‘‘Y’’ for POA. The lowest
frequency appears in the Surgical Site
Infection (SSI) Following Bariatric
Surgery for Obesity HAC category with
only 17 HAC-associated secondary
diagnosis codes (and procedure codes)
reported. It is important to note that the
number of secondary diagnosis codes
classified as POA is likely overstated
due to coding practices, and, therefore,
the number of HACs not POA are
expected to be greater than indicated in
Charts B and C. As a result, these data
likely underestimate the number of
complications some would consider
acquired in the hospital or other health
care setting. For example, the HACs
listed as present on admission (POA =
‘‘Y’’) include those instances where the
HAC condition was present on
admission from the emergency room or
other outpatient settings within the
admitting institution. The POA
indicator of ‘‘Y’’ is also used to identify
cases where a patient was discharged
and then readmitted one calendar day or
more after the date of discharge due to
complications from a HAC. In addition,
the POA indicator of ‘‘Y’’ may also
include patient transfers to the acute
care hospital from other health care
facilities, like nursing homes, or from a
home health setting, where the
secondary diagnosis considered to be a
HAC was initially acquired. Using
current coding guidelines, all of the
above scenarios can be correctly and
appropriately classified as POA (where
POA = ‘‘Y’’) on an inpatient claim, and
CMS does not have data from which to
determine where the condition
described in the secondary diagnisos
was acquired. Therefore, while a
fraction of the HACs reported as POA
were acquired outside the hospital prior
to admission, some conditions could
also have been acquired at the hospital
in an outpatient setting or through a
prior admission.
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mentioned previously, only IPPS
hospitals are required to submit POA
indicator data for all diagnosis codes on
Medicare claims. Therefore, all nonIPPS hospitals were excluded, as well as
providers in waiver States (Maryland)
and territories other than Puerto Rico.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23880 through
23898), we provided a preliminary
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In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23885), we
welcomed public comments on the data
presented that could provide insight
into the accuracy of those data, the use
of comparative data sets or analysis, and
how aspects of the coding system might
influence these data.
Comment: One commenter expressed
its past and continuing support of the
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HAC–POA program. This commenter
applauded CMS’ efforts to evaluate the
payment and clinical impacts of the
HAC–POA policy and for making the
preliminary data available for public
comment. However, the commenter
reported that it found the preliminary
published POA data for certain
conditions interesting. Specifically, the
commenter noted that the POA data for
the catheter-associated urinary tract
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infection (CAUTI) condition was
unexpected in that 85 percent of the
cases reporting that condition as a
secondary diagnosis were assigned a
POA indicator of ‘‘Y’’ (meaning that the
condition was present on admission).
The commenter further noted that there
were other conditions whose POA data
analysis results were equally
unexpected. This commenter stated it
looked forward to reviewing further
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analyses and understanding how the
POA indicator is being documented and
the accuracy of the documentation.
Response: We appreciate and
acknowledge the commenter’s support
of the HAC–POA provision. As stated
earlier, one aspect of the HAC–POA
program evaluation is to examine the
accuracy of coding, which includes a
review of the POA indicator data. RTI
will continue to study these data and,
when they become available, we plan to
publish the results.
Comment: Commenters expressed
concern about the accuracy of POA
indicator reporting for the HACs related
to intracranial injury with loss of
consciousness. One commenter stated
that it has come to the attention of the
American Hospital Association’s Central
Office on ICD–9–CM that there have
been different interpretations of the
POA coding guidelines for the reporting
of the following ICD–9–CM code
categories:
• 850 Concussions;
• 851 Cerebral laceration and
contusion;
• 852 Subarachnoid, subdural, and
extradural hemorrhage, following
injury;
• 853 Other and unspecified
intracranial hemorrhage following
injury; and
• 854 Intracranial injury of other and
unspecified nature.
The commenter pointed out that the
above mentioned ICD–9–CM code
categories require a fifth digit to specify
whether there was a loss of
consciousness, and the approximate
length of time that the patient was
unconscious. The commenter stated
that, currently, the POA guidelines state
to ‘‘assign ‘N’ if any part of the
combination code was not present on
admission.’’ The commenter further
indicated that, in some instances, coders
have assigned ‘‘N’’ to these codes if the
patient lost consciousness after
admission, even though the intracranial
injury occurred prior to admission. The
commenter stated that loss of
consciousness is a component of
intracranial injuries rather than a
separate condition. The commenter
believed that this guideline has resulted
in data implying that the intracranial
injuries were a result of trauma
sustained after admission to the
hospital, when the injury occurred prior
to admission.
The commenter stated that this POA
guideline was discussed by the Editorial
Advisory Board for Coding Clinic for
ICD–9–CM. After review, the commenter
stated that the Board determined that
the POA guideline should be clarified so
that coders will understand that these
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intracranial injury cases that have a loss
of consciousness after admission should
be assigned a POA indicator of ‘‘Y’’
rather than a ‘‘N.’’ The commenter stated
that this advice will be provided in a
future issue of Coding Clinic for ICD–9–
CM. The commenter pointed out that
CMS collaborated in this decision.
Response: We agree that there appears
to be inconsistency in how coders
interpret and apply the official POA
coding guideline for these combination
codes that include loss of
consciousness. CMS participated as a
voting member of the American
Hospital Association’s Editorial
Advisory Board for Coding Clinic for
ICD–9–CM to develop clarifications on
the POA reporting for combination
codes that involve loss of
consciousness. We agree that this
clarification will lead to greater
consistency and accuracy in POA
indicator reporting. CMS looks forward
to continuing its efforts as part of the
American Hospital Association’s
Editorial Advisory Board for Coding
Clinic for ICD–9–CM to provide
guidance on accuracy of coding and the
reporting of POA indicators. Hospitals
look to this publication to provide
detailed guidance on ICD–9–CM code
and POA reporting. We encourage
hospitals to send any other questions
about ICD–9–CM codes or POA
indicator selection to the American
Hospital Association so that the
Editorial Advisory Board can continue
its role of providing instruction on the
accurate selection and reporting of both
ICD–9–CM codes and POA indicators.
As described earlier, in the FY 2009
IPPS final rule (73 FR 48486 through
48487), we adopted as final our
proposal to: (1) Pay the CC/MCC MS–
DRGs for those HACs coded with ‘‘Y’’
and ‘‘W’’ indicators; and (2) not pay the
CC/MCC MS–DRGs for those HACs
coded with ‘‘N’’ and ‘‘U’’ indicators. We
also discussed the comments we
received urging CMS to strongly
consider changing the policy and to pay
for those HACs assigned a POA
indicator of ‘‘U’’ (documentation is
insufficient to determine if the
condition was present at the time of
admission). We stated we would
monitor the extent to which and under
what circumstances the ‘‘U’’ POA
reporting option is used. In the FY 2010
IPPS/RY 2010 LTCH PPS final rule, we
also discussed and responded to
comments regarding HACs coded with
the ‘‘U’’ indicator (74 FR 43784 and
43785). As shown in Chart B above,
RTI’s analysis provides some data on a
total of 404 HAC-associated secondary
diagnoses reported with a POA
indicator of ‘‘U.’’ Of those diagnoses, 270
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(0.2 percent) were assigned to the Falls
and Trauma HAC category.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23885), we stated
that we continue to believe that better
documentation will result in more
accurate public health data. Because the
RTI analysis we summarized in the FY
2011 IPPS/LTCH PPS proposed rule was
based on preliminary data, we did not
propose to change our policy under
which CMS does not pay at the higher
CC/MCC amount when a selected HAC
diagnosis code is reported with a POA
indicator of ‘‘U.’’
Comment: Several commenters asked
CMS to change our policy under which
we do not pay at the higher CC/MCC
amount when a HAC code reported with
a POA of ‘‘U.’’ (A POA indicator of ‘‘U’’
means that documentation was
insufficient to determine if the
condition was present at the time of the
inpatient admission.) The commenters
stated that while hospitals are
continuing to work on coding and
documentation improvement issues
with physicians who practice in their
facilities, in some cases, hospitals have
not been successful in obtaining clear
documentation to clarify whether or not
a condition was present on admission.
They added that when physicians do
not provide clear documentation in the
medical record, a POA indicator of ‘‘U’’
is assigned. The commenters asked that
CMS allow these cases with poor
documentation to result in a higher
payment if the HAC code is reported
with a ‘‘U.’’
Response: We are committed to
improving the accuracy of health care
data. Accurate and complete
documentation within the health record
is important for patient management,
outcome measurement, and quality
improvement, as well as payment
accuracy. We believe that it would be
inappropriate to pay a higher amount to
hospitals based on incomplete or poor
documentation. If accurate information
is not available within the health record
for a hospital to report a precise POA
indicator, hospitals are encouraged to
seek this additional documentation from
their physicians and/or other hospitals
if the hospital treated a patient who was
transferred. For these reasons, we
believe that reducing payment for
conditions on the HAC list with poor
documentation is appropriate.
Therefore, we did not propose to change
our approach to discounting the CC or
MCC assignment for selected HACs
reported with a POA indicator of ‘‘U.’’
We will maintain our existing policy
and not allow HACs with a POA
indicator of ‘‘U’’ to lead to the higher
payment.
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In the FY 2011 IPPS/LTCH PPS
proposed rule, we encouraged readers to
further review the RTI detailed report
which demonstrates the frequency of
each individual HAC-associated
diagnosis code within the HAC
categories. For example, in the Foreign
Object Retained After Surgery HAC
category, there are two unique ICD–9–
CM diagnosis codes to identify that
condition: code 998.4 (Foreign body
accidentally left during a procedure)
and code 998.7 (Acute reaction to
foreign substance accidentally left
during a procedure). In the updated
detailed RTI report, readers can view
that code 998.4 was reported 428 times
and code 998.7 was reported 13 times,
for a total of 441 times, as shown in
Chart B above. The RTI detailed report
is available at the following Web site:
https://www.rti.org/reports/cms/.
d. RTI Analysis of Frequency of
Discharges and POA Indicator Reporting
for Current HACs
RTI further analyzed the effect of the
HAC provision by studying the
frequency in which a HAC-associated
diagnosis was reported as a secondary
diagnosis with a POA indicator of ‘‘N’’
or ‘‘U’’ and, of that number, how many
resulted in MS–DRG reassignment. In
Chart C below, Column A shows the
number of discharges for each HAC
category where the HAC-associated
diagnosis was reported as a secondary
diagnosis. For example, there were 33
discharges that reported Air Embolism
as a secondary diagnosis. Column C
shows the number of discharges for each
HAC reported with a POA indicator of
‘‘N’’ or ‘‘U.’’ Continuing with the example
of Air Embolism, the chart shows that,
of the 33 reported discharges, 24
discharges (72.73 percent) had a POA
indicator of ‘‘N’’ or ‘‘U’’ and was
identified as a HAC discharge. There
were a total of 24 discharges to which
the HAC policy applies and that could,
therefore, have had an MS–DRG
reassignment. Column E shows the
number of discharges where an actual
MS–DRG reassignment occurred. As
shown in Column E, the number of
discharges with an Air Embolism that
resulted in actual MS–DRG
reassignments is 12 (50 percent of the 24
discharges with a POA indicator of ‘‘N’’
or ‘‘U’’). Thus, while there were 24
discharges (72.73 percent of the original
33) with an Air Embolism reported with
a POA indicator of ‘‘N’’ or ‘‘U’’ identified
as a HAC discharge that could have
caused MS–DRG reassignment, the end
result was 12 (50 percent) actual MS–
DRG reassignments. There are a number
of reasons why a selected HAC reported
with a POA indicator of ‘‘N’’ or ‘‘U’’ will
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not result in MS–DRG reassignment.
These reasons were illustrated with the
diagram in section II.F.1.c. of this
preamble and will be discussed in
further detail in section II.F.3.e. of this
preamble.
Chart C below also shows that, of the
264,810 discharges with a HACassociated diagnosis as a secondary
diagnosis, 3,416 discharges ultimately
resulted in MS–DRG reassignment. As
we discuss below, there were 15 claims
that resulted in MS–DRG reassignment
where two HACs were reported on the
same admission. The four HAC
categories that had the most discharges
resulting in MS–DRG reassignment
were: (1) Falls and Trauma; (2)
Pulmonary Embolism and DVT
Orthopedic (Orthopedic PE/DVT); (3)
Pressure Ulcer Stages III & IV; and (4)
Catheter-Associated Urinary Tract
Infection (UTI). Codes falling under the
Falls and Trauma HAC category were
the most frequently reported secondary
diagnoses with 126,078 discharges. Of
these 126,078 discharges, 5,312 (4.21
percent) were coded as not POA and
identified as HAC discharges. This
category also contained the greatest
number of discharges that resulted in an
MS–DRG reassignment. Of the 5,312
discharges within this HAC category
that were not POA, 1,577 (29.69
percent) resulted in an MS–DRG
reassignment.
Of the 264,810 total discharges
reporting HAC-associated diagnoses as a
secondary diagnosis, 3,110 discharges
were coded with a secondary diagnosis
of Orthopedic PE/DVT. Of these 3,110
discharges, 2,335 (75.08 percent) were
coded as not POA and identified as
HAC discharges. This category
contained the second greatest number of
discharges resulting in an MS–DRG
reassignment. Of the 2,335 discharges in
this HAC category that were not POA,
1,024 discharges (43.85 percent)
resulted in an MS–DRG reassignment.
The Pressure Ulcer Stages III & IV
category had the second most frequently
coded secondary diagnoses, with 99,656
discharges. Of these discharges, 1,316
(1.32 percent) were coded as not POA
and identified as HAC discharges. This
category contained the third greatest
number of discharges resulting in an
MS–DRG reassignment. Of the 1,316
discharges in this HAC category that
were not POA, 384 discharges (29.18
percent) resulted in an MS–DRG
reassignment.
The Catheter-Associated UTI category
had the third most frequently coded
secondary diagnoses, with 14,089
discharges. Of these discharges, 2,333
(16.56 percent) were coded as not POA
and identified as HAC discharges. This
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category contained the fourth greatest
number of discharges resulting in an
MS–DRG reassignment. Of the 2,333
discharges in this HAC category that
were not POA, 223 discharges (9.56
percent) resulted in a MS–DRG
reassignment.
The remaining 6 HAC categories only
had 208 discharges that ultimately
resulted in MS–DRG reassignment. We
note that, even in cases where a large
number of HAC-associated secondary
diagnoses were coded as not POA, this
finding did not necessarily translate into
a large number of discharges that
resulted in MS–DRG reassignment. For
example, only 26 of the 2,573 Vascular
Catheter-Associated Infection secondary
diagnoses that were coded as not POA
and identified as HAC discharges
resulted in a MS–DRG reassignment.
There were a total of 417 discharges
with a HAC-associated secondary
diagnosis reporting a POA indicator of
‘‘N’’ or ‘‘U’’ that were excluded from
acting as a HAC discharge (subject to
MS–DRG reassignment) due to the CC
Exclusion List logic within the
GROUPER. The CC Exclusion List
identifies secondary diagnosis codes
designated as a CC or MCC that are
disregarded by the GROUPER logic
when reported with certain principal
diagnoses. For example, a claim with
the principal diagnosis code of 250.83
(Diabetes with other specified
manifestations, type 1 [juvenile type],
uncontrolled) and a secondary diagnosis
code of 250.13 (Diabetes with
ketoacidosis, type 1, [juvenile type],
uncontrolled) with a POA indicator of
‘‘N’’ would result in the HAC-associated
secondary diagnosis code 250.13 being
ignored as a CC. According to the CC
Exclusion List, code 250.13 is excluded
from acting as a CC when code 250.83
is the principal diagnosis. As a result,
the HAC logic would not be applicable
to that case. For a detailed discussion on
the CC Exclusion List, we refer readers
to section II.G.9. of this preamble.
Discharges where the HAC logic was
not applicable due to the CC Exclusion
List occurred among the following 4
HAC categories: Pressure Ulcer Stages
III and IV (44 cases), Falls and Trauma
(311 cases), Catheter-Associated UTI (9
cases), Vascular Catheter-Associated
Infection (4 cases), and Manifestations
of Poor Glycemic Control (49 cases).
Further information regarding the
specific number of cases that were
excluded for each HAC-associated
secondary diagnosis code within each of
the above mentioned HAC categories is
also available. We refer readers to the
RTI detailed report at the following Web
site: https://www.rti.org/reports/cms/.
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In summary, Chart C below
demonstrates that there were a total of
264,810 discharges with a reported
HAC-associated secondary diagnosis. Of
the total 264,810 discharges, 14,681
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(5.68 percent) discharges included
HACs that were reported with a POA
indicator of ‘‘N’’ or ‘‘U’’ and were
identified as a HAC discharge. Of these
14,681 discharges, the number of
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discharges resulting in MS–DRG
reassignments was 3,416 (22.72
percent).
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An extremely small number of
discharges had multiple HACs reported
during the same stay. In reviewing the
9.3 million claims, RTI found 60 cases
in which two HACs were reported on
the same discharge. Chart D below
summarizes these cases. There were 9
cases in which a Falls and Trauma HAC
was reported in addition to a Pressure
Ulcer Stages III & IV HAC. Twenty of the
cases with two HACs involved Pressure
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Ulcer Stages III & IV and 24 cases
involved Falls or Trauma. Other
multiple HAC cases included 10
Catheter-Associated UTI cases and 6
Vascular Catheter-Associated Infection
cases.
Some of these cases with multiple
HACs reported had both HAC codes
ignored in the MS–DRG assignment. Of
these 60 claims, 15 did not receive
higher payments based on the presence
of one or both of these reported HACs
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and we describe these claims below in
section II.F.3.g.(2) of this preamble.
Depending on the MS–DRG to which
the cases were originally assigned,
ignoring the HAC codes would have led
to a MS–DRG reassignment if there were
no other MCCs or CCs reported, if the
MS–DRG was subdivided into severity
levels, and if the case were not already
in the lowest severity level prior to
ignoring the HAC codes.
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e. RTI Analysis of Circumstances When
Application of HAC Provisions Would
Not Result in MS–DRG Reassignment
for Current HACs
As discussed in section II.F.1. and
illustrated in the diagram in section
II.F.1.c. of this preamble, there are
instances when the MS–DRG
assignment does not change even when
a HAC-associated secondary diagnosis
has a POA indicator of either ‘‘N’’ or ‘‘U.’’
In analyzing our claims data, RTI
identified four main reasons why a MS–
DRG assignment would not change
despite the presence of a HAC. Those
four reasons are described below and
are shown in Chart E below. Column A
shows the frequency of discharges that
included a HAC-associated secondary
diagnosis. Column B shows the
frequency of discharges where the HACassociated secondary diagnosis was
coded as not POA and identified as a
HAC discharge. Column C shows the
frequency of discharges in which the
HAC-associated secondary diagnosis
coded as not POA resulted in a change
in MS–DRG. Columns D, E, F, and G
show the frequency of discharges in
which the HAC-associated secondary
diagnosis coded as not POA did not
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(1) Other MCCs/CCs Prevent
Reassignment
CCs resulted in no change to the MS–
DRG assignment. Chart E shows that a
total of 8,208 cases did not have a
change in the MS–DRG assignment
because of the presence of other
reported MCCs and CCs.
Column D (Other MCC/CCs that
Prevent Reassignment) in Chart E below
indicates the number of cases reporting
a HAC-associated secondary diagnosis
code that did not have a MS–DRG
reassignment because of the presence of
other secondary diagnoses on the MCC
or CC list. A claim that is coded with
a HAC-associated secondary diagnoses
and a POA status of either ‘‘N’’ or ‘‘U’’
may have other secondary diagnoses
that are classified as an MCC or a CC.
In such cases, the presence of these
other MCC and CC diagnoses will still
lead to the assignment of a higher
severity level, despite the fact that the
GROUPER software is disregarding the
ICD–9–CM code that identifies the
selected HAC in making the MS–DRG
assignment for that claim. For example,
there were 96 cases in which the ICD–
9–CM codes for the Foreign Object
Retained After Surgery HAC category
were present, but the presence of other
secondary diagnoses that were MCCs or
(2) Two Severity Levels Where HAC
Does Not Impact MS–DRG Assignment
Column E (Number of MS–DRGs with
Two Severity Levels Where HAC Does
Not Impact MS–DRG Assignment)
shows the frequency with which
discharges with a HAC as a secondary
diagnosis coded as not POA did not
result in an MS–DRG change because
the MS–DRG is subdivided solely by the
presence or absence of an MCC. A claim
with a HAC and a POA indicator of
either ‘‘N’’ or ‘‘U’’ may be assigned to an
MS–DRG that is subdivided solely by
the presence or absence of an MCC. In
such cases, removing a HAC ICD–9–CM
CC code will not lead to further changes
in the MS–DRG assignment. Examples
of these MS–DRG subdivisions are
shown in the footnotes to the chart and
include the following examples:
• MS–DRGs 100 and 101 (Seizures
with or without MCC, respectively)
• MS–DRGs 102 and 103 (Headaches
with or without MCC, respectively)
result in a change in MS–DRG
assignment. Columns D, E, F, and G are
explained in more detail below.
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The codes that fall under the HAC
category of Foreign Object Retained
After Surgery are CCs. If this case were
assigned to a MS–DRG with an MCC
subdivision such as MS–DRGs 100 and
101, the presence of the HAC code
would not affect the MS–DRG severity
level assignment. In other words, if the
Foreign Object Retained After Surgery
code was the only secondary diagnosis
reported, the case would be assigned to
MS–DRG 101. If the POA indicator was
‘‘N,’’ the HAC Foreign Object Retained
After Surgery code would be ignored in
the MS–DRG assignment logic. Despite
the fact that the code was ignored, the
case would still be assigned to the same,
lower severity level MS–DRG.
Therefore, there would be no impact on
the MS–DRG assignment.
Column E in Chart E below shows
that there were a total of 1,793 cases
where the HAC code was ‘‘N’’ or ‘‘U’’ and
the MS–DRG assignment did not change
because the case was already assigned to
the lowest severity level.
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(3) No Severity Levels
Column F (Number of MS–DRGs with
No Severity Levels) shows the frequency
with which discharges with an HAC as
a secondary diagnosis coded as not POA
did not result in an MS–DRG change
because the MS–DRG is not subdivided
by severity levels. A claim with a HAC
and a POA of ‘‘N’’ or ‘‘U’’ may be
assigned to a MS–DRG with no severity
levels. For instance, MS–DRG 311
(Angina Pectoris) has no severity level
subdivisions; this MS–DRG is not split
based on the presence of an MCC or a
CC. If a patient assigned to this MS–
DRG develops a secondary diagnosis
such as a Stage III pressure ulcer after
admission, the condition would be
considered to be a HAC. The code for
the Stage III pressure ulcer would be
ignored in the MS–DRG assignment
because the condition developed after
the admission (the POA indicator was
‘‘N’’). Despite the fact that the ICD–9–CM
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code for the HAC Stage III pressure
ulcer was ignored, the MS–DRG
assignment would not change. The case
would still be assigned to MS–DRG 311.
Chart E below shows that 1,255 cases
reporting a HAC-associated secondary
diagnosis did not undergo a change in
the MS–DRG assignment based on the
fact that the case was assigned to a MS–
DRG that had no severity subdivisions
(that is, the MS–DRG is not subdivided
based on the presence or absence of an
MCC or a CC, rendering the presence of
the HAC irrelevant for payment
purposes).
(4) MS–DRG Logic
Column G (MS–DRG Logic Issues)
shows the frequency with which a HAC
as a secondary diagnosis coded as not
POA did not result in an MS–DRG
change because of MS–DRG assignment
logic. There were nine discharges where
the HAC criteria were met and the HAC
logic was applied, however, due to the
structure of the MS–DRG logic, these
cases did not result in MS–DRG
reassignment. These cases may appear
similar to those discharges where the
MS–DRG is subdivided into two
severity levels by the presence or
absence of an MCC and did not result
in MS–DRG reassignment; however,
these discharges differ slightly in that
the MS–DRG logic also considers
specific procedures that were reported
on the claim. In other words, for certain
MS–DRGs, a procedure may be
considered the equivalent of an MCC or
CC. The presence of the procedure code
dictates the MS–DRG assignment
despite the presence of the HACassociated secondary diagnosis code
with a POA indicator of ‘‘N’’ or ‘‘U’’.
For example, a claim with the
principal diagnosis code of 441.1
(Thoracic aneurysm, ruptured) with
HAC-associated secondary diagnosis
code of 996.64 (Infection and
inflammatory reaction due to indwelling
urinary catheter) and diagnosis code
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599.0 (Urinary tract infection, site not
specified), having POA indicators of
‘‘Y’’, ‘‘N’’, ‘‘N’’, respectively, and
procedure code 39.73 (Endovascular
implantation of graft in thoracic aorta),
results in an assignment to MS–DRG
237 (Major Cardiovascular Procedures
with MCC or Thoracic Aortic Aneurysm
Repair). In this case, the thoracic aortic
aneurysm repair is what dictated the
MS–DRG assignment and the presence
of the HAC-associated secondary
diagnosis code, 996.64, did not affect
the MS–DRG assigned. Other examples
of MS–DRGs that are subdivided in this
same manner are as follows:
• MS–DRG 029 (Spinal procedures
with CC or Spinal Neurostimulators)
• MS–DRG 129 (Major Head & Neck
Procedures with CC/MCC or Major
Device)
• MS–DRG 246 (Percutaneous
Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/
Stents)
Column G in the chart below shows
that four of the nine cases that did not
result in MS–DRG reassignment due to
the MS–DRG logic were in the Catheter
Associated UTI HAC category, three
cases were in the Falls and Trauma HAC
category, one case was in the Foreign
Body Retained After surgery HAC
category, and one case was in the
Vascular Catheter-Associated Infection
HAC Category.
In conclusion, a total of 11,265 cases
(8,208 + 1,793 + 1,255 + 9) did not have
a change in MS–DRG assignment,
regardless of the presence of a HAC. The
reasons described above explain why
only 3,416 cases had a change in MS–
DRG assignment despite the fact that
there were 14,681 HAC cases with a
POA of ‘‘N’’ or ‘‘U.’’ We refer readers to
the RTI detailed report at the Web site:
https://www.rti.org/reports/cms for
further information.
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f. RTI Analysis of Coding Changes for
HAC-Associated Secondary Diagnoses
for Current HACs
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23892), we
discussed RTI’s preliminary analysis on
coding changes using 9 months of
claims data from October 2008 through
June 2009. We noted that, in addition to
studying claims from October 2008
through June 2009, RTI evaluated claims
data from 2 years prior to determine if
there were significant changes in the
number of discharges with a HAC being
reported as a secondary diagnosis. For
this FY 2011 IPPS/LTCH PPS final rule
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analysis, RTI examined an additional 3
months of claims data for each fiscal
year (FY 2007 and FY 2008), and
compared these data to the updated FY
2009 data. Below we summarize the
results of the fiscal year to fiscal year
comparison using 12 months of claims
data.
RTI’s analysis found that there was an
overall increase in the reporting of
secondary diagnoses that are currently
designated as HACs from FY 2007 to FY
2008. The most significant increase was
in the Catheter-Associated UTI HAC
category, with 12,459 discharges being
reported in FY 2007, while 15,408
discharges were reported in FY 2008, an
increase of 2,949 cases. The next
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significant increase was in the Falls and
Trauma HAC category with 151,321
discharges being reported in FY 2007,
while 153,600 discharges were reported
in FY 2008, an increase of 2,279 cases.
However, the analysis also found that
there was an overwhelming decrease in
the HAC-associated secondary
diagnoses reported from FY 2008 to FY
2009. The most significant decrease was
in the Falls and Trauma HAC category,
with 153,600 discharges being reported
in FY 2008, while 125,505 discharges
were reported in FY 2009, a decrease of
28,095 cases. We point out that because
diagnosis codes for the Pressure Ulcer
Stages III & IV HAC did not become
effective until October 1, 2008, there are
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no data available for FY 2007 or FY
2008.
We refer readers to the RTI detailed
report for all the conditions in each
fiscal year (FY 2007 through FY 2009)
as described above at the following Web
site: https://www.rti.org/reports/cms/.
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g. RTI Analysis of Estimated Net
Savings for Current HACs
RTI estimated the net savings
generated by the HAC payment policy
based on 12 months of MedPAR claims
from October 2008 through September
2009.
(1) Net Savings Estimation Methodology
The payment impact of a HAC is the
difference between the IPPS payment
amount under the initially assigned
MS–DRG and the amount under the
reassigned MS–DRG. The amount for
the reassigned MS–DRG appears on the
MedPAR files. To construct this, RTI
modeled the IPPS payments for each
MS–DRG following the same approach
that we use to model the impact of IPPS
annual rule changes. Specifically, RTI
replicated the payment computations
carried out in the IPPS PRICER program
using payment factors for IPPS
providers as identified in various CMS
downloaded files. The files used are as
follows:
• Version 26 of the Medicare Severity
GROUPER software (applicable to
discharges between October 1, 2008 and
September 30, 2009). IPPS MedPAR
claims were run through this file to
obtain needed HAC–POA output
variables.
• The FY 2009 MS–DRG payment
weight file. This file includes the
weights, geometric mean length of stay
(GLOS), and the postacute transfer
payment indicators.
• CMS standardized operating and
capital rates. Tables 1A through 1C, as
downloaded from the Web site at:
https://www.cms.hhs.gov/
AcuteInpatientPPS/IPPS2009, include
the full update and reduced update
amounts, as well as the information
needed to compute the blended amount
for providers located in Puerto Rico.
• The IPPS impact files for FY 2009,
also as downloaded from the Web site
at: https://www.cms.hhs.gov/Acute
InpatientPPS/IPPS2009/. This file
includes the wage index and geographic
adjustment factors, plus the provider
type variable to identify providers
qualifying for alternative hospitalspecific amounts and their respective
HSP rates.
• The IPPS impact files for FY 2010,
as downloaded from the Web site at:
https://www.cms.hhs.gov/AcuteInpatient
PPS/10FR/. This file includes indirect
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medical education (IME) and
disproportionate share (DSH) percent
adjustments that were in effect as of
March 2009.
• CMS historical provider-specific
files (PSF). This includes the indicator
to identify providers subject to the full
or reduced standardized rates and the
applicable operating and capital cost-tocharge ratios. A SAS version was
downloaded from the Web site at:
https://www.cms.hhs.gov/ProspMedicare
FeeSvcPmtGen/04_psf_SAS.asp.
There were 50 providers with
discharges in the final HAC analysis file
that did not appear in the FY 2009
impact file, of which 11 also did not
appear in the FY 2010 impact file. For
these providers, we identified the
geographic CBSA from the historical
PSF and assigned the wage index using
values from Tables 4A and 4C as
downloaded from the Web site at:
https://www.cms.hhs.gov/
AcuteInpatientPPS/IPPS2009/. For
providers in the FY 2010 file but not the
FY 2009 file, we used IME and DSH
rates from FY 2010. The 11 providers in
neither impact file were identified as
non-IME and non-DSH providers in the
historical PSF file.
The steps for estimating the HAC
payment impact are as follows:
Step 1: Rerun the Medicare Severity
Grouper on all records in the analysis
file. This is needed to obtain
information on actual HAC-related MS–
DRG reassignments in the file, and to
identify the CCs and MCCs that
contribute to each MS–DRG assignment.
Step 2: Model the base payment and
outlier amounts associated with the
initial MS–DRG if the HAC were
excluded using the computations laid
out in the CMS file ‘‘Outlier Example FY
2007 new.xls,’’ as downloaded from the
Web site at: https://www.cms.hhs.gov/
AcuteInpatientPPS/04_outlier.asp#
TopOfPage, and modified to
accommodate FY 2009 factors.
Step 3: Model the base payment and
outlier amounts associated with the
final MS–DRG where the HAC was
excluded using the computations laid
out in the CMS file ‘‘Outlier Example FY
2007 new.xls,’’ as downloaded from the
Web site at: https://www.cms.hhs.gov/
AcuteInpatientPPS/04_outlier.asp#
TopOfPage and modified to
accommodate FY 2009 factors.
Step 4: Compute MS–DRG base
savings as the difference between the
nonoutlier payments for the initial and
final MS–DRGs. Compute outlier
amounts as the difference in outlier
amounts due under the initial and final
reassigned MS–DRG. Compute net
savings due to HAC reassignment as the
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sum of base savings plus outlier
amounts.
Step 5: Adjust the model to
incorporate short-stay transfer payment
adjustments.
Step 6: Adjust the model to
incorporate hospital-specific payments
for qualifying rural providers receiving
the hospital-specific payment rates.
It is important to mention that using
the methods described above, the MS–
DRG and outlier payments amounts that
are modeled for the final assigned MS–
DRG do not always match the DRG price
and outlier amounts that appear in the
MedPAR record. There are several
reasons for this. Some discrepancies are
caused by using single wage index, IME
and DSH factors for the full period
covered by the discharges, when in
practice these payment factors can be
adjusted for individual providers during
the course of the fiscal year. In addition,
RTI’s approach disregards any Part A
coinsurance amounts owed by
individual beneficiaries with greater
than sixty covered days in a spell of
illness. Five percent of all HAC
discharges showed at least some Part A
coinsurance amount due from the
beneficiary, although less than two
percent of reassigned discharges (55
cases in the analysis file) showed Part
A coinsurance amounts due. Any Part A
coinsurance payments would reduce the
actual savings incurred by the Medicare
program.
There are also a number of less
common special IPPS payment
situations that are not factored into
RTI’s modeling. These could include
new technology add-on payments,
payments for blood clotting factors,
reductions for replacement medical
devices, adjustments to the capital rate
for new providers, and adjustments to
the capital rate for certain classes of
providers who are subject to a minimum
payment level relative to capital cost.
(2) Net Savings Estimate
Chart F below summarizes the
estimated net savings of current HACs
based on MedPAR claims from October
2008 through September 2009, based on
the methodology described above.
Column A shows the number of
discharges where a MS–DRG
reassignment for each HAC category
occurred. For example, there were 12
discharges with an Air Embolism that
resulted in an actual MS–DRG
reassignment. Column B shows the total
net savings caused by MS–DRG
reassignments for each HAC category.
Continuing with the example of Air
Embolism, the chart shows that the 12
discharges with an MS–DRG
reassignment resulted in a total net
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HAC category, the net savings per
discharge is $12,366.
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savings of $148,394. Column C shows
the net savings per discharge for each
HAC category. For the Air Embolism
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As shown in Chart F above, the total
net savings calculated for the 12-month
period from October 2008 through
September 2009 was roughly $18.78
million. The three HACs with the largest
number of discharges resulting in MS–
DRG reassignment, Falls and Trauma,
Orthopedic PE/DVT, and Pressure Ulcer
Stages III & IV, generated $17.17 million
of net savings for the 12 month period.
Estimated net savings for the 12-month
period associated with the Falls and
Trauma category were $8.09 million.
Estimated net savings associated with
Orthopedic PE/DVT for the 12-month
period were $6.92 million. Estimated
net savings for the 12-month period
associated with Pressure Ulcer Stages III
& IV were $2.16 million.
As we discuss in section II.F.1.b. of
this preamble, implementation of this
policy is part of an array of Medicare
VBP tools that we are using to promote
increased quality and efficiency of care.
We again point out that a decrease over
time in the number of discharges where
these conditions are not POA is a
desired consequence. We recognize that
estimated net savings should likely
decline as the number of such
discharges decline. However, we believe
that the sentinel effect resulting from
CMS identifying these conditions is
critical. (We refer readers to section
IV.A. of this preamble for a discussion
of the inclusion of the incidence of
these conditions in the RHQDAPU
program.) It is our intention to continue
to monitor trends associated with the
frequency of these HACs and the
estimated net payment impact through
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The mean net savings per discharge
calculated for the 12-month period from
October 2008 through September 2009
was roughly $5,522. The HAC categories
of Air Embolism; SSI, Mediastinitis,
Following Coronary Artery Bypass Graft
(CABG); and SSI Following Certain
Orthopedic Procedures had the highest
net savings per discharge, but
represented a small proportion of total
net savings because the number of
discharges that resulted in MS–DRG
reassignment for these HACs was low.
With the exception of Blood
Incompatibility, where no savings
occurred because no discharges resulted
in MS–DRG reassignment, SSI
Following Bariatric Surgery for Obesity
and Catheter-Associated UTI had the
lowest net savings per discharge.
We refer readers to the RTI detailed
report available at the following Web
site: https://www.rti.org/reports/cms/.
As mentioned previously, an
extremely small number of cases in the
12-month period of FY 2009 analyzed
by RTI had multiple HACs during the
same stay. In reviewing our 9.3 million
claims, RTI found 60 cases where two
HACs were reported on the same
admission as noted in section II.F.3. d.
of this preamble. Of these 60 claims, 15
resulted in MS–DRG reassignment.
Chart G below summarizes these cases.
There were 15 cases that had two HACs
not POA that resulted in an MS–DRG
reassignment. Of these, 5 discharges
involved Pressure Ulcer Stages III & IV
and Falls and Trauma and 4 discharges
involved Orthopedic PE/DVT and Falls
and Trauma.
RTI’s program evaluation and possibly
beyond.
28,844 reported a POA indicator of ‘‘N’’;
(2) Staphylococcus aureus Septicemia,
with a total of 22,433 secondary
diagnoses codes being reported for that
condition, with 5,004 of those reporting
a POA indicator of ‘‘N’’; and (3)
Iatrogenic Pneumothorax, with a total of
20,673 secondary diagnoses codes being
reported for that condition, with 17,602
of those reporting a POA indicator of
‘‘N.’’ As these three conditions had the
most significant impact for reporting a
POA indicator of ‘‘N,’’ it is reasonable to
believe that these same three conditions
would have the greatest number of
potential MS–DRG reassignments. The
frequency of discharges for the
previously considered HACs that could
lead to potential changes in MS–DRG
assignment is discussed in the next
section. We take this opportunity to
remind readers that because more than
h. Previously Considered Candidate
HACs—RTI Analysis of Frequency of
Discharges and POA Indicator Reporting
RTI evaluated the frequency of
conditions previously considered, but
not adopted as HACs in prior
rulemaking, that were reported as
secondary diagnoses (across all 9.3
million discharges) as well as the POA
indicator assignments for these
conditions. Chart H below indicates that
the three previously considered
candidate conditions most frequently
reported as a secondary diagnosis were:
(1) Clostridium Difficile-Associated
Disease (CDAD), which demonstrated
the highest frequency, with a total of
85,096 secondary diagnoses codes being
reported for that condition, of which
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candidate condition reported as a
secondary diagnosis.
discharges, 29,296 discharges (34.43
percent) had a POA indicator of ‘‘N’’ or
‘‘U.’’ Therefore, there were a total of
29,296 discharges that could potentially
have had an MS–DRG reassignment.
Column E shows the number of
discharges where an actual MS–DRG
reassignment could have occurred; the
number of discharges with CDAD that
could have resulted in actual MS–DRG
reassignments is 896 (3.06 percent).
Thus, while there were 29,296
discharges with CDAD reported with a
POA indicator of ‘‘N’’ or ‘‘U’’ that could
potentially have had an MS–DRG
reassignment, the result was 896 (3.06
percent) potential MS–DRG
reassignments. As discussed above,
there are a number of reasons why a
condition reported with a POA indicator
of ‘‘N’’ or ‘‘U’’ would not result in a MS–
DRG reassignment.
In summary, Chart I below
demonstrates there were a total of
203,844 discharges with a previously
considered candidate HAC reported as a
secondary diagnosis. Of those, 57,902
discharges were reported with a POA
indicator of ‘‘N’’ or ‘‘U.’’ The total
number of discharges that could have
resulted in MS–DRG reassignments is
3,527.
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frequency of these diagnosis codes may
be more than the actual number of
discharges with a previously considered
In Chart I below, Column A shows the
number of discharges for each
previously considered candidate HAC
category when the condition was
reported as a secondary diagnosis. For
example, there were 85,096 discharges
that reported CDAD as a secondary
diagnosis. Previously considered
candidate HACs reported with a POA
indicator of ‘‘N’’ or ‘‘U’’ may cause MS–
DRG reassignment (which would result
in reduced payment to the facility).
Column C shows the discharges for each
previously considered candidate HAC
reported with a POA indicator of ‘‘N’’ or
‘‘U.’’ Continuing with the example of
CDAD, Chart I shows that, of the 85,096
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i. Current and Previously Considered
Candidate HACs—RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes
an updated report that provides
references for all evidence-based
guidelines available for each of the
selected and previously considered
candidate HACs that provide
recommendations for the prevention of
the corresponding conditions.
Guidelines were primarily identified
using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC,
along with relevant professional
societies. Guidelines published in the
United States were used, if available. In
the absence of U.S. guidelines for a
specific condition, international
guidelines were included.
Evidence-based guidelines that
included specific recommendations for
the prevention of the condition were
identified for each of the 10 selected
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conditions. In addition, evidence-based
guidelines were also found for the
previously considered candidate
conditions.
Comment: Several commenters stated
that CMS should not pay for HACs only
when evidence-based guidelines
indicate that the occurrence of an event
can be reduced to zero, or near zero. The
commenters stated that some patients,
particularly high-risk, co-morbid
individuals, may still develop
conditions on the HAC list even though
protocols have been strictly followed.
Response: We thank the commenters
for this comment. The statute requires
that CMS only choose conditions to be
selected HACs if they could
‘‘reasonably’’ be prevented through the
application of evidence-based
guidelines. We noted in the FY 2008
IPPS final rule that we only selected
those conditions where, if hospital
personnel are engaging in good medical
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practice, the additional costs of the
hospital-acquired condition will, in
most cases, be avoided (72 FR 47201).
RTI prepared a final report to
summarize its findings regarding
evidence-based guidelines, which can
be found on the Web site at: https://
www.rti.org/reports/cms.
j. Final Policy Regarding Current HACs
and Previously Considered Candidate
HACs
We believe that the updated RTI
analysis summarized above does not
provide additional information that
would require us to change our previous
determinations regarding either current
HACs (as described in section II.F.2. of
this preamble) or previously considered
candidate HACs in the FY 2008 IPPS
final rule with comment period and FY
2009 IPPS final rule (72 FR 47200
through 47218 and 73 FR 48471 through
48491, respectively). Accordingly, in the
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FY 2011 IPPS/LTCH PPS proposed rule,
we did not propose to add or remove
categories of HACs, although we
proposed to revise the Blood
Incompatibility HAC category as
discussed and finalized in section II.F.2.
of this preamble. We also note that in
section II.F.3.b. of this preamble, we
discuss our current policy regarding the
treatment of the ‘‘U’’ POA indicator.
However, we continue to encourage
public dialogue about refinements to the
HAC list.
We refer readers to section II.F.6. of
the FY 2008 IPPS final rule with
comment period (72 FR 47202 through
47218) and to section II.F.7. of the FY
2009 IPPS final rule (73 FR 48474
through 48491) for detailed discussion
supporting our determination regarding
each of these conditions.
G. Changes to Specific MS–DRG
Classifications
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23898 through
23910), we invited public comment on
each of the MS–DRG classification
proposed changes described below, as
well as our proposals to maintain
certain existing MS–DRG classifications,
which are also discussed below. In some
cases, we proposed changes to the MS–
DRG classifications based on our
analysis of claims data. In other cases,
we proposed to maintain the existing
MS–DRG classification based on our
analysis of claims data. Below, we also
summarize the public comments that we
received, if any, on our proposals,
present our responses to these
comments, and state our final policies.
1. Pre-Major Diagnostic Categories
(MDCs)
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a. Postsurgical Hypoinsulinemia (MS–
DRG 008 (Simultaneous Pancreas/
Kidney Transplant))
Diabetes mellitus is a pancreatic
disorder in which the pancreas fails to
produce sufficient insulin, or in which
the body cannot process insulin. Many
patients with diabetes will eventually
experience complications of the disease,
including poor kidney function. When
these patients show signs of advanced
kidney disease, they are usually referred
for transplant evaluation. Currently,
many doctors recommend that
individuals with diabetes being
evaluated for kidney transplantation
also be considered for pancreas
transplantation. A successful pancreas
transplant may prevent, stop, or reverse
the complications of diabetes.
Occasionally, secondary diabetes may
be surgically induced following a
pancreas transplant. This condition
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would be identified by using ICD–9–CM
diagnosis code 251.3 (Postsurgical
hypoinsulinemia). However, currently
the list of principal diagnosis codes
assigned to surgical MS–DRG 008
(Simultaneous Pancreas/Kidney
Transplant) does not include diagnosis
code 251.3. Therefore, when diagnosis
code 251.3 is assigned to a case as a
principal diagnosis, the case is not
assigned to MS–DRG 008. Instead, these
cases are grouped to MS–DRG 652
(Kidney Transplant) under MDC 11
(Diseases and Disorders of the Kidney
and Urinary Tract). The use of diagnosis
code 251.3 as a principal diagnosis
without a secondary diagnosis of
diabetes mellitus and with a procedure
code for pancreas transplant only during
that admission results in assignment of
the case to MS–DRG 628, 629, or 630
(Other Endocrine, Nutritional &
Metabolic Operating Room Procedures
with MCC, with CC, and without CC/
MCC, respectively). These MS–DRGs are
assigned to MDC 10 (Endocrine,
Nutritional and Metabolic Diseases and
Disorders).
As we stated in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23898),
we believe that the exclusion of
diagnosis code 251.3 from the list of
principal diagnosis codes assigned to
surgical MS–DRG 008 is an error of
omission. Therefore, in that proposed
rule, we proposed to add diagnosis code
251.3 to the list of principal or
secondary diagnosis codes assigned to
MS–DRG 008. As a conforming change,
we also proposed to add diagnosis code
251.3 to the list of principal or
secondary diagnosis codes assigned to
MS–DRG 010 (Pancreas Transplant).
Comment: Commenters concurred
with CMS’ proposal to add diagnosis
code 251.3 to the list of principal or
secondary diagnosis codes assigned to
MS–DRG 008. In addition, the
commenters concurred with the
proposal to add diagnosis code 251.3 to
the list of principal or secondary
diagnosis codes assigned to MS–DRG
010.
Response: We appreciate the support
for our proposals.
We are adopting as final without
modification our proposals to add
diagnosis code 251.3 to the list of
acceptable principal diagnoses in MS–
DRG 008 and, as a conforming change,
to add diagnosis code 251.3 to the list
of acceptable principal or secondary
diagnoses in MS–DRG 010.
b. Bone Marrow Transplants
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23898),
we received two requests to review
whether cost differences between an
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autologous bone marrow transplant
(where the patient’s own bone marrow
or stem cells are used) and an allogeneic
bone marrow transplant (where bone
marrow or stem cells come from either
a related or unrelated donor) necessitate
the creation of separate MS–DRGs to
more appropriately account for the
clinical nature of the services being
rendered as well as the costs. One of the
requestors stated that there are dramatic
differences in the costs between the two
types of transplants where allogeneic
cases are significantly more costly.
Bone marrow transplantation and
peripheral blood stem cell
transplantation are used in the
treatment of certain cancers and bone
marrow diseases. These procedures
restore stem cells that have been
destroyed by high doses of
chemotherapy and/or radiation
treatment. Currently, all bone marrow
transplants are assigned to MS–DRG 009
(Bone Marrow Transplant).
For the FY 2011 IPPS/LTCH PPS
proposed rule, we performed an
analysis of the FY 2009 MedPAR data
and found 1,664 total cases assigned to
MS–DRG 009 with average costs of
approximately $43,877 and an average
length of stay of approximately 21 days.
Of these MS–DRG 009 cases, 395 of
them were allogeneic bone marrow
transplant cases reported with one of
the following ICD–9–CM procedure
codes: 41.02 (Allogeneic bone marrow
transplant with purging); 41.03
(Allogeneic bone marrow transplant
without purging); 41.05 (Allogeneic
hematopoietic stem cell transplant
without purging); 41.06 (Cord blood
stem cell transplant); or 41.08
(Allogeneic hematopoietic stem cell
transplant). The average costs of these
allogeneic cases, approximately
$64,845, were higher than the overall
average costs of all cases in MS–DRG
009, approximately $43,877. The
average length of stay for the allogeneic
cases, approximately 28 days, was
slightly higher than the average length
of stay for all cases assigned to MS–DRG
009, approximately 21 days.
We found 1,269 autologous bone
marrow transplant cases reported with
one of the following ICD–9–CM
procedure codes: 41.00 (Bone marrow
transplant, not otherwise specified);
41.01 (Autologous bone marrow
transplant without purging); 41.04
(Autologous hematopoietic stem cell
transplant without purging); 41.07
(Autologous hematopoietic stem cell
transplant with purging); or 41.09
(Autologous bone marrow transplant
with purging). The average costs of
these cases, approximately $37,350, was
less than the overall average costs of all
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cases in MS–DRG 009 and the average
costs associated with the allogeneic
bone marrow transplant cases. The
average length of stay, of approximately
19 days, was less than the average
lengths of stay for all the cases assigned
to MS–DRG 009 and for the allogeneic
bone marrow transplant cases. We
included in our analysis of the
autologous bone marrow transplants
cases, 5 cases that were reported with
procedure code 41.00 (Bone marrow
transplant, not otherwise specified).
These 5 cases had average costs of
approximately $41,084 and an average
length of stay of approximately 12 days,
which was similar to the other
autologous bone marrow transplant
cases.
The table below illustrates our
findings:
Number of
cases
MS–DRG
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009—All cases .............................................................................................................................
009—Cases with allogeneic bone marrow transplants ...............................................................
009—Cases with autologous bone marrow transplants ..............................................................
As a result of our analysis, the data
support the requestor’s suggestion that
there are cost differences associated
with the autologous bone marrow
transplants and allogeneic bone marrow
transplants and warrants a separate MS–
DRG for these procedures. Therefore, in
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23898 and 23899), we
proposed to delete MS–DRG 009 and
create two new MS–DRGs: MS–DRG 014
(Allogeneic Bone Marrow Transplant)
and MS–DRG 015 (Autologous Bone
Marrow Transplant). We proposed that
proposed MS–DRG 014 would include
cases reported with one of the following
ICD–9–CM procedure codes:
• 41.02, Allogeneic bone marrow
transplant with purging
• 41.03, Allogeneic bone marrow
transplant without purging
• 41.05, Allogeneic hematopoietic
stem cell transplant without purging
• 41.06, Cord blood stem cell
transplant
• 41.08, Allogeneic hematopoietic
stem cell transplant
We proposed that proposed MS–DRG
015 would include cases reported with
one of the following ICD–9–CM
procedure codes:
• 41.00 (Bone marrow transplant, not
otherwise specified)
• 41.01 (Autologous bone marrow
transplant without purging)
• 41.04 (Autologous hematopoietic
stem cell transplant without purging)
• 41.07 (Autologous hematopoietic
stem cell transplant with purging)
• 41.09 (Autologous bone marrow
transplant with purging)
Comment: Several commenters
supported our proposed changes and
stated that these proposed MS–DRGs
more precisely recognize the substantial
differences in clinical complexity and
costs associated with allogeneic and
autologous bone marrow transplants,
allowing for more appropriate hospital
reimbursement.
Response: We appreciate the support
of the commenters.
Comment: Two commenters who
supported the proposed reclassification
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of the proposed bone marrow transplant
MS–DRGs requested further refinement
to account for severity of illness. The
commenters suggested a three-way split
for each proposed MS–DRG: With MCC,
with CC, and without MCC or CC. A few
commenters stated that the clinical and
cost differences between unrelated and
related allogeneic transplants
necessitate further reclassification of
proposed MS–DRG 014. However, one
of the commenters pointed out that
there were no ICD–9–CM codes to
classify allogeneic transplant cases by
cell source.
Response: As we outlined in our FY
2008 IPPS/LTCH PPS final rule with
comment period published in the
Federal Register on August 22, 2007 (72
FR 47169), in designating an MS–DRG
as one that would be subdivided into
subgroups based on the presence of a CC
or an MCC, we developed a set of
criteria to facilitate our decision-making
process. In order to warrant creation of
a CC or an MCC subgroup within a base
MS–DRG, the subgroup must meet all of
the following five criteria:
• A reduction in variance of charges
of at least 3 percent.
• At least 5 percent of the patients in
the MS–DRG fall within the CC or MCC
subgroup.
• At least 500 cases are in the CC or
MCC subgroup.
• There is at least a 20-percent
difference in average charges between
subgroups.
• There is a $4,000 difference in
average charges between subgroups.
We did not further subdivide
proposed MS–DRG 014 and MS–DRG
015 into severity levels as the
commenters suggested because the
proposed MS–DRGs did not meet our
criteria for subdivision. With regard to
the commenter who stated that there
were no ICD–9–CM codes to classify
allogeneic transplant cases by cell
source, we note that, contrary to the
commenter’s statement about the lack of
being able to report the donor source,
there are three ICD–9–CM procedure
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1,664
395
1,269
Average
length of stay
21.22
27.7
19.1
Average cost
$43,877
64,845
37,350
codes that identify the donor source of
the transplant: 00.91 (Transplant from
live related donor); 00.92 (Transplant
from live non-related donor); and 00.93
(Transplant from cadaver). We refer the
commenter to section II.G.7. of this
preamble for further information if the
commenter is interested in submitting
suggestions on coding issues.
After consideration of the public
comments we received, we are
finalizing our proposal to delete MS–
DRG 009, and to create two new MS–
DRGs: MS–DRG 014 (Allogeneic Bone
Marrow Transplant) and MS–DRG 015
(Autologous Bone Marrow Transplant).
New MS–DRG 014 will include cases
reported with one of the following ICD–
9–CM procedure codes: 41.02; 41.03;
41.05; 41.06; or 41.08.
New MS–DRG 015 will include cases
reported with one of the following ICD–
9–CM procedure codes: 41.00; 41.01;
41.04; 41.07; or 41.09.
2. MDC 1 (Nervous System):
Administration of Tissue Plasminogen
Activator (tPA) (rtPA)
During the comment period for the FY
2010 IPPS/RY 2010 LTCH PPS proposed
rule, we received a public comment that
had not been the subject of a proposal
in that proposed rule. The commenter
had requested that CMS conduct an
analysis of diagnosis code V45.88
(Status post administration of tPA (rtPA)
in a different facility within the last 24
hours prior to admission to current
facility) under MDC 1 (Diseases and
Disorders of the Nervous System).
Diagnosis code V45.88 was created for
use beginning October 1, 2008, to
identify patients who are given tissue
plasminogen activator (tPA) at one
institution, then transferred and
admitted to a comprehensive stroke
center for further care. This situation is
referred to as the ‘‘drip-and-ship’’ issue
that was discussed at detail in the FY
2009 IPPS final rule (73 FR 48493).
According to the commenter, the
concern at the receiving facilities is that
the costs associated with [caring for]
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more complex stroke patients that
receive tPA are much higher than the
cost of the drug, presumably because
stroke patients initially needing tPA
have more complicated strokes and
outcomes. However, because these
patients do not receive the tPA at the
second or transfer hospital, the
receiving hospital will not be assigned
to one of the higher weighted tPA stroke
MS–DRGs when it admits these patients
whose care requires the use of intensive
resources. The MS–DRGs that currently
include codes for the use of tPA are: 061
(Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC); 062
(Acute Ischemic Stroke with Use of
Thrombolytic Agent with CC); and 063
(Acute Ischemic Stroke with Use of
Thrombolytic Agent without CC/MCC).
These MS–DRGs have higher relative
weights in the hierarchy than the next
six MS–DRGs relating to brain injury.
The commenter requested an analysis of
the use of diagnosis code V45.88
reflected in the MedPAR data for FY
2009 and FY 2010. The commenter
believed that the data would show that
the use of this code could potentially
result in a new MS–DRG or a new set
of MS–DRGs in FY 2011.
In addressing this public comment in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43798), we noted that
the comment was out of scope for the
FY 2010 proposed rule and reiterated
that the deadline for requesting data
review and potential MS–DRG changes
had been the previous December. In the
FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23899), we indicated that we
were then able to address the
commenter’s concern because we had
been able to conduct an analysis of
MedPAR claims data for this diagnosis
code for that proposed rule.
For the FY 2011 proposed rule, we
undertook an analysis of MedPAR
claims data for FY 2009. Our analysis
reflected the data study specifically
asked for by the requestor, that is, a
review of the analysis of the presence or
absence of diagnosis code V45.88. For
our analysis in the proposed rule, we
did not include claims for patient cases
assigned to MS–DRGs 061, 062, or 063.
Patients whose cases were assigned to
these MS–DRGs would have been given
the tPA at the initial hospital, had they
been admitted there, with assignment of
procedure code 99.10 (Injection or
infusion of thrombolytic agent), prior to
their transfer to a comprehensive stroke
center. The tPA should not have been
given at the receiving hospital if it had
already been administered at the
transferring hospital; therefore,
inclusion of procedure code 99.10 on
the receiving hospital’s claims would
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constitute erroneous coding. Likewise,
we did not include MS–DRGs 067 and
068 (Nonspecific CVA & Precerebral
Occlusion without Infarction with MCC,
and without MCC, respectively), or MS–
DRG 069 (Transient Ischemia). We
believe that claims assigned to MS–
DRGs 067, 068, and 069 were unlikely
to contain cases in which tPA had been
administered.
Our data analysis included MS–DRGs
064, 065, and 066 (Intracranial
Hemorrhage or Cerebral Infarction with
MCC, with CC, and without CC/MCC,
respectively) because claims involving
diagnosis code V45.88 would be
properly reported in the data for these
MS–DRGs for FY 2009. This analysis
can be viewed in the FY 2011 IPPS/
LTCH PPS proposed rule published in
the Federal Register on May 4, 2010 (75
FR 23899 through 23900). Based on our
review of the data for all cases in MS–
DRGs 064, 064, and 066, compared to
the subset of cases containing the
V45.88 secondary diagnosis code, we
concluded that the movement of cases
with diagnosis code V45.88 as a
secondary diagnosis from MS–DRGs
064, 065, and 066 into MS–DRGs 061,
062, and 063 was not warranted.
We determined that the differences in
the average lengths of stay and the
average costs were too small to warrant
an assignment to the higher weighted
MS–DRGs. Likewise, neither the lengths
of stay nor the average costs were
deemed substantial enough to justify the
creation of an additional MS–DRG for
transferred tPA cases, or to create
separate MS–DRGs that would mirror
the MCC, CC or without CC/MCC
severity levels.
Therefore, for FY 2011, we did not
propose any change to MS–DRGs 061,
062, 063, 064, 065, or 066, or any
change involving the assignment of
diagnosis code V45.88.
Comment: One commenter agreed
with CMS’ proposal to not make any
changes to this group of MS–DRGs. The
commenter also suggested revisiting this
topic and reviewing the data after CMS
begins capturing 25 diagnosis codes and
25 procedure codes in future claims
data. Another commenter suggested that
diagnosis code V45.88 may be
underreported, or, even if reported, may
appear in a position [on the claim] that
is lower than the nine diagnosis codes
currently processed by Medicare.
Response: The HIPAA ASC X12
Technical Reports Type 3, Version
005010 (Version 5010) standards system
update is discussed at length elsewhere
in this preamble. Currently, CMS’
claims processing system recognizes up
to nine diagnosis codes and up to six
procedure codes for MS–DRG
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50103
determination. The ability to process up
to 16 additional diagnosis codes and up
to 19 additional procedure codes will
begin on January 1, 2011, according to
the Version 5010 update. We will be
interested to see the difference in our
MedPAR data that results from the
additional diagnosis and procedure
codes, and we will continue to follow
the tPA, ‘‘drip-and-ship,’’ and diagnosis
code V45.88 topic in our annual
analysis.
Comment: One commenter requested
that CMS continue to monitor the costs
and lengths of stays for these patients
identified by diagnosis code V45.88 in
order to determine whether, with
improved coding compliance and
accurate cost reporting, there will be
any change to the initial findings such
that MS–DRG assignments for the care
of these patients need to be changed.
Response: We review MS–DRG
assignments annually and will continue
to monitor this category of patients in
the future.
Comment: One commenter believed
that the CMS data reported in the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 23899 through 23900) reflects that
the V45.88 diagnosis code is being
underused and that the numbers do not
truly represent the much more common
occurrence of stroke centers receiving
stroke patients who already had tPA
administered. With this underuse in
mind, the commenter requested that
CMS issue a transmittal or MLN Matters
article that would inform physicians
and coders alike about the existence of
the code and simultaneously educate
them on the proper use of the code.
Response: While CMS is responsible
for both changes to the ICD–9–CM
procedure coding system through the
ICD–9–CM Coordination and
Maintenance Committee and the
incorporation of the resulting diagnostic
and procedure coding changes in CMS’
initiatives, we do not provide coding
advice. CMS looks to our partners in the
industry to fulfill this responsibility,
specifically through the AHA in their
publication Coding Clinic for ICD–9–CM
and through the AHIMA in their coding
training programs.
In addition, we suggest that this
commenter encourage its societies to
educate their members through their
newsletter or through coding and
documentation presentations at society
meetings.
Comment: One commenter was
concerned that the data analysis
described above and displayed in the
proposed rule did not properly compare
certain patient populations. The
commenter suggested that patients with
ICD–9–CM codes associated with
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ischemic stroke that have an
accompanying V-code be compared to
those ischemic stroke patients with the
ICD–9–CM codes who were not treated
with tPA. The commenter suggested
limiting the MS–DRGs to 064, 065, and
066, as well as 067 and 068, and further
noted that the V-code should only be
used for ischemic stroke patients who
have received tPA at another hospital.
The commenter believed that ischemic
stroke patients who have not received
tPA at another hospital should not be
included in the V-code count. The
commenter also recommended that
cases in which hemorrhage is the cause
of the stroke should not be included
with cases of ischemic stroke since costs
associated with these diseases are often
different from each other. The
commenter indicated that a more
refined analysis of the data would show
that these cases should be split into
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separate MS–DRGs, which would allow
the cost differences to become apparent.
Response: With regard to use of the
V-code for ischemic stroke patients who
have received tPA at another hospital,
we point out that the correct use of
V45.88 was created for that category of
patients. Correct coding practice as well
as the code title itself of V45.88 (Status
post administration of tPA (rtPA) in a
different facility within the last 24 hours
prior to admission to current facility)
precludes inclusion of this code by the
sending hospital.
With regard to the comment that
ischemic stroke patients who have not
received tPA at another hospital should
not be included in the V-code count, we
point out that these patients had not
been included in the analysis published
in the proposed rule; neither were they
included in the analysis presented in
this final rule. They would not appear
in the data as having received tPA at
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another facility. Instead, if they had
received tPA at the second or receiving
hospital, that hospital would have
coded those cases with ICD–9–CM
procedure code 99.10 (Injection or
infusion of thrombolytic agent), and the
cases would have been assigned to MS–
DRGs 061, 062, and 063 (Acute Ischemic
Stroke with use of Thrombolytic Agent
with MCC, with CC, or without CC/
MCC, respectively).
In our original analysis for the
proposed rule, we believe that we did
address all of the commenter’s concerns.
However, for this final rule, in response
to the commenter’s request, we have
arrayed the data from the original
analysis in the following table in a
manner that is divided into more
categories. We also have included MS–
DRGs 067 and 068 in the comparison as
well, per the commenter’s request.
BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C
The analysis of MS–DRGs 067 and
068 above does not include a
breakdown for cases of hemorrhage.
That is because the principal diagnoses
contained in these two MS–DRGs
describe occlusion without infarct, by
arterial site, except for diagnosis code
436 (Acute but ill-defined,
cerebrovascular disease). The
commenter believes diagnosis code 436
is often interpreted to be a ‘‘stroke, not
otherwise specified’’ code and has been
used to describe stroke events without
a clear etiology, and wanted the analysis
included for that reason.
When CMS created the MS–DRGs for
use beginning October 1, 2007 (FY
2008), our purpose was, and remains, to
accurately stratify groups of Medicare
patients with varying levels of severity.
Two of our major goals were to create
DRGs that would more accurately reflect
the severity of the cases assigned to
them and to create groups that would
have sufficient volume so that
meaningful and stable payment weights
could be developed. In designating an
MS–DRG as one that could be
subdivided into subgroups based on the
presence of a CC or MCC, we developed
a set of five criteria to facilitate our
decision making process. The subgroup
must meet all of the five criteria in order
for division into CC or MCC splits to be
considered. The entire discussion
surrounding this process can be found
in the FY 2008 IPPS/LTCH PPS final
rule with comment period (72 FR
47169).
Even with additional review of the
data, we are unable to justify either
moving the ‘‘drip-and-ship’’ cases to
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higher weighted MS–DRGs or to
consider creation of unique MS–DRGs
for these cases. There is a paucity of
data to substantiate such a change,
whether due to underreporting of
diagnosis code V45.88, or whether the
tPA administered in another hospital
was not documented in the receiving
hospital’s records, or whether the code
was reported to CMS but was further
down the list than the nine diagnosis
codes considered for MS–DRG
assignment. The differences in the
average lengths of stay and the average
costs represented in the above table are
too small to warrant an assignment to
the higher weighted MS–DRGs, and the
differences in the length of stay and
costs are not substantial enough to
justify the creation of additional MS–
DRGs. Therefore, for FY 2011, we are
not making any changes to MS–DRGs
061, 062, 063, 064, 065, 066, 067, and
068; nor are we making changes to the
MS–DRG assignment of diagnosis code
V45.88.
We will continue to monitor these
MS–DRGs and diagnosis code V45.88 in
upcoming annual reviews of the IPPS.
3. MDC 5 (Diseases and Disorders of the
Circulatory System): Intraoperative
Fluorescence Vascular Angiography
(IFVA) and X-Ray Coronary
Angiography in Coronary Artery Bypass
Graft Surgery
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43785 through
43787), we discussed a request we
received to reassign cases reporting the
use of intraoperative fluorescence
vascular angiography (IFVA) with
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coronary artery bypass graft (CABG)
procedures from MS–DRGs 235 and 236
(Coronary Bypass without Cardiac
Catheterization with and without MCC,
respectively) to MS–DRG 233 (Coronary
Bypass with Cardiac Catheterization
with MCC) and MS–DRG 234 (Coronary
Bypass with Cardiac Catheterization
without MCC). Effective October 1,
2007, procedure code 88.59
(Intraoperative fluorescence vascular
angiography (IFVA)) was established to
describe this technology.
In addition, we also discussed
receiving related requests (74 FR 43798
through 43799) that were outside the
scope of issues addressed for MDC 5 in
the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule. There were three
components to these requests. The first
component involved the creation of new
MS–DRGs. One request was to create
four new MS–DRGs that would
differentiate the utilization of resources
between intraoperative angiography and
IFVA when utilized with CABG. A
second request was to create only one
new MS–DRG to separately identify the
use of intraoperative angiography, by
any method, in CABG surgery. The
second component involved reviewing
the ICD–9–CM procedure codes.
Currently, the ICD–9–CM procedure
codes do not distinguish between
preoperative, intraoperative, and
postoperative angiography. Procedure
code 88.59 (Intraoperative fluorescence
vascular angiography (IFVA)) is one
intraoperative angiography technique
that allows visualization of the coronary
vasculature. The third component
involved reassigning cases with
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procedure code 88.59 to the ‘‘Other
Cardiovascular MS–DRGs’’: MS–DRGs
228, 229, and 230 (Other Cardiothoracic
Procedures with MCC, CC, and without
CC/MCC, respectively). We stated our
intent to consider these requests during
the FY 2011 rulemaking process.
After publication of the FY 2010
IPPS/RY 2010 LTCH PPS final rule, we
were contacted by one of the requestors,
the manufacturer of the IFVA
technology. We met with the requestor
in mid-November 2009 to discuss
evaluating the data for IFVA (procedure
code 88.59) again in consideration of a
proposal to create new MS–DRGs and to
discuss a request for a new procedure
code(s).
IFVA technology consists of a mobile
device imaging system with software. It
is used to test cardiac graft patency and
technical adequacy at the time of
coronary artery bypass grafting (CABG).
While this system does not involve
fluoroscopy or cardiac catheterization, it
has been suggested that it yields results
that are similar to those achieved with
selective coronary arteriography and
cardiac catheterization. Intraoperative
coronary angiography provides
information about the quality of the
anastomosis, blood flow through the
graft, distal perfusion, and durability.
For additional information regarding
IFVA technology, we refer readers to the
September 28–29, 2006 ICD–9–CM
Coordination and Maintenance
Committee meeting handout at the
following Web site: https://www.cms.
hhs.gov/ICD9ProviderDiagnosticCodes/
03_meetings.asp#TopOfPage.
a. New MS–DRGs for Intraoperative
Fluorescence Vascular Angiography
(IFVA) With CABG
As stated in the FY 2010 IPPS/LTCH
PPS proposed rule (75 FR 23900), the
manufacturer requested that we create
four new MS–DRGs for CABG to
distinguish CABG surgeries performed
with IFVA and those performed without
IFVA. According to the requestor, these
four new MS–DRGs would correspond
to the existing MS–DRG for CABG but
would also include intraoperative
angiography. The requestor proposed
the following four new MS–DRGs:
MS–DRG XXX (Coronary Bypass with
Cardiac Catheterization with MCC with
Intraoperative Angiography).
MS–DRG XXX (Coronary Bypass with
Cardiac Catheterization without MCC
with Intraoperative Angiography).
MS–DRG XXX (Coronary Bypass
without Cardiac Catheterization with
MCC with Intraoperative Angiography).
MS–DRG XXX (Coronary Bypass
without Cardiac Catheterization without
MCC with Intraoperative Angiography).
For the FY 2011 proposed rule, using
claims data from the FY 2009 MedPAR
file, we examined cases identified by
procedure code 88.59 in MS–DRGs 233,
234, 235, and 236. As shown in the table
below, for both MS–DRGs 235 and 236,
the cases utilizing IFVA technology
(code 88.59) have a shorter length of
stay and lower average costs compared
to all cases in MS–DRGs 235 and 236.
There were a total of 10,281 cases in
MS–DRG 235 with an average length of
stay of 10.61 days and average costs of
$34,639. There were 114 cases
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235—All cases .............................................................................................................................
235—Cases with procedure code 88.59 .....................................................................................
235—Cases without procedure code 88.59 ................................................................................
236—All cases .............................................................................................................................
236—Cases with code procedure 88.59 .....................................................................................
236—Cases without procedure code 88.59 ................................................................................
233—All cases .............................................................................................................................
233—Cases with procedure code 88.59 .....................................................................................
233—Cases without procedure code 88.59 ................................................................................
234—All cases .............................................................................................................................
234—Cases with procedure code 88.59 .....................................................................................
234—Cases without procedure code 88.59 ................................................................................
We stated in the proposed rule that if
the cases identified by procedure code
88.59 were proposed to be reassigned
from MS–DRGs 235 and 236 to MS–
DRGs 233 and 234, they would be
significantly overpaid. In addition, we
indicated that because the cases in MS–
DRGs 235 and 236 did not actually have
a cardiac catheterization performed, a
proposal to reassign cases identified by
procedure code 88.59 would result in
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lowering the relative weights of MS–
DRGs 233 and 234 where a cardiac
catheterization is truly performed.
In summary, in the proposed rule, we
indicated that the data do not support
moving IFVA cases (procedure code
88.59) from MS–DRGs 235 and 236 to
MS–DRGs 233 and 234. Therefore, we
did not propose to make any MS–DRG
modifications for cases reporting
procedure code 88.59 for FY 2011.
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identified by procedure code 88.59 with
an average length of stay of 10.38 days
with average costs of $28,238. In MS–
DRG 236, there were a total of 22,410
cases with an average length of stay of
6.37 days and average costs of $23,402;
and there were 186 cases identified by
procedure code 88.59 with an average
length of stay of 6.54 days and average
costs of $19,305. Similar to the data
reported last year, the data for FY 2009
clearly demonstrate that the IFVA cases
(identified by procedure code 88.59) are
assigned appropriately to MS–DRGs 235
and 236. We also examined cases
identified by procedure code 88.59 in
MS–DRGs 233 and 234. Likewise, in
MS–DRGs 233 and 234 cases identified
by code 88.59 reflect shorter lengths of
stay and lower average costs compared
to the remainder of the cases in those
MS–DRGs; and there were a total of
16,475 cases in MS–DRG 233 with an
average length of stay of 13.47 days and
average costs of $42,662. There were 58
cases identified by procedure code
88.59 with an average length of stay of
12.12 days and average costs of $35,940.
In MS–DRG 234, there were a total of
23,478 cases with an average length of
stay of 8.61 days and average costs of
$29,615; and there were 67 cases
identified by procedure code 88.59 with
an average length of stay of 8.85 days
and average costs of $25,379. The data
clearly demonstrate the IFVA cases
(identified by procedure code 88.59) are
appropriately assigned to MS–DRGs 233
and 234.
Number of
cases
MS–DRG
Frm 00067
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50107
10,281
114
10,167
22,410
186
22,224
16,475
58
16,417
23,478
67
23,411
Average
length of stay
10.61
10.38
10.62
6.37
6.54
6.37
13.47
12.12
13.47
8.61
8.85
8.61
Average cost
$34,639
28,238
34,711
23,402
19,305
23,436
42,662
35,940
42,686
29,615
25,379
29,627
Comment: Several commenters agreed
with CMS’ proposal to not make any
MS–DRG modifications in FY 2011 for
cases reporting procedure code 88.59.
One commenter, the manufacturer,
reported that they worked with a
consulting group to conduct an analysis
on a subset of MedPAR claims data that
reported procedure code 88.59.
According to the data presented, the
consultant’s methodology for the
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analysis involved examining only cases
from the facilities that reported
procedure code 88.59, in any procedure
code sequencing position, in each one of
the four MS–DRGs previously discussed
(233, 234, 235, or 236). The
manufacturer asserted that results of the
consultant’s analysis varied
significantly from the CMS data and that
their data supported reassignment of
cases reporting procedure code 88.59
from MS–DRGs 235 and 236 to MS–
DRGs 233 and 234.
Response: We acknowledge the
commenters who supported our
proposal to not make any MS–DRG
modifications for cases reporting
procedure code 88.59 for FY 2011. In
response to the manufacturer who
worked with the consulting group, we
point out that the process of evaluating
MS–DRG reclassifications is not based
on subsets of facility-specific data, but
rather, as stated earlier in section II.B.2
of the preamble to this final rule, in
deciding whether to make modifications
to the MS–DRGs we consider whether
the resource consumption and clinical
characteristics of the patients with a
given set of conditions are significantly
different than the remaining patients in
the MS–DRG. In addition, in evaluating
resource costs, we consider both the
absolute and percentage differences in
average costs between the cases we
select for review and the remainder of
cases in the MS–DRG. As the
manufacturer noted, the consultant’s
analysis submitted for consideration
was based on a subset of facility-specific
claims reporting code 88.59. Therefore,
it is not comparable to the analysis
conducted by CMS. While the
consultant’s analysis included cases that
reported procedure code 88.59, it did
not reflect the differences in comparison
to MedPAR claims data, as the CMS
analysis did, that are representative of
the remaining Medicare patients
grouped in the above mentioned
relevant MS–DRGs.
In addition, the manufacturer also
submitted the consultant’s summary of
observations from the analysis which
stated two key points:
(1) The number of discharges they
observed in the MedPAR data was
slightly higher than the volumes
reported in the proposed rule. They
believed this may be the result of
slightly different data files between
what they examined and what CMS
used. The volume differences are
comparatively small.
(2) They were unable to account for
differences in their cost calculation for
cases reporting procedure code 88.59
and the CMS published results. Their
hypothesis was that, because these
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represent a small number of cases, cost
report differences may be playing a
significant role in the calculation.
Currently, CMS’ systems only process
up to six procedure codes and, as the
commenter stated, the consultant’s
methodology considered procedure
code 88.59 in any sequencing position.
Therefore, it is unclear how many cases
may have been reported after the sixth
position. Effective January 1, 2011, the
HIPAA ASC X12 Technical Reports
Type 3, Version 005010 (Version 5010)
standards system update will become
effective. The version 5010 format will
allow facilities to report up to 25
diagnoses and 25 procedure codes, and
CMS’ systems will begin to process all
25 diagnosis and procedure codes.
(Further detail regarding this issue is
discussed in section II.G.11. of this final
rule.).
Lastly, the manufacturer concluded
that ‘‘the cost data continue to be
unreliable due to the sample size and
inherent limitations of cost reporting.’’
We reiterate that the analysis conducted
by the manufacturer and consultant
were not comparable to the analysis
conducted by CMS that examined cases
reporting procedure code 88.59 against
all cases in the specified MS–DRGs
versus the consultant’s analysis that
only provided data on those facilities
that are using the technology and their
associated costs. Therefore, we are
finalizing our proposal to not reassign
cases reporting procedure code 88.59 for
FY 2011.
b. New MS–DRG for Intraoperative
Angiography, by Any Method, With
CABG
We also received a request to create a
single MS–DRG for any type of
intraoperative angiography utilized in
CABG surgery. The requestor suggested
the following title for the proposed new
MS–DRG: XXX Coronary Bypass with
Intraoperative Angiography, by any
Method.
As we indicated in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23901),
currently, the only ICD–9–CM
procedure code that identifies an
intraoperative angiography is procedure
code 88.59 (Intraoperative fluorescence
vascular angiography), as described in
the previous section. Due to the
structure of the ICD–9–CM procedure
classification system, it is not possible
to distinguish when other types of
angiography are performed
intraoperatively. Therefore, we
indicated that we were unable to
evaluate any data, other than that for
procedure code 88.59, as shown in the
tables above. We did not propose to
create a new MS–DRG in FY 2011 for
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coronary bypass with intraoperative
angiography, by any method.
Comment: Several commenters agreed
with CMS’ proposal to not create a new
MS–DRG in FY 2011 for coronary
bypass with intraoperative angiography,
by any method. Another commenter, the
manufacturer, acknowledged the
limitations of the ICD–9–CM coding
structure and the ability to currently
only identify one method of
intraoperative angiography. The
manufacturer stated that the creation of
a new ICD–9–CM procedure code to
identify intraoperative angiography by
conventional X-ray angiography would
allow CMS to obtain accurate data on
intraoperative or completion
angiography by either method.
Response: We appreciate the
commenter’s support of our proposal to
not create a new MS–DRG in FY 2011
for coronary bypass with intraoperative
angiography, by any method. We also
acknowledge the manufacturer’s
concern regarding the inability to
identify intraoperative angiography by
conventional X-ray angiography. As
discussed previously (75 FR 23901) and
in further detail below, proposals for
creating a new procedure code must be
submitted to the ICD–9–CM
Coordination and Maintenance
Committee for consideration.
c. New Procedure Codes
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23901), we
indicated that, in response to our
invitation to submit public comments
regarding the proposal not to make any
MS–DRG modifications for cases
reporting procedure code 88.59 in the
FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106–24107), one
requestor presented another option
involving the creation of new ICD–9–
CM procedure codes. According to the
requestor, the purpose of these new
codes would be to separately identify
the two technologies used to perform
intraoperative coronary angiography in
CABG surgery: X-ray coronary
angiography with cardiac
catheterization and fluoroscopy versus
intraoperative fluorescence coronary
angiography (IFVA). The requestor
stated that due to the structure of the
current codes and MS–DRGs for CABG,
it is difficult to identify when x-ray
angiography is performed.
X-ray angiography is commonly
performed as a separate procedure in a
catheterization laboratory. Currently,
there are no procedure codes to
distinguish if this angiography was
performed preoperatively,
intraoperatively, and/or postoperatively.
We informed the requestor that they
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could submit a proposal for creating a
new procedure code(s) to the ICD–9–CM
Coordination and Maintenance
Committee for its consideration.
Therefore, in the FY 2011 proposed
rule, we indicated that this topic would
be further evaluated through the ICD–9–
CM Coordination and Maintenance
Committee meeting process.
Comment: Similar to comments made
at the March 9–10, 2010 ICD–9–CM
Coordination and Maintenance
Committee meeting, one commenter, the
manufacturer, stated that the resource
utilization costs for a diagnostic cardiac
catheterization, which is routinely
performed in a catheterization
laboratory may differ from those costs
incurred for performing intraoperative
completion angiography concomitant
with a coronary artery bypass graft
procedure in a surgical suite. However,
the manufacturer noted that, regardless
of the technology (IFVA or X-ray
angiography), performance of
intraoperative completion angiography
in a surgical suite involves similar
resources. The commenter further noted
that an intraoperative completion
angiography performed with X-ray
angiography cannot be separately
identified from a diagnostic cardiac
catheterization due to the coding
structure. According to the commenter,
this scenario creates a payment
incentive for physicians to select X-ray
technology to perform a completion
angiography, despite the known risks to
patients associated with exposure to
radiation because the code used to
report X-ray angiography (cardiac
catheterization) is recognized in the
MS–DRG assignment. The commenter
urged CMS to remove this incentive by
ensuring that procedure code 88.59 will
impact MS–DRG assignment in the same
way that the code for X-ray angiography
does.
Response: As stated above, requests
for updates and changes to the
procedure coding system are discussed
through the ICD–9–CM Coordination
and Maintenance Committee meeting
process. At the March 9–10, 2010
meeting, a proposal was submitted by
the manufacturer and presented. Details
of the initial proposal regarding
intraoperative angiography with
coronary artery bypass graft discussed at
the March 2010 ICD–9–CM
Coordination and Maintenance
Committee meeting along with the
summary report of the meeting can be
located at the following CMS Web site:
https://www.cms.gov/ICD9Provider
DiagnosticCodes/03_meetings.asp.
Currently, there is not a mechanism to
analyze if both technologies utilize
similar resources in the surgical suite as
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the manufacturer asserts since, as stated
several times, the coding structure does
not currently distinguish between
intraoperative X-ray angiography and
IFVA. Despite the inability to currently
differentiate between the two
technologies in an intraoperative
setting, we disagree that physicians
have a payment incentive to utilize Xray angiography over IFVA to perform a
completion angiography. The current
MS–DRG assignments are based on
claims data for the purposes of
maintaining clinically coherence,
accounting for patient’s severity of
illness, ensuring similar utilization of
resources and complexity of services
and are not formulated to provide
incentives as the commenter indicated.
We believe that physicians provide the
most clinically appropriate, quality of
care and make decisions with respect to
the individual patient’s needs and not
subject patients to inherent risk.
In response to the manufacturer’s
request urging CMS to ensure that IFVA
impacts the MS–DRG assignment in the
same way as a cardiac catheterization
currently does, as stated in the FY 2010
IPPS/LTCH PPS final rule (74 FR
43787), it would be inappropriate to
reassign cases reporting the use of IFVA
to higher weighted MS–DRGs merely as
an incentive for hospitals to invest in
the IFVA technology.
As stated earlier, at the March 2010
meeting, an initial proposal was
presented and, as a result, one aspect of
the two-part proposal was finalized that
involves an update to an existing code
and the creation of a new code for IFVA.
Effective October 1, 2010 (FY 2011),
procedure code 88.59 has been revised
to uniquely identify intraoperative
coronary fluorescence vascular
angiography and new code 17.71 has
been created to identify noncoronary
intraoperative fluorescence vascular
angiography. We do not agree with the
manufacturer’s comment that these new
code changes for FY 2011 will facilitates
the MS–DRG case reassignment that the
commenter proposed for procedure code
88.59 and believed was appropriate for
policy. CMS does believe additional
data are needed to fully evaluate the
volume of cases and resources involved
to perform intraoperative completion
angiography using X-ray technology
versus IFVA. Therefore, CMS is
planning to discuss other options at a
future ICD–9–CM Coordination and
Maintenance Committee meeting.
In summary, we are finalizing our
proposal not to make any changes to
MS–DRGs 233, 234, 235 or 236 for cases
reporting the use of procedure code
88.59.
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d. MS–DRG Reassignment of
Intraoperative Fluorescence Vascular
Angiography (IFVA)
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23901 and 23902),
we indicated that we had received a
request suggesting that we reassign
procedure code 88.59 (Intraoperative
Fluorescence Vascular Angiography), to
the ‘‘Other Cardiovascular MS–DRGs’’:
MS–DRGs 228, 229, and 230 (Other
Cardiothoracic Procedures with MCC,
CC, and without CC/MCC, respectively).
The requestor noted that these MS–
DRGs have three levels of severity and
that other procedures assigned to these
MS–DRGs (for example,
transmyocardial revascularization) are
frequently performed at the same time
as a CABG. The requestor believed that
reassigning cases that report IFVA
(procedure code 88.59) to these MS–
DRGs would not result in a significant
overpayment to hospitals.
In the FY 2011 proposed rule, we
pointed out that, in the surgical
hierarchy, MS–DRGs 228, 229, and 230
rank higher than MS–DRGs 233, 234,
235, and 236, which were evaluated in
the above tables for CABG procedures
performed with IFVA (procedure code
88.59). The surgical hierarchy reflects
the relative resource requirements of
various surgical procedures. For
example, if a CABG surgery were
performed along with another procedure
currently assigned to MS–DRGs 228,
229, and 230, the case would be
assigned to one of the ‘‘Other
Cardiothoracic Procedures MS–DRGs’’
(228, 229, and 230) because patients
with multiple procedures are assigned
to the highest surgical hierarchy to
which one of the procedures is assigned.
Therefore, as the data shown above
did not demonstrate that IFVA utilized
an equivalent (or additional) amount of
resources as a cardiac catheterization to
warrant a proposal to reassign IFVA
cases to MS–DRGs 233 and 234 and the
fact that IFVA cases with CABG
performed with a procedure assigned to
MS–DRGs 228, 229, and 230 would
already be grouped to those same MS–
DRGs, we did not propose to reassign
cases reporting procedure code 88.59 to
MS–DRGs 228, 229, and 230 for FY
2011.
Comment: Several commenters
supported the proposal not to reassign
cases reporting procedure code 88.59 to
MS–DRGs 228, 229, and 230.
Response: We appreciate the
commenters’ support.
We are finalizing our proposal to not
reassign cases reporting procedure code
88.59 to MS–DRGs 228, 229, and 230 for
FY 2011.
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4. MDC 6 (Diseases and Disorders of the
Digestive System): Gastrointestinal
Stenting
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR43799), we
discussed a request we received to
create new MS–DRGs in FY 2011 to
better identify patients who undergo the
insertion of a gastrointestinal stent. The
request was considered outside the
scope of issues addressed in the FY
2010 IPPS/RY 2010 LTCH PPS proposed
rule; therefore, we stated our intent to
consider this request during the FY
2011 rulemaking process.
Gastrointestinal stenting is performed
by inserting a tube (stent) into the
esophagus, duodenum, biliary tract or
colon to reestablish or maintain patency
of these structures and allow
swallowing, drainage, or passage of
waste. The commenter requested that
the new MS–DRGs be subdivided into
three severity levels (with MCC, with
CC, and without CC/MCC) to better
align payment rates with resource
consumption and improve the clinical
coherence of these cases.
In its own analysis using FY 2008
MedPAR data, the commenter identified
gastrointestinal stenting cases using
relevant diagnosis codes and a
combination of procedure codes with
revenue code 0278 in MS–DRGs 374,
375, and 376 (Digestive Malignancy
with MCC, with CC, and without CC/
MCC, respectively), MS–DRGs 391and
392 (Esophagitis, Gastroenteritis and
Miscellaneous Digestive Disorders with
MCC and without MCC, respectively),
and MS–DRGs 393, 394, and 395 (Other
Digestive System Diagnoses with MCC,
with CC, and without CC/MCC,
respectively) in MDC 6 (Diseases and
Disorders of the Digestive System); and
MS–DRGs 435, 436, and 437
(Malignancy of Hepatobiliary System or
Pancreas with MCC, with CC, and
without CC/MCC, respectively) in MDC
7 (Diseases and Disorders of the
Hepatobiliary System and Pancreas).
As stated above, the commenter
utilized a combination of procedure
codes along with revenue code 0278 for
its analysis. There were a total of six
procedure codes included, of which,
only three (procedure codes 42.81,
51.87, and 52.93) actually describe the
insertion of a stent. The complete list of
procedure codes is as follows:
• 42.81 (Insertion of permanent tube
into esophagus)
• 45.13 (Other endoscopy of small
intestine)
• 45.22 (Endoscopy of large intestine
through artificial stoma)
• 46.85 (Dilation of intestine)
• 51.87 (Endoscopic insertion of stent
(tube) into bile duct)
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• 52.93 (Endoscopic insertion of stent
(tube) into pancreatic duct)
The commenter aggregated the results
by the previously mentioned MS–DRG
groupings and did not present results
for individual stenting procedures.
According to the commenter, mean
standardized charges for gastrointestinal
stenting procedures were higher than
those for nonstenting procedures across
all levels of severity of illness. In
addition, the commenter believed that
the difference in charges was not simply
related to the costs of the stents, but
rather that the extent of the difference
in charges reflected the severity of
illness and resource intensity associated
with gastrointestinal stenting
procedures.
As indicated in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23902),
in response to the commenter’s request,
we pointed out that we do not utilize
revenue codes in our process to evaluate
if new MS–DRGs are warranted. The use
of revenue codes in the MS–DRG
reclassification process would require a
major structural change from the current
process that has been utilized since the
inception of the IPPS. In addition, the
commenter included procedure codes in
its analysis that do not identify the
insertion of a stent; thereby, the data are
unreliable. Furthermore, two procedure
codes describing the insertion of a
colonic stent were recently
implemented, effective with discharges
occurring on or after October 1, 2009—
procedure code 46.86 (Endoscopic
insertion of colonic stent(s)) and
procedure code 46.87 (Other insertion of
colonic stent(s)). However, we do not
have data currently available on these
two new procedure codes to include
them in a comprehensive analysis.
Lastly, as the commenter indicated, the
differences between those procedures
with and without stents is a reflection
on the severity of illness and resource
consumption associated with these
types of procedures. The commenter
also acknowledged that patients
receiving a gastrointestinal stent who
are severely debilitated due to
prolonged illness are reflected by the
fact that the majority of cases are
assigned to MS–DRGs for patients with
MCCs (major complications or
comorbidities). Therefore, the medical
MS–DRGs to which these procedures
are currently assigned already account
for the severity of illness and intensity
of resources utilized.
For the FY 2011 IPPS/LTCH PPS
proposed rule, using FY 2009 MedPAR
data, we analyzed the three procedure
codes that truly identify and describe
the insertion of a stent (procedure codes
42.81, 51.87, and 52.93) within the MS–
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DRGs referenced above. Similar to the
commenter’s findings, our analysis
demonstrated a small volume of cases in
which insertion of a gastrointestinal
stent occurred in the specified MS–
DRGs. Of the 411,390 total cases across
the digestive system MS–DRGs the
requestor identified, there were only
2,011 cases that involved the actual
insertion of a gastrointestinal stent.
These cases had average costs ranging
from a low of $5,846 to a high of
$17,626. Based on these findings, in the
proposed rule, we indicated that we did
not believe it was appropriate to assign
cases with such disparity in costs into
a single, new MS–DRG. Furthermore, in
applying the five criteria used to
establish new MS–DRGs, we indicated
that the data do not support the creation
of new MS–DRGs with three severity
levels (with MCC, with CC, and without
CC/MCC).
For the reasons stated above, we
invited the public to submit comments
on our proposal not to make any MS–
DRG modifications to cases involving
the use of gastrointestinal stents for FY
2011.
Comment: Several commenters in
general supported CMS’ proposal not to
make any MS–DRG modifications
involving the use of gastrointestinal
stents for FY 2011. One commenter
expressed appreciation for CMS’ efforts
to consider its request to create a new
series of MS–DRGs for gastrointestinal
stent placement cases. The commenter
acknowledged the lack of specific ICD–
9–CM procedure codes for colonic and
duodenal stent placement in the data
and CMS’ practice of not using revenue
codes to help distinguish between
different types of procedures. The
commenter agreed that the lack of
specific codes and not using revenue
codes in the MS–DRG grouping logic
precludes CMS’ ability to implement the
requested MS–DRG modifications for
gastrointestinal stents for FY 2011. The
commenter indicated that it will
continue to monitor these cases in
future years and, if appropriate, request
the creation of new MS–DRGs.
Response: We agree with the
commenters that our data and claims
analysis support our proposal to not
make any MS–DRG modifications to
cases involving the use of
gastrointestinal stents for FY 2011.
Therefore, we are finalizing our
proposal to not make any MS–DRG
modifications to cases involving the use
of gastrointestinal stents for FY 2011.
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5. MDC 8 (Diseases and Disorders of the
Musculoskeletal System and Connective
Tissue): Pedicle-Based Dynamic
Stabilization
As we did for FY 2009 (73 FR 45820),
we received a request from a
manufacturer to reassign procedure
code 84.82 (Insertion or replacement of
pedicle-based dynamic stabilization
device(s)), effective October 1, 2007,
from MS–DRG 490 (Back and Neck
Procedures Except Spinal Fusion with
CC/MCC or Disc Device/
Neurostimulator) to MS–DRG 460
(Spinal Fusion Except Cervical without
MCC). According to the manufacturer,
the technology that is identified by this
procedure code, the Dynesys® Dynamic
Stabilization System, is clinically
similar to lumbar spinal fusion and
requires similar utilization of resources.
Dynamic stabilization is a concept
that utilizes a flexible system to stabilize
the spine without fusion. The primary
goals of dynamic stabilization are to
limit the amount of unnatural spinal
motion and preserve as much of the
patient’s natural anatomic structures as
possible. The Dynesys® Dynamic
Stabilization System is comprised of
three components with specific
functions: titanium alloy pedicle screws
that anchor the system to the spine; a
polyethylene-terephthalate (PET) cord
that connects the Dynesys® screws; and
a polycarbonate-urethane (PCU) spacer
that runs over the cord between the
Dynesys® screws. The system is placed
under tension creating a dynamic
interaction between the components.
The MS–DRGs are comprised of
clinically coherent groups of patients
who consume similar utilization of
resources and complexity of services.
The insertion of a Dynesys® Dynamic
Stabilization System is clinically not a
lumbar fusion. As stated previously,
dynamic stabilization is a concept that
utilizes a flexible system to stabilize the
spine without fusion. Therefore, in the
FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23903), we stated that it would
be clinically inappropriate to reassign
cases reporting procedure code 84.82 in
the fusion MS–DRG.
In conclusion, the Dynesys® Dynamic
Stabilization System is currently FDA
approved for use only as an adjunct to
spinal fusion, there is uncertainty
regarding the coding and reporting of
procedure code 84.82, as well as offlabel use, and currently, all other
similar nonfusion devices are assigned
to MS–DRG 490.
For the reasons listed above, we did
not propose to reassign cases reporting
procedure code 84.82 from MS–DRG
490 to MS–DRG 460 for FY 2011.
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Comment: Several commenters
supported CMS’ proposal not to reassign
cases reporting procedure code 84.82
from MS–DRG 490 to MS–DRG 460 for
FY 2011. One commenter, the
manufacturer, stated that they
conducted a clinical comparison of
Dynesys® as well as an analysis of
charges and costs associated with MS–
DRGs 490 and 460, specifically
procedure codes 84.82 (Insertion or
replacement of pedicle-based dynamic
stabilization device(s)), and 81.08
(Lumbar and lumbosacral fusion,
posterior technique). According to the
manufacturer, the analysis
demonstrated that the resource
utilization of Dynesys® as a nonfusion
device is similar to that of fusion and is
greater than that of other procedures
grouped in MS–DRG 490.
Response: We appreciate the
manufacturer’s analysis. As stated
previously, and as the manufacturer
stated in its comments, the FDA has not
yet approved the Post-Market Approval
(PMA) application to expand the
indication of Dynesys® for use as a nonfusion device. Dynesys® is currently
approved as an adjunct to spinal fusion;
therefore, when reported correctly, cases
utilizing the Dynesys® technology are
appropriately assigned to the fusion
MS–DRGs. We will continue to monitor
the resource utilization of procedure
codes 84.82 and 81.08 to determine if
future MS–DRG reassignments or new
MS–DRGs are warranted. For FY 2011,
we are finalizing our proposal not to
reassign cases with procedure code
84.82 from MS–DRG 490 to MS–DRG
460.
6. MDC 15 (Newborns and Other
Neonates With Conditions Originating
in the Perinatal Period)
a. Discharges/Transfers of Neonates to a
Designated Cancer Center or Children’s
Hospital
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23903),
we received a request to add patient
discharge status code 05 (Discharged/
transferred to a designated cancer center
or children’s hospital) to the MS–DRG
GROUPER logic for MS–DRG 789
(Neonates, Died or Transferred to
Another Acute Care Facility). Currently,
neonate cases with the discharge status
code 05 are being assigned to MS–DRG
795 (Normal Newborn).
The definition of discharge status
code 05 was changed on April 1, 2008,
from ‘‘discharged/transferred to another
type of health care institution not
defined elsewhere in this code list’’ to
‘‘discharged/transferred to a designated
cancer center or children’s hospital.’’
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50111
For the FY 2011 proposed rule, we
examined cases in the FY 2009 MedPAR
file but did not find any cases with the
discharge status code 05 that were
assigned to either MS–DRG 789 or MS–
DRG 795. However, we indicated that
we believed the request has merit in
identifying neonate cases appropriately.
Therefore, for FY 2011, we proposed to
add discharge status code 05 to the MS–
DRG GROUPER logic for MS–DRG 789.
Comment: Some commenters
supported the proposed change to the
MS–DRG GROUPER logic for discharge
status 05. A few commenters
commended CMS for responding to
industry requests related to MDC 15,
especially in light of the limited impact
on the Medicare population while
acknowledging that other payers also
utilize the MS–DRG classification
system. One commenter recommended
adding the logic for discharge status
code 05 to the MS–DRG GROUPER logic
for all newborn cases assigned to MS–
DRGs: 790 (Extreme Immaturity or
Respiratory Distress Syndrome,
Neonate), 791 (Prematurity with Major
Problems), 792 (Prematurity without
Major Problems), 793 (Full Term
Neonate with Major Problems), 794
(Neonate with Other Significant
Problems), and 795 so that these cases
may be appropriately grouped to the
MS–DRG 789 for transferred neonates.
Response: We appreciate the support
of the commenters. To clarify our
proposed policy change, we are adding
discharge status code 05 to the MS–DRG
GROUPER logic for assigning cases to
MS–DRG 789. This change will result in
any case identified with discharge status
05, which would have normally been
assigned to MS–DRGs 790 through 795,
being reassigned to MS–DRG 789, as the
commenter recommended.
After consideration of the public
comments we received, we contend that
this logic change has merit and,
therefore, are adopting it as final for FY
2011. All newborn cases assigned to
MS–DRGs 790 through 795 and
indentified with discharge status 05 will
be reassigned to MS–DRG 789 for
transferred neonates.
b. Vaccinations of Newborns
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23903),
we received a request to examine the
assignment of code V64.05 (Vaccination
not carried out because of caregiver
refusal) to MS–DRG 794 (Neonate with
Other Significant Problems). Code
V64.05 is currently being reported when
a physician documents that a parent/
caregiver has refused immunization for
a child. The reporting of this code as a
principal or secondary diagnosis
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impacts the MS–DRG assignment for
normal newborns cases being assigned
to MS–DRG 794.
For the FY 2011 proposed rule, we
examined cases in the FY 2009 MedPAR
file but did not find any cases of code
V64.05 assigned to MS–DRG 794. Our
medical advisors agree that code V64.05
should not be assigned to MS–DRG 794.
We determined that the presence of
code V64.05 does not indicate that there
is a significant problem with the
newborn and should not be assigned to
MS–DRG 794. Therefore, as we
indicated in the FY 2011 proposed rule,
we believe that assignment of code
V64.05 to MS–DRG 795 (Normal
Newborn) would be more appropriate
for this code because it does not identify
a significant problem.
The logic for MS–DRG 795 contains a
list of principal diagnosis codes for
normal newborn and no secondary
diagnosis or a list of only secondary
diagnosis codes. Therefore, in the
proposed rule, for FY 2011, we
proposed to remove code V64.05 from
MS–DRG 794 and add this code to the
only secondary diagnosis list for MS–
DRG 795.
Comment: Commenters supported
this proposed change.
Response: We appreciate the
commenters support. As stated above,
we believe that the assignment of code
V64.05 to MS–DRG 795 is appropriate.
After consideration of the public
comments we received, we are adopting
our proposal to remove code V64.05
from MS–DRG 794 and to add it to the
only secondary diagnosis list for MS–
DRG 795 as final for FY 2011.
7. Medicare Code Editor (MCE) Changes
As explained under section II.B.1. of
the preamble of this final rule, the
Medicare Code Editor (MCE) is a
software program that detects and
reports errors in the coding of Medicare
claims data. Patient diagnoses,
procedure(s), and demographic
information are entered into the
Medicare claims processing systems and
are subjected to a series of automated
screens. The MCE screens are designed
to identify cases that require further
review before classification into a MS–
DRG. In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23903), we
indicated that we intended to make the
following changes to the MCE edits and
invited public input on whether or not
we should do so:
a. Unacceptable Principal Diagnosis
Edit: Addition of Code for Gastroparesis
It was brought to our attention that
diagnosis code 536.3 (Gastroparesis) has
a ‘‘code first underlying disease’’ note.
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This note indicates that diagnosis code
536.3 should not be used as a principal
diagnosis. Therefore, diagnosis code
536.3 should have been included on the
list of unacceptable principal diagnoses
in the MCE.
We agree that diagnosis code 536.3
should have been included on the list of
unacceptable principal diagnoses in the
MCE. Therefore, in the proposed rule for
FY 2011, we indicated that we intended
to add diagnosis code 536.3 to that list
in the MCE.
Comment: A number of commenters
opposed the proposed change because
they believed that this sequencing
change in the order of reported codes
would eliminate Medicare coverage for
the condition of gastroparesis.
Response: The commenters
erroneously believed that this
sequencing change in the order of
reported codes would eliminate
Medicare coverage for the condition of
gastroparesis. Therefore, we are taking
the opportunity in this final rule to
clarify that at no time did we intend to
withdraw coverage for gastroparesis. We
believe that many commenters
mistakenly assumed that if diagnosis
code 536.3 were not permitted to be in
the principal diagnosis position, it
would become a noncovered condition
by Medicare. This is not CMS’ intent,
nor would it have been the result of our
proposed change. As one commenter
stated: ‘‘The effect of the proposed edit
would be that idiopathic gastroparesis
* * * could not be sequenced as a
principal diagnosis. We recognize that
an inconsistency currently exists
between the MCE and the ‘code first
underlying disease’ associated with
[code] 536.3. We understand the issue is
not with the MCE, but rather the note.’’
We agree with the commenters and
with the medical community that
diagnosis code 536.3 should not be
included in the MCE’s Unacceptable
Principal Diagnosis Edit, and hereby
withdraw our suggestion to put it on
that list. Diagnosis code 536.3 will not
be added to the MCE in FY 2011.
We understand that the matter of the
‘‘code first’’ note will be addressed by
the ICD–9–CM Coordination &
Maintenance Committee in September
2010.
b. Open Biopsy Check Edit
The Open Biopsy Check edit in the
MCE dates back to the early years of the
IPPS when the surgical and medical
DRGs were not as expansive as they are
today. In the mid-1980s when the Open
Biopsy Check edit was created, the ICD–
9–CM codes did not have many biopsy
procedure codes that clearly showed the
approach, such as codes for open,
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percutaneous, and closed biopsies.
Furthermore, under the current MS–
DRGs, the open biopsy codes do not
have as significant an impact as they did
in the early versions of the DRGs. We
believe that the Open Biopsy Check edit
no longer serves a useful purpose.
Therefore, in the FY 2011 proposed
rule, we indicated that we intended to
delete the entire Open Biopsy Check
edit from the MCE, which meant
removing the following 63 codes from
the edit:
• 01.11 (Closed [Percutaneous]
[Needle] biopsy of cerebral meninges)
• 01.12 (Open biopsy of cerebral
meninges)
• 01.13 (Closed [Percutaneous]
[Needle] biopsy of brain)
• 01.14 (Open biopsy of brain)
• 04.11 (Closed [Percutaneous]
[Needle] biopsy of cranial or peripheral
nerve or ganglion)
• 04.12 (Open biopsy of cranial or
peripheral nerve or ganglion)
• 06.11 (Closed [Percutaneous]
[Needle] biopsy of thyroid gland)
• 06.12 (Open biopsy of thyroid
gland)
• 07.11 (Closed [Percutaneous]
[Needle] biopsy of adrenal gland)
• 07.12 (Open biopsy of adrenal
gland)
• 22.11 (Closed [Endoscopic] [Needle]
biopsy of nasal sinus)
• 22.12 (Open biopsy of nasal sinus)
• 25.01 (Closed [Needle] biopsy of
tongue)
• 25.02 (Open biopsy of tongue)
• 26.11 (Closed [Needle] biopsy of
salivary gland or duct)
• 26.12 (Open biopsy of salivary
gland or duct)
• 31.43 (Closed [Endoscopic] biopsy
of larynx)
• 31.44 (Closed [Endoscopic] biopsy
of trachea)
• 31.45 (Open biopsy of larynx or
trachea)
• 33.24 (Closed [Endoscopic] biopsy
of bronchus)
• 33.25 (Open biopsy of bronchus)
• 33.26 (Closed [Percutaneous]
[Needle] biopsy of lung)
• 33.28 (Open biopsy of lung)
• 34.25 (Closed [Percutaneous]
[Needle] biopsy of mediastinum)
• 34.26 (Open mediastinal biopsy)
• 41.32 (Closed [Aspiration]
[Percutaneous] biopsy of spleen)
• 41.33 (Open biopsy of spleen)
• 42.24 (Closed [Endoscopic] biopsy
of esophagus)
• 42.25 (Open biopsy of esophagus)
• 44.14 (Closed [Endoscopic] biopsy
of stomach)
• 44.15 (Open biopsy of stomach)
• 45.14 (Closed [Endoscopic] biopsy
of small intestine)
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• 45.15 (Open biopsy of small
intestine)
• 45.25 (Closed [Endoscopic] biopsy
of large intestine)
• 45.26 (Open biopsy of large
intestine)
• 48.24 (Closed [Endoscopic] biopsy
of rectum)
• 48.25 (Open biopsy of rectum)
• 50.11 (Closed (Percutaneous)
[Needle] biopsy of liver)
• 50.12 (Open biopsy of liver)
• 51.12 (Percutaneous biopsy of
gallbladder or bile ducts)
• 51.13 (Open biopsy of gallbladder
or bile ducts)
• 52.11 (Closed [Aspiration] [Needle]
[Percutaneous] biopsy of pancreas)
• 52.12 (Open biopsy of pancreas)
• 54.23 (Biopsy of peritoneum)
• 54.24 (Closed [Percutaneous]
[Needle] biopsy of intra-abdominal
mass)
• 55.23 (Closed [Percutaneous]
[Needle] biopsy of kidney)
• 55.24 (Open biopsy of kidney)
• 56.32 (Closed percutaneous biopsy
of ureter)
• 56.34 (Open biopsy of ureter)
• 57.33 (Closed [Transurethral]
biopsy of bladder)
• 57.34 (Open biopsy of bladder)
• 60.11 (Closed [Percutaneous]
[Needle] biopsy of prostate)
• 60.12 (Open biopsy of prostate)
• 60.13 (Closed [Percutaneous] biopsy
of seminal vesicles)
• 60.14 (Open biopsy of seminal
vesicles)
• 62.11 (Closed [Percutaneous]
[Needle] biopsy of testis)
• 62.12 (Open biopsy of testis)
• 68.13 (Open biopsy of uterus)
• 68.14 (Open biopsy of uterine
ligaments)
• 68.15 (Closed biopsy of uterine
ligaments)
• 68.16 (Closed biopsy of uterus)
• 85.11 (Closed [Percutaneous]
[Needle] biopsy of breast)
• 85.12 (Open biopsy of breast)
We did not receive any public
comments regarding the proposal to
delete the Open Biopsy Check edit from
the MCE. Therefore, because there were
no objections to the proposal, we are
deleting the Open Biopsy Check edit
from the MCE. The edit containing the
codes listed above will be removed,
effective for October 1, 2010 (FY 2011).
c. Noncovered Procedure Edit
The ICD–9–CM procedure codes 52.80
(Pancreatic transplant, not otherwise
specified) and 52.82 (Homotransplant of
pancreas) alone (that is, without
procedure code 55.69 (Other kidney
transplantation)) are considered
noncovered procedures, except when
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either one is combined with at least one
specific principal or secondary
diagnosis code. These specific diagnosis
codes identify Type I diabetes mellitus,
not stated as uncontrolled, or else
identified as uncontrolled.
To conform to the proposed change to
Pre-MDC MS–DRGs 008 and 010 as
discussed in section II.G.1. of the FY
2011 IPPS/LTCH PPS proposed rule, in
which we proposed to add code 251.3
(Postsurgical hypoinsulinemia) to those
MS–DRGs, we indicated in that FY 2011
proposed rule that we intended to add
procedure code 251.3 to the list of
acceptable principal or secondary
diagnosis codes in the MCE.
We did not receive any public
comments on our proposal to add
procedure code 251.3 to the list of
acceptable principal or secondary
diagnosis codes in the MCE. Therefore,
because there were no objections to this
proposal, we are adding procedure code
251.3 (Postsurgical hypoinsulinemia) to
the MCE in the list of acceptable
principal or secondary codes associated
with procedure codes 52.80 (Pancreatic
transplant, not otherwise specified) and
52.82 (Homotransplant of pancreas).
8. Surgical Hierarchies
Some inpatient stays entail multiple
surgical procedures, each one of which,
occurring by itself, could result in
assignment of the case to a different
MS–DRG within the MDC to which the
principal diagnosis is assigned.
Therefore, it is necessary to have a
decision rule within the GROUPER by
which these cases are assigned to a
single MS–DRG. The surgical hierarchy,
an ordering of surgical classes from
most resource-intensive to least
resource-intensive, performs that
function. Application of this hierarchy
ensures that cases involving multiple
surgical procedures are assigned to the
MS–DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity
of surgical classes can shift as a function
of MS–DRG reclassification and
recalibrations, we reviewed the surgical
hierarchy of each MDC, as we have for
previous reclassifications and
recalibrations, to determine if the
ordering of classes coincides with the
intensity of resource utilization.
A surgical class can be composed of
one or more MS–DRGs. For example, in
MDC 11, the surgical class ‘‘kidney
transplant’’ consists of a single MS–DRG
(MS–DRG 652) and the class ‘‘major
bladder procedures’’ consists of three
MS–DRGs (MS–DRGs 653, 654, and
655). Consequently, in many cases, the
surgical hierarchy has an impact on
more than one MS–DRG. The
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methodology for determining the most
resource-intensive surgical class
involves weighting the average
resources for each MS–DRG by
frequency to determine the weighted
average resources for each surgical class.
For example, assume surgical class A
includes MS–DRGs 1 and 2 and surgical
class B includes MS–DRGs 3, 4, and 5.
Assume also that the average costs of
MS–DRG 1 is higher than that of MS–
DRG 3, but the average costs of MS–
DRGs 4 and 5 are higher than the
average costs of MS–DRG 2. To
determine whether surgical class A
should be higher or lower than surgical
class B in the surgical hierarchy, we
would weigh the average costs of each
MS–DRG in the class by frequency (that
is, by the number of cases in the MS–
DRG) to determine average resource
consumption for the surgical class. The
surgical classes would then be ordered
from the class with the highest average
resource utilization to that with the
lowest, with the exception of ‘‘other O.R.
procedures’’ as discussed below.
This methodology may occasionally
result in assignment of a case involving
multiple procedures to the lowerweighted MS–DRG (in the highest, most
resource-intensive surgical class) of the
available alternatives. However, given
that the logic underlying the surgical
hierarchy provides that the GROUPER
search for the procedure in the most
resource-intensive surgical class, in
cases involving multiple procedures,
this result is sometimes unavoidable.
We note that, notwithstanding the
foregoing discussion, there are a few
instances when a surgical class with a
lower average cost is ordered above a
surgical class with a higher average cost.
For example, the ‘‘other O.R.
procedures’’ surgical class is uniformly
ordered last in the surgical hierarchy of
each MDC in which it occurs, regardless
of the fact that the average costs for the
MS–DRG or MS–DRGs in that surgical
class may be higher than those for other
surgical classes in the MDC. The ‘‘other
O.R. procedures’’ class is a group of
procedures that are only infrequently
related to the diagnoses in the MDC, but
are still occasionally performed on
patients in the MDC with these
diagnoses. Therefore, assignment to
these surgical classes should only occur
if no other surgical class more closely
related to the diagnoses in the MDC is
appropriate.
A second example occurs when the
difference between the average costs for
two surgical classes is very small. We
have found that small differences
generally do not warrant reordering of
the hierarchy because, as a result of
reassigning cases on the basis of the
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hierarchy change, the average costs are
likely to shift such that the higherordered surgical class has a lower
average costs than the class ordered
below it.
As we proposed, based on the changes
that we are making for FY 2011, as
discussed in section II.C.2. of this
preamble, we are revising the surgical
hierarchy for Pre-MDCs and MDC 10
(Endocrine, Nutritional and Metabolic
Diseases and Disorders) to reflect the
resource intensiveness of the MS–DRGs,
as follows:
In Pre-MDCs, we are reordering new
MS–DRG 014 (Allogeneic Bone Marrow
Transplant) above MS–DRG 007 (Lung
Transplant); and new MS–DRG 015
(Autologous Bone Marrow Transplant)
above MS–DRG 010 (Pancreas
Transplant).
In MDC 10, we are reordering MS–
DRG 614 (Adrenal and Pituitary
Procedures With CC/MCC) and MS–
DRG 615 (Adrenal and Pituitary
Procedures Without CC/MCC) above
MS–DRG 625 (Thyroid, Parathyroid and
Thyroglossal Procedures With MCC).
Comment: Commenters generally
supported our proposals without any
objections.
Response: Based on the test of the
proposed revisions using the March
2010 update of the FY 2009 MedPAR
file and the revised GROUPER software,
we found that the revisions are still
supported by the data. Therefore, we are
incorporating the proposed revisions to
the surgical hierarchy as final for FY
2011.
9. Complications or Comorbidity (CC)
Exclusions List
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a. Background
As indicated earlier in the preamble
of this final rule, under the IPPS MS–
DRG classification system, we have
developed a standard list of diagnoses
that are considered CCs. Historically, we
developed this list using physician
panels that classified each diagnosis
code based on whether the diagnosis,
when present as a secondary condition,
would be considered a substantial
complication or comorbidity. A
substantial complication or comorbidity
was defined as a condition that, because
of its presence with a specific principal
diagnosis, would cause an increase in
the length of stay by at least 1 day in
at least 75 percent of the patients. We
refer readers to section II.D.2. and 3. of
the preamble of the FY 2008 IPPS final
rule with comment period for a
discussion of the refinement of CCs in
relation to the MS–DRGs we adopted for
FY 2008 (72 FR 47121 through 47152).
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b. CC Exclusions List for FY 2011
In the September 1, 1987 final notice
(52 FR 33143) concerning changes to the
DRG classification system, we modified
the GROUPER logic so that certain
diagnoses included on the standard list
of CCs would not be considered valid
CCs in combination with a particular
principal diagnosis. We created the CC
Exclusions List for the following
reasons: (1) To preclude coding of CCs
for closely related conditions; (2) to
preclude duplicative or inconsistent
coding from being treated as CCs; and
(3) to ensure that cases are appropriately
classified between the complicated and
uncomplicated DRGs in a pair. As we
indicated above, we developed a list of
diagnoses, using physician panels, to
include those diagnoses that, when
present as a secondary condition, would
be considered a substantial
complication or comorbidity. In
previous years, we have made changes
to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice
(52 FR 18877) and the September 1,
1987 final notice (52 FR 33154), we
explained that the excluded secondary
diagnoses were established using the
following five principles:
• Chronic and acute manifestations of
the same condition should not be
considered CCs for one another.
• Specific and nonspecific (that is,
not otherwise specified (NOS))
diagnosis codes for the same condition
should not be considered CCs for one
another.
• Codes for the same condition that
cannot coexist, such as partial/total,
unilateral/bilateral, obstructed/
unobstructed, and benign/malignant,
should not be considered CCs for one
another.
• Codes for the same condition in
anatomically proximal sites should not
be considered CCs for one another.
• Closely related conditions should
not be considered CCs for one another.
The creation of the CC Exclusions List
was a major project involving hundreds
of codes. We have continued to review
the remaining CCs to identify additional
exclusions and to remove diagnoses
from the master list that have been
shown not to meet the definition of a
CC.2
2 See the FY 1989 final rule (53 FR 38485,
September 30, 1988), for the revision made for the
discharges occurring in FY 1989; the FY 1990 final
rule (54 FR 36552, September 1, 1989), for the FY
1990 revision; the FY 1991 final rule (55 FR 36126,
September 4, 1990), for the FY 1991 revision; the
FY 1992 final rule (56 FR 43209, August 30, 1991)
for the FY 1992 revision; the FY 1993 final rule (57
FR 39753, September 1, 1992), for the FY 1993
revision; the FY 1994 final rule (58 FR 46278,
PO 00000
Frm 00074
Fmt 4701
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(1) Limited Revisions Based on Changes
to the ICD–9–CM Diagnosis Codes
For FY 2011, as we proposed, we are
making limited revisions to the CC
Exclusions List to take into account the
changes made in the ICD–9–CM
diagnosis coding system effective
October 1, 2009. (We refer readers to
section II.G.11. of the preamble of this
final rule for a discussion of ICD–9–CM
changes.) We are making these changes
in accordance with the principles
established when we created the CC
Exclusions List in 1987. In addition, we
are indicating on the CC Exclusions List
some changes as a result of updates to
the ICD–9–CM codes to reflect the
exclusion of codes from being MCCs
under the MS–DRG system that we
adopted in FY 2008.
(2) Suggested Changes to Severity Levels
for Obesity-Related and Major Osseous
Defect Diagnosis Codes
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43793 through
43794), we indicated that several
commenters on the FY 2010 IPPS
proposed rule recommended that CMS
consider making further adjustments to
the MS–DRG assignments based on
obesity and major osseous defects. The
commenters stated that obesity, high
Body Mass Index (BMI) ratings, and
major osseous defects add to the
complexity of care for patients such as
those patients undergoing orthopedic
procedures. The commenters
recommended the following changes to
the list of MCCs and CCs:
Several commenters recommended
that CMS add the following diagnosis
codes, which are classified as non-CCs,
to the CC or MCC list:
• 731.3 (Major osseous defects)
September 1, 1993), for the FY 1994 revisions; the
FY 1995 final rule (59 FR 45334, September 1,
1994), for the FY 1995 revisions; the FY 1996 final
rule (60 FR 45782, September 1, 1995), for the FY
1996 revisions; the FY 1997 final rule (61 FR 46171,
August 30, 1996), for the FY 1997 revisions; the FY
1998 final rule (62 FR 45966, August 29, 1997) for
the FY 1998 revisions; the FY 1999 final rule (63
FR 40954, July 31, 1998), for the FY 1999 revisions;
the FY 2001 final rule (65 FR 47064, August 1,
2000), for the FY 2001 revisions; the FY 2002 final
rule (66 FR 39851, August 1, 2001), for the FY 2002
revisions; the FY 2003 final rule (67 FR 49998,
August 1, 2002), for the FY 2003 revisions; the FY
2004 final rule (68 FR 45364, August 1, 2003), for
the FY 2004 revisions; the FY 2005 final rule (69
FR 49848, August 11, 2004), for the FY 2005
revisions; the FY 2006 final rule (70 FR 47640,
August 12, 2005), for the FY 2006 revisions; the FY
2007 final rule (71 FR 47870) for the FY 2007
revisions; the FY 2008 final rule (72 FR 47130) for
the FY 2008 revisions, the FY 2009 final rule (73
FR 48510), and the FY 2010 final rule (74 FR
43799). In the FY 2000 final rule (64 FR 41490, July
30, 1999, we did not modify the CC Exclusions List
because we did not make any changes to the ICD–
9–CM codes for FY 2000.
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• V85.35 (Body mass index 35.0–35.9,
adult)
• V85.36 (Body mass index 36.0–36.9,
adult)
• V85.37 (Body mass index 37.0–37.9,
adult)
• V85.38 (Body mass index 38.0–38.9,
adult)
• V85.39 (Body mass index 39.0–39.9,
adult)
Several commenters recommended
that CMS add the following diagnosis
code, which is on the CC list, to the
MCC list:
• V85.40 (Body mass index 40 and
over, adult)
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we stated that we
believed these comments were outside
the scope of the proposals in the FY
2010 proposed rule. We did not propose
significant revisions to the MS–DRGs in
the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24091) for these
Code
Diagnosis
Cnt1
Count (Cnt) is the number of patients
in each subset. C1, C2, and C3 are a
measure of the impact on resource use
of patients in each of the subsets. The
C1, C2, and C3 values are a measure of
the ratio of average costs for patients
with these conditions to the expected
average cost across all cases. The C1
value reflects a patient with no other
secondary diagnosis or with all other
secondary diagnoses that are non-CCs.
The C2 value reflects a patient with at
Diagnosis
278.00 .........
278.01 .........
278.02 .........
731.3 ...........
V85.35 ........
V85.36 ........
V85.37 ........
V85.38 ........
V85.39 ........
mstockstill on DSKH9S0YB1PROD with RULES2
Code
codes. We stated that we were
encouraging individuals with comments
about MS–DRG classifications to submit
these comments no later than early
December of each year so they can be
carefully considered for possible
inclusion in the annual proposed rule
and, if included, may be subjected to
public review and comment. Therefore,
we did not add these codes to the MCC
list or the CC list for FY 2010. We stated
that we would consider their
appropriateness for inclusion in next
year’s annual proposed rule.
In addition to the diagnosis codes
mentioned above, we also have received
requests that we consider changing the
following diagnosis codes from a nonCC to a CC:
• 278.00 (Obesity NOS)
• 278.01 (Morbid obesity)
• 278.02 (Overweight)
For the FY 2011 IPPS/LTCH PPS
proposed rule, we analyzed claims data
Obesity NOS ...................
Morbid obesity ................
Overweight ......................
Major osseous defects ...
BMI 35.0–35.9, adult ......
BMI 36.0–36.9, adult ......
BMI 37.0–37.9, adult ......
BMI 38.0–38.9, adult ......
BMI 39.0–39.9, adult ......
C1
least one other secondary diagnosis that
is a CC but none that is a MCC. The C3
value reflects a patient with at least one
other secondary diagnosis that is a MCC.
A value close to 1.0 in the C1 field
would suggest that the diagnosis code
produces the same expected value as a
non-CC. A value close to 2.0 suggests
the condition is more like a CC than a
non-CC but not as significant in
resource usage as an MCC. A value close
to 3.0 suggests the condition is expected
Cnt1
C1
130,310
51,832
5,242
215
2,621
2,359
2,305
2,152
2,253
The C1 findings do not support a
reclassification of any of these diagnosis
codes from a non-CC to a CC. As can be
seen by the C1 findings, the codes range
from a low of 0.9729 for code V85.35 to
a high of 1.3833 for diagnosis code
731.3. These findings are consistent
with a classification as a non-CC.
Cnt2
Cnt2
1.0755
1.2619
0.9948
1.3833
0.9759
0.9729
0.9849
0.9713
0.9857
116,304
106,169
3,594
575
1,480
1,298
1,271
1,231
1,141
Therefore, for FY 2011, as we proposed,
we are not changing the CC
classification of any of the diagnosis
codes mentioned in the chart above
from a non-CC to a CC. Our clinical
advisors agree with this
recommendation.
50115
for the diagnosis codes mentioned above
related to obesity and major osseous
defects. We used the same approach we
used in initially creating the MS–DRGs
and classifying secondary diagnosis
codes as non-CCs, CCs, or MCC. A
detailed discussion of the process and
criteria we used in this process is
described in the FY 2008 IPPS final rule
(72 FR 47158 through 47161). We refer
the readers to this discussion for
complete information on our approach
to developing the non-CC, CC, and MCC
lists. Each diagnosis for which Medicare
data were available was evaluated to
determine its impact on resource use
and to determine the most appropriate
CC subclass (non-CC, CC, or MCC)
assignment. In order to make this
determination, the average cost for each
subset of cases was compared to the
expected cost for cases in that subset.
The following format was used to
evaluate each diagnosis:
C2
Cnt3
C3
to consume resources more similar to an
MCC than a CC or non-CC. For
additional details on this analysis, we
refer readers to the FY 2008 IPPS final
rule at 72 FR 47158 through 47161.
The following chart shows the
analysis for each of the obesity related
and major osseous defect diagnosis
codes that are currently classified as
non-CCs.
C2
Cnt3
1.7234
1.9630
1.7042
2.3390
1.6932
1.6536
1.7225
1.5964
1.7741
45,565
52,398
1,033
186
499
466
473
432
445
C3
2.3843
2.6787
2.3471
2.7627
2.3664
2.3107
2.4032
2.2743
2.4919
For the FY 2011 proposed rule, we
also examined claims data for diagnosis
code V85.4 (Body mass index 40 and
over, adult), which is classified as a CC.
We received a request to reclassify this
code as a MCC. The following chart
summarizes our findings for this
diagnosis code:
Code
Diagnosis
Cnt1
C1
Cnt2
C2
Cnt3
C3
V85.4 ..........
BMI 40 and over, adult ...
51,871
1.2323
59,941
2.1711
57,220
3.0465
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We note that the C1 finding of 1.2323
does not support a reclassification of
this diagnosis code from a CC to a MCC.
This finding is much more consistent
with classifying the code as a non-CC.
Our clinical advisors recommended that
CMS not reclassify this diagnosis code
from a CC to a non-CC for FY 2011.
They recommended that CMS analyze
data associated with this diagnosis code
again in the future to determine if it
continues to act like a non-CC. For the
FY 2011 proposed rule, we did not
recommend any change in the severity
classification of diagnosis code V85.4.
We proposed to retain it as a CC for FY
2011. We welcomed public comments
on our proposal not to change the
severity levels of the diagnosis codes
mentioned above.
Comment: Several commenters in
general supported the proposal not to
change the following codes from a nonCC to a CC or MCC based on our data
and clinical analysis: 278.00; 278.01;
278.02; 731.3; V85.35; V85.36; V85.37;
V85.38; and V85.39.
The commenters also supported our
proposal not to change code V85.40
from a CC to an MCC.
One commenter stated that it
understood that the request to change
the severity level for the obesity related
codes was not supported by the current
hospital claim data. The commenter
expressed appreciation for CMS’
consideration of its recommendation.
However, the commenter expressed
concerns that hospitals may not be fully
reporting codes that describe obesity,
and, therefore, all resources associated
with obesity related cases may not be
included in the hospital claims data.
The commenter requested that CMS
actively encourage hospitals to report
codes that more fully describe obesity
and its related conditions. The
commenter stated that if hospitals
increased their reporting of obesity
related conditions, our national data
would be more accurate and would
more fully reflect hospital resource use
associated with these patients.
Another commenter also
acknowledged that the data did not
support a change in the severity level
for the obesity related codes. This
commenter also expressed that hospitals
may be underreporting obesity cases,
and requested that hospitals be
encouraged to more fully and accurately
code and report these conditions. Once
a more complete data set is available to
describe these patients, the commenter
recommended that the issue be
reviewed again.
Response: We agree with the
commenters that our data and clinical
analysis support our proposal not to
change the severity level for the obesity
related codes. We appreciate the
commenters’ statement about our
consideration and review of this issue.
We agree that it is important to provide
clear documentation and accurate
coding for all patient diagnoses and
conditions, including obesity related
conditions. As discussed in section
II.G.11.c. of this preamble, we are
expanding the number of diagnosis and
procedure codes processed so that more
codes are available to describe each
patient’s hospitalization. The clinical
data and the comments received support
our recommendation not to change the
severity levels for the obesity related
codes. Therefore, we are finalizing our
proposal to continue classifying the
following codes as non-CCs for FY 2011.
• 278.00 (Obesity NOS)
• 278.01 (Morbid obesity)
• 278.02 (Overweight)
• 731.3 (Major osseous defects)
• V85.35 (Body mass index 35.0–35.9,
adult)
• V85.36 (Body mass index 36.0–36.9,
adult)
• V85.37 (Body mass index 37.0–37.9,
adult)
• V85.38 (Body mass index 38.0–38.9,
adult)
• V85.39 (Body mass index 39.0–39.9,
adult)
We are also finalizing our proposal to
continue classifying the following code
as a CC for FY 2011.
• V85.40 (Body mass index 40 and
over, adult)
(3) Suggested Change to the Severity
Level for Alzheimer’s Disease Diagnosis
Code
We received a request to change the
severity classification for diagnosis code
331.0 (Alzheimer’s disease). Currently,
this diagnosis code is classified as a
non-CC. For the FY 2011 IPPS/LTCH
PPS proposed rule, we analyzed claims
data for this diagnosis code. The
following chart shows our findings:
Diagnosis
Cnt1
C1
Cnt2
C2
Cnt3
C3
331.0 ...........
mstockstill on DSKH9S0YB1PROD with RULES2
Code
Alzheimer’s disease ........
83,743
1.1381
114,445
1.8890
77,841
2.4185
The C1 finding of 1.1381 for
Alzheimer’s disease supports the
current classification of this diagnosis
code as a non-CC. Our clinical advisors
agree with this classification. Therefore,
we did not propose to change the
severity classification of diagnosis code
331.0 from a non-CC to a CC for FY
2011. We believe the code is
appropriately classified as a non-CC.
Comment: Several commenters in
general supported CMS’ proposal not to
change diagnosis code 331.0 from a nonCC to a CC for FY 2011. They stated that
the data supported this decision. One
commenter stated that the analysis
provided by CMS supports the proposal
that diagnosis code 331.0 should
continue to be a non-CC. The
commenter suggested that this issue be
revisited after CMS begins processing 25
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codes instead of the current limitation
of 9 diagnosis codes.
Response: We agree with the
commenters that our data support our
proposal not to change diagnosis code
331.0 from a non-CC to a CC for FY
2011. Therefore, we are finalizing our
proposal to continue classifying
diagnosis code 331.0 as a non-CC for FY
2011. We will revisit the severity level
classification of diagnosis code 331.0
once we begin processing claims using
the increase in the number of diagnosis
codes to 25.
(4) Change to the Severity Level for
Acute Renal Failure, Unspecified
Diagnosis Code
We received a request to reclassify the
diagnosis code, which captures acute
renal failure, 584.9 (Acute kidney
failure, unspecified) from a MCC to a
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Frm 00076
Fmt 4701
Sfmt 4700
CC. The commenter stated that this code
is being widely used to capture degrees
of renal failure that range from that
which is caused by mild dehydration
with only minor laboratory
abnormalities all the way through severe
renal failure that requires dialysis. The
commenter pointed out that there are no
clinical criteria for assigning diagnosis
code 584.9. The attending physician
must simply document the presence of
acute renal failure for the diagnosis code
to be assigned. The concern is that the
diagnosis code for acute kidney failure,
unspecified (diagnosis code 584.9) is
being assigned to patients with a low
clinical severity level.
We also point out that the Editorial
Advisory Board of Coding Clinic for
ICD–9–CM has received a number of
requests to clarify the use of diagnosis
code 584.9. Coders are observing the
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terminology of ‘‘acute renal failure’’
being applied to patients who are
simply dehydrated. These patients do
not require renal dialysis, and they do
not appear to be severely ill. Coders
have stated that there appears to be an
increase in the use of the terminology of
acute renal failure for patients who were
previously referred to as acute renal
insufficiency. When acute renal
insufficiency is documented, the ICD–
9–CM index directs the use of code
593.9 (Unspecified disorder of kidney
and ureter). Diagnosis code 593.9
includes acute renal insufficiency and is
classified as a non-CC. The problem is
50117
further compounded by the fact that
there is no consistent convention among
clinicians for documenting acute renal
insufficiency versus acute renal failure.
For the FY 2011 IPPS/LTCH PPS
proposed rule, we examined claims data
on diagnosis code 584.9, and our
findings are shown in the table below:
Diagnosis
Cnt1
C1
Cnt2
C2
Cnt3
C3
584.9 ...........
mstockstill on DSKH9S0YB1PROD with RULES2
Code
Acute kidney failure, unspecified.
124,428
1.8364
411,667
2.6151
417,359
3.2429
The C1 finding of 1.8364 is more
consistent with a classification of a CC.
Our clinical advisors agreed that cases
captured by diagnosis code 584.9 are
more appropriately classified as a CC.
This unspecified type of kidney failure
is clearly not capturing patients with a
MCC severity level. Therefore, we
proposed to change the severity level for
diagnosis code 584.9 from a MCC to a
CC for FY 2011.
Comment: Most commenters opposed
our proposal to change diagnosis code
584.9 (Acute kidney failure,
unspecified) from an MCC to a CC.
However, one commenter supported the
proposal to change the severity level
classification of acute renal failure cases
from an MCC to a CC. The commenter
stated that there has been an increased
reporting of acute renal failure which is
primarily due to increased physician
education by clinical documentation
improvement programs. The commenter
further stated that the statistical analysis
offered in the proposed rule was
sufficient to support this change.
Response: We agree that the claims
data support our proposal to change
diagnosis code 584.9 from an MCC to a
CC. We respond to the specific
comments opposing our proposed
changes in the following comments and
responses.
Comment: Several commenters
suggested that the introduction of the
terminology of acute kidney injury may
have added to the inconsistent
classification of the disease process.
One commenter stated that, in 2004, the
Acute Dialysis Quality Initiative work
group provided a definition and
classification system for acute renal
failure, described by the acronym RIFLE
(Risk of renal dysfunction, Injury to the
kidney, Failure or Loss of kidney
function, and End-stage kidney disease).
The commenter stated that clinical
researchers have since applied the
RIFLE system to the clinical evaluation
of acute kidney injury. Several
commenters stated that the FY 2009
update to the coding classification
system, which classifies acute kidney
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injury and acute renal failure with the
same code, may be diluting the patient
mix. The commenters stated that
inconsistency in the application of
diagnosis code 584.9 results in dilution
of the data and an inaccurate reflection
of the severity level for acute renal
failure.
Another commenter stated that claims
data on diagnosis code 584.9 may be
flawed due to the variable terminology
used by physicians and changes in the
ICD–9–CM classification. This
commenter stated that physicians often
use the terms ‘‘acute renal insufficiency’’
and ‘‘acute renal failure’’
interchangeably, and that this results in
cases of acute renal insufficiency being
classified as acute renal failure. The
commenter also stated that physicians
often use the term ‘‘acute kidney injury’’
to mean either acute renal insufficiency
or acute renal failure, and that the term
‘‘acute kidney injury’’ is indexed in ICD–
9–CM to diagnosis code 584.9.
Therefore, the commenter stated that
cases of acute kidney injury are also
being classified as acute renal failure.
The commenter stated that these
inconsistencies result in diagnosis code
584.9 capturing a mix of cases,
including both acute renal insufficiency
as well as true acute renal failure cases,
and that this has diluted national data
for diagnosis code 584.9 and is an
inaccurate reflection of the severity
level for acute renal failure. The
commenters recommended that
diagnosis code 584.9 remain an MCC
while CMS works on ways to revise the
codes or improve documentation
guidelines.
Response: We agree that diagnosis
code 584.9 captures a range of severity
levels. Patients are not consistently at
the highest severity level as shown by
our claims data. As discussed above, our
claims data show that patients with this
code as a secondary diagnosis are
similar to those who are at a CC level.
We do not believe it is appropriate to
defer a decision on reclassification of
the severity level of diagnosis code
584.9 until future coding or guideline
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Frm 00077
Fmt 4701
Sfmt 4700
modifications can be considered
because our claims data clearly support
the proposed change. Should a new
range of codes be developed, we will
consider what severity levels should be
applied to each new code and include
this analysis as part of future
rulemaking.
Comment: One commenter stated that
the definition of conditions assigned to
diagnosis code 584.9 is inadequate as it
encompasses patients with both small
and large elevations of creatinine that
still meet the definition of acute kidney
injury. Furthermore, the commenter
pointed out that diagnosis code 584.9
does not identify severe cases of renal
failure requiring dialysis. However, the
commenter opposed changing diagnosis
code 584.9 from an MCC to a CC as it
would penalize those institutions
treating more severe cases of renal
failure. The commenter indicated its
plans to contact the National Center for
Health Statistics to request that fifth
digits be added to diagnosis code 584.9
to distinguish those in various stages of
renal failure. Other commenters also
agreed that diagnosis code 584.9 was
vague and suggested that the code be
subdivided to add additional
information on the stages of the renal
function. The commenters suggested
using existing standards from the Acute
Kidney Injury Network or the National
Kidney Foundation to develop stages for
kidney injury that could be captured
with the new codes.
Another commenter agreed that the
diagnosis of acute renal failure should
not be used to describe mild
dehydration and renal insufficiency
when only minor lab abnormalities are
present. The commenter believed that
criteria were needed to better define the
stages of acute renal failure. The
commenter stated that appropriate
guidelines were needed for both
physicians and coders who are
attempting to differentiate between a
mildly dehydrated patient and one with
true acute renal failure. Until such time
as these documentation guidelines are
developed, the commenter asked that
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diagnosis code 584.9 not be changed
from an MCC to a CC.
Response: We agree that diagnosis
code 584.9 captures a wide range of
severity levels. We also agree that the
use of this code does not mean that the
patient’s renal capacity is so impaired as
to require renal dialysis. As stated
earlier, our data indicate that most of
these cases are at a CC severity level, not
an MCC. As stated earlier, we do not
believe it is appropriate to defer a
decision on reclassification of the
severity level of diagnosis code 584.9
until future coding or guideline
modifications can be considered.
Should a new range of codes be
developed, we will consider what
severity levels should be applied to each
new code and include this within future
rulemaking.
Comment: Several commenters
objected to a change of severity levels
for diagnosis code 584.9 from an MCC
to a CC because of the financial impact
the change would have on their
hospitals. Several hospitals stated that
this change would reduce their annual
Medicare payments by $1.0 to $3.6
million per year. Other commenters
stated that this change could lead to a
reduction of 2 percent or more in total
Medicare payments to their facilities.
The commenters acknowledged that the
code does not consistently capture
patients at the highest severity level and
that there was no clear convention
among clinicians for documenting acute
renal insufficiency versus acute renal
failure. The commenters asked that the
change not be made because of the
payment impact on their hospitals.
Response: We agree that diagnosis
code 584.9 captures patients who are
not consistently at the highest severity
level. Classifying these patients at the
highest severity level greatly distorts our
national data. It gives the impression
that a large number of patients have an
MCC severity level when they may in
fact have only minor renal symptoms.
Our data support that patients with
diagnosis code 584.9 are more
appropriately classified at the CC
severity level. These acute renal failure
patients captured with this code do not
utilize the resources of other conditions
on the MCC list. We believe the data
support changing the code from an MCC
to a CC. We believe our claims data
show that this change will lead to more
accurate payment, even if it does reduce
some hospital payments. We do not
believe it is appropriate to inflate
payments for hospitals that report a
higher incidence of this code, yet are
treating patients with a lower severity
level.
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Comment: Other commenters who
disagreed with the proposed change
from an MCC to a CC, acknowledged
that this unspecified code captures a
range of severity levels from those
patients with only a minimal elevation
in serum creatinine or simple
dehydration to those patients who are
actually in acute renal failure. Some of
the commenters stated that, while the
code may currently capture patients
with low severity levels, the patients
still need treatment and monitoring to
prevent any worsening in their
conditions. The commenters also
acknowledged that there is no clear
convention among clinicians for
documenting acute renal insufficiency
versus acute renal failure. The
commenters stated that this has been a
problematic area on which there have
been consensus conferences and
publications from a variety of quality
and renal organizations. The
commenters stated that additional work
was needed to develop a clear
consensus for documenting acute renal
failure. The commenters urged CMS to
pursue greater standardization for the
clinical documentation of acute renal
failure. Until such time as the clinical
documentation improves, the
commenters recommended that CMS
continue to classify diagnosis code
584.9 as an MCC.
Response: We agree that there is not
a consistent use of the term acute renal
failure. As mentioned earlier, this term
has been used to describe a wide range
of severity levels. However, our claims
data show that the term is being used
predominately to describe those patients
who are not at the highest severity level.
The patients are more like others with
a CC severity level. We do not believe
that it is appropriate for CMS to wait for
a consensus to build about how to use
and document the term acute renal
failure. We believe it is more
appropriate to base our decision on
current claims data and clinical review.
Regardless of the different uses of the
term ‘‘acute renal failure’’ and the
inclusion of a wide range of severity
levels, the current data show that the
code is more properly a CC and not an
MCC. As mentioned by a number of
commenters, the term ‘‘acute renal
failure’’ is being used for a wide variety
of patients, most of which do not have
a high severity level. We also point out
that we proposed reclassifying only the
unspecified acute renal failure code
from an MCC to a CC. We are leaving
the more precise acute renal failure
codes as MCCs. For instance, these more
precise acute renal failure codes will
remain on the MCC list:
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• 584.5 (Acute kidney failure with
lesion of tubular necrosis);
• 584.6 (Acute kidney failure with
lesion of renal cortical necrosis);
• 584.7 (Acute kidney failure with
lesion of renal medullary [papillary]
necrosis); and
• 584.8 (Acute kidney failure with
other specified pathological lesion in
kidney).
We proposed to remove only the code
for an unspecified type of acute kidney
failure from the MCC list and to add it
to the CC list. Our data support this
reclassification.
After consideration of the public
comments we received, we are
finalizing our proposal to change
diagnosis code 584.9 (Acute kidney
failure, unspecified) from an MCC to a
CC.
Comment: One commenter asked that
CMS also examine whether the
following encephalopathy codes should
be removed from the MCC list. The
commenter stated that claims analysis
may show a justification for removing
these codes from the MCC list.
• 348.30 Encephalopathy,
unspecified
• 348.31 Metabolic encephalopathy
• 348.39 Other encephalopathy
• 349.82 Toxic encephalopathy
Response: We believe this comment is
outside the scope of the FY 2011 IPPS/
LTCH PPS proposed rule. We did not
propose to change the severity level
classification for any of the
encephalopathy codes. We will examine
this issue as part of next year’s proposed
rule. Therefore, we are not making any
changes to the severity level
classifications of the encephalopathy
codes mentions above.
Tables 6G and 6H, Additions to and
Deletions from the CC Exclusion List,
respectively, which are effective for
discharges occurring on or after October
1, 2010, are not being published in the
Addendum to this final rule because of
the length of the two tables. Instead, we
are making them available through the
Internet on the CMS Web site at: https://
www.cms.hhs.gov/AcuteInpatientPPS.
Each of these principal diagnoses for
which there is a CC exclusion is shown
in Tables 6G and 6H in the Addendum
to this final rule with an asterisk, and
the conditions that will not count as a
CC, are provided in an indented column
immediately following the affected
principal diagnosis.
A complete updated MCC, CC, and
Non-CC Exclusions List is also available
through the Internet on the CMS Web
site at: https://www.cms.hhs.gov/Acute
InpatientPPS. Beginning with
discharges on or after October 1, 2010,
the indented diagnoses will not be
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occurred as a result of updates to the
ICD–9–CM codes, as described in Tables
6A, 6C, and 6E of the Addendum to this
final rule, we are providing the
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following summaries of those MCC and
CC changes.
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recognized by the GROUPER as valid
CCs for the asterisked principal
diagnosis.
To assist readers in identifying the
changes to the MCC and CC lists that
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Alternatively, the complete
documentation of the GROUPER logic,
including the current CC Exclusions
List, is available from 3M/Health
Information Systems (HIS), which,
under contract with CMS, is responsible
for updating and maintaining the
GROUPER program. The current MS–
DRG Definitions Manual, Version 27.0,
is available for $250.00, which includes
shipping and handling. Version 27.0 of
the manual is also available on a CD for
$200.00; a combination hard copy and
CD is available for $400.00. Version 28.0
of this manual, which includes the final
FY 2011 MS–DRG changes, will be
available in CD only for $225.00. These
manuals may be obtained by writing
3M/HIS at the following address: 100
Barnes Road, Wallingford, CT 06492; or
by calling (203) 949–0303, or by
obtaining an order form at the Web site:
https://www.3MHIS.com. Please specify
the revision or revisions requested.
10. Review of Procedure Codes in MS
DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned
to former CMS DRG 468 (Extensive O.R.
Procedure Unrelated to Principal
Diagnosis), CMS DRG 476 (Prostatic
O.R. Procedure Unrelated to Principal
Diagnosis), and CMS DRG 477
(Nonextensive O.R. Procedure Unrelated
to Principal Diagnosis) to determine
whether it would be appropriate to
change the procedures assigned among
these CMS DRGs. Under the MS–DRGs
that we adopted for FY 2008, CMS DRG
468 was split three ways and became
MS–DRGs 981, 982, and 983 (Extensive
O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and
without CC/MCC, respectively). CMS
DRG 476 became MS–DRGs 984, 985,
and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became
MS–DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated
to Principal Diagnosis with MCC, with
CC, and without CC/MCC, respectively).
MS–DRGs 981 through 983, 984
through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477,
respectively) are reserved for those cases
in which none of the O.R. procedures
performed are related to the principal
diagnosis. These MS–DRGs are intended
to capture atypical cases, that is, those
cases not occurring with sufficient
frequency to represent a distinct,
recognizable clinical group. MS–DRGs
984 through 986 (previously CMS DRG
476) are assigned to those discharges in
which one or more of the following
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prostatic procedures are performed and
are unrelated to the principal diagnosis:
• 60.0, Incision of prostate
• 60.12, Open biopsy of prostate
• 60.15, Biopsy of periprostatic tissue
• 60.18, Other diagnostic procedures
on prostate and periprostatic tissue
• 60.21, Transurethral prostatectomy
• 60.29, Other transurethral
prostatectomy
• 60.61, Local excision of lesion of
prostate
• 60.69, Prostatectomy, not elsewhere
classified
• 60.81, Incision of periprostatic
tissue
• 60.82, Excision of periprostatic
tissue
• 60.93, Repair of prostate
• 60.94, Control of (postoperative)
hemorrhage of prostate
• 60.95, Transurethral balloon
dilation of the prostatic urethra
• 60.96, Transurethral destruction of
prostate tissue by microwave
thermotherapy
• 60.97, Other transurethral
destruction of prostate tissue by other
thermotherapy
• 60.99, Other operations on prostate
All remaining O.R. procedures are
assigned to MS–DRGs 981 through 983
and 987 through 989, with MS–DRGs
987 through 989 assigned to those
discharges in which the only procedures
performed are nonextensive procedures
that are unrelated to the principal
diagnosis.3
Our review of MedPAR claims data
showed that there were 59 cases in
3 The original list of the ICD–9–CM procedure
codes for the procedures we consider nonextensive
procedures, if performed with an unrelated
principal diagnosis, was published in Table 6C in
section IV. of the Addendum to the FY 1989 final
rule (53 FR 38591). As part of the FY 1991 final rule
(55 FR 36135), the FY 1992 final rule (56 FR 43212),
the FY 1993 final rule (57 FR 23625), the FY 1994
final rule (58 FR 46279), the FY 1995 final rule (59
FR 45336), the FY 1996 final rule (60 FR 45783),
the FY 1997 final rule (61 FR 46173), and the FY
1998 final rule (62 FR 45981), we moved several
other procedures from DRG 468 to DRG 477, and
some procedures from DRG 477 to DRG 468. No
procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962); in FY 2000 (64 FR 41496);
in FY 2001 (65 FR 47064); or in FY 2002 (66 FR
39852). In the FY 2003 final rule (67 FR 49999) we
did not move any procedures from DRG 477.
However, we did move procedure codes from DRG
468 and placed them in more clinically coherent
DRGs. In the FY 2004 final rule (68 FR 45365), we
moved several procedures from DRG 468 to DRGs
476 and 477 because the procedures are
nonextensive. In the FY 2005 final rule (69 FR
48950), we moved one procedure from DRG 468 to
477. In addition, we added several existing
procedures to DRGs 476 and 477. In the FY 2006
(70 FR 47317), we moved one procedure from DRG
468 and assigned it to DRG 477. In FY 2007, we
moved one procedure from DRG 468 and assigned
it to DRGs 479, 553, and 554. In FYs 2008, 2009,
and FY 2010, no procedures were moved, as noted
in the FY 2008 final rule with comment period (72
FR 46241), the FY 2009 final rule (73 FR 48513),
and the FY 2010 final rule (74 FR 43796).
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which procedures related to the prostate
were arrayed across 10 different MDCs.
None of the 59 cases were cases that
should logically be assigned to any of
the other MDCs. For example, there
were a total of 16 cases of other
transurethral prostate surgery that
occurred in MDC 5 (Diseases and
Disorders of the Circulatory System). In
addition, none of the cases had lengths
of stay or average charges that would
indicate that these cases were anything
other than some of the expected
irregularities of medical care. Therefore,
for FY 2011, we did not propose to
change the procedures assigned among
these MS–DRGs.
We did not receive any public
comments on our proposal and,
therefore, are adopting it as final.
a. Moving Procedure Codes From MS–
DRGs 981 Through 983 or MS–DRGs
987 Through 989 Into MDCs
We annually conduct a review of
procedures producing assignment to
MS–DRGs 981 through 983 (Extensive
O.R. procedure unrelated to principal
diagnosis with MCC, with CC, and
without CC.MCC, respectively) or MS–
DRGs 987 through 989 (Nonextensive
O.R. procedure unrelated to principal
diagnosis with MCC, with CC, and
without CC/MCC, respectively) on the
basis of volume, by procedure, to see if
it would be appropriate to move
procedure codes out of these MS–DRGs
into one of the surgical MS–DRGs for
the MDC into which the principal
diagnosis falls. The data are arrayed in
two ways for comparison purposes. We
look at a frequency count of each major
operative procedure code. We also
compare procedures across MDCs by
volume of procedure codes within each
MDC.
We identify those procedures
occurring in conjunction with certain
principal diagnoses with sufficient
frequency to justify adding them to one
of the surgical MS–DRGs for the MDC in
which the diagnosis falls. Our review of
claims data showed that there were
4,443 cases in MS–DRGs 981 through
983. These 4,443 cases were arrayed
across 18 MDCs. The single most
common procedure was code 00.66
(Percutaneous transluminal coronary
angioplasty [PTCA] of coronary
atherectomy), 21 cases, located in MDC
1 (Diseases and Disorders of the
Nervous System). These cases represent
a very small volume of cases that are
unlikely to indicate medical practice
trends. In addition, from a clinical
coherence standpoint, we do not believe
it benefits the GROUPER system to add
cardiac procedures to the nervous
system MDC. The same situation was
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evident in MS–DRGs 987 through 989.
There were a total of 1,601 cases across
17 MDCs and, again, the cases did not
represent clinically coherent examples
of medical care that warranted
movement of procedure codes into
additional MS–DRGs. Examples of cases
that we reviewed included six cases of
bone biopsies in MDC 21 (Injuries,
Poisonings and Toxic Effects of Drugs)
and one case of a destruction of a lesion
of the knee in MDC 13 (Diseases and
Disorders of the Female Reproductive
System). Again, the volume of these
cases is negligible, and clinical
coherence is not demonstrated to the
degree that a change in the MS–DRGs is
warranted. Therefore, for FY 2011, we
did not propose to remove any
procedures from MS–DRGs 981 through
983 or MS–DRGs 987 through 989 into
one of the surgical MS–DRGs for the
MDC into which the principal diagnosis
is assigned.
We did not receive any public
comments on our proposal and,
therefore, are adopting it as final.
b. Reassignment of Procedures Among
MS–DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of
ICD–9–CM procedures that, when in
combination with their principal
diagnosis code, result in assignment to
MS–DRGs 981 through 983, 984 through
986 (Prostatic O.R. procedure unrelated
to principal diagnosis with MCC, with
CC, or without CC/MCC, respectively),
and 987 through 989, to ascertain
whether any of those procedures should
be reassigned from one of these three
MS–DRGs to another of the three MS–
DRGs based on average charges and the
length of stay. We look at the data for
trends such as shifts in treatment
practice or reporting practice that would
make the resulting MS–DRG assignment
illogical. If we find these shifts, we
would propose to move cases to keep
the MS–DRGs clinically similar or to
provide payment for the cases in a
similar manner. Generally, we move
only those procedures for which we
have an adequate number of discharges
to analyze the data.
To reiterate, our review of claims data
showed that 18 MDCs were represented
in MS–DRGs 981 through 983, for a total
of 4,443 cases. There were 10 MDCs
represented in MS–DRGs 984 through
986, which contained 59 cases. In
addition, our review of claims data for
MS–DRGs 987 through 989 showed
1,601 cases across 17 MDCs. However,
these cases represent such disparate
situations as one case of a large bowel
incision assigned to MDC 1 (Diseases
and Disorders of the Nervous System)
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and one case of a revision of the femoral
component of a hip replacement
assigned to MDC 3 (Diseases and
Disorders of the Ear, Nose, Mouth, and
Throat). We do not believe that any of
these cases represent shifts in either
treatment practice or reporting practice.
As these types of cases do not represent
clinical coherence, we do not believe
that the addition of these procedure
codes identified in our review would
positively benefit the overall MS–DRG
logic. Therefore, for FY 2011, we did not
propose to move any procedure codes
among these MS–DRGs.
We did not receive any public
comments on our proposal and,
therefore, are adopting it as final.
c. Adding Diagnosis or Procedure Codes
to MDCs
Based on the review of cases in the
MDCs as described above in sections
G.10.a. and b., we did not propose to
add any diagnosis or procedure codes to
MDCs for FY 2011.
We did not receive any public
comments on our proposal and,
therefore, are adopting it as final.
11. Changes to the ICD–9–CM Coding
System, Including Discussion of the
Replacement of the ICD–9–CM Coding
System With the ICD–10–CM and ICD–
10–PCS Systems in FY 2014
a. ICD–9–CM Coding System
As described in section II.B.1. of the
preamble of this final rule, the ICD–9–
CM is a coding system currently used
for the reporting of diagnoses and
procedures performed on a patient. In
September 1985, the ICD–9–CM
Coordination and Maintenance
Committee was formed. This is a
Federal interdepartmental committee,
co-chaired by the National Center for
Health Statistics (NCHS), the Centers for
Disease Control and Prevention, and
CMS, charged with maintaining and
updating the ICD–9–CM system. The
Committee is jointly responsible for
approving coding changes, and
developing errata, addenda, and other
modifications to the ICD–9–CM to
reflect newly developed procedures and
technologies and newly identified
diseases. The Committee is also
responsible for promoting the use of
Federal and non-Federal educational
programs and other communication
techniques with a view toward
standardizing coding applications and
upgrading the quality of the
classification system.
The Official Version of the ICD–9–CM
contains the list of valid diagnosis and
procedure codes. (The Official Version
of the ICD–9–CM is available from the
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Government Printing Office on CD–
ROM for $19.00 by calling (202) 512–
1800.) Complete information on
ordering the CD–ROM is also available
at: https://www.cms.hhs.gov/
ICD9ProviderDiagnosticCodes/
05_CDROM.asp#TopOfPage. The
Official Version of the ICD–9–CM is no
longer available in printed manual form
from the Federal Government; it is only
available on CD–ROM. Users who need
a paper version are referred to one of the
many products available from
publishing houses.
The NCHS has lead responsibility for
the ICD–9–CM diagnosis codes included
in the Tabular List and Alphabetic
Index for Diseases, while CMS has lead
responsibility for the ICD–9–CM
procedure codes included in the
Tabular List and Alphabetic Index for
Procedures.
The Committee encourages
participation in the above process by
health-related organizations. In this
regard, the Committee holds public
meetings for discussion of educational
issues and proposed coding changes.
These meetings provide an opportunity
for representatives of recognized
organizations in the coding field, such
as the American Health Information
Management Association (AHIMA), the
American Hospital Association (AHA),
and various physician specialty groups,
as well as individual physicians, health
information management professionals,
and other members of the public, to
contribute ideas on coding matters.
After considering the opinions
expressed at the public meetings and in
writing, the Committee formulates
recommendations, which then must be
approved by the agencies.
The Committee presented proposals
for coding changes for implementation
in FY 2011 at a public meeting held on
September 16–17, 2009 and finalized
the coding changes after consideration
of comments received at the meetings
and in writing by November 20, 2009.
Those coding changes are announced in
Tables 6A through 6F in the Addendum
to this final rule. The Committee held
its 2010 meeting on March 9–10, 2010.
New codes for which there was a
consensus of public support and for
which complete tabular and indexing
changes are made by May 2010 will be
included in the October 1, 2010 update
to ICD–9–CM. Code revisions that were
discussed at the March 9–10, 2010
Committee meeting but that could not
be finalized in time to include them in
the Addendum to the FY 2011 IPPS/
LTCH PPS proposed rule are included
in Tables 6A through 6F of the
Addendum to this final rule and are
marked with an asterisk (*).
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Copies of the minutes of the
procedure codes discussions at the
Committee’s September 16–17, 2009
meeting and March 9–10, 2010 meeting
can be obtained from the CMS Web site
at: https://cms.hhs.gov/
ICD9ProviderDiagnosticCodes/
03_meetings.asp. The minutes of the
diagnosis codes discussions at the
September 16–17, 2009 meeting and
March 9–10, 2010 meeting are found at:
https://www.cdc.gov/nchs/icd.htm.
These Web sites also provide detailed
information about the Committee,
including information on requesting a
new code, attending a Committee
meeting, and timeline requirements and
meeting dates.
We encourage commenters to address
suggestions on coding issues involving
diagnosis codes to: Donna Pickett, CoChairperson, ICD–9–CM Coordination
and Maintenance Committee, NCHS,
Room 2402, 3311 Toledo Road,
Hyattsville, MD 20782. Comments may
be sent by e-mail to: dfp4@cdc.gov.
Questions and comments concerning
the procedure codes should be
addressed to: Patricia E. Brooks, CoChairperson, ICD–9–CM Coordination
and Maintenance Committee, CMS,
Center for Medicare Management,
Hospital and Ambulatory Policy Group,
Division of Acute Care, C4–08–06, 7500
Security Boulevard, Baltimore, MD
21244–1850. Comments may be sent by
e-mail to:
patricia.brooks2@cms.hhs.gov.
The ICD–9–CM code changes that
have been approved will become
effective October 1, 2010. The new ICD–
9–CM codes are listed, along with their
MS–DRG classifications, in Tables 6A
and 6B (New Diagnosis Codes and New
Procedure Codes, respectively) in the
Addendum to this final rule. As we
stated above, the code numbers and
their titles were presented for public
comment at the ICD–9–CM
Coordination and Maintenance
Committee meetings. Both oral and
written comments were considered
before the codes were approved.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23911), we
solicited comments on the proposed
classification of these new codes, which
were shown in Tables 6A and 6B of the
Addendum to the proposed rule.
Comment: A few commenters
supported our proposals. One
commenter, representing one of the
national hospital associations,
recommended that the new codes
488.01 (Influenza due to identified
avian influenza virus with pneumonia)
and 488.11 (Influenza due to identified
novel H1N1 influenza virus with
pneumonia) be assigned to the
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pneumonia MS–DRGs to be consistent
with the MS–DRG definitions and
classification of diagnosis code 487.0
(Influenza with pneumonia).
Response: We agree with the
commenters. Therefore, both codes
488.01 and 488.11 will be assigned to
MS–DRGs 193 through 195 (Simple
Pneumonia with Pleurisy With MCC,
Simple Pneumonia with Pleurisy With
CC, and Simple Pneumonia with
Pleurisy Without CC/MCC, respectively)
as reflected in Table 6A of this final
rule.
Comment: The same commenter
representing one of the hospital
associations also questioned the CC
designation for two new codes: 780.33
(Post traumatic seizures) and 278.03
(Obesity hypoventilation syndrome). In
the proposed rule (75 FR 24207 through
24208), both codes were listed as nonCCs in Table 6A. The commenter
pointed out that specific seizures
(convulsions) codes such as 780.31
(Febrile convulsion (simple),
unspecified) and 780.32 (Complex
febrile convulsions) are classified as a
CC and to be consistent within the
classification system, code 780.33
should also be classified as a CC.
The commenter recommended further
analysis for code 278.03 (Obesity
hypoventilation syndrome) to determine
if this condition meets the definition of
a CC. The commenter pointed out that
obesity hypoventilation syndrome is a
condition where overweight patients
cannot breathe appropriately resulting
in low blood oxygen levels and high
blood carbon dioxide levels. This
condition puts a strain on the heart and
lungs and may eventually lead to a more
serious condition such as heart failure
or respiratory failure. This condition
would have to be closely monitored
while the patient is in the hospital and
may require respiratory treatment such
as CPAP, BIPAP, or even mechanical
ventilation depending on the severity of
the condition. Such services involve
intensive monitoring where, for
example, in an intensive care unit,
expensive and technically complex
services or extensive care requiring a
greater number of caregivers is required.
Response: Our medical advisors agree
with the commenter’s assessment that
both codes should be classified as CCs.
Therefore, we are amending the
proposed non-CC designation for both
codes 788.03 and 278.03 and classifying
them as CCs in Table 6A. These changes
are reflected in Table 6A in this final
rule.
Comment: Several commenters
addressed the MS–DRG placement of
new procedure code 35.97
(Percutaneous mitral valve repair with
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implant) that was created for use
beginning on October 1, 2010. The
commenters urged CMS to assign this
code to the same MS–DRG as open
surgery so that higher payment would
result.
Response: In addition to the
MitraClip® device not yet being FDA
approved, we have no claims data on
which to evaluate such a MS–DRG
assignment. However, the most
important concept for denying these
requests is that the MitraClip® device is
delivered percutaneously. To assign this
percutaneous procedure to MS–DRGs
utilizing an open approach would not
conform to the structure of the MS–
DRGs, and disregards the concept of
clinical coherence. We have no
evidence-based data with which to
justify any other MS–DRG assignment
than those where the current
percutaneous valve procedures are now
assigned. Therefore, procedure code
35.97 is assigned to MS–DRGs 246, 247,
248, 249, 250, and 251.
Comment: Two comments urged CMS
to assign new procedure code 37.37
(Excision or destruction of other lesion
or tissue of heart, thoracoscopic
approach) to MS–DRGs 228, 229, and
230 (Other Cardiothoracic Procedure
with MCC, with CC, and without CC/
MCC, respectively).
Response: CMS’ practice has been,
where practicable, to assign new ICD–9–
CM codes to the same MS–DRG(s) as
their predecessor codes. For this reason,
procedure code 37.37 has been assigned
to MS–DRGs 228, 229, and 230, as
described above.
For codes that have been replaced by
new or expanded codes, the
corresponding new or expanded
diagnosis codes are included in Table
6A in the Addendum to this final rule.
New procedure codes are shown in
Table 6B in the Addendum to this final
rule. Diagnosis codes that have been
replaced by expanded codes or other
codes or have been deleted are in Table
6C (Invalid Diagnosis Codes) in the
Addendum to this final rule. These
invalid diagnosis codes will not be
recognized by the GROUPER beginning
with discharges occurring on or after
October 1, 2010. Table 6D in the
Addendum to this final rule contains
invalid procedure codes. These invalid
procedure codes will not be recognized
by the GROUPER beginning with
discharges occurring on or after October
1, 2010. Revisions to diagnosis code
titles are in Table 6E (Revised Diagnosis
Code Titles) in the Addendum to this
final rule, which also includes the MS–
DRG assignments for these revised
codes. Table 6F in the Addendum to
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this final rule includes revised
procedure code titles for FY 2011.
In the September 7, 2001 final rule
implementing the IPPS new technology
add-on payments (66 FR 46906), we
indicated we would attempt to include
proposals for procedure codes that
would describe new technology
discussed and approved at the Spring
meeting as part of the code revisions
effective the following October. As
stated previously, ICD–9–CM codes
discussed at the March 9–10, 2010
Committee meeting that receive
consensus and that were finalized by
May 2010 are included in Tables 6A
through 6F in the Addendum to this
final rule.
Section 503(a) of Public Law 108–173
included a requirement for updating
ICD–9–CM codes twice a year instead of
a single update on October 1 of each
year. This requirement was included as
part of the amendments to the Act
relating to recognition of new
technology under the IPPS. Section
503(a) amended section 1886(d)(5)(K) of
the Act by adding a clause (vii) which
states that the ‘‘Secretary shall provide
for the addition of new diagnosis and
procedure codes on April 1 of each year,
but the addition of such codes shall not
require the Secretary to adjust the
payment (or diagnosis-related group
classification) * * * until the fiscal year
that begins after such date.’’ This
requirement improves the recognition of
new technologies under the IPPS system
by providing information on these new
technologies at an earlier date. Data will
be available 6 months earlier than
would be possible with updates
occurring only once a year on October
1.
While section 1886(d)(5)(K)(vii) of the
Act states that the addition of new
diagnosis and procedure codes on April
1 of each year shall not require the
Secretary to adjust the payment, or DRG
classification, under section 1886(d) of
the Act until the fiscal year that begins
after such date, we have to update the
DRG software and other systems in
order to recognize and accept the new
codes. We also publicize the code
changes and the need for a mid-year
systems update by providers to identify
the new codes. Hospitals also have to
obtain the new code books and encoder
updates, and make other system changes
in order to identify and report the new
codes.
The ICD–9–CM Coordination and
Maintenance Committee holds its
meetings in the spring and fall in order
to update the codes and the applicable
payment and reporting systems by
October 1 of each year. Items are placed
on the agenda for the ICD–9–CM
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Coordination and Maintenance
Committee meeting if the request is
received at least 2 months prior to the
meeting. This requirement allows time
for staff to review and research the
coding issues and prepare material for
discussion at the meeting. It also allows
time for the topic to be publicized in
meeting announcements in the Federal
Register as well as on the CMS Web site.
The public decides whether or not to
attend the meeting based on the topics
listed on the agenda. Final decisions on
code title revisions are currently made
by March 1 so that these titles can be
included in the IPPS proposed rule. A
complete addendum describing details
of all changes to ICD–9–CM, both
tabular and index, is published on the
CMS and NCHS Web sites in May of
each year. Publishers of coding books
and software use this information to
modify their products that are used by
health care providers. This 5-month
time period has proved to be necessary
for hospitals and other providers to
update their systems.
A discussion of this timeline and the
need for changes are included in the
December 4–5, 2005 ICD–9–CM
Coordination and Maintenance
Committee minutes. The public agreed
that there was a need to hold the fall
meetings earlier, in September or
October, in order to meet the new
implementation dates. The public
provided comment that additional time
would be needed to update hospital
systems and obtain new code books and
coding software. There was considerable
concern expressed about the impact this
new April update would have on
providers.
In the FY 2005 IPPS final rule, we
implemented section 1886(d)(5)(K)(vii)
of the Act, as added by section 503(a)
of Public Law 108–173, by developing a
mechanism for approving, in time for
the April update, diagnosis and
procedure code revisions needed to
describe new technologies and medical
services for purposes of the new
technology add-on payment process. We
also established the following process
for making these determinations. Topics
considered during the Fall ICD–9–CM
Coordination and Maintenance
Committee meeting are considered for
an April 1 update if a strong and
convincing case is made by the
requester at the Committee’s public
meeting. The request must identify the
reason why a new code is needed in
April for purposes of the new
technology process. The participants at
the meeting and those reviewing the
Committee meeting summary report are
provided the opportunity to comment
on this expedited request. All other
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topics are considered for the October 1
update. Participants at the Committee
meeting are encouraged to comment on
all such requests. There were no
requests approved for an expedited
April l, 2010 implementation of an ICD–
9–CM code at the September 16–17,
2009 Committee meeting. Therefore,
there were no new ICD–9–CM codes
implemented on April 1, 2010.
Current addendum and code title
information is published on the CMS
Web site at: https://www.cms.hhs.gov/
icd9ProviderDiagnosticCodes/01_
overview.asp#TopofPage. Information
on ICD–9–CM diagnosis codes, along
with the Official ICD–9–CM Coding
Guidelines, can be found on the Web
site at: https://www.cdc.gov/nchs/
icd9.htm. Information on new, revised,
and deleted ICD–9–CM codes is also
provided to the AHA for publication in
the Coding Clinic for ICD–9–CM. AHA
also distributes information to
publishers and software vendors.
CMS also sends copies of all ICD–9–
CM coding changes to its Medicare
contractors for use in updating their
systems and providing education to
providers.
These same means of disseminating
information on new, revised, and
deleted ICD–9–CM codes will be used to
notify providers, publishers, software
vendors, contractors, and others of any
changes to the ICD–9–CM codes that are
implemented in April. The code titles
are adopted as part of the ICD–9–CM
Coordination and Maintenance
Committee process. Thus, although we
publish the code titles in the IPPS
proposed and final rules, they are not
subject to comment in the proposed or
final rules. We will continue to publish
the October code updates in this manner
within the IPPS proposed and final
rules. For codes that are implemented in
April, we will assign the new procedure
code to the same MS–DRG in which its
predecessor code was assigned so there
will be no MS–DRG impact as far as
MS–DRG assignment. Any midyear
coding updates will be available
through the Web sites indicated above
and through the Coding Clinic for ICD–
9–CM. Publishers and software vendors
currently obtain code changes through
these sources in order to update their
code books and software systems. We
will strive to have the April 1 updates
available through these Web sites 5
months prior to implementation (that is,
early November of the previous year), as
is the case for the October 1 updates.
b. Code Freeze
The International Classification of
Diseases, 10th Revision (ICD–10) coding
system applicable to hospital inpatient
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services will be implemented on
October 1, 2013, as described in the
Health Insurance Portability and
Accountability Act (HIPAA)
Administrative Simplification:
Modifications to Medical Data code Set
Standards to Adopt ICD–10–CM and
ICD–10–PCS final rule (74 FR 3328
through 3362, January 16, 2009). The
ICD–10 coding system includes the
International Classification of Diseases,
10th Revision, Clinical Modification
(ICD–10–CM) for diagnosis coding and
the International Classification of
Diseases, 10th Revision, Procedure
Coding System (ICD–10–PCS) for
inpatient hospital procedure coding, as
well as the Official ICD–10–CM and
ICM–10–PCS Guidelines for Coding and
Reporting. In the January 16, 2009 ICD–
10–CM and ICD–10–PCS final rule (74
FR 3328 through 3362), there was a
discussion of the need for a partial or
total freeze in the annual updates to
both ICD–9–CM and ICD–10–CM and
ICD–10–PCS codes. The public
comment addressed in that final rule
stated that the annual code set updates
should cease l year prior to the
implementation of ICD–10. The
commenters stated that this freeze of
code updates would allow for
instructional and/or coding software
programs to be designed and purchased
early, without concern that an upgrade
would take place immediately before
the compliance date, necessitating
additional updates and purchases.
We responded to comments in the
ICD–10 final rule that the ICD–9–CM
Coordination and Maintenance
Committee has jurisdiction over any
action impacting the ICD–9–CM and
ICD–10 code sets. Therefore, the issue of
consideration of a moratorium on
updates to the ICD–9–CM, ICD–10–CM,
and ICD–10–PCS code sets in
anticipation of the adoption of ICD–10–
CM and ICD–10–PCS would be
addressed through the Committee at a
future public meeting.
At the March 11–12, 2009 ICD–9–CM
Coordination and Maintenance
Committee meeting, the public was
notified that there would be a
discussion of whether there was a need
to freeze updates to ICD–9–CM and/or
ICD–10–CM and ICD–10–PCS prior to
the implementation of ICD–10. The
audience was asked to consider this
issue and be prepared to discuss the
topic at the September 16–17, 2009
ICD–9–CM Coordination and
Maintenance Committee meeting.
Advance written comments on this
topic were welcomed. The first part of
the meeting was devoted to this topic.
CMS received comments in advance
of the meeting. CMS staff summarized
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these advanced comments at the
meeting as follows:
No ICD–9–CM or ICD–10–CM/PCS
updates beginning October 1, 2010 (36
months for implementation activities
without annual code updates). This
approach involves updating ICD–9–CM
and ICD–10 codes on October 1, 2010,
and not updating them again until after
ICD–10 implementation on October 1,
2013. The commenters mentioned the
extensive work needed to prepare for
the transition to ICD–10 which will
affect vendors, payers, providers,
trainers, clearinghouses, and all claims
handling organizations. The
commenters stated that the 36 months
between the last ICD–9–CM and ICD–10
updates on October 1, 2010 and the
implementation of ICD–10 on October 1,
2013, were necessary to prepare and
train for the transition.
No ICD–9–CM or ICD–10–CM/PCS
updates beginning October 1, 2011 (24
months for implementation activities
without annual code updates). This
approach involves updating ICD–9–CM
and ICD–10 codes on October 1, 2011,
and not updating them again until after
ICD–10 implementation on October 1,
2013. The commenters raised similar
concerns to those mentioned above. The
commenters stated that, if codes
continue to change, the changes would
make it difficult for vendors, payers,
and providers to be ready and for coder
training to be successful. One
commenter suggested that a provision
be developed to perform limited annual
updates to capture new technologies or
new diagnoses.
No ICD–10–CM/PCS updates
beginning October 1, 2012 but continue
annual updates to ICD–9–CM. This
commenter supported annual updates to
ICD–9–CM to capture advances in
medical science. However, the
commenter supported a freeze of ICD–
10 beginning October 1, 2012, to give
the industry time to update systems and
prepare for ICD–10 implementation.
No ICD–10 updates on October 1,
2012, but update ICD–9–CM without
interruption. (No period for
implementation activities without
annual code updates.) The commenter
recommended no ICD–10 updates on
October 1, 2012, but then updating ICD–
10 again on October 1, 2013. The
commenter recommended updating
ICD–9–CM continuously through a final
update on October 1, 2012. The
commenter stated that having a two or
three year gap between updating the
code books would lead to a loss of data.
The commenter stated that there is a
need to retain the ability to update the
code books to capture conditions such
as Swine flu.
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Update both ICD–9–CM and ICD–10–
CM/PCS annually through October 1,
2013 (no period for implementation
activities without annual code updates).
The commenter stated that codes should
not be frozen prior to the
implementation of ICD–10. The
commenter stated that freezing the
updates would inhibit the recognition of
new technologies.
Many of the commenters suggested a
resumption of updates to ICD–10–CM
and ICD–10–PCS beginning on October
1, 2014. However, one commenter
suggested annual updates of ICD–10–
CM and ICD–10–PCS without
interruptions, including on October 1,
2013.
The topic was then opened for public
discussion at the Committee meeting.
CMS received a variety of comments
from the participants that mirrored the
advance written comments. These
comments ranged from those supporting
a complete freeze for both coding
systems to those who recommended that
both coding systems continue to be
updated annually prior to ICD–10
implementation. There were also many
comments that supported a more
limited update process beginning on
October 1, 2011, or October 1, 2012,
which would allow only a small number
of new codes to capture new
technologies or new diseases. A number
of commenters pointed out that section
503(a) of Public Law 108–173 included
a requirement for updating ICD–9–CM
codes twice a year to capture new
technologies. The commenters stated
that CMS must make a provision to
capture new technologies despite any
requests to freeze code updates.
Commenters voiced concerns about
the impact on vendors creating new
ICD–10 products when both ICD–9–CM
and ICD–10–CM and ICD–10–PCS codes
were extensively updated on an annual
basis. Commenters stated that vendors
and educators were reluctant to begin
ICD–10 products and training materials
until there was a period of stability
without extensive annual updates. Some
commenters stated that it was important
for physician offices to have time to
prepare for the implementation of ICD–
10. Reducing the annual ICD–9–CM and
ICD–10 annual updates would be
helpful to physician offices.
Other commenters stated that it was
important to update codes annually so
that information on new diseases and
technologies can be captured. These
commenters stated that vendors,
providers, system maintainers, and
coders were used to annual code
updates, and that they should continue.
One commenter requested that ICD–
10–CM codes be frozen on October 1,
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2011 so that ICD–10–CM codes could be
coordinated with the Diagnostic and
Statistical Manual of Mental Disorders
(DSM), Fifth Edition. The commenter
stated that the American Psychiatric
Association plans to publish the fifth
edition in 2012. Updates to ICD–10–CM
on or after October 1, 2011, would
disrupt those plans.
One commenter suggested an
approach that would greatly reduce the
number of updates and provide more
stability in the coding systems during
the implementation period. This
commenter suggested that the large,
regular code updates on ICD–9–CM be
discontinued beginning on October 1,
2011, or October 1, 2012. The
commenter suggested that CMS and
CDC raise the bar for new code requests
at that time and only consider requests
for new codes that clearly describe a
new technology or a new disease. The
commenter stated that this may lead to
the creation of some new procedure
codes which do not ultimately receive
FDA approval, as is the case now.
CMS and CDC have carefully
reviewed the comments received at the
ICD–9–CM Coordination and
Maintenance Committee meeting as well
as the written comments submitted.
Most commenters proposed a limited
freeze on code updates to both ICD–9–
CM and ICD–10–CM and ICD–10–PCS
code sets, with an exception made for
adding codes for new technologies and
diseases. Providing this exception
would comply with section 503(a) of
Public Law 108–173, which, as
previously stated, includes a
requirement for updating ICD–9–CM
codes twice a year to capture new
technologies. There was support for
making the last regular update on
October 1, 2011. The commenters
recommended that the ICD–9–CM
Coordination and Maintenance
Committee continue to discuss any new
code updates for both coding systems.
However, new codes would only be
added to ICD–9–CM or ICD–10 to
capture new technologies, as required
by section 503(a) of Public Law 108–
173. Other coding issues raised would
be held for consideration after ICD–10 is
implemented.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23913), we
solicited additional input on this
subject, especially in light of the
requirements on hospitals for
meaningful use of electronic health
records. We welcomed public comments
that explore whether a freeze is needed
to help with adoption of health IT, given
other priorities such as achievement of
meaningful use and implementation of
ICD–10 by FY 2013. We welcomed
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input on having the last regular, annual
update to both ICD–9–CM and ICD–10
be made on October 1, 2011. On October
1, 2012, there would be only limited
code updates to both the ICD–9–CM and
ICD–10 coding systems to capture new
technologies and diseases. On October
1, 2013, there would be only limited
code updates to ICD–10 to capture new
technologies and diagnoses. Any other
issues raised would be considered for
implementation in ICD 10 on October 1,
2014, a year after ICD–10 is
implemented. We agree with
commenters that there is a need to
provide the provider, payer, and vendor
community time to prepare for the
implementation of ICD–10 and the
accompanying system and product
updates. The vendor community is
especially interested in providing a
more stable code set for ICD–10 while
they are developing new products.
Comment: A number of commenters
supported the recommendation that the
last regular update to ICD–9–CM and
ICD–10–CM/PCS be implemented on
October 1, 2011, with only limited code
updates to both ICD–9–CM and ICD–10–
CM/PCS on October 1, 2012, to capture
new technologies and procedures as
well as new diseases. Commenters
stated that successful implementation of
ICD–10 will require significant
planning, education, and systems
modifications. Continuing regular
updates to ICD–9–CM and ICD–10–CM/
PCS would make the implementation of
these new coding systems more costly
and complex. The commenters
recommended that updates occurring on
October 1, 2012, be limited to proposals
for urgently needed codes. They stated
that such proposals should make a
‘‘clear and convincing’’ case to the ICD–
9–CM Coordination and Maintenance
Committee, including public comment
as to why the proposal cannot wait for
the next regularly scheduled updates.
An example of the emergence of a new
disease such as H1N1 influenzas was
provided.
Several commenters who supported
the limited freeze stated that, by
accommodating the process for the
capture of new technologies and disease
during this period, CMS is not only in
compliance with section 503(a) of
Public Law 108–173 requirements for
new technology, but also anticipates
that new diagnosis codes may be needed
to capture new diseases, as we have
seen with the Avian and H1N1
influenzas. The commenters called this
a thoughtful approach which should
allow the freeze of code sets while still
accommodating new codes for new
technologies and procedures as well as
urgent needs to capture new diseases.
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Several commenters also stated that
most practicing physicians and their
staff have not had sufficient opportunity
to become familiar with ICD–10–CM.
They believed that this freeze will allow
physicians and physician specialty
groups a better opportunity to become
familiar with the codes common to their
specialty prior to the implementation of
ICD–10. Other comments who
supported the recommendations for a
limited code freeze recommended that
CMS and CDC develop strict criteria
that a code proposal must meet in order
to qualify for the limited update during
the freeze period.
Several commenters recommended
that there be no updates to ICD–10–CM/
PCS on October 1, 2013, unless
absolutely necessary. They indicated
that an example of an urgent need was
that of a pandemic that could not be
otherwise reported with existing codes.
The commenters stated that they
understood the statutory requirements
for add-on payments for new technology
under the inpatient payment system,
and urged CMS to consider alternative
solutions to recognize such new
technologies. Other commenters
opposed any ICD–10 code updates on
October 1, 2013. The commenters stated
that a total freeze was needed on
October 1, 2013, to enable users of the
classification system the opportunity to
prepare for ICD–10.
One commenter who strongly
supported the limited freeze offered an
example of the possible impact of not
pursuing a code freeze would have on
its organization. This organization is
currently working with clients to
complete the necessary software
updates for the adoption of ICD–10 by
early next year. Based on its analysis,
the work is not confined to systems but
also involves coding and billing
activities for healthcare claims. The
commenter stated that there would be
an impact on physician documentation,
problem lists, decision support,
laboratory, emergency department,
radiology, nursing, scheduling,
registration management, and other
internal systems. The commenter
opined that, by continuing regular code
updates without a freeze, they would
have to rework activities and spend
cycle time doing maintenance updates
to software and content updates they
had already performed to include
additional annual code updates. The
ICD–10 updates they make will need to
be tested and maintenance activities
performed to build the necessary
reference data to support production
adoption of ICD–10.
One commenter strongly opposed the
partial freeze for FY 2012. The
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commenter stated that accurate, specific
code assignment is a prerequisite for
accurate physician and hospital
profiling and value-based purchasing.
The commenter stated that ICD–10–CM
is an imperfect system and that
refinements to ICD–9–CM should be
carried over to ICD–10 prior to its
implementation date of October 1, 2013.
The commenter urged CMS to continue
to work on refining ICD–10. Another
commenter opposed any freeze of ICD–
9–CM or ICD–10 codes. The commenter
stated that codes should continue to be
updated as usual each year so that
physician and hospital efficiency can be
more accurately measured with accurate
codes.
Several commenters supported the
limited freeze, but requested that the
last regular code updates be on October
1, 2012, instead of 2011. The
commenters stated that a 3-year freeze
from October 1, 2011 through October 1,
2014 was overly long.
Response: We will review all
comments received on the partial freeze
as part of the ICD–9–CM Coordination
and Maintenance Committee process as
well as these additional comments
received and summarized above. A final
decision on whether or not there will be
a partial code freeze will be announced
at the September 15–16, 2010 ICD–9–
CM Coordination and Maintenance
Committee. An agenda for this meeting
will be posted on the CMS Web site by
mid-August 2010 at https://www.cms.
gov/ICD9ProviderDiagnosticCodes/03_
meetings.asp.
We believe that this advance notice of
a partial code freeze provides the health
care industry ample time to request last
major code updates to ICD–9–CM and
ICD–10, which could be discussed at the
September 15–16, 2010 and the March
2011 ICD–9–CM Coordination and
Maintenance Committee meeting. Codes
discussed at these two meetings would
be considered for the final major code
updates on October 1, 2011. Any code
issues raised after that time would be
addressed at the ICD–9–CM
Coordination and Maintenance
Committee meetings in September 2011
through March 2013 to determine if they
represented new technologies or new
diseases. Any new technologies and
diseases would be added during the
regular annual updates. Other code
requests would be held for
implementation on October 1, 2014.
We welcome additional input on
having the last regular code updates to
ICD–9–CM and ICD–10 on October 1,
2011, and to only add codes for new
technologies and diseases on October 1,
2012 and 2013. We also welcome
additional input on having the next
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regular update to ICD–10 occur again on
October 1, 2014.
Information on ICD–10 can be found
on the CMS Web site at: https://www.
cms.hhs.gov/ICD10. The final ICD–10
version of MS–DRGs would be adopted
under the formal rulemaking process as
part of our annual IPPS updates.
c. Processing of 25 Diagnosis Codes and
25 Procedure Codes on Hospital
Inpatient Claims
We have received repeated requests
from the hospital community to process
all 25 diagnosis codes and 25 procedure
codes submitted on electronic hospital
inpatient claims. Hospitals can submit
up to 25 diagnoses and 25 procedures;
however, CMS’ current system
limitations allow for the processing of
only the first 9 diagnoses and 6
procedures. While CMS accepts all 25
diagnoses and 25 procedures submitted
on the claims, we do not process all of
the codes because of these system
limitations. We recognize that much
valuable information is lost by not
processing the additional diagnosis and
procedure codes that are reported by
hospitals.
We responded to hospitals’ requests
that we process up to 25 diagnosis codes
and 25 procedure codes in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 43798). In that final rule, we referred
readers to the ICD–10 final rule (74 FR
3328 through 3362) where we discuss
the updating of Medicare systems prior
to the implementation of ICD–10 on
October 1, 2013. We mentioned that part
of the system updates in preparation for
ICD–10 is the ‘‘expansion of our ability
to process more diagnosis and
procedure codes.’’ In the FY 2009 IPPS
final rule (73 FR 48433 through 48444),
we also responded to multiple requests
to increase the number of codes
processed from 9 diagnosis and 6
procedure codes to 25 diagnosis and 25
procedure codes.
CMS is currently undergoing
extensive system updates as part of the
move to 5010, which includes the
ability to accept ICD–10 codes. This
complicated transition involves
converting many internal systems prior
to October 1, 2013, when ICD–10 will be
implemented. One important step in
this planned conversion process is the
expansion of our ability to process
additional diagnosis and procedure
codes. We are currently planning to
complete the expansion of this internal
system capability so that we are able to
process up to 25 diagnoses and 25
procedures on hospital inpatient claims
as part of the HIPPA ASC X12 Technical
Reports Type 3, Version 005010
(Version 5010) standards system update.
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CMS will be able to process up to 25
diagnosis codes and 25 procedure codes
when received on the 5010 format
starting on January 1, 2011. We
recognize the value of the additional
information provided by this coded data
for multiple uses such as for payment,
quality measures, outcome analysis, and
other important uses. We will continue
to pursue this additional processing
capacity as aggressively as possible in
response to the multiple requests from
the hospital industry. We appreciate the
support of the health care community
for this extensive system update process
that will allow us to process more of
this important data. Therefore, for
claims submitted on the 5010 format
beginning January 1, 2011, we will
increase the capacity to process
diagnosis and procedure codes on
hospital inpatient claims from the
current 9 diagnoses and 6 procedures up
to 25 diagnoses and 25 procedures.
Comment: Several commenters
commended CMS on its plans to accept
and process up to 25 diagnoses and 25
procedures on hospital inpatient claims
submitted on the 5010 format beginning
January 1, 2011. One commenter
expressed appreciation for CMS’
recognition that a complete picture of
patients’ clinical conditions and
procedures is necessary in order to
accurately measure quality, analyze
outcomes, assess severity of illness, and
determine reimbursement.
Response: We appreciate the support
for our plan to accept and process up to
25 diagnoses and 25 procedures on
hospital inpatient claims submitted on
the 5010 format beginning January 1,
2011. We will keep the providers
updated on our progress in this activity.
ICD–10 MS–DRGs
We received comments on the
creation of the ICD–10 version of the
MS–DRGs, which will be implemented
on October 1, 2013 (FY 2014) when we
implement the reporting of ICD–10
codes. While we did not propose an
ICD–10 version of the MS–DRGs, CMS
has been actively involved in converting
our current MS–DRGs from ICD–9–CM
codes to ICD–10 codes and sharing this
information through the ICD–9–CM
Coordination and Maintenance
Committee. CMS undertook this early
conversion project to assist other payers
and providers in understanding how to
go about their own conversion projects.
We posted ICD–10 MS–DRGs based on
V26.0 (FY 2009) of the MS–DRGs. We
also posted a paper that describes how
CMS went about completing this project
and suggestions for others to follow. All
of this information can be found on our
Web site at: https://www.cms.gov/ICD10/
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17_ICD10_MS_DRG
_Conversion_Project.asp. We will
continue to keep the public updated on
our maintenance efforts for ICD–10–CM
and ICD–10–PCS coding systems as well
as the General Equivalence Mappings
that assist in conversion through the
ICD–9–CM Coordination and
Maintenance Committee. Information on
these committee meetings can be found
at: https://www.cms.gov/ICD9Provider
DiagnosticCodes/03_meetings.asp.
Comment: Several commenters
recommended that the ICD–10 MS–DRG
GROUPER logic be available no later
than the FY 2013 rulemaking period,
with an extended public comment
period in order to allow providers
sufficient time to analyze and model the
proposed MS–DRG groupings prior to
its implementation on October 1, 2013.
Response: CMS initiated early efforts
to convert the MS–DRGs from ICD–9–
CM codes to ICD–10 codes. As
discussed earlier, the public was
informed of this project through the
ICD–9–CM Coordination and
Maintenance Committee. Summary
reports of those meetings where this
ICD–10 conversion of MS–DRGs took
place can be found at https://
www.cms.gov/ICD9Provider
DiagnosticCodes/03_meetings.asp.
Currently, we have Version 26.0 of the
ICD–10 MS–DRGs posted for public
review. During FY 2011, we will post
Version 28.0 of the ICD–10 MS–DRGS
based on the FY 2011 MS–DRGs
(Version 28.0) that we are finalizing in
this final rule. This ICD–10 MS–DRG
Version 28.0 will also include the CC
Exclusion List, which was not posted
with Version 26.0. We will be
discussing this update at the September
15–16, 2010 ICD–9–CM Coordination
and Maintenance Committee Meeting. A
complete agenda for this meeting will be
posted in mid-August 2010 at: https://
www.cms.gov/ICD9ProviderDiagnostic
Codes/03_meetings.asp. The registration
site for the meeting will open on August
13, 2010. We will continue to work with
the public to explain how we are
approaching the conversion of MS–
DRGs to ICD–10 and will post drafts of
updates as they are developed for public
review. The final version of the ICD–10
MS–DRGs to be implemented in FY
2014 will be subject to notice and
comment rulemaking. In the meantime,
we will provide extensive and detailed
information on this activity through the
ICD–9–CM Coordination and
Maintenance Committee.
12. Other Issues Not Addressed in the
Proposed Rule
We received a number of public
comments on issues that were not
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within the scope of the proposals in the
FY 2011 IPPS/LTCH PPS proposed rule.
a. Rechargeable Dual Array Deep Brain
Stimulation System
We received a public comment
requesting that CMS assign the
combination of procedure codes
representing rechargeable systems for
deep brain stimulation therapy, code
02.93 (Implantation or replacement of
intracranial neurostimulator lead(s)),
and code 86.98 (Insertion or
replacement of dual array rechargeable
neurostimulator pulse generator) to MS–
DRGs 023 and 024 (Craniotomy with
Major Device Implant/Acute Complex
CNS PDX with MCC or Chemo Implant
and Craniotomy with Major Device
Implant/Acute Complex CNS PDX
without MCC, respectively). The
commenter stated that this would allow
all full system dual array deep brain
stimulation cases to be appropriately
grouped to the same MS–DRGs. The
commenter stated that the procedures to
implant the rechargeable and
nonrechargeable dual array systems are
similar clinically and with respect to
resource utilization. Currently, codes
02.93 and 86.98 are assigned to MS–
DRGs 025 through 027 (Craniotomy and
Endovascular Intracranial Procedures
with MCC, Craniotomy and
Endovascular Intracranial Procedures
with CC, and Craniotomy and
Endovascular Intracranial Procedures
without MCC/CC, respectively).
This comment is outside the scope of
the FY 2011 IPPS/LTCH PPS proposed
rule, as we did not propose any changes
to MS–DRGs 023 and 024 for
rechargeable systems for deep brain
stimulation therapy. Therefore, we are
not addressing this issue for FY 2011.
As we stated in FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23864), we
encourage individuals with comments
about MS–DRG classifications to submit
these comments no later than early
December of each year so they can be
carefully considered for possible
inclusion in the annual proposed rule
and, if included, may be subject to
public review and comment.
b. IntraOperative Electron RadioTherapy
(IOERT)
We received a public comment
requesting that CMS update the MS–
DRG mapping assignments for
procedure code 92.41 (Intra-operative
electron radiation therapy) to ensure the
cost of this technology is captured in
each MS–DRG involving tumor removal
in the rectum, head/neck, pancreas,
lung, genitourinary, soft tissue, and
breast. IntraOperative Electron
RadioTherapy (IOERT) is the direct
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application of radiation to a tumor and/
or tumor bed while the patient is
undergoing surgery for cancer.
Currently, this code is not assigned to a
specific MS–DRG.
This comment is outside the scope of
the FY 2011 IPPS/LTCH PPS proposed
rule, as we did not propose any changes
to the MS–DRG for IOERT. We refer the
commenter to section II.B.2 of the
proposed rule (75 FR 23864) where we
discuss the timeline for submission of
comments about MS–DRG
classifications.
c. Brachytherapy
We received a public comment
requesting that CMS assign procedure
code 92.27 (Implantation or insertion of
radioactive elements) to various MS–
DRGs where the use of brachytherapy
sources has been expanded. In addition,
it was recommended that appropriate
separate payment for the brachytherapy
sources be allowed so that hospitals
may be reimbursed appropriately for the
unique source cost per patient.
Brachytherapy, also called seed
implantation, involves placing
radioactive sources in or near the tumor
either as a permanent or temporary
implant.
This comment is outside the scope of
the FY 2011 IPPS/LTCH PPS proposed
rule, as we did not propose any changes
to the MS–DRG for brachytherapy. We
refer the commenter to section II.B.2 of
the proposed rule (75 FR 23864) where
we discuss the timeline for submission
of comments about MS–DRG
classifications.
d. Excisional Debridement
We received a public comment
recommending that procedure code
86.22 (Excisional debridement of
wound, infection, or burn) be
reclassified from an OR procedure to a
non-OR procedure. The commenter
stated that many excisional
debridements are not performed in the
operating room setting, but instead are
done in wound clinics, physician
offices, and in patient rooms. The
commenter interpreted the classification
of code 86.22 to be that of a proxy for
severity of illness before MS–DRGs were
implemented. With the more serious
pressure ulcers, Stages 3 and 4, being
classified as MCCs, according to the
commenter, the need to classify code
86.22 as an OR is no longer necessary.
This comment is outside the scope of
the FY 2011 IPPS/LTCH PPS proposed
rule, as we did not propose any changes
for excisional debridement. We refer the
commenter to section II.B.2 of the
proposed rule (75 FR 23864) where we
discuss the timeline for submission of
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comments about MS–DRG
classifications.
H. Recalibration of MS–DRG Weights
As we proposed, in developing the FY
2011 system of weights, we used two
data sources: Claims data and cost
report data. As in previous years, the
claims data source is the MedPAR file.
This file is based on fully coded
diagnostic and procedure data for all
Medicare inpatient hospital bills. The
FY 2009 MedPAR data used in this final
rule include discharges occurring on
October 1, 2008, through September 30,
2009, based on bills received by CMS
through March 31, 2010, from all
hospitals subject to the IPPS and shortterm, acute care hospitals in Maryland
(which are under a waiver from the IPPS
under section 1814(b)(3) of the Act). The
FY 2009 MedPAR file used in
calculating the proposed relative
weights includes data for approximately
10,898,371 Medicare discharges from
IPPS providers. Discharges for Medicare
beneficiaries enrolled in a Medicare
Advantage managed care plan are
excluded from this analysis. The data
exclude CAHs, including hospitals that
subsequently became CAHs after the
period from which the data were taken.
The second data source used in the costbased relative weighting methodology is
the FY 2008 Medicare cost report data
files from HCRIS (that is, cost reports
beginning on or after October 1, 2007,
and before October 1, 2008), which
represents the most recent full set of
cost report data available. We used the
March 31, 2010 update of the HCRIS
cost report files for FY 2008 in setting
the relative cost-based weights.
The methodology we used to calculate
the DRG cost-based relative weights
from the FY 2009 MedPAR claims data
and FY 2008 Medicare cost report data
is as follows:
• To the extent possible, all the
claims were regrouped using the
proposed FY 2011 MS–DRG
classifications discussed in sections II.B.
and G. of the preamble of this final rule.
• The transplant cases that were used
to establish the relative weights for heart
and heart-lung, liver and/or intestinal,
and lung transplants (MS–DRGs 001,
002, 005, 006, and 007, respectively)
were limited to those Medicareapproved transplant centers that have
cases in the FY 2009 MedPAR file.
(Medicare coverage for heart, heart-lung,
liver and/or intestinal, and lung
transplants is limited to those facilities
that have received approval from CMS
as transplant centers.)
• Organ acquisition costs for kidney,
heart, heart-lung, liver, lung, pancreas,
and intestinal (or multivisceral organs)
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transplants continue to be paid on a
reasonable cost basis. Because these
acquisition costs are paid separately
from the prospective payment rate, it is
necessary to subtract the acquisition
charges from the total charges on each
transplant bill that showed acquisition
charges before computing the average
cost for each MS–DRG and before
eliminating statistical outliers.
• Claims with total charges or total
lengths of stay less than or equal to zero
were deleted. Claims that had an
amount in the total charge field that
differed by more than $10.00 from the
sum of the routine day charges,
intensive care charges, pharmacy
charges, special equipment charges,
therapy services charges, operating
room charges, cardiology charges,
laboratory charges, radiology charges,
other service charges, labor and delivery
charges, inhalation therapy charges,
emergency room charges, blood charges,
and anesthesia charges were also
deleted.
• At least 96.1 percent of the
providers in the MedPAR file had
charges for 10 of the 15 cost centers.
Claims for providers that did not have
charges greater than zero for at least 10
of the 15 cost centers were deleted.
• Statistical outliers were eliminated
by removing all cases that were beyond
3.0 standard deviations from the mean
of the log distribution of both the total
charges per case and the total charges
per day for each MS–DRG.
• Effective October 1, 2008, because
hospital inpatient claims include a POA
indicator field for each diagnosis
present on the claim, only for purposes
of relative weight-setting, the POA
indicator field was reset to ‘‘Y’’ for ‘‘Yes’’
for all claims that otherwise have an ‘‘N’’
(No) or a ‘‘U’’ (documentation
insufficient to determine if the
condition was present at the time of
inpatient admission) in the POA field.
Under current payment policy, the
presence of specific HAC codes, as
indicated by the POA field values, can
generate a lower payment for the claim.
Specifically, if the particular condition
is present on admission (that is, a ‘‘Y’’
indicator is associated with the
diagnosis on the claim), then it is not a
HAC, and the hospital is paid for the
higher severity (and, therefore, the
higher weighted MS–DRG). If the
particular condition is not present on
admission (that is, an ‘‘N’’ indicator is
associated with the diagnosis on the
claim) and there are no other
complicating conditions, the DRG
GROUPER assigns the claim to a lower
severity (and, therefore, the lower
weighted MS–DRG) as a penalty for
allowing a Medicare inpatient to
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contract a HAC. While the POA
reporting meets policy goals of
encouraging quality care and generates
program savings, it presents an issue for
the relative weight-setting process.
Because cases identified as HACs are
likely to be more complex than similar
cases that are not identified as HACs,
the charges associated with HACs are
likely to be higher as well. Thus, if the
higher charges of these HAC claims are
grouped into lower severity MS–DRGs
prior to the relative weight-setting
process, the relative weights of these
particular MS–DRGs would become
artificially inflated, potentially skewing
the relative weights. In addition, we
want to protect the integrity of the
budget neutrality process by ensuring
that, in estimating payments, no
increase to the standardized amount
occurs as a result of lower overall
payments in a previous year that stem
from using weights and case-mix that
are based on lower severity MS–DRG
assignments. If this would occur, the
anticipated cost savings from the HAC
policy would be lost.
To avoid these problems, we reset the
POA indicator field to ‘‘Y’’ only for
relative weight-setting purposes for all
claims that otherwise have a ‘‘N’’ or an
‘‘U’’ in the POA field. This resetting
‘‘forced’’ the more costly HAC claims
into the higher severity MS–DRGs as
appropriate, and the relative weights
calculated for each MS–DRG more
closely reflect the true costs of those
cases.
Once the MedPAR data were trimmed
and the statistical outliers were
removed, the charges for each of the 15
cost groups for each claim were
standardized to remove the effects of
differences in area wage levels, IME and
DSH payments, and for hospitals in
Alaska and Hawaii, the applicable costof-living adjustment. Because hospital
charges include charges for both
operating and capital costs, we
standardized total charges to remove the
effects of differences in geographic
adjustment factors, cost-of-living
adjustments, and DSH payments under
the capital IPPS as well. Charges were
then summed by MS–DRG for each of
the 15 cost groups so that each MS–DRG
had 15 standardized charge totals. These
charges were then adjusted to cost by
applying the national average CCRs
developed from the FY 2008 cost report
data.
The 15 cost centers that we used in
the relative weight calculation are
shown in the following table. The table
shows the lines on the cost report and
the corresponding revenue codes that
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we used to create the 15 national cost
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BILLING CODE 4120–01–C
We developed the national average
CCRs as follows:
Taking the FY 2008 cost report data,
we removed CAHs, Indian Health
Service hospitals, all-inclusive rate
hospitals, and cost reports that
represented time periods of less than 1
year (365 days). We included hospitals
located in Maryland as we are including
their charges in our claims database. We
then created CCRs for each provider for
each cost center (see prior table for line
items used in the calculations) and
removed any CCRs that were greater
than 10 or less than 0.01. We
normalized the departmental CCRs by
dividing the CCR for each department
by the total CCR for the hospital for the
purpose of trimming the data. We then
took the logs of the normalized cost
center CCRs and removed any cost
center CCRs where the log of the cost
center CCR was greater or less than the
mean log plus/minus 3 times the
standard deviation for the log of that
cost center CCR. Once the cost report
data were trimmed, we calculated a
Medicare-specific CCR. The Medicarespecific CCR was determined by taking
the Medicare charges for each line item
from Worksheet D–4 and deriving the
Medicare-specific costs by applying the
hospital-specific departmental CCRs to
the Medicare-specific charges for each
line item from Worksheet D–4. Once
each hospital’s Medicare-specific costs
were established, we summed the total
Medicare-specific costs and divided by
the sum of the total Medicare-specific
charges to produce national average,
charge-weighted CCRs.
After we multiplied the total charges
for each MS–DRG in each of the 15 cost
centers by the corresponding national
average CCR, we summed the 15 ‘‘costs’’
across each MS–DRG to produce a total
standardized cost for the MS–DRG. The
average standardized cost for each MS–
DRG was then computed as the total
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weights for FY 2011. Using the FY 2009
MedPAR data set, there are 8 MS–DRGs
that contain fewer than 10 cases. Under
the MS–DRGs, we have fewer lowvolume DRGs than under the CMS DRGs
because we no longer have separate
DRGs for patients age 0 to 17 years.
With the exception of newborns, we
previously separated some DRGs based
on whether the patient was age 0 to 17
years or age 17 years and older. Other
than the age split, cases grouping to
these DRGs are identical. The DRGs for
patients age 0 to 17 years generally have
very low volumes because children are
typically ineligible for Medicare. In the
past, we have found that the low
volume of cases for the pediatric DRGs
could lead to significant year-to-year
instability in their relative weights.
Although we have always encouraged
Group
CCR
non-Medicare payers to develop weights
Routine Days ..................................
0.539 applicable to their own patient
Intensive Days ................................
0.473 populations, we have heard frequent
Drugs ..............................................
0.202 complaints from providers about the use
Supplies & Equipment ....................
0.345 of the Medicare relative weights in the
Therapy Services ............................
0.403
Laboratory .......................................
0.155 pediatric population. We believe that
Operating Room .............................
0.272 eliminating this age split in the MS–
Cardiology .......................................
0.169 DRGs will provide more stable payment
Radiology ........................................
0.152 for pediatric cases by determining their
Emergency Room ...........................
0.263 payment using adult cases that are
Blood and Blood Products ..............
0.415 much higher in total volume. Newborns
Other Services ................................
0.416 are unique and require separate MS–
Labor & Delivery .............................
0.470
DRGs that are not mirrored in the adult
Inhalation Therapy ..........................
0.200
Anesthesia ......................................
0.128 population. Therefore, it remains
necessary to retain separate MS–DRGs
for newborns. All of the low-volume
Since FY 2009, the relative weights
MS–DRGs listed below are for
have been based on 100 percent cost
weights based on our MS–DRG grouping newborns. In FY 2011, because we do
not have sufficient MedPAR data to set
system.
accurate and stable cost weights for
When we recalibrated the DRG
these low-volume MS–DRGs, we
weights for previous years, we set a
proposed to compute weights for the
threshold of 10 cases as the minimum
low-volume MS–DRGs by adjusting
number of cases required to compute a
reasonable weight. In the FY 2011 IPPS/ their FY 2010 weights by the percentage
LTCH PPS proposed rule (75 FR 23922), change in the average weight of the
we proposed to use that same case
cases in other MS–DRGs. The crosswalk
threshold in recalibrating the MS–DRG
table is shown below:
standardized cost for the MS–DRG
divided by the transfer-adjusted case
count for the MS–DRG. The average cost
for each MS–DRG was then divided by
the national average standardized cost
per case to determine the relative
weight.
The new cost-based relative weights
were then normalized by an adjustment
factor of 1.57489 so that the average case
weight after recalibration was equal to
the average case weight before
recalibration. The normalization
adjustment is intended to ensure that
recalibration by itself neither increases
nor decreases total payments under the
IPPS, as required by section
1886(d)(4)(C)(iii) of the Act.
The 15 national average CCRs for FY
2011 are as follows:
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50136
We did not receive any public
comment on this section. Therefore, we
are adopting the national average CCRs
as proposed, with the MS–DRG weights
recalibrated based on these CCRs.
I. Add-On Payments for New Services
and Technologies
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1. Background
Sections 1886(d)(5)(K) and (L) of the
Act establish a process of identifying
and ensuring adequate payment for new
medical services and technologies
(sometimes collectively referred to in
this section as ‘‘new technologies’’)
under the IPPS. Section
1886(d)(5)(K)(vi) of the Act specifies
that a medical service or technology will
be considered new if it meets criteria
established by the Secretary after notice
and opportunity for public comment.
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Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or
technology may be considered for new
technology add-on payment if, ‘‘based
on the estimated costs incurred with
respect to discharges involving such
service or technology, the DRG
prospective payment rate otherwise
applicable to such discharges under this
subsection is inadequate.’’ We note that
beginning with FY 2008, CMS
transitioned from CMS–DRGs to MS–
DRGs.
The regulations implementing these
provisions specify three criteria for a
new medical service or technology to
receive the additional payment: (1) The
medical service or technology must be
new; (2) the medical service or
technology must be costly such that the
DRG rate otherwise applicable to
discharges involving the medical service
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or technology is determined to be
inadequate; and (3) the service or
technology must demonstrate a
substantial clinical improvement over
existing services or technologies. These
three criteria are explained below in the
ensuing paragraphs in further detail.
Under the first criterion, as reflected
in 42 CFR 412.87(b)(2), a specific
medical service or technology will be
considered ‘‘new’’ for purposes of new
medical service or technology add-on
payments until such time as Medicare
data are available to fully reflect the cost
of the technology in the MS–DRG
weights through recalibration.
Typically, there is a lag of 2 to 3 years
from the point a new medical service or
technology is first introduced on the
market (generally on the date that the
technology receives FDA approval/
clearance) and when data reflecting the
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use of the medical service or technology
are used to calculate the MS–DRG
weights. For example, data from
discharges occurring during FY 2009 are
used to calculate the FY 2011 MS–DRG
weights in this final rule. Section
412.87(b)(2) of the regulations therefore
provides that ‘‘a medical service or
technology may be considered new
within 2 or 3 years after the point at
which data begin to become available
reflecting the ICD–9–CM code assigned
to the new medical service or
technology (depending on when a new
code is assigned and data on the new
medical service or technology become
available for DRG recalibration). After
CMS has recalibrated the MS–DRGs,
based on available data to reflect the
costs of an otherwise new medical
service or technology, the medical
service or technology will no longer be
considered ‘new’ under the criterion for
this section.’’
The 2-year to 3-year period during
which a medical service or technology
can be considered new would ordinarily
begin on the date on which the medical
service or technology received FDA
approval or clearance. (We note that, for
purposes of this section of this final
rule, we generally refer to both FDA
approval and FDA clearance as FDA
‘‘approval.’’) However, in some cases,
there may be few to no Medicare data
available for the new service or
technology following FDA approval. For
example, the newness period could
extend beyond the 2-year to 3-year
period after FDA approval is received in
cases where the product initially was
generally unavailable to Medicare
patients following FDA approval, such
as in cases of a national noncoverage
determination or a documented delay in
bringing the product onto the market
after that approval (for instance,
component production or drug
production has been postponed
following FDA approval due to shelf life
concerns or manufacturing issues). After
the MS–DRGs have been recalibrated to
reflect the costs of an otherwise new
medical service or technology, the
medical service or technology is no
longer eligible for special add-on
payment for new medical services or
technologies (as specified under
§ 412.87(b)(2)). For example, an
approved new technology that received
FDA approval in October 2008 and
entered the market at that time may be
eligible to receive add-on payments as a
new technology for discharges occurring
before October 1, 2011 (the start of FY
2012). Because the FY 2012 MS–DRG
weights would be calculated using FY
2010 MedPAR data, the costs of such a
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new technology would be fully reflected
in the FY 2012 MS–DRG weights.
Therefore, the new technology would no
longer be eligible to receive add-on
payments as a new technology for
discharges occurring in FY 2012 and
thereafter.
We do not consider a service or
technology to be new if it is
substantially similar to one or more
existing technologies. That is, even if a
technology receives a new FDA
approval, it may not necessarily be
considered ‘‘new’’ for purposes of new
technology add-on payments if it is
‘‘substantially similar’’ to a technology
that was approved by FDA and has been
on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR
47351), we explained our policy
regarding substantial similarity in detail
and its relevance for assessing if the
hospital charge data used in the
development of the relative weights for
the relevant DRGs reflect the costs of the
technology. In that final rule, we stated
that, for determining substantial
similarity, we consider (1) whether a
product uses the same or a similar
mechanism of action to achieve a
therapeutic outcome, and (2) whether a
product is assigned to the same or a
different DRG. We indicated that both of
the above criteria should be met in order
for a technology to be considered
‘‘substantially similar’’ to an existing
technology. However, in that same final
rule, we also noted that, due to the
complexity of issues regarding the
substantial similarity component of the
newness criterion, it may be necessary
to exercise flexibility when considering
whether technologies are substantially
similar to one another. Specifically, we
stated that we may consider additional
factors, depending on the circumstances
specific to each application.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43813 and 43814),
we noted that the discussion of
substantial similarity in the FY 2006
IPPS final rule related to comparing two
separate technologies made by different
manufacturers. Nevertheless, we stated
that the criteria discussed in the FY
2006 IPPS final rule also are relevant
when comparing the similarity between
a new use and existing uses of the same
technology (or a very similar technology
manufactured by the same
manufacturer). In other words, we stated
that it is necessary to establish that the
new indication for which the
technology has received FDA approval
is not substantially similar to that of the
prior indication. We explained that such
a distinction is necessary to determine
the appropriate start date of the newness
period in evaluating whether the
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technology would qualify for add-on
payments (that is, the date of the ‘‘new’’
FDA approval or that of the prior
approval), or whether the technology
could qualify for separate new
technology add-on payments under each
indication.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43814), we added
a third factor of consideration to our
analysis of whether a new technology is
substantially similar to one or more
existing technologies. Specifically, in
making a determination of whether a
technology is substantially similar to an
existing technology, we will consider
whether the new use of the technology
involves the treatment of the same or
similar type of disease and the same or
similar patient population (74 FR
24130), in addition to considering the
already established factors described in
the FY 2006 IPPS final rule (that is, (1)
whether a product uses the same or a
similar mechanism of action to achieve
a therapeutic outcome; and (2) whether
a product is assigned to the same or a
different DRG). As we noted in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule, if all three components are present
and the new use is deemed substantially
similar to one or more of the existing
uses of the technology (that is beyond
the newness period), we would
conclude that the technology is not new
and, therefore, is not eligible for the new
technology add-on payment.
Under the second criterion,
§ 412.87(b)(3) further provides that, to
be eligible for the add-on payment for
new medical services or technologies,
the MS–DRG prospective payment rate
otherwise applicable to the discharge
involving the new medical services or
technologies must be assessed for
adequacy. Under the cost criterion, to
assess the adequacy of payment for a
new technology paid under the
applicable MS–DRG prospective
payment rate, we evaluate whether the
charges for cases involving the new
technology exceed certain threshold
amounts. In the FY 2004 IPPS final rule
(68 FR 45385), we established the
threshold at the geometric mean
standardized charge for all cases in the
MS–DRG plus 75 percent of 1 standard
deviation above the geometric mean
standardized charge (based on the
logarithmic values of the charges and
converted back to charges) for all cases
in the MS–DRG to which the new
medical service or technology is
assigned (or the case-weighted average
of all relevant MS–DRGs, if the new
medical service or technology occurs in
more than one MS–DRG).
However, section 503(b)(1) of Public
Law 108–173 amended section
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1886(d)(5)(K)(ii)(I) of the Act to provide
that, beginning in FY 2005, CMS will
apply ‘‘a threshold * * * that is the
lesser of 75 percent of the standardized
amount (increased to reflect the
difference between cost and charges) or
75 percent of one standard deviation for
the diagnosis-related group involved.’’
(We refer readers to section IV.D. of the
preamble to the FY 2005 IPPS final rule
(69 FR 49084) for a discussion of the
revision of the regulations to
incorporate the change made by section
503(b)(1) of Pub. L. 108–173.) Table 10
that was included in the IPPS/LTCH
PPS final rule published in the Federal
Register on August 27, 2009, contained
the final thresholds that we used to
evaluate applications for new
technology add-on payments for the
proposed rule for FY 2011 (74 FR
44173). However, we issued a
supplemental proposed rule in the
Federal Register on June 2, 2010 (75 FR
30756) that addressed the provisions of
the Affordable Care Act that affected our
proposed policies and payment rates for
FY 2011 under the IPPS and the LTCH
PPS. In addition, we issued a Federal
Register notice on June 2, 2010 (75 FR
31118) and further instructions that
addressed the provisions of the
Affordable Care Act that affected the
policies and payment rates for FY 2010
under the IPPS and the LTCH PPS. In
these documents, we updated Table 10
that was published in the Federal
Register on August 27, 2009 and Table
10 in the Addendum to the FY 2011
IPPS/LTCH PPS proposed rule to reflect
the changes made by the Affordable
Care Act.
In the September 7, 2001 final rule
that established the new technology
add-on payment regulations (66 FR
46917), we discussed the issue of
whether the HIPAA Privacy Rule at 45
CFR parts 160 and 164 applies to claims
information that providers submit with
applications for new technology add-on
payments. Specifically, we explained
that health plans, including Medicare,
and providers that conduct certain
transactions electronically, including
the hospitals that would be receiving
payment under the FY 2001 IPPS final
rule, are required to comply with the
HIPAA Privacy Rule. We further
explained how such entities could meet
the applicable HIPAA requirements by
discussing how the HIPAA Privacy Rule
permitted providers to share with health
plans information needed to ensure
correct payment, if they had obtained
consent from the patient to use that
patient’s data for treatment, payment, or
health care operations. We also
explained that, because the information
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to be provided within applications for
new technology add-on payment would
be needed to ensure correct payment, no
additional consent would be required.
The HHS Office for Civil Rights has
since amended the HIPAA Privacy Rule,
but the results remain. The HIPAA
Privacy Rule does not require a covered
entity to obtain consent from patients to
use or disclose protected health
information for the covered entity’s
treatment, payment, or health care
operations purposes, and expressly
permits such entities to use or to
disclose protected health information
for these purposes and for the treatment
purposes of another health care provider
and the payment purposes of another
covered entity or health care provider.
(We refer readers to 45 CFR
164.502(a)(1)(ii) and 164.506(c)(1) and
(c)(3) and the Standards for Privacy of
Individually Identifiable Health
Information published in the Federal
Register (67 FR 53208 through 53214)
on August 14, 2002, for a full discussion
of consent in the context of the HIPAA
Privacy Rule.)
Under the third criterion,
§ 412.87(b)(1) of our existing regulations
provides that a new technology is an
appropriate candidate for an additional
payment when it represents ‘‘an advance
that substantially improves, relative to
technologies previously available, the
diagnosis or treatment of Medicare
beneficiaries.’’ For example, a new
technology represents a substantial
clinical improvement when it reduces
mortality, decreases the number of
hospitalizations or physician visits, or
reduces recovery time compared to the
technologies previously available. (We
refer readers to the September 7, 2001
final rule for a complete discussion of
this criterion (66 FR 46902).)
The new medical service or
technology add-on payment policy
under the IPPS provides additional
payments for cases with relatively high
costs involving eligible new medical
services or technologies while
preserving some of the incentives
inherent under an average-based
prospective payment system. The
payment mechanism is based on the
cost to hospitals for the new medical
service or technology. Under § 412.88, if
the costs of the discharge (determined
by applying cost to charge ratios
(‘‘CCRs’’) as described in § 412.84(h))
exceed the full DRG payment (including
payments for IME and DSH, but
excluding outlier payments), Medicare
will make an add-on payment equal to
the lesser of: (1) 50 percent of the
estimated costs of the new technology
(if the estimated costs for the case
including the new technology exceed
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50139
Medicare’s payment); or (2) 50 percent
of the difference between the full DRG
payment and the hospital’s estimated
cost for the case. Unless the discharge
qualifies for an outlier payment,
Medicare payment is limited to the full
MS–DRG payment plus 50 percent of
the estimated costs of the new
technology.
Section 1886(d)(4)(C)(iii) of the Act
requires that the adjustments to annual
MS–DRG classifications and relative
weights must be made in a manner that
ensures that aggregate payments to
hospitals are not more or less than they
were in the prior fiscal year (i.e., they
are ‘‘budget neutral’’). Therefore, in the
past, we accounted for projected
payments under the new medical
service and technology provision during
the upcoming fiscal year, while at the
same time estimating the payment effect
of changes to the MS–DRG
classifications and recalibration. The
impact of additional payments under
this provision was then included in the
budget neutrality factor, which was
applied to the standardized amounts
and the hospital-specific amounts.
However, section 503(d)(2) of Public
Law 108–173 provides that there shall
be no reduction or adjustment in
aggregate payments under the IPPS due
to add-on payments for new medical
services and technologies. Therefore, in
accordance with section 503(d)(2) of
Public Law 108–173, add-on payments
for new medical services or technologies
for FY 2005 and later years have not
been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR
48561 through 48563), we modified our
regulations at § 412.87 to codify our
current practice of how CMS evaluates
the eligibility criteria for new medical
service or technology add-on payment
applications. We also amended
§ 412.87(c) to specify that all applicants
for new technology add-on payments
must have FDA approval for their new
medical service or technology by July 1
of each year prior to the beginning of the
fiscal year that the application is being
considered.
The Council on Technology and
Innovation (CTI) at CMS oversees the
agency’s cross-cutting priority on
coordinating coverage, coding and
payment processes for Medicare with
respect to new technologies and
procedures, including new drug
therapies, as well as promoting the
exchange of information on new
technologies between CMS and other
entities. The CTI, composed of senior
CMS staff and clinicians, was
established under section 942(a) of
Public Law 108–173. The Council is cochaired by the Director of the Office of
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Clinical Standards and Quality (OCSQ)
and the Director of the Center for
Medicare (CM), who is also designated
as the CTI’s Executive Coordinator.
The specific processes for coverage,
coding, and payment are implemented
by CM, OCSQ, and the local claimspayment contractors (in the case of local
coverage and payment decisions). The
CTI supplements, rather than replaces,
these processes by working to assure
that all of these activities reflect the
agency-wide priority to promote highquality, innovative care. At the same
time, the CTI also works to streamline,
accelerate, and improve coordination of
these processes to ensure that they
remain up to date as new issues arise.
To achieve its goals, the CTI works to
streamline and create a more
transparent coding and payment
process, improve the quality of medical
decisions, and speed patient access to
effective new treatments. It is also
dedicated to supporting better decisions
by patients and doctors in using
Medicare-covered services through the
promotion of better evidence
development, which is critical for
improving the quality of care for
Medicare beneficiaries.
CMS plans to continue its Open Door
forums with stakeholders who are
interested in CTI’s initiatives. In
addition, to improve the understanding
of CMS’ processes for coverage, coding,
and payment and how to access them,
the CTI has developed an ‘‘innovator’s
guide’’ to these processes. The intent is
to consolidate this information, much of
which is already available in a variety
of CMS documents and in various
places on the CMS Web site, in a userfriendly format. This guide was
published in August 2008 and is
available on the CMS Web site at:
https://www.cms.hhs.gov/
CouncilonTechInnov/Downloads/
InnovatorsGuide8_25_08.pdf.
As we indicated in the FY 2009 IPPS
final rule (73 FR 48554), we invite any
product developers or manufacturers of
new medical technologies to contact the
agency early in the process of product
development if they have questions or
concerns about the evidence that would
be needed later in the development
process for the agency’s coverage
decisions for Medicare.
The CTI aims to provide useful
information on its activities and
initiatives to stakeholders, including
Medicare beneficiaries, advocates,
medical product manufacturers,
providers, and health policy experts.
Stakeholders with further questions
about Medicare’s coverage, coding, and
payment processes, or who want further
guidance about how they can navigate
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these processes, can contact the CTI at
CTI@cms.hhs.gov or from the ‘‘Contact
Us’’ section of the CTI home page
(https://www.cms.hhs.gov/
CouncilonTechInnov/).
We note that applicants for add-on
payments for new medical services or
technologies for FY 2012 must submit a
formal request, including a full
description of the clinical applications
of the medical service or technology and
the results of any clinical evaluations
demonstrating that the new medical
service or technology represents a
substantial clinical improvement, along
with a significant sample of data to
demonstrate that the medical service or
technology meets the high-cost
threshold. Complete application
information, along with final deadlines
for submitting a full application, will be
posted as it becomes available on our
Web site at: https://www.cms.hhs.gov/
AcuteInpatientPPS/08_newtech.asp. To
allow interested parties to identify the
new medical services or technologies
under review before the publication of
the proposed rule for FY 2012, the Web
site also will list the tracking forms
completed by each applicant.
Comment: A number of commenters
addressed topics relating to the
substantial similarity criteria, marginal
cost factor for the new technology addon payment, the potential
implementation of ICD–10–CM, the use
of external data in determining the cost
threshold, paying new technology addon payments for 2 to 3 years, mapping
new technologies to the appropriate
MS–DRG, and the use of the date that
a ICD–9–CM code is assigned to a
technology or the FDA approval date
(whichever is later) as the start of the
newness period.
Response: We did not request public
comments nor propose to make any
changes to any of the issues summarized
above. Because these comments are
outside of the scope of the provisions
included in the proposed rule, we are
not providing a complete summary of
the comments or responding to them in
this final rule.
2. Public Input Before Publication of a
Notice of Proposed Rulemaking on AddOn Payments
Section 1886(d)(5)(K)(viii) of the Act,
as amended by section 503(b)(2) of
Public Law 108–173, provides for a
mechanism for public input before
publication of a notice of proposed
rulemaking regarding whether a medical
service or technology represents a
substantial clinical improvement or
advancement. The process for
evaluating new medical service and
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technology applications requires the
Secretary to—
• Provide, before publication of a
proposed rule, for public input
regarding whether a new service or
technology represents an advance in
medical technology that substantially
improves the diagnosis or treatment of
Medicare beneficiaries;
• Make public and periodically
update a list of the services and
technologies for which applications for
add-on payments are pending;
• Accept comments,
recommendations, and data from the
public regarding whether a service or
technology represents a substantial
clinical improvement; and
• Provide, before publication of a
proposed rule, for a meeting at which
organizations representing hospitals,
physicians, manufacturers, and any
other interested party may present
comments, recommendations, and data
regarding whether a new medical
service or technology represents a
substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for
public input regarding add-on payments
for new medical services and
technologies for FY 2011 prior to
publication of the FY 2011 IPPS/RY
2011 LTCH PPS proposed rule, we
published a notice in the Federal
Register on November 27, 2009 (74 FR
62339 through 62342), and held a town
hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February
19, 2010. In the announcement notice
for the meeting, we stated that the
opinions and alternatives provided
during the meeting would assist us in
our evaluations of applications by
allowing public discussion of the
substantial clinical improvement
criterion for each of the FY 2011 new
medical service and technology add-on
payment applications before the
publication of the FY 2011 proposed
rule.
Approximately 80 individuals
registered to attend the town hall
meeting in person, while additional
individuals listened over an open
telephone line. Each of the three FY
2011 applicants presented information
on its technology, including a
discussion of data reflecting the
substantial clinical improvement aspect
of the technology. We considered each
applicant’s presentation made at the
town hall meeting, as well as written
comments submitted on the
applications, in our evaluation of the
new technology add-on applications for
FY 2011 in the FY 2011 proposed rule
and this final rule.
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In response to the published notice
and the new technology town hall
meeting, we received 11 written
comments regarding applications for FY
2011 new technology add-on payments.
We summarized these comments or, if
applicable, indicated that there were no
comments received, at the end of each
discussion of the individual
applications in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23926 and
23927).
3. FY 2011 Status of Technologies
Approved for FY 2010 Add-On
Payments
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a. Spiration® IBV® Valve System
Spiration, Inc. submitted an
application for new technology add-on
payments for the Spiration® IBV® Valve
System (Spiration® IBV®). The
Spiration® IBV® is a device that is used
to place, via bronchoscopy, small, oneway valves into selected small airways
in the lung in order to limit airflow into
selected portions of lung tissue that
have prolonged air leaks following
surgery while still allowing mucus,
fluids, and air to exit, thereby reducing
the amount of air that enters the pleural
space. The device is intended to control
prolonged air leaks following three
specific surgical procedures: lobectomy;
segmentectomy; or lung volume
reduction surgery (LVRS). According to
the applicant, an air leak that is present
on postoperative day 7 is considered
‘‘prolonged’’ unless present only during
forced exhalation or cough. In order to
help prevent valve migration, there are
five anchors with tips that secure the
valve to the airway. The implanted
valves are intended to be removed no
later than 6 weeks after implantation.
With regard to the newness criterion,
the Spiration® IBV® received a HDE
approval from the FDA on October 24,
2008. We were unaware of any
previously FDA-approved predicate
devices, or otherwise similar devices,
that could be considered substantially
similar to the Spiration® IBV®.
However, the applicant asserted that the
FDA had precluded the device from
being used in the treatment of any
patients until the Institutional Review
Board (IRB) granted approvals regarding
its study sites. Therefore, the Spiration®
IBV® met the newness criterion once it
obtained at least one IRB approval
because the device would then be
available on the market to treat
Medicare beneficiaries.
After evaluation of the newness, costs,
and substantial clinical improvement
criteria for new technology payments for
the Spiration® IBV® and consideration
of the public comments we received on
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the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule, including the additional
analysis of clinical data and supporting
information submitted by the applicant,
we approved the Spiration® IBV® for
new technology add-on payments for FY
2010. In that final rule, we noted that
the Spiration® IBV® was the only device
currently approved for the purpose of
treating prolonged air leaks following
lobectomy, segmentectomy, and LVRS
patients in the United States. We stated
that without the availability of this
device, patients with prolonged air leaks
(following lobectomy, segmentectomy,
and LVRS) might otherwise remain
inpatients in the hospital (and have a
longer length of stay than they might
otherwise have without the Spiration®
IBV®) or might even require additional
invasive surgeries to resolve the air leak.
We also noted that use of the Spiration®
IBV® may lead to more rapid beneficial
resolution of prolonged air leaks and
reduce recovery time following the three
lung surgeries mentioned above.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43823), we
indicated that we remained interested in
seeing whether the clinical evidence
continues to find it to be effective. This
approval was on the basis of using the
Spiration® IBV® consistent with the
FDA approval (HDE). Accordingly, we
emphasized the need for appropriate
patient selection. Therefore, we limited
the add-on payment to cases involving
prolonged air leaks following
lobectomy, segmentectomy, and LVRS
in MS–DRGs 163, 164, and 165. In the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43823), we stated that cases
involving the Spiration® IBV® that are
eligible for the new technology add-on
payment are identified by assignment to
MS–DRGs 163, 164, and 165 with
procedure code 33.71 or 33.73 in
combination with one of the following
procedure codes: 32.22, 32.30, 32.39,
32.41, or 32.49.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we stated that the
average cost of the Spiration® IBV® is
reported as $2,750. Based on data from
the FY 2010 application, the average
amount of valves per case is 2.5.
Therefore, the total maximum cost for
the Spiration® IBV® was expected to be
$6,875 per case ($2,750 × 2.5). Under
§ 412.88(a)(2) of our regulations, new
technology add-on payments are limited
to the lesser of 50 percent of the average
cost of the device or 50 percent of the
costs in excess of the MS–DRG payment
for the case. As a result, we finalized a
maximum add-on payment for a case
involving the Spiration® IBV® as
$3,437.50.
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In the FY 2011 IPPS/LTCH PPS
proposed rule, we did not propose any
changes to the new technology add-on
payments for the Spiration® IBV®. We
did not receive any public comments on
whether to continue or discontinue the
new technology add-on payment for the
Spiration® IBV® for FY 2011. Therefore,
for FY 2011, we are continuing new
technology add-on payments for cases
involving the Spiration® IBV® in FY
2011, with a maximum add-on payment
of $3,437.50. However, we did receive
one public comment on the MS–DRGs
and codes used to identify which cases
involving the Spiration® IBV® are
eligible for the new technology add-on
payment.
Comment: One commenter, the
manufacturer, explained that the coding
requirements described above that
identify cases of the Spiration® IBV® for
new technology add-on payments do
not account for all cases where a
hospital may be using the device to treat
patients with prolonged air leaks
following lobectomy, segmentectomy,
and LVRS consistent with the product’s
HDE approval. These cases occur when
the hospital inserting the Spiration®
IBV® did not perform the initial
lobectomy, segmentectomy, or LVRS
surgery; instead, the hospital inserting
the device received the beneficiary as a
transfer case. The commenter explained
that there are instances when a hospital
performs the initial surgery and then
determines that treatment of the patient
with the IBV® valve is appropriate but
the hospital has not been approved to
perform the IBV® valve insertion
procedure under the HDE regulations.
Therefore, the hospital must transfer the
patient to an approved facility for
treatment with the IBV® valve. If it were
possible to consider this situation as one
case, the commenter believed that,
between the two hospitals, the new
technology payment criteria as specified
for FY 2010 (identified by assignment to
MS–DRGs 163, 164, and 165 with
procedure code 33.71 or 33.73 in
combination with one of the following
procedure codes: 32.22, 32.30, 32.39,
32.41, or 32.49) would be met. However,
because insertion of the IBV® valve is
limited to approved facilities, the
commenter believed that that the
hospital receiving such a patient for
treatment for prolonged air leak
following lobectomy, segmentectomy,
and LVRS likely reports the case under
ICD–9–CM diagnosis code 512.1
(Iatrogenic pneumothorax) as the
principal diagnosis in the absence of a
more specific code for prolonged air
leak and because the second hospital
did not perform the initial lobectomy,
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segmentectomy, or LVRS surgery. Such
cases would be assigned to MS–DRGs
199, 200, or 201 (Pneumothorax with
MCC, with CC, or with CC or MCC,
respectively) based on the principal
ICD–9–CM diagnosis code of 512.1 and
are therefore ineligible for the new
technology add-on payment based on
the specifications finalized in FY 2010.
In this situation, because the
transferring hospital that performed the
initial surgery did not insert the IBV®
valve, it would also be ineligible for the
new technology add-on payment. The
commenter recommended that CMS
allow an add-on payment in such cases
by linking transfer hospitalizations
cases that had an IBV® valve inserted at
the receiving hospital to a previous
claim in the patient’s history to ensure
that the patient had previously
undergone a lobectomy, segmentectomy,
or LVRS as reported by one of the
following procedure codes: 32.22, 32.30,
32.39, 32.41 or 32.49. This would
ensure that the Spiration® IBV® is being
used consistent with its FDA approved
indication for the treatment of
prolonged air leaks following
lobectomy, segmentectomy, or LVRS.
Response: We thank the commenter
for the comments. We agree with the
manufacturer that it is appropriate that
all cases in which the Spiration® IBV®
Valve is inserted consistent with its
HDE approval be eligible for the
approved new technology add-on
payment. For this reason, we are
expanding the new technology add-on
payment for the Spiration® IBV® Valve
to cases that map to MS–DRGs 199, 200,
and 201 with an assigned principal
diagnosis code of 512.1. In accordance
with the FDA HDE approval, only
approved hospital centers with an
Internal Review Board (IRB) may
implant the device. According to the
manufacturer, all sites must be
approved before the device will be
shipped for use. The approval process
includes an evaluation of the facility,
training of physicians, an institutional
compliance agreement, IRB process and
documentation, and a purchasing
agreement. The IRB ensures that the
patient had a lobectomy,
segmentectomy, or LVRS and had a
prolonged air leak and then approves
the device to be implanted in the
patient. Therefore, due to the strict
requirements associated with the HDE
approval of this technology, even if a
patient was transferred to a hospital for
device implantation and the lobectomy,
segmentectomy, or LVRS was not
performed at that hospital (and,
therefore, the surgery is not billed on
the same claim as the implantation of
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the device), we believe our concerns
regarding patient selection are
addressed and that the hospital
implanting the device is doing so to
treat prolonged post-surgical air leaks.
The manufacturer asserted that, in this
transfer situation, the beneficiary’s case
would typically be assigned to diagnosis
code 512.1, which maps to MS–DRGs
199, 200, and 201. For this reason, we
are expanding the new technology addon payment for the Spiration® IBV®
Valve to cases that map to these MS–
DRGs.
We performed an analysis to
determine if the technology would still
meet the cost criteria by adding these
additional MS–DRGs to the applicant’s
cost analysis in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43820). The cases that map to MS–DRGs
199, 200, and 201 are small in number
and, therefore, have a minimal effect on
the case-weighted average standardized
per case and the case-weighted
threshold published in the FY 2010/RY
2010 LTCH PPS final rule. Therefore,
the Spiration® IBV® would still meet
the cost criteria with the inclusion of
these additional MS–DRGs.
For FY 2011, in addition to making
new technology add-on payments for
cases of the Spiration® IBV® that map
to MS–DRGs 163, 164, and 165 (with
procedure code 33.71 or 33.73 in
combination with one of the following
procedure codes: 32.22, 32.30, 32.39,
32.41, or 32.49), we will make the new
technology add-on payment for cases of
the Spiration® IBV® that map to MS–
DRGs 199, 200, and 201 with the
presence of a diagnosis code of 512.1 in
combination with procedure code 33.71
and 33.73. This determination will
ensure that the hospital implanting the
device receives the new technology addon payment. We note that, in these
cases, the transferring hospital
performing the surgery will be subject to
the transfer policy and would not
receive the new technology add-on
payment because it did not implant the
device.
b. CardioWestTM Temporary Total
Artificial Heart System (CardioWestTM
TAH-t)
SynCardia Systems, Inc. submitted an
application for approval of the
CardioWestTM temporary Total Artificial
Heart system (TAH-t) in FY 2009. The
TAH-t is a technology that is used as a
bridge to heart transplant device for
heart transplant-eligible patients with
end-stage biventricular failure. The
TAH-t pumps up to 9.5 liters of blood
per minute. This high level of perfusion
helps improve hemodynamic function
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in patients, thus making them better
heart transplant candidates.
The TAH-t was approved by the FDA
on October 15, 2004, for use as a bridge
to transplant device in cardiac
transplant-eligible candidates at risk of
imminent death from biventricular
failure. The TAH-t is intended to be
used in hospital inpatients. One of the
FDA’s post-approval requirements is
that the manufacturer agrees to provide
a post-approval study demonstrating
that success of the device at one center
can be reproduced at other centers. The
study was to include at least 50 patients
who would be followed up to 1 year,
including (but not limited to) the
following endpoints: survival to
transplant; adverse events; and device
malfunction.
In the past, Medicare did not cover
artificial heart devices, including the
TAH-t. However, on May 1, 2008, CMS
issued a final national coverage
determination (NCD) expanding
Medicare coverage of artificial hearts
when they are implanted as part of a
study that is approved by the FDA and
is determined by CMS to meet CMS’
Coverage with Evidence Development
(CED) clinical research criteria. (The
final NCD is available on the CMS Web
site at: https://www.cms.hhs.gov/mcd/
viewdecisionmemo.asp?id=211.)
We indicated in the FY 2009 IPPS/RY
2009 LTCH PPS final rule (73 FR 48555)
that, because Medicare’s previous
coverage policy with respect to this
device had precluded payment from
Medicare, we did not expect the costs
associated with this technology to be
currently reflected in the data used to
determine the relative weights of MS–
DRGs. As we have indicated in the past,
and as we discussed in the FY 2009
IPPS/RY 2009 LTCH PPS final rule,
although we generally believe that the
newness period would begin on the date
that FDA approval was granted, in cases
where the applicant can demonstrate a
documented delay in market availability
subsequent to FDA approval, we would
consider delaying the start of the
newness period. This technology’s
situation represented such a case. We
also noted that section
1886(d)(5)(K)(ii)(II) of the Act requires
that we provide for the collection of cost
data for a new medical service or
technology for a period of at least 2
years and no more than 3 years
‘‘beginning on the date on which an
inpatient hospital code is issued with
respect to the service or technology.’’
Furthermore, the statute specifies that
the term ‘‘inpatient hospital code’’
means any code that is used with
respect to inpatient hospital services for
which payment may be made under the
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IPPS and includes ICD–9–CM codes and
any subsequent revisions. Although the
TAH-t has been described by the ICD–
9–CM code(s) since the time of its FDA
approval, because the TAH-t had not
been covered under the Medicare
program (and, therefore, no Medicare
payment had been made for this
technology), this code could not be
‘‘used with respect to inpatient hospital
services for which payment’’ is made
under the IPPS, and thus we assumed
that none of the costs associated with
this technology would be reflected in
the Medicare claims data used to
recalibrate the MS–DRG relative weights
for FY 2009. For this reason, as
discussed in the FY 2009 IPPS/RY 2009
LTCH PPS final rule, despite the FDA
approval date of the technology, we
determined that TAH-t would still be
eligible to be considered ‘‘new’’ for
purposes of the new technology add-on
payment because the TAH-t met the
newness criterion on the date that
Medicare coverage began, consistent
with issuance of the final NCD, effective
on May 1, 2008.
After evaluation of the newness, costs,
and substantial clinical improvement
criteria for new technology add-on
payments for the TAH-t and
consideration of the public comments
we received in response to the FY 2009
IPPS/RY 2009 LTCH PPS proposed rule,
we approved the TAH-t for new
technology add-on payments for FY
2009 (73 FR 48557). We indicated that
we believed the TAH-t offered a new
treatment option that previously did not
exist for patients with end-stage
biventricular failure. However, we
indicated that we recognized that
Medicare coverage of the TAH-t is
limited to approved clinical trial
settings. The new technology add-on
payment status does not negate the
restrictions under the NCD nor does it
obviate the need for continued
monitoring of clinical evidence for the
TAH-t. We remain interested in seeing
whether the clinical evidence
demonstrates that the TAH-t continues
to be effective. If evidence is found that
the TAH-t may no longer offer a
substantial clinical improvement, we
reserve the right to discontinue new
technology add-on payments, even
within the 2- to 3-year period that the
device may still be considered to be
new. We also continued to make new
technology add-on payments for the
TAH-t in FY 2010. We welcome public
comment regarding whether there is
new evidence that demonstrates that the
TAH–T continues to be effective and
whether it should still be considered to
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be a substantial clinical improvement
for FY 2011.
The new technology add-on payment
for the TAH-t for FY 2010 is triggered
by the presence of ICD–9–CM procedure
code 37.52 (Implantation of total heart
replacement system), condition code 30,
and the diagnosis code reflecting
clinical trial—V70.7 (Examination of
participant in clinical trial). For FY
2010, we finalized a maximum add-on
payment of $53,000 (that is, 50 percent
of the estimated operating costs of the
device of $106,000) for cases that
involve this technology.
Our practice has been to begin and
end new technology add-on payments
on the basis of a fiscal year. In general,
we extend add-on payments for an
additional year only if the 3-year
anniversary date of the product’s entry
on the market occurs in the latter half
of the fiscal year (70 FR 47362). The
TAH-t is still eligible to be considered
‘‘new’’ for purposes of the new
technology add-on payment because the
3-year anniversary date of the TAH-t
entry on the market was in the second
half of the fiscal year and the TAH-t met
the newness criterion on the date that
Medicare coverage began, consistent
with issuance of the final NCD, effective
on May 1, 2008. Therefore, for FY 2011,
we proposed to continue new
technology add-on payments for cases
involving the TAH-t in FY 2011 with a
maximum add-on payment of $53,000.
Comment: Commenters supported our
proposal to continue add-on payments
for the TAH-t. The commenters believed
that the TAH-t continues to represent a
substantial clinical improvement for
patients with biventricular heart failure
in need of a heart transplant. One
commenter, the manufacturer of the
TAH-t, stated that the TAH-t continues
to be the only biventricular replacement
device that is available for patients,
Medicare or otherwise, with
biventricular failure. The commenter
noted that the device is indicated for
use as a ‘‘bridge to transplant’’ in cardiac
transplant-eligible patients who are at
risk of imminent death. The commenter
stated that the device is approved by the
FDA ‘‘* * * for use in-hospital, and,
under a currently approved
investigational device exemption (‘‘IDE’’)
clinical study out of hospital as well.’’
The commenter stated that the TAH-t
has been implanted in over 865 patients
worldwide and that between January 1,
2009 and June 11, 2010, there were 15
TAH-t implants in the United States. Of
these 15 patients, 10 were continuing on
support, 4 received heart transplants,
and 1 expired; the commenter stated
that without the device, it is likely that
all of the patients would have expired.
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50143
The commenter asserted that it recently
began to employ the use of a ‘‘* * *
smaller, portable driver, known as the
‘‘Freedom Driver’’ as part of the
TAH-t system.’’ The commenter noted
that the Freedom Driver allows
increased patient mobility so that
patients may leave the hospital while
waiting for a donor heart and that the
Freedom Driver further demonstrated
that the TAH-t was a substantial clinical
improvement. The commenter asserted
that the new driver increased the
operating cost of the device from
$106,000 to $124,700 and requested that
the new technology add-on payment be
increased from $53,000 to $62,350,
accordingly.
Response: We agree with the
commenters that, for patients with
biventricular heart failure, the TAH-t
continues to represent a substantial
clinical improvement. With respect to
the manufacturer’s request for an
increase in the new technology add-on
payment amount for FY 2011, we note
that the version of the TAH-t that
contains the Freedom Driver is not
currently approved to be marketed by
the FDA. Rather, the device is being
studied in a clinical trial under an IDE.
The IDE allows the investigational
device to be used in a clinical study in
order to collect safety and effectiveness
data to support a Premarket Approval
(PMA) application or a Premarket
Notification [510(k)] submission to FDA.
An approved IDE permits a device to be
shipped lawfully for the purpose of
conducting investigations of the device
without complying with other
requirements of the Federal Food, Drug,
and Cosmetic Act that would apply to
devices in commercial distribution. For
example, sponsors are not required to
have an approved PMA application or
cleared Premarket Notification 510(k),
register their establishment, or list the
device while the device is under
investigation. Sponsors of IDEs are also
exempt from the Quality System (QS)
Regulation except for the requirements
for design control, if applicable (unless
the sponsor states an intention to
comply with these requirements). An
IDE does not constitute FDA approval to
market the device. Once the clinical
trial conducted under an IDE has been
completed, the device may receive FDA
approval or clearance to be legally
marketed. If the modified TAH-t device
using the Freedom Driver does receive
FDA approval, we would require that a
new technology application be formally
submitted for review for new technology
add-on payments for the TAH-t device
using the Freedom Driver at that time.
Because we have not received such an
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application and because the modified
device is not yet approved by the FDA,
we are unable to increase the new
technology add-on payments for TAH–
T for FY 2011. We would encourage the
manufacturer to submit a new
technology add-on payment application
if and when it expects to receive FDA
approval for the modified TAH-t with
the Freedom Driver.
Therefore, as we proposed, we are
continuing new technology add-on
payments for cases involving the TAHt in FY 2011 with a maximum add-on
payment of $53,000.
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4. FY 2011 Applications for New
Technology Add-On Payments
We received five applications to be
considered for new technology add-on
payment for FY 2011. However, two
applicants withdrew their applications:
Nycomed Austria GmbH, which
submitted an application for new
technology add-on payments for FY
2011 for TachoSil®; and Zimmer, which
submitted an application for new
technology add-on payments for FY
2011 for the Dynesys Dynamic
Stabilization System. Nycomed Austria
GmbH withdrew its application from
further review in January 2010, and
Zimmer withdrew its application in
February 2010. Because both
applications were withdrawn prior to
the town hall meeting and publication
of the FY 2011 IPPS/LTCH PPS
proposed rule, we are not discussing
these two applications in this final rule.
A discussion of the remaining three
applications is presented below. At the
time the proposed rule was developed,
one of the technologies had not yet
received FDA approval. Since that time,
that technology, the LipiScanTM IVUS,
has received FDA approval.
a. Auto Laser Interstitial Thermal
Therapy (AutoLITTTM) System
Monteris Medical submitted an
application for new technology add-on
payments for FY 2011 for the
AutoLITTTM. We note that the applicant
submitted an application for new
technology add-on payments for FY
2010 but withdrew its application prior
to the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. AutoLITTTM is a minimally
invasive, MRI-guided laser tipped
catheter designed to destroy malignant
brain tumors with interstitial thermal
energy causing immediate coagulation
and necrosis of diseased tissue. The
technology can be identified by ICD–9–
CM procedure codes 17.61 (Laser
interstitial thermal therapy [LITT] of
lesion or tissue of brain under
guidance), and 17.62 (Laser interstitial
thermal therapy [LITT] of lesion or
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tissue of head and neck under
guidance), which became effective on
October 1, 2009.
The applicant asserts that the
AutoLITTTM delivers laser energy to the
lesion with a proprietary 3mm diameter
probe that directs the energy radially
(that is, at right angle to the axis of the
probe, or side-firing) toward the targeted
tumor tissue in a narrow beam profile
and at the same time, a proprietary
probe cooling system removes heat from
tissue not directly in the path of the
laser beam, ostensibly protecting it from
thermal damage and enabling the
physician to selectively ablate only
targeted tissue. The AutoLITTTM
received a 510K FDA clearance in May
2009. The AutoLITTTM is indicated for
use to necrotize or coagulate soft tissue
through interstitial irradiation or
thermal therapy in medicine and
surgery in the discipline of
neurosurgery with 1064 nm lasers. The
AutoLITTTM may be used in patients
with glioblastoma multiforme brain
(GBM) tumors. The applicant stated in
its application and through
supplemental information that, due to
required updates, the technology was
actually introduced to the market in
December 2009. The applicant
explained that it was necessary to
reduce the thermal damage lines from
three to one and complete International
Electrotechnical Commission/
Underwriter Laboratory testing, which
led to the introduction of the technology
to the market in December 2009,
although the technology was approved
by FDA in May 2009. The applicant also
stated through supplementary
information to its application that the
first sale of the product took place on
March 19, 2010. However, because the
product was already available for use in
December 2009, it appears that the
newness date would begin in December
2009. In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed public
comments on this issue.
With regard to the newness criterion,
in the FY 2011 IPPS/LTCH PPS
proposed rule, we expressed concern
that the AutoLITTTM may be
substantially similar to the device that
it listed as its predicate device in its
application to the FDA for approval.
Specifically, in making a determination
of substantial similarity, we consider
the following: (1) Whether a product
uses the same or similar mechanism of
action to achieve a therapeutic action;
(2) whether a product is assigned to the
same or different MS–DRG; and (3)
whether the new use of a technology
involves the treatment of the same or
similar type of disease and the same or
similar patient population. The
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applicant identified Visual-ase as its
predicate device (which was approved
by the FDA in 2006), which is also used
to treat tumors of the head and neck.
The applicant maintains that
AutoLITTTM can be distinguished from
the Visual-ase by its mechanism of
action (that is, side-firing laser versus
elliptical firing). Additionally, as
mentioned above, the technology
contains a proprietary probe cooling
system that removes heat from tissue
not directly in the path of the laser
beam. In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed comments
from the public regarding whether or
not the AutoLITTTM is substantially
similar to the Visual-ase and if it meets
the newness criteria.
Comment: One commenter described
the components of the AutoLITTTM that
should qualify the AutoLITTTM as
‘‘new’’. Specifically, the commenter
noted that the probe uses side-firing and
has a gas-cooled tip. The commenter
noted that probe drive is an MRIcompatible steering device and the
software for the device provides thermal
dose reporting in real time. In addition,
the commenter explained that the
software is designed to provide real time
feedback to the surgeon and also to
provide a discrete line of thermal dosage
at the expanding boundary or isotherm.
The commenter further explained that
this isotherm is used by the surgeon to
control treatment in comparison to the
delineated pre-defined treatment or
tumor boundary and also provides this
information in a volume (that includes
treatment and two axial planes) so that
the surgeon can monitor and plan, in
real time, the next heating cycle to
complete the treatment regimen.
Response: We thank the commenter
for the additional information on the
AutoLITTTM. After reviewing all of the
information provided by the applicant
and the public, we believe that the
AutoLITTTM uses a different mechanism
of action when compared to the Visualase. We agree with the applicant that the
AutoLITTTM can be distinguished from
the Visual-ase by its side-firing laser
versus elliptical-firing. In addition, the
AutoLITTTM contains a proprietary
probe cooling system that removes heat
from tissue not directly in the path of
the laser beam, while the Visual-ase
does not contain this cooling system.
Therefore, we do not believe the
AutoLITTTM is substantially similar to
the Visual-ase. Because the AutoLITTTM
was available on the market beginning
with December 2009 (and is not
substantially similar to its predicate
device), the technology is still within
the 2 to 3 year newness period.
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In an effort to demonstrate that
AutoLITTTM meets the cost criterion,
the applicant used 2007 Medicare data
from the Healthcare Cost and Utilization
Project (HCUP). We first note that the
applicant believes that cases eligible for
the AutoLITTTM will map to MS–DRG
25 (Craniotomy and Endovascular
Intracranial Procedures with MCC), MS–
DRG 26 (Craniotomy and Endovascular
Intracranial Procedures with CC), and
MS–DRG 27 (Craniotomy and
Endovascular Intracranial Procedures
without CC or MCC). The applicant
explained through supplemental
information to its application that most
cases of the AutoLITTTM would map to
MS–DRG 25 in the near-term. As the
technology becomes more widely
available, the applicant asserted that
clinicians will use the technology
instead of performing a craniotomy for
brain cancer. Additionally, the
applicant asserted that clinicians will
expand their use of the technology
beyond GBM to other different types of
brain cancers, including metastases,
which would map to other MS–DRGs
aside from MS–DRG 25. The applicant
further stated that life expectancy with
brain cancer is predicated on the
removal of as much of the cancer as
possible and asserted that over time the
AutoLITTTM will do a better job of
removing the majority of the cancer that
is present within the brain tissue
compared to other procedures. The
applicant believes that physicians using
the AutoLITTTM have a better tool to
remove more cancer, necrotize it more
precisely, and access parts of the brain
that surgical resection cannot access.
Lastly, the applicant believes that the
minimally invasive nature of the
procedure will also result in broader
usage to other less complicated
procedures (as clinical and patient
awareness expands).
The applicant searched HCUP
hospital data for cases potentially
eligible for the AutoLITTTM that was
assigned one of the following ICD–9–
CM primary diagnosis codes: A
diagnosis code that begins with a prefix
of 191 (Malignant neoplasm of brain);
diagnosis code 225.0 (Benign neoplasm
of brain and other parts of nervous
system); or diagnosis code 239.6
(Neoplasm of the brain of unspecified
nature). The applicant found 41,021
cases and weighted the standardized
charge per case based on the number of
cases found within each of the diagnosis
codes listed above rather than the
percentage of cases that would group to
different MS–DRGs. Based on this
analysis, the applicant calculated an
average standardized charge per case of
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$57,511. While the applicant’s analysis
established a case-weighted average
charge per case in the aggregate, it did
not provide a case-weighted average
standardized charge per case by MS–
DRG (as required by the application).
The applicant also noted that their
estimate of the case-weighted average
standardized charge per case of $57,511
did not include charges related to the
AutoLITTTM. Therefore, it is necessary
to add the charges related to the device
to the case-weighted average
standardized charge per case in
evaluating the cost threshold criterion.
Although the applicant submitted data
related to the estimated cost of the
AutoLITTTM per case, the applicant
stated that the cost of the device was
proprietary information. Based on a
study of charge compression data by
RTI 4 and charge master data from
Stanford University and University of
California, San Francisco, the applicant
estimates $38,886 in charges related to
the AutoLITTTM (we note that some of
the data used a markup of 294 percent
of the costs). Adding the estimated
charges related to the device to the
average standardized charge per case
resulted in a total average standardized
charge per case of $96,397 ($57,511 plus
$38,886). We note, in the applicant’s
discussion of substantial clinical
improvement below, the applicant
maintains that improved clinical
outcomes using nonfocused LITT
included reduced recovery time and a
reduced rate of complications.
Therefore, in the FY 2011 IPPS/LTCH
PPS proposed rule, we sought public
comment on how reduced recovery time
and a reduced rate of complications
would affect the total case-weighted
average standardized charge per case
and the average length of stay (for cases
eligible for the AutoLITTTM).
Comment: The applicant submitted
supplemental information and noted
that, compared to a craniotomy, surgery
involving the AutoLITTTM requires an
MRI and/or interventional MRI. The
commenter indicated that the addition
of the MRI requires additional
resources, namely a MRI technician, at
a minimum, and a radiologist, as
needed, to review images. In total, these
additions would increase the level of
resources a hospital would use to treat
these patients, both in terms of direct
costs (for example, labor, contracted
physician resources, etc.), and fixed and
indirect costs (for example, MRI, use of
radiology office space, etc.) The
commenter further added that overall
4 RTI International, A Study of Charge
Compression in Calculating DRG Relative Weights,
RTI Project No. 0207964.012.008; January 2007.
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50145
additional time for the procedure (also
a cost) is currently required to conduct
an AutoLITTTM case compared to the
standard of care (that is, craniotomy as
asserted by the applicant). The
commenter reported that during the
clinical trials, cases of AutoLITTTM
ranged from 10 to 12 hours (including
OR, MRI, and Anesthesia time as
opposed to 4 to 6 hours for a
craniotomy). As efficiencies are gained
in the hospitals working with the
technology, the applicant predicts that
this time will be reduced to 7 hours
within the next year or so. In addition,
the commenter believed that the
updated HCUP analysis, which we
discuss below, supports a standardized
charge of $96,947. This supplemental
data correlate to 2010 pricing
information that the applicant received
from two institutions demonstrating an
approximate charge (not standardized)
of $103,000 per case.
Response: We thank the commenter
for providing this information. We
considered this information in our
decision (indicated below) on whether
the AutoLITTTM meets the cost
criterion.
As noted above, the applicant’s
analysis established a case-weighted
average charge per case in the aggregate,
but it did not provide a case-weighted
average standardized charge per case by
MS–DRG. However, the applicant
explained through supplemental
information to its application that the
total average standardized charge per
case significantly exceeds the cost
threshold established by CMS for FY
2011 in Table 10 (74 FR 44173) of
$84,185 for MS–DRG 25. As noted
above, due to section 3401(a) of the
Affordable Care Act which adjusted the
FY 2010 applicable percentage increase
(thus requiring CMS to revise the FY
2010 standardized amounts), for this
final rule, we used the revised FY 2011
thresholds as published in the FY 2010
IPPS/RY 2010 LTCH PPS notice issued
in the Federal Register on June 2, 2010
(75 FR 31213) to determine if the
AutoLITTTM met the cost criterion.
Therefore, using the revised FY 2011
thresholds, the total average
standardized charge per case would also
exceed the cost thresholds established
by CMS of $58,591 for MS–DRG 26 and
$47,033 for MS–DRG 27. Because the
total average standardized charge per
case exceeds the threshold amount for
each individual MS–DRG to which the
technology would map (MS–DRGs 25,
26, and 27), the applicant maintains that
the AutoLITTTM would meet the cost
criterion. In the FY 2011 IPPS/LTCH
PPS proposed rule, we invited public
comment on whether or not the
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AutoLITTTM meets the cost criterion for
a new technology add-on payment for
FY 2011.
Comment: In supplemental
information provided to CMS, the
applicant noted that, after further
reviewing its cost analysis from the
HCUP hospital data that was presented
in the FY 2011 IPPS/LTCH PPS
proposed rule, the applicant discovered
that it inadvertently used discharges
from all hospitals, including nonMedicare data, instead of only using
Medicare data. Therefore, the applicant
updated its analysis from the proposed
rule and filtered the claims data in the
HCUP database for Medicare claims
with the same primary diagnosis codes
listed above. Instead of the FY 2007
MedPAR database, the applicant used
the most recent updated MedPAR
database on the HCUP Web site, which
was the FY 2008 MedPAR file. The
applicant found a total of 12,816 cases
with an average standardized charge of
$58,061. Similar to above, adding the
estimated charges related to the device
to the average standardized charge per
case resulted in a total average
standardized charge per case of $96,947
($58,061 plus $38,886). As noted above,
the analysis from the HCUP database
established a case-weighted average
charge per case in the aggregate, but it
did not provide a case-weighted average
standardized charge per case by MS–
DRG. Similar to above, the applicant
maintains that the total average
standardized charge per case
significantly exceeds the revised cost
thresholds established by CMS for FY
2011 in Table 10 (75 FR 31213) of
$84,164 for MS–DRG 25. Additionally,
the applicant maintains that the total
average standardized charge per case
would also exceed the cost thresholds
established by CMS of $58,591 for MS–
DRG 26 and $47,033 for MS–DRG 27.
Response: Even with the applicant’s
revised HCUP analysis, the applicant
still did not establish a case-weighted
average standardized charge per case by
MS–DRG as required by 42 CFR
412.87(b)(3). To determine whether the
applicant met the cost criterion, we
performed an analysis of MedPAR data.
We searched the FY 2009 MedPAR file
for cases with a primary diagnosis that
begins with a prefix of 191; diagnosis
code 225.0; or diagnosis code 239.6. We
found 1,711 cases (or 34.2 percent of all
cases) in MS–DRG 25, 1,587 cases (or
31.7 percent of all cases) in MS–DRG 26,
and 1,702 cases (or 34 percent of all
cases) in MS–DRG 27. The average
standardized charge per case was
$86,678 for MS–DRG 25, $63,089 for
MS–DRG 26, and $47,033 for MS–DRG
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27, equating to a case-weighted average
standardized charge per case of $65,685.
The average standardized charge per
case does not include charges related to
the AutoLITTTM; therefore, it is
necessary next to add the charges
related to the device to the average
standardized charge per case to evaluate
whether the cost threshold criterion is
met. As noted above, the applicant
estimates $38,886 in charges related to
the AutoLITTTM. Adding the estimated
charges related to the device to the
average standardized charge per case
(based on the case distribution from the
FY 2009 MedPAR claims data analysis)
resulted in a case-weighted average
standardized charge per case of
$104,571 ($65,685 plus $38,886).
Although we have established a caseweighted average standardized charge
per case, the case-weighted average
standardized charge per case above does
not take into consideration reduced
recovery time and a reduced rate of
complications that would affect the total
case-weighted average standardized
charge per case and the average length
of stay. Both would decrease the costs
associated with the AutoLITT device.
Therefore, we made the following
calculations, taking into consideration
our concerns as stated above, in order to
determine if the AutoLITTTM meets the
cost criteria. The average length of stay
for cases we found in the FY 2009
MedPAR file was 7.4 days. This results
in an average charge per day of $8,824
(the case-weighted average standardized
charge of $65,685 divided by 7.4 days).
However, we note that the first day of
an inpatient hospitalization is typically
more expensive than subsequent days in
the stay. Nonetheless, absent specific
charge per day data, we are equally
dividing charges for purposes of
evaluating the decreased costs
associated with the reduced length of
stay using AutoLITTTM. This should
provide us with a lower charge estimate
than what it otherwise would be if we
had actual charge data. That is, if the
device meets the cost criterion based on
the lower estimate, it should meet it
based on the actual data, which would
be higher. Based on data from the
applicant’s clinical trial, the average
length of stay for cases with the
AutoLITTTM was 3.8 days. Using the
difference of 3.6 days (7.4 days minus
3.8 days) from cases in the FY 2009
MedPAR file to the applicant’s clinical
trial, we determined it is necessary to
deduct a total of $32,154 in charges (3.6
times $8,824) from the case-weighted
average standardized charge per case of
$65,685, as determined above. This
resulted in a reduced case-weighted
average standardized charge per case of
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$33,531. We then added the estimated
charges related to the device to the
reduced average standardized charge
per case and determined a revised caseweighted average standardized charge
per case of $72,417 ($33,531 plus
$38,886 (charges related to the
AutoLITTTM); all calculations above
were performed using unrounded
numbers).
Using the revised FY 2010 thresholds
published in Table 10 (75 FR 31213),
the case-weighted threshold for MS–
DRGs 25, 26, and 27 was $63,408 (again,
all calculations above were performed
using unrounded numbers). Based on
this analysis, the revised case-weighted
average standardized charge per case for
the applicable MS–DRGs exceed the
case-weighted threshold amount.
Additionally, we also conducted a
sensitivity test with a majority of cases
mapping to MS–DRG 25 (because the
applicant maintained that most patients’
conditions would be an MCC and the
case would map to this MS–DRG and
because patients with GBM are more
likely to be more severely ill than
patients with other types of tumors) and
the remaining cases mapping to MS–
DRGs 26 and 27. With a majority of
cases mapping to MS–DRG 25, we used
a higher percentage of charges from MS–
DRG 25 to determine the case-weighted
threshold and the case-weighted average
standardized charge per case, which
would make it more difficult for the
case-weighted average standardized
charge per case to exceed the caseweighted threshold (because the
threshold for MS–DRG 25 is the highest
of MS–DRGs 25, 26, and 27). The
sensitivity test demonstrated that even
with a majority of cases mapping to
MS–DRG 25, the case-weighted
standardized charge per case would
exceed the case-weighted threshold.
After reviewing all of the data
summarized above, we believe the
applicant has provided a sufficient
explanation for the additional charges
associated with the AutoLITTTM, even
with a reduced recovery time and a
reduced rate of complications.
Additionally, our analysis of the FY
2009 MedPAR data demonstrates that
the average standardized charge per case
(for cases eligible for the AutoLITTTM)
does exceed the case-weighted cost
threshold (even with a majority of cases
mapping to a MS–DRG). Furthermore,
the applicant did provide charge data
from two centers verifying the expected
high charges associated with the cases
of the AutoLITTTM. Therefore, we
believe that the AutoLITTTM meets the
cost criterion.
With respect to the substantial
clinical improvement criterion, the
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applicant maintains that it meets this
criterion in its application. Specifically,
the applicant stated that several nonAutoLITTTM clinical trials have
demonstrated that nonfocused LITT
(and more recently, the use of LITT plus
MRI) improved survival, quality of life,
and recovery in patients with advanced
GBM tumors and advanced metastatic
brain tumors that cannot be effectively
treated with surgery, radiosurgery,
radiation, chemotherapy, or any
currently available clinical procedure.
In a number of these patients,
nonfocused LITT was the treatment of
last resort, due to either the
unresponsiveness to or inability of these
therapies to treat the brain tumor (due
to tumor location, type, or size, among
other reasons). The applicant also
maintains that when compared to
craniotomy, it offers improved clinical
outcomes using nonfocused LITT,
including reduced recovery time and a
reduced rate of complications (that is,
infection, brain edema). The applicant
stated that these factors, as discussed in
the FY 2001 final rule (66 FR 46914
through 46915) demonstrate that the
AutoLITTTM meets the new technology
criterion for substantial clinical
improvement.
The applicant further asserts that
AutoLITTTM would represent a
substantial clinical improvement over
existing standards of care for a number
of reasons and should build upon less
sophisticated, nonfocused LITT
therapies. These clinical improvements
cited by the applicant include: a less
invasive method of tumor ablation,
potentially leading to lower
complication rates post procedure
(infection, edema); an ability to employ
multiple interventions over shorter
periods of time and an ability to be used
as a treatment of last resort
(radiosurgery is limited due to radiation
dosing and craniotomy is limited to 1 to
2 procedures); an ability to be used in
hard-to-reach brain tumors (the
AutoLITTTM may be used as a treatment
of last resort); and a shorter recovery
time (the possibility for same day
surgery, which has been demonstrated
above with nonfocused LITT).
In the FY 2011 IPPS/LTCH PPS
proposed rule, we stated that, while we
recognize the future potential of this
interesting therapy, we have concerns
that, to date, the AutoLITTTM has been
used for the treatment of only a few
patients as part of a safety evaluation
with no comparative efficacy data and,
therefore, there may not be sufficient
objective clinical evidence to determine
if the AutoLITTTM meets the substantial
clinical improvement criteria. The
applicant did note in its presentation at
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the new technology town hall meeting
that it is currently conducting a clinical
trial with a summary report expected in
the near future. In the FY 2011 IPPS/
LTCH PPS proposed rule, we welcomed
additional clinical data to demonstrate
whether the AutoLITTTM meets the
substantial clinical improvement
criterion and invited public comment
on whether or not the AutoLITTTM
meets the substantial clinical
improvement criterion.
Comment: A number of commenters
who are physicians agreed with the
applicant that the AutoLITTTM meets
the substantial clinical improvement
criterion. Two commenters (that
conducted the clinical trial) described
their experience with the AutoLITTTM
in the clinical trial for use in patients
with recurrent GBM who were
demonstrated to be refractory to other
treatment options. (We note that this
clinical trial is also discussed below in
a separate comment from the
manufacturer). The commenters treated
10 patients with the AutoLITTTM and
noted the following: (1) A short recovery
time that allowed patient discharges
within 2 to 3 days, compared to 3 to 5
days following a craniotomy; (2)
patients were able to ambulate more
quickly, typically within 3 to 4 hours,
compared to craniotomy which often
takes 6 or more hours of recovery time
prior to becoming ambulatory (The
commenters noted that this is important
in the prevention of venous thrombosis,
commonly seen in patients with GBM.);
and (3) adverse events have been
minimal and do not exceed those
published for first or second
craniotomies for glioblastomas.5 The
commenters noted that, over time,
adverse events are likely to decrease as
clinical experience is gained with the
AutoLITTTM and will likely be less than
those experienced with craniotomy, due
to the less invasive nature of the
AutoLITTTM.
Other commenters who have
reviewed the most recent clinical data
on the AutoLITTTM expressed their
support for the clinical benefits of the
AutoLITTTM. One commenter stated it
foresees using the AutoLITTTM on deep
seated primary tumors for which total
resection would risk a major insult to
the brain and/or its functional
structures. The commenter further
stated that use of the AutoLITTTM
would minimize hospitalization, and
possibly reduce complications, such as
thromboembolic events, seen with other
therapies. Another commenter added
that there are many patients with
5 Chang et al., J. Neurosurg., vol. 98, pp. 1175–
1181, 2003.
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50147
metastases to the brain and more than
10 percent of patients who receive
Gamma Knife treatment for such brain
metastases have recurrence of the
metastasis at or near the original site.
The commenter stated it would consider
the AutoLITTTM as an alternative to
Gamma Knife treatment in these cases
because Gamma Knife treatment
dramatically increases the risk of
symptomatic radiation necrosis. All of
these commenters stated that the
AutoLITTTM offers additional quality of
life in patients with GBM due to its
reduced recovery time and its use as a
less invasive alternative treatment to
other available treatment options.
Response: We appreciate these
comments. Some commenters described
their positive experiences using the
AutoLITTTM which reduced recovery
time for the patient. Other commenters
noted that they would use the
AutoLITTTM as an alternative to other
available treatments because it is less
invasive and provides an improved
quality of life for the patient outside the
hospital. We considered the comments
above in our determination (indicated
below) on whether the AutoLITTTM
represents a substantial clinical
improvement.
Comment: The manufacturer
submitted two public comments that
addressed the substantial clinical
improvement criterion. The first
comment reiterated that options
available to treat patients with brain
tumors are limited in general, and these
limitations are magnified by the fact that
many patients are refractory to currently
available options such as surgical
resection via craniotomy and
radiotherapy. The comment further
stated that the literature on AutoLITTTM
and LITT has demonstrated that the
AutoLITTTM offers another clinically
viable option to brain cancer patients,
especially after other options have
failed.
Below we highlight some of the
results of the clinical studies cited by
the commenter:
• Time to progression of disease and
survival were longer for brachytherapy
plus LITT compared to brachytherapy;6
• Survival time using LITT/MRI
therapy was substantially longer than
the natural history of the disease and
longer than using chemotherapy alone.
After a short surgeon learning curve, the
6 Sneed, PK et al. (1998). Survival benefit of
hyperthermia in a prospective randomized trial of
brachytherapy boost + hyperthermia for
glioblastoma multiforme. International J. Radiation
Oncology Biol. Phys.; 1998: 287–295.
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median survival time increase by up to
a factor of 4× (p = 0.0267);7
• Use of MRI guidance in brain
surgery alone has demonstrated a
statistically significant reduction in
major complications versus surgery
without MRI guidance (p = 0.019);8 and
• The combination of LITT and MRI
guidance for treating metastatic
intracranial tumors has been evaluated
for safety and feasibility 9 in a study of
four patients that were refractory to
other treatments. The patients
demonstrated on follow up that in all
cases the procedure was well tolerated
without secondary effect and patients
were discharged within 14 hours after
the procedure. Upon a 90-day follow up,
tumor volume demonstrated a gradual
and steady decrease, with no recurrence
within the thermal ablation zones.
The commenter concluded that it
carefully reviewed the available
literature on LITT and believes that the
AutoLITTTM has demonstrated the
following positive clinical benefits for
patients: a robust and clinical validated
integrated platform of clinically useful
technologies (LITT, MRI guidance, real
time MR monitoring of thermal energy
applications) that works within the
existing clinical frameworks available at
major medical centers; effective
abilation of targeted tumor tissue; short
length of stay; ability to ambulate early;
and minimally lasting or late developing
side effects. As a result, the commenter
believes that the AutoLITTTM represents
a new, clinically viable option for brain
cancer patients and meets the
substantial clinical improvement
criteria.
The other comment from the
manufacturer discussed the applicant’s
clinical trial. Some of these data were
discussed above in the comments we
received from physicians in support of
the AutoLITTTM. The manufacturer
provided more detail about the design of
the clinical study. The manufacturer
stated that it conducted a clinical trial
of 10 patients with tumors in locations
that either made access to the tumor
without risk of complications difficult
or made total gross resection of the
entire mass impossible or impractical
without significant risk. All patients
7 Schwarzmaier, HJ et al. (2006). MR guided laserinduced interstitial thermotherapy of recurrent
glioblastoma multiforme: Preliminary results in 16
patients. Eur. J. Radiology; 59: 208–215.
8 Paleologos, TS et al. (2000). Clinical Utility and
Cost-Effectiveness of Interactive Image Guided
Craniotomy: Clinical Comparison between
Conventional and Image Guided Meningioma
Surgery. Neurosurgery; 47: 40–48.
9 Carpentier, A. et al. (2008). Real-Time Magnetic
Resonance Guided Laser Thermal Therapy for Focal
Metastatic Brain Tumors. Neurosurgery; 63:
ONS21–ONS29.
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treated in the study had first or second
GBM tumors with poor prognosis. The
Karnofsky Performance Scale used to
measure functional and mental status
was assessed pre- and post-treatment
and remained the same or improved
during the post treatment interval.
Finally, as also mentioned in the
comments from the physicians in
support of the AutoLITTTM, all patients
in the clinical study were discharged
within 2 to 7 days with a mean of 3.8
days, which compares favorably to a
12-day average length of stay for cases
that map to MS–DRG 25.
Response: We thank the applicant and
all of the commenters for providing
additional clinical data to demonstrate
that the AutoLITTTM meets the
substantial clinical improvement
criteria. With respect to substantial
clinical improvement, we considered all
of the case-specific clinical information
presented by the applicant and the
public to determine whether there is
evidence to support a conclusion that
use of the AutoLITTTM represents a
substantial clinical improvement.
Specifically, we focused our review on
the peer-reviewed medical literature
and the results of the clinical studies.
We remain concerned that no
prospective comparative data exist to
help understand the benefit of the
technology compared to other
modalities.
However, we agree that the
AutoLITTTM can improve clinical
outcomes by providing an alternative
treatment for brain tumors that
potentially has a lower risk of adverse
events and is less invasive compared to
craniotomy. Also, the comments we
received from the physicians and the
manufacturer noted that the
AutoLITTTM provides a new treatment
option in cases where no existing
treatment was available due to the risk
of complications or total gross resection
of the entire mass made impossible or
impractical without significant risk.
Lastly, we received positive comments
from physicians who indicated that the
AutoLITTTM is a less invasive treatment
than other alternative treatments such as
craniotomy and produced positive
clinical outcomes by reducing average
length of stay, quicker ambulation, and
a reduction of other adverse events that
occur in cases of first or second
craniotomies for glioblastomas.
Although we continue to believe that
limited, anecdotal reports from
physicians using a new technology are
insufficient to demonstrate substantial
clinical improvement over existing
technologies, such information, when
considered together with peer-reviewed
medical literature and results of clinical
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studies, can help to inform our decision.
Therefore, after reviewing the totality of
the evidence, we have determined that
the AutoLITTTM meets the substantial
clinical improvement criterion.
Accordingly, after consideration of
the clinical evidence received, we are
approving the AutoLITTTM for new
technology add-on payments in FY
2011. Consistent with the applicant’s
clinical trial, the add-on payment is
intended only for use of the device in
cases of Glioblastoma Multiforme.
Therefore, we intend to limit the new
technology add-on payment to cases
involving the AutoLITTTM in MS–DRGs
25, 26, and 27. Cases involving the
AutoLITTTM that are eligible for the new
technology add-on payment will be
identified by assignment to MS–DRGs
25, 26, and 27 with a procedure code of
17.61 in combination with a primary
diagnosis codes that begins with a prefix
of 191. We note that using the procedure
and diagnosis codes above and
restricting the add-on payment to cases
that map to MS–DRGs 25, 26, and 27 is
consistent with information provided by
the applicant, which demonstrated that
cases of the AutoLITTTM would only
map to MS–DRGs 25, 26, and 27.
Procedure code 17.62 does not map to
MS–DRGs 25, 26, or 27 under the
GROUPER software and, therefore, is
ineligible for new technology add-on
payment.
The average cost of the AutoLITTTM is
reported as $10,600 per case. Under
§ 412.88(a)(2) of the regulations, new
technology add-on payments are limited
to the lesser of 50 percent of the average
cost of the device or 50 percent of the
costs in excess of the MS–DRG payment
for the case. As a result, the maximum
add-on payment for a case involving the
AutoLITTTM is $5,300.
b. LipiScanTM Coronary Imaging System
InfraReDx, Inc. submitted an
application for new technology add-on
payments for FY 2011 for the
LipiScanTM Coronary Imaging System
(LipiScanTM). We note that an
application was also submitted for FY
2010, but the application was denied on
the grounds that it did not meet the
substantial clinical improvement
criterion at that time. The application
for FY 2011 contains some additional
clinical and charge data that were not
available at the time that the FY 2010
new technology add-on payment
decisions were made.
The LipiScanTM device is a diagnostic
tool that uses Intravascular Near
Infrared Spectroscopy (INIRS) during an
invasive coronary catheterization to
scan the artery wall in order to
determine coronary plaque composition.
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The purpose of the device is to identify
lipid-rich areas in the artery because
such areas have been shown to be more
prone to rupture. The procedure does
not require flushing or occlusion of the
artery. INIRS identifies the chemical
content of plaque by focusing near
infrared light at the vessel wall and
measuring reflected light at different
wavelengths (that is, spectroscopy). The
LipiScanTM system collects
approximately 1,000 measurements per
12.5 mm of pullback, with each
measurement interrogating an area of 1
to 2 mm2 of lumen surface
perpendicular to the longitudinal axis of
the catheter. When the catheter is in
position, the physician activates the
pullback and rotation device and the
scan is initiated providing 360 degree
images of the length of the artery. The
rapid acquisition speed for the image
freezes the motion of the heart and
permits scanning of the inside of the
arterial wall in less than 2 minutes.
When the catheter pullback is
completed, the console displays the
scan results, which are referred to as a
‘‘chemogram’’ image. The chemogram
image requires reading by a trained user,
but, according to the applicant, was
designed to be simple to interpret.
With regard to the newness criterion,
the LipiScanTM received a 510K FDA
clearance for a new indication on April
25, 2008, and was available on the
market immediately thereafter. On June
23, 2006, InfraReDx, Inc. was granted a
510K FDA clearance for the ‘‘InfraReDx
Near Infrared (NIR) Imaging System.’’
Both devices are under the common
name of ‘‘Near Infrared Imaging System’’
according to the 510K summary
document from the FDA. However, the
InfraReDx NIR Imaging System device
that was approved by the FDA in 2006
was approved ‘‘for the near infrared
imaging of the coronary arteries,’’
whereas the LipiscanTM device cleared
by the FDA in 2008 is for a modified
indication. The modified indication
specified that LipiscanTM is ‘‘intended
for the near-infrared examination of
coronary arteries * * *, the detection of
lipid-core-containing plaques of interest
* * * [and] for the assessment of
coronary artery lipid core burden.’’ In
the FY 2010 IPPS/RY 201 LTCH PPS
proposed rule (74 FR 24132 through
24134), we noted that we had concerns
with whether LipiscanTM was
substantially similar to its predicate
device that was approved by the FDA in
2006. However, those concerns were
addressed by the manufacturer during
the comment period. Specifically, the
manufacturer stated that there were
technical problems with the original
device and that LipiScanTM had to be
modified in the following ways:
2006 NIRS device
Console ................................
Catheter ...............................
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Marketed 2008 LipiScan
No display of results of scan ..........................................
Saline-filled with microbubble problem obscuring many
scans.
No algorithmic processing of NIR signals—no means of
certifying that lipid core plaque is present.
The problems with the LipiScanTM
device that was approved in 2006 were
addressed in the second device that was
granted FDA approval in April 2008.
The LipiScanTM device was not
marketed until after its second FDA
clearance. Therefore, we no longer
needed to make a determination as to
whether the newer device was
substantially similar to the predicate
device and we determined in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43815) that LipiscanTM would be
considered to be ‘‘new’’ to the market as
of the date of its FDA approval in April
2008. Because a technology may be
considered new for a period of up to 3
years if, during the third year, the
technology is new for more than 6
months of the fiscal year, it appears that
the technology would still be in the
newness period for FY 2011. In the FY
2011 IPPS/LTCH PPS proposed rule, we
welcomed public comment on whether
LipiscanTM meets the newness criterion.
Comment: One commenter, the
manufacturer, stated that the
LipiScanTM met the newness criterion
based on its FDA approval date.
Response: We agree that the
LipiScanTM is new as of the date of its
supplemental FDA approval, April 25,
2008, because the manufacturer
Jkt 220001
Results displayed immediately.
Air-filled with no microbubble problem.
Algorithm validated in over 1,000 autopsy measurements proving that NIRS can detect lipid core plaque,
and providing diagnosis of lipid core plaque to the
MD during the case.
provided information to us to show that
the device was not marketed until after
the supplemental FDA approval.
Accordingly, LipiscanTM meets the
newness criterion.
We note that the LipiscanTM
technology is identified by ICD–9–CM
procedure code 38.23 (Intravascular
spectroscopy), which became effective
October 1, 2008, and cases involving the
use of this device generally map to MS–
DRG 246 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s)
with MCC or 4+ Vessels/Stents); MS–
DRG 247 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s)
without MCC); MS–DRG 248
(Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting
Stent(s) with MCC or 4+ Vessels/Stents);
MS–DRG 249 (Percutaneous
Cardiovascular Procedures with NonDrug-Eluting Stent(s) without MCC);
MS–DRG 250 (Percutaneous
Cardiovascular Procedures without
Coronary Artery Stent with MCC); and
MS–DRG 251 (Percutaneous
Cardiovascular Procedures without
Coronary Artery Stent without MCC).
In an effort to demonstrate that the
technology meets the cost criterion, the
applicant used the FY 2010 IPPS/RY
2010 LTCH PPS final rule After Outliers
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50149
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Removed (AOR) file (posted on the CMS
Web site) to identify cases potentially
eligible for LipiscanTM. The applicant
believes that every case within MS–
DRGs 246, 247, 248, 249, 250, and 251
is eligible for LipiscanTM. In addition,
the applicant believes that LipiscanTM
will be evenly distributed across
patients in each of those six MS–DRGs
(16.7 percent within each MS–DRG).
Using data from the AOR file, the
applicant found the average
standardized charge per case for MS–
DRGs 246, 247, 248, 249, 250, and 251
was $67,531, $44,485, $62,936, $40,149,
$59,416, and $38,864, respectively,
equating to a case-weighted average
standardized charge per case of $52,230
(calculation performed using unrounded
numbers). The applicant indicated that
the case-weighted average standardized
charge per case does not include charges
related to LipiscanTM; therefore, it is
necessary to add the charges related to
the device to the average case-weighted
standardized charge per case to evaluate
the cost threshold criterion. Although
the applicant submitted data related to
the estimated cost per case of
LipiscanTM, the applicant stated that the
cost of the device is proprietary
information. Based on a sampling of all
10 non-Veterans Administration
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hospitals that are actively using the
device, the applicant determined that
the average charge for the device was
$7,497. Adding the estimated average
charge related for the device to the caseweighted standardized charge per case
(based on the case distribution from the
applicant’s FY 2010 AOR analysis)
results in a total case-weighted average
standardized charge per case of $59,727
($52,230 plus $7,497). In the FY 2011
IPPS/LTCH PPS proposed rule, we used
the FY 2011 thresholds published in
Table 10 of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44173) to
determine if the LipiscanTM met the cost
criterion. For this final rule, due to the
provisions of section 3401(a) of the
Affordable Care Act which adjusted the
FY 2010 applicable percentage increase
(thus requiring CMS to revise the FY
2010 standardized amounts), we used
the revised FY 2011 thresholds as
published in the FY 2010 IPPS/RY 2010
LTCH PPS notice issued in the Federal
Register on June 2, 2010 (75 FR 31213)
to determine if the LipiscanTM meet the
cost criterion. Based on the revised FY
2011 Table 10 thresholds, the caseweighted threshold for MS–DRGs 246,
247, 248, 249, 250, and 251 is $56,466
(all calculations above were performed
using unrounded numbers). Because the
applicant’s calculation of the total caseweighted average standardized charge
per case for the applicable
MS–DRGs exceeds the case-weighted
threshold amount, the applicant
maintains that LipiscanTM meets the
cost criterion.
We note that in the applicant’s
analysis of the cost criterion, instead of
determining the case-weighted average
standardized charge per case and the
case-weighted threshold amount based
on the actual number of cases from the
FY 2010 AOR file in the applicable MS–
DRGs that are eligible for the
LipiscanTM, the applicant’s analysis
assumed an even distribution of patients
in the applicable MS–DRGs. However,
the data from the FY 2010 AOR file
shows a varied distribution of cases in
each of the applicable MS–DRGs. We
believe the more appropriate way to
determine the case-weighted average
standardized charge per case and the
case-weighted threshold amount for
evaluating the cost criterion is to use the
actual distribution of cases in the
applicable MS–DRGs based on the
number of cases from the AOR file
because this would more accurately
reflect the number and type of Medicare
cases typically treated in the applicable
MS–DRGs. Moreover, this would better
conform to the applicant’s assertion that
the probability of use of LipiscanTM is
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the same in each of those six MS–DRGs.
Using data from the FY 2011 AOR file
(in the proposed rule, we used the FY
2010 AOR file; however, for this final
rule, we used the most recent data
available, which is the FY 2011 AOR
file), for MS–DRGs 246, 247, 248, 249,
250, and 251, there were 30,663,
141,780, 14,281, 46,037, 7,591, and
36,059 cases, respectively. Using this
case distribution and the average
standardized charge per case for MS–
DRGs 246, 247, 248, 249, 250, and 251
(that is, $73,006, $48,275, $67,954,
$44,336, $65,238, and $44,504,
respectively, as stated above), we
calculated that the case-weighted
average standardized charge per case is
$51,353. As the applicant indicated
above, the case-weighted average
standardized charge per case does not
include charges related to LipiscanTM.
Therefore, it is necessary to add the
average charge of $7,497 related to the
device to the case-weighted
standardized charge per case to evaluate
the cost threshold criterion. Adding the
estimated charges related to the device
to the case-weighted average
standardized charge per case (based on
the case distribution from the FY 2011
AOR final rule file) results in a total
case-weighted average standardized
charge per case of $58,850 ($51,353 plus
$7,497). Using the revised FY 2011
thresholds published in Table 10 of the
FY 2010 IPPS/RY 2010 LTCH PPS
notice (75 FR 31213) and the actual case
distribution from the FY 2011 AOR file,
the case-weighted threshold for MS–
DRGs 246, 247, 248, 249, 250, and 251
is $52,940 (all calculations above were
performed using unrounded numbers).
Because this alternative calculation of
total case-weighted average
standardized charge per case for the
applicable MS–DRGs also exceeds the
case-weighted threshold amount, it
appears that LipiscanTM would meet the
cost criterion. In the FY 2011 IPPS/
LTCH PPS proposed rule, we invited
public comment on whether or not
LipiscanTM meets the cost criterion. We
did not receive any public comments on
whether or not LipiscanTM meets the
cost criterion. Therefore, for FY 2011,
we have determined that LipiscanTM
meets the cost criterion.
With regard to substantial clinical
improvement, we determined that the
FY 2010 new technology add-on
payment application for LipiscanTM did
not meet the substantial clinical
improvement criterion because the
evidence and information available at
the time the new technology decisions
were made did not allow CMS to
determine that the application
PO 00000
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represented a substantial clinical
improvement over existing technologies.
Specifically, we found that there was a
lack of evidence that demonstrated that
LipiscanTM affected the medical
management of patients in which the
device was used.
The applicant maintains that the
device meets this criterion for the
following reasons. The applicant noted
that from November 2008 to 2009, the
number of patients in whom LipiscanTM
has been used for clinical purposes has
increased from 100 to 500 and during
the same period, the number of
hospitals using the product has
increased from 6 to 16. In addition, the
applicant asserts that ‘‘during the past
year, two LipiscanTM publications
demonstrate that dilation of a lipid core
plaque is responsible for slow or no
reflow and myocardial infarction during
the procedure.’’ The applicant noted that
this is important because ‘‘several
treatments are available that could
prevent this stenting complication.’’ The
applicant referenced the ‘‘700 patient
PROSPECT Study’’ which was presented
at the Transcatheter Cardiovascular
Therapeutics Conference in September
2009 and found that 20.4 percent of
patients experience a new event in the
3.4 years following stenting. The
applicant pointed to that finding as
evidence that there is a need for
improved safety and efficacy of stenting
and maintained that LipiscanTM offers
clinicians the ability to make decisions
that result in such improvements.
The PROSPECT (Providing Regional
Observations to Study Predictors of
Events in the Coronary Tree) study is a
cohort study of patients with acute
coronary syndrome who underwent
percutaneous coronary angioplasty and
stenting (percutaneous coronary
intervention). Following the procedure,
angiography and intravascular
ultrasound (IVUS) were performed. If a
patient had a subsequent event, a new
angiogram and IVUS image were
obtained and compared to the original
results. The investigators reported that
‘‘angiographically mild lesions with
certain morphologic features on
grayscale and IVUS present with a 3
year cardiac event rate of 17%, versus
other morphologies (indistinguishable
by conventional angiograms) with three
year event risks of less than 1%.’’ We are
concerned that with this type of study
design, it is not possible to determine
whether the information for the IVUS
image would have altered the
angioplasty and stenting procedures
since the images were collected after the
procedure. The results are suggestive,
but a prospective study is needed to
determine the clinical utility of IVUS
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and whether use of IVUS leads to
changes in clinical practice or
improvements in health outcomes. The
PROSPECT study generated a
hypothesis that use of IVUS may help
determine which plaques are vulnerable
to future events but further clinical
research is needed to confirm this
hypothesis. We note that the PROSPECT
study was presented at the
Transcatheter Cardiovascular
Therapeutics Conference in September
2009, but that the study results have yet
to be published in a peer-reviewed
journal. We also note that methods and
conclusions from a study may change
from what was verbally presented
during the peer review process that is
required to publish the study results.
As it did in its prior application, the
applicant noted that the September 1,
2001 final rule states that one facet of
the criterion for substantial clinical
improvement is ‘‘the device offers the
ability to diagnose a medical condition
in a patient population where the
medical condition is currently
undetectable or offers the ability to
diagnose a medical condition earlier in
a patient population than allowed by
currently available methods. There must
also be evidence that use of the device
to make a diagnosis affects the
management of the patient’’ (66 FR
46914). The applicant believes that
LipiscanTM meets all facets of this
criterion. The applicant asserted that the
device is able to detect a condition that
is not currently detectable. The
applicant explained that LipiScanTM is
the first device of its kind to be able to
detect lipid-core-containing plaques of
interest and to assess of coronary artery
lipid core burden. The applicant further
noted that FDA, in its approval
documentation, has indicated that ‘‘This
is the first device that can help assess
the chemical makeup of coronary artery
plaques and help doctors identify those
of particular concern.’’
In addition, the applicant stated that
the LipiScanTM chemogram permits a
clinician to detect lipid-core-containing
plaques in the coronary arteries
compared to other currently available
devices that do not have this ability.
The applicant explained that the
angiogram, the conventional test for
coronary atherosclerosis, shows only
minimal coronary narrowing. However,
the applicant indicated that the
LipiScanTM chemogram has the ability
to reveal when an artery contains
extensive lipid-core-containing plaque
at an earlier stage.
The applicant also noted that the
device has the ability to make a
diagnosis that better affects the
management of the patient. Specifically,
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the applicant asserted that LipiScanTM
‘‘is currently used in the management of
patients undergoing coronary stenting to
improve the safety and efficacy of the
procedure’’ and that while stenting has
steadily improved, its results are not
optimal in approximately 30 percent of
cases due to 3 problems: (1) Peristenting MI due to embolization of lipid
core contents and side branch
occlusion; (2) major adverse coronary
events (MACE) post stenting from
difficulties at the stented site; and (3)
MACE post stenting for non-stented
vulnerable sites. We note that in order
to demonstrate that the technology
represents a substantial clinical
improvement, there must be evidence
that use of the device to make a
diagnosis affects the medical
management of the patient and leads to
improved clinical outcomes.
The applicant described three case
studies where each of the above
problems was addressed by use of the
LipiScanTM. In addition, the applicant
asserts that the chemogram results are
available to the interventional
cardiologist during the PCI procedure,
and have been found to be useful in
decision-making. According to the
applicant, physicians have reported
changes in therapy based on LipiScanTM
findings in 20 to 50 percent of patients
in which the device has been used.
According to the applicant, the most
common use of LipiScanTM results has
been by physicians for selection of the
length of artery to be stented. In some
cases a longer stent has been used when
there is a lipid-core-containing plaque
adjacent to the area that is being stented
because a flow-limiting stenosis is
present. The applicant also noted that,
in some cases, physicians have chosen
to use down-stream protective devices
during stenting procedures on the basis
of information gathered by use of
LipiscanTM in several patients, and that
this has directly impacted their outcome
by capturing emboli and preventing
further cardiac damage. Therefore, the
applicant contends that the use of
LipiScanTM by clinicians to select the
length of artery to be stented and as an
aid in selection of intensity of lipidaltering therapy, demonstrates that
LipiScanTM affects the management of
patients.
In the proposed rule, we stated that
while we recognized that the
identification of lipid-rich plaques in
the coronary vasculature holds promise
in the management of coronary artery
disease, we were concerned that
statements in the FDA approval
documents, as well as statements made
by investigators in the literature, suggest
that the clinical implications of
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50151
identifying these lipid-rich plaques are
not yet certain and that further studies
need to be done to understand the
clinical implications of obtaining this
information.
The applicant also submitted
commentary from a group of
interventional cardiologists who
currently utilize the LipiScanTM device
explaining the clinical benefits of the
device. The applicant further noted that
the device may have other potential
uses that would be of clinical benefit,
and studies are currently being
conducted to investigate these other
potential uses. The applicant explained
that LipiScanTM offers promise as a
means to enhance progress against the
two leading problems in coronary
disease management: (1) The high rate
of second events that occur even after
catheterization, revascularization, and
the institution of optimal medical
therapy; and (2) the failure to diagnose
coronary disease early, which results in
sudden death or MI being the first sign
of the disease in most patients. The
applicant further stated that the
identification of coronary lipid-corecontaining plaques, which can most
readily be done in those already
undergoing catheterization, is likely to
be of benefit in the prevention of second
events. In the longer term, the applicant
stated that the identification of lipidcore-containing plaques by LipiScanTM
may contribute to the important goal of
primary prevention of coronary events,
which, in the absence of adequate
diagnostic methods, continue to cause
extensive morbidity, mortality and
health care expenditures in Medicare
beneficiaries and the general
population.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed public
comment regarding whether or not the
LipiScanTM technology represents a
substantial clinical improvement for the
Medicare population.
Comment: One commenter, a trade
association for interventional
cardiologists, stated that it appreciated
CMS’ clarification in the proposed rule
that ‘‘a new diagnostic technology can
meet the substantial clinical
improvement criterion not just by
demonstrating improvement in clinical
outcomes, but also on the basis of
evidence showing changes in the
management of the patient.’’ This
commenter stated that, in light of the
‘‘clarification,’’ it supported the approval
of the LipiScanTM for new technology
add-on payments.
Response: This comment
mischaracterizes CMS’ position
regarding the required showing for a
diagnostic technology to meet the
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substantial clinical improvement
criterion. CMS has not stated that a new
diagnostic technology can meet the
substantial clinical improvement
criterion not just by demonstrating
improvement in clinical outcomes, but
also on the basis of evidence showing
changes in the management of the
patient. As we stated in the September
7, 2001 Federal Register, we follow
certain guidelines to determine whether
a technology represents a substantial
clinical improvement. For a diagnostic
technology, we make this determination
by judging whether the technology
‘‘offers the ability to diagnose a medical
condition in a patient population where
that medical condition is currently
undetectable or offers the ability to
diagnose a medical condition earlier in
a patient population than allowed by
currently available methods. There must
also be evidence that use of the device
to make a diagnosis affects the
management of the patient.’’ (66 FR
46914)
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43818), we further
discussed what evidence an applicant
must show in order to meet the
substantial clinical improvement
criterion for diagnostic technologies. We
continue to believe that it would not be
appropriate to provide additional
payments for new diagnostic tools that
fail to significantly change the
management of patients, thereby
improving clinical outcomes.
Comment: Commenters supported
deeming the LipiscanTM to be a
substantial clinical improvement over
currently available technologies. The
manufacturer stated that the use of
LipiScanTM increased from 100 cases in
late 2008 to 900 cases by June 2010, and
that the number of hospitals using the
technology has increased from 16 to 22.
Additionally, over 350 patients are
enrolled in the manufacturer’s registry
of cases involving LipiScanTM, COLOR.
The manufacturer asserted that the data
now available clearly identify three
specific clinical implications of the
detection of lipid core plaque: (1) To
predict and minimize the occurrence of
peri-stenting MI; (2) to identify the
length of artery to be stented; and (3) to
assist in selection of the intensity of
pharmacologic therapy following
stenting.
The manufacturer submitted the
chemogram images of 44 stabilized
patients who were stented and in whom
enzymes are available to determine if an
MI occurred during stenting. Some of
the 44 patients had the presence of large
lipid core plaque; others did not. Eight
of these patients were found to have
experienced an MI during stenting (as
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identified by a cardiac enzyme elevation
of greater than or equal to 3x ULN).
With respect to LipiScanTM’s ability to
predict and minimize the occurrence of
peri-stenting MI, the manufacturer
referenced a doctor who had used filters
or embolic protection during stenting.
That doctor’s summary is presented is
the next paragraph. With respect to
identifying the length of artery to be
stented, the manufacturer stated that ‘‘a
case has now been observed in which
acute stent thrombosis occurred when a
stent * * * ended in a lipid core
plaque, as documented in vivo by
LipiScanTM.’’ The manufacturer asserted
that the evidence linking stent
thrombosis to termination of a stent in
a lipid core plaque has led physicians
to use the image provided by
LipiScanTM as a factor determining the
length of artery to be stented. With
respect to LipiScanTM assisting in the
selection of the intensity of medical
therapy post-stenting, the manufacturer
maintained that ‘‘the development of
[LipiScanTM] now makes it possible to
perform in vivo assessment of the
relationship between the presence of
lipid core plaque and coronary event.’’
The manufacturer submitted before and
after chemograms in which the baseline
chemogram did not show lipid core
plaque. In subsequent days, ranging
from 42 to 316 days, the manufacturer
added, the patients still had no lipid
rich plaque. The manufacturer asserted
that these cases ‘‘correctly predicted the
continued patency of the artery and the
absence of a coronary event related to
that artery.’’ The manufacturer showed a
baseline and 325 day follow-up of a
patient who did have lipid rich plaque
at baseline and had a re-stenosis of the
lipid rich area 325 later.
The commenters who supported this
technology generally made anecdotal
assertions in which the information
provided by LipiScanTM was useful to
them in managing their patients. One
commenter, a physician, stated that he
had used the identification of lipid core
plaque (as identified by LipiScanTM) in
an attempt to protect patient from the
high risk of peri-stenting MI by ‘‘placing
a distal protection filter beyond the
lipid core stenosis to be dilated.’’ This
commenter asserted that such filters are
used in dilation of saphenous vein grafts
which have rates of periprocedural MI
that can be reduced by approximately
40 percent if embolic protection is used.
The commenter used protection devices
before stenting in the native coronary
arteries seven patients with large lipid
core plaque as assessed by LipiScanTM.
A filter was used in six patients and a
proximal embolic protection was used
in one patient. The commenter stated
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that he believed that the rate of
infarction was lower in these seven
patients than it would have been had
embolic protection devices not been
utilized, and that the two infarctions
that did occur were smaller than they
would have been if the full load of
debris mobilized by balloon inflation—
included the debris collected in the first
basket—would have lodged in the distal
vessels.
Another physician stated that there
‘‘have been anecdotal cases by multiple
operators of the catastrophic no reflow
phenomenon in patients who
underwent angioplasty of a lipid rich
stenosis [LipiScanTM] imaging may be
able to identify these patients and
hopefully prevent this catastrophic
complication’’ The same commenter
stated that the diagnostic information
provided by the LipiScanTM chemogram
‘‘can be combined with well-established
treatments * * * as a means to reduce
stenting complications and peri-stenting
MI.’’ Some commenters believed they
could reduce the incidence of heart
attacks that occur during stenting by
using a filter to remove the lipid-rich
plaque.
Another commenter stated that,
although he does not perform
interventional cardiology procedures, he
was interested in how the information
provided by LipiScanTM could
contribute to the prevention of initial
and secondary coronary events. He
described an asymptomatic man who
participated in a clinical research study
designed to evaluate the noninvasive
identification of patients at increased
risk of coronary events. He stated that
the patient had a ‘‘noninvasive CTA’’
and that positive results led to a cardiac
catherization in which LipiScanTM was
used. Based on the chemogram, which
showed extensive lipid core plaque, the
clinicians decided to treat this patient
with intensive lipid altering therapy.
The commenter did not describe any
followup for that patient.
Another commenter, a physician,
stated that he performed approximately
70 procedures with the LipiScanTM
since 2008. The commenter asserted
that in roughly 75 percent of these
procedures, the ‘‘lesion characterization
information provided by the Lipiscan
image affected [his] diagnosis of the
patient’s condition.’’ In approximately
50 percent of the procedures, the
commenter stated that the imaging
information affected his treatment of the
patient’s condition. The commenter
further stated that the most significant
changes involved his decisions about
which segments of the artery required
treatment, the length of stent to employ,
and the type of stent he chose to
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employ. The commenter provided
information on three specific cases in
which he used LipiScanTM. In two of the
cases, he indicated that he was better
able to choose the length of stent and in
one case, the use of LipiScanTM helped
guide the selection of the type of stent
to be used; although the patient did
suffer a heart attack, the stenting was
able to proceed.
Response: In the case of LipiScanTM,
we note that existing technologies may
not be able to adequately identify lipidrich plaques. However, methods exist
currently for diagnosing CAD, including
intravascular ultrasound (IVUS) and
optical coherence tomography (OCT).
We also reiterate that such diagnostic
capability must also be linked to
‘‘evidence that use of the device to make
a diagnosis affects the management of
the patient.’’ In this case, the evidence
currently available to CMS consists of
anecdotal claims made by the applicant
and one other commenter that the
identification of such plaques affects the
management of the patient. A review of
the literature yielded no additional
evidence base to support the applicant’s
claim regarding the effect of this
technology on patient management.
Furthermore, as we stated last year, we
continue to believe that the prognostic
implications of detecting lipid-rich
plaque are not yet sufficiently well
understood and documented in the
peer-reviewed evidence base to
conclude that its identification will lead
to widespread and evidence-based
changes in the management of CAD.
We believe that a diagnostic
technology must necessarily have
evidence-based, significant, and positive
effects on the management of patients,
thereby resulting in improved clinical
outcomes generally accepted by
clinicians, in order to meet the
threshold of representing an advance
that substantially improves, relative to
technologies previously available, the
diagnosis of Medicare beneficiaries.
In response to the comments that the
LipiScan, combined with a filter could
reduce the incidence of peri-stenting
MI, we note that use of such a filter in
the coronary vasculature is not currently
approved by the FDA and therefore is
‘‘off-label’’ to the extent that it is already
being employed by physicians. The
most recent article submitted to us by
the applicant (dated 2010), an ‘‘Imaging
Vignette’’ which does not appear to have
been published yet, concludes:
‘‘Additional studies are needed to
quantitate the ability of NIRS to predict
the occurrence of peri-stenting
infarction and to test, in a randomized
trial, the strategy of NIRS guided use of
a distal protection device’’ (Goldstein, et
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al). We agree with the commenters that
use of such filter may ultimately reduce
the incidence of peri-stenting MI to the
extent that it aides the physician in
placing the stent such that it does not
cause the lipid core plaque to rupture.
However, absent FDA approval for this
indication, we do not believe it is
appropriate to consider this use as part
of our evaluation of substantial clinical
improvement for the LipiScanTM. We
also agree with the vignette’s conclusion
that additional clinical studies are
needed to evaluate this claim.
Therefore, while we recognize that
LipiscanTM provides the ability to detect
lipid-rich plaque which is currently
undetectable by any other means, we are
nonetheless still concerned that there is
significant uncertainty within the
clinical community regarding the
prognostic implications of obtaining this
information. We believe the evidence
supplied by the applicant and the
commenters that the device is affecting
the management of the patient is not
able to be validated broadly and is still
anecdotal. Further, the discussions of
the technology in the scientific studies
submitted by the applicant acknowledge
the possible potential of the technology
to affect treatment in the future, but all
stated that additional studies are
necessary to determine its actual
clinical utility. Specifically, in an
editorial published in 2008, the author
wrote, ‘‘In conclusion, further studies
are warranted to determine if detection
of [lipid core plaque of interest] by [near
infrared spectroscopy] imaging will
contribute to enhanced prediction of
outcomes in patients with known CAD’’
(Young, 2008). Also, in a letter to the
editor in the Journal of the College of
Cardiology, another author wrote about
his experience with three patients over
a period of three weeks to share his
‘‘initial observations.’’ The author wrote
that ‘‘* * * preliminary results suggest
that intravascular investigation of
chemical composition of a coronary
plaque has become a clinical reality
[but] it remains to be seen whether
chemograms would perform better than
the ultrasound of whether they will be
able to predict adverse events and
faciltate development of clinically
effective strategies for management of
vulnerable plaques before it is too late.’’
(Maini, 2008) (emphasis added).
In addition, we are concerned that
there continues to be relatively few
cases in which LipiscanTM has been
used relative to the patient population
in which it could potentially be used.
As we have previously explained, we do
not consider merely anecdotal claims
that a device affects the management of
the patient as sufficient evidence to
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demonstrate that a new diagnostic
device affects the management of the
patient, particularly where the device
could be used for a relatively large
patient population. Specifically, the
applicant claims that the device could
potentially be used in every patient who
undergoes coronary angiography. To
date, the device is only in use in 22
hospitals total and, as noted above,
there has been no data published, or
even reported, from the hospitals where
the device has been used, to indicate
that management of patients has
changed and that patients who received
LipiScanTM had better clinical outcomes
than those who did not.
We believe that the lack of
comparative data from hospitals
showing statistically valid improved
outcomes for the patients who received
LipiScanTM compared to those who did
not receive the technology further
supports our previously stated view that
the prognostic implications of detecting
lipid-rich plaque are still not well
enough understood and therefore the
detection of such plaque cannot be
reasonably assumed to automatically
lead to evidence-based, significant, and
positive in the management of patients
with CAD generally accepted by
clinicians, much less lead to improved
clinical outcomes. We agree with the
commenters and applicant that the
identification of lipid-rich plaques by
LipiScanTM may potentially hold
promise and ultimately lead to changes
in the management of CAD and that
LipiscanTM has the potential to provide
additional benefits in clinical outcomes
of patients with CAD. However, we do
not believe the evidence and
information available at this time allows
us to determine that it meets the
substantial clinical improvement
criterion.
Accordingly, we are not approving
LipiscanTM for new technology add-on
payments for FY 2011.
c. LipiScanTM Coronary Imaging System
With Intravascular Ultrasound (IVUS)
InfraReDx, Inc. submitted an
application for new technology add-on
payments for FY 2011 for the
LipiScanTM Coronary Imaging System
with Intravascular Ultrasound
(LipiScanTM IVUS). The LipiScanTM
IVUS device is a diagnostic device that
uses Intravascular near infrared
spectroscopy (INIRS) combined with
intravascular ultrasound (IVUS) during
an invasive coronary angiography to
determine the chemical composition of
coronary plaques, which is
accomplished using near infrared
spectroscopy (INIRS) and to visualize
stents and the structural features of
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coronary lesions, which is
accomplished using IVUS. This new
technology combines both capabilities
in a single catheter. The IVUS part of
the device utilizes sound to interrogate
the artery and, according to the
applicant, provides an image of the size
of the plaque, the degree of stenosis
produced by the plaque, the size of the
artery and the degree of expansion of
the stent. The device consists of a
single-use catheter, a console and a
‘‘single pullback with the artery.’’ The
device is intended to be used in patients
already undergoing coronary stenting.
We note that the LipiScanTM IVUS
device is identified by ICD–9–CM
procedure codes 38.23 (Intravascular
spectroscopy) and 00.24 (Intravascular
imaging of coronary vessels). Cases
involving the use of this device
generally map to MS–DRG 246
(Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s)
with MCC or 4+ Vessels/Stents); MS–
DRG 247 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s)
without MCC); MS–DRG 248
(Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting
Stent(s) with MCC or 4+ Vessels/Stents);
MS–DRG 249 (Percutaneous
Cardiovascular Procedures with NonDrug-Eluting Stent(s) without MCC);
MS–DRG 250 (Percutaneous
Cardiovascular Procedures without
Coronary Artery Stent with MCC); and
MS–DRG 251 (Percutaneous
Cardiovascular Procedures without
Coronary Artery Stent without MCC).
With respect to the newness criterion,
we noted in the proposed rule that this
device was not currently approved by
the FDA, but the manufacturer
anticipated that FDA approval will be
granted in the second quarter of 2010.
We also noted that IVUS has existed for
over 20 years. Therefore, IVUS, on its
own, would not meet the newness
criterion. The applicant asserted that
one difference from the LipiscanTM
product, for which it has also submitted
an application for new technology addon payments, is that the catheter for the
combined product is filled with saline
(which is required for transmission of
sound). The manufacturer has also
stated that the combined device only
requires the use of one catheter, as
opposed to two separate ones. The
manufacturer asserted that the singleuse catheter for the combined
technologies is only supplied by
InfraReDx (the manufacturer of
LipiScanTM). However, we noted that a
physician could use LipiScanTM and
IVUS as two separate products in the
same patient (through the use of two
catheters) and still be able to obtain the
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INIRS image and the ultrasound that are
achieved through the combined product
albeit separately.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed public
comments regarding whether the
combined LipiScanTM IVUS device
should be considered to be ‘‘new’’ as of
the date of the existing LipiScanTM
device received FDA approval or
whether it should be considered new
from the FDA approval date for
LipiScanTM IVUS (should such an
approval be granted). We also welcomed
public comments regarding whether
LipiScanTM IVUS, as a combined
technology, should be considered to be
substantially similar to each individual
technology separately as of the date that
each separate technology received FDA
approval (or the date that each
technology became available on the
market, if either technology was not
available on the market until a date after
FDA approval).
As stated above, in making a
determination of substantial similarity,
we consider the following: (1) Whether
a product uses the same or similar
mechanism of action to achieve a
therapeutic action; (2) whether a
product is assigned to the same or a
different DRG; and (3) whether new use
of a technology involves treatment of
the same or similar type of disease and
the same or similar patient population.
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule, we stated that ‘‘due to the
complexity of issues regarding the
substantial similarity component of the
newness criterion, it may be necessary
to exercise flexibility when considering
whether technologies are substantially
similar to one another’’ (74 FR 43813).
Comment: One comment, the
manufacturer, stated that it agreed with
the proposed rule statement of ‘‘it
appears that LipiScanTM IVUS meet the
newness criterion.’’ Additionally, the
commenter stated that should the
LipiScanTM IVUS receive FDA approval,
it should be considered new because
LipiScanTM IVUS provides the
individual benefits of both LipiScan and
IVUS, ‘‘plus accurate co-registration,
synergistic benefits, and enhanced
safety and ease of use we believe that
the LipiScanTM IVUS multimodality
imaging catheter should be considered
new if and when it receives clearance by
the FDA and is marketed.’’ The
commenter did not specifically address
the three criteria considered under
substantial similarity.
Response: We note that the
LipiScanTM IVUS received a 510(k)
approval from the FDA on June 30,
2010, prior to the July 1 deadline that
applicants for new technology must
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meet in order to be evaluated under the
newness criterion. The FDA approval
letter did not provide information that
would distinguish the LipiScanTM IVUS
from its predicate devices. In addition,
the manufacturer did not provide
enough information for us to distinguish
the LipiScanTM IVUS from the
LipiScanTM, which is what we
specifically questioned in the proposed
rule. (Indeed, we note that the uses for
both devices appear to be markedly
similar.) Also, we did not state in the
proposed rule that the technology meets
the newness criterion, as the commenter
suggested. We note that under FDA’s
510(k) approval process, there must be
at least one predicate device that is
‘‘substantially equivalent.’’ However, as
we have stated previously, we do not
believe that a determination of
substantial equivalence by FDA under
the 510(k) approval process necessarily
means that a technology is substantially
similar to its predicate device(s) for
purposes of the new technology add-on
payment.
Moreover, none of the public
commenters specifically addressed
whether the LipiScanTM IVUS was
substantially similar to the LipiScanTM.
Specifically, none of the public
commenters, including the
manufacturer, addressed: (1) Whether
the products use the same or similar
mechanism of action to achieve a
therapeutic action; (2) whether the
products are assigned to the same or a
different DRG; and (3) whether new use
of a technology involves treatment of
the same or similar type of disease and
the same or similar patient population.
As a result, we do not believe that we
have sufficient information to make an
affirmative decision regarding whether
the LipiScanTM IVUS is substantially
similar to the LipiScanTM. Accordingly,
we are not making a determination
regarding whether the LipiScanTM IVUS
is substantially similar to its predicate
device or the LipiScanTM in this final
rule. However, we note that whether or
not LipiScanTM IVUS was substantially
similar to LipiScanTM, the LipiScanTM
IVUS is still within its newness period
for FY 2011 (because the LipiScanTM
was new as of April 2008 and is still
within its ‘‘newness’’ window for FY
2011). Accordingly, we believe that
LipiScanTM IVUS meets the newness
criterion for FY 2011, but we do not
have sufficient information regarding
whether or not the start of the newness
period began in April 2008 or June
2010. Therefore, we are not making a
determination in this rulemaking
regarding the start of the newness
period.
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In an effort to demonstrate that the
technology meets the cost criterion, the
applicant used the FY 2010 IPPS/RY
2010 LTCH PPS final rule AOR file
(posted on the CMS Web site) to identify
cases potentially eligible for LipiscanTM
IVUS. The applicant believes that every
case within MS–DRGs 246, 247, 248,
249, 250, and 251 is eligible for
LipiscanTM IVUS. In addition, the
applicant believes that LipiscanTM IVUS
will be evenly distributed across
patients in each of those six MS–DRGs
(16.7 percent within each MS–DRG).
Using data from the AOR file, the
applicant found the average
standardized charge per case for MS–
DRGs 246, 247, 248, 249, 250, and 251
was $67,531, $44,485, $62,936, $40,149,
$59,416, and $38,864 respectively,
equating to a case-weighted average
standardized charge per case of $52,230
(calculation performed using unrounded
numbers). The applicant indicated that
the case-weighted average standardized
charge per case does not include charges
related to LipiscanTM IVUS. Therefore, it
is necessary to add the charges related
to the device to the average caseweighted standardized charge per case
to evaluate the cost threshold criterion.
Although the applicant submitted data
related to the estimated cost per case of
LipiscanTM IVUS, the applicant stated
that the cost of the device is proprietary
information. The applicant analyzed
Hospital Cost Report Information
System (HCRIS) data from 2008 to
determine the charges related to the
device. Specifically, the applicant
searched for the 100 cardiac
catheterization labs that had the highest
volume of cases in the United States.
Based on the HCRIS data from these 100
laboratories, the applicant determined
the mean CCR was 0.188 with a markup
of 532 percent, yielding a charge of
$15,960 for LipiscanTM IVUS. (We note
that this estimate of charges related to
the LipiscanTM IVUS is significantly
higher than the estimate of charges
related to the LipiscanTM device derived
from a sample of hospitals.) Adding the
estimated average charge related for the
device to the case-weighted
standardized charge per case (based on
the case distribution from the
applicant’s FY 2010 AOR analysis)
results in a total case-weighted average
standardized charge per case of $68,190
($52,230 plus $15,960). In the FY 2011
IPPS/LTCH PPS proposed rule, we used
the FY 2011 thresholds published in
Table 10 of the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44173) to
determine if the LipiscanTM IVUS meets
the cost criterion. For this final rule, due
to the provisions of section 3401(a) of
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the Affordable Care Act which adjusted
the FY 2010 applicable percentage
increase (thus requiring CMS to revise
the FY 2010 standardized amounts), we
used the revised FY 2011 thresholds as
published in the FY 2010 IPPS/RY 2010
LTCH PPS notice that appeared in the
Federal Register on June 2, 2010 (75 FR
31213) to determine if the LipiscanTM
IVUS meets the cost criterion. Based on
the revised FY 2011 Table 10
thresholds, the case-weighted threshold
for MS–DRGs 246, 247, 248, 249, 250,
and 251 is $56,466 (all calculations
above were performed using unrounded
numbers). Because the applicant’s
calculation of the total case-weighted
average standardized charge per case for
the applicable MS–DRGs exceeds the
case-weighted threshold amount, the
applicant maintains that LipiscanTM
IVUS meets the cost criterion.
We note that in the applicant’s
analysis of the cost criterion, instead of
determining the case-weighted average
standardized charge per case and the
case-weighted threshold amount based
on the actual number of cases from the
FY 2010 AOR file in the applicable MS–
DRGs that are eligible for the LipiscanTM
IVUS, the applicant’s analysis assumed
an even distribution of patients in the
applicable MS–DRGs. However, the data
from the FY 2010 AOR file shows a
varied distribution of cases in each of
the applicable MS–DRGs. We believe
the more appropriate way to determine
the case-weighted average standardized
charge per case and the case-weighted
threshold amount for evaluating the cost
criterion is to use the actual distribution
of cases in the applicable MS–DRGs
based on the number of cases from the
AOR file because this would more
accurately reflect the number and type
of Medicare cases typically treated in
the applicable MS–DRGs. Moreover, this
would better conform to the applicant’s
assertion that the probability of use of
LipiscanTM IVUS is the same in each of
those six MS–DRGs. Using data from the
FY 2011 AOR file (in the proposed rule,
we used the FY 2010 AOR file; however,
for this final rule, we used the most
recent data available, which are
contained in the FY 2011 AOR file), for
MS–DRGs 246, 247, 248, 249, 250, and
251, there were 30,663, 141,780, 14,281,
46,037, 7,591, and 36,059 cases
respectively. Using this case
distribution and the average
standardized charge per case for MS–
DRGs 246, 247, 248, 249, 250, and 251
(that is, $73,006, $48,275, $67,954,
$44,336, $65,238, and $44,504,
respectively, as stated above), the caseweighted average standardized charge
per case is $46,949. As the applicant
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indicated above, the case-weighted
average standardized charge per case
does not include charges related to
LipiscanTM IVUS. Therefore, it is
necessary to add the average charge of
$15,960 related to the device to the caseweighted standardized charge per case
to evaluate the cost threshold criterion.
Adding the estimated charges related to
the device to the case-weighted average
standardized charge per case (based on
the case distribution from the FY 2010
AOR final rule file) results in a total
case-weighted average standardized
charge per case of $62,909 ($46,949 plus
$15,960). Using the revised FY 2011
thresholds published in Table 10 of the
FY 2010 IPPS/RY 2010 LTCH PPS
notice (75 FR 31215) and the actual case
distribution from the AOR file, the caseweighted threshold for MS–DRGs 246,
247, 248, 249, 250, and 251 is $52,940
(all calculations above were performed
using unrounded numbers). Because
this alternative calculation of total caseweighted average standardized charge
per case for the applicable MS–DRGs
exceeds the case-weighted threshold
amount, it appears that LipiscanTM
IVUS would meet the cost criterion.
In addition to the analysis above, the
applicant searched the FY 2008
MedPAR file for cases potentially
eligible for use of the LipiscanTM IVUS.
Because the technology can potentially
be used for all cases within MS–DRGs
246 through 251, the applicant searched
the FY 2008 MedPAR file for all cases
within these MS–DRGs. The applicant
found 30,265 cases (or 9.7 percent of all
cases) in MS–DRG 246; 147,695 cases
(or 47.4 percent of all cases) in MS–DRG
247; 19,642 cases (or 6.3 percent of all
cases) in MS–DRG 248; 67,840 cases (or
21.8 percent of all cases) in MS–DRG
249; 8,120 cases (or 2.6 percent of all
cases) in MS–DRG 250; and 38,022 cases
(or 12.2 percent of all cases) in MS–DRG
251. The average standardized charge
per case was $66,958 for MS–DRG 246,
$50,192 for MS–DRG 247, $72,099 for
MS–DRG 248, $45,086 for MS–DRG 249,
$71,355 for MS–DRG 250, and $46,141
for MS–DRG 251, equating to a caseweighted average standardized charge
per case of $45,964.
Similar to above, the average
standardized charge per case does not
include charges related to the
LipiscanTM IVUS; therefore, it is
necessary to add the charges related to
the device to the average standardized
charge per case in evaluating the cost
threshold criterion. Although the
applicant submitted data related to the
estimated cost of LipiscanTM IVUS per
case, the applicant noted that the cost of
the device was proprietary information.
Based on 2008 HCRIS data from the
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cardiac catheterization laboratories for
all IPPS hospitals, the applicant
determined a mean cost-to-charge ratio
of 0.246 with a markup of 351 percent,
yielding a charge of $10,543 for
LipiscanTM IVUS. Assuming that the
LipiscanTM IVUS device was marked up
351 percent, the total case-weighted
average standardized charge per case for
cases involving the use of LipiscanTM
IVUS would be $56,507 ($45,964 plus
$10,543) across MS–DRGs 246 through
251.
Using the revised FY 2011 thresholds
published in Table 10 of the FY 2010
IPPS/RY 2010 LTCH PPS notice (75 FR
31215), the case-weighted threshold for
MS DRGs 246, 247, 248, 249, 250, and
251 is $52,671 (all calculations above
were performed using unrounded
numbers). Because the applicant’s
calculation of the total case-weighted
average standardized charge per case for
the applicable MS–DRGs exceeds the
case-weighted threshold amount, the
applicant maintains that LipiscanTM
IVUS meets the cost criterion. In the FY
2011 IPPS/LTCH PPS proposed rule, we
invited public comment on whether or
not LipiscanTM IVUS meets the cost
criterion. We did not receive any public
comments in this regard. Accordingly,
we find that for FY 2011 LipiscanTM
IVUS meets the cost criterion.
With regard to substantial clinical
improvement, the applicant asserts that
LipiScanTM IVUS lends all the same
benefits of LipiScanTM by itself (see
discussion of LipiScanTM with respect
to clinical improvement in the above
application analysis) and also gives
added benefits of IVUS. Specifically, the
applicant maintains that LipiScanTM
IVUS is superior to perfusion imaging
and coronary angiography because those
procedures only provide information
about the lumen, but not the wall of the
vessel. The applicant asserts that it is
superior to IVUS (by itself) because
IVUS alone cannot identify plaque
composition. The applicant further
maintains that LipiScanTM IVUS
provides a substantial clinical benefit
over Optical Coherence Tomography
(OCT) because OCT cannot be used if
blood is present in the field of view and
identification of lipid by OCT is ‘‘timeconsuming with a requirement for
expert interpretation.’’ In contrast, ‘‘the
LipiScanTM IVUS signal is available
immediately after the coronary pullback
and does not require expert
interpretation.’’
The applicant also states that
LipiScanTM IVUS makes it possible to
find the lipid core plaques that are
strongly associated with peri-stenting
MI and adverse events post-MI that
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current methods of diagnosis fail to
find.
Finally, the applicant asserts that
LipiScanTM IVUS affects the
management of the patient by improving
the safety and efficacy of stenting.
Further, the applicant states that while
stenting has steadily improved, its
results are not optimal in approximately
30 percent of cases due to three
problems: (1) Peri-stenting MI due to
embolization of lipid core contents and
side branch occlusion; (2) major adverse
coronary events (MACE) post stenting
from difficulties at the stented site; and
(3) MACE post stenting for non-stented
vulnerable sites.
The applicant described three case
studies where each of the above
problems were addressed by use of the
LipiScanTM IVUS. LipiScanTM IVUS
achieves its utility to differentiate lipid
core plaque from fibrotic plaque, a
differentiation that cannot be made by
angiography or grayscale IVUS.
The applicant referenced the ‘‘700
patient PROSPECT Study’’ which was
presented at the Transcatheter
Cardiovascular Therapeutic Conference
in September 2009 and found that 20.4
percent of patients experience a new
event in the 3.4 years following stenting.
The applicant pointed to that finding as
evidence that there is a need for
improved safety and efficacy of stenting
and maintained that LipiscanTM offers
clinicians the ability to make decisions
that result in such improvements. We
note that the applicant did make this
assertion with regard to LipiscanTM and
not LipiscanTM IVUS.
The PROSPECT (Providing Regional
Observations to Study Predictors of
Events in the Coronary Tree) study is a
cohort study of patients with acute
coronary syndrome who underwent
percutaneous coronary angioplasty and
stenting (percutaneous coronary
intervention). Following the procedure,
angiography and IVUS were performed.
If a patient had a subsequent event, a
new angiogram and IVUS image were
obtained and compared to the original
results. The investigators reported that
‘‘angiographically mild lesions with
certain morphologic features on
grayscale and IVUS present with a 3
year cardiac event rate of 17%, versus
other morphologies (indistinguishable
by conventional angiograms) with three
year event risks of less than 1%.’’ We are
concerned that with this type of study
design, it is not possible to determine
whether the information for the IVUS
image would have altered the
angioplasty and stenting procedures
since the images were collected after the
procedure. The results are suggestive,
but a prospective study is needed to
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determine the clinical utility of
LipiScanTM and whether use of IVUS
leads to changes in clinical practice or
improvements in health outcomes. The
PROSPECT study generated a
hypothesis that use of IVUS may help
determine which plaques are vulnerable
to future events but further clinical
research is needed to confirm this
hypothesis. We note that the PROSPECT
study was presented at the
Transcatheter Cardiovascular
Therapeutics Conference in 2009, but
that the study results have yet to be
published in a peer-reviewed journal.
We also note that methods and
conclusions from a study may change
from what was verbally presented
during the peer review process that is
required to publish the study results.
We are concerned that, in the
LipiScanTM IVUS application, the
applicant has generally repeated the
statements made regarding use of
LipiScanTM alone and has not provided
information that indicates that
combined use of LipiScanTM plus IVUS
offers additional clinical benefit,
although the applicant did maintain that
the use of one catheter to co-register of
the near infrared (NIR) mirrors and the
ultrasound transducer can enhance the
accuracy of output and can have safety
benefits. Indeed, we note that most of
the studies that were presented in an
effort to demonstrate that LipiScanTM by
itself was a substantial clinical
improvement were also included to
support the LipiScanTM IVUS
application. The applicant did not
present any published peer-reviewed
journal articles that were specifically
related to the clinical merits of the
combined LipiScanTM IVUS device.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed public
comments on whether the LipiScanTM
IVUS represents a substantial clinical
improvement over existing technologies
as well as public comments on what is
the appropriate comparison device for
LipiScanTM IVUS.
Comment: Many of the commenters
who supported the LipiScanTM
application also stated that, should the
LipiScanTM IVUS receive FDA approval,
they believed that it would offer similar
benefits to the LipiScanTM. For this
reason, these commenters were
supportive of LipiScanTM IVUS being
approved for the new technology add-on
payments. The manufacturer
commented that the LipiScanTM IVUS
‘‘has been constructed and used
successfully in seven patients in
Rotterdam, Netherlands’’ and that it was
featured in a live case presentation at
‘‘EuroPCR,’’ ‘‘the leading meeting of
interventional cardiologists in Europe.’’
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The manufacturer also stated that
LipiScanTM IVUS provides the benefits
of LipiScanTM and IVUS plus several
synergistic benefits. Specifically, the
manufacturer noted the co-registration
of the near infrared (NIR) mirrors and
the ultrasound transducer enhances the
accuracy of the output. The IVUS shows
the location of the catheter in the artery
while the NIR enhances the
interpretation of the grayscale IVUS
image. The manufacturer stated that
‘‘once NIR has clearly shown that a lipid
core is present, it is possible to reexamine the IVUS image for features
such as an estimate of cap thickness.’’
The manufacturer also stated that there
are safety benefits associated with using
one catheter to obtain both the NIR
image and the IVUS image and noted
that with each insertion of a catheter
comes the risk of an adverse event such
as a stroke or myocardial infarction.
Additionally, the manufacturer stated
that combining both technologies into
one catheter reduces procedure time,
radiation exposure and contrast
utilization. The manufacturer stated that
a peer-reviewed manuscript has been
published by Garg, et al.
Response: According to the applicant,
there have only been seven cases in
which the LipiScanTM IVUS has been
used, none of them in the United States
(and, ostensibly, none on a Medicare
beneficiary). Despite the applicant’s
claims that the combined LipiScanTM
IVUS technology enhances the benefits
of either LipiScanTM or IVUS alone as
well as LipiScanTM and IVUS used
simultaneously, but with two separate
catheters, we do not believe that there
is enough clinical evidence relating to
this technology to support this claim or
to demonstrate that the technology is a
substantial clinical improvement over
other existing diagnostic technologies.
That is, the evidence available at this
time does not support that the
LipiScanTM IVUS affects the medical
management of the patient which, in
turn, leads to improved clinical
outcomes. We also note that we did not
believe that there was enough clinical
evidence available at this time to
substantiate the claims that LipiScanTM
by itself is a substantial clinical
improvement. To the extent that the
same information was submitted to
support the applicant’s LipiScanTM
IVUS application, we also find, for the
reasons discussed above, that the
evidence is insufficient to demonstrate
that the LipiScanTM IVUS represents a
substantial clinical improvement over
existing technologies. The manuscript
that the applicant referred to simply
describes what the technology does and
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how it is used; it does not provide any
details as to how the technology affects
the medical management of patients nor
does it provide evidence that use of the
LipiScanTM IVUS ultimately leads to
improved clinical outcomes for patients.
Although we recognize that the
combination of these two existing
technologies may ultimately lead to
better clinical outcomes for patients
undergoing coronary stenting, no data is
available at this time to support that
notion.
Accordingly, we are not approving the
LipiScanTM IVUS device for new
technology add-on payments for FY
2011.
III. Changes to the Hospital Wage Index
for Acute Care Hospitals
A. Background
Section 1886(d)(3)(E) of the Act
requires that, as part of the methodology
for determining prospective payments to
hospitals, the Secretary must adjust the
standardized amounts ‘‘for area
differences in hospital wage levels by a
factor (established by the Secretary)
reflecting the relative hospital wage
level in the geographic area of the
hospital compared to the national
average hospital wage level.’’ In
accordance with the broad discretion
conferred under the Act, we currently
define hospital labor market areas based
on the definitions of statistical areas
established by the Office of Management
and Budget (OMB). A discussion of the
FY 2011 hospital wage index based on
the statistical areas, including OMB’s
revised definitions of Metropolitan
Areas, appears under section III.C. of
this preamble.
Beginning October 1, 1993, section
1886(d)(3)(E) of the Act requires that we
update the wage index annually.
Furthermore, this section of the Act
provides that the Secretary base the
update on a survey of wages and wagerelated costs of short-term, acute care
hospitals. The survey must exclude the
wages and wage-related costs incurred
in furnishing skilled nursing services.
This provision also requires us to make
any updates or adjustments to the wage
index in a manner that ensures that
aggregate payments to hospitals are not
affected by the change in the wage
index. The adjustment for FY 2011 is
discussed in section II.B. of the
Addendum to this final rule.
As discussed below in section III.I. of
this preamble, we also take into account
the geographic reclassification of
hospitals in accordance with sections
1886(d)(8)(B) and 1886(d)(10) of the Act
when calculating IPPS payment
amounts. Under section 1886(d)(8)(D) of
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50157
the Act, the Secretary is required to
adjust the standardized amounts so as to
ensure that aggregate payments under
the IPPS after implementation of the
provisions of sections 1886(d)(8)(B) and
(C) and 1886(d)(10) of the Act are equal
to the aggregate prospective payments
that would have been made absent these
provisions. The budget neutrality
adjustment for FY 2011 is discussed in
section II.A.4.b. of the Addendum to
this final rule.
Section 1886(d)(3)(E) of the Act also
provides for the collection of data every
3 years on the occupational mix of
employees for short-term, acute care
hospitals participating in the Medicare
program, in order to construct an
occupational mix adjustment to the
wage index. A discussion of the
occupational mix adjustment that we
are applying beginning October 1, 2010
(the FY 2011 wage index) appears under
section III.D. of this preamble.
B. Wage Index Reform
1. Wage Index Study Required Under
the MIEA–TRHCA
a. Legislative Requirement
Section 106(b)(1) of the MIEA–
TRHCA (Pub. L. 109–432) required
MedPAC to submit to Congress, not later
than June 30, 2007, a report on the
Medicare wage index classification
system applied under the Medicare
IPPS. Section 106(b) of MIEA–TRHCA
required the report to include any
alternatives that MedPAC recommends
to the method to compute the wage
index under section 1886(d)(3)(E) of the
Act.
In addition, section 106(b)(2) of the
MIEA–TRHCA instructed the Secretary
of Health and Human Services, taking
into account MedPAC’s
recommendations on the Medicare wage
index classification system, to include
in the FY 2009 IPPS proposed rule one
or more proposals to revise the wage
index adjustment applied under section
1886(d)(3)(E) of the Act for purposes of
the IPPS. The Secretary was also to
consider each of the following:
• Problems associated with the
definition of labor markets for the wage
index adjustment.
• The modification or elimination of
geographic reclassifications and other
adjustments.
• The use of Bureau of Labor
Statistics (BLS) data or other data or
methodologies to calculate relative
wages for each geographic area.
• Minimizing variations in wage
index adjustments between and within
MSAs and statewide rural areas.
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• The feasibility of applying all
components of CMS’ proposal to other
settings.
• Methods to minimize the volatility
of wage index adjustments while
maintaining the principle of budget
neutrality.
• The effect that the implementation
of the proposal would have on health
care providers and on each region of the
country.
• Methods for implementing the
proposal(s), including methods to phase
in such implementations.
• Issues relating to occupational mix
such as staffing practices and any
evidence on quality of care and patient
safety including any recommendation
for alternative calculations to the
occupational mix.
In the FY 2009 IPPS final rule (73 FR
48563 through 48567), we discussed the
MedPAC’s study and recommendations,
the CMS contract with Acumen, L.L.C.
for assistance with impact analysis and
study of wage index reform, and public
comments we received on the MedPAC
recommendations and the CMS/
Acumen study and analysis.
b. Interim and Final Reports on Results
of Acumen’s Study
(1) Interim Report on Impact Analysis of
Using MedPAC’s Recommended Wage
Index
In the FY 2009 IPPS final rule (73 FR
48566 through 48567), we discussed the
analysis conducted by Acumen
comparing use of the MedPAC
recommended wage indices to the
current CMS wage index. We refer
readers to section III.B.1.e. of that final
rule for a full discussion of the impact
analysis as well as to Acumen’s interim
report available on the Web site: https://
www.acumenllc.com/reports/cms.
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(2) Acumen’s Final Report on Analysis
of the Wage Index Data and
Methodology
Acumen’s final report addressing the
issues in section 106(b)(2) of the MIEA–
TRHCA is divided into two parts. In the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43824), we provided a
description of Acumen’s analyses for
both parts. The first part of Acumen’s
final report analyzed the strengths and
weaknesses of the data sources used to
construct the MedPAC and CMS
indexes. The first part of the report was
published on Acumen’s Web site after
the publication of the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule. In its
conclusion, Acumen suggested that
MedPAC’s recommended methods for
revising the wage index represented an
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improvement over the existing methods,
and that the BLS data should be used so
that the MedPAC approach can be
implemented.
The second part of Acumen’s final
report focuses on the methodology of
wage index construction and covers
issues related to the definition of wage
areas and methods of adjusting for
differences among neighboring wage
areas, as well as reasons for differential
impacts of shifting to a new index.
Acumen published the second part of its
final report in March 2010 on its Web
site at: https://www./acumenllc.com/
reports/cms. In particular, the report
analyzes MedPAC’s recommended
method of improving upon the
definition of the wage areas used in the
current wage index. MedPAC’s method
first blends MSA and county-level
wages and then implements a
‘‘smoothing’’ step that limits differences
in wage index values between adjacent
counties to no more than 10 percent.
Acumen found MedPAC’s method to be
an improvement over the current wage
index construct. However, although
MedPAC’s method diminishes the size
of differences between adjacent areas,
Acumen suggested that MedPAC’s
method does not guarantee an accurate
representation of a hospital labor market
and would not necessarily eliminate or
reduce hospitals’ desire to reclassify for
a higher wage index. Acumen
recommended further exploration of
labor market area definitions using a
wage area framework based on hospitalspecific characteristics, such as
commuting times from hospitals to
population centers, to construct a more
accurate hospital wage index. Acumen
suggested that such an approach offers
the greatest potential for replacing or
greatly reducing the need for hospital
reclassifications and exceptions.
We indicated in the FY 2009 IPPS
final rule (73 FR 48566) that, in
developing any proposal(s) for
additional wage index reform that may
be included in the FY 2010 IPPS
proposed rule, we would consider all of
the public comments on the MedPAC
recommendations that we had received
in that proposed rulemaking cycle,
along with the interim and final reports
to be submitted to us by Acumen. As
Acumen’s study was not complete at the
time of issuance of the FY 2010 IPPS/
RY 2010 LTCH PPS proposed rule, we
did not propose any additional changes
to the hospital wage index for the FY
2010 IPPS. We also did not propose any
additional changes regarding reforming
the wage index for the FY 2011 IPPS.
We welcomed comments regarding the
second part of Acumen’s final report.
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Comment: Several commenters
addressed the data source for
constructing the wage index. One
commenter supported the use of BLS
data and suggested that a simplified,
standard dataset will eliminate
unnecessary reclassifications and
inconsistencies among Medicare
contractors and create a more valid
wage index calculation. Other
commenters reiterated the concerns
about the shortcomings of the BLS data
that they expressed in public comments
summarized in the FY 2009 IPPS final
rule (73 FR 48564). One commenter
suggested that CMS use data that reflect
the price of labor rather than the cost of
labor in constructing the wage index.
The commenter also suggested that the
wage index include data from SNFs and
other postacute care settings because the
wage index is also applied in those
Medicare provider payment systems.
Regarding the methodology for
constructing the wage index, several
commenters shared Acumen’s concern
that MedPAC’s blending and smoothing
methodology may not be well suited for
the Medicare wage index because it may
mask actual geographic variations in
wage levels. However, the commenters
supported MedPAC’s suggestion of
varying wage indices by more refined
areas, such as counties. Several
commenters also expressed interest in
Acumen’s suggestion for further
exploration of labor market area
definitions based on hospital specific
characteristics, such as the commuting
times from hospitals to population
centers.
One national hospital association
recommended that CMS consider the
following guiding principles as it
evaluates options for improving the
wage index system:
‘‘Any new system should—
• Be fair and accurately reflect the labor
marketplace for hospitals, e.g., consider only
hospital wage and benefit costs rather than
broader labor market costs;
• Provide predictable payments;
• Be stable;
• Be transparent so that the data may be
examined and verified;
• Minimize the administrative burden on
hospitals;
• Utilize the most current information
possible;
• Define boundaries that capture
meaningful relationships between labor
markets, to reduce the need for exceptions
and reclassifications;
• Due to the imperfection of any current
labor market definition that we are aware of,
provide an exception process for hospitals
with labor costs atypical for areas to which
they have been assigned;
• Use consistent definitions,
methodologies, rules, and interpretations
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across the nation for the acquisition and
application of data;
• Include a transition from the old to the
new system that is not disruptive; it should
include a phased-in transition period if
necessary to protect hospitals from abrupt
reductions in payment levels; and
• Not let perfection be the enemy of the
better.’’
Commenters generally urged CMS to
move forward cautiously and ensure a
thorough process for evaluating changes
to the existing wage index.
Response: As discussed in section
III.B.4. of the preamble in this final rule,
section 3137(b) of the Affordable Care
Act requires the Secretary of Health and
Human Services to submit to Congress,
not later than December 31, 2011, a
report that includes a plan to reform the
Medicare wage index applied under the
Medicare IPPS. We will consider the
MedPAC’s and Acumen’s reports and
findings, along with all of the public
comments and suggestions we have
received, as we evaluate ways for
improving the wage index.
2. FY 2009 Policy Changes in Response
to Requirements Under Section 106(b)
of the MIEA–TRHCA and Subsequent
Changes Under Sections 3137(c) and
3141 of the Affordable Care Act
To implement the requirements of
section 106(b) of the MIEA–TRHCA and
respond to MedPAC’s recommendations
in its June 2007 report to Congress, in
the FY 2009 IPPS final rule (73 FR
48567 through 48574), we made policy
changes to the wage index relating to
geographic reclassification average
hourly wage comparison criteria and
rural and imputed floor budget
neutrality. (We refer readers to the FY
2009 IPPS final rule for a full discussion
of the basis for the proposals, the public
comments received, and the FY 2009
final policy.) In the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43825), we reiterated these policy
changes, especially as they related to the
FY 2010 IPPS. However, provisions of
the Affordable Care Act recently
changed the reclassification average
hourly wage comparison criteria and
rural and imputed floor budget
neutrality policies that we adopted in
FY 2009.
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a. Reclassification Average Hourly Wage
Comparison Criteria
In the FY 2009 IPPS final rule, we
adopted the policy to adjust the
reclassification average hourly wage
standard, comparing a reclassifying
hospital’s (or county hospital group’s)
average hourly wage relative to the
average hourly wage of the area to
which it seeks reclassification. (We refer
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readers to the FY 2009 IPPS final rule
for a full discussion of the basis for the
proposals the public comments received
and the FY 2009 final policies.) We
provided for a phase-in of the
adjustment over 2 years. For
applications for reclassification for the
first transitional year, FY 2010, the
average hourly wage standards were set
at 86 percent for urban hospitals and
group reclassifications, and 84 percent
for rural hospitals. For applications for
reclassification for FY 2011 (for which
the application deadline was September
1, 2009) and for subsequent fiscal years,
the average hourly wage standards were
88 percent for urban and group
reclassifications and 86 percent for rural
hospitals. Sections 412.230, 412.232,
and 412.234 of the regulations were
revised accordingly. These policies were
adopted in the FY 2009 IPPS final rule
and were reflected in the wage index in
the Addendum to the FY 2011 IPPS
proposed rule, which appeared in the
Federal Register on May 4, 2010.
However, as we discussed in the
supplemental proposed rule to the FY
2011 IPPS/LTCH PPS proposed rule
issued in the Federal Register on June
2, 2010 (75 FR 30919), the provisions of
section 3137(c) of the Affordable Care
Act revised the average hourly wage
standards. Specifically, section 3137(c)
restored the average hourly wage
standards that were in place for FY 2008
(that is, 84 percent for urban hospitals,
85 percent for group reclassifications,
and 82 percent for rural hospitals) for
applications for reclassification for FY
2011 and for each subsequent fiscal year
until the first fiscal year beginning on or
after the date that is one year after the
Secretary of Health and Human Services
submits a report to Congress on a plan
for reforming the wage index under
section 3137(b) of the Affordable Care
Act. Section 3137(c) of the Affordable
Care Act also requires the revised
average hourly wage standards to be
applied in a budget neutral manner. We
note that section 3137(c) of the
Affordable Care Act does not provide for
the revised average hourly wage
standards to be applied retroactively,
nor does it change the statutory
deadline for applications for
reclassification for FY 2011. Under
section 1886(d)(10) of the Act, the
Medicare Geographic Classification
Review Board (MGCRB) considers
applications by hospitals for geographic
reclassification for purposes of payment
under the IPPS. Hospitals must apply to
the MGCRB to reclassify 13 months
prior to the start of the fiscal year for
which reclassification is sought
(generally by September 1). For
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50159
reclassifications for the FY 2011 wage
index, the deadline for applications was
September 1, 2009 (74 FR 43838).
As we discussed in the June 2, 2010
FY 2011 supplemental proposed rule
(75 FR 30919 and 30920), in our
proposed implementation of section
3137(c) of the Affordable Care Act, we
requested the assistance of the MGCRB
in determining, for applications
received by September 1, 2009, whether
additional hospitals would qualify for
reclassification for FY 2011 based on the
revised average hourly wage standards
of 84 percent for urban hospitals, 85
percent for group reclassifications, and
82 percent for rural hospitals restored
by section 3137(c). We determined that
18 additional hospitals would qualify
for reclassification for FY 2011. In
addition, 5 hospitals, for which the
MGCRB granted reclassifications to their
secondary requested areas for FY 2011,
would qualify for reclassifications
instead to their primary requested areas
because they now meet the average
hourly wage criteria to reclassify to
those areas. Therefore, in accordance
with § 412.278 of the regulations, in
which paragraph (c) provides the
Administrator discretionary authority to
review any final decision of the
MGCRB, we submitted a letter to the
Administrator requesting that she
review and amend the MGCRB’s
decision and grant the 23 hospitals their
requested reclassifications (or primary
reclassifications) for FY 2011. The
proposed wage index in the Addendum
to the June 2, 2010 supplemental
proposed rule (75 FR 30984) reflected
these changes in hospital
reclassifications, although the
Administrator had not issued all of her
decisions by the issuance date of the
supplemental proposed rule. We stated
that any changes to the FY 2011 wage
index, as a result of the Administrator’s
actual decision issued under
§ 412.278(c), or an amendment of the
Administrator’s decision issued under
§ 412.278(g), would be reflected in the
FY 2011 IPPS final rule. As a result of
her review, the Administrator amended
the MGCRB’s decision for 22 of the 23
hospitals for the FY 2011 wage index.
One hospital had decided to withdraw
its approved reclassification for FYs
2011 through 2013 and, instead, ‘‘fall
back’’ to its prior reclassification for FYs
2010 through 2012. (We refer readers to
42 CFR 412.273 and the discussion on
withdrawals, terminations, and ‘‘fall
back’’ reclassifications in section
III.I.3.a. of the preamble in this final
rule.)
In the June 2, 2010 supplemental
proposed rule (75 FR 30973), we
proposed to amend §§ 412.230, 412.232,
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and 412.234 to reflect the average
hourly wage reclassification criteria
restored by section 3137(c) of the
Affordable Care Act.
Comment: Several commenters urged
CMS to use its administrative discretion
to open an additional short window of
opportunity for FY 2011 reclassification
application. The commenters stated that
some hospitals did not meet the average
hourly wage criteria in effect as of the
September 1, 2009 deadline, and,
therefore, did not apply for
reclassification for FY 2011; however,
they meet the revised criteria and
should be allowed a fair and equitable
opportunity to reclassify. The
commenters suggested that only a fairly
limited number of hospitals would
apply, so the workloads for CMS and
the MGCRB should be manageable.
Response: As we discussed above, the
deadline for application for
reclassification is established through
statute, under section 1886(d)(10) of the
Act. Therefore, we believe that if the
Congress had intended for hospitals to
be afforded another opportunity to
apply for reclassification for FY 2011
due to the revisions made by section
3137(c) of the Affordable Care Act, the
Congress also would have established
such opportunity through a provision of
the law. We also believe that the
commenters may have underestimated
the workload and time required for the
suggested additional window of
opportunity and that such opportunity,
instead, would have been very
disruptive to the development and
publication of the IPPS proposed and
final rates for FY 2011. Given the
amount of time it would have taken
after the March 23, 2010 enactment date
of the law for CMS to (1) Establish and
implement a process for the additional
application period, (2) allow hospitals
sufficient time to submit their
applications to the MGCRB, and (3)
allow a sufficient period of time for the
MGCRB to review the applications and
make its decisions, the additional
reclassifications would not have been
determined in time for inclusion in the
FY 2011 IPPS/LTCH PPS proposed rule
or the supplemental proposed rule, and
there would not be sufficient time to
gather and consider comments regarding
the effects of this application period on
other nonreclassified hospitals as well
as the hospitals that were able to take
advantage of the second window for
application.
We believe that our proposed
implementation of section 3137(c) is the
least disruptive and intended approach.
Therefore, we are adopting our proposal
as final in this FY 2011 IPPS/LTCH PPS
final rule. The wage index in the
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Addendum to this final rule reflects the
reclassifications that resulted from the
Administrator’s reversal of the MGCRB’s
decision for 22 hospitals that applied by
September 1, 2009 and meet the revised
average hourly wage criteria. In
addition, we are adopting as final,
without modification, the proposed
revisions to §§ 412.230, 412.232, and
412.234 of the regulations to codify the
revised average hourly wage criteria.
b. Budget Neutrality Adjustment for the
Rural and Imputed Floors
In the FY 2009 IPPS final rule (73 FR
48574 through 48575), we adopted State
level budget neutrality (rather than the
national budget neutrality adjustment)
for the rural and imputed floors,
effective beginning with the FY 2009
wage index and incorporated this policy
in our regulation at § 412.64(e)(4).
Specifically, the regulations specified
that CMS makes an adjustment to the
wage index to ensure that aggregate
payments after implementation of the
rural floor under section 4410 of the
Balanced Budget Act of 1997 (Pub. L.
105–33) and the imputed floor under
§ 412.64(h)(4) are made in a manner that
ensures that aggregate payments to
hospitals are not affected and that,
beginning October 1, 2008, we would
transition from a nationwide adjustment
to a statewide adjustment, with a
statewide adjustment fully in place by
October 1, 2010.
These policies for the rural and
imputed floors were adopted in the FY
2009 IPPS final rule and were reflected
in the proposed wage index in the
Addendum to the FY 2011 IPPS/LTCH
PPS proposed rule, published in the
Federal Register on May 4, 2010 (75 FR
23937 and 23938). However, as we
discussed in the June 2, 2010
supplemental FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 30920), these
policies were recently changed by the
provisions of section 3141 of the
Affordable Care Act. Specifically,
section 3141 of the Affordable Care Act
rescinded our policy that established a
statewide budget neutrality adjustment
for the rural and imputed floors and,
instead, restored a uniform, national
adjustment to the area wage index,
beginning with the FY 2011 wage index.
In addition, we note that the imputed
floor is set to expire on September 30,
2011. As we indicated in the
supplemental proposed rule, we are not
reading the language of section 3141 of
the Affordable Care Act as altering this
expiration date. Section 3141 of the
Affordable Care Act requires that the
Secretary ‘‘administer subsection (b) of
such section 4410 and paragraph (e) of
* * * section 412.64 in the same
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manner as the Secretary administered
such subsection (b) and paragraph (e)
for discharges occurring during fiscal
year 2008 (through a uniform, national
adjustment to the area wage index).’’
Thus, section 3141 of the Affordable
Care Act is governing how we apply
budget neutrality, under the authorities
of § 412.64(e) and section 4410(b) of the
Balanced Budget Act, but it does not
alter § 412.64(h) of our regulations
(which includes the imputed floor and
its expiration date). To the extent there
is an imputed floor, section 3141 of the
Affordable Care Act governs budget
neutrality for that floor, but it does not
continue the imputed floor beyond the
expiration date already included in our
regulations.
In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule issued in
the Federal Register on June 2, 2010, we
proposed to revised the regulations at
§ 412.64(e) to reflect the changes made
by section 3141 of the Affordable Care
Act that restored a uniform, national
adjustment to the area wage index,
beginning with the FY 2011 wage index.
We did not propose any other special
rules or procedures for implementing
the provisions of section 3141.
Comment: A few commenters favored
the provision of section 3141 to restore
the national adjustment to the wage
index; other commenters objected to the
provision.
Response: We appreciate the support
of the commenters. Regarding the
comment objecting to the provision, we
are obligated to implement the
provisions of the law.
In accordance with the law, we are
adopting as a final policy in this final
rule, a uniform, national budget
neutrality adjustment for the rural and
imputed floors, which, for FY 2011, is
a factor of 0.996641. The wage index in
the Addendum to this final rule reflects
this policy. In addition, we are adopting
as final, without modification, the
proposed changes to § 412.64(e) of the
regulations to incorporate the
restoration provisions of section 3141 of
the Affordable Care Act.
3. Floor for Area Wage Index for
Hospitals in Frontier States
Section 10324(a)(1) of the Affordable
Care Act amended section 1886(d)(3)(E)
of the Act by adding a provision under
new subsection (iii) to establish an
adjustment to create a wage index floor
of 1.00 for all hospitals located in States
determined to be ‘‘frontier States,’’
beginning in FY 2011. The new section
1886(d)(3)(E)(iii)(II) of the Act defines a
‘‘frontier State’’ as a State in which at
least 50 percent of the counties in the
State are determined to be ‘‘frontier
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counties.’’ The new section
1886(d)(3)(E)(iii)(III) of the Act defines a
‘‘frontier county’’ as a county in which
the population per square mile is less
than 6 persons. The new section
1886(d)(3)(E)(iii)(IV) of the Act specifies
that this provision for the frontier State
floor shall not apply to hospitals that are
receiving a nonlabor-related share
adjustment under section 1886(d)(5)(H)
of the Act, that is, hospitals in Alaska
or Hawaii.
To implement the provision for the
frontier State floor adjustment, in the FY
2011 IPPS/LTCH PPS supplemental
proposed rule published in the Federal
Register on June 2, 2010 (75 FR 30920),
we proposed to identify frontier
Counties by analyzing population data
and county definitions based upon the
most recent annual Population
Estimates published by the U.S. Census
Bureau. We proposed to divide each
county’s population total by each
county’s reported land area (according
to the decennial census) in square miles
to establish population density. We also
proposed to update this analysis from
time to time, such as upon publication
of a subsequent decennial census and, if
necessary, add or remove qualifying
States from the list of frontier States
based on the updated analysis.
In accordance with section
1886(d)(3)(E)(iii) of the Act, as added by
section 10324(a)(1) of the Affordable
Care Act, all PPS hospitals located
within a State that qualifies as a frontier
State will receive either the higher of its
post-reclassification wage index rate, or
a wage index with a minimum value of
1.00. In the June 2, 2010 supplemental
proposed rule, we proposed that, for a
hospital that is geographically located in
a frontier State and is reclassified under
section 1886(d)(10) of the Act to a CBSA
in a non-frontier State, the hospital
would receive a wage index that is the
higher of the reclassified area wage
index or the minimum wage index of
1.00. In accordance with section
10324(a)(2) of the Affordable Care Act,
the frontier State adjustment will not be
subject to budget neutrality under
section 1886(d)(3)(E) of the Act, and
will only be extended to hospitals
geographically located within a Frontier
State. In the June 2, 2010 supplemental
proposed rule, we proposed to calculate
and apply the frontier State floor
adjustments after rural and imputed
floor budget neutrality adjustments are
calculated for all labor market areas, so
as to ensure that no hospital in a
Frontier State will receive a wage index
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of less than 1.00 due to the rural and
imputed floor adjustment. We invited
public comment on these proposals
regarding our methods for determining
frontier States, and for calculation and
application of the adjustment.
In the June 2, 2010 supplemental
proposed rule (75 FR 30971), we
proposed to establish a new paragraph
(m) under § 412.64 to incorporate the
provisions of section 1886(d)(3)(E)(iii) of
the Act, as added by section 10324(a)(1)
of the Affordable Care Act.
Comment: Commenters supported the
proposed methods for implementation
of the frontier States floor adjustment to
the area wage index provided for under
section 1886(d)(3)(E)(iii) of the Act.
Response: We appreciate the
commenters’ support.
In this final rule, we are
implementing the frontier State floor
adjustment using the criteria described
above that we are finalizing in this final
rule. For the final FY 2011 IPPS wage
indices, based on the criteria described
above, we identified the following
frontier States that will receive the floor
adjustment for FY 2011. These frontier
States also are identified by a footnote
in Table 4D–2 of the Addendum to this
final rule.
FRONTIER STATES IDENTIFIED FOR THE FY 2011 WAGE INDEX FLOOR ADJUSTMENT UNDER SECTION 10324(a) OF THE
AFFORDABLE CARE ACT
Total
counties
State
Montana ...................................................................................................................................................
Wyoming ..................................................................................................................................................
North Dakota ............................................................................................................................................
Nevada .....................................................................................................................................................
South Dakota ...........................................................................................................................................
56
23
53
17
66
Frontier
counties
45
17
36
11
34
Percent of
counties
identified as
frontier
80
74
68
65
52
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Figures in table based on:
—Population Data set available at: https://www.census.gov/popest/estimates.html (2009 County Total Population Estimates).
—Land Area Dataset available at: https://factfinder.census.gov/ (Decennial Census Geographic Comparison Tables: ‘‘United States—County by
State and for Puerto Rico’’).
After consideration of the public
comments we received, we are adopting
as final, without modification, the
proposed addition of new paragraph (m)
under § 412.64 of the regulations to
incorporate the provisions of section
1886(d)(3)(E)(iii) of the Act, as added by
section 10324(a)(1) of the Affordable
Care Act, by specifying the criteria for
adjusting the wage index to account for
the frontier State floor adjustment, the
amount of the wage index adjustment,
and our process for determining and
posting the wage index adjustments.
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4. Plan for Reforming the Wage Index
Under Section 3137(b) of Affordable
Care Act
As we discussed in the June 2, 2010
supplemental proposed rule (75 FR
30919), section 3137(b) of the
Affordable Care Act requires the
Secretary of Health and Human Services
to submit to Congress, not later than
December 31, 2011, a report that
includes a plan to reform the Medicare
wage index applied under the Medicare
IPPS. In developing the plan, the
Secretary of Health and Human Services
must take into consideration the goals
for reforming the wage index that were
set forth by MedPAC in its June 2007
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report entitled, ‘‘Report to Congress:
Promoting Greater Efficiency in
Medicare’’, including establishing a new
system that—
• Uses Bureau of Labor of Statistics
(BLS) data, or other data or
methodologies, to calculate relative
wages for each geographic area;
• Minimizes wage index adjustments
between and within MSAs and
statewide rural areas;
• Includes methods to minimize the
volatility of wage index adjustments
while maintaining budget neutrality in
applying such adjustments;
• Takes into account the effect that
implementation of the system would
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have on health care providers and on
each region of the country;
• Addresses issues related to
occupational mix, such as staffing
practices and ratios, and any evidence
on the effect on quality of care or patient
safety as a result of the implementation
of the system; and
• Provides for a transition.
In addition, section 3137(b)(3) of the
Affordable Care Act requires the
Secretary of Health and Human Services
to consult with relevant affected parties
in developing the plan. Although the
provisions of section 3137(b) of the
Affordable Care Act will not have an
actual impact on the FY 2011 wage
index, we notified the public of the
provisions in the supplemental
proposed rule so that they would have
an opportunity to provide comments
and suggestions on how they may
participate in developing the plan.
Comment: A few commenters
encouraged CMS to involve the industry
in the process. One commenter in
particular suggested that CMS should
adopt an advisory commission approach
in addressing future changes to the wage
index.
Response: We will consider these
suggestions in developing our plan for
meeting the requirements of section
3137(b) of the Affordable Care Act.
C. Core-Based Statistical Areas for the
Hospital Wage Index
The wage index is calculated and
assigned to hospitals on the basis of the
labor market area in which the hospital
is located. In accordance with the broad
discretion under section 1886(d)(3)(E) of
the Act, beginning with FY 2005, we
define hospital labor market areas based
on the Core-Based Statistical Areas
(CBSAs) established by OMB and
announced in December 2003 (69 FR
49027). For a discussion of OMB’s
revised definitions of CBSAs and our
implementation of the CBSA
definitions, we refer readers to the
preamble of the FY 2005 IPPS final rule
(69 FR 49026 through 49032).
As with the FY 2010 final rule, in the
FY 2011 proposed rule, we proposed to
provide that hospitals receive 100
percent of their wage index based upon
the CBSA configurations. Specifically,
for each hospital, we proposed to
determine a wage index for FY 2011
employing wage index data from
hospital cost reports for cost reporting
periods beginning during FY 2007 and
using the CBSA labor market
definitions. We consider CBSAs that are
MSAs to be urban, and CBSAs that are
Micropolitan Statistical Areas as well as
areas outside of CBSAs to be rural. In
addition, it has been our longstanding
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policy that where an MSA has been
divided into Metropolitan Divisions, we
consider the Metropolitan Division to
comprise the labor market areas for
purposes of calculating the wage index
(69 FR 49029) (regulations at
§ 412.64(b)(1)(ii)(A)).
On December 1, 2009, OMB
announced changes to the principal
cities and, if applicable, titles of a
number of CBSAs and Metropolitan
Divisions (OMB Bulletin No. 10–2). The
changes to the principal cities and titles
are as follows:
• San Marcos, TX qualifies as a new
principal city of the Austin-Round
Rock, TX CBSA. The new title is AustinRound Rock-San Marcos, TX CBSA.
• Delano, CA qualifies as a new
principal city of the Bakersfield, CA
CBSA. The new title: BakersfieldDelano, CA CBSA.
• Conroe, TX qualifies as a new
principal city of the Houston-Sugar
Land-Baytown, TX CBSA. The CBSA
title is unchanged.
• North Port, FL qualifies as a new
principal city of the Bradenton-SarasotaVenice, FL CBSA. The new title is North
Port-Bradenton-Sarasota, FL CBSA. The
new code is CBSA 35840.
• Sanford, FL qualifies as a new
principal city of the OrlandoKissimmee, FL CBSA. The new title is
Orlando-Kissimmee-Sanford, FL CBSA.
• Glendale, AZ qualifies as a new
principal city of the Phoenix-MesaScottsdale, AZ CBSA. The new title is
Phoenix-Mesa-Glendale, AZ CBSA.
• Palm Desert, CA qualifies as a new
principal city of the Riverside-San
Bernardino-Ontario, CA CBSA. The
CBSA title is unchanged.
• New Braunfels, TX qualifies as a
new principal city of the San Antonio,
TX CBSA. The new title is San AntonioNew Braunfels, TX CBSA.
• Auburn, WA qualifies as a new
principal city of the Seattle-TacomaBellevue, WA CBSA. The CBSA title is
unchanged.
The changes to titles resulting from
changes to the order of principal cities
based on population are as follows:
• Rockville, MD replaces Frederick,
MD as the second most populous
principal city in the Bethesda-FrederickRockville, MD Metropolitan Division.
The new title is Bethesda-RockvilleFrederick, MD Metropolitan Division.
• Rock Hill, SC replaces Concord, NC
as the third most populous principal
city in the Charlotte-Gastonia-Concord,
NC-SC CBSA. The new title is CharlotteGastonia-Rock Hill, NC-SC CBSA.
• Joliet, IL replaces Naperville, IL as
the second most populous principal city
in the Chicago-Naperville-Joliet, IL
Metropolitan Division. The new title is
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Chicago-Joliet-Naperville, IL
Metropolitan Division.
• Crestview, FL replaces Fort Walton
Beach, FL as the most populous
principal city in the Fort Walton BeachCrestview-Destin, FL CBSA. The new
title is Crestview-Fort Walton BeachDestin, FL CBSA. The new code is
18880.
• Hillsboro, OR replaces Beaverton,
OR as the third most populous principal
city in the Portland-VancouverBeaverton, OR-WA CBSA. The new title
is Portland-Vancouver-Hillsboro,
OR-WA CBSA.
• Steubenville, OH replaces Weirton,
WV as the most populous principal city
in the Weirton-Steubenville, WV-OH
CBSA. The new title is SteubenvilleWeirton, OH-WV CBSA. The new CBSA
code is 44600.
The OMB bulletin is available on the
OMB Web site at https://
www.whitehouse.gov/OMB—go to
‘‘Agency Information’’ and click on
‘‘Bulletins’’.
We received one public comment on
the proposed rule that commended CMS
for continuing to incorporate OMB
changes to the geographic area
definitions used under the IPPS. CMS
will apply these changes to the IPPS
beginning October 1, 2010.
D. Occupational Mix Adjustment to the
FY 2011 Wage Index
As stated earlier, section 1886(d)(3)(E)
of the Act provides for the collection of
data every 3 years on the occupational
mix of employees for each short-term,
acute care hospital participating in the
Medicare program, in order to construct
an occupational mix adjustment to the
wage index, for application beginning
October 1, 2004 (the FY 2005 wage
index). The purpose of the occupational
mix adjustment is to control for the
effect of hospitals’ employment choices
on the wage index. For example,
hospitals may choose to employ
different combinations of registered
nurses, licensed practical nurses,
nursing aides, and medical assistants for
the purpose of providing nursing care to
their patients. The varying labor costs
associated with these choices reflect
hospital management decisions rather
than geographic differences in the costs
of labor.
1. Development of Data for the FY 2011
Occupational Mix Adjustment Based on
the 2007–2008 Occupational Mix
Survey
As provided for under section
1886(d)(3)(E) of the Act, we collect data
every 3 years on the occupational mix
of employees for each short-term, acute
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care hospital participating in the
Medicare program.
For the FY 2010 hospital wage index,
we used occupational mix data
collected on a revised 2007–2008
Medicare Wage Index Occupational Mix
Survey (the 2007–2008 survey) to
compute the occupational mix
adjustment for FY 2010. (We refer
readers to the FY 2010 IPPS final rule
(74 FR 43827) for a detailed discussion
of the 2007–2008 survey.) Again, for the
FY 2011 hospital wage index, we used
data from the 2007–2008 survey
(including revised data for 45 hospitals)
to compute the FY 2011 adjustment.
2. New 2010 Occupational Mix Survey
for the FY 2013 Wage Index
As stated earlier, section 304(c) of
Public Law 106–554 amended section
1886(d)(3)(E) of the Act to require CMS
to collect data every 3 years on the
occupational mix of employees for each
short-term, acute care hospital
participating in the Medicare program.
We used occupational mix data
collected on the 2007–2008 survey to
compute the occupational mix
adjustment for FY 2010 and the FY 2011
wage index in this final rule. We also
plan to use the 2007–2008 survey data
for the FY 2012 wage index. Therefore,
a new measurement of occupational mix
will be required for FY 2013.
Since we implemented the 2007–2008
survey, we received several public
comments suggesting further
improvements to the occupational mix
survey. Specifically, commenters
recommended that CMS use the
calendar year (that is, January 1 through
December 31) as the 1-year reporting
period instead of July 1 through June 30.
Commenters also requested that CMS
allow for a 6-month period after the end
of the survey reporting period for
hospitals to complete and submit their
data to their Medicare fiscal
intermediaries and MACs. The
commenters suggested that these
changes will allow hospitals more time
to develop their occupational mix data
before submitting the data to the
Medicare contractors and CMS for use
in development of the wage index.
Based on these comments, we revised
the occupational mix survey. The new
2010 survey (Form CMS–10079 (2010))
will provide for the collection of
hospital-specific wages and hours data
for calendar year 2010 (that is, payroll
periods ending between January 1, 2010
and December 31, 2010) and will be
applied beginning with the FY 2013
wage index.
On September 4, 2009, we published
in the Federal Register a notice
soliciting comments on the proposed
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2010 survey (74 FR 45860). The
comment period for the notice ended on
November 3, 2009. After considering the
comments we received, we made a few
minor editorial changes and published
the final 2010 survey in the Federal
Register on January 15, 2010 (75 FR
2548). The survey was approved by
OMB on February 26, 2010 (OMB
control number 0938–0907) and is
available on the CMS Web site at:
https://www.cms.hhs.gov/
AcuteInpatientPPS/WIFN/
list.asp#TopOfPage, and through the
fiscal intermediaries/MACs. Hospitals
are required to submit their completed
2010 surveys to their fiscal
intermediaries/MACs by July 1, 2011.
The preliminary, unaudited 2010 survey
data will be released in early October
2011, along with the FY 2009 Worksheet
S–3 wage data, for the FY 2013 wage
index review and correction process.
Although, in the FY 2011 proposed
rule, we did not propose any changes or
solicit comments pertaining to the 2010
occupational mix survey, we received
one comment that commended CMS for
its decision to provide for a calendar
year reporting period and a submission
deadline that is 6 months after the end
of the reporting period. The commenter
believed that this timeframe will
increase both the survey’s accuracy and
submission rate.
3. Calculation of the Occupational Mix
Adjustment for FY 2011
For FY 2011 (as we did for FY 2010),
we calculated the occupational mix
adjustment factor using the following
steps:
Step 1—For each hospital, determine
the percentage of the total nursing
category attributable to a nursing
subcategory by dividing the nursing
subcategory hours by the total nursing
category’s hours. Repeat this
computation for each of the four nursing
subcategories: Registered nurses;
licensed practical nurses; nursing aides,
orderlies, and attendants; and medical
assistants.
Step 2—Determine a national average
hourly rate for each nursing subcategory
by dividing a subcategory’s total salaries
for all hospitals in the occupational mix
survey database by the subcategory’s
total hours for all hospitals in the
occupational mix survey database.
Step 3—For each hospital, determine
an adjusted average hourly rate for each
nursing subcategory by multiplying the
percentage of the total nursing category
(from Step 1) by the national average
hourly rate for that nursing subcategory
(from Step 2). Repeat this calculation for
each of the four nursing subcategories.
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50163
Step 4—For each hospital, determine
the adjusted average hourly rate for the
total nursing category by summing the
adjusted average hourly rate (from Step
3) for each of the nursing subcategories.
Step 5—Determine the national
average hourly rate for the total nursing
category by dividing total nursing
category salaries for all hospitals in the
occupational mix survey database by
total nursing category hours for all
hospitals in the occupational mix
survey database.
Step 6—For each hospital, compute
the occupational mix adjustment factor
for the total nursing category by
dividing the national average hourly
rate for the total nursing category (from
Step 5) by the hospital’s adjusted
average hourly rate for the total nursing
category (from Step 4).
If the hospital’s adjusted average
hourly rate is less than the national
average hourly rate (indicating the
hospital employs a less costly mix of
nursing employees), the occupational
mix adjustment factor is greater than
1.0000. If the hospital’s adjusted average
hourly rate is greater than the national
average hourly rate, the occupational
mix adjustment factor is less than
1.0000.
Step 7—For each hospital, calculate
the occupational mix adjusted salaries
and wage-related costs for the total
nursing category by multiplying the
hospital’s total salaries and wage-related
costs (from Step 5 of the unadjusted
wage index calculation in section III.G.
of this preamble) by the percentage of
the hospital’s total workers attributable
to the total nursing category (using the
occupational mix survey data, this
percentage is determined by dividing
the hospital’s total nursing category
salaries by the hospital’s total salaries
for ‘‘nursing and all other’’) and by the
total nursing category’s occupational
mix adjustment factor (from Step 6
above).
The remaining portion of the
hospital’s total salaries and wage-related
costs that is attributable to all other
employees of the hospital is not
adjusted by the occupational mix. A
hospital’s all other portion is
determined by subtracting the hospital’s
nursing category percentage from 100
percent.
Step 8—For each hospital, calculate
the total occupational mix adjusted
salaries and wage-related costs for a
hospital by summing the occupational
mix adjusted salaries and wage-related
costs for the total nursing category (from
Step 7) and the portion of the hospital’s
salaries and wage-related costs for all
other employees (from Step 7).
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To compute a hospital’s occupational
mix adjusted average hourly wage,
divide the hospital’s total occupational
mix adjusted salaries and wage-related
costs by the hospital’s total hours (from
Step 4 of the unadjusted wage index
calculation in section III.G. of this
preamble).
Step 9—To compute the occupational
mix adjusted average hourly wage for an
urban or rural area, sum the total
occupational mix adjusted salaries and
wage-related costs for all hospitals in
the area, then sum the total hours for all
hospitals in the area. Next, divide the
area’s occupational mix adjusted
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salaries and wage-related costs by the
area’s hours.
Step 10—To compute the national
occupational mix adjusted average
hourly wage, sum the total occupational
mix adjusted salaries and wage-related
costs for all hospitals in the Nation, then
sum the total hours for all hospitals in
the Nation. Next, divide the national
occupational mix adjusted salaries and
wage-related costs by the national
hours. The FY 2011 occupational mix
adjusted national average hourly wage is
$34.9664.
Step 11—To compute the
occupational mix adjusted wage index,
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divide each area’s occupational mix
adjusted average hourly wage (Step 9)
by the national occupational mix
adjusted average hourly wage (Step 10).
Step 12—To compute the Puerto Rico
specific occupational mix adjusted wage
index, follow Steps 1 through 11 above.
The FY 2011 occupational mix adjusted
Puerto Rico-specific average hourly
wage is $14.7620.
The table below is an illustrative
example of the occupational mix
adjustment.
BILLING CODE 4120–01–P
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Because the occupational mix
adjustment is required by statute, all
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hospitals that are subject to payments
under the IPPS, or any hospital that
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would be subject to the IPPS if not
granted a waiver, must complete the
occupational mix survey, unless the
hospital has no associated cost report
wage data that are included in the FY
2011 wage index. For the FY 2007–2008
survey, the response rate was 91.1
percent.
In computing the FY 2011 wage
index, if a hospital did not respond to
the occupational mix survey, or if we
determined that a hospital’s submitted
data were too erroneous to include in
the wage index, we assigned the
hospital the average occupational mix
adjustment for the labor market area.
This method has the least impact on the
wage index for other hospitals in the
area. For areas where no hospital
submitted data for purposes of
calculating the occupational mix
adjustment, we applied the national
occupational mix factor of 1.0000 in
calculating the area’s FY 2011
occupational mix adjusted wage index.
In addition, if a hospital submitted a
survey, but that survey data could not
be used because we determine it to be
aberrant, we also assigned the hospital
the average occupational mix
adjustment for its labor market area. For
example, if a hospital’s individual nurse
category average hourly wages were out
of range (that is, unusually high or low),
and the hospital did not provide
sufficient documentation to explain the
aberrancy, or the hospital did not
submit any registered nurse salaries or
hours data, we assigned the hospital the
average occupational mix adjustment for
the labor market area in which it is
located.
In calculating the average
occupational mix adjustment factor for
a labor market area, we replicated Steps
1 through 6 of the calculation for the
occupational mix adjustment. However,
instead of performing these steps at the
hospital level, we aggregated the data at
the labor market area level. In following
these steps, for example, for CBSAs that
contain providers that did not submit
occupational mix survey data, the
occupational mix adjustment factor
ranged from a low of 0.9249 (CBSA
17780, College Station-Bryan, TX), to a
high of 1.1196 (CBSA 40980, SaginawSaginaw Township North, MI). Also, in
computing a hospital’s occupational
mix adjusted salaries and wage-related
costs for nursing employees (Step 7 of
the calculation), in the absence of
occupational mix survey data, we
multiplied the hospital’s total salaries
and wage-related costs by the
percentage of the area’s total workers
attributable to the area’s total nursing
category. For FY 2011, there are five
CBSAs (that include six hospitals) for
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which we did not have occupational
mix data for any of its hospitals. The
CBSAs are:
• CBSA 21940 Fajardo, PR (one
hospital)
• CBSA 22140 Farmington, NM (one
hospital)
• CBSA 36140 Ocean City, NJ (one
hospital)
• CBSA 41900 San German-Cabo
Rojo, PR (two hospitals)
• CBSA 49500 Yauco, PR (one
hospital)
Since the FY 2007 IPPS final rule, we
have periodically discussed applying a
hospital-specific penalty to hospitals
that fail to submit occupational mix
survey data. (See 71 FR 48013 through
48014; 72 FR 47314 through 47315; 73
FR 48580; and 74 FR 43832.) During the
FY 2008 rulemaking cycle, some
commenters suggested a penalty equal
to a 1- to 2-percent reduction in the
hospital’s wage index value or a set
percentage of the standardized amount.
During the FY 2009 and FY 2010
rulemaking cycles, several commenters
reiterated their view that full
participation in the occupational mix
survey is critical, and that CMS should
develop a methodology that encourages
hospitals to report occupational mix
survey data but does not unfairly
penalize neighboring hospitals. We
indicated in the FY 2010 IPPS/RY 2010
LTCH PPS proposed rule that, while we
were not proposing a penalty at that
time, we would consider the public
comments we previously received, as
well as any public comments on the
proposed rule, as we develop the
proposed FY 2011 wage index.
In the FY 2011 proposed rule, we
stated that, in order to gain a better
understanding of why some hospitals
are not submitting the occupational mix
data, we will require hospitals that do
not submit occupational mix data to
provide an explanation for not
complying. This requirement will be
effective beginning with the new 2010
occupational mix survey (the 2010
survey is discussed in section III.D.2. of
this preamble). We will instruct fiscal
intermediaries/MACs to begin gathering
this information as part of the FY 2013
wage index desk review process. We
note that we reserve the right to apply
a different approach in future years,
including potentially penalizing
nonresponsive hospitals.
Comment: One commenter stated that
it is unfair that some hospitals do not
submit occupational mix data, while
others consistently submit their data.
The commenter also stated that there are
presently no incentives for hospitals to
submit occupational mix data, but
praised CMS for beginning to take steps
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to address the issue by proposing to
require hospitals that do not submit the
data to provide an explanation for their
noncompliance. The commenter
suggested that CMS should still
implement some kind of penalty in the
form of a negative percentage
adjustment to hospitals that do not
submit occupational mix data, similar to
what is done with hospitals that fail to
submit quality data, in order to provide
a greater motivation for hospitals to
submit their occupational mix data.
Response: We appreciate this
comment and will consider it as we
continue to monitor and assess how to
address hospitals’ failure to submit
occupational mix data for the wage
index.
E. Worksheet S–3 Wage Data for the FY
2011 Wage Index
The final FY 2011 wage index values
are based on the data collected from the
Medicare cost reports submitted by
hospitals for cost reporting periods
beginning in FY 2007 (the FY 2010 wage
index was based on data from cost
reporting periods beginning during FY
2006).
1. Included Categories of Costs
The final FY 2011 wage index
includes the following categories of data
associated with costs paid under the
IPPS (as well as outpatient costs):
• Salaries and hours from short-term,
acute care hospitals (including paid
lunch hours and hours associated with
military leave and jury duty)
• Home office costs and hours
• Certain contract labor costs and
hours (which includes direct patient
care, certain top management,
pharmacy, laboratory, and nonteaching
physician Part A services, and certain
contract indirect patient care services
(as discussed in the FY 2008 final rule
with comment period (72 FR 47315))
• Wage-related costs, including
pensions and other deferred
compensation costs. We note that, for
developing pension and deferred
compensation costs for purposes of the
wage index, CMS requires hospitals to
comply with the requirements in 42
CFR 413.100, the Provider
Reimbursement Manual (PRM), Part I,
Sections 2140, 2141, and 2142, and
related Medicare program instructions,
as discussed in the cost reporting
instructions (PRM, Part II, section
3605.2) for Worksheet S–3, Part II, Lines
13 through 20, and in the FY 2006 IPPS
final rule (70 FR 47369). On March 28,
2008, CMS published Revision 436, a
technical clarification to the PRM, Part
I policies for pension and deferred
compensation costs. In addition, in
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November 2009, CMS released, through
a Joint Signature Memorandum,
instructions and a spreadsheet to assist
hospitals and Medicare contractors in
determining the annual allowable
defined benefit pension cost for the FY
2011 wage index (JSM/TDL–10061,
11–20–09, December 3, 2009). These
instructions and spreadsheet crosswalk
the current interest, liability, and
normal cost terminology found in the
Medicare reimbursement policies under
Section 2142 of the PRM, Part I to the
new terminology applicable under the
Pension Protection Act of 2006. The
spreadsheet and instructions can be
downloaded from the CMS Web site at
https://www.cms.hhs.gov/AcuteInpatient
PPS/WIFN/itemdetail.asp?filterType=
none&filterByDID=0&sortByDID=3&
sortOrder=descending&itemID=
CMS1231035&intNumPerPage=10.
2. Excluded Categories of Costs
Consistent with the wage index
methodology for FY 2010, the final wage
index for FY 2011 also excludes the
direct and overhead salaries and hours
for services not subject to IPPS payment,
such as SNF services, home health
services, costs related to GME (teaching
physicians and residents) and certified
registered nurse anesthetists (CRNAs),
and other subprovider components that
are not paid under the IPPS. The final
FY 2011 wage index also excludes the
salaries, hours, and wage-related costs
of hospital-based rural health clinics
(RHCs), and Federally qualified health
centers (FQHCs) because Medicare pays
for these costs outside of the IPPS (68
FR 45395). In addition, salaries, hours,
and wage-related costs of CAHs are
excluded from the wage index, for the
reasons explained in the FY 2004 IPPS
final rule (68 FR 45397).
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3. Use of Wage Index Data by Providers
Other Than Acute Care Hospitals Under
the IPPS
Data collected for the IPPS wage
index are also currently used to
calculate wage indices applicable to
other providers, such as SNFs, home
health agencies (HHAs), and hospices.
In addition, they are used for
prospective payments to IRFs, IPFs, and
LTCHs, and for hospital outpatient
services. We note that, in the IPPS rules,
we do not address comments pertaining
to the wage indices for non-IPPS
providers, other than for LTCHs. Such
comments should be made in response
to separate proposed rules for those
providers.
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F. Verification of Worksheet S–3 Wage
Data
The wage data for the final FY 2011
wage index were obtained from
Worksheet S–3, Parts II and III of the
Medicare cost report for cost reporting
periods beginning on or after October 1,
2006, and before October 1, 2007. For
wage index purposes, we refer to cost
reports during this period as the ‘‘FY
2007 cost report,’’ the ‘‘FY 2007 wage
data,’’ or the ‘‘FY 2007 data.’’
Instructions for completing Worksheet
S–3, Parts II and III are in the Provider
Reimbursement Manual (PRM), Part II,
sections 3605.2 and 3605.3. The data
file used to construct the wage index
includes FY 2007 data submitted to us
as of June 22, 2010. As in past years, we
performed an intensive review of the
wage data, mostly through the use of
edits designed to identify aberrant data.
We asked our fiscal intermediaries/
MACs to revise or verify data elements
that resulted in specific edit failures.
For the proposed FY 2011 wage index,
we identified and excluded 14 providers
with data that was too aberrant to
include in the proposed wage index,
although if data elements for some of
these providers are corrected, we
intended to include some of these
providers in the FY 2011 final wage
index. We instructed fiscal
intermediaries/MACs to complete their
data verification of questionable data
elements and to transmit any changes to
the wage data no later than April 14,
2010. The data for none of the hospitals
identified in the proposed rule were
resolved. However, the data for three
additional hospitals were identified as
too aberrant to include in the final wage
index. Therefore, we determined that
the data for 17 hospitals (that is,
14+3=17) should not be included in the
FY 2011 final wage index.
In constructing the final FY 2011
wage index, we included the wage data
for facilities that were IPPS hospitals in
FY 2007, inclusive of those facilities
that have since terminated their
participation in the program as
hospitals, as long as those data did not
fail any of our edits for reasonableness.
We believe that including the wage data
for these hospitals is, in general,
appropriate to reflect the economic
conditions in the various labor market
areas during the relevant past period
and to ensure that the current wage
index represents the labor market area’s
current wages as compared to the
national average of wages. However, we
excluded the wage data for CAHs as
discussed in the FY 2004 IPPS final rule
(68 FR 45397). For this final rule, we
removed 11 hospitals that converted to
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CAH status between February 16, 2009,
the cut-off date for CAH exclusion from
the FY 2010 wage index, and February
15, 2010, the cut-off date for CAH
exclusion from the FY 2011 wage index.
After removing hospitals with aberrant
data and hospitals that converted to
CAH status, the final FY 2011 wage
index is calculated based on 3,511
hospitals.
In the FY 2008 final rule with
comment period (72 FR 47317) and the
FY 2009 IPPS final rule (73 FR 48582),
we discussed our policy for allocating a
multicampus hospital’s wages and
hours data, by full-time equivalent
(FTE) staff, among the different labor
market areas where its campuses are
located. During the FY 2011 wage index
desk review process, we requested fiscal
intermediaries/MACs to contact
multicampus hospitals that had
campuses in different labor market areas
to collect the data for the allocation. The
FY 2011 wage index in this final rule
includes separate wage data for
campuses of three multicampus
hospitals.
For FY 2011, we are again allowing
hospitals to use FTE or discharge data
for the allocation of a multicampus
hospital’s wage data among the different
labor market areas where its campuses
are located. The Medicare cost report
was updated in May 2008 to provide for
the reporting of FTE data by campus for
multicampus hospitals. Because the
data from cost reporting periods that
begin in FY 2008 will not be used in
calculating the wage index until FY
2012, a multicampus hospital will still
have the option, through the FY 2011
wage index, to use either FTE or
discharge data for allocating wage data
among its campuses by providing the
information from the applicable cost
reporting period to CMS through its
fiscal intermediary/MAC. Two of the
three multicampus hospitals chose to
have their wage data allocated by their
Medicare discharge data for the FY 2011
wage index. One of the hospitals
provided FTE staff data for the
allocation. The average hourly wage
associated with each geographical
location of a multicampus hospital is
reflected in Table 2 of the Addendum to
this final rule.
G. Method for Computing the Final FY
2011 Unadjusted Wage Index
The method used to compute the FY
2011 wage index without an
occupational mix adjustment follows:
Step 1—As noted above, we are
basing the final FY 2011 wage index on
wage data reported on the FY 2007
Medicare cost reports. We gathered data
from each of the non-Federal, short-
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term, acute care hospitals for which data
were reported on the Worksheet S–3,
Parts II and III of the Medicare cost
report for the hospital’s cost reporting
period beginning on or after October 1,
2006, and before October 1, 2007. In
addition, we included data from some
hospitals that had cost reporting periods
beginning before October 2006 and
reported a cost reporting period
covering all of FY 2007. These data are
included because no other data from
these hospitals would be available for
the cost reporting period described
above, and because particular labor
market areas might be affected due to
the omission of these hospitals.
However, we generally describe these
wage data as FY 2007 data. We note
that, if a hospital had more than one
cost reporting period beginning during
FY 2007 (for example, a hospital had
two short cost reporting periods
beginning on or after October 1, 2006,
and before October 1, 2007), we
included wage data from only one of the
cost reporting periods, the longer, in the
wage index calculation. If there was
more than one cost reporting period and
the periods were equal in length, we
included the wage data from the later
period in the wage index calculation.
Step 2—Salaries—The method used to
compute a hospital’s average hourly
wage excludes certain costs that are not
paid under the IPPS. (We note that,
beginning with FY 2008 (72 FR 47315),
we include Lines 22.01, 26.01, and
27.01 of Worksheet S–3, Part II for
overhead services in the wage index.
However, we note that the wages and
hours on these lines are not
incorporated into Line 101, Column 1 of
Worksheet A, which, through the
electronic cost reporting software, flows
directly to Line 1 of Worksheet S–3, Part
II. Therefore, the first step in the wage
index calculation for FY 2011 is to
compute a ‘‘revised’’ Line 1, by adding
to the Line 1 on Worksheet S–3, Part II
(for wages and hours respectively) the
amounts on Lines 22.01, 26.01, and
27.01.) In calculating a hospital’s
average salaries plus wage-related costs,
we subtract from Line 1 (total salaries)
the GME and CRNA costs reported on
Lines 2, 4.01, 6, and 6.01, the Part B
salaries reported on Lines 3, 5 and 5.01,
home office salaries reported on Line 7,
and exclude salaries reported on Lines
8 and 8.01 (that is, direct salaries
attributable to SNF services, home
health services, and other subprovider
components not subject to the IPPS). We
also subtract from Line 1 the salaries for
which no hours were reported. To
determine total salaries plus wagerelated costs, we add to the net hospital
salaries the costs of contract labor for
direct patient care, certain top
management, pharmacy, laboratory, and
nonteaching physician Part A services
(Lines 9 and 10), home office salaries
and wage-related costs reported by the
hospital on Lines 11 and 12, and
nonexcluded area wage-related costs
(Lines 13, 14, and 18).
We note that contract labor and home
office salaries for which no
corresponding hours are reported are
not included. In addition, wage-related
costs for nonteaching physician Part A
employees (Line 18) are excluded if no
corresponding salaries are reported for
those employees on Line 4.
Step 3—Hours—With the exception of
wage-related costs, for which there are
no associated hours, we compute total
hours using the same methods as
described for salaries in Step 2.
Step 4—For each hospital reporting
both total overhead salaries and total
overhead hours greater than zero, we
then allocate overhead costs to areas of
the hospital excluded from the wage
index calculation. First, we determine
the ratio of excluded area hours (sum of
Lines 8 and 8.01 of Worksheet S–3, Part
II) to revised total hours (Line 1 minus
the sum of Part II, Lines 2, 3, 4.01, 5,
5.01, 6, 6.01, 7, and Part III, Line 13 of
Worksheet S–3). We then compute the
amounts of overhead salaries and hours
to be allocated to excluded areas by
multiplying the above ratio by the total
overhead salaries and hours reported on
Line 13 of Worksheet S–3, Part III. Next,
we compute the amounts of overhead
wage-related costs to be allocated to
excluded areas using three steps: (1) We
determine the ratio of overhead hours
(Part III, Line 13 minus the sum of lines
22.01, 26.01, and 27.01) to revised hours
excluding the sum of lines 22.01, 26.01,
and 27.01 (Line 1 minus the sum of
Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, 8,
8.01, 22.01, 26.01, and 27.01). (We note
that for the FY 2008 and subsequent
wage index calculations, we are
excluding the sum of lines 22.01, 26.01,
and 27.01 from the determination of the
ratio of overhead hours to revised hours
because hospitals typically do not
provide fringe benefits (wage-related
costs) to contract personnel. Therefore,
it is not necessary for the wage index
calculation to exclude overhead wagerelated costs for contract personnel.
Further, if a hospital does contribute to
wage-related costs for contracted
personnel, the instructions for Lines
22.01, 26.01, and 27.01 require that
associated wage-related costs be
combined with wages on the respective
contract labor lines.); (2) we compute
overhead wage-related costs by
multiplying the overhead hours ratio by
wage-related costs reported on Part II,
Lines 13, 14, and 18; and (3) we
multiply the computed overhead wagerelated costs by the above excluded area
hours ratio. Finally, we subtract the
computed overhead salaries, wagerelated costs, and hours associated with
excluded areas from the total salaries
(plus wage-related costs) and hours
derived in Steps 2 and 3.
Step 5—For each hospital, we adjust
the total salaries plus wage-related costs
to a common period to determine total
adjusted salaries plus wage-related
costs. To make the wage adjustment, we
estimate the percentage change in the
employment cost index (ECI) for
compensation for each 30-day
increment from October 14, 2004,
through April 15, 2006, for private
industry hospital workers from the BLS’
Compensation and Working Conditions.
We use the ECI because it reflects the
price increase associated with total
compensation (salaries plus fringes)
rather than just the increase in salaries.
In addition, the ECI includes managers
as well as other hospital workers. This
methodology to compute the monthly
update factors uses actual quarterly ECI
data and assures that the update factors
match the actual quarterly and annual
percent changes. We also note that,
since April 2006 with the publication of
March 2006 data, the BLS’ ECI uses a
different classification system, the North
American Industrial Classification
System (NAICS), instead of the Standard
Industrial Codes (SICs), which no longer
exist. We have consistently used the ECI
as the data source for our wages and
salaries and other price proxies in the
IPPS market basket, and we are not
making any changes to the usage for FY
2011. The factors used to adjust the
hospital’s data were based on the
midpoint of the cost reporting period, as
indicated below.
MIDPOINT OF COST REPORTING PERIOD
After
Before
Adjustment factor
10/14/2006
11/14/2006
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1.04077
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MIDPOINT OF COST REPORTING PERIOD—Continued
Before
Adjustment factor
12/14/2006
01/14/2007
02/14/2007
03/14/2007
04/14/2007
05/14/2007
06/14/2007
07/14/2007
08/14/2007
09/14/2007
10/14/2007
11/14/2007
12/14/2007
01/14/2008
02/14/2008
03/14/2008
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After
01/15/2007
02/15/2007
03/15/2007
04/15/2007
05/15/2007
06/15/2007
07/15/2007
08/15/2007
09/15/2007
10/15/2007
11/15/2007
12/15/2007
01/15/2008
02/15/2008
03/15/2008
04/15/2008
1.03786
1.03508
1.03243
1.02981
1.02709
1.02430
1.02153
1.01891
1.01643
1.01394
1.01127
1.00844
1.00556
1.00275
1.00000
0.99732
For example, the midpoint of a cost
reporting period beginning January 1,
2007, and ending December 31, 2007, is
June 30, 2007. An adjustment factor of
1.02153 would be applied to the wages
of a hospital with such a cost reporting
period. In addition, for the data for any
cost reporting period that began in FY
2007 and covered a period of less than
360 days or more than 370 days, we
annualize the data to reflect a 1-year
cost report. Dividing the data by the
number of days in the cost report and
then multiplying the results by 365
accomplishes annualization.
Step 6—Each hospital is assigned to
its appropriate urban or rural labor
market area before any reclassifications
under section 1886(d)(8)(B), section
1886(d)(8)(E), or section 1886(d)(10) of
the Act. Within each urban or rural
labor market area, we add the total
adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in
that area to determine the total adjusted
salaries plus wage-related costs for the
labor market area.
Step 7—We divide the total adjusted
salaries plus wage-related costs obtained
under both methods in Step 6 by the
sum of the corresponding total hours
(from Step 4) for all hospitals in each
labor market area to determine an
average hourly wage for the area.
Step 8—We add the total adjusted
salaries plus wage-related costs obtained
in Step 5 for all hospitals in the Nation
and then divide the sum by the national
sum of total hours from Step 4 to arrive
at a national average hourly wage. Using
the data as described above, the final
national average hourly wage
(unadjusted for occupational mix) is
$34.9895.
Step 9—For each urban or rural labor
market area, we calculate the hospital
wage index value, unadjusted for
occupational mix, by dividing the area
average hourly wage obtained in Step 7
by the national average hourly wage
computed in Step 8.
Step 10—Following the process set
forth above, we develop a separate
Puerto Rico-specific wage index for
purposes of adjusting the Puerto Rico
standardized amounts. (The national
Puerto Rico standardized amount is
adjusted by a wage index calculated for
all Puerto Rico labor market areas based
on the national average hourly wage as
described above.) We add the total
adjusted salaries plus wage-related costs
(as calculated in Step 5) for all hospitals
in Puerto Rico and divide the sum by
the total hours for Puerto Rico (as
calculated in Step 4) to arrive at an
overall final average hourly wage
(unadjusted for occupational mix) of
$14.7404 for Puerto Rico. For each labor
market area in Puerto Rico, we calculate
the Puerto Rico-specific wage index
value by dividing the area average
hourly wage (as calculated in Step 7) by
the overall Puerto Rico average hourly
wage.
Step 11—Section 4410 of Public Law
105–33 provides that, for discharges on
or after October 1, 1997, the area wage
index applicable to any hospital that is
located in an urban area of a State may
not be less than the area wage index
applicable to hospitals located in rural
areas in that State. The areas affected by
this provision are identified in Table
4D–2 of the Addendum to this final
rule.
In the FY 2005 IPPS final rule (69 FR
49109), we adopted the ‘‘imputed’’ floor
as a temporary 3-year measure to
address a concern by some individuals
that hospitals in all-urban States were
disadvantaged by the absence of rural
hospitals to set a wage index floor in
those States. The imputed floor was
originally set to expire in FY 2007, but
we extended it an additional year in the
FY 2008 IPPS final rule with comment
period (72 FR 47321). In the FY 2009
IPPS final rule (73 FR 48570 through
48574 and 48584), we extended the
imputed floor for an additional 3 years,
through FY 2011.
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H. Analysis and Implementation of the
Final Occupational Mix Adjustment and
the Final FY 2011 Occupational Mix
Adjusted Wage Index
As discussed in section III.D. of this
preamble, for FY 2011, we are applying
the occupational mix adjustment to 100
percent of the final FY 2011 wage index.
We calculated the final occupational
mix adjustment using data from the
2007–2008 occupational mix survey
data, using the methodology described
in section III.D.3. of this preamble.
Using the occupational mix survey
data and applying the occupational mix
adjustment to 100 percent of the final
FY 2011 wage index results in a final
national average hourly wage of
$34.9664 and a final Puerto Ricospecific average hourly wage of
$14.7620. After excluding data of
hospitals that either submitted aberrant
data that failed critical edits, or that do
not have FY 2007 Worksheet S–3 cost
report data for use in calculating the
final FY 2011 wage index, we calculated
the final FY 2011 wage index using the
occupational mix survey data from
3,197 hospitals. Using the Worksheet
S–3 cost report data of 3,511 hospitals
and occupational mix survey data from
3,197 hospitals represents a 91.1 percent
survey response rate. The final FY 2011
national average hourly wages for each
occupational mix nursing subcategory
as calculated in Step 2 of the
occupational mix calculation are as
follows:
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Average hourly
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National
National
National
National
National
RN ...................................................................................................................................................................................
LPN and Surgical Technician ..........................................................................................................................................
Nurse Aide, Orderly, and Attendant ................................................................................................................................
Medical Assistant ............................................................................................................................................................
Nurse Category ...............................................................................................................................................................
The final national average hourly
wage for the entire nurse category as
computed in Step 5 of the occupational
mix calculation is $30.47379669.
Hospitals with a nurse category average
hourly wage (as calculated in Step 4) of
greater than the national nurse category
average hourly wage receive an
occupational mix adjustment factor (as
calculated in Step 6) of less than 1.0.
Hospitals with a nurse category average
hourly wage (as calculated in Step 4) of
less than the national nurse category
average hourly wage receive an
occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the 2007–2008 occupational
mix survey data, we determined (in Step
7 of the occupational mix calculation)
that the national percentage of hospital
employees in the nurse category is 44.29
percent, and the national percentage of
hospital employees in the all other
occupations category is 55.71 percent.
At the CBSA level, the percentage of
hospital employees in the nurse
category ranged from a low of 29.08
percent in one CBSA, to a high of 70.76
percent in another CBSA.
We compared the final FY 2011
occupational mix adjusted wage indices
for each CBSA to the final unadjusted
wage indices for each CBSA. As a result
of applying the occupational mix
adjustment to the wage data, the final
wage index values for 206 (52.7 percent)
urban areas and 32 (68.1 percent) rural
areas would increase. One hundred six
(27.1 percent) urban areas would
increase by 1 percent or more, and 6 (1.5
percent) urban areas would increase by
5 percent or more. Eighteen (38.3
percent) rural areas would increase by
1 percent or more, and no rural areas
would increase by 5 percent or more.
However, the wage index values for 185
(47.3 percent) urban areas and 15 (31.9
percent) rural areas would decrease.
Eighty nine (22.8 percent) urban areas
would decrease by 1 percent or more,
and no urban area would decrease by
5 percent or more. Seven (14.9 percent)
rural areas would decrease by 1 percent
or more, and no rural areas will
decrease by 5 percent or more. The
largest positive impacts are 7.81 percent
for an urban area and 2.97 percent for
a rural area. The largest negative
impacts are 3.97 percent for an urban
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area and 2.41 percent for a rural area.
No urban or rural areas are unaffected.
These results indicate that a larger
percentage of rural areas (68.1 percent)
benefit from the occupational mix
adjustment than do urban areas (52.7
percent). While these results are more
positive overall for rural areas than
under the previous occupational mix
adjustment that used survey data from
2006, approximately one-third (31.9
percent) of rural CBSAs will still
experience a decrease in their wage
indices as a result of the occupational
mix adjustment.
The final wage index values for FY
2011 (except those for hospitals
receiving wage index adjustments under
section 1886(d)(13) of the Act) included
in Tables 4A, 4B, 4C, and 4F of the
Addendum to this final rule include the
final occupational mix adjustment.
Tables 3A and 3B in the Addendum
to this final rule list the 3-year average
hourly wage for each labor market area
before the redesignation or
reclassification of hospitals based on
FYs 2009, 2010, and 2011 cost reporting
periods. Table 3A lists these data for
urban areas and Table 3B lists these data
for rural areas. In addition, Table 2 in
the Addendum to this final rule
includes the adjusted average hourly
wage for each hospital from the FY 2005
and FY 2006 cost reporting periods, as
well as the FY 2007 period used to
calculate the final FY 2011 wage index.
The 3-year averages are calculated by
dividing the sum of the dollars (adjusted
to a common reporting period using the
method described previously) across all
3 years, by the sum of the hours. If a
hospital is missing data for any of the
previous years, its average hourly wage
for the 3-year period is calculated based
on the data available during that period.
The final average hourly wages in
Tables 2, 3A, and 3B in the Addendum
to this final rule include the final
occupational mix adjustment. The final
wage index values in Tables 4A, 4B, and
4C also include the final State-specific
rural floor and imputed floor budget
neutrality adjustments. (We note that
Table 4D–1, Rural Floor Budget
Neutrality Factors for Acute Care
Hospitals, was included in the
Addendum to the FY 2011 IPPS/LTCH
PPS proposed rule. However, we are not
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including it in this final rule because
section 3141 of the Affordable Care Act
restores rural floor and imputed floor
budget neutrality to a uniform national
adjustment.)
I. Revisions to the Wage Index Based on
Hospital Redesignations and
Reclassifications
1. General
Under section 1886(d)(10) of the Act,
the MGCRB considers applications by
hospitals for geographic reclassification
for purposes of payment under the IPPS.
Hospitals must apply to the MGCRB to
reclassify 13 months prior to the start of
the fiscal year for which reclassification
is sought (generally by September 1).
Generally, hospitals must be proximate
to the labor market area to which they
are seeking reclassification and must
demonstrate characteristics similar to
hospitals located in that area. The
MGCRB issues its decisions by the end
of February for reclassifications that
become effective for the following fiscal
year (beginning October 1). The
regulations applicable to
reclassifications by the MGCRB are
located in 42 CFR 412.230 through
412.280.
Section 1886(d)(10)(D)(v) of the Act
provides that, beginning with FY 2001,
a MGCRB decision on a hospital
reclassification for purposes of the wage
index is effective for 3 fiscal years,
unless the hospital elects to terminate
the reclassification. Section
1886(d)(10)(D)(vi) of the Act provides
that the MGCRB must use average
hourly wage data from the 3 most
recently published hospital wage
surveys in evaluating a hospital’s
reclassification application for FY 2003
and any succeeding fiscal year.
Section 304(b) of Public Law 106–554
provides that the Secretary must
establish a mechanism under which a
statewide entity may apply to have all
of the geographic areas in the State
treated as a single geographic area for
purposes of computing and applying a
single wage index, for reclassifications
beginning in FY 2003. The
implementing regulations for this
provision are located at 42 CFR 412.235.
Section 1886(d)(8)(B) of the Act
requires the Secretary to treat a hospital
located in a rural county adjacent to one
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or more urban areas as being located in
the labor market area to which the
greatest number of workers in the
county commute, if the rural county
would otherwise be considered part of
an urban area under the standards for
designating MSAs and if the commuting
rates used in determining outlying
counties were determined on the basis
of the aggregate number of resident
workers who commute to (and, if
applicable under the standards, from)
the central county or counties of all
contiguous MSAs. In light of the CBSA
definitions and the Census 2000 data
that we implemented for FY 2005 (69
FR 49027), we undertook to identify
those counties meeting these criteria.
Eligible counties are discussed and
identified under section III.I.5. of this
preamble.
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2. Effects of Reclassification/
Redesignation
Section 1886(d)(8)(C) of the Act
provides that the application of the
wage index to redesignated hospitals is
dependent on the hypothetical impact
that the wage data from these hospitals
would have on the wage index value for
the area to which they have been
redesignated. These requirements for
determining the wage index values for
redesignated hospitals are applicable
both to the hospitals deemed urban
under section 1886(d)(8)(B) of the Act
and hospitals that were reclassified as a
result of the MGCRB decisions under
section 1886(d)(10) of the Act.
Therefore, as provided in section
1886(d)(8)(C) of the Act, the wage index
values were determined by considering
the following:
• If including the wage data for the
redesignated hospitals would reduce the
wage index value for the area to which
the hospitals are redesignated by 1
percentage point or less, the area wage
index value determined exclusive of the
wage data for the redesignated hospitals
applies to the redesignated hospitals.
• If including the wage data for the
redesignated hospitals reduces the wage
index value for the area to which the
hospitals are redesignated by more than
1 percentage point, the area wage index
determined inclusive of the wage data
for the redesignated hospitals (the
combined wage index value) applies to
the redesignated hospitals.
• If including the wage data for the
redesignated hospitals increases the
wage index value for the urban area to
which the hospitals are redesignated,
both the area and the redesignated
hospitals receive the combined wage
index value. Otherwise, the hospitals
located in the urban area receive a wage
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index excluding the wage data of
hospitals redesignated into the area.
Rural areas whose wage index values
would be reduced by excluding the
wage data for hospitals that have been
redesignated to another area continue to
have their wage index values calculated
as if no redesignation had occurred
(otherwise, redesignated rural hospitals
are excluded from the calculation of the
rural wage index). The wage index value
for a redesignated rural hospital cannot
be reduced below the wage index value
for the rural areas of the State in which
the hospital is located.
CMS also has adopted the following
policies:
• The wage data for a reclassified
urban hospital is included in both the
wage index calculation of the urban area
to which the hospital is reclassified
(subject to the rules described above)
and the wage index calculation of the
urban area where the hospital is
physically located.
• In cases where hospitals have
reclassified to rural areas, such as urban
hospitals reclassifying to rural areas
under 42 CFR 412.103, the hospital’s
wage data are: (a) Included in the rural
wage index calculation, unless doing so
would reduce the rural wage index; and
(b) included in the urban area where the
hospital is physically located. The effect
of this policy, in combination with the
statutory requirement at section
1886(d)(8)(C)(ii) of the Act, is that rural
areas may receive a wage index based
upon the highest of: (1) Wage data from
hospitals geographically located in the
rural area; (2) wage data from hospitals
geographically located in the rural area,
but excluding all data associated with
hospitals reclassifying out of the rural
area under section 1886(d)(8)(B) or
section 1886(d)(10) of the Act; or (3)
wage data associated with hospitals
geographically located in the area plus
all hospitals reclassified into the rural
area.
In addition, in accordance with the
statutory language referring to
‘‘hospitals’’ in the plural under sections
1886(d)(8)(C)(i) and 1886(d)(8)(C)(ii) of
the Act, our longstanding policy is to
consider reclassified hospitals as a
group when deciding whether to
include or exclude them from both
urban and rural wage index
calculations.
Comment: One commenter opposed
CMS’ longstanding methodology for
calculating the wage index for
reclassified hospitals, and suggested
that CMS calculate a separate
reclassified wage index for those
hospitals that meet the reclassification
proximate requirement and another
wage index for those hospitals that do
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not meet the requirement. In addition,
the commenter suggested another option
which would provide for calculation of
the reclassified wage index based on the
hospitals physically located in the
CBSA and each individual hospital,
instead of combining all reclassified
hospitals as a group.
Response: We did not include any
proposals in the FY 2011 proposed rule
to change our longstanding
methodology for calculating the wage
index for reclassified hospitals. We
believe that this methodology continues
to be appropriate in order to calculate
the wage index for hospitals for
Medicare payment purposes.
3. FY 2011 MGCRB Reclassifications
a. FY 2011 Reclassifications
Requirements and Approvals
Under section 1886(d)(10) of the Act,
the MGCRB considers applications by
hospitals for geographic reclassification
for purposes of payment under the IPPS.
The specific procedures and rules that
apply to the geographic reclassification
process are outlined in 42 CFR 412.230
through 412.280.
At the time this final rule was
constructed, the MGCRB had completed
its review of FY 2011 reclassification
requests. Based on such reviews, there
were 285 hospitals approved for wage
index reclassifications by the MGCRB
for FY 2011. Because MGCRB wage
index reclassifications are effective for 3
years, for FY 2011, hospitals reclassified
during FY 2009 or FY 2010 are eligible
to continue to be reclassified to a
particular labor market area based on
such prior reclassifications. There were
247 hospitals approved for wage index
reclassifications in FY 2009 and 251
hospitals approved for wage index
reclassifications in FY 2010. Of all of
the hospitals approved for
reclassification for FY 2009, FY 2010,
and FY 2011, based upon the review at
the time of this final rule, 823 hospitals
are in a reclassification status for FY
2011.
Under 42 CFR 412.273, hospitals that
have been reclassified by the MGCRB
are permitted to withdraw their
applications within 45 days of the
publication of a proposed rule.
Generally stated, the request for
withdrawal of an application for
reclassification or termination of an
existing 3-year reclassification that
would be effective in FY 2011 had to be
received by the MGCRB within 45 days
of the publication of the FY 2011
proposed rule. Hospitals also could
cancel prior reclassification
withdrawals or terminations in certain
circumstances. For further information
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about withdrawing, terminating, or
canceling a previous withdrawal or
termination of a 3-year reclassification
for wage index purposes, we refer the
reader to 42 CFR 412.273, as well as the
FY 2002 IPPS final rule (66 FR 39887)
and the FY 2003 IPPS final rule (67 FR
50065). Additional discussion on
withdrawals and terminations, and
clarifications regarding reinstating
reclassifications and ‘‘fallback’’
reclassifications, were included in the
FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result
from withdrawals of requests for
reclassification, terminations, wage
index corrections, appeals, and the
Administrator’s review process for FY
2011 are incorporated into the wage
index values published in this FY 2011
IPPS/LTCH PPS final rule. These
changes affect not only the wage index
value for specific geographic areas, but
also the wage index value redesignated/
reclassified hospitals receive; that is,
whether they receive the wage index
that includes the data for both the
hospitals already in the area and the
redesignated/reclassified hospitals.
Further, the wage index value for the
area from which the hospitals are
redesignated/reclassified may be
affected.
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b. Applications for Reclassifications for
FY 2012
Applications for FY 2012
reclassifications are due to the MGCRB
by September 1, 2010. We note that this
is also the deadline for canceling a
previous wage index reclassification
withdrawal or termination under 42
CFR 412.273(d). Applications and other
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information about MGCRB
reclassifications may be obtained,
beginning in mid-July 2010, via the
CMS Internet Web site at: https://
cms.hhs.gov/MGCRB/
02_instructions_and_applications.asp,
or by calling the MGCRB at (410) 786–
1174. The mailing address of the
MGCRB is: 2520 Lord Baltimore Drive,
Suite L, Baltimore, MD 21244–2670.
c. Appeals of MGCRB Denials of
Withdrawals and Terminations
Section 412.278 of the regulations
permits a hospital or a group of
hospitals dissatisfied with the MGCRB’s
decision regarding its geographic
designation to request the
Administrator’s review of the decision.
Section 412.273(e) permits a hospital to
file an appeal to the Administrator
regarding the MGCRB’s denial of the
hospital’s request for withdrawal of an
application. However, this section of the
regulations did not address
Administrator review of the MGCRB’s
denial of a hospital’s request for
termination; that is, ‘‘terminations’’ not
specified in the regulations at
§ 412.273(e).
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23949), we
proposed to revise the regulations to
specify the availability of Administrator
review of MGCRB decisions regarding
withdrawals and terminations, as well
as cancellations of withdrawals or
terminations. Because reclassifications
are considered budget neutral actions,
we stated our belief that these proposed
revisions would have no impact on total
IPPS payments.
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In addition, during our review of
§ 412.273, we determined that some of
the existing language in the section
could be clarified to make it more easily
understood and proposed to revise the
provision accordingly.
We did not receive any public
comments regarding our proposed
changes to the regulations at § 412.273.
Therefore, in this final rule, we are
adopting as final, without modification,
the proposed changes to § 412.273.
4. Redesignations of Hospitals Under
Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B) of the Act
requires us to treat a hospital located in
a rural county adjacent to one or more
urban areas as being located in the MSA
if certain criteria are met. Effective
beginning FY 2005, we use OMB’s 2000
CBSA standards and the Census 2000
data to identify counties in which
hospitals qualify under section
1886(d)(8)(B) of the Act to receive the
wage index of the urban area. Hospitals
located in these counties have been
known as ‘‘Lugar’’ hospitals and the
counties themselves are often referred to
as ‘‘Lugar’’ counties. We provide the FY
2011 chart below with the listing of the
rural counties containing the hospitals
designated as urban under section
1886(d)(8)(B) of the Act. For discharges
occurring on or after October 1, 2010,
hospitals located in the rural county in
the first column of this chart will be
redesignated for purposes of using the
wage index of the urban area listed in
the second column.
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As in the past, hospitals redesignated
under section 1886(d)(8)(B) of the Act
are also eligible to be reclassified to a
different area by the MGCRB. Affected
hospitals were permitted to compare the
reclassified wage index for the labor
market area in Table 4C in the
Addendum to the proposed rule into
which they would be reclassified by the
MGCRB to the wage index for the area
to which they are redesignated under
section 1886(d)(8)(B) of the Act.
Hospitals could have withdrawn from
an MGCRB reclassification within 45
days of the publication of the FY 2011
proposed rule.
5. Reclassifications Under Section
1886(d)(8)(B) of the Act
As discussed in the FY 2009 IPPS
final rule (73 FR 48588), Lugar hospitals
are treated like reclassified hospitals for
purposes of determining their
applicable wage index and receive the
reclassified wage index for the urban
area to which they have been
redesignated. Because Lugar hospitals
are treated like reclassified hospitals,
when they are seeking reclassification
by the MGCRB, they are subject to the
rural reclassification rules set forth at 42
CFR 412.230. The procedural rules set
forth at § 412.230 list the criteria that a
hospital must meet in order to reclassify
as a rural hospital. Lugar hospitals are
subject to the proximity criteria and
payment thresholds that apply to rural
hospitals. Specifically, the hospital
must be no more than 35 miles from the
area to which it seeks reclassification
(§ 412.230(b)(1)); and the hospital must
show that its average hourly wage is at
least 106 percent of the average hourly
wage of all other hospitals in the area in
which the hospital is located
(§ 412.230(d)(1)(iii)(C)). In accordance
with the requirements of section 3137(c)
of the Affordable Care Act, as discussed
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in section III.B.2.a of the preamble in
this final rule, beginning with
reclassifications for the FY 2011 wage
index, a Lugar hospital must also
demonstrate that its average hourly
wage is equal to at least 82 percent of
the average hourly wage of hospitals in
the area to which it seeks redesignation
(§ 412.230(d)(1)(iv)(C)).
Hospitals not located in a Lugar
county seeking reclassification to the
urban area where the Lugar hospitals
have been redesignated are not
permitted to measure to the Lugar
county to demonstrate proximity (no
more than 15 miles for an urban
hospital, and no more than 35 miles for
a rural hospital or the closest urban or
rural area for RRCs or SCHs) in order to
be reclassified to such urban area. These
hospitals must measure to the urban
area exclusive of the Lugar County to
meet the proximity or nearest urban or
rural area requirement. We treat New
England deemed counties in a manner
consistent with how we treat Lugar
counties. (We refer readers to FY 2008
IPPS final rule with comment period (72
FR 47337) for a discussion of this
policy.)
6. Reclassifications Under Section 508
of Public Law 108–173
Section 508 of Public Law 108–173
allowed certain qualifying hospitals to
receive wage index reclassifications and
assignments that they otherwise would
not have been eligible to receive under
the law. Although section 508 originally
was scheduled to expire after a 3-year
period, Congress extended the provision
several times, as well as certain special
exceptions that would have otherwise
expired. For a discussion of the original
section 508 provision and its various
extensions, we refer readers to the FY
2010 notice issued in the Federal
Register on June 2, 2010 (75 FR 31118).
Prior to the enactment of the Afforable
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Care Act, the extension of the 508
provision was included in section 124
of Public Law 110–275 (MIPPA).
Section 124 extended, through FY 2009,
section 508 reclassifications as well as
certain special exceptions. The most
recent extension of the provision was
included in sections 3137(a) and 10317
of Affordable Care Act, as amended.
Section 3137(a) of the Affordable Care
Act, as amended by section 10317,
extended, through FY 2010, section 508
reclassifications as well as certain
special exceptions. Because the latest
extension of these provisions expires on
September 30, 2010, and will not be
applicable in FY 2011, we are not
making any changes related to these
provisions in this final rule.
J. FY 2011 Wage Index Adjustment
Based on Commuting Patterns of
Hospital Employees
In accordance with the broad
discretion under section 1886(d)(13) of
the Act, as added by section 505 of
Public Law 108–173, beginning with FY
2005, we established a process to make
adjustments to the hospital wage index
based on commuting patterns of
hospital employees (the ‘‘out-migration’’
adjustment). The process, outlined in
the FY 2005 IPPS final rule (69 FR
49061), provides for an increase in the
wage index for hospitals located in
certain counties that have a relatively
high percentage of hospital employees
who reside in the county but work in a
different county (or counties) with a
higher wage index. Such adjustments to
the wage index are effective for 3 years,
unless a hospital requests to waive the
application of the adjustment. A county
will not lose its status as a qualifying
county due to wage index changes
during the 3-year period, and counties
will receive the same wage index
increase for those 3 years. However, a
county that qualifies in any given year
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may no longer qualify after the 3-year
period, or it may qualify but receive a
different adjustment to the wage index
level. Hospitals that receive this
adjustment to their wage index are not
eligible for reclassification under
section 1886(d)(8) or section 1886(d)(10)
of the Act. Adjustments under this
provision are not subject to the budget
neutrality requirements under section
1886(d)(3)(E) of the Act.
Hospitals located in counties that
qualify for the wage index adjustment
are to receive an increase in the wage
index that is equal to the average of the
differences between the wage indices of
the labor market area(s) with higher
wage indices and the wage index of the
resident county, weighted by the overall
percentage of hospital workers residing
in the qualifying county who are
employed in any labor market area with
a higher wage index. Beginning with the
FY 2008 wage index, we use postreclassified wage indices when
determining the out-migration
adjustment (72 FR 47339).
For the final FY 2011 wage index, we
calculated the out-migration adjustment
using the same formula described in the
FY 2005 IPPS final rule (69 FR 49064),
with the addition of using the postreclassified wage indices, to calculate
the out-migration adjustment. This
adjustment is calculated as follows:
Step 1—Subtract the wage index for
the qualifying county from the wage
index of each of the higher wage area(s)
to which hospital workers commute.
Step 2—Divide the number of hospital
employees residing in the qualifying
county who are employed in such
higher wage index area by the total
number of hospital employees residing
in the qualifying county who are
employed in any higher wage index
area. For each of the higher wage index
areas, multiply this result by the result
obtained in Step 1.
Step 3—Sum the products resulting
from Step 2 (if the qualifying county has
workers commuting to more than one
higher wage index area).
Step 4—Multiply the result from Step
3 by the percentage of hospital
employees who are residing in the
qualifying county and who are
employed in any higher wage index
area.
These adjustments will be effective
for each county for a period of 3 fiscal
years. For example, hospitals that
received the adjustment for the first
time in FY 2010 will be eligible to retain
the adjustment for FY 2011. For
hospitals in newly qualified counties,
adjustments to the wage index are
effective for 3 years, beginning with
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discharges occurring on or after October
1, 2010.
Hospitals receiving the wage index
adjustment under section 1886(d)(13)(F)
of the Act are not eligible for
reclassification under sections
1886(d)(8) or (d)(10) of the Act unless
they waive the out-migration
adjustment. Consistent with our FYs
2005 through 2010 IPPS final rules, we
are specifying that hospitals
redesignated under section 1886(d)(8) of
the Act or reclassified under section
1886(d)(10) of the Act are deemed to
have chosen to retain their
redesignation or reclassification. Section
1886(d)(10) hospitals that wished to
receive the out-migration adjustment,
rather than their reclassification
adjustment, were instructed to follow
the termination/withdrawal procedures
specified in 42 CFR 412.273 and section
III.I.3. of the preamble of the FY 2011
proposed rule. Otherwise, they were
deemed to have waived the outmigration adjustment. Hospitals
redesignated under section 1886(d)(8) of
the Act were deemed to have waived the
out-migration adjustment unless they
explicitly notified CMS within 45 days
from the publication of the FY 2011
proposed rule that they elected to
receive the out-migration adjustment
instead.
Table 4J in the Addendum to this
final rule lists the out-migration wage
index adjustments for FY 2011.
Hospitals that are not otherwise
reclassified or redesignated under
section 1886(d)(8) or section 1886(d)(10)
of the Act automatically receive the
listed adjustment. In accordance with
the procedures discussed above,
redesignated/reclassified hospitals were
deemed to have waived the outmigration adjustment unless CMS was
otherwise notified within the necessary
timeframe. In addition, hospitals
eligible to receive the out-migration
wage index adjustment and that
withdrew their application for
reclassification will automatically
receive the wage index adjustment
listed in Table 4J in the Addendum to
this final rule. The wage index is
updated annually and, as such,
hospitals that wish to waive their Lugar
redesignation in order to receive their
home area wage index plus the outmigration adjustment must request the
waiver annually.
Comment: A few commenters
opposed our existing policy that
hospitals waiving their Lugar
redesignation in order to receive their
home area wage index plus the outmigration adjustment must request such
waiver annually.
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50177
Response: We did not propose to
change this policy and continue to
believe the existing policy is
appropriate for designation of the outmigration adjustment annually. We
addressed this comment in the FY 2010
IPPS/RY 2010 LTCH PPS final rule and
refer readers to that discussion (74 FR
43840).
K. Process for Requests for Wage Index
Data Corrections
The preliminary, unaudited
Worksheet S–3 wage data and
occupational mix survey data files for
the proposed FY 2011 wage index were
made available on October 5, 2009,
through the Internet on the CMS Web
site at: https://www.cms.hhs.gov/
AcuteInpatientPPS/WIFN/
list.asp#TopOfPage.
In the interest of meeting the data
needs of the public, beginning with the
proposed FY 2009 wage index, we post
an additional public use file on our Web
site that reflects the actual data that are
used in computing the proposed wage
index. The release of this new file does
not alter the current wage index process
or schedule. We notified the hospital
community of the availability of these
data as we do with the current public
use wage data files through our Hospital
Open Door forum. We encouraged
hospitals to sign up for automatic
notifications of information about
hospital issues and the scheduling of
the Hospital Open Door forums at:
https://www.cms.hhs.gov/
OpenDoorForums/.
In a memorandum dated October 21,
2009, we instructed all fiscal
intermediaries/MACs to inform the IPPS
hospitals they service of the availability
of the wage index data files and the
process and timeframe for requesting
revisions (including the specific
deadlines listed below). We also
instructed the fiscal intermediaries/
MACs to advise hospitals that these data
were also made available directly
through their representative hospital
organizations.
If a hospital wished to request a
change to its data as shown in the
October 5, 2009 wage and occupational
mix data files, the hospital was to
submit corrections along with complete,
detailed supporting documentation to
its fiscal intermediary/MAC by
December 7, 2009. Hospitals were
notified of this deadline and of all other
possible deadlines and requirements,
including the requirement to review and
verify their data as posted on the
preliminary wage index data files on the
Internet, through the October 21, 2009
memorandum referenced above.
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In the October 21, 2009
memorandum, we also specified that a
hospital requesting revisions to its
occupational mix survey data was to
copy its record(s) from the CY 2007–
2008 occupational mix preliminary files
posted to our Web site in October,
highlight the revised cells on its
spreadsheet, and submit its
spreadsheet(s) and complete
documentation to its fiscal
intermediary/MAC no later than
December 7, 2009.
The fiscal intermediaries/MACs
notified the hospitals by mid-February
2010 of any changes to the wage index
data as a result of the desk reviews and
the resolution of the hospitals’ earlyDecember revision requests. The fiscal
intermediaries/MACs also submitted the
revised data to CMS by mid-February
2010. CMS published the proposed
wage index public use files that
included hospitals’ revised wage index
data on February 22, 2010. Hospitals
had until March 8, 2010, to submit
requests to the fiscal intermediaries/
MACs for reconsideration of
adjustments made by the fiscal
intermediaries/MACs as a result of the
desk review, and to correct errors due to
CMS’s or the fiscal intermediary’s (or, if
applicable, the MAC’s) mishandling of
the wage index data. Hospitals also were
required to submit sufficient
documentation to support their
requests.
After reviewing requested changes
submitted by hospitals, fiscal
intermediaries/MACs were required to
transmit any additional revisions
resulting from the hospitals’
reconsideration requests by April 14,
2010. The deadline for a hospital to
request CMS intervention in cases
where the hospital disagrees with the
fiscal intermediary’s (or, if applicable,
the MAC’s) policy interpretations was
April 21, 2010.
Hospitals were given the opportunity
to examine Table 2 in the Addendum to
the proposed rule. Table 2 in the
Addendum to the proposed rule
contained each hospital’s adjusted
average hourly wage used to construct
the wage index values for the past 3
years, including the FY 2007 data used
to construct the proposed FY 2011 wage
index. We noted that the hospital
average hourly wages shown in Table 2
only reflected changes made to a
hospital’s data and transmitted to CMS
by March 2010.
We released the final wage index data
public use files in early May 2010 on
the Internet at https://www.cms.hhs.gov/
AcuteInpatientPPS/WIFN/
list.asp#TopOfPage. The May 2010
public use files were made available
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solely for the limited purpose of
identifying any potential errors made by
CMS or the fiscal intermediary/MAC in
the entry of the final wage index data
that resulted from the correction process
described above (revisions submitted to
CMS by the fiscal intermediaries/MACs
by April 14, 2010). If, after reviewing
the May 2010 final files, a hospital
believed that its wage or occupational
mix data were incorrect due to a fiscal
intermediary/MAC or CMS error in the
entry or tabulation of the final data, the
hospital had to send a letter to both its
fiscal intermediary/MAC and CMS that
outlined why the hospital believed an
error exists and provided all supporting
information, including relevant dates
(for example, when it first became aware
of the error). CMS and the fiscal
intermediaries (or, if applicable, the
MACs) had to receive these requests no
later than June 7, 2010.
Each request also had to be sent to the
fiscal intermediary/MAC. The fiscal
intermediary/MAC reviewed requests
upon receipt and contacted CMS
immediately to discuss any findings.
At this point in the process, that is,
after the release of the May 2010 wage
index data files, changes to the wage
and occupational mix data were only
made in those very limited situations
involving an error by the fiscal
intermediary/MAC or CMS that the
hospital could not have known about
before its review of the final wage index
data files. Specifically, neither the fiscal
intermediary/MAC nor CMS approved
the following types of requests:
• Requests for wage index data
corrections that were submitted too late
to be included in the data transmitted to
CMS by fiscal intermediaries or the
MACs on or before April 21, 2010.
• Requests for correction of errors
that were not, but could have been,
identified during the hospital’s review
of the February 22, 2010 wage index
public use files.
• Requests to revisit factual
determinations or policy interpretations
made by the fiscal intermediary or the
MAC or CMS during the wage index
data correction process.
Verified corrections to the wage index
data received timely by CMS and the
fiscal intermediaries or the MACs (that
is, by June 7, 2010) were incorporated
into the final wage index in this FY
2011 IPPS/LTCH PPS final rule, which
will be effective October 1, 2010.
We created the processes described
above to resolve all substantive wage
index data correction disputes before we
finalize the wage and occupational mix
data for the FY 2011 payment rates.
Accordingly, hospitals that did not meet
the procedural deadlines set forth above
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will not be afforded a later opportunity
to submit wage index data corrections or
to dispute the fiscal intermediary’s (or,
if applicable, the MAC’s) decision with
respect to requested changes.
Specifically, our policy is that hospitals
that do not meet the procedural
deadlines set forth above will not be
permitted to challenge later, before the
Provider Reimbursement Review Board,
the failure of CMS to make a requested
data revision. (See W. A. Foote
Memorial Hospital v. Shalala, No. 99–
CV–75202–DT (E.D. Mich. 2001) and
Palisades General Hospital v.
Thompson, No. 99–1230 (D.D.C. 2003).)
We refer readers also to the FY 2000
IPPS final rule (64 FR 41513) for a
discussion of the parameters for
appealing to the PRRB for wage index
data corrections.
Again, we believe the wage index data
correction process described above
provides hospitals with sufficient
opportunity to bring errors in their wage
and occupational mix data to the fiscal
intermediary’s (or, if applicable, the
MAC’s) attention. Moreover, because
hospitals have access to the final wage
index data by early May 2010, they have
the opportunity to detect any data entry
or tabulation errors made by the fiscal
intermediary or the MAC or CMS before
the development and publication of the
final FY 2011 wage index by August
2010, and the implementation of the FY
2011 wage index on October 1, 2010. If
hospitals availed themselves of the
opportunities afforded to provide and
make corrections to the wage and
occupational mix data, the wage index
implemented on October 1 should be
accurate. Nevertheless, in the event that
errors are identified by hospitals and
brought to our attention after June 7,
2010, we retain the right to make
midyear changes to the wage index
under very limited circumstances.
Specifically, in accordance with 42
CFR 412.64(k)(1) of our existing
regulations, we make midyear
corrections to the wage index for an area
only if a hospital can show that: (1) The
fiscal intermediary or the MAC or CMS
made an error in tabulating its data; and
(2) the requesting hospital could not
have known about the error or did not
have an opportunity to correct the error,
before the beginning of the fiscal year.
For purposes of this provision, ‘‘before
the beginning of the fiscal year’’ means
by the June 7 deadline for making
corrections to the wage data for the
following fiscal year’s wage index. This
provision is not available to a hospital
seeking to revise another hospital’s data
that may be affecting the requesting
hospital’s wage index for the labor
market area. As indicated earlier,
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because CMS makes the wage index
data available to hospitals on the CMS
Web site prior to publishing both the
proposed and final IPPS rules, and the
fiscal intermediaries or the MACs notify
hospitals directly of any wage index
data changes after completing their desk
reviews, we do not expect that midyear
corrections will be necessary. However,
under our current policy, if the
correction of a data error changes the
wage index value for an area, the
revised wage index value will be
effective prospectively from the date the
correction is made.
In the FY 2006 IPPS final rule (70 FR
47385), we revised 42 CFR 412.64(k)(2)
to specify that, effective on October 1,
2005, that is, beginning with the FY
2006 wage index, a change to the wage
index can be made retroactive to the
beginning of the Federal fiscal year only
when: (1) The fiscal intermediary (or, if
applicable, the MAC) or CMS made an
error in tabulating data used for the
wage index calculation; (2) the hospital
knew about the error and requested that
the fiscal intermediary (or, if applicable,
the MAC) and CMS correct the error
using the established process and
within the established schedule for
requesting corrections to the wage index
data, before the beginning of the fiscal
year for the applicable IPPS update (that
is, by the June 7, 2010 deadline for the
FY 2011 wage index); and (3) CMS
agreed that the fiscal intermediary (or, if
applicable, the MAC) or CMS made an
error in tabulating the hospital’s wage
index data and the wage index should
be corrected.
In those circumstances where a
hospital requested a correction to its
wage index data before CMS calculated
the final wage index (that is, by the June
7, 2010 deadline), and CMS
acknowledges that the error in the
hospital’s wage index data was caused
by CMS’ or the fiscal intermediary’s (or,
if applicable, the MAC’s) mishandling of
the data, we believe that the hospital
should not be penalized by our delay in
publishing or implementing the
correction. As with our current policy,
we indicated that the provision is not
available to a hospital seeking to revise
another hospital’s data. In addition, the
provision cannot be used to correct
prior years’ wage index data; and it can
only be used for the current Federal
fiscal year. In other situations where our
policies would allow midyear
corrections, we continue to believe that
it is appropriate to make prospectiveonly corrections to the wage index.
We note that, as with prospective
changes to the wage index, the final
retroactive correction will be made
irrespective of whether the change
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increases or decreases a hospital’s
payment rate. In addition, we note that
the policy of retroactive adjustment will
still apply in those instances where a
judicial decision reverses a CMS denial
of a hospital’s wage index data revision
request.
L. Labor-Related Share for the FY 2011
Wage Index
Section 1886(d)(3)(E) of the Act
directs the Secretary to adjust the
proportion of the national prospective
payment system base payment rates that
are attributable to wages and wagerelated costs by a factor that reflects the
relative differences in labor costs among
geographic areas. It also directs the
Secretary to estimate from time to time
the proportion of hospital costs that are
labor-related: ‘‘The Secretary shall adjust
the proportion (as estimated by the
Secretary from time to time) of
hospitals’ costs which are attributable to
wages and wage-related costs of the
DRG prospective payment rates * * * ’’
We refer to the portion of hospital costs
attributable to wages and wage-related
costs as the labor-related share. The
labor-related share of the prospective
payment rate is adjusted by an index of
relative labor costs, which is referred to
as the wage index.
Section 403 of Public Law 108–173
amended section 1886(d)(3)(E) of the
Act to provide that the Secretary must
employ 62 percent as the labor-related
share unless this ‘‘would result in lower
payments to a hospital than would
otherwise be made.’’ However, this
provision of Public Law 108–173 did
not change the legal requirement that
the Secretary estimate ‘‘from time to
time’’ the proportion of hospitals’ costs
that are ‘‘attributable to wages and wagerelated costs.’’ We believe that this
reflected Congressional intent that
hospitals receive payment based on
either a 62-percent labor-related share,
or the labor-related share estimated from
time to time by the Secretary, depending
on which labor-related share resulted in
a higher payment.
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43850 through
43856), we rebased and revised the
hospital market basket for operating
costs. We established a FY–2006-based
IPPS hospital market basket to replace
the FY 2002-based IPPS hospital market
basket, effective October 1, 2009. In that
final rule, we presented our analysis
and conclusions regarding the frequency
and methodology for updating the laborrelated share for FY 2010. We also
recalculated a labor-related share of 68.8
percent, using the FY 2006-based IPPS
market basket, for discharges occurring
on or after October 1, 2009. In addition,
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50179
we implemented this revised and
rebased labor-related share in a budget
neutral manner, but consistent with
section 1886(d)(3)(E) of the Act, we did
not take into account the additional
payments that would be made as a
result of hospitals with a wage index
less than or equal to 1.0 being paid
using a labor-related share lower than
the labor-related share of hospitals with
a wage index greater than 1.0.
The labor-related share is used to
determine the proportion of the national
IPPS base payment rate to which the
area wage index is applied. In the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 23955), we did not propose to make
any further changes to the national
average proportion of operating costs
that are attributable to wages and
salaries, fringe benefits, contract labor,
the labor-related portion of professional
fees, administrative and business
support services, and all other laborrelated services (previously referred to
in the FY 2002-based IPPS market
basket as labor-intensive).
We did not receive any public
comments on this policy. Therefore, for
FY 2011, we are continuing to use a
labor-related share of 68.8 percent for
discharges occurring on or after October
1, 2010. Tables 1A and 1B in the
Addendum to this final rule reflects this
labor-related share. We note that section
403 of Public Law 108–173 amended
sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act to provide
that the Secretary must employ 62
percent as the labor-related share unless
this employment ‘‘would result in lower
payments to a hospital than would
otherwise be made.’’ Therefore, for all
IPPS hospitals whose wage indices are
less than 1.0000, we are applying the
wage index to a labor-related share of 62
percent of the national standardized
amount. For all IPPS hospitals whose
wage indices are greater than 1.0000, we
are applying the wage index to a laborrelated share of 68.8 percent of the
national standardized amount.
For Puerto Rico hospitals, the national
labor-related share will always be 62
percent because the national wage index
for all Puerto Rico hospitals is less than
1.0. As we proposed, in this final rule,
we are continuing to use a labor-related
share for the Puerto Rico-specific
standardized amounts of 62.1 percent
for discharges occurring on or after
October 1, 2010. This Puerto Rico laborrelated share of 62.1 percent was also
adopted in the FY 2010 IPPS/LTCH PPS
final rule (74 FR 43857) at the time the
FY 2006-based hospital market basket
was established, effective October 1,
2009. Consistent with our methodology
for determining the national labor-
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related share, we added the Puerto Ricospecific relative weights for wages and
salaries, fringe benefits, contract labor,
the labor-related portion of professional
fees, administrative and business
support services, and all other laborrelated services (previously referred to
in the FY 2002-based IPPS market
basket as labor-intensive) to determine
the labor-related share. Puerto Rico
hospitals are paid based on 75 percent
of the national standardized amounts
and 25 percent of the Puerto Ricospecific standardized amounts. The
labor-related share of a hospital’s Puerto
Rico-specific rate will be either the
Puerto Rico-specific labor-related share
of 62.1 percent or 62 percent, depending
on which results in higher payments to
the hospital. If the hospital has a Puerto
Rico-specific wage index of greater than
1.0, we will set the hospital’s rates using
a labor-related share of 62.1 percent for
the 25 percent portion of the hospital’s
payment determined by the Puerto Rico
standardized amounts because this
amount will result in higher payments.
Conversely, a hospital with a Puerto
Rico-specific wage index of less than 1.0
will be paid using the Puerto Ricospecific labor-related share of 62 percent
of the Puerto Rico-specific rates because
the lower labor-related share will result
in higher payments. We did not receive
any public comments on the Puerto
Rico-specific labor-related share. The
Puerto Rico labor-related share of 62.1
percent for FY 2011 is reflected in the
Table 1C of the Addendum to this final
rule.
IV. Other Decisions and Changes to the
IPPS for Operating Costs and GME
Costs
A. Reporting of Hospital Quality Data
for Annual Hospital Payment Update
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1. Background
a. Overview
CMS is seeking to promote higher
quality and more efficient health care
for Medicare beneficiaries. This effort is
supported by the adoption of an
increasing number of widely-agreed
upon quality measures. CMS has
worked with relevant stakeholders to
define measures of quality in almost
every setting and currently measures
some aspect of care for almost all
Medicare beneficiaries. These measures
assess structural aspects of care, clinical
processes, patient experiences with
care, and, increasingly, outcomes.
CMS has implemented quality
measure reporting programs for multiple
settings of care. To measure the quality
of hospital inpatient services, CMS
implemented the Reporting Hospital
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Quality Data for Annual Payment
Update (RHQDAPU) program. In
addition, CMS has implemented quality
reporting programs for hospital
outpatient services, the Hospital
Outpatient Quality Data Reporting
Program (HOP QDRP), and for
physicians and other eligible
professionals, the Physician Quality
Reporting Initiative (PQRI). CMS has
also implemented quality reporting
programs for home health agencies and
skilled nursing facilities that are based
on conditions of participation, and an
end-stage renal disease quality reporting
program that is based on conditions for
coverage. In implementing RHQDAPU
and other quality reporting programs,
CMS has focused on measures that have
high impact and support CMS and HHS
priorities for improved quality and
efficiency of care for Medicare
beneficiaries. Our goal for the future is
to align the clinical quality measure
requirements of RHQDAPU and various
other programs including HITECH so
that burden for reporting would be
reduced.
Comment: Some commenters
commended CMS’ commitment to raise
quality, transparency, and efficiency in
the health care world and applauded its
efforts to integrate with other programs
and initiatives.
Response: We thank these comments
regarding our implementation of the
RHQDAPU program.
Comment: A commenter noted that
the proposed rule did not reference the
quality-related provisions of the
Affordable Care Act (Pub. L. 111–148)
and the Health Care and Education
Reconciliation Act of 2010 (HCERA)
(Pub. L. 111–152). The Affordable Care
Act requires the Secretary to establish a
national quality strategy to include
priorities and goals for quality
improvement with input from
stakeholders, such as the NQF.
Response: The timing of the FY 2011
IPPS/LTCH PPS proposed rule did not
allow us to address the many qualityrelated provisions of the Affordable Care
Act. The Affordable Care Act modified
the RHQDAPU statutory provisions,
authorized the Secretary to implement
quality-related programs for various
settings of care, and also added new
requirements for collaborative goal
setting regarding quality (as noted by
the commenter). The focus of this
specific section of this final rule is the
RHQDAPU program, and we are
addressing changes to the RHQDAPU
program under the Affordable Care Act
in this final rule. We plan to propose
requirements for the Hospital ValueBased Purchasing (HVBP) program
(section 3001 of Affordable Care Act)
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and other quality-related Affordable
Care Act provisions through future
rulemaking. Additionally, section 3011
of the Affordable Care Act requires the
Secretary to establish and update a
national strategy to improve the delivery
of health care services, patient health
outcomes and population health. The
initial submission of the national
strategy to Congress must be no later
than January 1, 2011. The national
strategy as directed by section 3011 is
broader in scope than hospital inpatient
services, which are the focus of the
RHQDAPU program. However, the
national strategy may include guidance
for future RHQDAPU program
implementation.
b. Hospital Quality Data Reporting
Under Section 501(b) of Public Law
108–173
Section 501(b) of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA),
Public Law 108–173, added section
1886(b)(3)(B)(vii) to the Act. This
section established the authority for the
RHQDAPU program and revised the
mechanism used to update the
standardized payment amount for
inpatient hospital operating costs.
Specifically, section 1886(b)(3)(B)(vii)(I)
of the Act, before it was amended by
section 5001(a) of Public Law 109–171,
provided for a reduction of 0.4
percentage points to the update
percentage increase (also known as the
market basket update) for FY 2005
through FY 2007 for any subsection (d)
hospital that did not submit data on a
set of 10 quality indicators established
by the Secretary as of November 1, 2003.
It also provides that any reduction
would apply only to the fiscal year
involved, and would not be taken into
account in computing the applicable
percentage increase for a subsequent
fiscal year. The statute thereby
established an incentive for IPPS
hospitals to submit data on the quality
measures established by the Secretary,
and also built upon the previously
established Voluntary Hospital Quality
Data Reporting Program that we
described in the FY 2009 IPPS final rule
(73 FR 48598).
We implemented section
1886(b)(3)(B)(vii) of the Act in the FY
2005 IPPS final rule (69 FR 49078) and
codified the applicable percentage
change in § 412.64(d) of our regulations.
We adopted additional requirements
under the RHQDAPU program in the FY
2006 IPPS final rule (70 FR 47420).
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c. Hospital Quality Data Reporting
Under Section 5001(a) of Public Law
109–171
Section 5001(a) of the Deficit
Reduction Act of 2005 (DRA), Public
Law 109–171, further amended section
1886(b)(3)(B) of the Act to revise the
mechanism used to update the
standardized payment amount for
hospital inpatient operating costs, in
particular, by adding new section
1886(b)(3)(B)(viii) to the Act.
Specifically, sections
1886(b)(3)(B)(viii)(I) and (II) of the Act
as added by the DRA provide that the
payment update for FY 2007 and each
subsequent fiscal year be reduced by 2.0
percentage points for any subsection (d)
hospital that does not submit quality
data in a form and manner, and at a
time, specified by the Secretary.
(Section 4102(b)(1)(A) of the American
Recovery and Reinvestment Act of 2009
(Public Law 111–5) and section
3401(a)(2) of the Affordable Care Act
(Public Law 111–148) amended section
1886(b)(3)(B)(viii)(I) of the Act to
provide that, beginning in FY 2015, the
reduction will be by one-quarter of such
applicable percentage increase
(determined without regard to
reductions under sections
1886(b)(3)(B)(ix), (xi), or (xii) of the
Act).) Section 1886(b)(3)(B)(viii)(I) of the
Act also provides that any reduction in
a hospital’s payment update will apply
only with respect to the fiscal year
involved, and will not be taken into
account for computing the applicable
percentage increase for a subsequent
fiscal year. In the FY 2007 IPPS final
rule (71 FR 48045), we amended our
regulations at § 412.64(d)(2) to reflect
the 2.0 percentage point reduction in
the payment update for FY 2007 and
subsequent fiscal years for subsection
(d) hospitals that do not comply with
requirements for reporting quality data,
as provided for under section
1886(b)(3)(B)(viii) of the Act before it
was amended by the American Recovery
and Reinvestment Act and the
Affordable Care Act.
d. Hospital Quality Data Reporting
Under Sections 3001(a)(2) and
3401(a)(2) of Public Law 111–148
Section 3001(a)(2) of the Affordable
Care Act, Public Law 111–148, amended
section 1886(b)(3)(B)(viii) of the Act.
Specifically, section 3001(a)(2)(A) of the
Affordable Care Act amended section
1886(b)(3)(B)(viii)(II) of the Act to state
that the Secretary may require hospitals
to submit data on measures that are not
used for the determination of valuebased incentive payments under the
HVBP program. Section 3001(a)(2)(C) of
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the Affordable Care Act amended
section 1886(b)(3)(B)(viii)(VII) of the Act
to require that the Secretary establish
procedures for making information
regarding measures submitted (instead
of data submitted) available to the
public. In addition, section 3001(a)(2)(B)
of the Affordable Care Act amended
section 1886(b)(3)(B)(viii)(V) of the Act
to limit the requirement that measures
added by the Secretary reflect consensus
among affected parties and, to the extent
feasible and practicable, include
measures set forth by one or more
national consensus building entities to
payments for FYs 2008 through 2012.
Section 3001(a)(2)(D) of the
Affordable Care Act added section
1886(b)(3)(B)(viii)(IX) of the Act to
require, for payments beginning with FY
2013, each measure specified by the
Secretary under section
1886(b)(3)(B)(viii) of the Act to be
endorsed by the entity with a contract
under section 1890(a) regarding
consensus entities (the ‘‘consensus
entity’’) except, in the case of a specified
area or medical topic determined
appropriate by the Secretary for which
a feasible and practical measure has not
been endorsed by the consensus entity,
the Secretary may specify a measure
that is not endorsed so long as due
consideration is given to measures that
have been endorsed or adopted by a
consensus organization identified by the
Secretary.
Section 3001(a)(2)(D) of the
Affordable Care Act also added new
sections 1886(b)(3)(B)(viii)(VIII),
1886(b)(3)(B)(viii)(X) and
1886(b)(3)(B)(viii)(XI) to the Act, which
require the Secretary to do the
following, respectively: (1) Provide for
such risk adjustment as the Secretary
determines appropriate to maintain
incentives for hospitals to treat patients
with severe illnesses or conditions with
respect to quality measures for
outcomes of care effective for payments
beginning with FY 2013; (2) to the
extent practicable and with input from
consensus organizations and other
stakeholders, take steps to ensure that
the measures specified by the Secretary
under 1886(b)(3)(B)(viii) of the Act are
coordinated and aligned with quality
measures applicable to physicians
under section 1848(k) of the Act and
other providers of services and
suppliers under Medicare; and (3)
establish a process to validate measures
specified under section
1886(b)(3)(B)(viii) of the Act, which
includes the auditing of a number of
randomly selected hospitals sufficient to
ensure validity of the reporting program
under this clause as a whole and shall
provide a hospital with an opportunity
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50181
to appeal the validation of measures
reported by such hospital.
Additionally, section 3401(a)(2) of the
Affordable Care Act amended section
1886(b)(3)(B)(viii)(I) of the Act by
adding the phrase ‘‘of such applicable
percentage increase (determined
without regard to clause (ix), (xi), or
(xii))’’ after the word ‘‘one-quarter’’ so
that, beginning in FY 2015, the
reduction under the RHQDAPU program
will be by one-quarter of such
applicable percentage increase
determined without regard to other
reductions in the annual payment
update set forth in sections
1886(b)(3)(B)](ix), (xi), or (xii) of the
Act.
e. Quality Measures
Section 1886(b)(3)(B)(viii)(III) of the
Act requires that the Secretary expand
the ‘‘starter set’’ of 10 quality measures
that was established by the Secretary as
of November 1, 2003, as the Secretary
determines to be appropriate for the
measurement of the quality of care
furnished by a hospital in inpatient
settings. In expanding this set of
measures, section 1886(b)(3)(B)(viii)(IV)
of the Act requires that, effective for
payments beginning with FY 2007, the
Secretary begin to adopt the baseline set
of performance measures as set forth in
a report issued by the Institute of
Medicine (IOM) of the National
Academy of Sciences under section
238(b) of Public Law 108–173.10
Section 1886(b)(3)(B)(viii)(V) of the
Act, as amended by section
3001(a)(2)(B) of the Affordable Care Act,
requires that, effective for payments for
FYs 2008 through 2012, the Secretary
add other quality measures that reflect
consensus among affected parties, and
to the extent feasible and practicable,
have been set forth by one or more
national consensus building entities.
The NQF is a voluntary consensus
standard-setting organization with a
diverse representation of consumer,
purchaser, provider, academic, clinical,
and other health care stakeholder
organizations. The NQF was established
to standardize health care quality
measurement and reporting through its
consensus development process. We
have generally adopted NQF-endorsed
measures. However, we believe that
consensus among affected parties also
can be reflected by other means,
10 Institute of Medicine, ‘‘Performance
Measurement: Accelerating Improvement,’’
December 1, 2005, available at: https://
www.iom.edu/CMS/3809/19805/31310.aspx. IOM
set forth these baseline measures in a November
2005 report. However, the IOM report was not
released until December 1, 2005 on the IOM Web
site.
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including consensus achieved during
the measure development process,
consensus shown through broad
acceptance and use of measures, and
consensus through public comment.
As discussed previously, section
3001(a)(2) of the Affordable Care Act
amended section 1886(b)(3)(B)(viii) of
the Act to provide a different standard
for quality measures included in the
RHQDAPU program for payments
beginning with FY 2013. Under section
1886(b)(3)(B)(viii)(IX) of the Act, for
payments beginning with FY 2013, each
measure specified by the Secretary must
be endorsed by a consensus entity,
currently NQF, except in certain
circumstances. Specifically, in the case
of a specified area or medical topic
determined appropriate by the Secretary
for which a feasible and practical
measure has not been endorsed by the
consensus entity, the Secretary may
specify a measure that is not endorsed
by the consensus entity if due
consideration is given to measures that
have been endorsed or adopted by a
consensus organization identified by the
Secretary.
Section 1886(b)(3)(B)(viii)(VI) of the
Act authorizes the Secretary to replace
any quality measures or indicators in
appropriate cases, such as where all
hospitals are effectively in compliance
with a measure, or the measures or
indicators have been subsequently
shown to not represent the best clinical
practice. Thus, the Secretary is granted
broad discretion to replace measures
that are no longer appropriate for the
RHQDAPU program.
In the FY 2007 IPPS final rule, we
began to expand the RHQDAPU
program measures by adding 11 quality
measures to the 10-measure starter set to
establish an expanded set of 21 quality
measures for the FY 2007 payment
determination (71 FR 48033 through
48037, 48045).
In the CY 2007 OPPS/ASC final rule
(71 FR 68201), we adopted 6 additional
quality measures for the FY 2008
payment determination, for a total of 27
measures. Two of these measures (30Day Risk Standardized Mortality Rates
for Heart Failure and 30-Day Risk
Standardized Mortality Rates for AMI)
were calculated using existing
administrative Medicare claims data;
thus, no additional data submission by
hospitals was required for these two
measures. The measures used for the FY
2008 payment determination included,
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for the first time, the HCAHPS patient
experience of care survey.
In the FY 2008 IPPS final rule (72 FR
47348 through 47358) and the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66875 through 66877), we
added three additional process
measures to the RHQDAPU program
measure set. (These three measures are
SCIP-Infection-4: Cardiac Surgery
Patients with Controlled 6AM
Postoperative Serum Glucose, SCIPInfection-6: Surgery Patients with
Appropriate Hair Removal, and
Pneumonia 30-day mortality (Medicare
patients).) The addition of these 3
measures brought the total number of
RHQDAPU program measures to be
used for the FY 2009 payment
determination to 30 (72 FR 66876). The
30 measures used for the FY 2009
annual payment determination are
listed in the FY 2009 IPPS final rule (73
FR 48600 through 48601).
For the FY 2010 payment
determination, we added 15 new
measures to the RHQDAPU program
measure set and retired 1 measure from
the program (PN–1: Oxygenation
Assessment). Of the new measures, 13
were adopted in the FY 2009 IPPS final
rule (73 FR 48602 through 48611) and
2 additional measures were finalized in
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68780 through
68781). This resulted in an expansion of
the RHQDAPU program measures from
30 measures for the FY 2009 payment
determination to 44 measures for the FY
2010 payment determination. The
RHQDAPU program measures for the FY
2010 payment determination consist of:
26 chart-abstracted process measures,
which measure quality of care provided
for Acute Myocardial Infarction (AMI),
Heart Failure (HF), Pneumonia (PN),
and Surgical Care Improvement (SCIP);
6 claims-based measures, which
evaluate 30-day mortality and 30-day
readmission rates for AMI, HF, or PN; 9
claims-based AHRQ patient safety
indicators and inpatient quality
indicators; 1 claims-based nursing
sensitive measure; 1 structural measure
that assesses participation in a
systematic database for cardiac surgery;
and the HCAHPS patient experience of
care survey. The measures are listed in
the FY 2009 IPPS final rule
(73 FR 46809) and in the CY 2009
OPPS/ASC final rule with comment
period (73 FR 68781).
On December 31, 2008, we advised
hospitals that they would no longer be
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required to submit data for the
RHQDAPU program measure AMI–6–
Beta blocker at arrival, beginning with
discharges occurring on April 1, 2009.
This change was based on the evolving
evidence regarding AMI patient care, as
well as changes in the American College
of Cardiology/American Heart
Association (ACC/AHA) practice
guidelines for ST-segment elevation
myocardial infarction and non-ST
segment elevation myocardial
infarction, upon which AMI–6 is based.
We took action to remove the measure
from reporting initiatives based on the
lack of support by the measure
developer and the clinical and scientific
considerations described in the FY 2010
IPPS/RY 2010 LTCH PPS final rule
(74 FR 43863).
We had previously discussed
considerations relating to retiring or
replacing measures in the FY 2008 IPPS
final rule with comment period and the
FY 2009 IPPS final rule, including the
‘‘topping out’’ of hospitals’ performance
under a measure (72 FR 47358 through
47359 and 73 FR 48603 through 48604,
respectively). However, in this instance,
the measure no longer ‘‘represent[s] the
best clinical practice,’’ an additional
basis under section
1886(b)(3)(B)(viii)(VI) of the Act for
retiring a measure. In the FY 2010 IPPS/
RY 2010 LTCH PPS final rule, we
formally retired the AMI–6 measure
from the RHQDAPU program for the FY
2011 payment determination and
subsequent payment determinations.
For the FY 2011 payment
determination, we retained 41 of the FY
2010 quality measures; harmonized 2
FY 2010 RHQDAPU program quality
measures (combining PSI 04—Death
among surgical patients with treatable
serious complications; and Nursing
Sensitive—Failure to rescue into a
single measure (Death among surgical
inpatients with serious, treatable
complications); added 2chart-abstracted
measures (SCIP-Infection-9:
Postoperative Urinary Catheter Removal
on Post Operative Day 1 or 2 and SCIPInfection-10: Perioperative Temperature
Management); and added 2 structural
measures: (1) Participation in a
Systematic Clinical Database Registry
for Stroke Care; and (2) Participation in
a Systematic Clinical Database Registry
for Nursing Sensitive Care) (74 FR
43868 through 43873). The 46 measures
we adopted for the FY 2011 payment
determination are:
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f. Maintenance of Technical
Specifications for Quality Measures
The technical specifications for the
RHQDAPU program measures, or links
to Web sites hosting technical
specifications, are contained in the
CMS/The Joint Commission
Specifications Manual for National
Hospital Inpatient Quality Measures
(Specifications Manual). This
Specifications Manual is posted on the
CMS QualityNet Web site at https://
www.QualityNet.org/. We maintain the
technical specifications by updating this
Specifications Manual semiannually, or
more frequently in unusual cases, and
include detailed instructions and
calculation algorithms for hospitals to
use when collecting and submitting data
on required measures. These
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semiannual updates are accompanied by
notifications to users, providing
sufficient time between the change and
the effective date in order to allow users
to incorporate changes and updates to
the specifications into data collection
systems.
We did not receive any public
comments on this section and we will
continue to use this process to maintain
the technical specifications for the
RHQDAPU program measures.
g. Public Display of Quality Measures
Section 1886(b)(3)(B)(viii)(VII) of the
Act, as amended by section 3001(a)(2) of
the Affordable Care Act, requires that
the Secretary establish procedures for
making information regarding measures
submitted available to the public after
ensuring that a hospital has the
opportunity to review its data before
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they are made public. To meet this
requirement, data from the RHQDAPU
program are typically displayed on CMS
Web sites such as the Hospital Compare
Web site, https://
www.hospitalcompare.hhs.gov after a
30-day preview period. An interactive
Web tool, this Web site assists
beneficiaries by providing information
on hospital quality of care to those who
need to select a hospital. It further
serves to encourage beneficiaries to
work with their doctors and hospitals to
discuss the quality of care hospitals
provide to patients, thereby providing
an additional incentive to hospitals to
improve the quality of care that they
furnish. The RHQDAPU program
currently includes process of care
measures, risk-adjusted outcome
measures, the HCAHPS patient
experience-of-care survey, and
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structural measures, all of which are
featured on the Hospital Compare Web
site.
However, information that may not be
relevant to or understood by
beneficiaries and information for which
there are unresolved display issues or
design considerations for inclusion on
Hospital Compare may be made
available on other CMS Web sites that
are not intended to be used as an
interactive Web tool, such as https://
www.cms.hhs.gov/HospitalQualityInits/.
Publicly reporting the information in
this manner, though not on the Hospital
Compare Web site, allows CMS to meet
the requirement under section
1886(b)(3)(B)(viii)(VII) of the Act for
establishing procedures to make quality
data used for RHQDAPU payment
determinations available to the public
following a preview period. In such
circumstances, affected parties are
notified via CMS listservs, CMS e-mail
blasts, national provider calls, and
QualityNet announcements regarding
the release of preview reports followed
by the posting of data on a Web site
other than Hospital Compare.
Comment: One commenter supported
CMS’ current policy of identifying
quality measures rates based on fewer
than 25 cases as potentially unreliable
for judging a hospital’s performance
when displaying data on Hospital
Compare. The commenter indicated that
this is currently accomplished by
footnoting the data but it would be
better to simply not display the rates
that are based on fewer than 25 cases.
Response: We thank the commenter
for the suggestion. Although data
display and Web site design issues are
not subject to the rulemaking process,
we will take this suggestion under
consideration for future releases of the
Hospital Compare Web site.
Comment: One commenter requested
that CMS describe in greater detail the
rationale for publicly reporting
measures on CMS Web sites other than
Hospital Compare on a case-by-case
basis.
Response: Section
1886(b)(3)(B)(viii)(VII) of the Act
requires that the Secretary establish
procedures for making information
regarding measures submitted for the
RHQDAPU payment determinations
available to the public after ensuring
that a hospital has the opportunity to
review its data before they are made
public. While we strive to make as
much of this information available on
the Hospital Compare Web site, there
are instances where we need further
time to develop a method of displaying
the information so that it does not
confuse or mislead consumers intending
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to use the data in healthcare decision
making. To satisfy the statutory
requirement for transparency of the
information used to make RHQDAPU
payment determinations available to the
public, we would display the data on
another CMS Web site such as https://
www.cms.gov, but not on the Hospital
Compare Web site, which is meant to be
a consumer oriented decision tool. Once
an appropriate display mechanism has
been determined, the information would
be added to the Hospital Compare Web
site.
We will continue to use this public
display process for the RHQDAPU
program.
2. Retirement of RHQDAPU Program
Measures
a. Considerations in Retiring Quality
Measures From the RHQDAPU Program
Unless stated otherwise, we generally
retain measures from the current year’s
RHQDAPU program measure set for
subsequent years’ measure sets. We
have previously retired one measure,
PN–1: Oxygenation Assessment for
Pneumonia, from the RHQDAPU
program on the basis of high unvarying
performance among hospitals, as
measures with very high performance
among hospitals present little
opportunity for improvement, and do
not provide meaningful distinctions in
performance for consumers. We also
have retired one measure from the
program because it no longer
‘‘represent[ed] the best clinical practice,’’
as stated under section
1886(b)(3)(B)(viii)(VI) of the Act. In this
latter situation, we stated that when
there is reason to believe that the
continued collection of a measure as it
is currently specified raises potential
patient safety concerns that it is
appropriate for CMS to take immediate
action to remove a measure from the
RHQDAPU program and not wait for the
annual rulemaking cycle. Therefore, in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43864 and 43865), we
stated that we would promptly retire
such measures followed by subsequent
confirmation of the retirement in the
next IPPS rulemaking. When we do so,
we will notify hospitals and the public
through the usual hospital and QIO
communication channels used for the
RHQDAPU program, which include
memo and e-mail notification and
QualityNet Web site articles and
postings.
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule, we invited public
comment regarding additional
RHQDAPU program measures that
should be considered for retirement
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along with criteria that should be used
for retiring measures. In the FY 2010
IPPS/RY 2010 LTCH PPS final rule,
commenters recommended 11
RHQDAPU program measures for
retirement for various reasons (74 FR
43865). Among the criteria suggested by
commenters that CMS should consider
when determining whether to retire
RHQDAPU program measures were: (1)
Measure performance among hospitals
is so high and unvarying that
meaningful distinctions and
improvements in performance can no
longer be made; (2) performance or
improvement on a measure does not
result in better patient outcomes; (3) a
measure does not align with current
clinical guidelines or practice; (4) the
availability of a more broadly applicable
(across settings, populations, or
conditions) quality measure for the
topic; (5) the availability of a measure
that is more proximal in time to desired
patient outcomes for the particular
topic; (6) the availability of a measure
that is more strongly associated with
desired patient outcomes for the
particular topic; (7) collection and/or
public reporting of a measure leads to
negative unintended consequences
other than patient harm. We agreed with
commenters that these criteria should be
among those considered in evaluating
current RHQDAPU program measures
for retirement. We again invited
commenters to submit suggestions for
additional measure retirement criteria
for CMS to consider.
Comment: One commenter asked for
the CMS definition of ‘‘retirement’’ and
the relationship of retired measures to
the RHQDAPU program.
Response: Retirement of a measure
from the RHQDAPU program constitutes
permanent removal of a measure from
the RHQDAPU program measurement
set for future payment determinations.
Comment: Some commenters agreed
with CMS’ quality measure retirement
criteria including measures with
consistent high performance (toppedout), measures not supported by
evidence, measures that no longer
represent the best clinical practice, and
measures that have become a cause for
potential patient safety concerns. A
commenter recommended that CMS add
the following two criteria to its list of
criteria to be considered when
determining whether to retire a
RHQDAPU measure: (1) The measure
should be modified or deleted if new
clinical evidence exists that
demonstrates that the measure should
be modified or deleted; and (2) a
previous process measure should be
retired in favor of a new risk-adjusted
outcomes measure. Some commenters
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suggested CMS collaborate with
organizations such as the NQF and the
HQA in reviewing all current
RHQDAPU quality measures for
retirement determinations.
A few commenters supported the
retirement of topped-out measures but
some commenters were concerned that
the retirement of topped-out measures
would lead to subsequent declining
performance. The commenters further
suggested that the process measures are
also accountability measures and should
not be retired just because they are
topped-out. Some commenters
recommended that CMS should
continue data collection for topped out
measures on a 3-year cycle, or consider
incorporating the measure into a
meaningful composite measure set.
Another commenter recommended that
CMS conduct demonstration projects to
ascertain the impact of the proposed
measures for retirement and assess the
organizations’ ability to sustain
improvement over time for measures
that are considered to be taken out of
the RHQDAPU program. The
commenter believed that demonstration
projects would enable the cycling of
measures in and out of the RHQDAPU
program as desired for public reporting
and incentive payment programs.
Response: We thank the commenters
for sharing these suggestions and
criteria for quality measure retirement.
We will consider the commenters’
recommendations for evaluating current
RHQDAPU program measures for
retirement. We agree that changing
scientific evidence should be
considered in deciding whether to
modify or retain a measure. We also
agree that risk-adjusted outcome
measures could potentially serve to
replace process measures, although we
believe other factors should be
considered such as the performance on
the process measures and the degree to
which the measures address the same
populations. While sustaining quality
improvement gains for measures is
important, it currently is not feasible for
us to conduct continued surveillance on
measures that have been retired from
the RHQDAPU program. Further, we do
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not believe that the one measure that we
have retired requires continued
surveillance. This is because measuring
oxygen saturation is part of ongoing
monitoring functions built into
equipment used for all hospitalized
patients, and therefore would not suffer
a decline in practice from lack of
inclusion in this reporting program. We
will consider the feasibility of the
commenters’ suggestions to periodically
monitor performance of measures that
we may subsequently retire. As for
collaboration with NQF and HQA, we
consider changes in NQF endorsement
status for measures adopted and
considered for RHQDAPU, and as HQA
members, we participate in HQA
activities, which include reviewing
measures which may be considered for
retirement. We will consider the
feasibility and appropriateness of the
suggestion to use Medicare
demonstrations as a potential
mechanism to monitor measure
performance for measures that may in
the future be retired from the
RHQDAPU program and suffer a decline
in desired practices as a result of
retirement.
b. Retirement of Quality Measures
Under the RHQDAPU Program for the
FY 2011 Payment Determination and
Subsequent Years
In the FY 2009 IPPS final rule for the
FY 2010 payment determination, we
adopted nine measures that were
developed by the Agency for Healthcare
Research and Quality (AHRQ), and in
the FY 2010 IPPS/RY 2010 LTCH PPS
we subsequently retained these
measures for the FY 2011 payment
determination. One of these measures
was the AHRQ Mortality for Selected
Surgical Procedures Composite, which
is comprised of measures from the
AHRQ Inpatient Quality Indicator (IQI)
measure set. In late June of 2009,
following an NQF steering committee
evaluation of the AHRQ Mortality for
Selected Surgical Procedures composite,
the AHRQ issued guidance 11 that this
11 AHRQ.
Guidance on Using the AHRQ QI for
Hospital-Level Comparative Reporting. June 2009.
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composite is ‘‘not recommended for
comparative reporting’’ as specified due
to significant evidence gaps, and that
these significant evidence gaps are
unlikely to be addressed with further
development or validation work. This
guidance is available at: https://www.
qualityindicators.ahrq.gov/downloads/
publications/AHRQ%20QI%20
Guide%20to%20Comparative
%20Reporting%20v10.pdf.
For this reason, we proposed to retire
the Mortality for Selected Procedures
Composite from the RHQDAPU program
measure set for the FY 2011 payment
determination and for subsequent
payment determinations because the
measure is not considered suitable for
purposes of comparative reporting by
the measure developer. We will neither
calculate this measure for the FY 2011
payment determination, nor display
results for this measure on Hospital
Compare. We invited comment on our
proposal to retire this measure from the
RHQDAPU program for the FY 2011
payment determination and for
subsequent payment determinations.
We also invited commenters to submit
suggestions and rationales for retirement
of other RHQDAPU program measures.
Comment: Commenters
overwhelmingly supported the
proposed retirement of the Mortality for
Selected Procedures Composite from the
RHQDAPU program measure set for the
FY 2011 payment determination and for
subsequent payment determinations due
to its unsuitability for comparative
reporting.
Response: We thank the commenters
for their support and we are finalizing
the retirement of this measure for the FY
2011 and subsequent payment
determinations.
Set out below are the 45 RHQDAPU
program quality measures for the FY
2011 payment determination reflecting
our retirement of 1 measure:
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3. Expansion Plan for Quality Measures
for the FY 2012, FY 2013, and FY 2014
Payment Determinations
a. Considerations in Expanding and
Updating Quality Measures Under the
RHQDAPU Program
In the FY 2009 IPPS final rule (73 FR
48613) and the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43866
through 43869), we acknowledged the
data collection burden for hospitals
participating in the RHQDAPU program,
and reiterated our desire to expand the
RHQDAPU program measure set while
minimizing burden and seeking to
provide alternative mechanisms for data
submission for the RHQDAPU program.
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule, we also stated that in future
expansions and updates to the
RHQDAPU program measure set, we
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would be taking into consideration
several important goals. These goals
include: (a) Expanding the types of
measures beyond process of care
measures to include an increased
number of outcome measures, efficiency
measures, and patients’ experience-ofcare measures; (b) expanding the scope
of hospital services to which the
measures apply; (c) considering the
burden on hospitals in collecting chartabstracted data; (d) harmonizing the
measures used in the RHQDAPU
program with other CMS quality
programs to align incentives and
promote coordinated efforts to improve
quality; (e) seeking to use measures
based on alternative sources of data that
do not require chart abstraction or that
utilize data already being reported by
many hospitals, such as data that
hospitals report to clinical data
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registries, or all-payer claims data bases;
and (f) weighing the relevance and
utility of the measures compared to the
burden on hospitals in submitting data
under the RHQDAPU program.
Specifically, we give priority to
quality measures that assess
performance on: (a) Conditions that
result in the greatest mortality and
morbidity in the Medicare population;
(b) conditions that are high volume and
high cost for the Medicare program; and
(c) conditions for which wide cost and
treatment variations have been reported,
despite established clinical guidelines.
We have used and continue to use these
criteria to guide our decisions regarding
what measures to add to the RHQDAPU
program measure set. In addition, in
selecting measures, we seek to address
the six quality aims of effective, safe,
timely, efficient, patient-centered, and
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equitable healthcare. Current and long
term priority topics include: prevention
and population health; safety; chronic
conditions; high cost and high volume
conditions; elimination of health
disparities; healthcare-associated
infections and other adverse healthcare
outcomes; improved care coordination;
improved efficiency; improved patient
and family experience of care; effective
management of acute and chronic
episodes of care; reduced unwarranted
geographic variation in quality and
efficiency; and adoption and use of
interoperable health information
technology.
These criteria, priorities, and goals are
consistent with section
1886(b)(3)(B)(viii)(X) of the Act, as
added by section 3001(a)(2)(D) of the
Affordable Care Act, which requires the
Secretary, to the extent practicable and
with input from consensus
organizations and other stakeholders, to
take steps to ensure that the RHQDAPU
measures are coordinated and aligned
with quality measures applicable to
physicians and other providers of
services and suppliers under Medicare.
RHQDAPU program measures were
initially based solely on a hospital’s
submission of chart-abstracted quality
measure data. However, in recent years
we have adopted measures that do not
require chart abstraction, including
structural and claims-based quality
measures which we can calculate using
other data sources. This supports our
goal of expanding the measures for the
RHQDAPU program while minimizing
the burden on hospitals and, in
particular, without significantly
increasing the chart abstraction burden.
In addition to claims-based and
structural measures, we previously
noted that registries 12 and electronic
health records (EHRs) are potential
alternative sources of hospital data for
the RHQDAPU program. We observed
that many hospitals already submit data
to and participate in existing registries,
and that registries often capture
outcome information and provide
ongoing quality improvement feedback
to registry participants. We envisioned
that instead of requiring hospitals to
submit the same data to CMS that many
hospitals are already submitting to
registries, that we would collect the data
directly from the registries. This could
enable the expansion of the RHQDAPU
program measure set without increasing
the burden of data collection for those
hospitals participating in the registries.
We cited as examples of registries
12 A registry is a collection of clinical data for
purposes of assessing clinical performance, quality
of care, and opportunities for quality improvement.
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actively used by hospitals the Society of
Thoracic Surgeons (STS) Cardiac
Surgery Registry (with approximately 90
percent participation by cardiac surgery
programs), the AHA Stroke Registry
(with approximately 1200 hospitals
participating), and the American
Nursing Association (ANA) Nursing
Sensitive Measures Registry (with
approximately 1400 hospitals
participating). In the FY 2009 IPPS final
rule (73 FR 48608 through 48609), we
adopted the first RHQDAPU program
measure related to registries:
Participation in a Systematic Database
for Cardiac Surgery. Subsequently, in
the FY 2010 IPPS/RY 2010 LTCH PPS
(74 FR 43870 through 43872), we
adopted two additional structural
measures of registry participation for the
topics of Stroke and Nursing Sensitive
Care. We continue to evaluate the
feasibility of leveraging registry-based
data collection mechanisms for the
RHQDAPU program.
We also stated our intention to
explore mechanisms for data
submission using EHRs (73 FR 48614;
74 FR 43866, 43892). Establishing such
a system will require interoperability
between EHRs and CMS data collection
systems, additional infrastructure
development on the part of hospitals
and CMS, and the adoption of standards
for the capturing, formatting, and
transmission of data elements that make
up the measures. However, once these
activities are accomplished, the
adoption of measures that rely on data
obtained directly from EHRs will enable
us to expand the RHQDAPU program
measure set with less cost and burden
to hospitals.
In the FY 2009 IPPS final rule, we
adopted nine AHRQ measures for the
RHQDAPU program, one of which is
now retired for the FY 2011 payment
determination and subsequent payment
determinations in this final rule. We
stated that we would initially calculate
the measures using Medicare claims
data (73 FR 48608). However, we also
stated that we remained interested in
using all-payer claims data to calculate
them and that we might propose to
collect such data in the future. In the FY
2010 IPPS/RY 2010 LTCH PPS proposed
rule (74 FR 24169), we invited input
and suggestions on how all-payer claims
data can be collected and used by CMS
to calculate these measures, as well as
on additional AHRQ measures that we
should consider adopting for future
RHQDAPU program payment
determinations.
In summary, we noted in the FY 2011
IPPS/LTCH PPS proposed rule that we
will continue to pursue goals regarding
the expansion and updating of quality
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measures under the RHQDAPU program
while minimizing burden. We will take
into account the public comments we
receive on the possible uses of EHRs,
registries, and all-payer claims data in
the RHQDAPU program. We also will
consider the measure selection criteria
suggested by various commenters in
prioritizing and selecting quality
measures for the future.
Comment: A few commenters
supported the use of EHR-based data
collection. One commenter was
concerned that the clinical quality
measures in the RHQDAPU program do
not align with the electronic quality
measure reporting requirements as part
of the meaningful use criteria under the
HITECH EHR incentive program rule.
Response: We appreciate these
supportive comments for EHR-based
data collection as an alternative data
source for quality measures. One of our
priorities in the RHQDAPU program is
to align clinical quality measures in the
RHQDAPU program with the electronic
quality measure reporting requirements
under the meaningful use criteria under
the HITECH EHR Incentive program in
the future, and to specify current
RHQDAPU measures for EHR-based
collection. We note that some of the
RHQDAPU program quality measures
do not lend themselves to EHR
reporting, for example HCAHPS
experience of care measures. We are
mindful of the need for alignment of the
clinical measures used in the two
programs as more measures are
implemented in the future.
Comment: Several commenters stated
that CMS should delay the
implementation of additional quality
measures and spend time prioritizing
future electronic quality measures
during this transition to EHR.
Response: Given the time that will be
needed for building of infrastructure,
interoperability, testing and
development of e-specifications of
measures, and the proposal and
finalization of clinical quality measures,
we believe we should not wait for the
complete transition to EHR-based
measure collection in order to move
forward with the expansion of the
RHQDAPU program. In determining
whether to adopt new quality measures
for the RHQDAPU program, we weigh
the potential benefit of improvement
that would result from reporting a given
measure against the potential resource
burden associated with reporting a
measure. However, in the future, our
intent is to develop and specify
electronic measures of quality that will
be aligned and meet the requirements
for both programs.
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Comment: One commenter questioned
the value of claims-based and registrybased data collection when EHR data
collection is fully implemented.
Response: We believe that claims may
still be needed to identify prior events
and diagnoses for measures that require
look-back periods, involving the
matching of data for a single patient
over long periods of time (for example,
1 year of prior history) across multiple
settings. EHR data provides a crosssectional snapshot of data, and such
matching is not possible with a
snapshot of data from a single provider
or setting because it would not have all
events and diagnoses for a particular
patient outside of the particular setting
or episode of care. This is possible,
however, when claims for Medicare
beneficiaries are utilized for such
historical information across providers.
Such data could be used to supplement
cross-sectional clinical EHR data.
Furthermore, registries provide services
beyond data collection, such as quality
improvement support, feedback and
best practices.
Comment: A commenter requested
that CMS only implement measures that
are aligned with identical technical
specifications as other national data
collection projects. For instance, the
proposed Stroke registry measure has
different population definitions from
the Joint Commission stroke core
measures, Disease certification program
and designated Stroke Centers.
Response: We agree that measures
used in the RHQDAPU program should
be based on a single set of harmonized
population definitions and measure
specifications. As discussed in later
sections, we are not finalizing the
registry-based submission mechanism
proposal.
Comment: One commenter asked for
clarification on the requirements for
measures that are calculated based on
ICD–9 CM codes as well as the timeline
and impact of transitioning to ICD–10–
CM codes.
Response: CMS has announced the
transition to ICD–10–CM codes effective
October 1, 2013, at the start of FY 2014.
Prior to that date, we will be
respecifying measures that are
implemented in quality data reporting
programs to incorporate ICD–10–CM
codes.
Comment: Several commenters noted
that CMS’ intent to reduce burden by
proposing different reporting
mechanism may in fact create more
burden on hospitals. Hospitals are most
familiar with chart abstraction.
Response: We agree with commenters
that hospitals are most familiar with
chart abstraction as a data collection
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method. However, we also recognize
that this is a burdensome mechanism.
Therefore, we believe, that it is desirable
to leverage other collection
mechanisms, especially where they are
already actively being used by hospitals.
We introduced two alternative reporting
mechanisms in the proposed rule, the
National Healthcare Safety Network
(NHSN) and registry-based reporting.
Although we are not adopting registrybased reporting, we envisioned that
most hospitals would already be
reporting one of the measures sets to at
least one registry. Accordingly, we
anticipated that in most cases there
would be no new reporting required,
only the selection of a registry to which
hospitals were already reporting.
With respect to the NHSN, many
States are introducing requirements that
hospitals report HAI data to the Centers
for Disease Control and Prevention
(CDC) via NHSN. Although we could
have required that hospitals report HAI
measures to CMS via chart abstraction,
this would require duplicate effort on
the part of hospitals submitting data
through the NHSN on HAIs. Therefore,
we proposed and are finalizing the CDC
NHSN as the mechanism to submit data
on HAI measures. In this way, we have
aligned the CDC reporting efforts, and
reporting mandated by many States. We
believe that this is good policy and
something commenters have urged.
Comment: A number of commenters
supported the use of registries as an
alternative source of hospital-specific
data on quality measures and as a means
to reduce hospital burden. Several
commenters indicated that the use of
registries to collect hospital-level data
would reduce administrative burden
and ensure appropriate risk-adjustment
for quality improvement and public
reporting purposes, as well as other
benefits, including broadening the
information for quality improvement
and Hospital Compare, but cautioned
that registry data could weaken the
validity and reliability of the
information unless strict standards for
data quality were imposed. A
commenter suggested that CMS consider
additional measures that could be
compiled from registry data.
Response: We thank the commenters
for acknowledging the potential
efficiencies and quality improvement
support that could be gained through
registry-based quality data reporting. We
agree that standards for data quality
would be necessary should CMS adopt
registry-based measures for RHQDAPU
in the future. The qualification criteria
we proposed for registries were meant to
establish standards for data quality for
the measures we proposed to receive
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from registries. We will continue to
pursue registry-based data submission
as an alternative mechanism for
receiving data for quality measures
adopted into the RHQDAPU
measurement set.
Comment: Many commenters opposed
the inclusion of quality measures that
require participation in registries.
Several commenters expressed concern
regarding the possibility that they may
be required to participate in proprietary
registries in the future. These
commenters saw registry-based data
collection as costly and labor intensive
because many of the measures collected
by registries require chart abstraction.
Some commenters recommended that
CMS first standardize the data
collection and submission process
across registries to ensure data quality.
One commenter asked for clarification
on how would the registry-based
measures which are only used by a
subset of hospitals be utilized in a value
based purchasing program. Some
commenters encouraged CMS to
promote the study of regional variation
to enable comparisons within/across
systems and among regional registries in
order to give hospitals more options in
data reporting.
Response: We are not finalizing the
registry-based submission proposal.
Among other reasons for not finalizing
this proposal, we agree that it would be
difficult to use the measures for value
based purchasing if only a subset of
hospitals with such cases report the
measures, as the commenter suggests.
Regional registries may be appropriate
for registry-based submission, so long as
there are a sufficient number of other
registries to allow submission
nationwide. We agree with the
importance of standardizing data
collection and submission processes by
registries. Many hospitals are currently
participating in a number of registries
that collect data on quality measures
that are topics of interest to us. We did
not intend to require hospitals to
participate in a proprietary registry, but
rather to leverage existing participation
in registries as an efficient alternative
source from which to collect the data.
However, we acknowledge the
commenters’ concern regarding the cost
and labor associated with participation
in certain registries which may make
this alternative mechanism for data
submission less feasible for some
hospitals.
In considering registry-based
submission for the future, we will
consider whether registry-based data
collection should be one means, but not
an exclusive means, of submitting data
for RHQDAPU quality measures.
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Comment: Some commenters
encouraged CMS to look to the National
Priorities Partnership goals as a
framework for the types of measures
that should be included in the
RHQDAPU program. Another
commenter suggested the RHQDAPU
program should only include those
quality measures that meet a high
threshold of accountability criteria.
Another commenter stated CMS should
develop a core measure set for inclusion
in the pay-for-performance program.
Response: The National Priorities
Partnership is a 28 member organization
convened by the NQF for the purpose of
identifying improvement goals and
action steps for the U.S. healthcare
system. We are a member of the
National Priorities Partnership and
participate in its framework-setting
activity. Our measure selection activity
and measure development activity takes
into account the priorities established
by this framework as well as other
criteria described earlier. Since measure
selection for the HVBP program is
dependent upon the pool of measures
that have been adopted for the
RHQDAPU program, the measures to be
selected for inclusion in the HVBP
program would be guided by these same
frameworks and criteria.
Comment: Several commenters stated
that measures selected for the
RHQDAPU program should be both
endorsed by the NQF and adopted by
the HQA. Some commenters suggested
that these steps were required by the
Deficit Reduction Act of 2005 (DRA).
Response: Section
1886(b)(3)(B)(viii)(V) of the Act, as
added by the DRA and prior to the
amendment made by section
3001(a)(2)(B) of the Affordable Care Act,
requires that, effective for payments
beginning with FY 2008, the Secretary
add quality measures that reflect
consensus among affected parties and,
to the extent feasible and practicable,
have been set forth by one or more
national consensus building entities.
This provision does not require that the
measures we adopt for the RHQDAPU
program be endorsed by any particular
entity, and we believe that consensus
among affected parties can be reflected
by means other than endorsement by a
voluntary consensus organization,
including consensus achieved during
the measure development process,
consensus shown through broad
acceptance and use of measures, and
consensus through public comment (74
FR 24165 through 24166). Nevertheless,
we have stated on numerous occasions
that we prefer quality measures that are
endorsed by the NQF. The NQF uses a
formal consensus development process.
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As the NQF notes on its Web site at:
https://www.qualityforum.org/
Measuring_Performance/Consensus_
Development_Process.aspx, it has been
recognized as a voluntary consensus
standards-setting organization as
defined by the National Technology
Transfer and Advancement Act of 1995
(Pub. L. 104–113) (NTTAA) and Office
of Management and Budget Circular A–
119. We are unaware of any other
organizations that qualify as an NTTAA
consensus organization for the
endorsement of quality measures.
We also take into consideration the
measures adopted by the HQA as well
as an array of input from the public. The
HQA is a national public-private
collaboration that is committed to
making meaningful, relevant, and easily
understood information about hospital
performance accessible to the public
and to informing and encouraging
efforts to improve quality. We
appreciate HQA’s integral efforts to
improve hospital quality of care and its
support of our public quality reporting
programs. As discussed previously,
section 3001(a)(2) of the Affordable Care
Act amended section
1886(b)(3)(B)(viii)(V) of the Act and
limited its applicability effective for
payments for FYs 2008 through 2012.
However, section 3001(a)(2) of the
Affordable Care Act added a new
section 1886(b)(3)(B)(viii)(IX) to the Act.
This provision requires, for payments
beginning with FY 2013, that each
measure specified by the Secretary be
endorsed by a consensus entity, except
in certain circumstances. In the case of
a specified area or medical topic
determined appropriate by the Secretary
for which a feasible and practical
measure has not been endorsed by the
consensus entity, the Secretary may
specify a measure that is not endorsed
by the consensus entity if due
consideration is given to measures that
have been endorsed or adopted by a
consensus organization identified by the
Secretary.
In the past, we have proposed to add
new RHQDAPU program measures for
one year’s payment determination in a
given rulemaking cycle. Although in
prior years we have identified various
measures for future consideration, we
have not proposed or finalized measures
for RHQDAPU beyond those to be
collected for the purpose of the next
sequential payment determination. In
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23965), we proposed an
expansion to the RHQDAPU program
that will take place over 3 payment
years, and proposed to add measures
not only for the FY 2012 payment
determination, but also for FY 2013 and
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50191
FY 2014 payment determinations. To
the extent we finalize some or all of
these proposed measures this year, we
believe that we will be providing greater
certainty for hospitals to plan to meet
future reporting requirements and
implement related quality improvement
efforts. We will also have more time to
prepare, organize and implement the
necessary infrastructure to collect data
on the measures and make payment
determinations. Finally, in section
IV.A.5.a.(2) of the proposed rule (75 FR
23985), we discussed a proposal to
make RHQDAPU payment
determinations beginning with FY 2013
using, in part, a consecutive calendar
year of quality measure data. This
proposed approach, of synchronizing
the quarters for which data on these
measures must be submitted during
each year with the quarters we will use
to make payment determinations, would
apply beginning with January 1, 2011
discharges although it would not affect
our payment determinations until FY
2013. We invited public comment on
the measures and timeframe for their
addition to the RHQDAPU program
measure set.
Comment: Many commenters
expressed support of our proposal to
propose and finalize RHQDAPU quality
measures for 3 years in a single
rulemaking in order to provide hospitals
with advanced notice for planning
purpose.
Response: We appreciate the
commenters’ support of our proposal to
finalize measures for 3 consecutive
payment determinations. Although we
will finalize measures for 3 consecutive
years, we may add or remove measures
for these years in future rulemaking
cycles should we need to respond to
agency and statutory changes.
Comment: A few commenters urged
CMS not to finalize the proposed 3-year
RHQDAPU quality measure plan until
the availability of adequate information
to align RHQDAPU program quality
measures with the upcoming health care
priorities of the Affordable Care Act
becomes available. A commenter stated
it is crucial to assure data quality given
the various data sources that CMS
proposed.
Response: We retain the ability to
change or replace measures in future
rulemaking, which could be based on
the national strategy to be developed
under the Affordable Care Act. The
measures that we finalize reflect
important HHS priorities. Establishing
them as RHQDAPU measures allows
hospitals, CMS, and the public to have
a longer time to prepare for collection
and quality improvement efforts related
to the measure. We have also previously
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stated that should agency priorities or
legislative changes require us to alter
the measures selected, we will do so
through the rulemaking process. We
intend to examine and assure data
quality for new sources of data if
adopted for RHQDAPU.
Comment: Some commenters
questioned CMS’ authority to add
measures to the RHQDAPU program
beyond the FY 2012 payment
determination as section 3001(a)(2)(B) of
the Affordable Care Act revises section
1886(b)(3)(B)(viii)(V) of the Act.
Response: We do not believe that the
commenters are correctly reading the
amendment to section
1886(b)(3)(B)(viii)(V) of the Act made by
section 3001(a)(2)(B) of the Affordable
Care Act in conjunction with section
1886(b)(3)(B)(viii)(III) of the Act. As
amended, section 1886(b)(3)(B)(viii)(V)
of the Act states that, for payments for
FYs 2008 through 2012, the Secretary
shall add other measures that reflect
consensus among affected parties and,
to the extent feasible and practicable,
shall include measures set forth by one
or more national consensus building
entities. For payments for FY 2013 and
beyond, the Secretary would be able to
add measures because section
1886(b)(3)(B)(viii)(III) of the Act
provides the Secretary with the
authority to expand the measures
consistent with the succeeding statutory
provisions. Section
1886(b)(3)(B)(viii)(V) of the Act simply
would not apply to payments for FYs
2013 and beyond.
In summary, we are finalizing our
proposal to select measures for three
consecutive payment years. As
discussed in section IV.A.5.a.(2) of this
final rule, where we respond to
comments on synchronizing the
quarterly submission of data, we are
finalizing our proposal to synchronize
the quarterly submission of data for
RHQDAPU. We will continue to pursue
goals regarding the expansion and
updating of quality measures under the
RHQDAPU program while minimizing
burden. We will take into account the
public comments we received on the
possible uses of EHRs, registries, and
all-payer claims data in the RHQDAPU
program. We also will consider the
measure selection criteria suggested by
various commenters in prioritizing and
selecting quality measures for the
future.
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b. RHQDAPU Program Quality Measures
for the FY 2012 Payment Determination
(1) Retention of 45 Existing RHQDAPU
Program Quality Measures for the FY
2012 Payment Determination
As noted above, we are retiring the
AHRQ Mortality for Selected Surgical
Procedures Composite for the FY 2011
payment determination. We proposed
that the remaining 45 of the 46 quality
measures for the FY 2011 RHQDAPU
program payment determination will be
used for the FY 2012 RHQDAPU
program payment determination. Details
regarding data submission requirements
were discussed in section IV.A.5. of the
proposed rule. We invited comment on
the proposal to include all FY 2011
measures except for the AHRQ Mortality
for Selected Surgical Procedures
Composite in the FY 2012 RHQDAPU
measure set.
Comment: A commenter suggested
CMS further discuss risk-adjustment,
co-morbid conditions, exclusion
criteria, and interpretation of the
collected data before making decisions
to retain the 45 measures as proposed.
Response: In general, we retain
measures from one payment
determination to the next unless we
specifically retire them. Currently, risk
adjustment of comorbidities for outcome
measures and exclusion criteria for all
measures are maintained on an ongoing
basis as part of routine measure
maintenance, and are submitted every 3
years to NQF for reevaluation. We do
not address measure maintenance or
data display and interpretation issues in
annual rulemaking. These issues are
addressed in sub-regulatory processes.
Comment: Some commenters were
concerned that the Pneumonia Measure
PN·6 (including PN·6a and PN–6b)
relating to the initial antibiotic selection
for Community Acquired Bacterial
Pneumonia (CABP) in immunecompetent patients is at risk of not
representing the best clinical practice if
its technical specifications are not
updated in a timely manner. The
commenters suggested that, for PN–6,
CMS should clearly define the process
for hospitals to prescribe newly
approved antibiotics to treat CABP with
flexibility. Furthermore, the
commenters noted that CMS also should
add Ceftaroline Fosamil to the
Pneumonia Antibiotic Consensus
Recommendations upon FDA approval.
Response: As stated earlier, we
maintain and update the technical
specifications for RHQDAPU program
measures regularly, which includes
regular updating of drug lists to include
new FDA approved medications,
including antibiotics that could be used
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for patients included in the PN–6
measure. Appropriate documentation
for hospital prescribing practices for
measures such as PN–6 is also
maintained in the technical
specifications.
After consideration of the public
comments we received, we are adopting
as final our proposal to retain 45
existing measures from the FY 2011
RHQDAPU payment determinations as
RHQDAPU quality measures for the FY
2012 payment determination.
In proposing to retain 45 of the 46 FY
2011 measures, we recognized that we
were not significantly reducing the
burden for hospitals, since the 1
measure that we proposed to remove is
a measure that currently is calculated
based on Medicare claims. At the same
time, our proposal to expand the
measures for FY 2012 and beyond may
add additional reporting burdens and
new focus areas for hospital quality
improvement efforts. In view of our
concern about the burden of reporting
for hospitals, especially when it comes
to reporting chart-abstracted measures,
another option that we have considered
to accommodate the expansion of the
measure set is the retirement of
additional measures. Specifically, we
have considered retiring one or more of
those measures suggested by various
commenters that were listed in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43865). We noted in that final
rule that 11 RHQDAPU program chartabstracted measures were recommended
for retirement by commenters. Seven of
these 11 measures were recommended
for retirement based on their
performance being uniformly high
nationwide, with little variability among
hospitals. Information on the
performance rates for hospitals
reporting is available at: https://www.
cms.hhs.gov/HospitalQualityInits/
downloads/
HospitalNationalLevelPerformance.pdf.
These measures are:
• AMI–1 Aspirin at arrival
• AMI–3 ACEI/ARB for left
ventricular systolic dysfunction
• AMI–4 Adult smoking cessation
advice/counseling
• AMI–5 Beta-blocker prescribed at
discharge
• HF–4 Adult smoking cessation
advice/counseling
• PN–4 Adult smoking cessation
advice/counseling
• SCIP–Infection-6: Surgery patients
with appropriate hair removal
In addition to these ‘‘topped-out’’
measures, commenters recommended
we retire four additional measures listed
below for reasons unrelated to high
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unvarying performance. These measures
are:
• HF–1 Discharge instructions
• PN–3b Blood culture performed
before first antibiotic received in
hospital
• SCIP–Infection-2: Prophylactic
antibiotic selection for surgical patients
• SCIP–Infection-4: Cardiac Surgery
Patients with Controlled 6AM
Postoperative Serum Glucose
Reasons given by commenters
included the following: (1) Care process
measured has weak or no relationship to
better outcomes, (2) collection burden of
measure negates or outweighs the
benefit of reporting the measure, and (3)
measure perceived to be discordant with
current guidelines.
We invited comments on the option to
retire 1 or more of these 11 measures
that were suggested for retirement by
commenters to the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule. We
acknowledged that some of these
measures were proposed for electronic
reporting under the program for
incentive payment for meaningful use of
electronic health records (75 FR 1896).
In addition, we stated that we were
considering an option under which if
we propose and finalize measures that
are specified to more broadly address a
clinical topic, and thus would require
hospitals to submit the same data that
they are already submitting on more
narrowly specified measures that we
previously adopted for the RHQDAPU
program, we would propose to retire the
more narrowly specified measures from
the RHQDAPU measure set. An example
of this option that we were considering
would be retirement of the current
Influenza and Pneumoccocal
vaccination measures that apply only to
the Pneumonia admission inpatient
population (PN–2 Pneumococcal
vaccination status; and PN–7 Influenza
vaccination status) if we proposed and
finalized measures of Influenza and
Pneumoccocal vaccination that apply to
all inpatients. We invited comments on
this option to retire narrowly specified
measures in order to accommodate more
broadly specified measures on a given
topic.
Comment: A few commenters
supported retiring narrowly specified
measures such as the vaccination
measures that are specific to Pneumonia
inpatients, as a way to reduce burden,
especially when broader measures are
available.
Response: We thank the commenters
for their support of the concept of
retiring narrowly specified measures
and replacing them with measures that
could be applied to a broader
population. As we discuss below in
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section IV.A.3.d. of this final rule, we
are using this strategy and retiring the
pneumonia-specific immunization
measures for the FY 2014 payment
determination because we are adopting
the global immunization measures.
Comment: Some commenters
supported the retirement of one or more
of the measures listed. Others also
suggested additional measures to
consider for retirement including: PN–2
Pneumococcal vaccination status and
PN–7 Influenza vaccination status, and
the AHRQ Abdominal Aortic Aneurysm
(AAA) Mortality Rate (with or without
volume) (IQI 11).
Response: We appreciate the
commenters’ specific suggestions
regarding retirement of particular
measures. As discussed in section
IV.A.3.d. of this final rule, we are
retiring PN–2 and PN–7 for the FY 2014
payment determination because we are
adopting the global immunization
measures.
Comment: A commenter pointed out
that three of the measures listed (AM1–
1, AMI–5, and SCIP–INF–2) for the FY
2011 payment determination overlap
with the HITECH EHR incentive
program Stage 1 meaningful use criteria
and, therefore, they should be retired for
burden reduction purposes. The
commenter recommended that when the
retirement of overlapped measures
occurs in one program, they should also
be retired in other programs as well.
Response: The final rule for the
HITECH EHR incentive program (75 FR
44314) did not include the AMI and
SCIP measures identified by the
commenter. Rather, the measures that
were finalized for HITECH EHR program
hospital reporting are not currently
included in the RHQDAPU program. As
discussed previously, an important
objective for the RHQDAPU program is
to align the reporting of quality
measures by hospitals for both the
RHQDQPU and HITECH EHR programs.
However, this alignment must be
consistent with the data needs for the
RHQDAPU program. The HITECH EHR
program does not require the
submission of patient level data, as is
the case for the RHQDAPU program.
Therefore, in order to completely align
the clinical quality measure reporting if
RHQDAPU measures were required in
Stage 2 HITECH, changes to HITECH
requirements would need to be made
through the rule making process and
also standardize other processes such as
technology platform standards and
submission processes. In aligning the
HITECH EHR and RHQDAPU program
measures, we anticipate developing
electronic specifications for all of the
currently chart abstracted measures.
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50193
This could provide an EHR reporting
alternative for measures that are
currently chart abstracted. However, in
developing alternative data submission
mechanisms, we will be mindful of the
specific uses of data submitted for
RHQDAPU measures, that go beyond
uses for clinical quality measures under
the HITECH EHR program. Specifically,
section 1886(b)(3)(B)(viii)(VII) of the
Act, unlike the HITECH provisions,
requires the public reporting of
information regarding measures
submitted to the RHQDAPU program,
and the Affordable Care Act requires
that measures for the HVBP program be
specified under the RHQDAPU program.
In view of the specific uses for
RHQDAPU data, we must be satisfied
that the measures results are equivalent,
whether the data upon which the results
are based are submitted based on chart
abstraction or through use of certified
EHR technology.
Comment: One commenter stated that,
although the mortality measures
exclude patients who have a history of
Medicare hospice enrollment prior to or
on admission, the measures do not take
into account decisions made by the
patient or family to withhold treatments
and opt for comfort care later in the
hospital course as part of end-of-life
care. The commenter was concerned
that hospitals would transfer these
patients or over-treat patients to avoid
penalty. The commenter suggested that
CMS develop a mechanism, such as the
POA flag, to accurately and properly
report the care that they deliver to the
patient.
Response: We thank the commenter
for the input. However, we do not use
rulemaking to define the parameters of
the measures, such as exclusions.
Rather, we depend on the processes of
measure development and, if applicable,
the NQF endorsement review. In the
case of this measure, the exclusions in
the measure were considered in the
original endorsement process and at a
subsequent maintenance process
conducted by NQF. During the
maintenance process, the measure was
only modified to exclude cases where
the patient had been a prior hospice
patient.
(2) New Claims-Based Measures
We proposed to add 10 claims-based
measures to the RHQDAPU program
measure set for the FY 2012 payment
determination: 2 AHRQ Patient Safety
Indicators and 8 Hospital Acquired
Condition measures. These proposed
measures address important HHS
priorities of Patient Safety and
healthcare associated infections. They
would be calculated using up to 3 years
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of Medicare claims for discharges prior
to January 1, 2011. These measures are
discussed below.
(A) AHRQ Patient Safety Indicators
In the FY 2009 IPPS final rule, we
adopted a number of AHRQ Patient
Safety Indicators and Inpatient Quality
Indicators for the RHQDAPU program to
be calculated using Medicare claims.
The addition of these measures to the
RHQDAPU program allowed us to
expand the RHQDAPU program
measure set to include measures of
patient safety, in-hospital mortality,
adverse events and complications
without increasing the data submission
burden on hospitals. In the FY 2010
IPPS/RY 2010 LTCH PPS final rule, we
retained these measures for the FY 2011
payment determination. As we
proposed in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23960 and
23961), we are retiring one of those
measures (Mortality for Selected
Surgical Procedures Composite) from
the RHQDAPU program measure set for
the FY 2011 payment determination.
For the FY 2012 payment
determination, we proposed to adopt 2
additional Patient Safety Indicators
developed by the AHRQ. These were:
PSI–11: Post-Operative Respiratory
Failure and PSI–12: Post-Operative
Pulmonary Embolism (PE) or Deep Vein
Thrombosis (DVT). Both measures
address post-operative complications, a
topic that is currently not well
represented in the RHQDAPU program
measure set. Both measures are NQFendorsed, and have a Tier 1 evidence
rating by AHRQ, the measure developer.
Indicators given this level of evidentiary
rating by AHRQ have the strongest
evidence base, with established
evidence in several or most evidentiary
areas established by AHRQ, no
substantial evidence suggesting that the
indicator may not be useful for
comparative reporting purposes, and in
most cases have been endorsed by the
National Quality Forum (NQF).13 The
specific measures that we proposed to
add are NQF-endorsed, thus, reflecting
consensus among affected parties, and
are deemed appropriate for comparative
public reporting by the measure
developer. Like the current AHRQ
measures in the RHQDAPU program,
these indicators are both risk-adjusted
outcome measures that can be
calculated based on existing Medicare
claims, placing no additional reporting
burden on hospitals while allowing us
to expand outcomes measurement in the
13 https://www.qualityindicators.ahrq.gov/
downloads/publications/AHRQ%20QI%20Guide%
20to%20Comparative%20Reporting%20v10.pdf.
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RHQDAPU program. The specifications
for these measures can be found at http:
//www.qualityindicators.ahrq.gov/
TechnicalSpecs41.htm#PSI41. We
invited comment on our proposal to
adopt these two AHRQ Patient Safety
Indicators for the FY 2012 payment
determination.
Comment: Some commenters believed
that claims data are not an accurate
source of quality measures compared to
medically-abstracted data. One
commenter was concerned about the
limitation of the claim-based measures
used in Hospital Compare because the
claims used were for the Medicare feefor-service population only.
Response: We believe that claims
data/administrative data are an
appropriate data source upon which
quality measures selected by the
Secretary may be based. We note that
many NQF-endorsed evidence-based
quality measures which have been
found appropriate for public reporting
and quality improvement rely upon
claims and administrative data as data
sources. Furthermore, the use of claimsbased measures reduces reliance upon
chart abstraction and its associated
burden for quality measurement. We
acknowledge that all-payer claims/
administrative data would further
enhance the claims-based measures
shown on Hospital Compare. We plan to
continue to explore mechanisms to
collect all-payer claims/administrative
data.
Comment: Many commenters did not
support the proposed inclusion of PSI–
11 and PSI–12 measures because they
have time-limited NQF-endorsement
due to validation issues, and the delay
in the AHRQ update hampers hospitals’
ability to monitor the PSI results timely.
The commenters believed the PSI–11
and PSI–12 measures need more
refinement and testing before they can
be used for public reporting. One
commenter asked CMS to ensure that
the PSI–12 measure is not reported
twice as it is also currently reported as
part of PSI–90. Some commenters felt
that PSI–12 may be redundant with the
SCIP VTE measure and the VTE
measurement set listed under the future
measure section.
Response: NQF designates some
measures as having a 2-year ‘‘timelimited’’ endorsement when additional
information like testing results are
needed. All other NQF-endorsed
measures have a 3-year endorsement
period. However, in both instances, the
measures have a status of endorsed by
NQF, and undergo re-evaluation at the
end of the endorsement period.
Therefore, we do not agree with the
suggestion to treat endorsed measures
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with time limitations as not endorsed.
We also note that PSI–11 is endorsed
without time limitation. Further, both
measures are recommended for public
reporting by AHRQ. We also do not
agree that PSI–12 is duplicative of SCIP
VTE. The PSI–12 measure reflects the
actual occurrence of DVT (outcome)
following a broad set of procedures. The
SCIP VTE and VTE measurement set
covers processes of care intended to
prevent DVT.
We have carefully considered all
comments received and we are
finalizing the PSI–11 and PSI–12
measures for the FY 2012 payment
determination. These measures are
NQF-endorsed and address adverse
surgical outcomes, a high HHS priority
and a topic area that is currently not
represented in the RHQDAPU
measurement set. We will calculate
these measures using the same process
used for other measures based on
Medicare fee for service claims.
(B) Hospital Acquired Condition (HAC)
Measures
Section 1886(d)(4)(D) of the Act
required the Secretary to select, in
consultation with the Centers for
Disease Control and Prevention (CDC),
at least two conditions that: (a) Are high
cost, high volume, or both; (b) are
assigned to a higher paying MS–DRG
when present as a secondary diagnosis
(that is, conditions under the MS–DRG
system that are CCs or MCCs); and (c)
could reasonably have been prevented
through the application of evidence
based guidelines. We currently have 10
categories of Hospital Acquired
Conditions (HACs). We refer readers to:
section II.F. of the FY 2008 IPPS final
rule with comment period (72 FR 47202
through 47218); section II.F. of the FY
2009 IPPS final rule with comment
period (73 FR 48474 through 48486);
and section II.F. of the FY 2010 IPPS/
RY 2010 LTCH PPS final rule (74 FR
43782 through 43785) for detailed
discussions regarding the selection of
the current 10 HAC categories. We refer
readers to section II.F. of this final rule
for additional discussion and our HAC
policy for FY 2011.
We have worked collaboratively with
public health and infectious disease
professionals from across HHS,
including CDC, AHRQ, and the Office of
Public Health and Science, to identify
and select preventable HACs with input
and comment from affected parties.
CMS and CDC have also collaborated on
the process for hospitals to submit a
present on admission (POA) indicator
for each diagnosis listed on IPPS
hospital Medicare claims and on the
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payment implications for POA reporting
(74 FR 43783).
CMS, CDC and AHRQ held jointly
sponsored HAC and POA Listening
Sessions (December 17, 2007 and
December 18, 2008) to receive input
from affected parties, individuals, and
organizations regarding the selection
and definition of HACs. The adoption of
HACs were informed and continue to be
informed by feedback received during
the listening sessions, as well as through
public comment received during the
IPPS rulemaking process. In addition to
receiving comments regarding the
selection of conditions and POA
indicator reporting, in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 43785), commenters suggested that
CMS consider making aggregate POA
information publicly available, and
providing comparative information as a
means of facilitating improvements in
preventing the incidence of HACs.
We proposed to adopt as RHQDAPU
measures for the FY 2012 payment
determination 8 (of 10) current HACs
defined in section II.F. of the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
23966), 6 of which have been identified
by NQF as serious reportable events,
and to publicly report these measures as
we do other RHQDAPU program
measures. These measures are:
• Foreign Object Retained After
Surgery
• Air Embolism
• Blood Incompatibility
• Pressure Ulcer Stages III & IV
• Falls and Trauma: (Includes:
Fracture, Dislocation, Intracranial
Injury, Crushing, Injury, Burn, Electric
Shock)
• Vascular Catheter-Associated
Infection
• Catheter-Associated UTI
• Manifestations of Poor Glycemic
Control
We did not believe that it was
necessary to propose to adopt the other
two current HAC categories as
RHQDAPU measures because the topics
that they deal with would substantially
overlap with other RHQDAPU program
measures discussed below that we
proposed to adopt for future payment
determinations as chart-abstracted
measures (which allows us to collect
data on all patients). By contrast, the
eight proposed HAC measures are
claims-based measures for which we
can only (at this time) collect data on
Medicare beneficiaries.
We proposed to utilize Medicare
claims data to calculate measure rates
for these eight HACs using the ICD–9–
CM codes in conjunction with POA
coding of ‘‘N’’ or ‘‘U,’’ as defined in IPPS
rulemaking. We refer readers to section
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II.F.6. of the FY 2008 IPPS final rule
with comment period (72 FR 47202
through 47218), section II.F.7. of the FY
2009 IPPS final rule (73 FR 48474
through 48486), section II.F.6. (74 FR
43782 through 43785) of the FY 2010
IPPS/RY 2010 LTCH PPS final rule, and
section II.F. of the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23880) for
detailed discussions regarding the use of
the POA indicator in conjunction with
ICD–9–CM coding to determine the
presence of HACs. We also refer readers
to the current ICD–9–CM codes and
updates for these eight HAC categories
in this final rule. We proposed to use
the ICD–9–CM codes in conjunction
with the ‘‘N’’ and ‘‘U’’ POA indicators for
the HAC categories that will be finalized
in this FY 2011 IPPS/LTCH PPS final
rule to calculate the eight HAC
measures for the RHQDAPU program.
We believe that these HAC measures
reflect consensus among affected parties
as required for RHQDAPU program
measures by section
1886(b)(3)(B)(viii)(V) of the Act. In
addition to meeting the consensus
requirement through rulemaking and
public comment, Vascular CatheterAssociated Infection and CatheterAssociated UTI are the subject of a
quality measure which gained NQF
endorsement in August 2009. The
remaining six HAC categories have been
identified as serious reportable events
through the NQF consensus process and
have also been selected as HACs
through rulemaking and public
comment. Data reporting requirements
for these measures are provided in
section IV.A.5.b.(6) of the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23990).
We invited comment on our proposal to
adopt these eight HAC measures for the
FY 2012 payment determination.
Comment: Some commenters
supported inclusion of the HACs as
measures for the RHQDAPU program as
public reporting would encourage
improvement. Other commenters
supported inclusion, but also stressed
that appropriate risk adjustment,
comprehensive exclusion criteria, and
NQF endorsement should be pursued.
Response: We agree that public
reporting of the HACs on the Hospital
Compare Web site would encourage
improvement. We also note that section
3008 of the Affordable Care Act contains
a provision for the reporting of HACs on
the Hospital Compare Web site as well.
We intend to publish measure
specifications for the rates (including
numerators, denominators, and
exclusion criteria) in the Specifications
Manual. We agree risk-adjustment may
be appropriate for some of the
indicators, and intend to apply
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50195
appropriate risk adjustment for those
HACs that are not considered Never
Events, and are considered outcome
measures, such as infection-related
HACs. We will also consider the
suggestion that we pursue NQF
endorsement.
Comment: Many commenters opposed
the inclusion of HACs in the RHQDAPU
program for various reasons. Some
commenters did not believe the HACs as
currently defined by ICD–9–CM codes
constitute measures as there are no
measure specifications. Commenters
believed that they are tied to variables
which are indications of documentation
and coding and may inadvertently cause
unintended consequences. Other
commenters also believed that present
on admission (POA) reporting is in its
infancy and since the HACs would rely
upon POA coding, they are not reliable.
Other commenters indicated that some
of the HACs are too rare to be
meaningful. Other commenters believed
that NQF endorsement or HQA adoption
would be necessary prior to adoption of
the HACs.
Response: As stated in the response to
the previous comment, we intend to
include measure specifications in the
Specifications Manual. We also believe
that the HACs reflect consensus among
affected parties because they were
refined during two public listening
sessions and underwent public
comment through rulemaking.
Furthermore, six of the eight HACs
proposed as measures for the FY 2012
payment determination are also NQFendorsed ‘‘never events.’’ We
acknowledge that the rates of never
events may be rare. However, because
these are considered events that should
never happen, reporting their
prevalence, though rare, is still
meaningful. Although POA coding is
relatively new, it is subject to the same
level of monitoring and oversight as
diagnoses and procedures reported on
claims, and therefore, is accurate and
reliable to the best of hospitals’ abilities.
Comment: One commenter asked
CMS to address perceived overlap in the
proposed HAC measures, the proposed
HAI measures, and the nursing sensitive
measure set.
Response: While two of the HACs
topically address HAIs, they are not the
same measures as the HAIs proposed for
collection via NHSN. They have a close
relationship but they are not identical.
In our FY 2011 IPPS/LTCH PPS
proposed rule, we proposed the
addition of the CDC central line catheter
associated bloodstream infection rate for
ICU and high-risk nursery patients and
Surgical Site Infection Rate measure for
inclusion in the RHQDAPU program (75
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FR 23970 and 23971). These measures
align with the topic areas of the
Vascular Catheter-Associated Infection
and Surgical Site Infection HACs. The
information for determining the HACs is
derived from claims data, while the
central line catheter associated
bloodstream infection rate for ICU and
high-risk nursery patients and SSI
measures are derived from chart
abstraction. The central line catheter
associated bloodstream infection rate for
ICU and high-risk nursery patients
measure (NQF #0139) is part of the NQF
Nursing Sensitive Set. Section
1886(d)(4)(iv) of the Act requires the
Secretary to select at least two
conditions as HACs that are: (a) High
cost or high volume or both, (b) result
in the assignment of a case to a DRG that
has a higher payment when present as
a secondary diagnosis, and (c) could
reasonably have been prevented through
the application of evidence based
guidelines. The Hospital Acquired
Conditions are based on NQF’s Serious
Reportable Events.
After careful consideration of
comments received, we are finalizing
the adoption of the eight HAC measures
into the RHQDAPU program for the FY
2012 payment determination. We will
calculate these rates using Medicare Part
A fee for service claims, and we intend
to publicly report these measures on
Hospital Compare starting in the fall of
2010 after an appropriate preview
period. The data to be used for this
initial calculation will include claims
from Q4 2008, and at least Q1 and Q2
of 2009. We also note that section 3008
of the Affordable Care Act contains a
provision for public reporting of the
HACs on Hospital Compare and that
initiation of public reporting of the
HACs now will enable us to better fulfill
the requirements of this section in the
future. Since the RHQDAPU program
requires hospitals to submit data for
measures, hospitals have an obligation
to accurately report the diagnosis and
events defined for the HACs, including
POA codes, on their claims, because
their claims will be the source of data
for these measures under the RHQDAPU
program.
(3) All-Patient Volume Data for Selected
MS–DRGs
We currently display volume data for
70 MS–DRGs, 55 of which relate to
RHQDAPU program measures on the
Hospital Compare Web site. However,
the volume data currently shown on
Hospital Compare is based on Medicare
claims only. Although we do not
consider volume alone to be a quality
measure unless volume has been
determined to be an indicator of quality,
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we believe that to the extent all-patient
volume data are related to the measures,
as they provide context for the quality
measures in the inpatient hospital
setting, and may assist Hospital
Compare users in understanding the
measure calculations. In general, in
implementing RHQDAPU program
measures, we have sought where
currently possible to measure the care
rendered to all patients within a
hospital, and not just Medicare patients.
For this reason, the chart-abstracted
process of care measures we collect and
display on Hospital Compare are based
on the entire inpatient population for
the hospital.
We proposed that hospitals begin
submitting as data on measures selected
for the RHQDAPU program the allpatient data elements discussed in
section IV.A.5.b.(5) of the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23990)
for 55 MS–DRGs displayed on Hospital
Compare that relate to adopted
RHQDAPU program measures (75 FR
23967). The specific MS–DRGs were
listed in the proposed rule (75 FR
23970). As stated above, we believe that
the addition of this data will enable us
and Medicare beneficiaries to better
understand and evaluate the quality of
care provided by hospitals with respect
to both the chart-abstracted and claimsbased measures. We intend to publicly
display this volume data along with the
corresponding measure results on
Hospital Compare. Hospitals would
begin reporting these data once annually
beginning with January 1, 2011
discharges by submitting the all-patient
data elements needed to calculate MS–
DRG volume to QualityNet so we can
determine the volume of cases treated
by a hospital for the 55 MS–DRGs
currently displayed on Hospital
Compare. Rather than require hospitals
to group their all-patient claims data by
MS–DRG category themselves, CMS
would use the data to be submitted by
hospitals to group the data.
We invited comments on this
proposal. We also invited comments on
an alternative that hospitals submit allpatient volume data based upon specific
ICD–9–CM codes related to the
proposed MS–DRGs rather than all data
necessary to calculate the MS–DRGs.
Comment: Many commenters opposed
the collection of all-patient volume data
in the RHQDAPU program as proposed,
and stated that: (1) Volume does not
constitute a quality measure and,
therefore, would not fall under the
Secretary’s authority under the Act to
select measures for the RHQDAPU
program; (2) submitting all-patient
volume would require the transmission
of Protected Health Information or
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Patient Identifiable Information that is
not related to either quality or
reimbursement and therefore is not in
compliance with the requirements of the
Health Insurance Portability and
Accountability Act of 1996 (HIPAA); (3)
it is not clear how the collection of allpatient volume data would be helpful to
Medicare beneficiaries; (4) there are
concerns about whether CMS
infrastructure can handle data collection
of a large amount of additional data; and
(5) there are concerns regarding how the
data will be displayed on Hospital
Compare and fear that CMS and the
public will equate high volume with
high quality.
Response: We disagree with the
commenters about our authority to
collect all-patient volume data in
relation to RHQDAPU quality measures.
However, based on the public comment
received, we are not finalizing this
proposal because commenters indicated
that, as proposed, the reporting
requirement would be overly
burdensome for hospitals. We plan to
explore how all-patient volume may be
collected in an efficient manner and
reintroduce the proposal in a
subsequent rulemaking.
Comment: Some commenters argued
that CMS has underestimated the
potential burden on hospitals which
have to group the cases into one of the
55 MS–DRGs before sending the ICD–9
codes and other related data such as
procedure date, discharge status,
admission date, to name a few. A
commenter asked CMS to provide a
MS–DRG to ICD–9–CM codes equivalent
table to ensure no overlapping as well
as specifics on the data submission
process. Another commenter suggested
CMS provide an alternate method which
allows hospitals already grouping data
internally into MS–DRGs to post the allpatient volumes for these 55 MS–DRGs
onto QualityNet on an annual basis. A
commenter recommended CMS explore
the possibility of getting the all-payer
information from the Joint
Commission’s vendors, State healthcare
organizations or AHRQ.
Response: We agree with the
commenters that submission of the
required data that would be necessary to
determine the MS–DRG would be
burdensome. Further, we believe that
the alternative of requiring volume
based on diagnosis codes would provide
substantially equivalent information,
even though we could not relate the
volume data to a specific MS–DRG. As
a result, we are not adopting our
proposal to require the submission of
all-payer volume in this final rule. We
expect to refine the requirements for allpatient volume data submission based
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on diagnosis codes and reintroduce the
proposal in a subsequent rulemaking.
Comment: Some commenters
supported the inclusion of all-patient
volume data for selected MS–DRGs and
considered the inclusion of these data a
move in the right direction.
Response: We appreciate the
supportive comments. As discussed
previously, we expect to reintroduce the
proposal in a subsequent rulemaking.
Comment: Many commenters asked
CMS to provide more details about the
all-patient volume data submission
process. Specifically, the commenters
inquired if ICD–9–CM codes have to be
submitted; what data elements have to
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be submitted; the data formats and
transmission methods; frequency of data
submissions; and deadlines for data
submission.
Response: We expect to reintroduce
the proposal in a subsequent rulemaking
as discussed previously and we would
provide more details for the data
submission process at that time.
After consideration of the public
comments we received, we are not
finalizing this proposal to collect allpatient volume data for selected MS–
DRGs. We currently require hospitals to
submit all-patient counts to assess the
adequacy of sampling for the current
RHQDAPU measures, and will examine
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50197
whether this requirement can be
expanded upon in the future for public
reporting, and to accommodate future
quality measures adopted into the
RHQDAPU program.
In summary, for the FY 2012 payment
determination, we are retaining 45
measures adopted for the FY 2011
payment determination, and adding 10
claims-based measures (2 AHRQ
surgical outcome measures, and 8 HAC
measures) for a total of 55 measures.
The RHQDAPU measure set for the
FY 2012 payment determination is
listed below:
BILLING CODE 4120–01–P
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c. RHQDAPU Program Quality Measures
for the FY 2013 Payment Determination
(1) Retention of FY 2012 Payment
Determination Measures for the FY 2013
Payment Determination
We generally propose to retain
RHQDAPU program measures from 1
year to the next. Consistent with this
approach, we proposed to retain all of
the proposed measures for the FY 2012
RHQDAPU payment determination, if
finalized, for the FY 2013 payment
determination. We invited public
comment on the proposal to retain the
55 FY 2012 measures for the FY 2013
payment determination.
We did not receive any public
comments for this section. We are
finalizing the retention of the 55 FY
2012 measures for the FY 2013 payment
determination. We believe that all of the
55 finalized FY 2012 measures meet the
requirements for RHQDAPU program
measure selection for FY 2013 and
subsequent payment determinations
under sections 1886(b)(3)(B)(viii)(VIII)
and (IX) of the Act. As discussed
previously, section
1886(b)(3)(B)(viii)(VIII) of the Act
requires the Secretary to provide for
such risk adjustment as the Secretary
determines appropriate to maintain
incentives for hospitals to treat patients
with severe illnesses or conditions with
respect to quality measures for
outcomes of care effective for payments
beginning with FY 2013. Section
1886(b)(3)(B)(viii)(IX) of the Act
requires, for payments beginning with
FY 2013, each measure specified by the
Secretary to be endorsed by a consensus
entity, currently NQF, except in certain
circumstances. Specifically, in the case
of a specified area or medical topic
determined appropriate by the Secretary
for which a feasible and practical
measure has not been endorsed by the
consensus entity, the Secretary may
specify a measure that is not endorsed
by the consensus entity if due
consideration is given to measures that
have been endorsed or adopted by a
consensus organization identified by the
Secretary.
The process of care measures for AMI,
HF, PN, and SCIP, the three structural
measures regarding participation in a
registry, and the HCAHPS patient
experience of care survey being retained
for the FY 2013 payment determination
are all NQF-endorsed. The outcome
measures being retained for the FY 2013
payment determination include the 30day mortality and 30-day readmission
measures for AMI, HF, and PN as well
as the AHRQ PSIs and IQIs, the two
AHRQ composite measures, and the
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Death among surgical inpatients for
serious treatable complications measure
that is both part of the AHRQ PSI
measure set, and the Nursing Sensitive
measure set. These measures are all
NQF-endorsed and provide for such risk
adjustment as the Secretary determines
to be appropriate to maintain incentives
for hospitals to treat patients with
severe illnesses or conditions.
The eight HAC measures adopted for
the FY 2012 payment determination that
are being retained for the FY 2013
payment determination represent a
specified area or medical topic
determined appropriate by the Secretary
(CDC, CMS, AHRQ) for which a feasible
and practical measure has not been
endorsed by the consensus entity, and
due consideration was given to
measures that have been endorsed or
adopted by a consensus organization
identified by the Secretary. In fact, six
of the HACs are NQF Never Events. The
remaining two HACs are claims-based
measures of HAIs, and consideration
was given to chart abstracted NQF
endorsed measures prior to determining
that they would not be feasible to
implement for the FY 2012 payment
determination.
(2) New Chart-Abstracted Measure for
the FY 2013 Payment Determination
We proposed to add one new chartabstracted measure for the FY 2013
payment determination—AMI-Statin
prescribed at Discharge. This measure is
NQF-endorsed (NQF # 0639), and is
similar to the NQF-endorsed stroke
measure ‘‘Ischemic stroke patients with
LDL >/= 100 mg/dL, or LDL not
measured, or, who were on cholesterol
reducing therapy prior to
hospitalization are discharged on a
statin medication’’ (NQF #0439), only
specified for the AMI population.
Current scientific evidence supports the
continuation of statins more strongly for
AMI patients than for stroke patients.
Several randomized clinical trials have
proven the benefits of statin drugs (also
known as HMG Co-A reductase
inhibitors) in reducing the risk of death
and recurrent cardiovascular events in a
broad range of patients with established
cardiovascular disease, including those
with prior myocardial infarction.
Current ACC/AHA guidelines place a
strong emphasis on the initiation or
maintenance of statin drugs for patients
hospitalized with AMI, particularly
those with LDL-cholesterol levels at or
above 100 mg/dL. As a result of the
strength of the evidence and guideline
support, the ACC/AHA has developed a
performance measure to assess this
aspect of care for AMI patients.
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Because statins are generally welltolerated, most AMI patients are
appropriate candidates for this therapy.
As a result of this clinical evidence, the
NQF was asked to review whether it
should broaden the current endorsed
measure specification to include the
AMI population. Information on this
project can be found at: https://
www.qualityforum.org/Projects/a-b/
Ad_Hoc_Reviews/Statin_Medication/
Ad_Hoc_Review__Discharged
_on_Statin.aspx. In the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23970),
we stated that we would decide whether
to finalize this measure based on
whether it achieves NQF endorsement
and public comments. We believe that
minimal additional burden would result
from adoption of this measure into the
RHQDAPU program because the AMI
population that is the focus of this
measure is already part of data
collection efforts for the RHQDAPU
program, and very few additional data
elements would be needed to be
abstracted for the proposed new
measure on this existing measurement
population. We proposed that hospitals
would begin submission of data for the
measure AMI-Statin Prescribed at
Discharge beginning with January 1,
2011 discharges for the RHQDAPU 2013
payment determination.
Comment: The majority of the
commenters supported the proposed
addition of the AMI-Statin Prescribed at
Discharge measure. Some commenters
supported the addition of Statins at
Discharge for AMI patients contingent
on NQF endorsement.
Response: We thank the commenters
for their support of this proposed
measure. We note that this measure was
fully endorsed by the NQF on June 11,
2010, thus meeting the requirement
under section 1886(b)(3)(B)(viii)(IX) of
the Act.
After consideration of the public
comments, we are finalizing the
measure for Statins Prescribed at
Discharge for AMI patients for the FY
2013 payment determination.
(3) New Healthcare Associated Infection
(HAI) Measures for the FY 2013
Payment Determination
HHS has placed high priority on
reducing Healthcare Associated
Infections and adopted an action plan in
January of 2009. The HHS action plan
identified seven HAI measures and
measure targets. One of these measures,
SSI–2 (as identified in the HHS Action
Plan), is currently included in the
RHQDAPU program (identified as SCIP–
1). In the FY 2009 and FY 2010 IPPS
rulemakings, we listed several
Healthcare Associated Infection (HAI)
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measures as being under consideration
for future adoption. Commenters on the
FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule supported the HAI
measures that were listed as being under
consideration for the future and
encouraged us to consider others as well
(74 FR 43876). For the measure set to be
used for the FY 2013 payment
determination, we proposed adopting
two new HAI measures that are
currently being collected by CDC via the
National Healthcare Safety Network
(NHSN). These measures are: (1) Central
Line Associated Blood Stream Infection
(CLABSI) (NQF #0139) and (2) Surgical
Site Infection (SSI) (NQF #0299).
The NHSN is a secure, Internet-based
surveillance system maintained and
managed by the CDC, and can be
utilized by all types of healthcare
facilities in the United States, including
acute care hospitals, long term acute
care hospitals, psychiatric hospitals,
rehabilitation hospitals, outpatient
dialysis centers, ambulatory surgery
centers, and long term care facilities.
The NHSN enables healthcare facilities
to collect and use data about HAIs,
adherence to clinical practices known to
prevent HAIs, the incidence or
prevalence of multidrug-resistant
organisms within their organizations,
and other adverse events. Some States
use NHSN as a means for healthcare
facilities to submit data on HAIs
mandated through their specific State
legislation. NHSN data collection occurs
via a Web-based tool hosted by the CDC
provided free of charge to hospitals.
Additionally, the ability of CDC to
receive NHSN measures data from EHRs
may be possible in the near future.
Currently, 21 States require hospitals to
report HAIs using NHSN, and the CDC
supports more than 2000 hospitals that
are using NHSN.14
Both the Central Line Associated
Blood Stream Infection measure and the
Surgical Site Infection measure are
NQF-endorsed, and therefore meet the
statutory requirement under section
1886(b)(3)(B)(viii)(IX) of the Act. The
measures address HAIs, a topic area
widely acknowledged by the HHS, IOM,
the National Priorities Partnership and
others as a high priority requiring
measurement and improvement. HAIs
are among the leading causes of death
in the United States. The CDC estimates
that as many as 2 million infections are
acquired each year in hospitals and
result in approximately 90,000 deaths
per year.15 It is estimated that more
14 https://www.cdc.gov/nhsn/.
15 McKibben L, Horan T Guidance on public
reporting of healthcare-associated infections:
recommendations of the Healthcare Infection
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Americans die each year from HAIs than
from auto accidents and homicides
combined. HAIs not only put the patient
at risk, but also increase the days of
hospitalization required for patients and
add considerable health care costs.
HAIs are largely preventable through
interventions such as better hygiene and
advanced scientifically tested
techniques for surgical patients.
Therefore, many health care consumers
and organizations are calling for public
disclosure of HAIs, arguing that public
reporting of HAI rates provides the
information health care consumers need
to choose the safest hospitals, and gives
hospitals an incentive to improve
infection control efforts. We solicited
comment on the inclusion of quality
measures that assess performance on
HAIs as a high priority topic. We also
solicited public comment on additional
measures that could be added to those
proposed in the FY 2011 IPPS/LTCH
PPS proposed rule for public reporting
and quality improvement.
Comment: Many commenters
supported the proposed use of the CDC/
NHSN to collect HAI measures.
However, some commenters stated that
the NHSN data input process is
burdensome and commenters
questioned the CDC/NHSN’s readiness
to handle the new enrollment of one
fourth of the RHQDAPU participating
hospitals. Many commenters
recommended that CMS collaborate
with the CDC to streamline and
synchronize the data collection
mechanism and measure specifications
prior to implementation, and to limit
the surgical procedures for inclusion in
data reporting. Commenters
recommended development of robust
training and technical support for
NHSN collection. Many commenters
supported phasing in these measures in
order to allow hospitals to adjust to the
reporting requirement, adopting one
measure for collection in FY 2011 and
another for collection in FY 2012.
Response: We thank the commenters
for their support and suggestions.
Concurrently with the development of
the FY 2011 IPPS/LTCH PPS final rule,
we have been in extensive discussions
with the CDC regarding the
development and enhancements to the
existing NHSN and CMS infrastructure
that would enable utilization of the
NHSN to report one or more measures
to CMS. These enhancements include
improved user support and training
materials as well as streamlined
specifications for collection of required
data needed to calculate the HAI
Control Practices Advisory Committee. AJIC
2005;33:217–26.
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measures adopted for RHQDAPU. In the
future, we will also be working toward
the ability to receive reports
electronically from hospital EHRs. We
agree that phasing in these measures
will allow more time for hospitals to
adjust to the reporting requirements of
the NHSN and, as discussed below, are
finalizing the CLABSI measure for the
FY 2013 payment determination and the
SSI measure for the FY 2014 payment
determination. We intend to limit the
data elements required for RHQDAPU
reporting to the subset of data elements,
populations and procedures needed to
calculate the NQF-endorsed measures
we have proposed.
Comment: A few commenters asked
CMS to clarify how the proposed HAI
measures reported via NHSN would be
validated and publicly reported.
Specifically, the commenters requested
clarification whether the data will be
stratified by type of hospitals in
Hospital Compare.
Response: We are considering adding
CDC/NHSN measures to our validation
process, as outlined in section IV.A.7.b.
of this final rule. We acknowledge the
need for uniformity in the data that will
be publicly reported and used in the
HVBP program. We will examine the
need to validate these data, and may
propose validation requirements for
these data in the future, should we
determine a need. We plan to publicly
report the data for HAI measures
collected through the NHSN on the
Hospital Compare Web site as we do for
other RHQDAPU program measures.
Currently, the NQF specification
stratifies the measure by type of unit
within a hospital. We note NQFendorsed measure specifications for
measures adopted into the RHQDAPU
program are subject to periodic revision,
and such revisions will also be reflected
in what we require hospitals to submit
to the RHQDAPU program.
Comment: Some commenters were
concerned that publishing
administrative data via the HAC list,
hospitals reporting to NHSN, and
collecting data in another format could
cause confusion for stakeholders.
Response: We will take steps to
determine how best to display these
data so that they do not cause confusion
for viewers.
(A) Central Line Associated Blood
Stream Infection (CLABSI)
This HAI measure assesses the rate of
laboratory-confirmed cases of
bloodstream infection or clinical sepsis
among ICU patients. It was endorsed by
the NQF in 2004 and was adopted by
the HQA in 2007. The measure can be
stratified by the type of ICU.
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(B) Surgical Site Infection (SSI)
This HAI measure assesses the
number of NHSN-defined operative
procedures with a surgical site infection
(deep incisional or organ space) within
30 days, or 1 year if an implant is in
place. Infections are identified on
original admission or upon readmission
to the facility of original operative
procedure within the relevant time
frame (30 days for no implants; within
1 year for implants). The measure can be
stratified by procedure type or risk
factors. This measure was NQFendorsed in 2007 (and adopted by the
HQA in 2008).
We invited comment on our proposal
to adopt these two HAI measures into
the RHQDAPU program for the FY 2013
payment determination. Collection of
these measures would begin with
January 1, 2011 discharges for the FY
2013 payment determination. We
proposed that hospitals use the NHSN
infrastructure to report the measures for
RHQDAPU program purposes. The
proposed reporting mechanism for these
HAI measures is discussed in greater
detail in section IV.A.5.b.(6) of the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 23990).
Comment: A few commenters
supported the inclusion of CLABSI for
the FY 2013 annual payment
determination, stating that CLABSI is
the only measure that can be adopted
quickly to meet the statutory
requirement for inclusion in the HVBP
program without undue burden on
hospitals. Some commenters indicated
that a phased in approach starting with
the inclusion of the CLABSI measure is
appropriate. The commenters provided
several suggestions to implement the
CLABSI: (1) Provide clarification
whether the CLABSI data collection is
unit-based or hospital-based; (2) provide
clarification whether any or all surgical
procedures apply to specific
populations like adult, pediatric or both;
(3) limit the number of surgeries
reported for the 1st year; and (4) States
with existing HAI reporting mandates be
deemed to meet the CMS reporting
requirements by meeting their State
mandate.
Response: We agree that because more
hospitals are submitting the CLABSI
measure, this measure would be the
most feasible of the two proposed
measures for hospitals to implement
quickly, and that a phased in approach
to adopting the HAI measures is
warranted. The CLABSI measure is the
one that is most commonly required by
States, and currently most commonly
reported among the HAI measures
collected through the NHSN system.
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The CLABSI measure is currently
stratified by type of ICU unit within the
hospital, but is aggregated to the
hospital-level by the NHSN. For the
RHQDAPU program, we would limit the
required data elements, populations and
procedures to only those needed to
calculate the NQF-endorsed measure.
For the NQF-endorsed measure, the
procedures that apply are: Coronary
artery bypass graft and other cardiac
surgery, hip or knee arthroplasty, colon
surgery, hysterectomy (abdominal and
vaginal), and vascular surgery, and the
populations that apply are both the
adult and pediatric populations. These
procedures also correspond to the
procedure categories used in SCIP.
Capturing SCIP process-of-care data and
NHSN SSI data for the same procedure
categories will provide process and
outcome data for the same patient
populations. Regarding the extent that a
State requirement can be used to satisfy
the RHQDAPU program requirement, if
the data submission requirement
overlaps 100 percent with the
requirements for the RHQDAPU
program, it will be possible to satisfy
both requirements with one submission.
However, a State may mandate
additional requirements beyond what is
required for RHQDAPU, for example
States may also be requiring the release
of information to the State for public
reporting at the State level, which
would of course be in addition to the
RHQDAPU requirement for public
reporting. If a State mandate requires
fewer data elements than what is
required for RHQDAPU, hospitals
participating in RHQDAPU will be
required to submit the additional data in
order to satisfy the RHQDAPU
requirement.
Comment: Many commenters did not
support the SSI measure for FY 2013,
citing resource constraints, a lack of
clarification in data collection
procedure, the absence of riskadjustment for data presentation in
Hospital Compare; and a lack of
clarification in exemptions for small
hospitals.
Response: We are finalizing only one
HAI measure for the FY 2013 payment
determination, the CLABSI measure, in
order to allow hospitals to gain more
experience with these types of measures
and the new collection mechanism. We
are finalizing the SSI measure for the FY
2014 payment determination. In our
view, both measures are equally
important. However, we believe this
approach of phasing in the measures
will minimize the additional reporting
burden on hospitals that are in States
that do not currently mandate reporting
of infection data to the NHSN, and will
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also allow time to address any
measurement issues, such as those
raised by commenters, for the SSI
measure.
Comment: One commenter strongly
urged CMS to incorporate all seven HAI
metrics from the DHHS Action Plan into
the RHQDAPU program to ensure the
corresponding HVBP program HAI topic
is developed and included in
performance scoring by FY 2013.
Another commenter suggested CMS
address the execution of the HVBP
program with respect to the targeted
outcome metrics from HAIs as required
by the Affordable Care Act.
Response: We thank the commenters
for their recommendations and will
consider them in future rulemaking.
This FY 2011 IPPS/LTCH PPS final rule
does not directly address the HVBP
program authorized by section 3001 of
the Affordable Care Act. We refer
readers to section IV.A.14. of this final
rule where we discuss the relationship
between the RHQDAPU and HVBP
programs.
After consideration of the public
comments we received, we are
finalizing the CLABSI measure for the
FY 2013 payment determination.
Collection for the CLABSI measure will
begin with January 1, 2011 discharges.
Also, based upon public comment, we
are finalizing the SSI measure for the FY
2014 payment determination with
collection to begin with January 1, 2012
discharges. We expect the CLABSI
measure and the SSI measure to be riskadjusted consistent with section
1886(b)(3)(B)(viii)(VIII) of the Act for the
FY 2013 and FY 2014 payment
determinations, respectively.
(4) New Registry-Based Measures
For the FY 2013 payment
determination, we proposed that
hospitals choose one of the following
four proposed measure topics: (1)
Implantable Cardioverter Defibrillator
(ICD) Complications, (2) Cardiac
Surgery, (3) Stroke, or (4) NursingSensitive Care. With respect to the
proposed measure topic selected by a
hospital, we proposed that the hospital
report data on the proposed measure(s)
applicable to the measure topic
(discussed below) to a qualified registry
for the specific topic, and direct the
registry to both calculate the measure
results for the hospital and release those
results (along with the numerator/
denominator information and exclusion
information) to CMS for the RHQDAPU
program. We proposed that hospitals
begin submitting data to the qualified
registry of its choosing for discharges on
or after January 1, 2011, and we intend
to release a list of qualified registries
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before that date. In section IV.A.13. of
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23997), we specified the
self-nomination process we proposed to
use to qualify registries for each
proposed registry-based measure topic.
Proposed submission requirements for
the proposed registry-based measures
were discussed in section IV.A.5.b.(7) of
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23990 through 23991).
Comment: Some commenters stated
that the use of registries has the
potential for inconsistent reporting on
Hospital Compare and inaccurate
comparisons across hospitals. Hospitals
may cherry-pick the measures they do
best on and yet the measures may not
fully reflect the care they provide. One
commenter stated that if registries are
used, hospitals should be required to
report to more than one registry so that
they cannot just pick the registry in
which they have the best data.
Response: After consideration of the
public comments received, we are
persuaded that we should not finalize
any registry-based measures at this time.
As noted above, after consideration of
public comments received, we are not
finalizing any registry-based measures at
this time.
Below is a discussion of the four
proposed registry-based measure topics
and specific registry-based measures
that fall within each topic that we
proposed to add to the RHQDAPU
program for the FY 2013 payment
determination.
(A) Implantable Cardioverter
Defibrillator (ICD) Complications
Registry-Based Topic and Measure
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Implantable Cardioverter
Defibrillators (ICDs) reduce the risk of
sudden cardiac death for select high risk
patients, and the number of patients
undergoing ICD implantation increased
from 5,600 in 1990 to 108,680 by
2005.16 ICD implantation is an
expensive procedure performed on
patients with advanced cardiovascular
disease and, often, significant
comorbidities. Despite improvements in
technology and increasing experience
with device implantation, the procedure
carries a significant risk of
complications, 17 which in turn
increases its cost, the patient’s length of
stay, and the patient’s risk of
16 Brown, D.W., Croft, J.B., et al. (2008). ‘‘Trends
in Hospitalizations for the Implantation of
Cardioverter-Defibrillators in the United States,
1990–2005.’’ American Journal of Cardiology 101
(12): 1753–1755.
17 Hammill S and Curtis J. Publicly Reporting
Implantable Cardioverter Defibrillator Outcomes—
Grading the Report Card. Circ Arrhythmia
Electrophysiol. 2008;1:235–237).
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mortality.18 In the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43873
through 43875), our list of potential
future quality measures under
consideration included a measure of
implantable cardioverter defibrillator
(ICD) complications. This measure is a
risk standardized complication and
mortality rate following implantation of
ICDs in Medicare Fee for Service (FFS)
patients at least 65 years of age, with
complication specific outcome time
frames. The measure (NQF #OT1–007–
09) is currently undergoing NQF review
under Phase 1 of a call for Patient
Outcome Measures initiated in fall of
2009. We proposed to add the ICD
complications topic and measure to the
RHQDAPU measure set for collection
beginning with January 1, 2011
discharges for the FY 2013 RHQDAPU
payment determination pending NQF
endorsement. We anticipated a final
endorsement decision in the fall of 2010
after publication of this FY 2011 IPPS/
LTCH PPS final rule.
The proposed ICD complications
measure was developed based upon
data submitted to the American College
of Cardiology-National Cardiovascular
Data Registry’s (ACC–NCDR) ICD
registry, and data from that registry has
been linked with CMS administrative
claims data used to identify procedural
complications. For this proposed
measure, the measured outcome for
each ICD index admission is one or
more complications or mortality within
30 or 90 days (depending on the
complication) following ICD
implantation. Complications are
counted in the measure only if they
occur during a hospital admission.
Complications measured for 30 days
include: (1) Pneumothorax or
hemothorax plus a chest tube, (2)
Hematoma plus a blood transfusion or
evacuation, (3) Cardiac tamponade or
pericardiocentesis, and (4) Death.
Complications measured for 90 days
include: (5) Mechanical complications
requiring a system revision, (6) Device
related infection and (7) Additional ICD
implantation.
To comply with a January 2005
National Coverage Determination for
ICDs for primary prevention, all
hospitals in which ICD procedures are
performed are currently submitting to
the ACC–NCDR ICD registry patient
information needed for CMS to
determine whether the procedure was
reasonable and necessary. This
18 Al-Khatib SM, Greiner MA, Peterson ED,
Hernandez AF, Schulman KA, Curtis LH. Patient
and Implanting Physician Factors Associated With
Mortality and Complications 9After Implantable
Cardioverter-Defibrillator Implantation, 2002–2005.
Circ Arrhythmia Electrophysiol. 2008;1:240–249.
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requirement is documented in section
20.4 of the following Medicare National
Coverage Determination Manual: https://
www.cms.hhs.gov/manuals/downloads/
ncd103c1_Part1.pdf. For purposes of the
2005 National Coverage Determination,
CMS requires that hospitals submit data
to the ACC–NCDR ICD registry for
primary prevention patients only and
does not require hospitals to submit
data on patients undergoing ICD
implantation for secondary prevention.
However, the ICD complication measure
as submitted to the NQF for
endorsement is specified such that it
includes all ICD patients, regardless of
whether they receive an ICD for the
primary or secondary prevention of
sudden cardiac death.
Therefore, hospitals that choose this
registry-based measure topic for the
RHQDAPU program would submit data
on the ICD complications measure for
both primary and secondary prevention
patients to the qualified registry. For
risk adjustment, data matching, and
secondary prevention population
identification purposes, we proposed
that hospitals also submit to the
qualified ICD complications registry 11
additional data elements not currently
required under the NCD in order for the
measure to be calculated for RHQDAPU
program purposes.
In summary, we proposed to add the
ICD complications measure topic as one
of four proposed measure topics that
hospitals can choose from to submit
required data elements to a qualified
registry for the FY 2013 RHQDAPU
payment determination. The only
measure that we proposed to include in
this proposed topic at this time would
be the ICD complications measure.
Because the ICD complications measure
is a risk-adjusted outcome measure, it is
necessary that all data for the measure
be collected by a single qualified
registry in order for that registry to be
able to accurately calculate the risk
adjustment model and subsequent
measure results. Therefore, we proposed
to qualify one registry for this topic.
Proposed registry qualification criteria
were discussed in section IV.A.13. of
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23997). We note that the
ACC–NCDR ICD registry has already
been qualified to receive and transmit
data to CMS for a Medicare National
Coverage Determination, and is
currently the only registry to which
hospitals submit data for this NCD.
However, this would not preclude
another registry from self-nominating to
become a qualified registry for this
proposed topic for the RHQDAPU
program. Because the ICD complication
measure is a risk adjusted measure, it
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requires that all data be collected at a
single repository for calculation of the
measure. Therefore, we anticipate
qualifying a single registry to collect all
of the data for the proposed ICD
complications registry topic.
Comment: Several commenters
supported the inclusion of the ICD
complications measure. One commenter
was concerned with the quality of data
collected by the ACC–NCDR ICD
Registry and the STS Cardiac Surgery
Registry, specifically related to data
definition ambiguity and varying levels
of expertise amongst abstractors across
hospitals. One commenter pointed out
the problem of lack of standardization of
data and measure quality and data
submission process across registries.
One commenter suggested that CMS
provide information on the impact of
the ICD measure on hospital’s
management of cardiac patients.
Response: As stated previously, we
have decided not to finalize any
registry-based measures at this time. We
understand the commenters’ concerns
and will consider them in future
rulemaking.
Comment: One commenter suggested
that CMS provide detailed data
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definitions to guide hospital coders to
code complications in order to avoid
over or under documentation of
complications by physicians.
Response: As stated previously, we
have decided not to finalize any
registry-based measures at this time. We
will take this into consideration for
future rulemaking.
As stated previously, we are not
finalizing any registry-based measures
in this final rule.
(B) Stroke Registry-Based Topic and
Measures
We previously proposed to add five
stroke measures to the RHQDAPU
measure set in the FY 2009 IPPS
proposed rule (73 FR 23648). We
indicated that we would again consider
these measures once NQF reviewed and
endorsed the measures. Since that time,
eight stroke measures have received
NQF endorsement in July of 2008, and
in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule we included these measures in
the list of potential future measures. We
also included these measures in the
preview section of the Specifications
Manual, and have worked with the
Office of the National Coordinator for
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Health Information Technology (ONC)
and its partners to create a set of
electronic specifications for these
measures to facilitate collection through
EHRs.
We are also aware that a number of
hospitals are already submitting these
measures to registries, and in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule, we finalized a structural measure
of participation in a systematic clinical
database registry for stroke care. Stroke
is a topic of great relevance to the
Medicare population due to its impact
on morbidity and mortality, and is an
area of great potential improvement for
hospitals. Commenters on the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule
expressed support for these measures,
indicating that they accurately measure
evidence-based care of the stroke patient
to minimize secondary strokes and other
complications, are widely recognized,
and have great potential for quality
improvement (74 FR 43875).
Therefore, we proposed to include the
following eight measures in the Stroke
registry-based topic:
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We proposed to add the stroke
registry-based topic, which would
include these eight registry-based stroke
measures, to the RHQDAPU measure set
as one of the four proposed measure
topics that hospitals can choose from to
submit data to a qualified registry for
the FY 2013 payment determination
beginning with January 1, 2011
discharges. We invited comment on the
measures as well as the timing of their
addition to the RHQDAPU measure set.
Comment: Several commenters
supported the stroke measures, and
suggested the measures be accepted by
conventional chart abstraction, EHRs or
registry submission.
Response: As stated previously, we
have decided not to finalize any
registry-based measures at this time. We
thank the commenters for their support
and suggestions and will take them into
consideration in future rulemaking.
Comment: Some commenters did not
support the Stroke registry-based topic
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until the measure specifications are
harmonized with the Get with the
Guidelines stroke registry, the NHIQM
Stroke specifications, and meaningful
use requirements. A commenter
recommended delaying the
implementation of any stroke measure
set until they can be obtained
electronically. Another commenter
requested CMS to allow the Joint
Commission-accredited organizations to
use ORYX® stroke measure data as a
means for and in lieu of participating in
a registry. One commenter asked that
CMS add an exclusion to the Stroke
thrombolytic therapy measure for
patients who do not have an ER/
admitting diagnosis of stroke.
Response: We thank the commenters
for their support and suggestions.
Because we are not finalizing registrybased measures at this time, we will
consider these suggestions in future
rulemaking. We intend to propose the
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Stroke measurement set for inclusion in
a future payment determination.
As stated previously, we are not
finalizing any registry-based measures
in this final rule.
(C) Nursing Sensitive Care RegistryBased Topic and Measures
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule, we indicated that we
were considering adopting a number of
nursing-sensitive care measures for
future RHQDAPU program payment
determinations. Also in that rule, we
adopted a structural measure of
participation in a registry for nursingsensitive care, under which hospitals
submit data directly to the QIO Clinical
Warehouse.
For the FY 2013 payment
determination, we proposed to add a
nursing sensitive care registry-based
topic to the RHQDAPU measure set,
which would include the eight nursingsensitive care measures listed below. All
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of the proposed nursing sensitive
measures are NQF endorsed. Hospitals
selecting this topic would begin
reporting data on the eight proposed
nursing-sensitive care registry-based
measures to a qualified nursingsensitive care registry beginning with
January 1, 2011 discharges. Hospitals
would continue reporting the nursingsensitive care structural measure
previously adopted for the RHQDAPU
program directly to the QIO Clinical
Warehouse.
We invited comment on the proposed
addition of a nursing sensitive care
registry-based topic, which would
include eight proposed nursing
sensitive care measures, as well as the
timing of this addition to the RHQDAPU
program for the FY 2013 payment
determination.
PROPOSED MEASURES FOR NURSING SENSITIVE CARE REGISTRY-BASED TOPIC
Patient Falls: All documented falls with or without injury, experienced by patients on an eligible unit in a calendar month. (NQF #0141)
Falls with Injury: All documented patient falls with an injury level of minor or greater. (NQF #0202)
Pressure Ulcer Prevalence (NQF #0201)
Restraint Prevalence (vest and limb) (NQF #0203)
Skill Mix: Percentage of hours worked by: RN, LPN/LVN, UAP, Contract/Agency (NQF #0204)
Hours per patient day worked by RN, LPN, and UAP (NQF #0205)
Practice Environment Scale-Nursing Work Index (NQF #0206)
Voluntary turnover for RN, APN, LPN, UAP (NQF #0207)
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Comment: Many commenters
supported the nursing sensitive care
measures/measure set, but objected to
registry-based submission of the
measures for various reasons.
Response: We thank the commenters
for their support of the proposed
measures. We will not be finalizing any
of the registry-based measures in this
final rule.
Comment: One commenter did not
support the inclusion of the eight
Nursing Sensitive measures proposed
earlier unless significant restructuring of
the specifications were conducted and
these specifications were made available
to the public. Another commenter
supported the proposed addition of
Nursing Sensitive Care HAC measure
and topic.
Response: As stated earlier, we are not
finalizing any of the registry-based
measures in this final rule. We thank the
commenters for their support and
suggestions. We will consider these
suggestions in future rulemaking.
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As stated earlier, we are not finalizing
any of the registry-based measures in
this final rule.
(D) Cardiac Surgery Registry-Based
Topic and Measures
We have previously proposed to add
several measures on the topic of cardiac
surgery to the RHQDAPU measure set
(73 FR 48608), and have also listed a set
of NQF-endorsed cardiac surgery
measures in prior rules as being under
consideration for future adoption (74 FR
43874). We also adopted a structural
measure of cardiac surgery participation
in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. Cardiac surgery procedures
carry a significant risk of morbidity and
mortality. We believe that the
nationwide public reporting of the 15
proposed cardiac surgery registry-based
measures would provide highly
meaningful information for Medicare
beneficiaries because they address
procedures widely performed on
Medicare beneficiaries. Analysis of the
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structural measure data we have
received from hospitals indicates that
nearly 90 percent of hospitals
performing these procedures already
report these data to clinical registries,
which means that if they choose this
registry-based topic for purposes of the
FY 2013 payment determination and the
registry to which they already submit
data is qualified for this proposed topic,
they will not face any additional data
submission burden.
For the FY 2013 payment
determination, we proposed to include
15 cardiac surgery registry-based
measures in the cardiac surgery registrybased measure topic. These proposed
registry-based measures are listed
below, and hospitals would submit data
on these measures to a qualified registry
for the cardiac surgery registry-based
topic. We did not propose to retire the
structural measure for cardiac surgery
participation.
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These measures were endorsed by the
NQF in May of 2007 and meet the
statutory requirement of reflecting
consensus among affected parties. We
proposed that hospitals selecting this
topic would begin submitting data on
the proposed measures to a qualified
cardiac surgery registry beginning with
January 1, 2011 discharges. We note that
five of these measures (indicated with
an asterisk in the table above) must be
risk adjusted in order to be calculated
properly, which requires that the data
needed to calculate these measures be
collected by a single registry. While the
remaining measures do not require risk
adjustment, we believe it may be overly
burdensome for hospitals to submit data
for this topic to more than one registry.
For this reason, we anticipate qualifying
a single registry to collect all of the data
for the proposed cardiac surgery
registry-based topic. We invited public
comment on this proposal.
Comment: Many commenters
supported the cardiac surgery measures/
measure set, but objected to registrybased submission of the measures.
Response: We thank the commenters
for their support of the proposed
measures. As stated earlier, we are not
finalizing any registry-based measures
in this final rule.
Comment: One commenter was
concerned with the quality of data
collected by the STS Cardiac Surgery
Registry, specifically related to data
definition ambiguity and varying levels
of expertise amongst abstractors across
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hospitals. Another commenter
recommended requiring all hospitals to
participate in registries to report specific
measures sets, and to phase in the
measures sets starting with cardiac
surgery and nursing sensitive measures.
Response: We agree with the
importance of cardiac surgery measures
that include both processes of care and
outcomes in view of the significance of
such surgery and the benefit of having
such measures publicly reported.
Although we have decided not to adopt
registry-based reporting in this final
rule, we continue to believe that cardiac
surgery measures are a priority for the
RHQDAPU program.
Comment: Some commenters stated
that the use of registries has the
potential for inconsistent reporting on
Hospital Compare and inaccurate
comparisons across hospitals. Hospitals
may select to participate in registries for
measures that they expect the best
performance. Thus, allowing hospitals
to report on only one registry-based
measures set may not fully reflect the
care the hospital provides. One
commenter stated that if registries are
used, hospitals should be required to
report to more than one registry so that
they cannot just pick the registry in
which they have the best data.
Response: We continue to believe that
registry participation is very beneficial,
providing ongoing measurement of
quality of care, feedback to participants,
and the ability to measure outcomes. We
intend to continue considering how best
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to implement registry reporting as a
means for data submission. In doing so,
we will consider allowing registry-based
reporting as an option, rather than a
requirement, and to address the issues
of data comparability. We agree that if
the option to report measures by a
registry is adopted, is important to
assure that measures specifications are
standardized.
After consideration of public
comments received, we will not finalize
any registry-based measures at this time.
In summary, based on the public
comments received, for the FY 2013
payment determination, we are
retaining the 55 measures adopted for
the FY 2012 payment determination,
and are adding 1 chart abstracted
measure (AMI–Statin at Discharge) and
1 HAI measure to be collected via NHSN
(Catheter Associated Bloodstream
Infection) for the FY 2013 payment
determination. Collection of these two
new measures for the FY 2013 payment
determination will begin with January 1,
2011 discharges. We refer readers to
section IV.A.5. of this final rule for
further information about submission
requirements. We are not finalizing our
proposal for hospitals to pick one of
four topics in which to initiate registrybased measure submission to a qualified
registry. As discussed in section
IV.A.13., we also are not finalizing our
proposal to qualify registries for these
four topics. In the future, we anticipate
offering registry-based submission as a
mechanism to submit data for
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RHQDAPU measures, but not
necessarily the sole mechanism to
submit data for RHQDAPU measures.
Set out below are the 57 RHQDAPU
program quality measures to be used for
the FY 2013 payment determination:
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d. RHQDAPU Program Quality
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(1) Retention of FY 2013 Payment
Determination Measures for the FY 2014
Payment Determination
We proposed to retain all of the
measures adopted for the FY 2013
payment determination for the FY 2014
payment determination. Collection of
data for these measures would begin
with January 1, 2012 discharges. We
invited public comment on this
proposal. We did not receive any
specific comments on this proposal. As
discussed below, in response to
comments, we are retiring 2 FY 2013
narrowly specified measures (PN–2 and
PN–7) and adopting in their place 2
global immunization measures. We are
adopting as final our proposal to retain
all of the measures adopted for the FY
2013 payment determination for the FY
2014 payment determination, as
modified by our retirement of these FY
2013 measures.
(2) New Chart-Abstracted Measures for
the FY 2014 Payment Determination
We also proposed to add the
following four new chart-abstracted
measures to the RHQDAPU program
measure set for the FY 2014 payment
determination: (1) Emergency
Department (ED) Throughput—Admit
Decision Time to ED Departure Time for
Admitted Patients (NQF #0497), (2) ED
Throughput—Median time from
emergency department arrival to ED
departure for admitted patients (NQF
#0495), (3) Global Flu Immunization,
and (4) Global Pneumonia
Immunization. In proposing to adopt
these chart-abstracted measures, we
recognized that we were proposing to
increase the chart-abstraction burden on
hospitals with respect to the RHQDAPU
program. However, we stated that the
burden associated with the proposed
immunization measures for all
inpatients could be counterbalanced by
future retirement of the two current
immunization measures that apply only
to pneumonia inpatients. This measure
retirement option is discussed earlier in
section IV.A.2.b.(1) of the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23965).
Furthermore, we note that the ED
Throughput measures have been
specified for EHR-based collection,
which may also serve to reduce burden
associated with these measures in the
future. We proposed to adopt these four
chart-abstracted measures into the
RHQDAPU program measure set for the
FY 2014 payment determination. We
proposed that data submission for these
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measures would begin with January 1,
2012 discharges. We invited comment
on these proposed measures as well as
on the proposed timing of their addition
to the RHQDAPU program for the FY
2014 payment determination.
(A) Emergency Department (ED)
Throughput Measures
The two ED Throughput measures we
proposed for the FY 2014 payment
determination were: (1) Median time
from admit decision time to time of
departure from the emergency
department for emergency department
patients admitted to inpatient status,
and (2) Median time from emergency
department arrival to time of departure
from the emergency room for patients
admitted to the facility from the
emergency department.
The ED–Throughput measures reflect
not only the processes of care that occur
while the patient is in the emergency
department, but also reflect the
coordination of care, communication,
and efficiency of service provision
beyond the walls of the emergency
department. These measures have been
NQF-endorsed (NQF #0497 and #0495);
thereby, meeting the requirement of
section 1886(b)(3)(B)(viii)(IX) of the Act.
They also have been adopted by HQA.
Specifications for these measures are
available in the preview section of the
current Specification Manual available
on QualityNet.
These measures also address ED
overcrowding, which the IOM identified
as a major quality issue. Reducing the
time patients remain in the ED can
improve access to treatment and
increase the quality of care, and
capability of the hospital to provide
adequate treatment to patients. ED
overcrowding may result in delays in
the administration of medication such
as antibiotics for pneumonia and has
been associated with perceptions of
compromised emergency care. For
patients with non-ST-segment-elevation
myocardial infarction, long ED stays
were associated with decreased use of
guideline-recommended therapies and a
higher risk of recurrent myocardial
infarction. Overcrowding and heavy
emergency resource demand have led to
a number of problems, including
ambulance refusals, prolonged patient
waiting times, increased suffering for
those who wait, rushed and unpleasant
treatment environments, and potentially
poor patient outcomes. Finally, when
EDs are overwhelmed, their ability to
respond to community emergencies and
disasters may be compromised.
Comment: Many commenters
supported the inclusion of the proposed
ED Throughput—Admit Decision Time
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to ED Departure Time for Admitted
Patients (NQF #0497), and ED
Throughput—Median time from
emergency department arrival to ED
departure for admitted patients (NQF
#0495) measures. Some commenters
supporting these measures agreed that
the measures should reflect not only
processes within the emergency
department but also reflect coordination
of care, communication and efficiency
of provision beyond the walls of the
emergency department. However, some
of the commenters believed that the
measures need to be refined,
terminology needs to be clearly defined,
and a percentile should be used to
identify outliers. Some commenters
stated that implementation of the ED
measures should be contingent upon
successful EHR testing by CMS so the
measures can be reported electronically
and not via manual chart abstraction.
Several commenters opposed the
proposed ED Throughput measures,
stating there are multiple factors
affecting the ED admit decision time to
ED departure time for admitted patients
as well as the median time from ED
arrival to ED departure for admitted
patients and the proposed measures
cannot be adequately interpreted to
evaluate quality. Commenters requested
that CMS take into consideration timing
factors that are outside the control of the
ED, for example, bed availability and
patient characteristics.
Response: We appreciate the
supportive comments as to the
importance of the ED throughput
measures. Specifications are handled
through a sub-regulatory process
previously described with specifications
updated as needed. In order to gain
experience prior to the date of required
RHQDAPU submission, we encourage
hospitals to take advantage of the
voluntary submission process, which
we plan to have available starting in
October 2010. Although we believe that
the measures are well specified,
experience gained through the voluntary
reporting mechanism will assist us to
identify any needed refinements, prior
to the beginning of required submission
for the RHQDAPU program to begin
with January 1, 2012 discharges. We
will consider the suggestion regarding
showing the percentile distribution to
allow consumers to discern outliers
when publicly reporting the measures.
With regard to electronic submission,
we are working to provide an optional
mechanism for electronic submission
for ED and other RHQDAPU chartabstracted measures.
After consideration of the public
comments received, we are finalizing
the two ED–Throughput measures as
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proposed for the FY 2014 payment
determination.
(B) Global Immunization Measures
For the FY 2014 payment
determination, we proposed to adopt
two global immunization measures: (1)
Pneumoccocal Immunization; and (2)
Influenza Immunization. Increasing
influenza (flu) and pneumonia
vaccination could reduce unnecessary
hospitalizations and secondary
complications particularly among high
risk populations such as the elderly.
About 36,000 adults die annually and
over 200,000 are hospitalized for flurelated causes. Older adults are more
vulnerable, and adults over 65 comprise
about 90 percent of deaths related to flu.
Vaccinations can significantly reduce
the number of flu related illnesses and
deaths. The measures being proposed
are currently endorsed by the NQF,
which occurred as part of a consensus
development project titled ‘‘National
Voluntary Consensus Standards for
Influenza and Pneumococcal
Immunizations’’ which concluded in
2008. This project resulted in the
endorsement of immunization measures
that reflect current consensus among
affected parties that standard measure
specifications for influenza and
pneumonia immunization should be
broadly applicable across conditions,
populations, and care settings. The
technical specifications for these global
measures will be available in an
upcoming release of the Specifications
Manual to be published in October
2010. The difference between these
proposed immunization measures, and
the two immunization measures that are
currently part of the RHQDAPU
program is that the current measures
only apply to inpatients admitted for
pneumonia, whereas the proposed
measures apply to all inpatients
regardless of admission diagnosis.
Comment: Some commenters strongly
supported the proposed addition of the
Global Immunization measures ((1)
Pneumoccocal Immunization; and (2)
Influenza Immunization) to the
RHQDAPU program. The commenters
also recommended a measure threshold
and exemptions, for example, in times
of vaccine shortage.
Response: We thank the commenters
for supporting these measures. We will
take into consideration these
suggestions for exemptions during
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vaccine shortages. We are finalizing
these measures for the FY 2014 payment
determination.
Comment: Some commenters
expressed concerned that the proposed
FY 2014 global immunization measures
overlap with previously adopted
immunization measures that are specific
to the Pneumonia population (PN–2:
Pneumoccocal Vaccination Status and
PN–7: Influenza Vaccination Status).
Commenters also recommended that we
retire the two pneumonia-specific
measures if we elect to adopt the global
immunization measures into the
RHQDAPU program.
Response: We agree with the
commenters and are retiring the PN–2
and PN–7 measures from the RHQDAPU
measure set for the FY 2014 payment
determination because these measures
overlap with the global immunization
measures that we are adopting for the
FY 2014 payment determination.
Comment: Several commenters
opposed the inclusion of the Global
Influenza or Global Pneumococcal
measures into the RHQDAPU program
because of perceived burden of
collection. In addition, some
commenters stated that vaccination
during the acute phase of illness treated
in the hospital inpatient setting is not an
optimum practice, and that
miscommunication with patients’
primary care provider may lead to
unnecessary vaccinations.
Response: We understand the burden
concern and have attempted to mitigate
this by adopting the ED throughput and
Global immunization measures
concurrently as they utilize the same
global population, and adopting the
measures several years in advance. We
believe that finalizing the global
immunization measures for FY 2014 in
this final rule will give hospitals
adequate time to develop efficient
collection plans for future collection.
We agree with the commenters that the
current RHQDAPU immunizations
specified for the pneumonia inpatient
population should be replaced in favor
of these broadly applicable
immunization measures. The NQF also
recommends the use of the global
immunization measures over the
condition specific immunization
measures that are currently in the
program. Based on the public comments
received, we are adopting the two global
immunization measures for the FY 2014
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payment determination, and we are
retiring the PN–2: Pneumoccocal
Vaccination Status and PN–7: Influenza
Vaccination Status measures for the FY
2014 payment determination in order to
accommodate these more broadly
applicable immunization measures.
As for the commenter’s point that a
patient’s primary care provider would
ordinarily be the locus for
immunization, the current NQFendorsed measures recognize a role for
the acute care setting to assess the
vaccination status of and to intervene in
the appropriate vaccination of acutely
hospitalized patients against influenza
and pneumonia. This is consistent with
the indications for these vaccines which
are global in nature in the sense that
they are generally recommended for
patients over a certain age, not those
with only who have contracted
pneumonia. We will provide
specifications for these new measures in
the upcoming Specifications Manual
release.
After consideration of the public
comments received, we are finalizing all
four chart-abstracted measures into the
RHQDAPU program measure set for the
FY 2014 payment determination. Also
based upon public comments received,
and discussed in section IV.A.3.c.(3) of
this final rule, we are finalizing the
adoption of the SSI measure to be
collected via NHSN for the FY 2014
payment determination. Data
submission for these five measures
would begin with January 1, 2012
discharges. In addition, based on
comments received regarding retirement
of narrowly specified measures when
broader measures are available, we are
retiring the PN–2 and PN–7 measures
for the FY 2014 and subsequent
payment determinations, which will be
replaced by the two global measures for
influenza and pneumococcal
vaccination beginning with January 1,
2012 discharges. We will retain the
remaining FY 2013 measures for the FY
2014 payment determination. We expect
the CLABSI measure and the SSI
measure to be risk-adjusted consistent
with section 1886(b)(3)(B)(viii)(VIII) of
the Act for the FY 2013 and FY 2014
payment determinations, respectively.
The complete list of 60 quality
measures to be used for the FY 2014
payment determination is set out below.
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4. Possible New Quality Measures for
Future Years
We invited public comment on the
following quality measures and topics
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set out below that we are considering for
the future. We also sought suggestions
and rationales to support the adoption
of measures and topics that were not
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included in this list for the RHQDAPU
program.
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• General comments
Comment: A commenter
recommended that any long-range
planning must be consistent with the
Secretary’s strategic plan and priorities
which are unknown at this time for the
future years. A commenter stated that
CMS needs to have a more systematic
quality measure strategy and framework
to align measures in order to achieve the
overall goals of quality improvement
and attainment. Another commenter
stated that hospitals should be allowed
to prioritize measures based on risks of
their populations and programs and
questioned the reason why hospitals are
not given the option as physicians to
select from a list of measures to focus
on their quality improvement efforts.
The commenters suggested that we
follow a more methodical framework to
prioritize and integrate measures into
the RHQDAPU program and the
HITECH EHR incentive program with a
long-term goal of transitioning from the
RHQDAPU program to the meaningful
use criteria under the HITECH EHR
program. One commenter noted that in
moving forward, CMS should focus on
developing measures collected through
EHRs rather than using manually
intensive, chart-based measures through
the RHQDAPU program. Several
commenters believed that many of the
proposed measures for future years
overlap with the current RHQDAPU
measures. Another commenter
recommended that CMS focus reporting
on a variety of aspects for fewer
conditions rather than adding one or
two measures in a particular medical
condition or significantly increasing the
overall number of conditions being
measured at any one time. The
commenter believed that the second
approach would stretch hospital
resources. Another commenter noted
that it is unnecessary to put a single
measure under different composite
measures or under different reporting
requirements. The commenter gave the
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PSI–4 measure as an example which is
required in both the Nursing sensitive
composite measure as well as in the
AHRQ Patient Safety Indicators
measurement set. A commenter
suggested that CMS take a more
aggressive approach and add more
measures in high priority areas.
Response: We have retained the
ability to modify the measure set in the
future in order to respond to changes in
our priorities as well as changes in
legislation. One of our goals is to align
the quality measures across programs
including the HITECH EHR program in
order to reduce the burden on hospitals
reporting quality measures to multiple
programs. We generally try to adopt
measures for the RHQDAPU program
that are broadly applicable across IPPS
hospitals, because RHQDAPU measures
are made publicly available in
comparative reporting tools, and will be
the basis for measure selection for
hospital value based purchasing in the
future. Allowing hospitals to pick
among measure sets may not be ideal for
comparative public reporting and
performance-based incentive programs.
With respect to long-range planning
and the Affordable Care Act required
strategic plan and priorities, we agree
that the RHQDAPU program priorities
will be guided by this plan. Although
this plan is yet to be developed, the
measures that we include in this final
rule represent established HHS
priorities, which include some of the
priorities selected by the NQF National
Priorities Partners process. These
include patient safety, population
health, and care coordination.
The new outcomes measures, the
HACs and HAIs, the immunization
measures, AMI statin at discharge, and
ED throughput measures finalized in
this final rule reflect these priorities as
we discuss in the portions of this final
rule dealing with those measures. To the
extent that these or other measures are
incompatible with any revision to HHS
priorities and new strategic framework,
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the measures can be modified. Because
IPPS hospitals provide a broad array of
services, we believe that it is important
have an array of measures that cover
very substantially inpatient services. We
also believe it is beneficial to consumers
to measure and report many topics
governing aspects of health care
delivered in hospital settings, and thus,
we have been systematically expanding
the RHQDAPU program quality
measures in scope and topic. Currently,
AHRQ PSI–4 is in both the AHRQ
Patient Safety Indicator measure set and
the Nursing Sensitive Care measure set.
We have not adopted the Nursing
Sensitive Measure set at this time, but
would address this overlap in the future
should we propose to require this
measure set of participating hospitals.
We will also continue to assess the
feasibility of alternative data sources for
measures, such as registries and EHRs to
lessen the data collection burden on
hospitals. We agree with the importance
of transitioning to EHR submission of
RHQDAPU measures and plan to
actively move toward implementation.
However, we expect that, at least in the
short term, it would not be practical to
require all hospitals to report using EHR
technology, but rather to provide this
reporting method as an option.
• Comment on Measure Topic: Atrial
fibrillation
Comment: A commenter indicated
that atrial fibrillation measures is the
root cause of several conditions upon
which CMS has focused and that quality
measures for atrial fibrillation help alert
hospitals and clinicians to diagnose and
manage the condition.
Response: We agree and we did
propose the STK–3: Anticoagulation
therapy for atrial fibrillation/flutter
(NQF #0436) in the FY 2011 IPPS/LTCH
proposed rule under proposed measures
for the Stroke registry-based topic. As
discussed previously, we are not
finalizing any registry-based measures
in this final rule. We will take the
commenter’s suggestion into
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consideration in determining whether to
adopt this measure for the RHQDAPU
program in the future.
• Comment on prioritization of
Measure Topics
Comment: One commenter
recommended that CMS prioritize the
cardiovascular-related conditions that
are in the CMS top 20 based on root
cause and prevention of subsequent
conditions as follows: Diabetes,
ischemic heart disease, atrial
fibrillation, acute myocardial infarction,
congestive heart failure, stroke,
Alzheimer’s disease, and depression.
Response: We thank the commenter
for the suggestions and we will take the
commenter’s suggestion into
consideration in determining the
priorities of the measures for the
RHQDAPU program in the future.
• Comments on Measure Topic:
Cardiac rehabilitation referral for AMI,
HF, and Cardiac Surgery
Comment: A few commenters strongly
endorsed the proposal to consider
‘‘Cardiac Rehabilitation Referral for
AMI, HF, and Cardiac Surgery’’ for
possible RHQDAPU program futures
measure and topics.
Response: We thank the commenters
for their support of the proposed
measure. We will take that into
consideration in determining whether to
adopt this measure for the RHQDAPU
program in the future.
• Comments on Measure Topic:
Percutaneous coronary intervention
(PCI)
Comment: A few commenters
requested the addition of percutaneous
coronary intervention (PCI) in the
RHQDAPU measures for future years.
Response: We thank the commenters
for the suggestion and we will take it
into consideration in determining
whether to adopt this measure for the
RHQDAPU program in the future.
• Comment on Measure Topic:
Participation in a systematic database
for general thoracic surgery
Comment: One commenter suggested
the inclusion of participation in a
systematic database for general thoracic
surgery as a structural measure.
Response: We thank the commenter
for the suggestion and we will take it
into consideration in determining
whether to adopt this measure for the
RHQDAPU program in the future.
• Comments on Measure Topic: 30day AMI and heart failure care
transition composites
Comment: A few commenters urged
CMS not to include composite measures
for 30-day AMI and heart failure care
transition composites because they
believed they do not accurately identify
differences in performance that are due
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to failure to provide adequate care
coordination and may penalize
providers unfairly from serving
disadvantaged population served or
providing unrelated emergency
department visits. One commenter
recommended the inclusion of more
AMI measures.
Response: We acknowledge these
concerns. These measures are currently
undergoing NQF review and
endorsement. We also thank the
commenter that supported the addition
of AMI measures.
• Comment on Measure Topic:
Initiation of statin therapy in patients
with ischemic stroke or acute AMI prior
to discharge
Comment: One commenter
recommended adding a measure for the
initiation of statin therapy in patients
with ischemic stroke or acute AMI prior
to discharge when there is no
contraindication.
Response: We thank the commenter
for the suggestion and we will consider
it in future rulemaking.
• Comment on Measure Topic:
Smoking cessation screening, treatment,
and post-discharge follow-up
Comment: One commenter suggested
the inclusion of measures like the
smoking cessation screening, treatment,
and post-discharge follow-up measures
which are being pilot tested by the Joint
Commission.
Response: We thank the commenter
for the suggestion and we will take it
into consideration in determining
whether to adopt this measure for the
RHQDAPU program in the future.
• Comment on Measure Topic: 30Day PCI Readmission Measures
Comment: One commenter supported
the PCI mortality and readmission
measures and urged CMS to reconsider
delayed implementation of the measures
after FY 2014 and consider
implementing PSI–9 and/or other
measures to track severe bleeding as a
preventable readmission from PCI. One
commenter opposed the PCI
readmission measure. This commenter
opposed the data quality (probability
matching with CMS data), timeframe
(30-day) and numerator (readmission for
all-cause) of the measure and the
validity of the risk adjustment model (as
indicated by the low C-statistic).
Response: The PCI readmission
measure was developed using a
probabilistic match to link the registry
data with the Medicare data but would
be implemented using direct patient
identifiers. As to the time frame of the
measures, we selected 30-day period of
assessment based on empirical analysis
of available data, clinical judgment and
the advice of expert consultants. The
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consensus was that a 30-day time
provided the correct balance by
capturing the bulk of excess
readmissions occurring after PCI and
maintaining a high likelihood that the
readmission was attributable to the
hospital care. Moreover from a patient
perspective, readmission for any reason
is likely to be an undesirable outcome
of care. Readmissions not associated
with a cardiac diagnosis may be directly
related to the care delivered during the
index hospitalization. Finally in regard
to the low C-statistic, two factors affect
the C-statistic—patient factors and
hospital care. Since the patient-level
predictors included in the risk
adjustment model for the PCI measure
were robust based on registry clinical
data, the C-statistic of 0.663 indicates
that the quality of care delivered to
patients by hospitals (that are not part
of the model) plays a larger role. We
will consider the comment regarding
adoption of other companion measures,
such as PSI–9, that may address
preventability.
Comment: One commenter supported
the inclusion of Catheter-Associated
UTI and VAP in FY 2014.
Response: We thank the commenter
for the support of the proposed measure.
We will take it into consideration in
determining whether to adopt these
measures for the RHQDAPU program in
a future rulemaking cycle.
• Comment on Measure Topic: HACs
Comment: One commenter
recommended that CMS make a longterm goal to cultivate more global
hospital-wide assessments of harm
rather than targeting individual
organisms or HACs.
Response: We thank the commenter
for the suggestion and we will take it
into consideration in determining
whether to adopt this kind of measure
for the RHQDAPU program in the
future.
• Comments on Measure Topic: HAI
Comment: One commenter
recommended the inclusion of HAI—
ventilator associated pneumonia, HAI—
multidrug-resistant organism infection,
and HAI—CDAD. Another commenter
cautioned that for the possible inclusion
of the VAP measures, the term ‘‘VAP’’
must be clearly defined so that trauma
or immune-compromised patients can
be diagnosed correctly for VAP and
recommended that CMS take into
consideration the inadvertent penalty of
academic medical centers and hospitals
that treat complex and critically-ill
patients who are at risk for MDRO, and
experience high volume of patient
transfer.
Response: We thank the commenters
for their suggestion for other HAIs and
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we will take this into consideration in
determining whether to adopt the
measures for the RHQDAPU program in
the future. We plan to propose
additional HAI measures in a future
rulemaking cycle as they gain NQF
endorsement.
Comment: A commenter
recommended that the HHS Action Plan
to Prevent Healthcare-associated
Infections must be assessed for whether
the Plan’s metrics and targets have been
met and to provide the results to the
public at the hospital level, especially
measures related to MRSA, CDAD, and
UTI. A commenter urged CMS to add
the Catheter-Associated UTI in FY 2012.
The commenter suggested CMS and
CDC collaborate to develop a workable
guideline for identifying hospitalacquired VAP infections, moving
surveillance and reporting of central
line associated bloodstream infections
beyond the ICU. The commenter did not
recommend using NQF-endorsement
alone as adoption criteria. Another
commenter recommended that no
further data submission plan be
proposed for VAP, MRSA, and CDAD
until after fall of 2010 when the HHS
HAI Action Plan Review and Update is
released.
Response: We will take these
comments into consideration for
planning and measure selection. We
appreciate the commenter’s suggestion
that we add the Catheter-Associated UTI
in FY 2012, but we have determined
that we will consider it for future years.
The HHS Action Plan is currently
undergoing a process of
interdepartmental review and update
that will include an examination of the
metrics and targets. We anticipate that
this will be complete in October 2010.
• Comments on Measure Topic: VTE
Comment: One commenter suggested
the inclusion of a thromboembolism
(VTE) measure into the RHQDAPU
program for future years. One
commenter requested clarification for
the documentation requirements for the
VTE–1 VTE Prophylaxis and for the
VTE–2 ICU VTE Prophylaxis. The
commenter also agreed with the
exclusion of patients with reasons for
not administering mechanical and
pharmacological prophylaxis.
Response: We appreciate the
suggestion and agree with the high
importance of the VTE topic. With
respect to specifications and
documentation requirements these are
handled through a sub-regulatory
process.
• Comment on Measure Topic:
Surgical Safety
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Comment: One commenter supported
the continued development of Surgical
Safety measures.
Response: We thank the commenter
for the encouragement and we will take
that into consideration in determining
whether to adopt more of these types of
measures for the RHQDAPU program in
the future.
• Comment on Measure Topic: NQFapproved serious reportable events.
Comment: One commenter suggested
that CMS adopt NQF-endorsed serious
reportable events in future years.
Response: We thank the commenter
for the suggestion and we will take it
into consideration in determining
whether to adopt this measure for the
RHQDAPU program in the future.
• Comments on Measure Topic:
Influenza vaccination of healthcare
personnel
Comment: Many commenters
recommended the inclusion of Influenza
vaccination of healthcare personnel.
Response: We agree that Influenza
vaccination of healthcare personnel is
an important practice that may prevent
the spread of influenza and we thank
the commenters for their
recommendation. We will take this into
consideration in determining whether to
adopt this measure for the RHQDAPU
program in the future.
• Comment on Measure Topic:
Mortality measures
Comment: A commenter strongly
opposed the inclusion of mortality
measures because they are inconsistent
and unreliable indicators of the quality
of patient care. Furthermore, the
commenter stated that mortality
measures do not take into account
terminal, end-of-life issues, or withhold
treatment decisions made by patients
and families.
Response: These comments were
related to the prospect of inconsistent
approaches to mortality measures
resulting from inclusion of various
registry-based measures sets. We have
withdrawn the registry-based reporting
proposal. We have added no additional
mortality measures beyond the CMS 30day mortality measures and the AHRQ
PSI and IQI mortality measures. These
measures and their underlying
methodologies are all endorsed by NQF.
We thank the commenters for all their
suggestions for quality measures for the
future years. We also note that, although
we did not adopt the proposed registrybased measures: Stroke, Cardiac
Surgery, and Nurse Sensitive measures
for the FY 2013 payment determination
in this final rule, we are still very
interested in reconsidering them for
future adoption. While the stroke
measures were proposed only for
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registry-based participation in the
proposed rule, and not finalized, these
measures are currently specified for
chart abstraction and electronically
specified for EHR submission and
included in the HITECH EHR incentive
program for 2011 and 2012. We intend
to propose to add these measures to the
RHQDAPU program in future
rulemaking. In addition, while we did
not propose the VTE measures set in the
FY 2011 IPPS/LTCH PPS proposed rule,
which are also included in the HITECH
EHR incentive program for 2011 and
2012, we intend to propose to add these
measures to the RHQDAPU program in
future rulemaking.
5. Form, Manner, and Timing of Quality
Data Submission
Sections 1886(b)(3)(B)(viii)(I) and (II)
of the Act state that the payment update,
for FY 2007 and each subsequent fiscal
year, be reduced by 2.0 percentage
points (or, beginning with FY 2015, by
one-quarter of such applicable
percentage increase (determined
without regard to clause (ix), (xi), or
(xii)) for any subsection (d) hospital that
does not submit quality data in a form
and manner, and at a time, specified by
the Secretary. The data submission
requirements, Specifications Manual,
and submission deadlines are posted on
the QualityNet Web site at: https://
www.QualityNet.org/. CMS requires that
hospitals submit data in accordance
with the specifications for the
appropriate discharge periods.
Hospitals submit quality data through
the secure portion of the QualityNet
Web site (formerly known as QualityNet
Exchange) (https://www.QualityNet.org).
This Web site meets or exceeds all
current Health Insurance Portability and
Accountability Act (HIPAA)
requirements for security of protected
health information.
a. RHQDAPU Program Requirements for
FY 2012, FY 2013 and FY 2014
(1) Procedural Requirements for the FY
2012, FY 2013 and FY 2014 Payment
Determinations
For the FY 2012, FY 2013, and FY
2014 payment determinations, we
proposed that the following procedures
would apply to hospitals participating
in the RHQDAPU program. These
procedures are, for the most part, the
same as the procedures that apply to the
FY 2011 payment determination. We
identified where we proposed to modify
a procedure.
• Register with QualityNet, before
participating hospitals initially begin
reporting data, regardless of the method
used for submitting data.
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• Identify a QualityNet Administrator
who follows the registration process
located on the QualityNet Web site
(https://www.QualityNet.org).
• Complete a Notice of Participation.
New subsection (d) hospitals and
existing hospitals that wish to
participate in the RHQDAPU program
for the first time must complete a
revised ‘‘Reporting Hospital Quality
Data for Annual Payment Update Notice
of Participation’’ form (Notice of
Participation form) that includes the
name and address of each hospital
campus that shares the same CMS
Certification Number (CCN). We will
revise the Notice of Participation form
as needed and will provide appropriate
notification of any revisions to hospitals
and QIOs through the routine
RHQDAPU communication channels
which include memo and e-mail
notification and QualityNet Web site
articles and postings.
We proposed that, consistent with our
policy for the FY 2011 payment
determination, any hospital that
receives a new CCN on or after October
15, 2009 (including new subsection (d)
hospitals and hospitals that have
merged) that wishes to participate in the
RHQDAPU program and has not
otherwise submitted a Notice of
Participation form using the new CCN
must submit a completed Notice of
Participation form no later than 180
days from the date identified as the
open date (that is, the Medicare
acceptance date) on the approved CMS
Online System Certification and
Reporting (OSCAR) system to
participate in the RHQDAPU program
for FY 2012 and future years. We
believe that this deadline will give these
hospitals a sufficient amount of time to
get their operations up and running
while simultaneously providing CMS
with clarity regarding whether they
intend to participate in the RHQDAPU
program for FY 2012.
We did not receive any public
comments related to our proposal for
procedural requirements for the FY
2012, FY 2013 and FY 2014 payment
determinations. We are adopting as final
our proposal regarding the procedural
requirements discussed above for the FY
2012, FY 2013 and FY 2014 payment
determinations.
(2) Synchronization of RHQDAPU
Program Data Submission and
Validation Quarters With Quarters Used
To Make Payment Determinations
Currently, we determine, in part,
whether a hospital has met the
RHQDAPU program requirements for a
given fiscal year by looking at whether
the hospital properly submitted data
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with respect to a number of quarterly
discharge periods. However, the
quarters that we look at for HCAHPS
data, chart-abstracted RHQDAPU
program measures, and structural
measures may not be the same for a
single payment determination. For
example, for the FY 2011 payment
determination, we looked at discharge
data submitted by hospitals from 4th
quarter 2008 through 3rd quarter 2009
for AMI, HF, and PN chart-abstracted
RHQDAPU program measures, 1st
quarter 2010 for the newly added SCIP
Infection 9 and 10 measures, April 2008
through March 2009 data for HCAHPS,
and January 1, 2010 through June 30,
2010 data for structural measures.
This lack of synchronization has
developed because we have generally
made payment decisions using the four
earliest occurring discharge quarters for
each measure topic that we did not
include in a previous year’s payment
determination, and we have not
synchronized when hospitals must
begin reporting data on new measures.
Starting with the FY 2013 payment
determination, we proposed to
determine whether the hospital meets
the data submission requirement for
quality measure data by looking at
whether the hospital properly submitted
data on the applicable measures during
the same quarterly discharge periods.
Specifically, the quarterly discharge
periods that will apply to a particular
payment determination will be the four
quarters that occur within a calendar
year. In other words, beginning with the
FY 2013 payment determination, we
will look at whether the hospital
properly submitted data for HCAHPS,
CDC NHSN, chart-abstracted measures,
and structural measure quality measure
data during the four calendar year
quarters of FY 2011.
With respect to our requirement that
hospital data be successfully validated
in order for the hospital to earn the full
payment update for a given fiscal year,
we also proposed, beginning with the
FY 2013 payment determination, to
validate four discharge quarters, but the
quarters will be the 4th calendar quarter
of the year that occurs 2 years before the
payment determination and the first 3
calendar quarters of the following
calendar year. Thus, for the FY 2013
payment determination, we will
validate data from the 4th calendar
quarter of 2010 through the 3rd calendar
quarter of 2011. We believe this is
appropriate given the time required for
the validation abstraction and appeal
process.
This proposed synchronization will
give us a more complete picture of the
quality of care provided by a hospital
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during a given time period, thus
enabling us to link that quality of care
to the applicable RHQDAPU payment
determination. In addition, this
proposal will provide clarity to
hospitals regarding what data we will
look at to make payment determinations
for a given fiscal year. We believe that
this synchronization will also assist us
to more effectively implement the
RHQDAPU program because we will be
able to achieve operational consistency
regarding what data applies to what
payment determination. Further, we
believe that this proposal may assist the
agency in implementing the Hospital
Value-Based Purchasing Program as
authorized by section 3001(a)(1) of the
Affordable Care Act because it will
improve the link between quality as
measured during a single period of time
and the payment amounts provided to
hospitals. For example, under our
proposal, HCAHPS patient experience
of care measures and chart-abstracted
measures for a single set of discharge
quarters will be used together for a
single payment determination. Finally,
we believe that this proposal will
improve hospitals’ ability to implement
quality improvement strategies that
affect RHQDAPU program measures and
their quality of care.
We would post a table outlining the
discharge quarters that would be used to
make each fiscal year payment
determination no later than September
15th annually on the QualityNet Web
site (https://www.QualityNet.org). We
invited public comment on this
proposal.
Comment: Many commenters
supported the proposal to move all
measures to a consistent timeframe,
beginning with the FY 2013 payment
determination, in anticipation of the
transition to the HVBP program when
all measures need to be calculated
across a consistent timeframe.
Commenters also indicated that the
move provides clarity for the timeframe
of data for each fiscal year.
Response: We thank the commenters
for their support of this proposal.
Comment: Many commenters
questioned CMS’ intent related to the
HVBP program requirements under
section 3001 of the Affordable Care Act.
Response: We appreciate the
comments and intend to propose
regulations for the HVBP program
consistent with the legislative mandates
of section 3001 of the Affordable Care
Act in the FY 2012 IPPS/LTCH PPS
proposed rule.
After consideration of the public
comments we received, we are adopting
as final our proposal for
synchronization of RHQDAPU program
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data submission and validation quarters
with quarters used to make payment
determinations.
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(3) HCAHPS Requirements for the FY
2012, FY 2013 and FY 2014 Payment
Determinations
We proposed that, for the FY 2012, FY
2013 and FY 2014 payment
determinations, except as noted below,
the RHQDAPU program HCAHPS
requirements we adopted for FY 2011
would continue to apply. Under these
requirements, a hospital must
continuously collect and submit
HCAHPS data in accordance with the
current HCAHPS Quality Assurance
Guidelines and the quarterly data
submission deadlines, both of which are
posted at https://www.hcahpsonline.org.
In order for a hospital to participate in
the collection of HCAHPS data, a
hospital must either: (1) Contract with
an approved HCAHPS survey vendor
that will conduct the survey and submit
data on the hospital’s behalf to the QIO
Clinical Warehouse; or (2) selfadminister the survey without using a
survey vendor provided that the
hospital attends HCAHPS training and
meets Minimum Survey Requirements
as specified on the Web site at: https://
www.hcahpsonline.org. A current list of
approved HCAHPS survey vendors can
be found on the HCAHPS Web site at:
https://www.hcahpsonline.org.
We proposed that the FY 2012
payment determination for the
RHQDAPU program for HCAHPS will
be based on discharges from April 1,
2010 through December 31, 2010.
We proposed that the FY 2013
payment determination for the
RHQDAPU program for HCAHPS will
be based on discharges from January 1,
2011 through December 31, 2011.
We proposed that the FY 2014
payment determination for the
RHQDAPU program for HCAHPS will
be based on discharges from January 1,
2012 through December 31, 2012.
Every hospital choosing to contract
with a survey vendor should provide
the sample frame of HCAHPS-eligible
discharges to its survey vendor with
sufficient time to allow the survey
vendor to begin contacting each
sampled patient within 6 weeks of
discharge from the hospital. (We refer
readers to the Quality Assurance
Guidelines located at https://
www.hcahpsonline.org for details about
HCAHPS eligibility and sample frame
creation.) In addition, the hospital must
authorize the survey vendor to submit
data via My QualityNet, the secure part
of the QualityNet Web site, on the
hospital’s behalf.
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After the survey vendor submits the
data to the QIO Clinical Warehouse, we
strongly recommend that hospitals
employing a survey vendor promptly
review the two HCAHPS Feedback
Reports (the Provider Survey Status
Summary Report and the Data
Submission Detail Report) that are
available. These reports enable a
hospital to ensure that its survey vendor
has submitted the data on time and the
data has been accepted into the QIO
Clinical Warehouse.
Any hospital that has five or fewer
HCAHPS-eligible discharges in any
month is no longer required to submit
HCAHPS surveys for that month,
although the hospital may voluntarily
choose to submit these data. However,
the hospital still must submit its total
number of HCAHPS-eligible cases for
that month to the QIO Clinical
Warehouse as part of its quarterly
HCAHPS data submission.
In order to ensure compliance with
HCAHPS survey and administration
protocols, hospitals and survey vendors
must participate in all oversight
activities. As part of the oversight
process, during the onsite visits or
conference calls, the HCAHPS Project
Team will review the hospital’s or
survey vendor’s survey systems and
assess protocols based upon the most
recent HCAHPS Quality Assurance
Guidelines. All materials relevant to
survey administration will be subject to
review. The systems and program
review includes, but is not limited to:
(a) Survey management and data
systems; (b) printing and mailing
materials and facilities; (c) telephone
and Interactive Voice Response (IVR)
materials and facilities; (d) data receipt,
entry and storage facilities; and (e)
written documentation of survey
processes. Organizations will be given a
defined time period in which to correct
any problems and provide follow-up
documentation of corrections for
review. As needed, hospitals and survey
vendors will be subject to follow-up site
visits or conference calls. If CMS
determines that a hospital is not
compliant with HCAHPS program
requirements, CMS may determine that
the hospital is not submitting HCAHPS
data that meet the requirements of the
RHQDAPU program.
We continue to strongly recommend
that each new hospital participate in an
HCAHPS dry run, if feasible, prior to
beginning to collect HCAHPS data on an
ongoing basis to meet RHQDAPU
program requirements. New hospitals
can conduct a dry run in the last month
of a calendar quarter. The dry run will
give newly participating hospitals the
opportunity to gain first-hand
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experience collecting and transmitting
HCAHPS data without the public
reporting of results. Using the official
survey instrument and the approved
modes of administration and data
collection protocols, hospitals/survey
vendors will collect HCAHPS dry-run
data and submit the data to My
QualityNet, the secure portion of
QualityNet.
We again encouraged hospitals to
regularly check the HCAHPS Web site at
https://www.hcahpsonline.org for
program updates and information.
Comment: Commenters expressed
support for the use of the HCAHPS
survey, but they suggested the
development of additional survey
domains.
Response: We thank the commenters
for their input and will take their
suggestions into consideration in
developing future rulemaking.
After consideration of the public
comments we received, we are adopting
as final our proposed HCAHPS
requirements for the FY 2012, FY 2013
and FY 2014 payment determinations.
b. Additional RHQDAPU Program
Procedural Requirements for the FY
2012, FY 2013 and FY 2014 Payment
Determinations
(1) Chart-Abstracted Measures for
Which Data Are Submitted Directly to
CMS (via QualityNet)
Hospitals must begin submitting
RHQDAPU program data starting with
the first day of the quarter following the
date when the hospital registers to
participate in the program. For purposes
of meeting this requirement, we
interpret the registration date to be the
date that the hospital submits a
completed Notice of Participation form.
As proposed previously in this section,
hospitals must also register with
QualityNet and identify a QualityNet
Administrator who follows the
QualityNet registration process before
submitting RHQDAPU program data.
Hospitals must continuously collect
and report data to CMS (via QualityNet)
for each of the quality measures under
the topic areas that require chart
abstraction (and are not registry-based
topic areas). For the FY 2012 and FY
2013 payment determinations, the
proposed topic areas are AMI, HF, PN,
and SCIP. For the FY 2014 payment
determination, the proposed topic areas
are AMI, HF, PN, SCIP, Emergency
Department Throughput (EDT), and
Global Immunization (GIM).
For FY 2012, we proposed that
hospitals must submit data for five
calendar year discharge quarters as
follows: 4Q CY 2009, 1Q CY 2010 (AMI,
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HF and PN only), 2Q CY 2010, 3Q CY
2010 and 4Q CY 2010. For the FY 2013
payment determination, we proposed
that hospitals must submit data for four
consecutive calendar year discharge
quarters as follows: 1Q CY 2011, 2Q CY
2011, 3Q CY 2011 and 4Q CY 2011. For
the FY 2014 payment determination,
hospitals must submit data for four
consecutive calendar year discharge
quarters as follows: 1Q CY 2012, 2Q CY
2012, 3Q CY 2012 and 4Q CY 2012.
Hospitals must report these data by each
quarterly deadline.
We did not receive any public
comments related to this proposal. We
are adopting as final our proposal
related to chart-abstracted measures for
which data is submitted directly to CMS
(via QualityNet).
Hospitals must submit the data to the
QIO Clinical Warehouse using the CMS
Abstraction & Reporting Tool (CART),
The Joint Commission ORYX® Core
Measures Performance Measurement
System, or another third-party vendor
tool that meets the measurement
specification requirements for data
transmission to QualityNet. All
submissions will be executed through
My QualityNet, the secure part of the
QualityNet Web site. Because the
information in the QIO Clinical
Warehouse is considered QIO
information, it is subject to the stringent
QIO confidentiality regulations in 42
CFR part 480. The QIO Clinical
Warehouse will submit the data to CMS
on behalf of the hospitals.
Hospitals must submit complete data
for each quality measure that requires
chart abstraction in accordance with the
joint CMS/The Joint Commission
sampling requirements located on the
QualityNet Web site. These
requirements specify that hospitals must
submit a random sample or complete
population of cases for each of the
topics covered by the quality measures.
Hospitals must meet the sampling
requirements for these quality measures
for discharges in each quarter.
For the FY 2012 payment
determination, we proposed that
hospitals must submit population and
sampling data for three consecutive
calendar year discharge quarters as
follows: 2Q CY 2010, 3Q CY 2010 and
4Q CY 2010.
For the FY 2013 payment
determination, we proposed that
hospitals must submit population and
sampling data for four consecutive
calendar year discharge quarters as
follows: 1Q CY 2011, 2Q CY 2011, 3Q
CY 2011 and 4Q CY 2011.
For the FY 2014 payment
determination, we proposed that
hospitals must submit population and
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sampling data for four consecutive
calendar year discharge quarters as
follows: 1Q CY 2012, 2Q CY 2012, 3Q
CY 2012 and 4Q CY 2012.
We did not receive any public
comments related to these proposals.
We are adopting these proposals as
final.
Hospitals must submit to CMS on a
quarterly basis aggregate population and
sample size counts for Medicare and
non-Medicare discharges for the topic
areas for which chart-abstracted data
must be submitted (currently AMI, HF,
PN, and SCIP). For clarification, we
proposed that hospitals are required to
submit a numeric representation of their
aggregate population and sample size
count for each topic area even if the
hospital has not treated patients in a
specific topic area. For example, if a
hospital has not treated AMI patients,
the hospital is still required to submit a
zero for its quarterly aggregate
population and sample count for that
topic in order to meet the requirement.
In order to reduce the burden on
hospitals that treat a low number of
patients in an RHQDAPU program topic
area, a hospital that has five or fewer
discharges (Medicare and non-Medicare
combined) in a topic area during a
quarter in which data must be submitted
is not required to submit patient-level
data for that topic area for the quarter.
The hospital must still submit its
aggregate population and sample size
counts for Medicare and non-Medicare
discharges for the topic areas each
quarter. We also noted that hospitals
meeting the five or fewer patient
discharge exception may voluntarily
submit these data.
The quarterly data submission
deadline for hospitals to submit patient
level data for the proposed measures
that require chart abstraction is 41⁄2
months following the last discharge date
in the calendar quarter. CMS will post
the quarterly submission deadline
schedule on the QualityNet Web site
(https://www.QualityNet.org). Chartabstracted measures have not been
added for the FY 2012 payment
determination. The collection of new
chart-abstracted measures proposed for
the FY 2013 payment determination
would begin with the 1st calendar
quarter 2011 discharges, for which the
submission deadline would be August
15, 2011. The collection of new chartabstracted measures proposed for the FY
2014 payment determination would
begin with the 1st calendar quarter 2012
discharges, for which the submission
deadline would be August 15, 2012.
Hospitals must comply with the
discharge quarter submission deadlines
in any fiscal year for each quarter for
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50221
which data submission is required
(Quarter 1—August 15th; Quarter 2—
November 15th; Quarter 3—February
15th; Quarter 4—May 15th).
The data submission deadline for
hospitals to submit aggregate population
and sample size count data for the
measures requiring chart abstraction is
four months following the last discharge
date in the calendar quarter. This
requirement allows CMS to advise
hospitals regarding their submission
status in enough time for them to make
appropriate revisions before the data
submission deadline. We will post the
aggregate population and sample size
count data submission deadlines on the
QualityNet Web site (https://
www.QualityNet.org).
CMS strongly recommends that
hospitals review the QIO Clinical
Warehouse Feedback Reports and the
RHQDAPU Program Provider
Participation Reports that are available
after patient level data are submitted to
the QIO Clinical Warehouse. CMS
generally updates these reports on a
daily basis to provide accurate
information to hospitals about their
submissions. These reports enable
hospitals to ensure that their data were
submitted on time and accepted into the
QIO Clinical Warehouse.
We did not receive any public
comments related to this proposal. We
are adopting as final our proposal
related to the submission of aggregate
population and sampling data for AMI,
HF, PN, and SCIP topics.
(2) Data Submission Requirements for
HCAHPS
Hospitals must continuously collect
and submit HCAHPS data in accordance
with the current HCAHPS Quality
Assurance Guidelines, which can be
found on the HCAHPS Web site,
https://www.hcahpsonline.org. If a
hospital has zero HCAHPS-eligible
discharges, the hospital must submit
this information through the QIO
Clinical Warehouse. The QIO Clinical
Warehouse will accept zero HCAHPSeligible discharges. Hospitals with zero
HCAHPS-eligible discharges must
submit their total number of HCAHPSeligible cases to the QIO Clinical
Warehouse for that month as part of
their quarterly HCAHPS data
submission.
In order to reduce the burden on
hospitals that treat a low number of
patients that would be otherwise
covered by the HCAHPS submission
requirements, a hospital that has five or
fewer HCAHPS-eligible discharges
during a month is not required to
submit HCAHPS surveys for that month.
However, hospitals that meet this
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We did not receive any public
comments related to this proposal. We
are adopting as final our proposal
related to data submission requirements
for HCAHPS.
www.QualityNet.org, for program
updates and information.
• The following RHQDAPU program
claims-based measures would be
calculated using Medicare claims:
(3) Procedures for Claims-Based
Measures
Hospitals are encouraged to regularly
check the QualityNet Web site, https://
BILLING CODE 4120–01–P
BILLING CODE 4120–01–C
data to the QIO Clinical Warehouse. We
use the existing Medicare fee-for-service
claims to calculate the measures. For the
FY 2012 payment determination, we
would use up to 3 years of discharges
prior to January 1, 2011 (as appropriate
for the measure), to calculate the 30-day
mortality and 30-day readmission
For the claims-based RHQDAPU
program measures listed above,
hospitals are not required to submit the
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ER16AU10.050
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exception may voluntarily submit this
data. Hospitals with five or fewer
HCAHPS-eligible discharges must
submit their total number of HCAHPSeligible cases to the QIO Clinical
Warehouse for that month as part of
their quarterly HCAHPS data
submission.
Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules and Regulations
measures AHRQ PSI, IQI and Composite
measures (including the AHRQ PSI and
Nursing Sensitive Care measure, Death
among surgical inpatients with serious,
treatable complications), and the
proposed new HAC Measures. For the
FY 2013 and FY 2014 payment
determinations, we would use up to 3
years of discharges (as appropriate for
the measure) prior to January 1, 2012,
and January 1, 2013, respectively.
Hospitals are required to appropriately
report the POA indicator in conjunction
with ICD–9–CM coding to determine the
presence of HACs so that the proposed
HAC measures can be calculated for the
RHQDAPU program using Medicare
claims.
We did not receive any public
comments on this proposal. We are
finalizing our proposal to use up to 3
years of discharges (based on Medicare
claims) to calculate the claims-based
measures as appropriate. For the FY
2012 payment determination, we would
use up to 3 years of discharges prior to
January 1, 2011 as appropriate for the
measure. For the FY 2013 and FY 2014
payment determinations, we would use
up to 3 years of discharges as
appropriate for the measure prior to
January 1, 2012, and January 1, 2013,
respectively. In addition, hospitals are
required to appropriately report the
POA indicator in conjunction with ICD–
9–CM coding to determine the presence
of HACs so that the proposed HAC
Topic
(5) Data Submission of All-Patient
Volume Data for Selected DRGs Related
to RHQDAPU Program Measures
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(4) Data Submission Requirements for
Structural Measures
• We proposed that for the FY 2012
payment determination, hospitals
submit the required registry
participation information once for the
structural measures via a Web-based
collection tool between July 1, 2011–
August 15, 2011 with respect to the time
period of July 1, 2010 through December
31, 2010.
Below is the list of structural
measures we proposed to adopt for the
FY 2012 payment determination:
• Participation in a Systematic Database for Cardiac Surgery.
• Participation in a Systematic Clinical Database Registry for Stroke Care.
• Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care.
We did not receive any public
comments related to this proposal. We
are adopting as final our proposal
related to data submission requirements
for structural measures.
For submission of the all-patient
volume data for selected DRGs, we
proposed that hospitals submit patient
level information needed for CMS to
apply the MS–DRG GROUPER software
to calculate the all-patient MS–DRG
volumes, the data elements for which
would be defined in the Hospital
Measure Specification Manual.
Hospitals would begin submitting this
data quarterly via QualityNet beginning
with January 1, 2011 discharges.
We invited comment on an alternative
that hospitals submit hospital-level allpatient volume data based upon specific
ICD–9–CM codes that are related to the
proposed MS–DRGs (rather than the
patient-level data) necessary for CMS to
calculate the MS–DRGs. Hospitals
would begin submitting this data
quarterly via QualityNet beginning with
January 1, 2011 discharges.
As we stated in our responses to
comments on all-patient volume in
section IV.A.3.b.(3) of this final rule, we
are not finalizing the collection of allpatient volume data for selected MS–
DRGs; therefore, we are not adopting the
data submission requirements for allpatient volume data for selected MS–
DRGs.
17:02 Aug 13, 2010
measures can be calculated for the
RHQDAPU program using Medicare
claims.
FY 2012 Payment determination: Proposed structural measures
Cardiac Surgery ..............................
Stroke Care .....................................
Nursing Sensitive Care ...................
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(6) Data Submission and Reporting
Requirements for HAI Measures
Reported via NHSN
We proposed that hospitals
participating in the RHQDAPU program
submit the data elements needed to
calculate the Central Line Associated
Blood Stream Infection and Surgical
Site Infection measures to the NHSN
using the standard procedures that have
been set forth by CDC for NHSN
participation in general and for
submission of these two measures to
NHSN in particular. This would include
NHSN participation forms and
indications to CDC allowing CMS to
access data for these two measures for
RHQDAPU program purposes,
adherence to training requirements, use
of standard CDC measure specifications,
data element definitions, data collection
requirements and instructions, and data
reporting timeframes. Detailed
requirements for NHSN participation,
measure specifications, and data
collection can be found at https://
www.cdc.gov/nhsn/. Hospitals must use
the current specifications and data
collection tools available on the CDC
Web site to submit data for the Central
Line Associated Bloodstream Infection
and Surgical Site Infection measures.
We proposed that hospitals would
submit data for these two measures to
CDC’s NHSN on a monthly basis for
discharges occurring on or after January
1, 2011.
For the FY 2013 payment
determination, we proposed that
hospitals must submit HAI data via the
NHSN for four consecutive calendar
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year discharge quarters as follows: 1Q
CY 2011, 2Q CY 2011, 3Q CY 2011 and
4Q CY 2011.
For the FY 2014 payment
determination, hospitals must submit
HAI data for four consecutive calendar
year discharge quarters as follows: 1Q
CY 2012, 2Q CY 2012, 3Q CY 2012 and
4Q CY 2012.
We proposed that once quarterly each
hospital would utilize an automated
report function that will be made
available to submitters in the NHSN, to
generate a quarterly report containing
hospital-level numerator, denominator,
and exclusion counts for these two CDC
measures specifically for the RHQDAPU
program. The CDC will create this
automated RHQDAPU report function
and add it to NHSN’s reporting
functionalities in the next few months.
While hospitals may be reporting other
data elements to CDC for other reporting
programs (that is, State mandated
surveillance programs), the quarterly
RHQDAPU report that would be
generated within NHSN would only
contain those data elements needed to
calculate the two measures currently
being proposed for the RHQDAPU
program. We will access the reports in
the NHSN and will compile the reports
for RHQDAPU program and public
reporting purposes.
We invited comment on the proposed
mechanism for submitting data for the
Central Line Associated Blood Stream
Infection measure and the Surgical Site
Infection measure for the RHQDAPU
program beginning with the FY 2012
payment determination.
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We previously discussed public
comments on these data submission and
reporting requirements for HAI
measures reported via NHSN in section
IV.A.3.(c)(3) of this final rule. We are
adopting the CLABSI HAI measure for
the FY 2013 payment determination and
the SSI HAI measure for the FY 2014
payment determination. We are also
finalizing the quarterly NHSN
submission requirement. Requirements
for NHSN participation, measure
specifications, and data collection can
be found at https://www.cdc.gov/nhsn/.
Hospitals are encouraged to visit this
Web site in order to enroll, and obtain
the NHSN enrollment and reporting
requirements. Training resources are
also available there.
The collection of the CLABSI measure
via the NHSN will begin with January
1, 2011 discharges, and the collection of
the SSI measure will begin with January
1, 2012 discharges. The data collection
and submission timeframes for the
CLABSI measure for the FY 2012
payment determination are shown
below. Hospitals must submit their
quarterly data to NHSN for RHQDAPU
purposes on or around the dates shown
in the table below (updates to this will
be posted on the QualityNet Web site).
SUBMISSION TIMEFRAMES FOR CLABSI MEASURE FOR THE FY 2012 PAYMENT DETERMINATION
CDC–NHSN collection and quarterly report
generation time frame
CY 2011 Discharge dates
Q1
Q2
Q3
Q4
(Jan–Mar 2011) ............................................
(Apr–Jun 2011) ............................................
(Jul–Sep 2011) .............................................
(Oct–Dec 2011) ............................................
Hospitals have until the RHQDAPU
final submission deadline to submit
their quarterly data to NHSN. After the
final RHQDAPU submission deadline
has occurred for each CY 2011 quarter,
CMS will obtain the hospital-specific
calculations that have been generated by
the NHSN for the RHQDAPU program.
Further details regarding data
submission and reporting requirements
for HAI measures specified for the
RHQDAPU program to be reported via
NHSN will be posted on CMS’
QualityNet Web site in the fall of 2010.
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(7) Data Submission Requirements for
Registry-Based Measures
We proposed that hospitals
participating in RHQDAPU would be
required to choose at least one of four
registry based measure topics (ICD
Complications, Stroke, Nursing
Sensitive Care, or Cardiac Surgery), and
would submit the data needed to
calculate the measures included in the
chosen registry-based topic to a
qualified registry in order to meet the
requirements to receive the full FY 2013
annual payment update.
We proposed that hospitals then
would arrange to have the qualified
registry calculate the measures and
submit to the QIO Clinical Warehouse
the results, as well as the numerator,
denominator, and exclusions. Any
arrangement reached between the
hospital and the qualified registry must
comply with the HIPAA. The qualified
registry would also submit registryderived hospital-level measure
calculations to the QIO Clinical
Warehouse using a CMS-specified
record layout and file format that we
will make available.
Our program and its data system must
maintain compliance with the HIPAA
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Final submission deadline for RHQDAPU FY
2012 payment determination
April 30–August 15th ........................................
July 30–November 15th ...................................
September 30–Feb 15th ..................................
October 30th–May 15th ...................................
August 15, 2011.
November 15, 2011.
February 15, 2012.
May 15, 2012.
requirements for requesting, processing,
storing, and transmitting data. For the
FY 2013 RHQDAPU payment
determination, hospitals would need to
submit data for the proposed registrybased measures to the qualified registry
in the form and manner and by the
deadline(s) specified by the registry.
CMS proposed to begin qualifying
registries for the four proposed registrybased topics so that hospitals may begin
submitting data for discharges beginning
January 1, 2011. Proposed registry
qualification criteria were discussed in
a section IV.A.13. of the FY 2011 IPPS/
LTCH PPS proposed rule. We proposed
to post on the RHQDAPU program
section of the QualityNet Web site
https://www.qualitynet.org a list of
qualified registries for the FY 2013
RHQDAPU payment determination,
including the registry name, contact
information, and the measure(s) that the
registry has been qualified to collect and
report for the RHQDAPU program.
We anticipated posting the list of
qualified FY 2011 registries as soon as
we have completed vetting the registries
interested in participating in the FY
2013 RHQDAPU program payment
determination and identified the
qualified registries for the FY 2013
RHQDAPU program payment
determination, which we anticipated
would be completed by December 31,
2010.
hospitals can begin submitting data for
discharges beginning January 1, 2011.
We proposed that the hospital would
follow the standard participation and
reporting procedures set by the registry
regarding the submission of data
elements for the particular measures
CMS has specified for the topic. These
data elements and population
definitions will be listed in the
Specifications Manual.
Hospitals must allow the qualified
registry it is using to report the patientlevel data to CMS in order to calculate
the ICD complications measure.
(A) Hospitals That Choose To Report the
ICD Complications Measure
We proposed that if the hospital
chooses the ICD Complications measure,
it would submit specified data elements
for specified populations to the
qualified ICD registry, and that CMS
intended to establish criteria and begin
qualifying registries for this topic so that
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(B) Hospitals That Choose To Report
Either the Stroke, Nursing Sensitive
Care, or Cardiac Surgery Measures
If a hospital chooses the Stroke,
Nursing Sensitive Care, or Cardiac
Surgery measure topics, we proposed
that it would submit data on the
measures listed for these topics to a
qualified registry for the topic and that
we intend to establish criteria and begin
qualifying registries for these topics so
that hospitals can begin submitting data
for discharges beginning January 1,
2011. The hospital would follow the
standard participation and reporting
procedures set by the registry regarding
the submission of data elements for the
particular measures CMS has specified
for the topic. In addition, the hospital
would agree to allow the registry to send
calculations of the measures, numerator,
denominator and exclusion counts to
CMS for the RHQDAPU program.
As we stated previously in section
IV.A.3.(c) of this final rule, we are not
finalizing the proposed registry-based
measure topics. Therefore, we are not
finalizing these proposed data
submission requirements or the registry
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qualification process discussed in
section IV.A.13. of this final rule.
6. RHQDAPU Program Disaster
Extensions and Waivers
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24176), we
solicited public comment about rules
we could adopt that would enable
hospitals to request either an extension
or a waiver of various RHQDAPU
program requirements in the event of a
disaster (such as a hurricane that
damages or destroys the hospital).
Specifically, we solicited public
comment on the following issues:
• Recommendations for rules that we
could follow when considering whether
to grant an extension or waiver of
RHQDAPU program requirements in the
event of a disaster, including suggested
criteria that we should take into account
(for example, specific hospital
infrastructure damage, hospital closure
time period, degree of destruction of
medical records, impact on data
vendors, and long-term evacuation of
discharged patients impacting HCAHPS
survey participation).
• The role that QIOs and QIO support
contractors should play in the event of
a disaster, including communicating
with affected hospitals, communicating
with State hospital associations, and
collecting information directly from
hospitals.
• How CMS extension or waiver
decisions should be communicated to
affected hospitals.
• Any other issues commenters deem
relevant to a hospital’s request for an
extension or waiver of RHQDAPU
program requirements in the event of a
disaster.
We responded to public comments in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43881). We recognized
that there were times when hospitals are
unable to submit quality data due to
extraordinary circumstances that are not
within their control. It is our goal to not
penalize hospitals for such
circumstances and we do not want to
unduly increase their burden during
these times.
Therefore, we proposed a process for
hospitals to request and for CMS to
grant extensions or waivers with respect
to the reporting of required quality data
when there are extraordinary
circumstances beyond the control of the
hospital. Under the proposed process, in
the event of extraordinary
circumstances not within the control of
the hospital, for the hospital to receive
consideration for an extension or waiver
of the requirement to submit quality
data for one or more quarters, a hospital
must submit to the QIO in the hospital’s
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State a request form that will be made
available on the QualityNet Web site.
The following information should be
noted on the form:
• Hospital CCN;
• Hospital Name;
• CEO and any other designated
personnel contact information,
including name, e-mail address,
telephone number, and mailing address
(must include a physical address, a post
office box address is not acceptable);
• Hospital’s reason for requesting an
extension or waiver;
• Evidence of the impact of the
extraordinary circumstances, including
but not limited to photographs,
newspaper and other media articles; and
• A date when the hospital will again
be able to submit RHQDAPU data, and
a justification for the proposed date.
The request form must be signed by
the hospital’s CEO. A request form must
be submitted within 45 days of the date
that the extraordinary circumstance
occurred. The QIO in the hospital’s state
will forward the request form to CMS.
Following receipt of the request form,
CMS will: (1) Provide a written
acknowledgement using the contact
information provided in the request, to
the CEO and any additional designated
hospital personnel, notifying them that
the hospital’s request has been received;
and (2) provide a formal response to the
CEO and any additional designated
hospital personnel using the contact
information provided in the request
notifying them of our decision.
This proposal does not preclude CMS
from granting waivers or extensions to
hospitals that have not requested them
when we determine that an
extraordinary circumstance, such as an
act of nature (for example, hurricane),
affects an entire region or locale. If CMS
makes the determination to grant a
waiver or extension to hospitals in a
region or locale, CMS will communicate
this decision through routine
communication channels to hospitals,
vendors and QIOs, including but not
limited to issuing memos, e-mails and
notices on the QualityNet Web site. We
invited public comment on this
proposal.
Comment: A few commenters
supported this proposal.
Response: We thank the commenters
for their support of this proposal.
After consideration of the public
comments we received, we are adopting
as final our proposal related to
RHQDAPU program disaster extensions
and waivers.
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7. Chart Validation Requirements for
Chart-Abstracted Measures
a. Chart Validation Requirements and
Methods for the FY 2012 Payment
Determination
For the FY 2012 payment
determination, we will use the chart
validation requirements and methods
that we adopted for FY 2012 in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43884 through 43889). These
requirements, as well as additional
information on these requirements, will
be posted on the QualityNet Web site
after we issue the FY 2011 IPPS/LTCH
PPS final rule.
Specifically, we will:
• Randomly select on an annual basis
800 participating hospitals that
submitted chart-abstracted data for at
least 100 discharges combined in the
measure topics to be validated. To
determine whether a hospital meets this
‘‘100-case threshold,’’ we will look to the
discharge data submitted by the hospital
during the calendar year three years
prior to the fiscal year of the relevant
payment determination. For example, if
the 100-case threshold applied for the
FY 2011 payment determination (which
it will not), the applicable measure
topics would be AMI, HF, PN, and SCIP,
and we would choose 800 hospitals that
submitted discharge data for at least 100
cases combined in these topics during
calendar year 2008. If a hospital did not
submit discharge data for at least 100
cases in these topics during CY 2008,
we would not select the hospital for
validation. We will announce the topic
areas that apply for the FY 2012
payment determination at a later date,
and we plan to select the first 800
hospitals in July 2010. We will select
hospitals for the FY 2012 validation if
they meet the 100-case threshold during
CY 2009. We adopted this 100-case
threshold because we believe that it
strikes the appropriate balance between
ensuring that the selected hospitals have
a large enough patient population to be
able to submit sufficient data to allow us
to complete an accurate validation,
while not requiring validation for
hospitals with a low number of
submitted quarterly cases and relatively
unreliable measure estimates. Based on
previously submitted data, we estimate
that 98 percent of participating
RHQDAPU program hospitals will meet
this threshold and, thus, be eligible for
validation. As noted below, we solicited
comments and suggestions on how we
might be able to target the remaining 2
percent of hospitals for validation.
• Validate for each of the 800
hospitals a randomly selected stratified
sample for each quarter of the validation
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period. Each quarterly sample will
include 12 cases, with at least one but
no more than three cases per topic for
which chart-abstracted data was
submitted by the hospital. However, we
recognize that some selected hospitals
might not have enough cases in all of
the applicable topics to submit data (for
example, if they have 5 or fewer
discharges in a topic area in a quarter).
For those hospitals, we will validate
measures in only those topic areas for
which they have submitted data. For the
FY 2012 payment determination, we
will validate 1st calendar quarter 2010
through 3rd calendar quarter 2010
discharge data. We will validate 3
quarters of data for FY 2012 in order to
provide hospitals with enough time to
assess their medical record
documentation and abstraction
practices, and to take necessary
corrective actions to improve these
practices, before documenting their 1st
calendar quarter 2010 discharges into
medical records that may be sampled as
part of this proposed validation process.
The CDAC contractor will, each
quarter that applies to the validation,
ask each of the 800 selected hospitals to
submit 12 randomly selected medical
charts from which data was abstracted
and submitted by the hospital to the
QIO Clinical Warehouse. We noted that,
under our current requirements,
hospitals must begin submitting
RHQDAPU program data starting with
the first day of the quarter following the
date when the hospital registers to
participate in the program. For purposes
of meeting this requirement, we
interpret the registration date to be the
date that the hospital submits a
completed Notice of Participation form.
As proposed previously in section
IV.A.5.a. of the proposed rule, hospitals
must also register with QualityNet and
identify a QualityNet Administrator
who follows the QualityNet registration
process before submitting RHQDAPU
program data.
In addition, we will continue the
following timeline with respect to
CDAC contractor requests for paper
medical records for the purpose of
validating RHQDAPU program data.
Beginning with CDAC contractor
requests for second calendar quarter
2009 paper medical records, the CDAC
contractor will request paper copies of
the randomly selected medical charts
from each hospital via certified mail (or
other trackable method that requires a
hospital representative to sign for the
letter), and the hospital will have 45
days from the date of the request (as
documented on the request letter) to
submit the requested records to the
CDAC contractor. If the hospital does
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not comply within 30 days, the CDAC
contractor will send a second certified
letter to the hospital, reminding the
hospital that it must return paper copies
of the requested medical records within
45 calendar days following the date of
the initial CDAC contractor medical
record request. If the hospital still does
not comply, then the CDAC contractor
will assign a ‘‘zero’’ score to each
measure in each missing record. The
letter from the CDAC contractor is
addressed to the hospital’s medical
record staff identified by the hospital to
their state Quality Improvement
Organization (QIO). CMS recommends
that hospitals routinely check with their
State QIO to ensure the correct person
is listed to receive the record request. If
CMS has evidence from the CDAC
contractor that the hospital received
both letters requesting medical records
(as determined by the tracking system
used by CDAC contractor), the hospital
is responsible for not returning their
charts and will not be able to submit
charts as part of their reconsideration
request.
Under the validation methodology,
once the CDAC contractor receives the
charts, it will re-abstract the same data
submitted by the hospitals and calculate
the percentage of matching RHQDAPU
program measure numerators and
denominators for each measure within
each chart submitted by the hospital.
Specifically, we will estimate the
accuracy by calculating a match rate
percent agreement for all of the
variables submitted in all of the charts.
For any selected record, a measure’s
numerator and denominator can have
two possible states, included or
excluded, depending on whether the
hospital accurately included the cases
in the measure numerator(s) and
denominator(s). We will count each
measure in a selected record as a match
if the hospital submitted measure
numerator and denominator sets match
the measure numerator and
denominator states independently
abstracted by our contractor. For
example, one heart failure case from
which data has been abstracted for four
RHQDAPU program chart-abstracted
measures (that is, HF–1, HF–2, HF–3,
and HF–4) would receive a 75 percent
match if three out of four of the
hospital-reported heart failure measure
numerator and denominator states
matched the re-abstracted numerator
and denominator states. This proposed
scoring approach is the same as
recommended in the CMS Hospital
Value-Based Purchasing Report to
Congress, and is illustrated in further
detail using an example in pages 83–84
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of the report which can be found on our
Web site at: https://www.cms.hhs.gov/
AcuteInpatientPPS/downloads/
HospitalVBPPl
anRTCFINALSUBMITTED2007.pdf. We
believe that this approach is
appropriate, and it was supported by
many commenters when we requested
comment in the FY 2009 and FY 2010
IPPS final rules for input about the
RHQDAPU program validation process
(73 FR 48622 and 48623, 74 FR 43886
and 43887).
Under the validation methodology,
we will:
• Use, as we currently do, each
selected case as a cluster comprising
one or multiple measures utilized in a
validation score estimate. Each selected
case will have multiple measures
included in the validation score (for
example, for the FY 2011 payment
determination, a heart failure record
will include 4 heart failure measures).
Specifically, we will continue using the
design-specific estimate of the variance
for the confidence interval calculation,
which, in this case, is a stratified single
stage cluster sample, with unequal
cluster sizes. (For reference, see
Cochran, William G.: Sampling
Techniques, John Wiley & Sons, New
York, chapter 3, section 3.12 (1977); and
Kish, Leslie.: Survey Sampling, John
Wiley & Sons, New York, chapter 3,
section 3.3 (1964).) Each quarter and
clinical topic is treated as a stratum for
variance estimation purposes.
We believe that the clustering
approach is a statistically appropriate
technique for calculating the annual
validation confidence interval. Because
we will not be validating all hospital
records, we need to calculate a
confidence interval that incorporates a
potential sampling error. Our clustering
approach incorporates the degree of
correlation at the individual data record
level, because our previous validation
experience indicates that hospital data
mismatch errors tend to be clustered in
individual data records. We have used
this clustering since the inception of the
RHQDAPU program validation
requirement to calculate variability
estimates needed for calculating
confidence intervals (70 FR 47423).
• Use the upper bound of a one-tailed
95 percent confidence interval to
estimate the validation score; and
• Require all RHQDAPU program
participating hospitals selected for
validation to attain at least a 75 percent
validation score per quarter to pass the
validation requirement.
We believe that this modified
validation methodology incorporates
many of the principles supported by the
vast majority of commenters in response
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to our solicitation for public comments
in the FY 2009 and FY 2010 IPPS
proposed rule (73 FR 23658 through
23659, 74 FR 43886 and 43887).
Specifically, we believe that the
increased annual sample size per
hospital will provide more reliable
estimates of validation accuracy. The
sample size of 12 records per quarter
would provide a total of 36 records
across the three sampled quarters for the
FY 2012 payment determination, and 48
records in subsequent years. This
estimate would improve the reliability
of our validation estimate, as compared
to the current RHQDAPU program
annual validation sample of 20 cases per
year. We also believe that modifying the
validation score to reflect measure
numerator and denominator accuracy
will ensure that accurate data are posted
on the Hospital Compare Web site.
In addition, we believe that stratified
quarterly samples by topic will improve
the feedback provided to hospitals. CMS
will provide validation feedback to
hospitals about all sampled topics
submitted by the hospitals each quarter.
Because all relevant data elements
submitted by the hospital must match
the independently re-abstracted data
elements to count as a match, we
reduced the passing threshold from 80
percent to 75 percent. We will use a
one-tail confidence interval to calculate
the validation score because we strongly
believe that a one-tail test most
appropriately reflects the pass or fail
dichotomous nature of the statistical test
regarding whether the confidence
interval includes or is completely above
the 75 percent passing validation score.
We also will continue to allow
hospitals that fail to meet the passing
threshold for the quarterly validation an
opportunity to appeal the validation
results to their State QIO. QIOs are
currently tasked by CMS to provide
education and technical assistance
about RHQDAPU program data
abstraction and measures to hospitals,
and the quarterly validation appeals
process will provide hospitals with an
opportunity to both appeal their
quarterly results and receive education
free of charge from their State QIO. This
State QIO quarterly validation appeals
process is independent of the proposed
RHQDAPU program reconsideration
procedures for hospital reconsideration
requests involving validation for the FY
2011 payment update adopted in this
final rule.
b. Supplements to the Chart Validation
Process for the FY 2013 Payment
Determination and Subsequent Years
For FY 2013 and future years, we also
proposed to adopt the same validation
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requirements that we adopted for the FY
2012 payment determination, except as
set forth below. For FY 2013 and future
years, we proposed to modify our FY
2012 criteria by adding a targeting
criterion, refining our random sample
approach, and changing our data
discharge quarters validated as part of
our proposed synchronization of
RHQDAPU timelines. Specifically, we
proposed the following changes for FY
2013:
We proposed to validate the data
submitted by a hospital if the hospital
failed the previous year’s RHQDAPU
program validation. We proposed this
targeting criterion to improve data
accuracy for all hospitals failing our
validation requirement in a previous
year. We believe that this proposal is an
appropriate method to ensure data
accuracy, since it targets our resources
on the hospitals with the least accurate
data based on FY 2012 validation
results. We also believe that these
hospitals must correct the data
inaccuracies identified in RHQDAPU
validation for their internal quality
improvement and RHQDAPU measures
publicly reported on Hospital Compare.
Our proposal allows CMS to assess the
accuracy of these hospitals’ data and
provide feedback to hospitals until they
comply with our RHQDAPU validation
requirement.
Specifically, we proposed that all
hospitals selected for validation for the
FY 2012 payment determination and
that fail the validation will be selected
for validation for the FY 2013 payment
determination. Based on data analysis of
past validation results, we estimate that
targeting these hospitals would add
about 20 to 40 hospitals to our list of
validated hospitals to be selected in the
FY 2013 validation sample.
For FY 2013, we also proposed the
following changes to the FY 2012
RHQDAPU validation random sample
approach:
Starting in FY 2013, we proposed to
discontinue the 100 case minimum
threshold for selection in the RHQDAPU
800 hospital random sample. We believe
that discontinuing this requirement
would improve the robustness of the
RHQDAPU program validation sample
by including the smallest hospitals
participating in the RHQDAPU program
in the sample. All hospitals successfully
submitting at least one RHQDAPU case
for the third calendar quarter of the year
two years prior to the year to which the
validation applies would be eligible to
be selected for validation. For example,
for the FY 2013 payment determination,
we would select the sample in early
2011, and all hospitals that submitted at
least one RHQDAPU case for third
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quarter 2010 discharges would be
eligible to be selected. Starting in FY
2013, we proposed this change to the
RHQDAPU random validation sample,
rather than including these hospitals in
a targeted sample, to ensure that all
RHQDAPU participating hospitals are
equally likely to be selected in the
random validation sample.
For FY 2013, we proposed to modify
the quarterly stratified sample selection
by reallocating sample cases when a
hospital has submitted fewer than three
cases in a topic within a quarter. In
these rare cases, we proposed to
randomly reallocate the extra sample
cases to other topics with more than 3
submitted quarterly cases. This
proposed modification is designed to
ensure that CMS selects 12 cases for all
hospitals in a quarter, including those
hospitals specializing in only one topic.
For example, an orthopedic specialty
surgery hospital submitting only SCIP
measure cases in a given quarter would
have only SCIP measure cases randomly
selected in the validation sample for
that quarter. This would provide a more
reliable estimate of abstraction and
measure accuracy by maintaining the
same 12 case total quarterly validation
sample.
For the FY 2013 payment
determination, we also proposed to
validate data from the 4th calendar
quarter of 2010 through the 3rd calendar
quarter of 2011 in accordance with our
proposed synchronization of RHQDAPU
data as outlined in section IV.A.5.a.(2)
of the proposed rule (75 FR 23985 and
23986). This lag between the time a
hospital submits data and the time we
can validate that data is necessary
because data is not due to the QIO
Clinical Warehouse until 41⁄2 months
after the end of each quarter, and we
need additional time to select hospitals
and complete the validation process.
Comment: One commenter was
pleased that the proposed chart audit
validation process takes into account all
applicable chart-abstracted measures.
Response: We appreciate the
comment and agree that the proposed
approach ensures validation of all
submitted RHQDAPU chart-abstracted
measures by sampled hospitals.
Comment: One commenter
recommended that all hospitals should
be validated as opposed to a random
sample to hold hospitals equally
accountable.
Response: We thank the commenter
for the recommendation. We weighed
burden to hospitals, reliability of
hospital validation results in sample
size, and cost to the taxpayers through
validation expenses when proposing the
random sample. The annual random
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sampling approach ensures equal
probability of selection for all hospitals
submitting sufficient data each year.
Our proposed targeting approach also
ensures that all hospitals will be
validation at least once every four years.
This targeting approach will increase
equity in accountability in the
validation of all hospitals’ data over a
four year period, while reducing burden
to hospitals to copy and return
validation records through random
sampling.
Comment: One commenter supported
CMS’ proposal to implement the new
validation process for FY 2012, as it
minimizes burden for many hospitals
and implements a more rigorous
validation process compared to what is
currently in place.
Response: We appreciate and agree
with the commenter.
Comment: One commenter believed
that CMS should understand specific,
timely and frequent feedback from
hospitals would prevent serial
abstraction mistakes. The commenter
gave an example of an abstractor who
makes a mistake at the top of the
algorithm and does not have any
validation for 12–24 months. In this
example, the commenter believed that
serious validation mismatches could go
unchecked for such long periods of time
that a hospital could be put on the
‘‘targeted list’’ for validation because of
failing previous validations as CMS
describes and that the potential for a
longstanding mismatch is greater when
a mistake is not corrected through the
quarterly educational comments specific
to each facility. The commenter did not
agree with CMS that providing
validation feedback to a group of
hospitals that did not get validated will
correct abstraction errors for all.
Response: We appreciate the
comment, but believe that the process
we are finalizing starting in FY 2012
will improve the reliability of
RHQDAPU annual and quarterly
validation scores through the increased
sample size from 5 records per quarter
to 12 records per quarter. In addition,
sample stratification of measure topics
will ensure that CMS validates all chartabstracted measures, thereby providing
a more valid estimate of a hospital’s
overall abstraction accuracy for chartabstracted RHQDAPU data.
We believe that the improved
precision and reliability of our random
and targeted validation proposed
approaches outweigh the benefit of
providing hospital-specific feedback to
all hospitals. Hospitals have generally
improved in their RHQDAPU
abstraction accuracy since the program’s
inception, thereby lessening the need
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for regular quarterly hospital-specific
feedback to all hospitals. In past several
years, the vast majority of hospitals have
submitted accurate data, as evidenced
by 99.5 percent average percentage of
hospitals passing our annual RHQDAPU
validation requirement.
Comment: A commenter stated that
the timeline for turn-in of medical
charts of 45 days is fair and appreciated
that a certified letter follows-up when
records have not been received in 30
days by the CDAC. However, the
commenter would like the opportunity
to address when CDAC abstractions
have missed key documentation that
changes an answer. For example, the
commenter had several cases where
evidence of passing a measure on
smoking cessation or CHF discharge
instructions were in the chart, but the
CDAC missed it.
Response: The CDAC reabstraction
process is an independent reabstraction
of the hospital’s official medical record
documentation. Additionally, hospitals
may appeal quarterly scores below the
passing threshold to their State QIO for
an independent review. Hospitals that
do not pass our annual RHQDAPU
program validation requirement are
eligible to appeal validation
mismatched data elements reabstracted
by CDAC for CMS reconsideration.
Comment: A commenter believed that
CMS should be accountable regarding
their CDAC abstractors and should
require attestation by the CDAC
abstractors that they received
appropriate training on the
Specifications Manual and its proper
interpretation.
Response: Our abstractors receive
extensive training from CDAC
management and assisted by our
contractors responsible for RHQDAPU
measure maintenance and abstraction
education to our QIOs. Additionally, we
require our CDAC abstractors to pass
inter-rater reliability tests relative to
CDAC expert adjudicators. Historically,
CDAC abstractor inter-rater reliability
rates have averaged greater than 95
percent. We recognize that CDAC
abstractors are not 100 percent accurate
in their reabstraction, and the CDAC
adjudicates all potential mismatches.
Additionally, hospitals are eligible to
appeal quarterly scores below the
passing threshold to their state QIO for
an independent review. Hospitals that
do not pass our annual RHQDAPU
validation requirement are eligible to
appeal validation mismatched data
elements reabstracted by CDAC for CMS
reconsideration. Collectively, we believe
that the CDAC abstraction process is
accurate, but do provide multiple
independent methods of appeal for
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hospitals that believe their abstraction is
correct as compared to the CDAC
reabstraction.
Comment: One commenter opposed
modifying the quarterly stratified
sample selection by reallocating sample
cases when a hospital has submitted
fewer than three cases in a topic within
a quarter.
Response: We believe that our
approach provides a more reliable
validation estimate to ensure that
hospitals are submitting accurate quality
measure information. Our approach
prevents reduction in sample size and
retains reliability by maintaining a total
quarterly sample size of 12 cases across
all topics. We believe that this approach
creates equal and minimal burden for all
sampled hospitals.
Comment: A commenter disagreed
with addition of two validation samples
of three cases per hospital. The
commenter believed that this process is
very labor intensive as records have
transitioned from paper to electronic
records, requiring multiple queries
within an electronic health record to
obtain all of the necessary information.
Response: We appreciate the
comment, and will consider adding
technology to accept electronic health
records in the future to reduce
validation burden to hospitals using
electronic health records. We recognize
that many more hospitals will transition
their recordkeeping to EHRs, and we
want to provide the public with
accurate quality data and maintain
alignment with hospital recordkeeping
practices. We also believe that
validating all RHQDAPU chartabstracted measures is one of many
important elements to ensure accurate
publicly reported RHQDAPU data.
Comment: Some commenters were
concerned about the lack of CDC/NHSN
data validation process in place that is
similar to the current RHQDAPU
program validation process. The
commenters recommended that, before
any measure is included in public
reporting, an adequate validation
mechanism must be in place.
Response: We agree with the
commenter that CDC/NHSN should be
validated. We are considering validating
self-reported CDC/NHSN data by
proposing two additional quarterly
samples. One quarterly additional
sample would validate NHSN measure
data. We will solicit public comment
when we propose improvements to our
validation approach in future
rulemaking.
After considering the public
comments we received, we are adopting
as final our proposed supplements to
the chart validation process for the FY
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2013 payment determination and
subsequent FYs.
This RHQDAPU validation process
meets the requirements set forth in
section 1886(b)(3)(B)(viii)(XI) of the Act.
This section states that:
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The Secretary shall establish a process to
validate measures specified under this clause
as appropriate. Such process shall include
the auditing of a number of randomly
selected hospitals sufficient to ensure
validity of the reporting program under this
clause as a whole and shall provide a
hospital with an opportunity to appeal the
validation of measures reported by such
hospital.
Starting with the FY 2012 payment
determination and continuing in
subsequent fiscal years, the chart
validation process audits 800 randomly
selected hospitals for the discharge
quarters as outlined in this section. This
sample size is sufficient to validate
more than 22 percent of subsection (d)
hospitals for FY 2012 and ensure
validity of the reporting program.
Currently, this process validates 27
chart abstracted measures, including 7
AMI measures (AMI 1 through 8a), 4
Heart Failure measures (HF 1 through
HF 4), 6 Pneumonia measures, and all
10 SCIP measures.
Validation of the HCAHPHS measure
is conducted through our oversight
activities. We provide oversight of all
HCAHPS survey vendors and hospitals
self-administering the survey in order to
ensure that the data collection protocols
are followed. We also provide oversight
and validation through our review of
Quality Assurance Plans, site visits,
conference calls and detailed data
analyses each quarter to ensure there are
no anomalies found in the data. In
particular, we use site visits to review
all data collection activities, including
data reviews tracking a discharged
patient from sampling, survey
administration and data submission.
Information reported through claims
for the 24 RHQDAPU program measures
for FY 2012 as described in this rule is
already validated for accuracy by
Medicare Administrative Contractors
(MACs) to ensure accurate Medicare
payments. We are considering
validation methodologies for structural
measures and NHSN data and will
propose validation methodologies as
appropriate in the future.
We believe that the validation
processes described above ensures
validity of measures used under the
RHQDAPU reporting program. Our
reconsideration process outlined in this
section provides hospitals that do not
meet our validation requirement with
the opportunity to appeal mismatched
data elements that result in mismatched
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measures. We believe that our
reconsideration process provides
hospitals with appeal opportunities
when mismatched measures result in
potential payment reduction.
In the proposed rule, we state that we
are also considering additional changes
to our validation approach for future
years. Starting in FY 2014, we are
considering adding two strata to the
current RHQDAPU program validation
sample of SCIP, AMI, HF, and PN cases.
We are considering selecting two
additional validation samples of three
cases per selected hospital per quarter.
One additional quarterly sample would
enable us to validate the CLABSI and
SSI measures that we proposed to add
to the RHQDAPU program measure set
for the FY 2013 payment determination,
and the second additional quarterly
sample would enable us to validate the
ED–Throughput and the Immunization
for Influenza and Immunization for
Pneumonia global measures that we
proposed to add to the RHQDAPU
measure set for FY 2014. Thus, we
would be validating a total of 18 records
per quarter per validated hospital in 6
strata (1) SCIP, (2) AMI, (3) HF, (4) PN,
(5) CLABSI/SSI, and (6) ED–
Throughput/immunization measures).
We are also considering requiring
hospitals to sign a written form
explicitly granting CMS access to their
patient level data submitted to NHSN
for the proposed CLABSI measure and
the SSI measure. We believe that the
CLABSI/SSI stratum is necessary to
validate the data in the reports that we
will access from NHSN for the
RHQDAPU program. We invited public
comment on our validation proposals
and considerations.
Comment: Regarding FY 2014, the
commenter believed that the proposal to
add 2 strata (increasing from 12–18
records per quarter) to the current
program validation sample did not add
value, but rather adds busywork with
more cases to validate. The commenter
believed that this makes annual
validation a potential of near 80–100
records per validated facility and
believed that this number was excessive
and burdensome on the hospital to
produce this volume in a short period
of time.
Response: We understand the
commenter’s concern about burden, but
must also consider accuracy of all chartabstracted measures. Our random
sampling approach reduces this burden
to the majority of hospitals, since not all
hospitals’ data will be validated in a
particular year. We will consider this
comment in the future for future
supplements to the RHQDAPU
validation approach.
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We noted that, starting with the FY
2015 payment determination, we are
considering proposing to add hospitals
to our validation sample if they were
open under their current CCNs in FY
2012 but not selected for validation in
the three previous annual RHQDAPU
validation samples. We are considering
this addition to supplement our
validation approach to ensure that all
eligible RHQDAPU hospitals are
selected for validation at least once
every 4 years. We are considering this
addition starting in FY 2015 because FY
2015 would be the fourth year that CMS
would use the random validation
approach (which begins in FY 2012 as
adopted in this final rule).
We intend to propose this supplement
starting with the FY 2015 payment
determination to further improve the
targeting criteria that we are adopting in
this final rule beginning with FY 2013.
8. Data Accuracy and Completeness
Acknowledgement Requirements for the
FY 2011 Payment Determination and
Subsequent Years
For the FY 2011 payment
determination and subsequent years, in
the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24180), we
proposed to require hospitals to
electronically acknowledge on an
annual basis the completeness and
accuracy of the data submitted for the
RHQDAPU program payment
determination. Hospitals will be able to
submit this acknowledgement on the
same Web page that they use to submit
data necessary to calculate the structural
measures, and we believe that this Web
page will provide a secure vehicle for
hospitals to directly acknowledge that
their information is complete and
accurate to the best of their knowledge.
A single annual electronic
acknowledgement will provide us with
explicit documentation acknowledging
that the hospital’s data is accurate and
complete, but will not unduly burden
hospitals. We noted that commenters
generally supported the idea of
electronic attestation in the FY 2009
IPPS final rule (73 FR 48625) at the
point of data submission to the QIO
Clinical Warehouse.
In addition, the Government
Accountability Office (GAO)
recommended in a 2006 report (GAO–
06–54) that hospitals self-report that
their data are complete and accurate.
Therefore, in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43890) for
the FY 2010 payment determination, we
required hospitals to electronically
acknowledge their data accuracy and
completeness once between July 1,
2009, and August 15, 2009. Hospitals
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will acknowledge that all information
that is, or will be, submitted as required
by the RHQDAPU program for the FY
2010 payment determination is
complete and accurate to the best of
their knowledge.
We proposed requiring hospitals to
electronically acknowledge their data
accuracy and completeness once
between July 1, 2010 and August 15,
2010 for data to be used for the FY 2012
RHQDAPU program payment
determination.
Comment: A commenter stated that
the July 1, 2010 through August 15,
2010 period to report acknowledgement
of data accuracy and completeness is
over 1 year prior to the October 2011
start of FY 2012. Much of the data
reported by hospitals to CMS occurs
following this date.
Response: We agree with the
commenter. Consistent with our FY
2010 requirement (74 FR 43890), we
believe that a more appropriate period
to report FY 2012 data accuracy and
completeness is July 1, 2011 through
August 15, 2011, not 2010 as proposed
in the FY 2011 IPPS/LTCH PPS
proposed rule. We are modifying the
reporting period from our original
proposal to provide hospitals with time
to report more data applicable to the FY
2012 payment determination. We also
intend to propose in the FY 2012 IPPS
rule using the same July 1 through
August 15 time reporting period in
future payment years.
After consideration of the public
comments we received, we are adopting
as final our data accuracy and
completeness acknowledgement
requirements for the FY 2012 payment
determination and subsequent years.
However, we are requiring hospitals to
electronically acknowledge their data
accuracy and completeness once
between July 1, 2011 and August 15,
2011 for data to be used for the FY 2012
RHQDAPU program payment
determination instead of the proposed
July 1, 2010 through August 15, 2010
timeframe.
9. Public Display Requirements for the
FY 2012 Payment Determination and
Subsequent Years
Section 1886(b)(3)(B)(viii)(VII) of the
Act provides that the Secretary shall
establish procedures for information
regarding measures submitted under the
RHQDAPU program available to the
public. As we noted in section IV.A.1.g.
of this final rule, the RHQDAPU
program quality measures are typically
reported on the Hospital Compare Web
site (https://
www.hospitalcompare.hhs.gov), but on
occasion are reported on other CMS
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Web sites. We require that hospitals sign
a Notice of Participation form when
they first register to participate in the
RHQDAPU program. Once a hospital
has submitted a form, the hospital is
considered to be an active RHQDAPU
program participant until such time as
the hospital submits a withdrawal form
to CMS (72 FR 47360). Hospitals signing
this form agree that they will allow CMS
to publicly report the quality measures
included in the RHQDAPU program.
We will continue to display quality
information for public viewing as
required by section
1886(b)(3)(B)(viii)(VII) of the Act. Before
we display this information, hospitals
will be permitted to review their
information as recorded in the QIO
Clinical Warehouse.
We did not receive any public
comments on our proposal to continue
using FY 2011 requirements for FY 2012
and subsequent years. We adopt as final
our proposal regarding public display
requirements.
10. Reconsideration and Appeal
Procedures for the FY 2011 Payment
Determination
The general deadline for submitting a
request for reconsideration in
connection with the FY 2011 payment
determination is November 1, 2010. As
discussed more fully below, we
proposed that all hospitals submit a
request for reconsideration and receive
a decision on that request before they
can file an appeal with the Provider
Reimbursement Review Board (PRRB).
For the FY 2011 payment
determination, we proposed to continue
utilizing most of the same procedures
that we utilized for the FY 2010 requests
for reconsideration. Under these
proposed procedures, the hospital
must—
Submit to CMS, via QualityNet, a
Reconsideration Request form (available
on the QualityNet Web site) containing
the following information:
—Hospital CMS Certification number
(CCN).
—Hospital Name.
—CMS-identified reason for failure (as
provided in the CMS notification of
failure letter to the hospital).
—Hospital basis for requesting
reconsideration. This must identify
the hospital’s specific reason(s) for
believing it met the RHQDAPU
program requirements and should
receive the full FY 2011 IPPS annual
payment update.
—CEO contact information, including
name, e-mail address, telephone
number, and mailing address (must
include the physical address, not just
the post office box). We no longer
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require that the hospital’s CEO sign
the RHQDAPU program
reconsideration request. We have
found that this requirement increases
the burden for hospitals because it
prevents them from electronically
submitting the RHQDAPU program
reconsideration request forms. In
addition, to the extent that a hospital
can submit a request for
reconsideration on-line, the burden
on our staff is reduced and, as a
result, we can more quickly review
the request.
—QualityNet System Administrator
contact information, including name,
e-mail address, telephone number,
and mailing address (must include the
physical address, not just the post
office box).
—Paper medical record requirement for
reconsideration requests involving
validation. We proposed that if a
hospital asks us to reconsider an
adverse RHQDAPU program payment
decision made because the hospital
failed the validation requirement, the
hospital must submit paper copies of
all the medical records that it
submitted to the CDAC contractor
each quarter for purposes of the
validation. Hospitals must submit this
documentation to a CMS contractor.
The contractor will be a QIO support
contractor, which has authority to
review patient level information
under 42 CFR part 480. We will post
the address where hospitals can ship
the paper charts on the QualityNet
Web site after we issue the FY 2011
IPPS/LTCH PPS final rule. Hospitals
submitting a RHQDAPU program
validation reconsideration request
will have all mismatched data
reviewed by CMS, and not their State
QIO. (As discussed in section
IV.A.6.b. of this final rule, the State
QIO is available to conduct a
quarterly validation appeal if so
requested by a hospital.)
For the FY 2011 payment
determination, the RHQDAPU program
data that will be validated is 4th
calendar quarter 2008 through 3rd
quarter calendar year 2009 discharge
data. Hospitals must provide a written
justification for each appealed data
element classified during the validation
process as a mismatch. We will review
the data elements that were labeled as
mismatched, as well as the written
justifications provided by the hospitals,
and make a decision on the
reconsideration request. As we
mentioned above, we proposed that all
hospitals submit a reconsideration
request to CMS and receive a decision
on that request prior to submitting a
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PRRB appeal. We believe that the
reconsideration process is less costly for
both CMS and hospitals, and that this
requirement will decrease the number of
PRRB appeals by resolving issues earlier
in the appeals process.
Following receipt of a request for
reconsideration, we will—
• Provide an e-mail
acknowledgement, using the contact
information provided in the
reconsideration request, to the CEO and
the QualityNet Administrator that the
request has been received.
• Provide written notification to the
hospital CEO, using the contact
information provided in the
reconsideration request, regarding our
decision. We expect the process to take
approximately 90 days from the
reconsideration request due date of
November 1, 2010.
As we stated in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43892), the scope of our review when a
hospital requests reconsideration
because it failed our validation
requirements will be as follows:
1. Hospital requests reconsideration
for CDAC contractor-abstracted data
elements classified as mismatches
affecting validation scores. Hospitals
must timely submit a copy of the entire
requested medical record to the CDAC
contractor during the quarterly
validation process for the requested case
to be eligible to be reconsidered on the
basis of mismatched data elements.
2. Hospital requests reconsideration
for medical record copies submitted
during the quarterly validation process
and classified as invalid record
selections. Invalid record selections are
defined as medical records submitted by
hospitals during the quarterly validation
process that do not match the patient’s
episode of care information as
determined by the CDAC contractor (in
other words, the contractor determines
that the hospital returned a medical
record that is different from that which
was requested). If the CDAC contractor
determines that the hospital has
submitted an invalid record selection
case, it awards a zero validation score
for the case because the hospital did not
submit the entire copy of the medical
record for that requested case. During
the reconsideration process, our review
of invalid record selections will initially
be limited to determining whether the
record submitted to the CDAC
contractor was actually an entire copy of
the requested medical record. If we
determine during reconsideration that
the hospital did submit the entire copy
of the requested medical record, then
we would abstract data elements from
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the medical record submitted by the
hospital.
3. Hospital requests reconsideration
for medical records not submitted to the
CDAC contractor within the 45 calendar
day deadline. Our review will initially
be limited to determining whether the
CDAC contractor received the requested
record within 45 calendar days, and
whether the hospital received the initial
medical record request and reminder
notice. If we determine during
reconsideration that the CDAC
contractor did receive a paper copy of
the requested medical record within 45
calendar days, then we would abstract
data elements from the medical record
submitted by the hospital. If we
determine that the hospital received two
letters requesting medical records and
still did not submit the requested
records within the 45 day period, CMS
will not accept these records as part of
the reconsideration. CMS will not
abstract data from charts not received
timely by the CDAC contractor.
In sum, we are initially limiting the
scope of our reconsideration reviews
involving validation to information
already submitted by the hospital
during the quarterly validation process,
and we will not abstract medical records
that were not submitted to the CDAC
contractor during the quarterly
validation process. We will expand the
scope of our review only if we find
during the initial review that the
hospital correctly and timely submitted
the requested medical records. In that
case, we would abstract data elements
from the medical record submitted by
the hospital as part of our review of its
reconsideration request.
If a hospital is dissatisfied with the
result of a RHQDAPU program
reconsideration decision, the hospital
may file a claim under 42 CFR part 405,
subpart R (a PRRB appeal). We solicited
public comments on the extent to which
these proposed procedures will be less
costly for hospitals, and whether they
will lead to fewer PRRB appeals.
Comment: With respect to a hospital
needing to receive a decision from CMS
prior to submitting a PRRB appeal, some
commenters requested that CMS
consider the impact of 90 days without
the annual payment update to a facility.
Commenters stated that the wait for
CMS’s decision and an appeal to the
PRRB would delay the process of appeal
by months if not half of the year.
Response: We appreciate the
commenters’ concern with the
timeframe of our reconsideration
process. Our goal is to provide a
thorough technical and programmatic
reconsideration of our initial RHQDAPU
decision in a timely manner. Generally,
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our review requires 60 to 90 days, and
hospitals granted their full payment
update during this process would not
need PRRB review. We are reviewing
and standardizing our reconsideration
process in an effort to reduce the wait
time, but this wait time is largely
dependent on the number of received
requests. We hope to reduce the 90-day
wait period in future years.
Comment: A commenter disagreed
with the proposed process to require
hospitals to resubmit all paperwork
submitted to the CDAC contractor for
RHQDAPU reconsideration purposes,
and instead proposed that the CDAC
store all medical record documentation.
Response: We appreciate the
comment. We considered the relative
cost to CMS and the taxpayers for
storing all hospitals’ submitted
validation records for an additional 12
to 18 months, relative to the proposed
process. We estimate from previous
RHQDAPU results that the proposed
process would impact 20 or fewer
hospitals annually, and believe that this
total burden to hospital is less than the
extra storage cost to CMS and the
taxpayers.
After consideration of the public
comments we received, we are adopting
the proposed RHQDAPU
reconsideration and appeals
requirements without any changes.
11. RHQDAPU Program Withdrawal
Deadlines
We proposed to accept RHQDAPU
program withdrawal forms for the FY
2012 payment determination from
hospitals until August 15, 2011. We
proposed this deadline so that we
would have sufficient time to update the
FY 2012 payment to hospitals starting
on October 1, 2011. If a hospital
withdraws from the program for the FY
2012 payment determination, it will
receive a 2.0 percentage point reduction
in its FY 2012 annual payment update.
We noted that once a hospital has
submitted a Notice of Participation
form, it is considered to be an active
RHQDAPU program participant until
such time as the hospital submits a
withdrawal form to CMS.
We did not receive any comments on
our proposal. We are adopting as final
our proposal regarding withdrawal
deadlines without any changes.
12. Electronic Health Records (EHRs)
a. Background
Starting with the FY 2006 IPPS final
rule, we have encouraged hospitals to
take steps toward the adoption of EHRs
(also referred to in previous rulemaking
documents as electronic medical
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records) that will allow for reporting of
clinical quality data from the EHRs
directly to a CMS data repository (70 FR
47420 through 47421). We encouraged
hospitals that are implementing,
upgrading, or developing EHR systems
to ensure that the technology obtained,
upgraded, or developed conforms to
standards adopted by HHS. We
suggested that hospitals also take due
care and diligence to ensure that the
EHR systems accurately capture quality
data and that, ideally, such systems
provide point-of-care decision support
that promotes optimal levels of clinical
performance.
We also continue to work with
standard setting organizations and other
entities to explore processes through
which EHRs could speed the collection
of data and minimize the resources
necessary for quality reporting as we
have done in the past.
We note that we have initiated work
directed toward enabling EHR
submission of quality measures through
EHR standards development and
adoption. We have sponsored the
creation of electronic specifications for
quality measures that are currently
proposed for the RHQDAPU program
and measures under future
consideration. We look to continue this
activity in the future.
Comment: Many commenters
applauded our work toward developing
measure specifications for EHR-based
data collection in the future. The
commenters believed this approach
would substantially reduce the
reporting burden on hospitals.
Commenters recommended that CMS
adopt specifications that would limit
inclusions to ADT, bed tracking, or ED
tracking board tools for these data
elements.
Response: We thank the commenters
for their encouragement of our efforts to
integrate EHR technology with the
RHQDAPU program. We will take these
comments regarding specifications into
consideration when we look to adopt
measures that can be collected via EHRs
in the future.
Comment: Some commenters
requested that CMS clarify whether
becoming a meaningful user of EHR
certified technology is a path to fulfill
both the RHQDAPU participation
requirement and the eligibility
requirements for the HITECH incentive
program for being a meaningful user of
certified EHR technology.
Response: As we have indicated, we
are actively seeking to provide an
alternative of EHR-based submission for
RHQDAPU measures that otherwise
would require chart or manual
abstraction. Prior to accepting measures
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through EHRs for RHQDAPU, as
commenters have suggested, it would be
necessary to assure that data submitted
and results calculated are equivalent to
that from chart or manual abstraction so
that results would be reliable and
consistent. As we proceed with new
measures development we would
anticipate that testing during the
measure development process and EHR
certification process would become
sufficiently standardized that additional
implementation testing would not be
needed.
We note that some important
RHQDAPU quality measures such as
HCAHPS experience of care measures
are based on survey data and do not
lend themselves to EHR reporting.
Similarly, certain outcome quality
measures, such as the current
RHQDAPU readmission measures, are
based on claims rather than clinical
data. Thus, not all RHQDAPU measures
will necessarily be capable of being
submitted through EHRs. As a
consequence, not all RHQDAPU
measures would necessarily be included
in the HITECH EHR incentive program.
b. EHR Testing of Quality Measures
Submission
As we have previously stated, we are
interested in the reporting of quality
measures using EHRs, and we continue
to encourage hospitals to adopt and use
EHRs that conform to the certification
criteria as will be defined by the
Secretary through the Office of the
National Coordinator for Health
Information Technology, HHS at 45 CFR
Part 170. We believe that the testing of
EHR submission is an important and
necessary step to establish the ability of
EHRs to report clinical quality measures
and the capacity of CMS to receive such
data.
The electronic specifications and
interoperability standards for EHRbased collection and transmission of the
data elements for the ED Throughput,
Stroke, and Venous Thromboembolism
(VTE) measures have been finalized by
the Health Information Technology
Standards Panel (HITSP) and are
available for review and testing at
https://www.HITSP.org. We anticipate
testing the components required for the
submission of clinical quality data
extracted from EHRs for these measures,
and are exploring different mechanisms
and formats that will aid the submission
process, as well as ensure that the
summary measure results extracted from
the EHRs are reliable.
We anticipate moving forward with
testing CMS’ technical ability to accept
data from EHRs for the ED, Stroke, and
VTE measures as early as summer of
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2011. We anticipate building upon the
work completed by the HITSP in both
the Connectathon and Health
Information Management Systems
Society (HIMSS) Interoperability
Showcase. This testing will encompass
an ‘‘end to end’’ view of data
transmission. Pursuant to the Paperwork
Reduction Act, we have previously
published a Federal Register notice and
information collection request for CMS–
10296 (74 FR 44366) seeking public
comments on the process we intended
to follow to select EHR vendors/
hospitals for testing CMS ability to
accept EHR-based data submissions. We
will notify interested parties of changes
in the process and timeline for testing
via the Inpatient EHR testing Web site
at: https://www.cms.hhs.gov/
HospitalQualityInits/
15_HospitalInpatientEHRTesting.asp.
The test measures described above are
not currently required under the
RHQDAPU program. In addition, the
posting of the electronic specifications
for any particular measure should not be
interpreted as a signal that we intend to
select the measure for inclusion in the
RHQDAPU program measure set.
Comment: A few commenters
supported CMS in launching the EHR
Testing of Inpatient Quality Measures
voluntary pilot established in the FY
2010 IPPS/RY 2010 LTCH PPS final
rule. The commenters suggested that the
implementation of the electronic
metrics effective January 1, 2012, should
be contingent upon successful EHR
testing by CMS so that the measures can
be reported electronically and not via
manual chart abstraction. A commenter
stated that electronic-specified clinical
quality measures should not be
included in the RHQDAPU program
until they are fully tested. The
commenter cited the examples of the
collection and transmission for the ED
Throughput, Stroke and VTE measures
which are undergoing HITSP and CMS
testing. The commenter urged CMS to
expedite its development and testing of
eMeasures to no later than year end CY
2010. The commenter asked for
clarification on the possibility of
retirement of the chart-abstracted
specifications for these three measure
sets once they can be collected and
transmitted electronically.
Response: As discussed previously,
we agree with the commenter’s concern
about the importance of testing the
electronic specifications of the clinical
quality measures prior to accepting
submission for EHRs for the RHQDAPU
program. We note that the January 2010
Connectathon, and the 2010 Healthcare
and Information Management Systems
Society (HIMSS) Interoperability
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Showcase conducted initial testing and
demonstration of some of the
Emergency Department (ED)
Throughput, Venous Thromboembolism
(VTE), and Stroke measures. It is our
intent not to require duplicative
reporting across programs. When the
data collection and transmission can be
achieved through certified EHR
technology, we may be able to rely upon
EHRs to transmit the data. However,
whether chart abstraction remains an
option as a data collection mechanism
for a given measure set adopted for the
RHQDAPU program will largely depend
upon the prevalence of EHR adoption
among RHQDAPU participating
hospitals.
As additional electronic specifications
for clinical quality measures are
developing, we plan to conduct testing
of the electronically specified measures
simultaneously. Also, we expect that
vendors and providers will continue the
testing for data collection and
transmission.
c. HITECH Act EHR Provisions
The HITECH Act (Title IV of Division
B of the ARRA, together with Title XIII
of Division A of the ARRA) authorizes
payment incentives under Medicare for
the adoption and use of certified EHR
technology beginning in FY 2011.
Hospitals are eligible for these payment
incentives if they meet requirements for
meaningful use of certified EHR
technology, which include reporting on
quality measures using certified EHR
technology. With respect to the
selection of quality measures for this
purpose, under section 1886(n)(3)(A)(ii)
of the Act, as added by section 4102 of
the HITECH Act, the Secretary shall
select measures, including clinical
quality measures, that hospitals must
provide to CMS in order to be eligible
for the EHR incentive payments. With
respect to the clinical quality measures,
section 1886(n)(3)(B)(i) of the Act
requires the Secretary to give preference
to those clinical quality measures that
have been selected for the RHQDAPU
program under section
1886(b)(3)(B)(viii) of the Act or that
have been endorsed by the entity with
a contract with the Secretary under
section 1890(a) of the Act. Any
measures must be proposed for public
comment prior to their selection, except
in the case of measures previously
selected for the RHQDAPU program
under section 1886(b)(3)(B)(viii) of the
Act.
Thus, the RHQDAPU program and the
HITECH Act have important areas of
overlap and synergy with respect to the
reporting of quality measures using
EHRs. We believe the financial
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incentives under the HITECH Act for
the adoption and meaningful use of
certified EHR technology by hospitals
will encourage the adoption and use of
certified EHRs for the reporting of
clinical quality measures under the
RHQDAPU program. Further, these
efforts to test the submission of quality
data through EHRs may provide a
foundation for establishing the capacity
of hospitals to send, and for CMS to
receive, quality measures via hospital
EHRs for future RHQDAPU program
measures.
We again note that the provisions in
this FY 2011 IPPS/LTCH PPS final rule
do not implicate or implement any
HITECH statutory provisions. Those
provisions are the subject of separate
rulemaking and public comment.
Comment: One commenter noted that
in moving forward, CMS should focus
on developing measures collected
through EHRs rather than using
manually intensive, chart-based
measures through the RHQDAPU
program. The commenter suggested that
we follow a more methodical framework
to prioritize and integrate measures into
the RHQDAPU and EHR incentive
program with a long-term goal of
transitioning from RHQDAPU to the
meaningful use criteria under the
HITECH EHR program.
Response: We agree with the
importance of developing electronic
specifications for new measures that are
developed. We expect over time that
EHRs will be the primary source of
quality measures data. To this end, we
have spearheaded electronic refinement
and standardization of data
transmission and performance
measures.
Comment: A number of commenters
requested that CMS address the
potential duplication of clinical quality
measures selected for use in the
RHQDAPU program, and the clinical
quality measures chosen for eligible
professionals (EPs), eligible hospitals
and critical access hospitals (CAHs) to
demonstrate meaningful use of certified
EHR technology under the HITECH EHR
incentive program. The commenters
urged CMS to avoid duplicative
reporting burden by considering only
clinical quality measures chosen for the
RHQDAPU program for the meaningful
use criteria in the EHR incentive
program for eligible professionals,
eligible hospitals and CAHs.
Response: The rationale for the
selection of the eligible hospital and
CAH measure under HITECH Act are
discussed in the HITECH EHR final rule
(75 FR 44314). The 15 hospital and CAH
measures were electronically specified
for use in the RHQDAPU program, with
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anticipated implementation once the
necessary development and
infrastructure implementation had been
completed. We have included two of the
HITECH measures in this final rule for
FY 2014 payment determination, based
on chart abstraction. We anticipate that
we will provide an option of electronic
submission of these measures.
Comment: Some commenters
recommended that EPs, eligible
hospitals and CAHs reporting to
RHQDAPU program via a certified EHR
should be deemed to have successfully
reported in the EHR incentive program
to satisfy the meaningful use criteria for
clinical quality measures.
Response: The HITECH Act requires
the Secretary to strive to avoid
duplicative and redundant reporting for
HITECH with respect to the RHQDAPU
program. However, as discussed
previously, RHQDAPU and HITECH are
established as separate incentive
programs with separate requirements.
The authorizing statutes do not provide
that qualifying for one program should
result in a hospital being deemed to
have qualified for the other. As the two
programs would have little overlap in
measures as finalized in this rule, we do
not believe it would be appropriate to
deem participation in the RHQDAPU
program as meeting the requirements for
successful reporting in the EHR
incentive program. However, where
feasible, we intend to align the data
submission requirements for measures
included in each program. As HIT
enabled clinical data will allow for new
measures to be developed, we will
consider aligning the requirements of
the two programs.
Comment: Many commenters
suggested aligning clinical quality
measure reporting across federal
agencies such as with the Health
Resources and Services Administration,
and across programs, such as with the
Children’s Health Insurance Program, to
avoid duplicative and redundant quality
performance reporting.
Response: As discussed, we have
always sought to avoid duplicative and
redundant reporting across federal
programs. We will seek to align more
quality initiative programs in future
rulemaking.
13. Qualification of Registries for
RHQDAPU Data Submission
In section IV.A.3.c.(4) of the proposed
rule, we proposed that hospitals would
select at least one of four registry-based
measure topics for which they will
report data on proposed measures to a
qualified registry beginning with
January 1, 2011 discharges, and allow
the registry to calculate and report
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measure data for the specified measures
to CMS (via QualityNet) for RHQDAPU
program purposes. We are not adopting
our proposal for the registry-based
measure topics in this final rule. We
also will not be pursuing the
qualification of registries for these
topics at this time. Below is the process
and requirements that we had proposed
to use to determine whether a registry
is qualified to collect and submit quality
measure data for RHQDAPU and the
comments received on the process.
We proposed to post on the
RHQDAPU program section of the
QualityNet Web site https://
www.qualitynet.org no later than
December 31, 2010 a list of qualified
registries for the FY 2013 RHQDAPU
payment determination, including the
registry name, contact information, and
the measure(s) for which the registry is
qualified and will report for the FY 2013
RHQDAPU payment determination. We
proposed measures for inclusion in each
of the four registry-based topics, and a
registry seeking to be qualified for a
particular topic would have to agree to
collect and report the measures
included in the topic. The proposed
measures support CMS and HHS
priorities for improved quality and
efficiency of care for Medicare
beneficiaries (such as, prevention;
chronic conditions; high cost and high
volume conditions; elimination of
health disparities; healthcare-associated
infections and other conditions; and
effective management of acute and
chronic episodes of care). We noted,
however, that none of the registries that
we qualify for this purpose will be
acting as a CMS contractor or agent. In
other words, hospitals will still be
responsible for making sure that the
data it submits to the qualified registry
is successfully processed and
transmitted by the registry to CMS.
We proposed to implement a selfnomination process for registries
seeking to submit FY 2013 RHQDAPU
program quality measures (including
measure calculations, numerators,
denominators, and exclusions) on behalf
of hospitals beginning with January 1,
2011 discharges. A registry would be
able to self-nominate if it meets the
following requirements:
• The registry has been collecting
data elements needed to calculate the
particular measures that are being
proposed for inclusion in the registrybased topic for which the registry is
seeking qualification for at least 3 years
prior to January 1, 2010.
• As of January 1, 2010, the registry
has been collecting such data from at
least 750 hospitals.
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• The registry must have the
capability to collect from hospitals all of
the data elements which are included in
the measure specifications and calculate
the results for the specified measures.
The measures are NQF-endorsed and
will be listed in the Hospital Measure
Specification Manual.
• The registry must agree to report the
hospital level measure data to CMS (via
QualityNet). During the registry
qualification process, CMS will inform
the registries of the specified reporting
format which will include:
Æ The volume of eligible cases
(reporting denominator);
Æ The volume of numerator events for
the quality measure (reporting
numerator);
Æ The number of cases excluded from
the measure; and
Æ The measure results.
• The registry must agree to transmit
quality measure data in a CMSapproved format. We expected that this
CMS-specified record layout would be
made available in late 2010;
• The registry must be able to perform
data quality validation checks on the
data received from hospitals to
determine if the data submitted by the
hospitals are accurate and agree to
submit an acceptable ‘‘validation
strategy’’ to CMS by December 15, 2011.
A validation strategy ascertains whether
hospitals have submitted data
accurately to the registry. An acceptable
validation strategy may include such
provisions as the registry being able to
verify the accuracy of hospital data
through random sampling or through
the hospital’s adherence to a required
sampling method;
• The registry must agree to enter into
and maintain with its participating
hospitals an appropriate Business
Associate agreement that complies with
HIPAA.
• The registry must obtain and keep
on file signed documentation showing
that each of its participating hospitals
has authorized the registry to calculate
and submit the quality measure
hospital-level data specified by CMS to
CMS. This documentation must be
obtained at the time the hospital
arranges to submit RHQDAPU program
quality measure data to the registry;
• The registry must agree to provide
CMS with access (if requested) to review
the data that the hospital submitted to
it for purposes of the RHQDAPU
program;
• The registry must agree to indicate
to CMS upon request whether a
particular hospital has satisfied the
registry’s participation requirements;
• The registry must agree to provide
CMS with a signed, written attestation
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statement via mail or e-mail which
states that the quality measure data that
the registry has submitted to CMS on
behalf of its participating hospitals is
accurate and complete.
• The registry must agree to provide
at least 1 feedback report per year to
participating hospitals;
• The registry must agree to provide
on-going technical assistance to its
participating hospitals with respect to
the hospitals’ submission of RHQDAPU
data; and
• The registry must agree to
participate in periodic RHQDAPU
program support calls hosted by CMS.
To apply to be a qualified registry for
any of the four proposed registry-based
topics, a registry must submit a selfnomination letter by October 15, 2010 to
https://www.RHQDAPU_Registries@cms.
hhs.gov containing the registry name,
point of contact, the proposed registrybased measure topic for which
qualification is being sought, and
detailed information regarding how the
registry satisfies the criteria listed
above.
Comment: In general, while
commenters agreed that the concept of
registry qualification criteria would lead
to more standardized collection and
quality control of data collected by
registries, they had numerous
suggestions for improvement of the
criteria listed, and believed that the
proposed timeframe for qualification
and subsequent implementation of data
collection was overly ambitious. Some
commenters recommended that any
approved registry must have a robust,
CMS-certified validation system that
can test the data submitted and identify
missing data. Some commenters
suggested that there should be an
alternative approach for data
submission that does not mandate
participation in a registry with an
associated fee. Numerous commenters
noted that the proposed requirement
that as of January 1, 2010, the registry
has been collecting such data from at
least 750 hospitals is arbitrary and
precludes smaller registries such as
State and regional registries from
participating. These commenters urged
CMS to revise its criteria for the number
of participating hospitals as of January
1, 2010, or to not consider a number of
participating hospitals at all.
Commenters also stated that the one-day
interval between the publication of a list
of qualified registries and the starting
date for the reporting of measures
beginning with required discharges is
unreasonable. One commenter was
concerned that the proposed timeline
for registries gives little advance notice
to hospitals to research options, budget
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resources and prepare for participation.
Commenters recommended that the
registry eligibility criteria include
current performance, data integrity, and
capacity to support hospitals to capture
reliable and valid data, and suggested
that of core measure vendors and other
specialty registries such as the acute
stroke care registry created by Congress
be eligible to qualify (The Paul
Coverdell National Acute Stroke
Registry (PCNASR/CDC)).
Response: We thank the commenters
for their recommendations. We
acknowledge the commenters’ concerns
and intend to reexamine our criteria and
timeline based upon the public
comment received. We are not finalizing
our proposal to qualify registries for
data collection for the four topics listed
earlier in this final rule for data
collection beginning with January 1,
2011 discharges. If we propose to
qualify registries for RHQDAPU data
collection in the future, we will take
into considerations all of the comments
we received.
14. RHQDAPU and Hospital Value
Based Purchasing Program
CMS received many comments about
the HVBP program under section
3001(a)(1) of the Affordable Care Act,
including the potential use of
RHQDAPU measures and the
infrastructure for the HVBP program.
We address comments related to
RHQDAPU measures in the appropriate
RHQDAPU measures section
categorized by payment year for the
measure. We did not propose any
requirements for implementation of
section 3001(a)(1) of the Affordable Care
Act in this rule. In the coming months,
we plan to convene at least one listening
session or Open Door Forum to listen to
public feedback about the HVBP
program. We will consider this feedback
when proposing HVBP program
requirements in the future.
B. Payment for Transfers of Cases From
Medicare Participating Acute Care
Hospitals to Nonparticipating Hospitals
and CAHs (§ 412.4)
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1. Background
Existing regulations at § 412.4(a)
provide that an inpatient is considered
discharged from a hospital paid under
the IPPS when the patient is either
formally released from the hospital or
dies in the hospital. Under certain
circumstances, a discharge is considered
a transfer for purposes of payment
under the IPPS. Section 412.4(b) defines
acute care transfers, and § 412.4(c)
identifies those discharges considered a
postacute care transfer. In accordance
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with § 412.4(f), when a patient is
transferred and his or her length of stay
is less than the geometric mean length
of stay for the MS–DRG to which the
case is assigned, the transferring
hospital is generally paid based on a
graduated per diem rate for each day of
the stay, not to exceed the full MS–DRG
payment that would have been made if
the patient had been discharged without
being transferred. In the case of acute
care transfers, the receiving hospital that
ultimately discharges the transferred
patient receives the full MS–DRG
payment, regardless of whether the
length of the patient’s inpatient stay
exceeds the geometric mean length of
stay for the applicable MS–DRG.
The per diem rate paid to a
transferring hospital is calculated by
dividing the full MS–DRG payment by
the geometric mean length of stay for
the MS–DRG. Based on an analysis that
showed that the first day of
hospitalization is the most expensive
(60 FR 5804), our policy generally
provides for payment that is double the
per diem amount for the first day, with
each subsequent day paid at the per
diem amount up to the full DRG
payment (§ 412.4(f)(1)). Transfer cases
also are eligible for outlier payments. In
general, the outlier threshold for transfer
cases, as described in § 412.80(b) of the
regulations, is equal to the fixed-loss
outlier threshold for nontransfer cases
(adjusted for geographic variations in
costs), divided by the geometric mean
length of stay for the MS–DRG, and
multiplied by the length of stay for the
case plus one day.
The transfer policy adjusts the
payments of the transferring hospital to
approximate the reduced costs of
transfer cases. Medicare adopted its
IPPS transfer policy because, if
Medicare were to pay the full MS–DRG
payment regardless of whether a patient
is transferred or discharged, there would
be a strong incentive for hospitals to
transfer patients to another IPPS
hospital early in their stay in order to
minimize costs while still receiving the
full MS–DRG payment.
b. Policy Change
The regulations at § 412.4(b) state that
a discharge of a hospital inpatient is
considered to be an acute care transfer
when the patient is readmitted on the
same day to another hospital that is paid
under the IPPS, or to a hospital that is
excluded from the IPPS because of
participation in a statewide cost control
program, unless the readmission is
unrelated to the initial discharge. These
regulations were developed under the
authority granted in section
1886(d)(5)(I)(ii) of the Act. Because a
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discharge is only considered an acute
care transfer if the receiving hospital
either is paid under IPPS or participates
in a statewide cost control program, the
current acute care transfer policy only
applies to transfers between acute care
hospitals that participate in the
Medicare program (‘‘participating acute
care hospitals’’); it does not currently
apply to acute care hospitals that would
otherwise be eligible to be paid under
the IPPS, but do not have an agreement
to participate in the Medicare program
(‘‘nonparticipating acute care
hospitals’’). The acute care transfer
policy also does not currently apply to
IPPS acute care hospital transfers to
CAHs.
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23997
and 23998), the intent of the acute care
transfer policy is to make payment to
the transferring hospital commensurate
with the resources it expends in treating
Medicare beneficiaries. As stated above,
a participating acute care hospital that
admits a beneficiary from a transferring
hospital receives a full MS–DRG
payment, as long as the receiving
hospital does not subsequently transfer
the beneficiary prior to the geometric
mean length of stay for that MS–DRG.
The transferring hospital receives a
reduced per diem payment amount. If
the acute care transfer policy did not
exist, Medicare would make separate
full MS–DRG payments to each of the
hospitals involved with the treatment of
the beneficiary, even though the
hospitals shared in one episode of care
for the same beneficiary and neither
provided the full spectrum of care for
that beneficiary for that episode of care.
Such a policy would inappropriately
pay a ‘‘double’’ Medicare payment and
would be inconsistent with the intent of
the acute care transfer policy.
Although a nonparticipating acute
care hospital is generally ineligible to
receive payments under Medicare, such
a hospital may still treat Medicare
patients. In addition, acute care
hospitals that do participate in the
Medicare program are not precluded
from transferring a Medicare patient to
a nonparticipating acute care hospital.
We note that a hospital that transfers a
patient early in the patient’s stay (that
is, prior to the geometric mean length of
stay of the patient’s MS–DRG) incurs
reduced costs for that case, regardless of
whether the patient is transferred to a
Medicare participating acute care
hospital or a nonparticipating acute care
hospital. A hospital that sends such a
transfer to a CAH incurs similarly
reduced costs, despite the fact that
transfers to CAHs are not currently
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included under the Medicare acute care
transfer policy.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we proposed policy
changes in order to avoid creating a
financial incentive for an IPPS hospital
to transfer cases to one type of provider
versus another. A transfer decision
should be made based on the clinical
merits of the beneficiary’s situation and
the transferring hospital’s capabilities.
More pointedly, we want to avoid
providing a Medicare participating
acute care hospital with an incentive to
transfer cases to a nonparticipating
acute care hospital or a CAH. Without
a policy change, these incentives still
exist as payment issues relating to the
IPPS transfer policy. With respect to
nonparticipating acute care hospitals, it
is frequently explained that the
Medicare conditions of participation
provide a certain minimum standard of
care that beneficiaries can expect, and
that Medicare does not make payments
to nonparticipating acute care hospitals
because these hospitals do not commit
to adhering to these conditions of
participation. As such, the lack of a
policy with regard to transfers to
nonparticipating acute care hospitals
results in an inappropriate payment
incentive.
Accordingly, in order to further align
the IPPS regulations relating to transfer
of cases under § 412.4(b) with its
original intent (that is, that a hospital’s
payment should be commensurate with
the resources it expends for the case), in
the proposed rule (75 FR 23997 through
23998), we proposed to add a new
paragraph (b)(3) to § 412.4 to specify
that an acute care hospital ‘‘transfer
case’’ includes a transfer to an acute care
hospital that would otherwise be
eligible to be paid under the IPPS, but
does not have an agreement to
participate in the Medicare program,
and a new paragraph (b)(4) to state that
an acute care hospital ‘‘transfer’’ also
includes a transfer to a CAH.
We also stated that, under the
proposed policy, hospitals would be
required to use patient discharge status
code ‘‘66’’ (Discharged/Transferred to a
Critical Access Hospital) on IPPS claims
to identify transfers to CAHs. For
transfers to nonparticipating acute care
hospitals, hospitals would be required
to continue to use patient status code
‘‘02’’ (Discharged/Transferred to a ShortTerm General Hospital for Inpatient
Care) on IPPS claims. We noted that the
National Uniform Billing Committee
(NUBC) periodically updates or changes
patient status codes; therefore, hospitals
should check NUBC guidance
periodically to determine whether there
have been any changes to these codes.
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Comment: One commenter asked
whether there was an exemption from
the policy for an acute care discharge to
a SNF that was unrelated to the acute
care inpatient stay.
Response: We did not propose to
make any changes to the postacute
transfer policy with respect to acute care
discharges to SNFs. Therefore, we
consider this comment to be outside the
scope of the proposed rule. However,
we note that the statute governing the
postacute transfer policy does not
provide for an exemption for unrelated
discharges to SNFs. In other words, a
case involving a patient who is
transferred from an acute care hospital
to a SNF for the provision of skilled
nursing services would be covered
under the postacute transfer policy
whether or not the services provided at
the SNF were related to the services
provided in the acute care hospital.
Because we did not receive any other
public comments on this proposal, we
are adopting it as final, without
modification. Specifically, we are
adding a new paragraph (b)(3) to § 412.4
to specify that an acute care hospital
‘‘transfer case’’ includes a transfer to an
acute care hospital that would otherwise
be eligible to be paid under the IPPS,
but does not have an agreement to
participate in the Medicare program,
and a new paragraph (b)(4) to state that
an acute care hospital ‘‘transfer’’ also
includes a transfer to a CAH.
C. Rural Referral Centers (RRCs)
(§ 412.96)
Under the authority of section
1886(d)(5)(C)(i) of the Act, the
regulations at § 412.96 set forth the
criteria that a hospital must meet in
order to qualify under the IPPS as an
RRC. For discharges that occurred
before October 1, 1994, RRCs received
the benefit of payment based on the
other urban standardized amount rather
than the rural standardized amount (as
discussed in the FY 1993 IPPS final rule
(59 FR 45404 through 45409)). Although
the other urban and rural standardized
amounts are the same for discharges
occurring on or after October 1, 1994,
RRCs continue to receive special
treatment under both the DSH payment
adjustment and the criteria for
geographic reclassification.
Section 402 of Public Law 108–173
raised the DSH adjustment for RRCs
such that they are not subject to the 12percent cap on DSH payments that is
applicable to other rural hospitals. RRCs
are also not subject to the proximity
criteria when applying for geographic
reclassification. In addition, they do not
have to meet the requirement that a
hospital’s average hourly wage must
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exceed, by a certain percentage, the
average hourly wage of the labor market
area where the hospital is located.
Section 4202(b) of Public Law 105–33
states, in part, ‘‘[a]ny hospital classified
as an RRC by the Secretary * * * for
fiscal year 1991 shall be classified as
such an RRC for fiscal year 1998 and
each subsequent year.’’ In the August 29,
1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated
RRC status for all hospitals that lost the
status due to triennial review or MGCRB
reclassification. However, CMS did not
reinstate the status of hospitals that lost
RRC status because they were now
urban for all purposes because of the
OMB designation of their geographic
area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR
47089), we indicated that we were
revisiting that decision. Specifically, we
stated that we would permit hospitals
that previously qualified as an RRC and
lost their status due to OMB
redesignation of the county in which
they are located from rural to urban, to
be reinstated as an RRC. Otherwise, a
hospital seeking RRC status must satisfy
all of the other applicable criteria. We
use the definitions of ‘‘urban’’ and
‘‘rural’’ specified in subpart D of 42 CFR
part 412. One of the criteria under
which a hospital may qualify as an RRC
is to have 275 or more beds available for
use (§ 412.96(b)(1)(ii)). A rural hospital
that does not meet the bed size
requirement can qualify as an RRC if the
hospital meets two mandatory
prerequisites (a minimum CMI and a
minimum number of discharges), and at
least one of three optional criteria
(relating to specialty composition of
medical staff, source of inpatients, or
referral volume). (We refer readers to
§ 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53
FR 38513).) With respect to the two
mandatory prerequisites, a hospital may
be classified as an RRC if—
• The hospital’s CMI is at least equal
to the lower of the median CMI for
urban hospitals in its census region,
excluding hospitals with approved
teaching programs, or the median CMI
for all urban hospitals nationally; and
• The hospital’s number of discharges
is at least 5,000 per year, or, if fewer, the
median number of discharges for urban
hospitals in the census region in which
the hospital is located. (The number of
discharges criterion for an osteopathic
hospital is at least 3,000 discharges per
year, as specified in section
1886(d)(5)(C)(i) of the Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that
CMS establish updated national and
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regional CMI values in each year’s
annual notice of prospective payment
rates for purposes of determining RRC
status. The methodology we used to
determine the national and regional CMI
values is set forth in the regulations at
§ 412.96(c)(1)(ii). The national median
CMI value for FY 2011 includes data
from all urban hospitals nationwide,
and the regional values for FY 2011 are
the median CMI values of urban
hospitals within each census region,
excluding those hospitals with
approved teaching programs (that is,
those hospitals that train residents in an
approved GME program as provided in
§ 413.75). These values are based on
dischares occurring during FY 2009
(October 1, 2008 through September 30,
2009), and include bills posted to CMS’
records through March 2010.
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24000), we
proposed that, in addition to meeting
other criteria, if rural hospitals with
fewer than 275 beds are to qualify for
initial RRC status for cost reporting
periods beginning on or after October 1,
2010, they must have a CMI value for
FY 2009 that is at least—
• 1.5127; or
• The median CMI value (not
transfer-adjusted) for urban hospitals
(excluding hospitals with approved
teaching programs as identified in
§ 413.75) calculated by CMS for the
census region in which the hospital is
located. (We refer readers to the table set
forth in the FY 2011 IPPS/LTCH PPS
proposed rule at 75 FR 24000.)
Based on the latest available data (FY
2009 bills received through March
2010), in addition to meeting other
criteria, if rural hospitals with fewer
than 275 beds are to qualify for initial
RRC status for cost reporting periods
beginning on or after October 1, 2010,
they must have a CMI value for FY 2009
that is at least—
• 1.5136; or
• The median CMI value (not
transfer-adjusted) for urban hospitals
(excluding hospitals with approved
teaching programs as identified in
§ 413.75) calculated by CMS for the
census region in which the hospital is
located.
The final median CMI values by
region are set forth in the following
table:
Case-Mix
index value
Region
1.
2.
3.
4.
5.
6.
7.
8.
9.
New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................
Middle Atlantic (PA, NJ, NY) ...........................................................................................................................................................
South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ...............................................................................................................
East North Central (IL, IN, MI, OH, WI) ..........................................................................................................................................
East South Central (AL, KY, MS, TN) .............................................................................................................................................
West North Central (IA, KS, MN, MO, NE, ND, SD) ......................................................................................................................
West South Central (AR, LA, OK, TX) ............................................................................................................................................
Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ...............................................................................................................................
Pacific (AK, CA, HI, OR, WA) .........................................................................................................................................................
A hospital seeking to qualify as an
RRC should obtain its hospital-specific
CMI value (not transfer-adjusted) from
its fiscal intermediary or MAC. Data are
available on the Provider Statistical and
Reimbursement (PS&R) System. In
keeping with our policy on discharges,
the CMI values are computed based on
all Medicare patient discharges subject
to the IPPS MS–DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that
CMS set forth the national and regional
numbers of discharges in each year’s
annual notice of prospective payment
rates for purposes of determining RRC
status. As specified in section
1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. In
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24000 and 24001), we
proposed to update the regional
standards based on discharges for urban
hospitals’ cost reporting periods that
began during FY 2008 (that is, October
1, 2007 through September 30, 2008),
which were the latest cost report data
available at the time the proposed rule
was developed.
Therefore, in the FY 2011 IPPS/LTCH
PPS proposed rule, we proposed that, in
addition to meeting other criteria, a
hospital, if it is to qualify for initial RRC
status for cost reporting periods
beginning on or after October 1, 2010,
Number of
discharges
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New England (CT, ME, MA, NH, RI, VT) ........................................................................................................................................
Middle Atlantic (PA, NJ, NY) ...........................................................................................................................................................
South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ...............................................................................................................
East North Central (IL, IN, MI, OH, WI) ..........................................................................................................................................
East South Central (AL, KY, MS, TN) .............................................................................................................................................
West North Central (IA, KS, MN, MO, NE, ND, SD) ......................................................................................................................
West South Central (AR, LA, OK, TX) ............................................................................................................................................
Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ...............................................................................................................................
Pacific (AK, CA, HI, OR, WA) .........................................................................................................................................................
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1.2993
1.3582
1.4567
1.4251
1.3771
1.4407
1.5240
1.6204
1.4861
must have, as the number of discharges
for its cost reporting period that began
during FY 2008, at least—
• 5,000 (3,000 for an osteopathic
hospital); or
• The median number of discharges
for urban hospitals in the census region
in which the hospital is located. (We
refer readers to the table set forth in the
FY 2011 IPPS/LTCH PPS proposed rule
at 75 FR 24001.)
Based on the latest discharge data
available at this time, that is, for cost
reporting periods that began during FY
2008, the final median numbers of
discharges for urban hospitals by census
region are set forth in the following
table:
Region
1.
2.
3.
4.
5.
6.
7.
8.
9.
50237
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7,713
11,346
11,393
9,232
7,016
8,159
7,081
9,282
8,622
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We note that the median number of
discharges for hospitals in each census
region is greater than the national
standard of 5,000 discharges. Therefore,
5,000 discharges is the minimum
criterion for all hospitals.
We reiterate that, if an osteopathic
hospital is to qualify for RRC status for
cost reporting periods beginning on or
after October 1, 2010, the hospital
would be required to have at least 3,000
discharges for its cost reporting period
that began during FY 2008.
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D. Payment Adjustment for Low-Volume
Hospitals (§ 412.101)
1. Background
As discussed in the June 2, 2010
supplemental proposed rule (75 FR
309023 through 30925), section
1886(d)(12) of the Act, as added by
section 406(a) of Public Law 108–173,
provides for a payment adjustment to
account for the higher costs per
discharge for low-volume hospitals
under the IPPS, effective beginning FY
2005. Sections 3125 and 10314 of the
Affordable Care Act amended the
definition of a low-volume hospital
under section 1886(d)(12)(C) of the Act.
Sections 3125 and 10314 of the
Affordable Care Act also revised the
methodology for calculating the
payment adjustment for low-volume
hospitals.
Prior to the amendments made by the
Affordable Care Act, section
1886(d)(12)(C)(i) of the Act defined a
low-volume hospital as ‘‘a subsection (d)
hospital (as defined in paragraph (1)(B))
that the Secretary determines is located
more than 25 road miles from another
subsection (d) hospital and that has less
than 800 discharges during the fiscal
year.’’ Section 1886(d)(12)(C)(ii) of the
Act further stipulates that the term
‘‘discharge’’ means ‘‘an inpatient acute
care discharge of an individual
regardless of whether the individual is
entitled to benefits under Part A.’’
Therefore, the term ‘‘discharge’’ refers to
total discharges, not merely Medicare
discharges. Furthermore, under section
406(a) of Public Law 108–173, which
initially added subparagraph (12) to
section 1886(d) of the Act, the provision
requires the Secretary to determine an
applicable percentage increase for these
low-volume hospitals based on the
‘‘empirical relationship’’ between ‘‘the
standardized cost-per-case for such
hospitals and the total number of
discharges of such hospitals and the
amount of the additional incremental
costs (if any) that are associated with
such number of discharges.’’ The statute
thus mandates that the Secretary
develop an empirically justifiable
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adjustment based on the relationship
between costs and discharges for these
low-volume hospitals. The statute also
limits the adjustment to no more than
25 percent.
Based on an analysis we conducted
for the FY 2005 IPPS final rule (69 FR
49099 through 49102), a 25 percent lowvolume adjustment to all qualifying
hospitals with less than 200 discharges
was found to be most consistent with
the statutory requirement to provide
relief to low-volume hospitals where
there is empirical evidence that higher
incremental costs are associated with
low numbers of total discharges. In the
FY 2006 IPPS final rule (70 FR 47432
through 47434), we stated that a
multivariate analyses supported the
existing low-volume adjustment
implemented in FY 2005. Therefore, the
low-volume adjustment of an additional
25 percent would continue to be
provided for qualifying hospitals with
less than 200 discharges.
2. Temporary Changes for FYs 2011 and
2012
As stated above, section 1886(d)(12)
of the Act was amended by sections
3125 and 10314 of the Affordable Care
Act. The changes made by these
sections of the Affordable Care Act are
effective only for discharges occurring
during FYs 2011 and 2012. Beginning
with FY 2013, the preexisting lowvolume hospital payment adjustment
and qualifying criteria, as implemented
in FY 2005, will resume.
Sections 3125(3) and 10314(1) of the
Affordable Care Act amended the
qualifying criteria for low-volume
hospitals under section 1886(d)(12)(C)(i)
of the Act to make it easier for hospitals
to qualify for the low-volume
adjustment. Specifically, the revised
provision specifies that, for FYs 2011
and 2012, a hospital qualifies as a lowvolume hospital if it is ‘‘more than 15
road miles from another subsection (d)
hospital and has less than 1,600
discharges of individuals entitled to, or
enrolled for, benefits under Part A
during the fiscal year.’’ In addition,
section 1886(d)(12)(D) of the Act, as
added by section 3125(4) and amended
by section 10314 of the Affordable Care
Act, provides that the payment
adjustment (the applicable percentage
increase) is to be determined ‘‘using a
continuous linear sliding scale ranging
from 25 percent for low-volume
hospitals with 200 or fewer discharges
of individuals entitled to, or enrolled
for, benefits under Part A in the fiscal
year to 0 percent for low-volume
hospitals with greater than 1,600
discharges of such individuals in the
fiscal year.’’
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Section 3125(3)(A) of the Affordable
Care Act revised the distance
requirement for FYs 2011 and 2012 from
‘‘25 road miles’’ to ‘‘15 road miles’’ such
that a low-volume hospital is required
to be only more than 15 road miles,
rather than more than 25 road miles,
from another subsection (d) hospital for
purposes of qualifying for the lowvolume payment adjustment in FYs
2011 and 2012. Therefore, in the June 2,
2010 supplemental proposed rule, we
proposed to revise our regulations at 42
CFR 412.101(b)(2)(ii) to provide that, to
qualify for the low-volume adjustment
in FYs 2011 and 2012, a hospital must
be located more than 15 road miles from
the nearest subsection (d) hospital. The
statute specifies the 15 mile distance in
‘‘road miles.’’ The existing regulations at
§ 412.101 also specify the current 25
mile distance requirement in ‘‘road
miles,’’ but do not provide a definition
of the term ‘‘road miles.’’ In the June 2,
2010 supplemental proposed rule, we
proposed to define the term ‘‘road miles’’
consistent with the term ‘‘miles’’ as
defined at § 412.92 for purposes of
determining whether a hospital qualifies
as a SCH. Specifically, § 412.92(c)(i)
defines ‘‘miles’’ as ‘‘the shortest distance
in miles measured over improved roads.
An improved road for this purpose is
any road that is maintained by a local,
State, or Federal government entity and
is available for use by the general
public. An improved road includes the
paved surface up to the front entrance
of the hospital.’’ We noted that while the
proposed change in the qualifying
criteria from 25 to 15 road miles is
applicable only for FYs 2011 and 2012,
the proposed definition of ‘‘road miles’’
would continue to apply even after the
distance requirement reverts to 25 road
miles beginning in FY 2013.
Sections 3125(3)(B) and 10314(1) of
the Affordable Care Act revised the
discharge requirement for FYs 2011 and
2012 to less than 1,600 discharges of
individuals entitled to, or enrolled for,
benefis under Medicare Part A during a
fiscal year. Prior to enactment of the
Affordable Care Act, under section
1886(d)(12) of the Act, as added by
section 406(a) of Public Law 108–173,
the discharge requirement to qualify as
a low-volume hospital is less than 800
total discharges annually, which
includes discharges of both Medicare
and non-Medicare patients. This
discharge requirement will apply also
for fiscal years after FY 2012.
Section 226(a) of the Act provides that
an individual is automatically ‘‘entitled’’
to Medicare Part A when the person
reaches age 65 or becomes disabled,
provided that the individual is entitled
to Social Security benefits under section
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202 of the Act. Once a person becomes
entitled to Medicare Part A, the
individual does not lose such
entitlement simply because there is no
Part A coverage of a specific inpatient
stay. For example, a patient does not
lose entitlement to Medicare Part A
simply because the individual’s Part A
hospital benefits have been exhausted;
other items and services (for example,
skilled nursing services) still might be
covered under Part A, and the patient
would qualify for an additional 90 days
of Part A hospital benefits if at least 60
days elapsed between the individual’s
first and second hospital stay
(§ 409.60(a) and (b)(1) and § 409.61(a)(1)
and (c) of the regulations).
In addition, beneficiaries who are
enrolled in Medicare Advantage (MA)
plans provided under Medicare Part C
continue to meet all of the statutory
criteria for entitlement to Part A benefits
under section 226. First, in order to
enroll in Medicare Part C, a beneficiary
must be ‘‘entitled to benefits under Part
A and enrolled under Part B’’ (section
1852(a)(1)(B)(i) of the Act). There is
nothing in the Act that suggests that
beneficiaries who enroll in a Part C plan
forfeit their entitlement to Part A
benefits. Second, once a beneficiary
enrolls in Part C, the MA plan must
provide the beneficiary with the benefits
to which the enrollee is entitled under
Medicare Part A, even though it may
also provide for additional
supplemental benefits (section
1852(a)(1)(A) of the Act). Third, under
certain circumstances, Medicare Part A
pays for care furnished to patients
enrolled in Part C plans. For example,
if, during the course of the year, the
scope of benefits provided under
Medicare Part A expands beyond a
certain cost threshold due to
Congressional action or a national
coverage determination, Medicare Part
A will pay the provider for the cost of
those services directly (section
1852(a)(5) of the Act). Similarly,
Medicare Part A also pays for federally
qualified health center services and
hospice care furnished to MA patients
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(section 1853(a)(4) and (h)(2) of the Act).
Thus, a patient enrolled in a Part C plan
remains entitled to benefits under
Medicare Part A.
Accordingly, for purposes of
determining the number of discharges
for ‘‘individuals entitled to, or enrolled
for, benefits under Part A,’’ we proposed
to include all discharges associated with
individuals entitled to Part A, including
discharges of individuals whose
inpatient benefits are exhausted or
whose stay was not covered by
Medicare and discharges of individuals
enrolled in an MA plan under Medicare
Part C. Because a hospital may only
qualify for this adjustment if the
hospital has fewer than 1,600 discharges
for patients entitled to Part A, the
hospital must submit a claim to
Medicare on behalf of all Part A entitled
individuals, including a no-pay claim
for patients who are enrolled in Part C,
in order for Medicare to assure that
these discharges are included in the
determination of whether the hospital
has fewer than 1,600 discharges for
patients entitled to Part A.
Section 3125(4) of the Affordable Care
Act added section 1886(d)(12)(D) to the
Act, and section 10314(2) of the
Affordable Care Act modified section
1886(d)(12)(D) of the Act. Section
1886(d)(12)(D) of the Act modified the
methodology for calculating the
payment adjustment under section
1886(d)(12)(A) of the Act for lowvolume hospitals for discharges
occurring in FYs 2011 and 2012. For FY
2010 and prior fiscal years, and
beginning again in FY 2013, sections
1886(d)(12)(A) and (B) of the Act require
the Secretary to determine an applicable
percentage increase for low-volume
hospitals based on the ‘‘empirical
relationship’’ between ‘‘the standardized
cost-per-case for such hospitals and the
total number of discharges of such
hospitals and the amount of the
additional incremental costs (if any) that
are associated with such number of
discharges.’’ The statute thus requires
the Secretary to develop an empirically
justifiable adjustment based on the
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50239
relationship between costs and
discharges for these low-volume
hospitals. The statute also limits the
adjustment to no more than 25 percent.
Based on analyses we conducted for the
FY 2005 IPPS final rule (69 FR 49099
through 49102) and the FY 2006 IPPS
final rule (70 FR 47432 through 47434),
a 25 percent low-volume adjustment to
all qualifying hospitals with less than
200 discharges was found to be most
consistent with the statutory
requirement to provide relief to lowvolume hospitals where there is
empirical evidence that higher
incremental costs are associated with
low numbers of total discharges.
However, section 1886(d)(12)(D) of the
Act, as added by the Affordable Care
Act, provides that, for discharges
occurring in FYs 2011 and 2012, the
Secretary shall determine the applicable
percentage increase using a continuous,
linear sliding scale ranging from an
additional 25 percent payment
adjustment for hospitals with 200 or
fewer Medicare discharges to 0 percent
additional payment for hospitals with
more than 1,600 Medicare discharges. In
the June 2, 2010 supplemental proposed
rule (75 FR 30925), we proposed to
apply this payment adjustment based on
increments of 100 discharges (beginning
with more than 200 discharges), with
the applicable percentage increase
decreasing linearly in equal amounts by
1.6667 percent for every additional 100
Medicare discharges, with no payment
adjustment for hospitals with more than
1,599 Medicare discharges. We did not
propose an adjustment for a hospital
with exactly 1,600 discharges because,
as specified in section 1886(d)(12)(C)(i)
of the Act, as amended, a hospital must
have ‘‘less than’’ 1,600 discharges in
order to qualify as a low-volume
hospital. Consistent with the statute, we
proposed that hospitals with 200 or
fewer Medicare discharges would
receive an applicable percentage
increase of 25 percent. We proposed
that the payment adjustment would be
as determined below:
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While we proposed to revise the
qualifying criteria and the payment
adjustment for low-volume hospitals for
FYs 2011 and 2012, consistent with the
amendments made by the Affordable
Care Act, we noted that we did not
propose to modify the process for
requesting and obtaining the lowvolume hospital payment adjustment. In
order to qualify, a hospital must provide
to its fiscal intermediary or MAC
sufficient evidence to document that it
meets the number of Medicare
discharges and distance requirements.
The fiscal intermediary or MAC will
determine, based on the most recent
data available, if the hospital qualifies
as a low-volume hospital, so that the
hospital will know in advance whether
or not it will receive a payment
adjustment and, if so, the add-on
percentage. The fiscal intermediary or
MAC and CMS may review available
data, in addition to the data the hospital
submits with its request for low-volume
status, in order to determine whether or
not the hospital meets the qualifying
criteria. In the June 2, 2010
supplemental proposed rule (75 FR
30925), we also noted that currently a
prior cost reporting period is used to
determine if the hospital meets the
discharge criteria to receive the lowvolume payment adjustment in the
current year.
In the June 2, 2010 supplemental
proposed rule (75 FR 30925), we also
noted that as compared to the existing
methodology for determining the
payment adjustment for low-volume
hospitals, no hospital would receive a
lower payment adjustment under our
proposed methodology for FYs 2011 and
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2012. Although the statute specifies
that, for years other than FYs 2011 and
2012, a hospital is a low-volume
hospital if it has less than 800
discharges, currently only hospitals
with fewer than 200 discharges receive
a payment adjustment, an additional 25
percent, because the statute requires
that the adjustment be empirically based
to provide relief to low-volume
hospitals where there is empirical
evidence that higher incremental costs
are associated with low numbers of total
discharges. Consistent with section
1886(d)(12)(D) of the Act, for FYs 2011
and 2012, we indicated that under our
proposal we would continue to pay
hospitals with fewer than 200
discharges a payment adjustment
amount equal to an additional 25
percent.
We proposed to revise our regulations
at § 412.101 to reflect our proposal
outlined above. We also proposed a
clarification to the existing regulations
to indicate that a hospital must continue
to qualify as a low-volume hospital in
order to receive the payment adjustment
in that year; that is, it is not based on
a one-time qualification. Specifically,
existing § 412.101(a)(3) states that ‘‘The
fiscal intermediary makes the
determination of the discharge count for
purposes of determining a hospital’s
qualification for the adjustment based
on the hospital’s most recent submitted
cost report.’’ This may mistakenly be
interpreted to mean that once a hospital
qualifies as a low-volume hospital, no
further qualification is needed.
Comment: Several commenters stated
that the statute requires the low-volume
payment adjustment to be made using a
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Fmt 4701
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‘‘continuous linear sliding scale,’’ but
that the proposed payment adjustments
based on increments of 100 discharges
are not continuous. The commenters
requested the low-volume adjustment
for FYs 2011 and 2012 be determined
using a specific continuous, linear
equation that they included in their
comments. The commenters also stated
that determining the payment
adjustment using their submitted linear
equation, rather than the proposed 100discharge increments, would avoid a
significant change in the payment
adjustment for a hospital if the hospital
experienced only a small change in its
number of Medicare discharges from
one year to the next.
Response: We disagree with the
commenters that our proposal to
determine the low-volume payment
adjustment for FYs 2011 and 2012 based
on increments of 100 discharges does
not meet the ‘‘continuous linear sliding
scale’’ statutory requirement. Our
proposed methodology provided for a
continuous linearly decreasing
adjustment in the amount of a fixed
percentage for every additional 100
Medicare discharges. However, after
consideration of public comments
regarding the ‘‘continuous linear sliding
scale’’ specified by the statute for the
low-volume payment adjustment for
FYs 2011 and 2012, we agree that an
adjustment based on the linear equation
provided by the commenters would
result in less fluctuation in the payment
amount in situations in which the
number of discharges varied slightly in
both years. We believe this will assist
hospitals in their annual fiscal planning.
Therefore, in this final rule, we are
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adopting the continuous linear sliding
scale equation suggested by
commenters, to determine the lowvolume payment adjustment for FYs
2011 and 2012 for eligible low-volume
hospitals with Medicare discharges of
more than 200 and less than 1,600 (that
is, from 201 to 1,599 Medicare
discharges). Consistent with the statute
and as we proposed, for FYs 2011 and
2012 for eligible low-volume hospitals
with 200 or fewer Medicare discharges,
we are finalizing a low-volume payment
adjustment of 25 percent. Therefore,
under new § 412.101(c)(2), for FYs 2011
and 2012, the low-volume adjustment
will be determined as follows:
• Low-volume hospitals with 200 or
fewer Medicare discharges will receive
a low-volume adjustment of an
additional 25 percent for each
discharge.
• Low-volume hospitals with
Medicare discharges of more than 200
and fewer than 1,600 will receive for
each discharge a low-volume
adjustment of an additional percent
calculated using the formula: [(4/
14)¥(Medicare discharges/5600)].
Commenters have suggested that the
correct formula to apply the linear scale
specified in section 1886(d)(12)(D) of
the Act is (4/14)¥(Medicare discharges/
5600). This mathematical interpretation
is consistent with the plain language of
section 1886(d)(12)(D) of the Act. For
qualifying hospitals with fewer than
1,600 Medicare discharges but more
than 200 Medicare discharges, the lowvolume add-on payment is calculated by
subtracting from 25 percent the
proportion of payments associated with
the Medicare discharges in excess of
200. That proportion is calculated by
multiplying the Medicare discharges in
excess of 200 by a fraction that is equal
to the maximum available add-on
payment (25 percent) divided by a
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number represented by the range of
Medicare discharges for which this
policy applies (1,600 minus 200, or
1,400).
In other words, for qualifying
hospitals with fewer than 1,600
Medicare discharges but more than 200
Medicare discharges, the add-on
payment is calculated using the
following formula:
Low volume add-on payment =
0.25¥[(0.25/1400)*(Number of
Medicare discharges¥200)] = (4/
14)¥(Medicare discharges/5600).
Our proposal had been to apply this
formula through use of a linear scale
that represented this formula for every
100 discharges. In light of the
commenters’ suggestion, we will apply
this formula for each discharge. We
believe this is an equally appropriate
application of the statutory provision
and that it creates a more precise
calculation for the add-on payment.
As we proposed and described in
greater detail above, in this final rule,
we are revising the regulations to
specify at § 412.101(a) that ‘‘Medicare
discharges’’ means a discharge of
inpatients entitled to Medicare Part A,
including discharges associated with
individuals whose inpatient benefits are
exhausted or whose stay was not
covered by Medicare and also
discharges of individuals enrolled in a
MA organization under Medicare Part C.
As stated above, beginning with FY
2013, that is, with discharges occurring
on or after October 1, 2012, the existing
low-volume hospital payment
adjustment and qualifying criteria as
implemented in FY 2005 will resume.
Comment: A few commenters asked
for clarification regarding what is
required of the hospital in order to
receive the low-volume adjustment for
FYs 2011 and 2012, that is, what is the
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50241
process, what documentation is
required to verify Medicare discharges,
which data will be used, and can the
distance from comparable hospitals be
documented with Web-based tools such
as MapQuest.
Response: In order to determine the
low-volume adjustment for FYs 2011
and 2012, CMS will determine the
number of Medicare discharges from the
most recent available Medicare
discharge data from the MedPAR files.
These data will provide the number of
discharges for individuals that are
entitled to or enrolled for Medicare Part
A, as required by statute. As noted
elsewhere in this final rule, the
MedPAR discharge data now include
discharges for individuals enrolled in a
MA organization under Medicare Part C
and discharges for patients who are
entitled to Medicare Part A, but whose
Part A inpatient benefits have been
exhausted or whose stay was not
covered by Medicare. Therefore, for FY
2011, the low-volume payment
adjustment will be determined using
Medicare discharge data for FY 2009
from the March 2010 update of the
MedPAR files, as these are the most
recent available data. (We expect to use
Medicare claims data for FY 2010 to
determine the low-volume payment
adjustment for FY 2012, as these will be
the most recent available data at that
time.)
Below we are providing a chart that
lists the hospitals with fewer than 1,600
Medicare discharges based on the March
2010 update of the FY 2009 MedPAR
files. Eligibility for the low-volume
payment adjustment for FY 2011 and FY
2012 is also dependent upon meeting
the mileage criteria specified at
§ 412.101(b)(2)(ii), as finalized in this
final rule.
BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C
We note that this list of hospitals with
fewer than 1,600 Medicare discharges
does not reflect whether or not the
hospital meets the mileage criterion,
that is, the hospital also must be located
more than 15 road miles from any other
IPPS hospital. In order to receive the
applicable low-volume percentage addon payment, a hospital must notify and
provide documentation to its fiscal
intermediary or MAC that it meets this
mileage criterion. The use of a Webbased mapping tool, such as MapQuest,
as part of documenting that the hospital
meets the mileage criterion for lowvolume hospitals is acceptable. The
fiscal intermediary or MAC will
determine if the information submitted
by the hospital, such as the name and
street address of the nearest hospitals,
location on a map, and distance (in road
miles, as defined in the regulations at
§ 412.101(a)) from the hospital
requesting low-volume hospital status,
is sufficient to document that it meets
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the mileage criterion. If not, the fiscal
intermediary or MAC will follow up
with the hospital in order to obtain
additional necessary information to
determine whether or not the hospital
meets the low-volume mileage criterion.
The fiscal intermediary or MAC will
refer to the hospital’s Medicare
discharge data determined by CMS (as
shown in the chart above for FY 2011
and posted on the CMS Web site at:
https://www.cms.gov) to determine
whether or not the hospital meets the
discharge criterion, and the amount of
the payment adjustment, once it is
determined that both the mileage and
discharge criteria are met. The Medicare
discharge data shown in the chart
above, as well as the Medicare discharge
data for all hospitals with claims in the
March 2010 update of the FY 2009
MedPAR files, also will be available on
the CMS Web site for hospitals to check
their Medicare discharges to help them
to decide whether or not to apply for
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low-volume hospital status. We are
revising the regulations at § 412.101(b)
to reflect the policy of basing the
discharge criterion for FYs 2011 and
2012 (using Medicare discharges) on the
most recently available MedPAR data.
We will continue to base the discharge
criterion (using total discharges,
Medicare and non-Medicare) on the
hospital’s most recently submitted cost
report data, as we do under the existing
policy, for FY 2005 through FY 2010
and FY 2013 and subsequent fiscal
years.
For FY 2011, the hospital should
make its request for low-volume
hospital status in writing to its fiscal
intermediary or MAC by September 1,
2010, so that the applicable low-volume
percentage add-on will be applied to
payments for its discharges beginning
on or after October 1, 2010. For FY
2012, a hospital that qualified for the
low-volume adjustment in FY 2011 may
continue to receive the add-on payment,
without reapplying, if it continues to
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meet the Medicare discharge criterion
based on the latest available MedPAR
data. However, the hospital must verify
in writing to its fiscal intermediary or
MAC that it continues to be more than
15 miles from any other IPPS hospital.
(As noted above, we expect Medicare
claims data from FY 2010 to be available
to determine the low-volume payment
adjustment for FY 2012.) A hospital that
was not a low-volume hospital in FY
2011, and believes it meets the
discharge and mileage criterion for FY
2012, should make its request in
writing, with documentation that it
meets the mileage criterion, to its fiscal
intermediary or MAC by September 1,
2011, in order for the applicable lowvolume percentage add-on to be applied
beginning with discharges on or after
October 1, 2011.
Comment: A few commenters
requested clarification regarding the
application of the low-volume payment
adjustment at section 1886(d)(12) of the
Act to SCHs and MDHs, given that these
types of hospitals are also subsection (d)
hospitals. These commenters also
requested that CMS explicitly state that
the applicable low-volume percentage
add-on is applied to an SCH’s or a
MDH’s payments at the Federal rate or
the hospital-specific rate.
Response: Section 1886(d)(12)(C)(i)
defines a low-volume hospital, in part,
as a ‘‘subsection (d) hospital.’’ SCHs and
MDHs are ‘‘subsection (d) hospitals’’
although they can be paid under a
hospital-specific rate instead of under
the Federal standardized amount under
the IPPS. As subsection (d) hospitals,
SCHs and MDHs are eligible to receive
the low-volume adjustment if the
hospital meets the discharge and
mileage criteria. Section 1886(d)(12)(A)
states that the applicable low-volume
percentage add-on payment will be ‘‘[i]n
addition to any payments calculated
[under section 1886]’’. For SCHs and
MDHs, payment under section 1886 is
determined using either the Federal rate
or the hospital-specific rate, whichever
results in a greater payment.
After consideration of the public
comments we received, we are adopting
the continuous linear sliding scale
equation set forth by commenters to
determine the low-volume payment
adjustment for FYs 2011 and 2012 for
eligible low-volume hospitals with
Medicare discharges of more than 200
and less than 1,600 (that is, from 201 to
1,599 Medicare discharges), and we
have modified § 412.101(c)(2) of the
regulations in this final rule
accordingly. We are revising § 412.101
to reflect the final changes as discussed
above. In addition, we note that we are
making structural changes to the final
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regulation text at § 412.101 as compared
to the proposed regulation text at
§ 412.101(for example, we are
combining proposed paragraph
(b)(2)(iii) into paragraph (b)(2)(i) to more
concisely reflect the final policy that we
are establishing in this final rule).
E. Indirect Medical Education (IME)
Adjustment (§ 412.105)
1. Background
Section 1886(d)(5)(B) of the Act
provides for an additional payment
amount under the IPPS for hospitals
that have residents in an approved
graduate medical education (GME)
program in order to reflect the higher
indirect patient care costs of teaching
hospitals relative to nonteaching
hospitals. The regulations regarding the
calculation of this additional payment,
known as the indirect medical
education (IME) adjustment, are located
at § 412.105.
Public Law 105–33 (BBA 1987)
established a limit on the number of
allopathic and osteopathic residents that
a hospital may include in its full-time
equivalent (FTE) resident count for
direct GME and IME payment purposes.
Under section 1886(h)(4)(F) of the Act,
for cost reporting periods beginning on
or after October 1, 1997, a hospital’s
unweighted FTE count of residents for
purposes of direct GME may not exceed
the hospital’s unweighted FTE count for
its most recent cost reporting period
ending on or before December 31, 1996.
Under section 1886(d)(5)(B)(v) of the
Act, a similar limit on the FTE resident
count for IME purposes is effective for
discharges occurring on or after October
1, 1997.
2. IME Adjustment Factor for FY 2011
The IME adjustment to the MS–DRG
payment is based in part on the
applicable IME adjustment factor. The
IME adjustment factor is calculated by
using a hospital’s ratio of residents to
beds, which is represented as r, and a
formula multiplier, which is
represented as c, in the following
equation: c × [{1 + r}.405 ¥ 1]. The
formula is traditionally described in
terms of a certain percentage increase in
payment for every 10-percent increase
in the resident-to-bed ratio.
Section 502(a) of Public Law 108–173
modified the formula multiplier (c) to be
used in the calculation of the IME
adjustment. Prior to the enactment of
Public Law 108–173, the formula
multiplier was fixed at 1.35 for
discharges occurring during FY 2003
and thereafter. In the FY 2005 IPPS final
rule, we announced the schedule of
formula multipliers to be used in the
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calculation of the IME adjustment and
incorporated the schedule in our
regulations at § 412.105(d)(3)(viii)
through (d)(3)(xii). Section 502(a)
modified the formula multiplier
beginning midway through FY 2004 and
provided for a new schedule of formula
multipliers for FYs 2005 and thereafter
as follows:
• For discharges occurring on or after
April 1, 2004, and before October 1,
2004, the formula multiplier is 1.47.
• For discharges occurring during FY
2005, the formula multiplier is 1.42.
• For discharges occurring during FY
2006, the formula multiplier is 1.37.
• For discharges occurring during FY
2007, the formula multiplier is 1.32.
• For discharges occurring during FY
2008 and fiscal years thereafter, the
formula multiplier is 1.35.
Accordingly, for discharges occurring
during FY 2011, the formula multiplier
is 1.35. We estimate that application of
this formula multiplier for the FY 2011
IME adjustment will result in an
increase in IPPS payment of 5.5 percent
for every approximately 10-percent
increase in the hospital’s resident-to-bed
ratio.
3. IME-Related Changes in Other
Sections of this Final Rule
We refer readers to section IV.H.2.
and IV.H.3. of the preamble of this final
rule for a discussion of changes to the
policies for identifying ‘‘approved
medical residency programs’’ and the
electronic submission of Medicare GME
affiliation agreements.
F. Payment Adjustment for Medicare
Disproportionate Share Hospitals
(DSHs): Supplemental Security Income
(SSI) Fraction (§ 412.106)
1. Background
Section 1886(d)(5)(F) of the Act
provides for additional Medicare
payments to subsection (d) hospitals
that serve a significantly
disproportionate number of low-income
patients. The Act specifies two methods
by which a hospital may qualify for the
Medicare disproportionate share
hospital (DSH) adjustment. Under the
first method, hospitals that are located
in an urban area and have 100 or more
beds may receive a Medicare DSH
payment adjustment if the hospital can
demonstrate that, during its cost
reporting period, more than 30 percent
of its net inpatient care revenues are
derived from State and local
government payments for care furnished
to needy patients with low incomes.
This method is commonly referred to as
the ‘‘Pickle method.’’
The second method for qualifying for
the DSH payment adjustment, which is
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the most common, is based on a
complex statutory formula under which
the DSH payment adjustment is based
on the hospital’s geographic
designation, the number of beds in the
hospital, and the level of the hospital’s
disproportionate patient percentage
(DPP). A hospital’s DPP is the sum of
two fractions: the ‘‘Supplemental
Security Income (SSI) fraction’’ and the
‘‘Medicaid fraction.’’ The SSI fraction
(also known as the ‘‘SSI ratio’’ or the
‘‘Medicare fraction’’) is computed by
dividing the number of the hospital’s
inpatient days that are furnished to
patients who were entitled to both
Medicare Part A (including patients
who are enrolled in a Medicare
Advantage (Part C) plan) and SSI
benefits by the hospital’s total number
of patient days furnished to patients
entitled to benefits under Medicare Part
A (including patients who are enrolled
in a Medicare Advantage (Part C) plan).
The Medicaid fraction is computed by
dividing the hospital’s number of
inpatient days furnished to patients
who, for such days, were eligible for
Medicaid, but were not entitled to
benefits under Medicare Part A, by the
hospital’s total number of inpatient days
in the same period.
Because the DSH payment adjustment
is part of the IPPS, the DSH statutory
references (under section 1886(d)(5)(F)
of the Act) to ‘‘days’’ apply only to
hospital acute care inpatient days.
Regulations located at 42 CFR 412.106
govern the Medicare DSH payment
adjustment and specify how the DPP is
calculated as well as how beds and
patient days are counted in determining
the DSH payment adjustment. Under
§ 412.106(a)(1)(i), the number of beds for
the Medicare DSH payment adjustment
is determined in accordance with bed
counting rules for the IME adjustment
under § 412.105(b).
2. CMS’ Current Data Matching Process
for the SSI Fraction
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24002),
from the inception of the Medicare DSH
adjustment in 1986, CMS (formerly
HCFA) has calculated the SSI fraction
for each acute care hospital paid under
the IPPS. This fraction, in combination
with the Medicaid fraction, is used to
determine whether the provider
qualifies for a DSH payment adjustment
and the amount of any such payment
(51 FR 16772, 16777, May 6, 1986
interim final rule). In determining the
number of inpatient days for individuals
entitled to both Medicare Part A and
SSI, as required for calculation of the
numerator of the SSI fraction, CMS
matches the Medicare records and SSI
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eligibility records for each hospital’s
patients during the Federal fiscal year,
unless the provider requests calculation
of the SSI fraction on a cost reporting
period basis (in which case the provider
would receive its SSI fraction based on
its own cost reporting period). The data
underlying the match process are drawn
from: (a) The Medicare Provider
Analysis and Review (MedPAR) data
file; and (b) SSI eligibility data provided
by the Social Security Administration
(SSA). CMS has matched Medicare and
SSI eligibility records using Title II
numbers (included in the SSI records)
and Health Insurance Claims Account
Numbers (HICANs) (contained in the
MedPAR file). Below we provide a more
detailed description of both a Title II
number and a HICAN.
Title II Number: If a person qualifies
for retirement or disability benefits
under Title II of the Act (42 U.S.C. 401
et seq.), SSA assigns a ‘‘Title II number’’
to the individual. If the Title II
beneficiary’s own earnings history (or
the individual’s disability) were the
basis for such benefits, the person’s
Social Security number (SSN) would
constitute the ‘‘root’’ of the individual’s
Title II number. However, if the person’s
Title II benefits were based on the
earnings history of another individual
(for example, a spouse), that other
person’s SSN would provide the root for
the beneficiary’s Title II number. In
addition to a root SSN, each Title II
number ends with a Beneficiary
Identification Code (BIC) that identifies
the basis for an individual’s entitlement
to benefits. For example, a person who
becomes eligible for benefits under his
or her own account would be described
by his or her SSN followed by the BIC
‘‘A’’ whereas a wife who becomes
eligible for benefits under her husband’s
account would be described by his SSN
followed by the BIC ‘‘B.’’ Children who
become eligible under a parent’s
account would be described by the
parent’s SSN followed by the BIC ‘‘C1,’’
‘‘C2,’’ etc.
HICAN: When a person becomes
entitled to Medicare benefits, he or she
is assigned a HICAN for purposes of
processing claims submitted on his or
her behalf for Medicare services. A
beneficiary’s HICAN (which may not
necessarily contain his or her SSN) is
included on the Medicare inpatient
hospital claim.
Each HICAN for a beneficiary should
be identical, at the same point in time,
to that individual’s Title II number. This
is because HICANs and Title II numbers
are both assigned on the basis of the
same data source, the SSA-maintained
Master Beneficiary Record, and by using
the same rules (that is, the rules for
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determining which person’s SSN will
serve as the root for an individual’s
HICAN and Title II number and for
determining the BIC for both types of
numbers).
We note that a person’s Title II
number and HICAN can change over
time. For example, if the individual’s
entitlement to Title II and Medicare
benefits was originally based on the
earnings history of a first spouse, but the
beneficiary later qualified for such
benefits on the basis of a second
spouse’s earnings history, the
beneficiary’s HICAN and Title II number
would change accordingly. Specifically,
the first spouse’s SSN would be the root
of the beneficiary’s original HICAN and
Title II number; later, the second
spouse’s SSN would become the root of
the beneficiary’s second HICAN and
Title II number.
The SSI eligibility data that CMS
receives from SSA contain monthly
indicators to denote which month(s)
each person was eligible for SSI benefits
during a specific time period. The
current matching process uses only one
Title II number (which is included in
the SSI file) and one HICAN (found in
the MedPAR file) for each beneficiary.
In the current matching process, CMS
has used the HICAN because it is the
patient identifier that is provided by
hospitals on the Medicare claim.
Because SSNs are not included on
Medicare inpatient claims, CMS has not
historically used SSNs in the match
process.
For a given fiscal year, CMS
determines the numerator of the
hospital’s SSI fraction (that is, the
number of the hospital’s inpatient days
for all of its patients who were
simultaneously entitled to Medicare
Part A benefits and SSI benefits) by
calculating the sum of the number of the
hospital’s inpatient days that are
associated with all of the identical Title
II numbers and HICANs for the
hospital’s claims that are found through
the data matching process. In turn, CMS
determines the denominator of the
hospital’s SSI fraction by calculating the
sum of the number of the hospital’s
inpatient days for patients entitled to
benefits under Medicare Part A
(regardless of SSI eligibility) that are
included in the hospital’s inpatient
claims for the period.
3. Baystate Medical Center v. Leavitt
Court Decision
In Baystate Medical Center v. Leavitt,
545 F. Supp. 2d 20, as amended, 587 F.
Supp. 2d 37, 44 (D.D.C. 2008), the
district court concluded that, in certain
respects, CMS’ current matching process
(as described above) did not use the
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‘‘best available data’’ to match Medicare
patient day information with SSI
eligibility data when calculating the
plaintiff’s SSI fractions for FYs 1993
through 1996. Specifically, the court
found that:
• Stale SSI Records and Forced Pay
SSI Records. For the earliest years in
question in Baystate, the SSI eligibility
data did not include ‘‘stale’’ records—
that is, records for individuals whose
SSI records were no longer active from
SSA’s perspective. (We note that it is
our understanding that, as of the year
2000, SSA no longer differentiates
between inactive and active records and
therefore, no longer uses the ‘‘stale
record’’ indicator in its databases.) The
court also found that the SSI data file
only included SSI eligibility
information for SSI payments that were
automated (as opposed to manual),
thereby excluding those people who, for
whatever reason, received manual or
‘‘forced pay’’ payments. Baystate, 545 F.
Supp. 2d at 44–46.
• Match Based on Only One Title II
Number and One HICAN. The court
found fault with CMS’ use of only a
single Title II number and one HICAN
in the match process. As a beneficiary
may receive SSI and Medicare Part A
benefits under more than one Title II
number and HICAN over a period of
time, CMS would not have matched a
beneficiary’s records if there had been a
change in the person’s Title II number
and HICAN between the time of an
inpatient stay and when the match
process was completed. Baystate, 545 F.
Supp. 2d at 46–49.
• Retroactive SSI Eligibility
Determinations and Lifting of Payment
Suspensions. The court found that the
match process did not appropriately
account for retroactive eligibility
determinations of SSI eligibility and the
lifting of payment suspensions because
the match process used SSI eligibility
data that did not include more recent
retroactive determinations of SSI
eligibility and the lifting of SSI payment
suspensions. By not using more recent
SSI eligibility information that was
available to CMS at the time of the
hospital’s cost report settlement, the
court concluded that CMS did not use
the ‘‘best available data’’ to calculate the
provider’s SSI fraction. Baystate, 545 F.
Supp. 2d at 42–44.
CMS continues to believe that its
current data matching process and the
resultant SSI fraction and DSH
payments were lawful. Nonetheless, the
agency did not appeal the Baystate
decision. Accordingly, CMS
implemented the court’s decision by
recalculating the plaintiff’s SSI fractions
for 1993 through 1996. In recalculating
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the SSI fractions at issue in the Baystate
case, we worked closely with SSA to
ensure that stale and forced pay SSI
records were included in the SSI
eligibility data. Also, we used a revised
data matching process (described in
more detail below) that comports with
the court’s decision. As the revised data
matching process was completed using
SSI eligibility data compiled between 13
and 16 years beyond the fiscal years at
issue in the Baystate case, we believe
any issues associated with retroactive
determinations of SSI eligibility and the
lifting of payment suspensions had been
long since resolved. Furthermore,
because we believe that the revised
match process used to implement the
Baystate decision addressed all of the
concerns found by the court, in the FY
2011 IPPS/LTCH PPS proposed rule we
proposed to use the same revised data
matching process for calculating
hospitals’ SSI fractions for FY 2011 and
subsequent fiscal years.
4. CMS’ Process for Matching Medicare
and SSI Eligibility Data
a. Inclusion of Stale Records and Forced
Pay Records in the SSI Eligibility Data
Files
In recalculating the SSI fractions at
issue in the Baystate case, stale records
and forced pay records were included in
the SSI eligibility data files that CMS
used in the revised data match for the
four fiscal years at issue. All SSI
payment records, whether the payments
were automated or manual or were for
an individual whose record was active
or stale, are now included in the data
files provided by SSA and will continue
to be included in the future.
b. Use of SSNs in the Revised Match
Process
As indicated above, the current
matching process only uses one Title II
number and one HICAN in the data
match process. As we discussed in the
FY 2011 IPPS/LTCH PPS proposed rule,
by contrast, our revised match process
would make use of the Medicare
Enrollment Database (EDB), which is
CMS’ system of records for all
individuals who have ever been
enrolled in Medicare. The EDB includes
SSNs as well as all of an individual’s
HICANs. In our proposed revised match
process, the individual’s SSN, contained
in the SSI eligibility data file, would be
compared to the SSNs in the Medicare
EDB, and each matched SSN would
then be ‘‘cross-walked’’ within the EDB
to find any and all HICANs associated
with the individual’s SSN. The resulting
HICANs would then be matched against
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those HICANs contained in the MedPAR
claims data files.
As stated in the proposed rule, before
explaining our proposed revised match
process in more detail, we believe it is
appropriate to provide some background
regarding SSNs and the three databases
that would be used in our proposed
match process. An individual should
have only one SSN, which should be
unique to that individual. The SSN may
be assigned by SSA when the individual
begins gainful employment (if not
earlier). However, if an applicant for SSI
benefits does not already have a SSN,
SSA then assigns a SSN to the person.
Thus, in the SSI eligibility data that SSA
provides to CMS, each individual
identified in those data should have a
unique SSN.
The first database that we proposed to
use in our revised match process was
the SSI eligibility data file, which
contains a unique SSN for every SSI
record and could include as many as 10
different historical Title II numbers for
the records related to one individual.
We proposed to use 10 as the maximum
number of Title II numbers for a
beneficiary because that is likewise the
maximum number of HICANs that can
be attributed to any one individual in
our EDB. However, we noted that, as a
practical matter, the greatest number of
historical HICANs associated with any
beneficiary appears to be 7. The SSI
eligibility file serves as the system of
record for whether or not SSA made a
payment of SSI benefits to an individual
who applied for SSI benefits.
The second relevant database, the
Medicare EDB, contains a SSN for
virtually every record in the EDB.
Furthermore, the EDB has the capacity
to hold up to 10 historical HICANs for
a specific Medicare enrollee. (It is
important to note that, of the more than
100 million records in the EDB, less
than 0.07 percent (that is, fewer than 7
of every 10,000 records) relate to
individuals for whom the EDB does not
include a SSN for the person. The EDB
might not include a SSN for an
individual if, for example, the person
lives in another country but is entitled
to Medicare benefits through his or her
spouse.)
The third relevant database that we
proposed to use in our revised match
process was the MedPAR file. Hospitals
submit claims to Medicare for inpatient
services provided to Medicare
beneficiaries. These claims are
eventually accumulated in the MedPAR
database. We noted that the MedPAR
database does not contain SSNs. The
MedPAR database contains one HICAN
number for each and every record of
services provided to a Medicare
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beneficiary who was admitted to a
Medicare-certified hospital or skilled
nursing facility. This database allows us
to calculate the number of Medicare
inpatient hospital days, which we use in
determining each hospital’s DSH SSI
fraction.
Utilizing the steps set forth below, in
the proposed rule, we proposed to use
these three databases in a revised match
process for FY 2011 and subsequent
fiscal years:
Step 1—Use SSNs to find any and all
relevant HICANs. We proposed to use
the SSI eligibility file provided by SSA
to compare the individual SSNs in that
file to the SSNs contained in the
Medicare EDB. Each matched SSN
would then be ‘‘cross-walked’’ (within
the EDB) to find any and all HICANs
associated with the individual’s SSN.
The resulting HICANs would then be
matched against those HICANs
contained in the MedPAR claims data
files. This process should identify all
relevant SSI records in which a SSN is
associated with an individual who is
simultaneously enrolled in Medicare
Part A and in the SSI program.
Step 2—Utilize any and all Title II
numbers. In order to provide further
assurance that all of the Title II numbers
and HICANs for SSI-eligible individuals
have been identified, next we proposed
to compare the complete list of Title II
numbers from the SSI data file (up to 10
Title II numbers for any one individual)
to the list of HICANs generated through
Step 1 above. If the SSI data file
includes any Title II numbers that were
not already identified in Step 1, the
Title II number would be included in
our revised match process and
compared to any and all HICANs in
MedPAR. We noted that by including
this second step (that is, adding all Title
II numbers not previously identified by
Step 1), we were addressing the very
small universe of individuals for whom
the EDB does not include a SSN. If an
individual is entitled to SSI benefits and
Medicare benefits, the new format of the
SSI eligibility file will contain up to 10
Title II numbers and, if they have not
already been captured, each of those
numbers will be included in our revised
match process. Even if an individual
does not have a SSN in the EDB, this
second step should ensure that our
revised match process will include that
individual.
Step 3—Ensure consistency between
the HICANs in the EDB, Title II
numbers, and the HICANs in the
MedPAR file. The EDB stores the
beneficiary’s record at the most specific
level of detail. For example, if the
beneficiary’s Medicare eligibility was
originally based on the earnings history
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of a spouse who subsequently dies, the
beneficiary would have two HICANs.
Both HICANs, which would have the
same root, but different BICs, would be
stored in the EDB. However, the
inpatient claim in the MedPAR file will
only have the individual’s HICAN at a
more general level of detail; in the
preceding example, the BIC would
identify the beneficiary only as a spouse
without specifying whether the spouse
(that is, the ‘‘primary’’ beneficiary) was
alive or deceased. This third step should
ensure consistency between the HICANs
from Step 1 and the Title II numbers
from Step 2 by ‘‘equating’’ (or
converting) the BIC identifiers to the
identifiers that are on the inpatient
claim that is included in the MedPAR
file. In addition, we proposed that, for
any SSI-eligible beneficiary who is
receiving Medicare benefits based on his
or her own account but whose records
have not been matched already, we
would attempt to match the
beneficiary’s HICAN in the MedPAR
file. Specifically, we proposed to simply
add an ‘‘A’’ to all the SSNs in the SSI
eligibility data file so that, if that
individual was not captured by Steps 1
and 2 above (for whatever unlikely
reason) but MedPAR indicated that the
person had received Medicare services,
the individual would be included in the
data match process by this third step.
Step 4—Calculate the SSI fraction. We
did not propose any changes with
respect to the final step in determining
the SSI fraction. To calculate the
numerator of the SSI fraction, CMS
would continue to sum a hospital’s
Medicare inpatient days in the acute
care part of the hospital (excluding
IPPS-exempt units such as rehabilitation
and psychiatric units) where the
Medicare beneficiary was
simultaneously entitled to SSI benefits.
To calculate the denominator, CMS
would continue to sum a hospital’s total
Medicare inpatient days in the acute
care part of the hospital.
Comment: Many commenters
supported the proposed data matching
process and applauded CMS for
working to refine the data matching
process and for sharing details of the
process in the proposed rule. Some
commenters stated that it was difficult
to determine the accuracy of the
proposed data matching process without
more details about the matching
process, including more information on
steps, testing, and validation processes
or, alternatively, providing the
underlying data files to the hospitals.
Some commenters asked that CMS
ensure that all HICANs included in the
MedPAR file match to a HICAN in the
EDB. The commenters requested that
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CMS exclude any HICANs from the
MedPAR file that did not match to the
EDB so that the SSI fractions would not
be understated. Commenters also asked
that CMS ensure that the proposed data
matching process is consistent with
Federal Information Processing
Standards (FIPS). One commenter asked
that CMS include SSI indicators in the
EDB and give access to authorized
parties so that hospitals can calculate
their own SSI fractions and litigation
over the SSI fractions would be reduced.
Response: We appreciate the
commenters’ support of our proposed
data matching process. We believe that
the proposed data matching process will
produce more accurate SSI fractions. We
also believe that we have shared all
relevant details about the proposed
revised data matching process in order
to allow the public a meaningful
opportunity to submit comments.
Specifically, we have described the
specific data files we intend to use,
provided information and background
about those data files along with a
detailed, step-by-step description of
how we intend to use those files for
purposes of the data matching process,
and provided specific information,
including examples, of the specific
timeframes in which we intend to
conduct the various aspects of the data
matching processes. However, per the
commenters’ request, we are sharing
additional details in this final rule about
the testing and validation procedures
we intend to use. Specifically, as part of
our internal data validation processes,
we will track certain summary statistics
in an effort to minimize any errors or
omissions of data that might lead to
inaccurate SSI fractions. The summary
statistics we produce when calculating
each fiscal year’s SSI fractions for FY
2011 and beyond will include the
number of SSI records received from
SSA and will include at least all of the
following information about SSI records
that ‘‘matched’’ to Medicare inpatient
hospital claims using the revised data
matching process: (1) The number of SSI
records matched using the new data
matching process; (2) the number of
records indicating that the individual is
deceased; and (3) the number of records
where at least one SSI monthly
indicator reflects that the individual
was in forced pay or forced due status.
Additionally, we will produce summary
statistics relating to SSI records that did
not match to a Medicare inpatient claim,
and will include at least all of the
following information: (1) The number
of unmatched SSI records with no Title
II numbers; (2) the number of
unmatched SSI records with one or
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more Title II numbers; and (3) the
number of records in the EDB with a
HICAN, but no SSN. As these data will
be used as part of our internal data
validation process, we do not intend to
provide them to the public.
In response to the comment
requesting that we ensure that every
HICAN on the MedPAR file match a
HICAN in the EDB, we agree that every
HICAN in the MedPAR file should
match a HICAN in the EDB. We believe
that this is necessarily the case because
a Medicare claim must be submitted
with a valid HICAN in order to populate
the MedPAR database. As we stated in
the proposed rule, the EDB is CMS’
system of records for all individuals
who have ever been enrolled in
Medicare and includes SSNs as well as
all of an individual’s (current and
historical) HICANs. The MedPAR file
includes the HICAN under which the
Medicare beneficiary received hospital
benefits for a particular inpatient stay.
Therefore, there should not be a HICAN
in the MedPAR file that does not match
to a HICAN in the EDB. Because there
is no apparent reason for there to be a
case where a HICAN in the MedPAR file
did not match to a HICAN in the EDB,
we did not propose to match HICANs in
the MedPAR file to those in the EDB.
We also note that ‘‘Step 3’’ of our
proposed process should ensure
consistency between the HICANs in the
EDB and those in the MedPAR file by
‘‘equating’’ (or converting) the BIC
identifiers in the EDB to the identifiers
that are on the inpatient claim that is
included in the MedPAR file. We also
proposed that, for any SSI-eligible
beneficiary who is receiving Medicare
benefits based on his or her own
account but whose records have not
been matched in steps 1 or 2 of the
proposed data matching process, we
would attempt to match directly to the
beneficiary’s HICAN in the MedPAR
file. Specifically, we proposed to add an
‘‘A’’ to all the SSNs in the SSI eligibility
data file so that, if that individual was
not captured by Steps 1 and 2 above, but
the MedPAR file indicated that the
person had received Medicare services,
the individual would be included in the
data match process by this third step.
We believe that this step further helps
us to capture any SSI-entitled
individual who is receiving Medicare
benefits based on his or her own
account. However, after consideration of
this public comment, in an attempt to
provide even more assurances that our
data matching process will yield
accurate SSI fractions and capture all
Medicare beneficiaries who were
entitled to SSI at the time of their
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inpatient hospital stay, we will add this
step to our validation procedures when
conducting the data matching process.
That is, we will test the MedPAR data
to determine whether each HICAN in
the MedPAR file matches to a HICAN in
the EDB. In the unlikely event that we
find a HICAN in the MedPAR file that
we are not able to locate in the EDB, we
will investigate the record to determine
whether the HICAN is valid (in which
case we would include it in our data
matching process). However, if we find
that the HICAN is not valid, we are
adopting a policy to exclude that record
from the data matching process, and we
also will exclude that invalid record
from the calculation of both the
numerator and the denominator of the
SSI fraction.
With respect to the comment about
FIPS, we note that the data matching
process is consistent with the FIPS, to
the extent the data used in the data
matching process are covered under
FIPS.
In response to the comment that we
populate the EDB with the monthly SSI
indicators and grant access to certain
members of the public so that hospitals
could calculate their own SSI fractions,
we note that the EDB contains several
elements of protected personally
identifiable information and is the sole
system of records for Medicare
eligibility. As such, we may only
provide access to the EDB to persons
authorized under the Privacy Act or the
HIPAA Privacy Rule. However, we agree
that there are advantages to allowing
hospitals to compute their own SSI
fraction and provide supporting
documentation for the amount of DSH
claimed, consistent with the process
under the regulations for computing the
Medicaid fraction. We are open to
suggestions from the public regarding
how CMS and SSA could provide the
data necessary for hospitals to compute
their own SSI fractions without
compromising protected personally
identifiable information and other
protected information. We also welcome
suggestions describing how CMS or its
contractors should verify the accuracy
of the hospitals’ computations without
significantly increasing administrative
burden.
Comment: A few commenters
requested that CMS release each
hospital’s detailed SSI fraction data or
give hospitals access to patient-level
detail data, including SSI eligibility
information, so each hospital could
determine the accuracy of its SSI
fractions. One commenter asked that
CMS publish both the Federal fiscal
year SSI fractions and each hospital’s
cost reporting period SSI fractions.
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Some commenters asked that CMS
provide assurances that there are no
other data errors or omissions in the SSI
file or the data matching process and
asked that CMS work collaboratively
with SSA to ensure the accuracy of the
SSI file and to obtain SSNs for records
in the EDB that are missing an SSN.
Response: Under the proposed data
matching process for FY 2011 and
beyond, CMS will continue to share
certain detailed SSI fraction data used to
calculate the hospital’s SSI fraction as
long as the hospital has a valid data use
agreement with CMS and submits a
request for such data. More detail on
obtaining these data may be found on
our Web site at:
https://www.cms.gov/PrivProtectedData/
07_DSHRateData.asp and the data use
agreement application may be found on
our Web site at: https://cmsnet.cms.hhs.
gov/hpages/oisnew/sysndata/access_to_
data/cms-DUA.pdf. As we stated in the
proposed rule, we publish these data for
every hospital based on the Federal
fiscal year but, under the regulations at
§ 412.106(b)(3), a hospital with a cost
reporting period that differs from the
Federal fiscal year may request a revised
SSI fraction that is based on its own cost
reporting period rather than the Federal
fiscal year. In such a case, we would
revise the hospital’s SSI fraction using
SSI and Medicare data derived from the
data match process for the two Federal
fiscal years that spanned the hospital’s
cost reporting period. We believe that
the statute governing the SSI fraction
(section 1886(d)(5)(F)(vi)(I) of the Act)
requires that one SSI fraction be
calculated and used for purposes of
determining a hospital’s
disproportionate patient percentage. We
believe that allowing individual
hospitals to request their own cost
reporting period SSI fractions is
sufficient and goes above and beyond
what the statute requires. The current
policy of calculating all hospitals’ SSI
fractions based on the Federal fiscal
year does not require that we maintain
a list of each individual hospital’s cost
reporting period, nor does it require that
we perform multiple iterations of the
data matching process. It would be
administratively unwieldy to not only
track every hospital’s cost reporting
period, but to calculate SSI fractions
based on the many different cost
reporting periods that hospitals across
the country may have.
With respect to the comment
requesting that CMS work with SSA to
ensure accuracy of the SSI file, we note
that CMS has worked collaboratively
with SSA throughout the development
of the data matching process that was
described in the FY 2011 proposed rule.
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We are committed to continue working
with SSA to ensure that the file we
receive from SSA for the purposes of the
SSI fraction data matching process is
complete and comprehensive and
includes all individuals who are
entitled to SSI. To our knowledge, there
are no omissions or data errors on the
SSI file that we receive from SSA. If we
become aware of any such omissions or
errors, we will work with SSA to correct
them as quickly as possible. With
respect to obtaining an SSN for each
record in the EBD that does not have an
SSN, we remind the commenters that
‘‘of the more than 100 million records in
the EDB, less than 0.07 percent (that is,
fewer than 7 of every 10,000 records)
relate to individuals for whom the EDB
does not include a SSN for the person.’’
There are valid reasons that a person in
the EDB may not have an SSN. For
example, as we noted in the proposed
rule, a person could live in a country
other than the United States, but be
entitled to Medicare benefits through
his or her spouse. Another example of
a record in the EDB that may validly
lack an SSN is if the person filed for a
spouse’s or widow/er’s benefit prior to
the 1980’s because SSA did not require
that the person filing for benefits have
an SSN at that time. There may be other
valid reasons that a record in the EDB
does not have an SSN, and as we
previously stated, less than 0.07 percent
of records in the EDB lack an SSN. We
do not believe that it is possible to add
an SSN for every record if the person
became entitled to Title II or Medicare
benefits without ever applying or
receiving an SSN. However, we note
that the EDB is populated by SSA on a
frequent basis; to the extent that a
record is added to the EDB, the SSN that
SSA has on file for that person should
be included in the EDB as well.
Moreover, even if there were instances
in which a record in the EDB was
missing an SSN, the lack of an SSN for
certain records in the EDB should have
no effect on the data matching process
because, in order to be entitled to SSI
benefits, an individual must have an
SSN. That is, a person who does not
have an SSN, by definition, cannot be
entitled to SSI. (We refer readers to the
proposed rule language at 75 FR 24003
that states: ‘‘However, if an applicant for
SSI benefits does not already have a
SSN, SSA then assigns a SSN to the
person.’’) Thus, in the SSI eligibility
data that SSA provides to CMS, each
individual identified in those data
should have a unique SSN.
Additionally, as we stated under Step 2
of the proposed data matching process,
if an individual is entitled to SSI
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benefits and Medicare benefits, the new
format of the SSI eligibility file will
contain up to 10 Title II numbers and,
if they have not already been captured,
each of those numbers will be included
in our revised match process. Even if an
individual does not have a SSN in the
EDB, this second step should ensure
that our revised match process will
include that individual.
In response to the comment that CMS
share the SSI file data with hospitals,
the SSI program is under the authority
of SSA and CMS is not authorized to
share SSA data. Additionally, CMS is
only permitted to use the SSI data for
the sole purpose of conducting the data
match process and calculating the SSI
fractions. To the extent that a third party
wishes to obtain direct access to the SSI
file, it must contact SSA directly and
meet SSA’s requirements to become an
authorized user.
Comment: One commenter stated that
CMS uses total (that is, ‘‘paid and
unpaid’’) Medicare days in the
denominator of the SSI fraction, but
uses paid SSI days in the numerator of
the SSI fraction. The commenter
requested that CMS interpret the word
‘‘entitled’’ to mean ‘‘paid’’ for both SSIentitled days used for the numerator
and Medicare-entitled days used in the
denominator, or alternatively, that CMS
include both paid and unpaid days for
both SSI entitlement and Medicare
entitlement such that there is
consistency between the numerator and
the denominator of the SSI fraction. The
commenter stated that there were
several SSI codes that represent
individuals who were eligible for SSI,
but not eligible for SSI payments, that
should be included as SSI-entitled for
purposes of the data matching process.
Specifically, the commenter stated that
at least the following codes should be
considered to be SSI-entitlement:
• E01 and E02
• N06, N10, N11, N18, N35, N39,
N42, N43, N46, N50, and N54
• P01
• S04, S05, S06, S07, S08, S09, S10,
S20, S21, S90, and S91
• T01, T20, T22, and T31
Response: In response to the comment
that we are incorrectly applying a
different standard in interpreting the
word ‘‘entitled’’ with respect to SSI
entitlement versus Medicare
entitlement, we disagree. The
authorizing DSH statute at section
1886(d)(5)(F)(vi)(I) of the Act limits the
numerator to individuals entitled to
Medicare benefits who are also ‘‘entitled
to supplemental security income
benefits (excluding any State
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supplementation)’’ (emphasis added).19
Consistent with this requirement, we
have requested, and are using in the
data matching process, those SSA codes
that reflect ‘‘entitlement to’’ receive SSI
benefits. Section 1602 of the Act
provides that ‘‘[e]very aged, blind, or
disabled individual who is determined
under Part A to be eligible on the basis
of his income and resources shall, in
accordance with and subject to the
provisions of this title, be paid benefits
by the Commissioner of the Social
Security’’ (emphasis added). However,
eligibility for SSI benefits does not
automatically mean that an individual
will receive SSI benefits for a particular
month. For example, section 1611(c)(7)
of the Act provides that an application
for SSI benefits becomes effective on the
later of either the month following the
filing of an application for SSI benefits
or the month following eligibility for
SSI benefits.
On the other hand, section 226 of the
Act provides that an individual is
automatically ‘‘entitled’’ to Medicare
Part A when the person reaches age 65
and is entitled to Social Security
benefits under section 202 of the Act (42
U.S.C. 402) or becomes disabled and has
been entitled to disability benefits under
section 223 of the Act (42 U.S.C. 423)
for 24 calendar months. Section 226A of
the Act provides that qualifying
individuals with end-stage renal disease
shall be entitled to Medicare Part A. In
addition, section 1818(a)(4) of the Act
provides that, ‘‘unless otherwise
provided, any reference to an individual
entitled to benefits under [Part A]
includes an individual entitled to
benefits under [Part A] pursuant to
enrollment under [section 1818] or
section 1818A.’’ We believe that
Congress used the phrase ‘‘entitled to
benefits under part A’’ in section
1886(d)(5)(F)(vi) of the Act to refer
individuals who meet the criteria for
entitlement under these sections.
Moreover, unlike the SSI program (in
which entitlement to receive SSI
benefits is based on income and
resources and, therefore, can vary from
time to time), once a person becomes
entitled to Medicare Part A, the
individual does not lose such
entitlement simply because there was
no Medicare Part A coverage of a
19 As a side note, we have used the phrase ‘‘SSIeligible’’ interchangeably with the term ‘‘SSIentitled’’ in the FY 2011 proposed rule as well as
prior proposed and final rules, but the statute
requires that we include individuals who were
entitled to SSI benefits in the SSI fractions.
Although we have used these terms
interchangeably, we intended no different meaning,
and our policy has always been to include only
Medicare beneficiaries who are entitled to receive
SSI benefits in the numerator of the SSI fraction.
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specific inpatient stay. Entitlement to
Medicare Part A reflects an individual’s
entitlement to Medicare Part A benefits,
not the hospital’s entitlement or right to
receive payment for services provided to
such individual. Such Medicare
entitlement does not cease to exist
simply because Medicare payment for
an individual inpatient hospital claim is
not made. Again, we are bound by
section 1886(d)(5)(F)(vi)(I) of the Act,
which defines the SSI fraction
numerator as the number of SSI-entitled
inpatient days for persons who were
‘‘entitled to benefits under [P]art A,’’ and
the denominator as the total number of
inpatient days for individuals who were
‘‘entitled’’ to Medicare Part A benefits.
In response to the comment about
specific SSI status codes, SSA has
provided information regarding all of
the SSI status codes mentioned by the
commenter to assist in the
determination of whether any of these
codes represent individuals who were
entitled to SSI benefits for the purposes
of calculating the SSI fraction for
Medicare DSH. With respect to the
codes that begin with the letter ‘‘T,’’ SSA
informed us that all of the codes
represent individuals whose SSI
entitlement was terminated. Code ‘‘T01’’
represents records that were terminated
because of the death of the individual,
but we confirmed that this code would
not be used until the first full month
after the death of the individual. That is,
for example, if a Medicare individual
was entitled to SSI during the month of
October, was admitted to the hospital on
October 1 and died in the hospital on
October 15, the individual would show
up as entitled to SSI for the entire
month of October on the SSI file (code
T01 would not be used on the SSI file
until November) and 15 Medicare/SSI
inpatient hospital days for that
individual would be counted in the
numerator and the denominator of the
SSI fraction for that hospital.
Codes beginning with the letter ‘‘S’’
reflect records that are in a ‘‘suspended’’
status and, according to SSA, do not
represent individuals who are entitled
to SSI benefits.
SSA maintains that code ‘‘P01’’ is
obsolete and has not been used since the
mid-1980s. Therefore, it would not be
used on any SSI files reflecting SSI
entitlement for FY 2011 and beyond.
Codes that begin with the letter ‘‘N’’
represent records on ‘‘nonpayment’’ and
are not used for individuals who are
entitled to SSI benefits.
Code ‘‘E01’’ represents an individual
who is a resident of a medical treatment
facility and is subject to a $30 payment
limit, but has countable income of $30
or more. Such an individual is not
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entitled to receive SSI payment.
Alternatively, an individual who is a
resident of a medical treatment facility
and is subject to a $30 payment limit,
but does not have countable income of
at least $30, would be reflected on the
SSI file as a ‘‘C01’’ (which denotes SSI
entitlement) for any month in which the
requirements described in this sentence
are met. Code ‘‘E02’’ is used to identify
a person who is not entitled to SSI
payments in the month in which that
code is used pursuant to section
1611(c)(7) of the Act, which provides
that an application for SSI benefits shall
be effective on the later of (1) the first
day of the month following the date the
application is filed, or (2) the first day
of the month following the date the
individual becomes eligible for SSI
based on that application. Such an
individual is not entitled to SSI benefits
during the month that his or her
application is filed or is determined to
be eligible for SSI, but, for the following
month, would be coded as a ‘‘C01’’
because he or she would then be
entitled to SSI benefits.
Therefore, both codes E01 and E02
represent individuals who are not
entitled to SSI benefits and are reflected
accordingly on the SSI file. If the
individual’s entitlement to SSI benefits
is initiated the ensuing month, that
individual would then be coded as a
‘‘C01’’ on the SSI file and would be
included as SSI-entitled for purposes of
the data matching process.
As we have described above, none of
the SSI status codes that the commenter
mentioned would be used to describe an
individual who was entitled to receive
SSI benefits during the month that one
of those status codes was used. SSI
entitlement can change from time to
time, and we believe that including SSI
codes of C01, M01, and M02 accurately
captures all SSI-entitled individuals
during the month(s) that they are
entitled to receive SSI benefits.
After consideration of the public
comments we received, we are adopting
the proposed data matching process for
FY 2011 and beyond as final. The only
modification we are making to the
proposed data matching process is
adopting a policy to exclude a record
from the data matching process if we
find a HICAN in the MedPAR file that
we are not able to locate in the EDB,
which is an extremely unlikely situation
as noted in the prior discussion in this
final rule. We are adopting this
additional step in our validation process
in response to public comments to
provide even more assurances that our
data matching process will yield
accurate SSI fractions and capture all
Medicare beneficiaries who were
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entitled to SSI at the time of their
inpatient hospital stay.
c. Timing of the Match
One of the district court’s findings in
the Baystate decision was that CMS did
not use a more recent SSI entitlement
file to calculate the provider’s SSI
fractions. As a result, it might be
possible that if a beneficiary treated at
the hospital was later determined
retroactively to be SSI entitled, or if a
suspension of the individual’s SSI
payments was later lifted, that inpatient
stay might not be included in the
numerator of the SSI fraction. We
believe that, in our recalculation of the
Baystate hospital’s SSI fractions and
DSH payments, retroactive SSI
entitlement determinations and the
lifting of SSI payment suspensions were
not an issue due to the long period of
time that elapsed between the provider’s
1993 through 1996 fiscal years and our
use of updated SSI entitlement data
during our completion of the revised
match process in 2009. However, we
stated our belief that further
consideration of the timing of both the
SSI entitlement information that SSA
provides to CMS and our proposed
revised match process for FY 2011 and
subsequent fiscal years was warranted.
At present, SSA provides an annual
file to CMS with SSI entitlement
information that is current through
March 31, or 6 months after the end of
the prior Federal fiscal year on
September 30 (70 FR 47278, 47440,
August 12, 2005). Based on this date, for
a hospital with an October 1 to
September 30 cost reporting period, the
SSI entitlement information we
currently use contains 6 to 18 months
worth of retroactive SSI entitlement
determinations and payment suspension
closures—6 months from September
(that is, the end of the cost reporting
period), and 18 months from October
(that is, the beginning of the cost
reporting period). The time lag between
the close of a hospital’s cost reporting
period and the date that CMS receives
SSI entitlement information could
actually be longer or shorter for some
hospitals, depending on the hospital’s
specific cost reporting period. The SSI
fractions are generally based on the
Federal fiscal year; however, under the
regulations at § 412.106(b)(3), a hospital
with a cost reporting period that differs
from the Federal fiscal year may request
a revised SSI fraction that is based on
its own cost reporting period rather than
the Federal fiscal year. In such a case,
we would revise the hospital’s SSI
fraction using SSI and Medicare data
derived from the data match process for
the two Federal fiscal years that
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spanned the hospital’s cost reporting
period.
As we stated in the FY 2006 IPPS
final rule, we believe that administrative
finality with respect to the calculation
of a hospital’s SSI fraction is important
(70 FR 47440). We continue to believe
that it is important to find an
appropriate balance between
administrative finality (that is, the final
settlement of a hospital’s cost report)
and the inclusion of retroactive SSI
eligibility determinations and the lifting
of SSI payment suspensions by using
the best and latest available SSI
eligibility data at the time of cost report
settlement. Further, we believe it is
important to account for the time period
in which hospitals are allowed to
submit timely Medicare claims in order
to ensure that the point in time that we
perform the match process includes as
many timely submitted inpatient
hospital claims as are administratively
practicable.
In accordance with the regulations at
42 CFR 424.44 and the Medicare Claims
Processing Manual (Pub. 100–04),
Chapter 1, Section 70, a hospital must
generally file a claim by December 31 of
the following year (for services
furnished during the first 9 months of a
calendar year) and by December 31 of
the second following year (for services
provided during the last 3 months of the
calendar year). Section 6404 of the
Affordable Care Act recently changed
these deadlines to no more than ‘‘1
calendar year after the date of service’’
effective for services provided on or
after January 1, 2010. Therefore,
Medicare claims for hospital services
furnished in FY 2011 would have to be
submitted no later than September 30,
2012.
Generally speaking, providers have a
financial incentive to submit fee-forservice claims as close as possible to the
date of the patient’s discharge, and
providers have no incentive to wait
until the claims submission deadline.
Thus, while conducting a data match
with MedPAR files that were updated 6
months after the end of the Federal
fiscal year may not capture all of a
provider’s Medicare inpatient claims,
we believe that, in large part, the
provider’s fee-for-service claims are very
likely to be included in that MedPAR
file. The same may not be true for the
‘‘information only’’ or ‘‘no pay’’ claims
that hospitals are required to submit to
their fee-for-service contractor for
Medicare Advantage (MA) beneficiaries.
Because claims for MA beneficiaries are
paid by MA plans and not the fee-forservice contractor, hospitals may not
have the same incentive to file these
claims as close as possible to the date
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of the patient’s discharge.20 However, in
accordance with Transmittal 1396
(issued December 14, 2007) and
Transmittal 1695 (issued March 6,
2009), which changed the instructions
in the Medicare Claims Processing
Manual (Pub. 100–04), all IPPS
hospitals that do not qualify for IME
payments, direct GME payments, or
nursing and allied health (N&AH)
payments are specifically directed to
submit informational-only claims for all
MA inpatients to ensure that all data for
MA beneficiaries are included in the SSI
fraction. Accordingly, we indicated that
we also were considering changes to the
timing of the data match process to
ensure that all of a hospital’s MA claims
are included in the revised matching
process, given the current timing
requirements for when hospitals must
submit these claims after the time of the
patient’s discharge.
In addition, in matching eligibility
records for Medicare beneficiaries and
SSI recipients to calculate the SSI
fractions for FY 2011 and future fiscal
years, we proposed to use more recent
SSI eligibility information from SSA
and a more updated version of the
MedPAR file that is likely to contain
more claims data. We currently use SSI
eligibility data and MedPAR claims data
that are updated 6 months after the
close of the Federal fiscal year. We
proposed to use, for FY 2011 and
subsequent years, SSI eligibility data
files compiled by SSA and MedPAR
claims information that are updated 15
months after the close of each Federal
fiscal year. This proposal would more
closely align the timing of the match
process with the timing of our
requirements (described above) for the
timely submission of claims. For
example, under our proposal, to
calculate the FY 2011 SSI fractions, we
would use the December 2012 update of
the FY 2011 MedPAR file (containing
claims information for patient
discharges between October 1, 2010 and
September 30, 2011), and a December
2012 SSI eligibility file (containing FY
2011 SSI eligibility data updated
20 Teaching hospitals have an incentive to submit
these claims as close as possible to the date of the
patient’s discharge because these claims are used,
in part, to compute those hospitals’ indirect
graduate medical education payments. The claims
are also used for a teaching hospital’s direct
medical education payments. Non-teaching DSH
hospitals do not have the same direct incentives to
submit these claims as close as possible to the date
of the patient’s discharge, but to the extent that the
MA beneficiary is also SSI eligible, it would be to
the hospital’s advantage to ensure these claims are
included in the match process. However,
nonteaching DSH hospitals are required to submit
MA claims for all MA beneficiaries, regardless of
whether the beneficiaries were eligible for SSI
benefits.
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through December 2012, with a lag time
relative to the Federal fiscal year of
between 15 and 27 months). We expect
that the FY 2011 SSI fractions would be
published around March 2013 and
would be used to settle cost reports for
cost reporting periods that began in FY
2011. In addition, we would continue
our practice of using each hospital’s
latest available SSI fraction in
determining IPPS interim payments
from the time that the SSI fractions are
published until the SSI fractions for the
next fiscal year are published.
Under current law as amended by
section 6404 of the Affordable Care Act,
Medicare inpatient claims for FY 2011
can be submitted no later than 1
calendar year from the date of service or
by September 30, 2012, for claims with
a September 30, 2011 date of service.
Therefore, we believe that using the
version of MedPAR that is updated 15
months after the end of the fiscal year
would contain more accurate and
complete inpatient claims information,
as we would be using claims data from
3 months after the filing deadline for
claims with a date of service occurring
on the last day of the second preceding
fiscal year. Furthermore, a later update
of the SSI eligibility file would contain
more accurate eligibility information
and would account for all retroactive
changes in SSI eligibility and the lifting
of SSI payment suspensions through
that date.
We proposed that the FY 2011 SSI
fractions would be used to determine
the hospitals’ Medicare DSH payments
for cost reporting periods beginning in
FY 2011 (that is, October 1, 2010
through September 30, 2011). The
proposed timing of the data match for
the SSI fractions, effective for FY 2011,
would result in FY 2011 SSI fractions
being published around March 2013 and
would generally coincide with the final
settlement of cost reports for cost
reporting periods beginning in FY 2011.
We believe that, by calculating SSI
fractions on the basis of SSI eligibility
data and MedPAR claims data that are
updated 15 months after the end of the
Federal fiscal year, we would be using
the best data available to us, given the
deadlines for the submission and final
settlement of Medicare cost reports. Cost
reports must be submitted to the
Medicare fiscal intermediary or MAC no
later than 5 months after the end of the
provider’s cost reporting period; the
fiscal intermediary or MAC must make
a determination of cost report
acceptability within 30 days of receipt
of the provider’s cost report (42 CFR
413.24(f)(2)(i) and 413.24(f)(5)(iii)). In
accordance with the Medicare Financial
Manual (Pub. 100–06), Chapter 8,
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data match would achieve an
appropriate balance between accounting
for additional retroactive SSI eligibility
determinations and the lifting of SSI
payment suspensions using all timely
submitted Part A inpatient claims, and
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facilitating administrative finality
through the timely final settlement of
Medicare cost reports.
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Section 90, the fiscal intermediary or
MAC is expected to settle each cost
report that is not scheduled for audit
within 12 months of the contractor’s
acceptance of the cost report. We
believe that our proposed timing of the
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Comment: Many commenters
supported the proposed timing of the
data matching process. Some
commenters asked that CMS explain
how cost report settlement would
coincide with the proposed timing.
Specifically, commenters asked whether
contractors would issue Notices of
Program Reimbursement prior to the
availability of the SSI fractions. One
commenter asked that CMS calculate an
additional SSI fraction at the time of
cost report audit for cost reports that are
audited after the initial SSI fractions are
published. One commenter noted that
under the proposed timeline for
calculating the SSI fractions, some
hospitals would have already submitted
their cost reports and had desk reviews
and audits before the release of the SSI
fractions. In particular, some
commenters were concerned that
hospitals with fiscal years beginning
between October 1 and December 1
would have their cost reports settled
before the release of the SSI fractions.
One commenter cited Medicare
Financial Management Manual
Publication 100–06, Chapter 8, Section
90 that requires final settlement of cost
reports within 12 months of acceptance.
Commenters are concerned that the 12month cost report settlement deadline
may occur before the publication of the
SSI fractions for certain cost reporting
periods. Commenters questioned
whether CMS will instruct Medicare
contractors to hold the Notice of
Program Reimbursement until the SSI
fractions are released or will the
contractors settle cost reports using the
prior year’s SSI fraction. In addition,
commenters questioned whether
contractors would automatically re-open
cost reports to use the current year’s SSI
fractions if they were settled using the
prior year’s SSI fraction before the
publication of the current year’s SSI
fractions.
Response: We appreciate the support
for our proposal to change the timing of
our match and calculation of the SSI
fractions from 6 months after the end of
the Federal fiscal year to 15 months
after the end of the Federal fiscal year.
We believe that our proposal to conduct
the SSI eligibility match and calculate
the SSI fractions 15 months after the
end of the Federal fiscal year will
ensure that the SSI fractions are
calculated with the best data available
to us at that time. We note that the 15month timeframe proposed is an
approximation and subject to the data
validation protocols as described
previously in this final rule. We believe
that the match will be conducted no
sooner than 15 months after the end of
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the Federal fiscal year and the match
process, including all appropriate
validation steps as finalized, will be
performed as efficiently as possible and
in accordance with the production
cycles of the required data files.
Hospitals submit their cost reports
based on their cost reporting period,
which varies by hospital. Thus, it would
be administratively unwieldy to
conduct the SSI match in ‘‘real-time’’
and calculate an individual hospital’s
SSI fraction whenever that hospital’s
cost report needed to be settled. By
calculating the SSI fractions 15 months
after the end of the Federal fiscal year,
we believe that we are striking an
appropriate balance between the best
data available to us at the time and the
agency’s operational needs, using the
best available data that does not unduly
hinder the cost report settlement
process. As we discussed in the
proposed rule, hospital cost reports are
submitted to the Medicare contractor no
later than 5 months after the end of the
provider’s cost reporting period. The
Medicare contractor must accept the
cost report within 30 days of receipt (in
accordance with 42 CFR 413.24(f)(2)(i)
and 413.24(f)(5)(iii)), and is expected to
settle the cost reports that are not
audited within 12 months of acceptance
of the cost report (in accordance with
Medicare Financial Management
Manual Publication 100–06, Chapter 8,
Section 90). Generally, hospital cost
reports are not final settled without the
SSI fraction that corresponds to the
fiscal year in which the cost report
began. Commenters raised concerns that
hospitals with fiscal years beginning
October 1, 2010 or December 1, 2010
(thus, ending September 30, 2011 or
November 30, 2011) would be settled
before the release of the SSI fractions.
Those cost reports would be submitted
by the end of February 2012 or April
2012; they would be accepted by March
2012 or May 2012 and would need to be
final settled no later than March 2013 or
May 2013. We believe that under our
proposal to calculate the SSI match 15
months after the end of the Federal
fiscal year, cost reports will be settled
with the appropriate SSI fraction within
the timeframe of cost report settlement
and that cost reports will be final settled
with the SSI fraction of the given year.
In the case where a cost report is
required to be settled before the SSI
fractions are published, CMS may
instruct that the contractors settle the
cost report with the latest SSI fraction
available and may reopen the cost report
to issue a revised notice of program
reimbursement once the appropriate SSI
fraction is available, or we may instruct
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the contractors to wait to settle the cost
report until the appropriate SSI
fractions are published. We will
continue to evaluate what would be the
best approach in such a scenario.
Comment: One commenter stated that
the chart in the proposed rule that
displayed the timeline for the revised
match process indicated that, for FY
2011, the timely filing of claims ends in
December 2012 when it should be
September 2012. The commenter asked
that CMS correct the deadline for the
timely filing of claims for FY 2011 to
read September 2012.
Response: We agree with the
commenter. Under section 6404 of the
Affordable Care Act, the deadline for
timely filing of claims has been revised
to be one year after the end of the
Federal fiscal year, effective January 1,
2010. Therefore, hospitals will have
until September 2012 to file their FY
2011 claims. The chart has been revised
in this final rule to reflect this change.
Although the deadline for the timely
filing of claims is 12 months after the
end of the Federal fiscal year, we are
finalizing our proposal to conduct the
data matching process and calculate SSI
fractions approximately 15 months after
the end of the Federal fiscal year to
ensure we have captured all of the
inpatient claims and to capture as many
retroactive SSI entitlement
determinations as possible.
After consideration of the public
comments that we received, we are
adopting a policy to conduct the data
matching process approximately 15
months after the end of the Federal
fiscal year.
5. CMS Ruling 1498–R
On April 28, 2010, the CMS
Administrator issued a CMS Ruling,
CMS–1498–R (Ruling), that addresses
three Medicare DSH issues, including
CMS’ process for matching Medicare
and SSI eligibility data and calculating
hospitals’ SSI fractions. With respect to
the data matching process issue, the
Ruling requires the Medicare
administrative appeals tribunal (that is,
the Administrator of CMS, the PRRB,
the fiscal intermediary hearing officer,
or the CMS reviewing official) to
remand each qualifying appeal to the
appropriate Medicare contractor. The
Ruling also explains how, on remand,
CMS and the contractor will recalculate
the provider’s DSH payment adjustment
and make any payment deemed owing.
The Ruling further provides that CMS
and the Medicare contractors will apply
the provisions of the Ruling on the data
matching process issue (and two other
DSH issues, as applicable), in
calculating the DSH payment
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adjustment for each hospital cost
reporting period where the contractor
has not yet final settled the provider’s
Medicare cost report through the
issuance of an initial notice of program
reimbursement (NPR) (42 CFR
405.1801(a) and 405.1803).
More specifically, the Ruling provides
that, for qualifying appeals of the data
matching issue and for cost reports not
yet final settled by an initial NPR, CMS
will apply any new data matching
process that is adopted in the
forthcoming FY 2011 IPPS final rule for
each appeal that is subject to the Ruling.
The data matching process provisions of
the Ruling would apply to properly
pending appeals and open cost reports
for cost reporting periods beginning
prior to October 1, 2010 (that is, those
preceding the effective date of the FY
2011 IPPS final rule).
The Ruling further states that, if a new
data matching process is not adopted in
the forthcoming FY 2011 IPPS final rule,
CMS would apply to claims subject to
the Ruling the same data matching
process as the agency used to
implement the Baystate decision by
recalculating that provider’s SSI
fractions. As indicated above, we have
adopted the proposed data matching
process for FY 2011 and beyond as final.
The only modification we are making to
the proposed matching process is
adopting a policy to exclude a record
from the data matching process if we
find a HICAN in the MedPAR file that
we are not able to locate in the EDB,
which is an extremely unlikely situation
as noted in the prior discussion in this
final rule. We are adopting this
additional step in our validation process
to respond to public comment and
provide even more assurances that our
data matching process will yield
accurate SSI fractions and capture all
Medicare beneficiaries who were
entitled to SSI at the time of their
inpatient hospital stay. The same data
matching process will be used to
calculate SSI fractions for cost reporting
periods covered under the Ruling.
Comment: Several commenters
addressed a variety of issues related to
the Ruling.
Response: We note that Administrator
Rulings are not subject to public
comment and that we did not seek
public comment on CMS Ruling 1498–
R. Accordingly, we are not summarizing
or providing responses to comments
related to the Ruling in this final rule.
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6. Clarification of Language on Inclusion
of Medicare Advantage Days in the SSI
Fraction of the Medicare DSH
Calculation
In the FY 2005 IPPS final rule (69 FR
49099), we discussed in the preamble
the codification of our policy of
including the days associated with
Medicare + Choice (now Medicare
Advantage (MA)) beneficiaries under
Medicare Part C in the SSI fraction of
the DSH calculation. In that rule, we
indicated that we were revising the
regulation text at § 412.106(b)(2)(i) to
incorporate this policy. However, we
inadvertently did not make a change in
the regulation text to conform to the
preamble language. We also
inadvertently did not propose to change
§ 412.106(b)(2)(iii) in the FY 2005 final
rule, although we intended to do so.
Accordingly, in the FY 2007 IPPS final
rule (72 FR 47384), we made a technical
correction to amend the regulations at
§ 412.106(b)(2)(i) and § 412.106(b)(2)(iii)
to make them consistent with the
preamble language of the FY 2005 IPPS
final rule and to conform to the policy
implemented in that rule. Section
412.106(b)(2)(i) of the regulations
discusses the numerator of the SSI
fraction of the Medicare
disproportionate patient percentage
(DPP) calculation, while
§ 412.106(b)(2)(iii) of the regulations
discusses the denominator of the SSI
fraction of the Medicare DPP.
In the proposed rule, we indicated
that we were aware that there might be
some confusion about our policy to
include MA days in the SSI fraction,
specifically regarding whether we have
implied that MA beneficiaries are not
actually ‘‘entitled to receive benefits
under Part A’’ by using the word ‘‘or’’ in
§ 412.106(b)(2)(i)(B) and § 412.106
(b)(2)(iii)(B) with respect to MA days.
We note that, in the FY 2005 final rule,
we stated that we believed that
Medicare + Choice (now MA)
beneficiaries are patients who are
entitled to benefits under Medicare Part
A. With respect to the change to the
regulatory text that we intended to make
in the FY 2005 IPPS final rule, we stated
‘‘* * * we are adopting a policy to
include patient days for M+C
beneficiaries in the Medicare fraction’’
(69 FR 49099) (emphasis added). In
order to further clarify our policy that
patients days associated with MA
beneficiaries are to be included in the
SSI fraction because they are still
entitled to benefits under Medicare Part
A, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24006 and 24007),
we proposed to replace the word ‘‘or’’
with the word ‘‘including’’ in
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§ 412.106(b)(2)(i)(B) and
§ 412.106(b)(2)(iii)(B).
Comment: We did not receive any
public comments on this specific
proposal. However, several commenters
urged CMS to reconsider its policy to
include Medicare Advantage days and
days for which a beneficiary exhausted
his or her Medicare inpatient hospital
benefits in the SSI fraction. The
commenters stated that such days did
not represent days that individuals were
‘‘entitled to benefits under Medicare
[P]art A’’ (because the patient days were
not paid for under Medicare Part A) and
as such, should not be included in
either the numerator or denominator of
the SSI fraction. The commenters stated
that, to the extent that dually eligible
(that is, simultaneously enrolled in
Medicare and Medicaid) Medicare
Advantage patients or exhausted
benefits patients had an inpatient
hospital stay, those days should be
included in the Medicaid fraction.
Additionally, a commenter stated that
CMS did not have sufficient processes
in place to assure that the agency is
properly counting all of the days in the
SSI fraction and ‘‘is not double counting
any of them in both the numerator of the
Medicaid fraction and the denominator
of the SSI fraction.’’ The commenter
asked that CMS address why it ‘‘* * *
thinks it need not properly capture all
of these days in the denominator of the
SSI fraction or the precise steps that
CMS has or will take to assure that the
agency is capturing all of these days in
that denominator.’’
Response: We did not propose any
changes to the categories of Medicare
days that we include in the SSI
fractions. Specifically, the proposed rule
states that ‘‘We did not propose any
changes with respect to the final step in
determining the SSI fraction. As we
stated in the proposed rule, to calculate
the numerator of the SSI fraction, CMS
will continue to sum a hospital’s
Medicare inpatient days in the acute
care part of the hospital (excluding
IPPS-exempt units such as rehabilitation
and psychiatric units) where the
Medicare beneficiary was
simultaneously entitled to SSI benefits.
To calculate the denominator, CMS will
continue to sum a hospital’s total
Medicare inpatient days in the acute
care part of the hospital.’’
Accordingly, we are not responding to
these comments in detail. However, we
disagree that Medicare Advantage days
and exhausted benefit days should be
excluded from the SSI fraction. We
believe that the days of all patients who
are entitled to SSI and Medicare Part A
should be included in the Medicare
fraction. We adopted a policy to include
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exhausted benefit and other noncovered
days in the SSI fraction, after notice and
comment rulemaking, in FY 2005 (69 FR
49099). We adopted a policy to include
Medicare health maintenance
organization (HMO) days in the
September 4, 1990 final IPPS rule (55
FR 35994), and this longstanding policy
has continued as Medicare HMOs have
evolved, and these patient days have
been included with every iteration of
Medicare HMOs, including patient days
for beneficiaries entitled to Medicare
Part A but who elect to obtain their
benefits through Medicare Advantage.
As discussed above, we codified this
policy in our regulations in the FY 2005
IPPS final rule (69 FR 49099).
As we have previously explained, we
believe that, in the statutory section
which sets forth the Medicare DSH
fraction, the phrase ‘‘entitled to benefits
under [P]art A’’ refers to individuals
who are entitled to Part A benefits
under Part A pursuant to section 226,
section 226A, section 1818, or section
1818A (42 U.S.C. 426, 42 U.S.C. 426–1,
42 U.S.C. 1395i–2, or 42 U.S.C. 1395i–
2(a), respectively). We note that the
statute uses mandatory language,
unambiguously stating that qualifying
individuals ‘‘shall be entitled to benefits
under [P]art A.’’ Patients who have
exhausted their Part A hospital benefits
or enrolled in Medicare Advantage still
meet the statutory criteria for
entitlement to Medicare Part A benefits,
even though Medicare Part A does not
directly pay for a particular inpatient
day.
With respect to exhausted benefit
days, we note that a beneficiary’s right
to have Medicare make a payment is
subject to the limitations in Part A. The
rule that Medicare will not pay for days
after Part A hospital benefits are
exhausted is an example of one of those
restrictions. Thus, a patient remains
entitled to benefits under Part A on days
where Medicare does not make a
payment because of those limitations,
and consistent with section
1886(d)(5)(F)(vi)(I) of the Act, these days
should be included in the SSI fraction.
With respect to the days of patients
enrolled in Medicare Advantage plans,
we believe that the sections of the Social
Security Act which create Part C clearly
demonstrate that Part C enrollees
remain entitled to Medicare Part A
benefits, and we do not believe that
Congress intended to alter the
calculation of the DSH payment
adjustment when it enacted Medicare
Part C. Moreover, we also believe that
the commenters’ objections to including
the days of patients enrolled in
Medicare Advantage would be equally
applicable to patients enrolled in
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section 1876 risk plans, but section 1876
of the Act repeatedly makes clear that
patients enrolled in section 1876 risk
plans remain entitled to benefits under
Medicare Part A.
Finally, while the commenters suggest
that patients who have exhausted their
Part A hospital benefits or enrolled in
Medicare Advantage should be counted
in the Medicaid fraction, we note that
not all patients who are entitled to SSI
are also eligible for Medicaid. Thus,
adopting the commenters’ proposal
would result in some patients entitled to
SSI and Medicare Part A not being
counted in the numerator of either of
the DSH fractions. We believe that this
result would be contrary to
Congressional intent. Consequently, we
see no reason to revise our policy at this
time.
In response to the comment
requesting that CMS assure that it is
including all exhausted days and
Medicare Advantage days in the SSI
fraction and asserting that CMS does not
have sufficient processes in place to
assure accurate counting, we believe
that we are properly counting these
types of days, to the extent that
hospitals comply with Medicare
requirements and submit claims for
those days. We do not believe it is
necessary to go into further detail about
our processes for capturing these types
of days in this final rule because we did
not make any proposal related to that
issue.
We are adopting our proposed
revision of § 412.106(b)(2)(i)(B) and
§ 412.106(b)(2)(iii)(B) as final, without
modification.
G. Medicare-Dependent, Small Rural
Hospitals (MDHs) (§ 412.108)
1. Background
Under the IPPS, separate special
payment protections are provided to a
Medicare-dependent, small rural
hospital (MDH). MDHs are paid based
on the higher of the Federal rate for
their hospital inpatient services or a
blended rate based in part on the
Federal rate and in part on the MDH’s
hospital-specific rate. Section
1886(d)(5)(G)(iv) of the Act defines an
MDH as a hospital that is located in a
rural area, has not more than 100 beds,
is not an SCH, and has a high
percentage of Medicare discharges (that
is, not less than 60 percent of its
inpatient days or discharges either in its
1987 cost reporting year or in two of its
most recent three settled Medicare cost
reporting years). The regulations at 42
CFR 412.108 set forth the criteria that a
hospital must meet to be classified as an
MDH.
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Although MDHs are paid under an
adjusted payment methodology, they are
still IPPS hospitals paid under section
1886(d) of the Act. Like all IPPS
hospitals paid under section 1886(d) of
the Act, MDHs are paid for their
discharges based on the DRG weights
calculated under section 1886(d)(4) of
the Act.
Through and including FY 2006,
under section 1886(d)(5)(G) of the Act,
MDHs are paid based on the Federal rate
or, if higher, the Federal rate plus 50
percent of the amount by which the
Federal rate is exceeded by the updated
hospital-specific rate based on the
hospital’s FY 1982 or FY 1987 costs per
discharge, whichever of these hospitalspecific rates is higher. Section 5003(b)
of Public Law 109–171 (DRA 2005)
amended section 1886(d)(5)(G) of the
Act to provide that, for discharges
occurring on or after October 1, 2006,
MDHs are paid based on the Federal rate
or, if higher, the Federal rate plus 75
percent of the amount by which the
Federal rate is exceeded by the updated
hospital-specific rate based on FY 1982,
FY 1987, or FY 2002 costs per
discharge, whichever of these hospitalspecific rates is highest.
For each cost reporting period, the
fiscal intermediary or MAC determines
which of the payment options will yield
the highest aggregate payment. Interim
payments are automatically made at the
highest rate using the best data available
at the time the fiscal intermediary or
MAC makes the determination.
However, it may not be possible for the
fiscal intermediary or MAC to determine
in advance precisely which of the rates
will yield the highest aggregate payment
by year’s end. In many instances, it is
not possible to accurately forecast the
outlier payments, the amount of the
DSH adjustment or the IME adjustment,
all of which are applicable only to
payments based on the Federal rate and
not to payments based on the hospitalspecific rate. The fiscal intermediary or
MAC makes a final adjustment at the
settlement of the cost report after it
determines precisely which of the
payment rates would yield the highest
aggregate payment to the hospital.
If a hospital disagrees with the fiscal
intermediary’s or the MAC’s
determination regarding the final
amount of program payment to which it
is entitled, it has the right to appeal the
determination in accordance with the
procedures set forth in 42 CFR part 405,
subpart R, which govern provider
payment determinations and appeals.
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2. Medicare-Dependency: Counting
Medicare Inpatients
Currently, as specified in the
regulations at § 412.108(a)(1)(iii), in
order for an IPPS hospital to qualify as
an MDH, at least 60 percent of its
inpatient days or discharges must be
attributable to individuals receiving
Medicare Part A benefits.
The MDH policy, as explained in the
FY 1991 final rule (55 FR 35994 through
35998), does not include in the count of
Medicare inpatients those Medicare
beneficiaries who have exhausted their
Medicare Part A inpatient benefits. In
addition, section 1886(d)(5)(G)(iv)(IV) of
the Act specifies that a hospital is
Medicare-dependent if ‘‘not less than 60
percent of its inpatient days or
discharges during the cost reporting
period beginning in fiscal year 1987, or
two of the three most recently audited
cost reporting periods for which the
Secretary has a settled cost report, were
attributable to inpatients entitled to
benefits under part A.’’ The use of the
word ‘‘entitled’’ in the statute would
encompass individuals who are entitled
to Medicare Part A even though they
have exhausted their Part A hospital
days. Individuals who have exhausted
their Part A inpatient benefit coverage
remain ‘‘entitled’’ to Medicare Part A
because they retain the Medicare Part A
insurance benefit coverage (for example,
covered SNF days), and they continue to
meet all statutory criteria for entitlement
to Part A benefits under section 226,
226A, 1818, or 1818A of the Act
(Entitlement to Hospital Insurance
Benefits). In fact, for purposes of
determining DSH payment adjustments
under the IPPS in accordance with
section 1886(d)(5)(F)(vi)(I) of the Act,
our policy includes, in the Medicare
inpatient count, all individuals entitled
to Medicare Part A benefits, including
Medicare patients who have exhausted
Medicare Part A coverage. This policy is
discussed in the FY 2005 IPPS final rule
(69 FR 49090 through 49099).
Accordingly, in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23999),
we proposed to revise the Medicaredependency criterion at
§ 412.108(a)(1)(iii) of the regulations to
replace the term ‘‘receiving’’ with the
phrase ‘‘entitled to.’’ As a result, we
would include in the count of Medicare
inpatient days or discharges all days or
discharges attributable to individuals
entitled to the Medicare Part A
insurance benefit, including individuals
who have exhausted their Medicare Part
A inpatient hospital coverage benefit, as
well as individuals enrolled in Medicare
Advantage plans and section 1876 cost
contracts (health maintenance
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organizations (HMOs) and competitive
medical plans (CMPs)). We note that, for
inpatient care provided to Medicare Part
A entitled beneficiaries enrolled with an
HMO or a CMP, we provided that the
days and discharges for those stays are
counted for purposes of determining
Medicare-dependency for MDH
purposes (55 FR 35995). This was the
case when HMOs and CMPs were
included under Medicare Part A, and
continues to be the case since 1997
when HMOs and CMPs were placed
under Medicare Part C.
Comment: Several commenters
supported the proposed change to the
MDH policy to include in the count of
Medicare inpatient days or discharges
individuals entitled to Medicare Part A,
not just those receiving Medicare Part A
benefits. Another commenter asked if
the proposed change in policy would be
effective October 1, 2010, applying to
MDH status determinations from that
date forward, or if the proposed change
would be considered a clarification of
current policy and, therefore, would
apply retroactively.
Response: The MDH proposal to
better conform the regulations to the
statute by including in the count of
Medicare inpatient days or discharges
individuals entitled to Medicare Part A
even if they are not receiving Part A
hospital inpatient benefits because they
have exhausted these benefits is a
proposed change in policy. Because we
are finalizing the proposed change in
this final rule, the final policy change
will be effective beginning October 1,
2010, at which time all Medicare days
or discharges of patients entitled to
Medicare Part A will be counted as
Medicare days or discharges, affecting
the determination of MDH status for
hospitals from October 1, 2010 forward.
After consideration of the public
comments we received, we are adopting
the proposed revision to the Medicaredependency criterion at
§ 412.108(a)(1)(iii) as final.
3. Extension of the MDH Program
As we discussed in the June 2, 2010
supplemental proposed rule to the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 30926), section 3124 of the
Affordable Care Act extended the MDH
program from the end of FY 2011 (that
is, for discharges occurring before
October 1, 2011) to the end of FY 2012
(that is, for discharges occurring before
October 1, 2012). Under prior law, as
specified in section 5003(a) of Public
Law 109–171 (DRA 2005), the MDH
program was to be in effect through the
end of FY 2011 only. Section 3124(a) of
the Affordable Care Act amended
sections 1886(d)(5)(G)(i) and
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1886(d)(5)(G)(ii)(II) of the Act to extend
the MDH program and payment
methodology from the end of FY 2011
to the end of FY 2012, by striking
‘‘October 1, 2011’’ and inserting ‘‘October
1, 2012’’. Section 3124(b) of the
Affordable Care Act also made
conforming amendments to sections
1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of
the Act. Section 3124(b)(2) of the
Affordable Care Act also amended
section 13501(e)(2) of OBRA 1993 to
extend the provision permitting
hospitals to decline reclassification as
an MDH through FY 2012. We proposed
to amend the regulations at
§ 412.108(a)(1) and (c)(2)(iii) to reflect
these legislative changes.
Comment: One commenter supported
the extension of the MDH program for
an additional year, through FY 2012.
Response: We appreciate the support
of the commenter.
We are adopting as final, without
modification, the proposed changes to
§ 412.108(a)(1) and (c)(2)(iii) to reflect
the statutory extension of the MDH
program for an additional year, through
FY 2012.
H. Payments for Direct Graduate
Medical Education (GME) (§ 413.75)
1. Background
Under section 1886(a)(4) of the Act,
costs of approved educational activities
are excluded from the operating costs of
hospital inpatient services. Section
1886(h) of the Act, as implemented in
regulations at § 413.75 through § 413.83,
establishes a methodology for
determining payments to hospitals for
the direct costs of approved GME
programs. Section 1886(h)(2) of the Act
sets forth a methodology for the
determination of a hospital-specific,
base-period per resident amount (PRA)
that is calculated by dividing a
hospital’s allowable direct costs of GME
for a base period by its number of
residents in the base period. The base
period is, for most hospitals, the
hospital’s cost reporting period
beginning in FY 1984 (that is, the period
of October 1, 1983, through September
30, 1984). Medicare direct GME
payments are calculated by multiplying
the PRA by the weighted number of fulltime equivalent (FTE) residents working
in all areas of the hospital complex (and
nonhospital sites, when applicable), and
the hospital’s Medicare share of total
inpatient days. The base year PRA is
updated annually for inflation.
Hospitals may receive direct GME and
IME payments for residents in
‘‘approved medical residency training
programs.’’ Section 1886(h)(5)(A) of the
Act defines an ‘‘approved medical
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residency training program’’ as ‘‘a
residency or other postgraduate medical
training program participation in which
may be counted toward certification in
a specialty or subspecialty and includes
formal postgraduate training programs
in geriatric medicine approved by the
Secretary.’’ Section 1886(h)(4)(F) of the
Act established a limit on the number of
allopathic and osteopathic FTE
residents that a hospital may include in
its FTE resident count for purposes of
calculating direct GME payments. For
most hospitals, the limit, or cap, is the
unweighted number of allopathic and
osteopathic FTE residents training in
the hospital’s most recent cost reporting
period ending on or before December
31, 1996.
2. Identifying ‘‘Approved Medical
Residency Programs’’
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24007),
despite the fact that current policies
regarding the counting of FTE residents
for IME and direct GME purposes have
been in effect since October 1985, we
continue to receive questions as to
whether certain residents are training in
approved medical residency programs,
and whether these residents should be
included in the Medicare direct GME
and IME FTE counts. Although the
fundamental rules defining an approved
medical residency training program
seem straightforward, some confusion
apparently exists regarding whether
certain trainees in a teaching hospital
should be included in the FTE count for
IME and direct GME purposes, or
whether certain trainees should be
treated as physicians and should instead
bill for their services under Medicare
Part B. These questions arise most often
with regard to subspecialty training and
‘‘fellows.’’ It is important for hospitals to
understand when each of these types of
payment applies.
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a. Residents in Approved Medical
Residency Programs
As stated earlier, section
1886(h)(5)(A) of the Act defines an
‘‘approved medical residency training
program’’ as ‘‘a residency or other
postgraduate medical training program
participation in which may be counted
toward certification in a specialty or
subspecialty and includes formal
postgraduate training programs in
geriatric medicine approved by the
Secretary.’’ The regulations at
§ 413.75(b) define an ‘‘approved medical
residency program’’ as a program that
meets one of the following criteria
(emphasis added):
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(1) Is approved by one of the national
organizations listed in § 415.152 of the
regulations.
(2) May count towards certification of
the participant in a specialty or
subspecialty listed in the current edition
of either of the following publications:
(i) The Directory of Graduate Medical
Education Programs published by the
American Medical Association; or
(ii) The Annual Report and Reference
Handbook published by the American
Board of Medical Specialties.
(3) Is approved by the Accreditation
Council for Graduate Medical Education
(ACGME) as a fellowship program in
geriatric medicine.
(4) Is a program that would be
accredited except for the accrediting
agency’s reliance upon an accreditation
standard that requires an entity to
perform an induced abortion or require,
provide, or refer for training in the
performance of induced abortions, or
make arrangements for such training,
regardless of whether the standard
provides exceptions or exemptions.
The regulations at § 415.152 define an
‘‘approved graduate medical education
program’’ as a residency program
approved by one of the following
national organizations (or their
predecessors): The Accreditation
Council for Graduate Medical Education
(ACGME) of the American Medical
Association, the American Osteopathic
Association (AOA), the Commission on
Dental Accreditation (CODA) of the
American Dental Association, and the
Council on Podiatric Medical Education
(CPME) of the American Podiatric
Medical Association. (We note that the
ACGME is now a separate entity from
the American Medical Association.
Therefore, in this final rule, we are
making a technical amendment to the
regulations at § 415.152 to remove the
words ‘‘of the American Medical
Association.’’) The statutory basis for
this regulation is at section 1861(b)(6) of
the Act, which cites these accrediting
bodies for residency programs. Thus, in
general, under § 413.75(b), an
‘‘approved’’ program can be a program
that is accredited by one of these
national organizations, or one that leads
toward board certification by the
American Board of Medical Specialties
(ABMS). In the September 29, 1989 final
rule (54 FR 40295), we explained that,
in order to reconcile the two statutory
definitions of approved programs at
sections 1861(b)(6) and 1886(h)(5)(A) of
the Act, we did not limit our regulatory
definition of ‘‘approved medical
residency program’’ to one that may
count toward certification in a specialty,
but added that a program is also
‘‘approved’’ for purposes of IME and
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direct GME if it is approved by one of
the national accrediting bodies.
Furthermore, we understood that,
especially with respect to subspecialty
training, there historically were some
formal programs for which none of the
listed national accrediting bodies had
established standards. However, the
ABMS had established a national board
examination for some of those
unaccredited programs and,
consequently, those programs do count
toward certification. Accordingly, such
programs also meet the definition of an
‘‘approved medical residency training
program.’’
b. Determining Whether an Individual Is
a Resident or a Physician
The statute and the regulations (in at
least two places in the teaching context)
define the term ‘‘resident.’’ Section
1861(b)(6) of the Act refers to services
provided in a hospital by an ‘‘intern or
resident-in-training under a teaching
program approved’’ by one of the listed
accrediting bodies for residency
programs. In addition, section
1886(h)(5)(I) of the Act states that the
term ‘‘resident’’ includes ‘‘an intern or
other participant in an approved
medical residency training program.’’
The regulations at § 413.75(b) state that
the term resident means ‘‘an intern,
resident, or fellow who participates in
an approved medical residency
program, including programs in
osteopathy, dentistry, and podiatry, as
required in order to become certified by
the appropriate specialty board.’’
As discussed above, an ‘‘approved’’
program is one that is accredited by one
of the listed national organizations, or
one that may count towards board
certification. Generally, residency
programs today, whether they are core
or subspecialty programs, are both
accredited, and lead toward board
certification through an explicit board
examination for that field. Thus, in the
typical instance, a resident is accepted
into an accredited program in a
particular specialty, completes that
program over the course of what is
typically 3 to 5 years, and then qualifies
to take the board certifying examination
in the particular specialty of that
program. This resident may or may not
train in an additional accredited
subspecialty program, which would
typically last for 1 to 3 years, and which
would also lead to board certification
through an additional board certifying
examination which the individual
would be qualified to take upon
completion.
We receive questions from time to
time regarding whether individuals are
considered to be trainees in approved
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programs or whether they are
considered to be physicians and should
bill accordingly. These questions
frequently involve programs of further
training that certain senior and junior
faculty at hospitals, typically at large
academic medical centers, undertake on
their own, not under the auspices of any
accrediting body, and in an area of
practice for which there is no board
certification. Therefore, there is no
actual standardized curriculum or
formally organized ‘‘program’’ in which
the individual trainee is participating.
Another type of trainee about which we
have received questions is one that has
completed an accredited program in a
certain specialty, but subsequently
participates in additional training in
that specialty that he or she could have
participated in while still within the
accredited program. Sometimes this
individual may even train with
residents who are actually still training
in that accredited program (for example,
an individual who has completed a
dermatology residency may choose to
do additional training with PGY4
dermatology residents). In these
scenarios, in order to decide whether an
individual is considered a resident or a
physician for purposes of Medicare
payment, the pertinent questions are
whether—
(1) The individual actually needs the
training in order to meet board
certification requirements in that
specialty; and
(2) Whether the individual is formally
participating in an organized,
standardized, structured course of
study.
With regard to the junior faculty who
are ‘‘training’’ with senior faculty to
learn highly specialized skills, we
believe that individuals participating in
a course of training that one or more
senior physicians creates absent the
involvement and approval of an
accrediting body, and for which there is
no specific existing board certification
examination, should not be considered
‘‘residents’’ or counted for IME and
direct GME purposes. Similarly,
individuals that already completed an
accredited residency program, but
subsequently participate in additional
training in that same specialty that they
could have participated in while still
within that accredited program, should
also not be considered ‘‘residents’’ or be
included in the IME and direct GME
count. This is because these individuals
have already completed accredited
residency programs in a particular
specialty or subspecialty, and do not
need to complete the additional training
in order to meet board certification
requirements in that field in which they
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continue to ‘‘train.’’ The definition of
‘‘resident’’ at § 413.75(b) is ‘‘an intern,
resident, or fellow who participates in
an approved medical residency
program, including programs in
osteopathy, dentistry, and podiatry, as
required in order to become certified by
the appropriate specialty board’’
(emphasis added). Accordingly, the
individuals described in the scenarios
above do not meet the definition of
‘‘resident’’ at § 413.75(b) for IME and
direct GME purposes. Instead, these
individuals should be treated and
receive payment as physicians.
As we explained in the September 29,
1989 Federal Register rule: ‘‘The costs
relating to patient care services of
licensed physicians who are classified
as ‘‘fellows’’ but who are not in an
identifiable formal program leading to
certification as defined in section
1886(h)(5) of the Act but remain at a
teaching hospital/medical school
complex to enhance their expertise in a
field of study are payable on a Part B
reasonable charge basis [now under the
Medicare physician fee schedule] as
physicians’ services’’ (54 FR 40295).
Similarly, in the Provider
Reimbursement Manual, Part I, section
2405.3.F.2, we state, ‘‘Intermediaries
must not count an individual in the
indirect medical education adjustment
if * * * [A]n individual designated as
a ‘‘fellow’’ has elected to remain at a
teaching hospital/university complex
for additional work to gain expertise in
a particular field but is no longer in a
formally organized program to fulfill
certification requirements. The services
of such an individual are generally
covered as physicians’ services payable
on a reasonable charge basis’’ (emphasis
added). (Note: Although we used the
term ‘‘fellow,’’ which is defined
synonymously with ‘‘resident’’ in the
regulations at § 413.75, in these
paragraphs in the September 29, 1989
Federal Register and in the PRM–I, by
stating that such ‘‘fellows’’ are not in
identifiable, formally organized
programs and their services should be
billed under Part B as physician
services, we clearly were indicating that
these ‘‘fellows’’ are licensed physicians,
not residents, and should not be
included in the IME and direct GME
FTE counts. Perhaps ‘‘junior faculty’’
would have been a more apt
characterization of these individuals.)
The passage from the September 29,
1989 Federal Register also mentions an
‘‘identifiable formal program leading to
certification as defined in section
1886(h)(5) of the Act’’ which refers to
the statutory definition of ‘‘approved
medical residency program.’’ The word
‘‘approved’’ connotes formality; a
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planned, structured course of study
with a curriculum based on national
(rather than individual physician or
hospital) standards with a standardized
outcome based on standardized
evaluations. Since the early days of
Medicare, prior to the enactment of
section 1886(h) of the Act, when
hospitals received payment on a
reasonable cost basis for ‘‘approved
educational activities,’’ we defined such
activities as ‘‘formally organized or
planned programs of study operated or
supported by an institution, as
distinguished from ‘on-the-job,’
‘inservice,’ or similar work-learning
programs’’ (emphasis added) (PRM–I,
section 402.1). We believe the education
that junior faculty receive when
working closely with senior faculty to
gain highly specialized skills is more
appropriately characterized as on-thejob, or inservice training, rather than
training in an ‘‘approved medical
residency program.’’
In order for the training to be
considered an ‘‘approved medical
residency program,’’ the training must
prepare the individual for certification
in the particular specialty or
subspecialty in which the individual is
training. The mere possibility that the
training could be construed as leading
toward or counting toward certification
in some existing board examination is
insufficient. For example, an individual
who is enrolled and participating in a
two year accredited subspecialty
program in allergy and immunology
and, as part of that program, completes
an elective in allergic reactions to insect
stings is considered a resident during
that elective, and may be included in
the IME and direct GME FTE count
(assuming all other requirements are
met). However, if, after completion of
the 2-year allergy and immunology
subspecialty program, this individual
decides to remain at the teaching
hospital for a year to shadow a
physician who has unique expertise in
allergic reactions to insect stings, this
individual would not be considered a
resident, nor would this training be
considered an approved program,
because this individual is not formally
enrolled in a planned, structured,
standardized course of study, nor is this
year of training required for any
individual to qualify to take the board
examination in allergy and
immunology. This individual already
completed the 2-year subspecialty
program, and therefore, the extra year
spent studying allergic reactions to
insect stings is extraneous. Accordingly,
this individual would not be viewed as
a resident participating in an approved
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medical residency training program.
Rather, this individual is considered a
physician and should bill Medicare for
services furnished under the physician
fee schedule.
c. Formal Enrollment and Participation
in a Program
We understand that the participation
of individuals in an approved medical
residency program under which they
would be considered residents as
defined at § 413.75 is marked by a
formal application, acceptance, and
enrollment process. We believe that in
order for an individual to be considered
a resident for purposes of inclusion in
the IME and direct GME counts,
whether the individual is a graduate of
an allopathic medical school, an
osteopathic medical school, or a school
of podiatry or dentistry, the individual
must be:
(1) Formally accepted and enrolled in
the training program, and
(2) Fully participating in that training
(unless there is a documented
arrangement for the resident to work
part time).
In general, we would expect formal
acceptance to include an application
process (for example, the national
residency match process), and an
enrollment process which would
include letters or other official
notifications from the hospital or
program sponsor regarding the
resident’s acceptance to train in a
particular program. We also would
expect the resident to have an
employment contract with the
institution(s) sponsoring the program
and/or the institution(s) in which he or
she is training. A hospital must be able
to document that the individual’s
participation in the particular course of
training represents a definitive (not
hypothetical) path for that individual’s
certification, and that satisfactory
completion of such training would
fulfill all required elements in order for
the individual to qualify to take a
specific board examination.
In order to make these rules clearer
for the future, in the FY 2011 IPPS/
LTCH PPS proposed rule, we proposed
to revise the definition of ‘‘resident’’ to
specify that the trainee must be
‘‘formally accepted and enrolled’’ in the
approved program in order to be
considered a resident for IME and direct
GME purposes. Specifically, we
proposed to revise the definition of
‘‘resident’’ at § 413.75(b) to mean ‘‘an
intern, resident, or fellow who is
formally accepted, enrolled, and
participating in an approved medical
residency program, including programs
in osteopathy, dentistry, and podiatry,
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as required in order to become certified
by the appropriate specialty board.’’ We
also proposed to make a similar
conforming change to the definition of
‘‘primary care resident’’ at § 413.75(b).
We proposed that this change in the
definitions of ‘‘resident’’ and ‘‘primary
care resident’’ would be effective for
IME and direct GME for cost reporting
periods beginning on or after October 1,
2010.
Comment: Several commenters
expressed appreciation for CMS’
clarifications regarding which programs
are ‘‘approved medical residency
training programs’’ and which
individuals are residents or physicians.
Other commenters indicated CMS’
clarification is consistent with their
understanding of when an individual is
treated as a resident or physician.
Response: We appreciate the
commenters’ support and understanding
of our policy regarding approved
medical residency training programs
described in the proposed rule.
Comment: Some commenters noted
that CMS did not specifically address
the applicability of existing Line 70 on
Worksheet B, Part I of the Medicare cost
report, which historically has been used
to report the costs of interns and
residents in unapproved programs, nor
did CMS discuss the treatment of
residents with limited medical licenses.
The commenters requested that CMS
clarify its position regarding these
categories of residents in unapproved
programs and hoped that CMS did not
intend to eliminate the use of Line 70
of Worksheet B, Part I.
Another commenter noted that CMS
clarified that residents and fellows only
fall into two categories: (1) Residents
and fellows in programs recognized as
approved for GME purposes; and (2)
residents and fellows in non-approved
programs classified as physicians who
would bill under the MPFS. The
commenter noted that many residents,
such as the residents in the transplant
surgery program or other advanced but
unaccredited training programs, would
not fall under either category (1) or
category (2) because they are not fully
licensed. Another commenter noted that
States also have different licensure laws,
with some states requiring residents to
have temporary licenses, while other
States expect residents to be fully
licensed by the second or third year of
residency after completion of an
internship (the first year of training after
medical school), and taking Step III of
the United States Medical Licensing
Examination (USMLE). The commenter
added that bylaws in academic medical
centers differ, and that the trainees in
unapproved programs cannot always
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bill for services provided because they
may not be authorized under their
institution’s bylaws to do so because
they are ‘‘in a formal training program.’’
Response: The commenters are correct
that the Medicare cost report does
include a line (Line 70 on Worksheets
A and B) for hospitals to receive
payment for the services provided by
residents who are not in approved
programs. In the case of programs that
are not either accredited or do not count
toward board certification, in the
September 29, 1989 final rule (54 FR
40295), we explained that:
‘‘Medicare would pay its share of the
costs of residents not in approved
programs as described in § 405.523 of
our regulations regarding residents not
in approved teaching programs. Under
§ 405.523, hospitals are paid under Part
B for up to 80 percent of the reasonable
costs of services (that is, salaries and
salary-related fringe benefits) of interns
and residents who are not in approved
programs, after payment of the Part B
deductible by the Medicare beneficiary.
No other educational program costs
(that is, faculty compensation costs and
other direct and indirect program
expenses) in connection with such
residents are payable. The Medicare
beneficiary incurs the expense of
deductible and coinsurance amounts as
determined on the basis of the hospital’s
charges under Part B of the Medicare
program.’’
‘‘The costs relating to patient care
services of licensed physicians who are
classified as fellows but who are not in
an identifiable formal program leading
to certification as defined in section
1886(h)(5) of the Act but remain at a
teaching hospital/medical school
complex to enhance their expertise in a
field of study are payable on a Part B
reasonable charge basis as physicians’
services.’’
(We note that the regulations that
were previously located at § 405.523 are
currently located at § 415.202.)
The regulation at § 415.202(a) state, as
a general rule, that ‘‘For services of a
physician employed by a hospital who
is authorized to practice only in a
hospital setting and for the services of
a resident who is not in any approved
GME program, payment is made to the
hospital on a Part B reasonable cost
basis regardless of whether the services
are furnished to hospital inpatients or
outpatients.’’
We understand that there are
advanced training programs that exist,
such as those in transplant surgery and
surgical oncology, which are not
accredited by the ACGME, nor do they
lead to board certification in those
subspecialties, yet they are ‘‘accredited’’
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by their respective medical societies. As
such, they are formally organized,
planned, structured courses of study
that are at least one year in duration. We
also understand that, although the
participants in these advanced training
programs have already completed at
least one residency, there may be
reasons unique to them, their teaching
institution, or state as to why these
trainees are not always fully licensed.
Therefore, we understand that some
trainees who are not participating in an
‘‘approved medical residency program’’
are not currently billing under the
MPFS for the services they provide in
the programs.
We believe Part B reasonable cost
payment under § 415.202 may be
applicable only in the instance where
the trainee is not fully licensed in the
State in which he or she is participating
in an unapproved program. Services
provided by fully licensed physicians,
for example, those who are shadowing
an experienced senior physician but are
not in a formally organized, planned,
standard course of study, or who are
gaining practice experience, would not
be paid under § 415.202. However, we
are contemplating future rulemaking
that would revise the regulations at
§ 415.202 to not allow Part B reasonable
cost payment for the services of any
individuals who have already
completed one residency program,
regardless of licensure status.
Comment: Some commenters
requested that fellowship programs that
are approved by the American Society
of Transplant Surgeons (ASTS) be
considered approved programs for
purposes of direct GME and IME
payment, even though the ASTS is not
listed currently as one of the accrediting
agencies at § 413.75(b), nor is there any
board certification examination. The
commenters noted that the ASTS is a
national accrediting body, the programs
are ‘‘formally organized, standardized,
structured courses of study,’’ and
residents desiring to complete these
programs participate in a formal match
through the National Resident Matching
Program (NRMP). A commenter also
pointed out that training of these
fellows occurs in ‘‘Medicare approved
transplant programs’’ approved by CMS
to receive Medicare payment.
Another commenter asked that CMS
clarify the proposed rule to state that an
‘‘approved’’ program can be (1) one that
is accredited by a national organization
listed at § 415.152 or (2) one that leads
to certification by its governing body or
toward board certification by the ABMS.
The commenter added that as medical
training evolves over time, many
specialties are not currently part of
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CMS’ ‘‘approved’’ list, even though they
are recognized by national
organizations, such as the ASTS.
Another commenter added that the
ACGME’s Green Book lists some
subspecialty training programs
approved by various specialty societies
and academies, and that often this level
of approval is the first step to becoming
eventually accredited by the ACGME.
The commenters requested that CMS
update and expand the list of
‘‘approved’’ accrediting agencies
accordingly.
Response: As we noted above, section
1886(h)(5)(A) of the Act defines an
approved medical residency training
program as a ‘‘residency or other
postgraduate medical training program
participation in which may be counted
toward certification in a specialty or
subspecialty.’’ Our regulations at
§ 415.152 define an ‘‘approved graduate
medical education (GME) program’’ to
include a residency program approved
by one of the accrediting bodies
identified at section 1861(b)(6) of the
Act, or ‘‘a program otherwise recognized
as an ‘approved medical residency
program’ under § 413.75(b)’’ of our
regulations. Section 1861(b)(6) of the
Act lists only four accrediting bodies—
the Council on Medical Education of the
American Medical Association (now the
ACGME), the Committee on Hospitals of
the Bureau of Professional Education of
the American Osteopathic Association
(now the AOA), the Council on Dental
Education of the American Dental
Association (now known as CODA), and
the Council on Podiatric Medical
Education of the American Podiatric
Association. The ASTS is not listed in
the Act. We cannot update or expand
this list without a change in the law. In
addition, the regulation at § 413.75(b)
defines an ‘‘approved medical residency
program’’ as one that is either approved
by one of the four national organizations
noted above or one that ‘‘may count
towards certification of the participant
in a specialty or subspecialty listed in
the current edition’’ of either the AMA
or the ABMS directory. Because there is
no board certification examination
specifically for these transplant and
other advanced training programs, they
cannot be recognized as approved
medical residency training programs for
purposes of receiving direct GME and
IME payments under Medicare under
our current regulations.
Comment: One commenter asked for
clarification regarding participants in
programs that are accredited by the
ACGME and lead to receipt of a
Certificate of Additional Qualifications
(CAQs) from a specialty board. The
commenter indicated that the
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50291
participants in these programs, often
referred to as ‘‘fellows,’’ already received
board certification in the initial
specialty. The commenter requested
assurance that these fellows can still be
counted as residents for GME purposes,
even though they are not required to sit
for an additional board examination,
and indicated that completion of the
fellowship is sufficient for receipt of the
CAQ.
Response: As we noted previously,
there are numerous subspecialty
programs that the ACGME accredits.
Because these programs are accredited
by the ACGME, which is one of the
accrediting bodies specified at section
1861(b)(6) of the Act and the regulations
at § 415.152 for an approved medical
residency training program, the
participants in the program are
considered to be residents for IME and
direct GME payment purposes, even
though they have already received an
initial board certification.
Comment: One commenter requested
that CMS more clearly define what
constitutes a ‘‘fellowship’’ for the direct
GME and IME FTE counts. Another
commenter also requested clarification
regarding fellows, stating that there are
four types of fellows: (1) Fellows in
formal programs that qualify as
Medicare approved programs; (2)
fellows in formal programs that qualify
as nonapproved programs; (3) junior
faculty with a dual appointment as a
fellow but who are not in a formal
program at all; and (4) fellows solely
engaged in research outside the scope of
an approved program. The commenter
stated that most major academic
medical center bylaws distinguish
between these individuals based on
whether they have patient billing
privileges. The commenter believed that
the last two cited categories of fellows
should be categorized as physicians, not
residents.
Response: The existing regulations at
§ 413.75(b) define ‘‘resident’’ as an
intern, resident, or fellow who
participates in an approved medical
residency program, including programs
in osteopathy, dentistry, and podiatry,
as required in order to become certified
by the appropriate specialty board. In
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24009), we proposed to
revise the definition of ‘‘resident’’ at
§ 413.75(b) to mean ‘‘an intern, resident,
or fellow who is formally accepted,
enrolled, and participating in an
approved medical residency program,
including programs in osteopathy,
dentistry, and podiatry, as required in
order to become certified by the
appropriate specialty board.’’ In both the
existing and proposed revised
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definitions, a ‘‘resident’’ is defined to
include interns, fellows, and residents.
In other words, regardless of the term
used by the academic medical
community, as long as the individual is
participating in an ‘‘approved medical
residency program,’’ the ‘‘fellow’’ is
considered to be a ‘‘resident’’ for
Medicare IME and direct GME payment
purposes.
To respond to the commenter that
mentioned the four categories of
fellows, as we have explained in
response to other comments, we do not
agree that ‘‘fellows’’ in formal but
nonapproved programs, such as those
recognized by specialty medical
societies, should be categorized as
residents for IME and direct GME
purposes. However, we do agree with
the commenter that junior faculty not in
an approved or any training program,
whether approved or nonapproved, and
fellows engaged in research that is
outside the scope of any approved
residency program, should not be
categorized as residents.
Comment: One commenter disagreed
with the statement in the proposed rule
that additional training in the same
specialty or subspecialty should not be
counted for IME and direct GME
payment purposes. The commenter
believed that this type of training
should be included if a board considers
such training necessary to be admitted
to the board. The commenter asserted
that qualifying for an examination is
based on skill level, rather than only
completion of time requirements, and
that most boards rely on the residency
program director’s attestation about the
individual physician’s readiness. For
example, after a physician completes
the minimum years of training, the
program director may require additional
formal training in one or more
subspecialties to raise the resident’s
skill level. The commenter noted that
there is no rule that a candidate must
apply for admission to an examination
after he or she completes the minimum
training required, and that the boards
consider quality, not quantity, which
can include a broad range of formal
training.
Response: As we stated in the
proposed rule, in instances where an
individual has already completed a
residency program, and is continuing to
participate in additional training, in
order to decide whether an individual is
considered a resident or a physician for
purposes of Medicare payment, the
pertinent considerations are: (1)
Whether the individual actually needs
the training in order to meet the
generally applicable board certification
requirements in that specialty; and (2)
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whether the individual is formally
participating and enrolled in an
organized, standardized, structured
course of study. The commenter
believed that additional training in the
same specialty or subspecialty should
be considered part of an approved
program for IME and direct GME
payment purposes if a board considers
such training necessary for the
individual to be admitted to the board.
However, we do not agree that training
in the specialty or subspecialty that is
not part of the generally applicable
requirements for board certification, but
is supplemental training to raise the
skill level of a particular individual, is
considered to be participation in an
approved program as required in order
to become certified. The ACGME and
the ABMS establish minimum, generally
applicable standards for successful
completion of training and
qualifications for board certification.
While certain individuals may need to
pursue additional supplemental training
in order to ensure their personal skill
levels are sufficient prior to pursuing
actual board certification, we do not
believe such training would be part of
the generally applicable requirements
for taking a board examination. The
ACGME and the ABMS are national
organizations that establish and apply
these minimum standards nationally
across all programs, and not on a
resident-by-resident basis. The
regulations at § 413.75(b) state that the
term resident means ‘‘an intern,
resident, or fellow who participates in
an approved medical residency
program, including programs in
osteopathy, dentistry, and podiatry, as
required in order to become certified by
the appropriate specialty board’’
(emphasis added). ‘‘As required’’ means
nationally applicable standards, not
requirements that are determined on an
individual, case-by-case basis. Medicare
is also a national program. It would be
highly impractical for hospital
administrators and the Medicare
contractors to determine whether each
individual trainee (particularly in large
teaching hospitals where there could be
many such individuals) is participating
in training that may or may not be
considered necessary for board
certification for that specific individual.
Accordingly, we believe that training
that is only intended to enhance an
individual’s skills beyond the minimum
required level is not part of an approved
medical residency program. While it is
true that there is no rule that a
candidate must apply for a board
examination immediately after he or she
completes the minimum amount of
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training, the completion of additional
training is not part of the generally
applicable requirements for the board
examination. Therefore, an individual
who undertakes such additional training
is not considered a resident for IME and
direct GME payment purposes.
We recognize that a board may look
favorably upon an individual’s
additional training beyond the
minimum requirements in the process
of considering a particular individual
for certification. While we understand
that there could be some degree of
personalized consideration when an
individual applies to sit for a board
examination, as stated in response to the
previous comment, this does not mean
that all of the training that the
individual has completed is actually
required. It could be true that, in certain
cases, completion of the minimum
training requirements does not
guarantee admittance to a board
examination. However, because the
boards set forth national standards, in
most cases, the minimum training
requirements are sufficient. Further, we
are not convinced that additional GME
payments should be made with respect
to trainees who choose a customized
approach to their training (that is, one
that differs from their colleagues in the
same program), extending that training
beyond the minimum requirements
established by the ACGME and the
ABMS. At the point where a trainee has
completed the national standard
minimum requirements for certification,
and chooses to pursue additional
training that is not generally required
for board certification in that specialty,
that individual should no longer be
considered a resident for IME and direct
GME purposes.
Comment: One commenter believed
that the proposed revision to § 413.75(b)
that seeks to clarify which trainees are
allowable for Medicare GME payment
by including the terms ‘‘formally
accepted, enrolled, and participating in’’
to the definition of a ‘‘resident’’ needs to
be more comprehensive and more
focused. The commenter stated that
codifying that an approved program
must be formally organized does not
help to resolve questions regarding
unaccredited programs, particularly for
‘‘services of residents not in approved
GME programs’’ (42 CFR 415.202) or
attending or junior attending physicians
participating in informal training or
‘‘nontraining.’’ The commenter
suggested that expansing the definition
of an ‘‘approved program’’ would be
more appropriate than expanding the
definition of a ‘‘resident.’’ According to
the commenter, the main issue is
‘‘formal unaccredited programs,’’ and ‘‘it
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would be more helpful to define what
they are rather than focus on a few
obvious examples of what they are not.’’
The commenter suggested the following
expanded definition of an ‘‘approved
residency program’’ that ‘‘may count
toward certification of the participant in
a specialty or subspecialty’’ (42 CFR
413.75(b)): ‘‘A training program that
‘may count toward certification’ would
be one that is a formally organized
unaccredited program and may be
counted by individual ABMS boards
when accepting a candidate’s admission
to a board certification examination.
Allowable training includes training
considered by an individual board’s
application process.’’
The commenter also referred to the
original conference language
accompanying the original Medicare
legislation. The commenter quoted the
following: ‘‘Medicare shares in the
hospital’s training cost because it
increases the quality of care in the
institution’’ (Senate Finance Committee
Report 89–404, June 30, 1965). The
commenter was concerned that the
proposed rule discussion appears to
state that Medicare will not share in the
hospital’s medical education costs for
an individual training beyond the
minimum requirements, but rather treat
these costs as nonhospital costs to be
paid under the MPFS. Yet, the
commenter added, section 1832(a)(2) of
the Act clearly states that residents are
not paid as physicians. The distinction
is that resident services are hospital
costs because training involves a group
of patients, whereas physicians’ services
are billed professional fees for services
to a specific patient. The commenter did
not believe that it was the Congressional
intent to change training activities of
residents once they completed
minimum accredited specialty and
subspecialty requirements.
Response: We disagree with the
commenter’s assertion that our
proposed revised definition of
‘‘resident’’ at § 413.75(b) is not
sufficiently comprehensive or focused.
Rather, we believe our proposed revised
definition of ‘‘resident’’ correctly
characterizes what a resident is for IME
and direct GME payment purposes. We
do not believe that residents not in
approved programs (as discussed at
§ 415.202) should be counted as
residents for IME and direct GME
payment purposes. Perhaps the
commenter is confused because
‘‘resident’’ is defined in two places in the
regulations, first at § 413.75(b) for
purposes of direct GME and IME
payment, and second at § 415.152 for
purposes of payment for physician
services in teaching settings.
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Furthermore, we do not believe that
attending and junior attending
physicians participating in informal
training or nontraining should be
counted as residents for IME and direct
GME payment purposes either. We
believe that formal unaccredited
programs are easy to identify, in that
they are not accredited by the ACGME
or AOA. If there is no explicit board
certification for these programs, the
participants in these programs cannot be
counted for IME and direct GME
payment purposes. Therefore, we do not
agree with the commenter’s
recommended expanded definition of
‘‘approved residency program.’’
With regard to the commenter’s
reference to section 1832(a)(2) of the
Act, section 1832 addresses the scope of
benefits for which payment is made
under Medicare Part B, including
physician services. Section 1832(a)(2)
specifically addresses services other
than inpatient hospital services
furnished by or under arrangements
with a provider of services by residents
of a hospital. We do not believe this
refers to individuals who are licensed
(in other words, those are physicians as
defined at section 1861(r) of the Act)
and are not in approved programs.
Therefore, because the individuals are
licensed and are not in approved
programs, we believe they should be
billing for their services under the
MPFS. If an individual is in an
approved program, he or she is a
resident for purposes of a hospital’s IME
and direct GME FTE count. Further,
although the commenter is correct that
Congress did not limit Medicare direct
GME payment or IME payment to
training only occurring within the
initial residency period, the ACGME
and the ABMS have established
minimum standards required for
successful completion of a particular
specialty or subspecialty. If a physician
is involved in training that is not part
of the established requirements,
payment for the services provided by
that physician should be made under
the MPFS, not as part of direct GME or
IME. Further, we note that it is specious
for the commenter to assert that it was
not ‘‘Congressional intent to change
training activities of residents once they
completed minimum accredited
specialty and subspecialty
requirements.’’ In fact, as expressed in
the conference report accompanying the
original Medicare legislation, funding
for GME activities was intended to be
time limited. Specifically, the
conference report stated, ‘‘Educational
activities enhance the quality of care in
an institution and it is intended, until
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50293
the community undertakes to bear such
education costs in some other way, that
a part of the net cost of such activities
(including stipends of trainees as well
as compensation of teachers and other
costs) should be considered as an
element in the cost of patient care, to be
borne to an appropriate extent by the
hospital insurance program’’ (emphasis
added) (S. Rep. No. 404, 89th Cong., 1st
Sess. 36 (1965); H.R. No. 213, 89th
Cong., 1st Sess. 32 (1965)). Accordingly,
we believe that Medicare GME funding
for trainees should be ‘‘time limited’’
and not be made in perpetuity for
trainees that are not in an approved
medical residency training program or
for whom the training is not required in
order to meet the standard requirements
for board certification.
Comment: One commenter read the
proposed rule discussion to suggest that
if all training must be necessary to meet
board certification, formal training
beyond the minimum amount specified
in the board certification requirements
should not be included for GME
payment purposes. The commenter
believed this statement contradicts
policy expressed in the September 29,
1989 Federal Register (54 FR 40306),
which states, ‘‘If it is clear that these
individuals are actually in formally
approved programs, we believe that they
should be counted as residents in
approved programs even if the
individual has completed the
requirements for board certification.’’
The commenter believed that chief
residents are enrolled in accredited
programs and are eligible for inclusion
in the IME and direct GME FTE counts,
even though certain chief residencies
extend beyond the minimum accredited
length of the program. The commenter
also noted that there are several
instances, particularly in prestigious
teaching institutions, where the ACGME
allows a hospital to offer a program
length that is longer than the typical
minimum accredited length for that
specialty. For example, a hospital may
choose to operate a 6- or 7-year (as
opposed to the usual 5-year) surgery
program, wherein accreditation accrues
to the entire program, candidates
compete for slots through the National
Residency Match Program, and sign
formal contracts upon entering these
programs. The commenter referred to a
letter from CMS (then HCFA) written in
1996 that acknowledged that, in some
cases, a university’s formal program
may be longer than the ACGME’s
published accreditation length, and
stated that the school length, rather than
the accreditation length, would apply.
The commenter urged CMS to clarify
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This is the final year of the ACGMEthat training beyond the accredited
length of a formally organized program
accredited program. Therefore, we
is included in the IME and direct GME
consider ‘‘chief residents’’ in surgery
FTE resident counts.
programs to be residents for IME and
Response: We made the statement in
direct GME payment purposes.
the September 29, 1989 Federal Register However, we learned from the ACGME
(54 FR 40305) that was referenced by
that in internal medicine and pediatrics,
the commenter in response to a
acting as a ‘‘chief resident’’ is not a
comment we received from
requirement. There are only a select few
representatives of the specialties of
‘‘chief residents’’ per program, and the
internal medicine and family practice
chief residency is completed after the
who requested clarification of the status final year of the ACGME-accredited
of individuals who are spending a
residency. According to the ACGME, it
fourth year in internal medicine or
is not part of the accredited training.
family practice (both 3-year programs).
Therefore, although our policy in the
The commenters noted that some
September 29, 1989 Federal Register
programs add a fourth year for a variety
allowed chief residency years that were
of reasons, and in some instances,
completed after the minimum
‘‘individuals who have completed their
requirements for board certification
requirements for board certification
have been met to be considered part of
spend a fourth year as a chief resident
an approved program for IME and direct
and are technically no longer in a
GME payment purposes, effective for
program leading to certification in a
cost reporting periods beginning on or
specialty or subspecialty’’ (54 FR 40305). after October 1, 2010, we are revising
Our response was as follows:
our policy regarding chief residencies
‘‘If it is clear that these individuals are that occur after the accredited program
actually in formally approved programs, is completed and when minimum
we believe that they should be counted
requirements for board certification are
as residents in approved programs even already satisfied. That is, individuals
if the individual has completed the
that act as chief residents after they have
requirements for board certification. The completed the accredited program and
situation is not unlike those we
have satisfied minimum requirements
discussed in the proposed rule
for board certification are no longer
concerning Transitional Year programs
considered residents for IME and direct
and General Dentistry programs, neither
GME payment purposes. (We
of which, in itself, lead to certification
understand they would be considered
in a specialty or subspecialty. We do not
junior faculty in many teaching
believe that Congress enacted section
hospitals.) This is consistent with our
1886(h) of the Act to reduce the types
policy as expressed in the proposed
of programs recognized by Medicare.
rule, which states that in order to decide
Thus, if the ACGME and other
whether an individual is considered a
accrediting bodies recognize such
resident or a physician for purposes of
individuals as residents in the General
Medicare payment, the pertinent
Internal Medicine or Family Practice
questions are (1) whether the individual
program, we would count them for
purposes of direct GME payment at .5 or actually needs the training in order to
meet board certification requirements in
1.0 FTE depending on whether they are
still in their initial residency period. We that specialty; and (2) whether the
individual is formally enrolled and
would differentiate these individuals
participating in an organized,
from those who have completed their
standardized, structured course of
residency but remain for an additional
study. Because the chief residents in
period of time with the academic
internal medicine and pediatrics do not
settings to continue their training
need the training in order to meet board
outside the context of a formally
certification requirements, effective for
organized approved program.
Individuals in the latter group should be cost reporting periods beginning on or
after October, 1, 2010, we are not
paid as physicians.’’ (54 FR 40305 and
considering them to be residents for IME
40306)
and direct GME payment purposes.
We recently consulted with the
With regard to the comment asserting
ACGME to determine what its policy is
that the ACGME allows a hospital to
regarding individuals, such as ‘‘chief
offer a program length that is longer
residents,’’ that, in certain programs,
than the typical minimum accredited
stay beyond the minimum accredited
length for that specialty, and that
length of the program. We learned that
accreditation accrues to the entire
in the surgical specialties and a few of
program, we consulted with the ACGME
the other hospital-based specialties, all
on this point as well. We were informed
fifth year (or final year of training)
that this additional time is not part of
residents are considered ‘‘chief
resident,’’ or in their chief resident year. the accredited program, nor is the
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ACGME aware of when the situations
described by the commenter occur.
Therefore, individuals training in a
hospital’s program that extend beyond
the actual accredited length are not
considered residents for IME and direct
GME payment purposes because they
are no longer training in an accredited
program according to the ACGME. Thus,
for example, an individual training in a
6- or 7-year general surgery program
would only be counted as a resident for
IME and direct GME purposes in PGYs
1 through 5. The commenter references
a letter that CMS (then HCFA) wrote in
1996 that addresses this point of
hospitals that operate programs that
extend beyond the minimum accredited
length. CMS was asked ‘‘What are the
criteria for determining [sic] approved
program length for IME?’’ We
responded, in part, as follows:
‘‘* * * we do believe the length of an
approved program may be of relevance
in the intermediary’s IME
determination. The question then is,
what is to be considered the program’s
recognized length? In your letter, you
stated that BCCA’s (Blue Cross of
California) position is that ‘the approved
program length is the ACGME published
accreditation length for the specific
university.’ We generally agree with this
position. However, we acknowledge that
the ACGME published accreditation
length may reflect only the minimum
number of years and that in some cases,
the university’s formal program may be
longer. For the intermediary to
recognize a program length that is
longer than that published by the
ACGME, the intermediary should expect
to see that a majority of residents are in
the program for the same length of time.
This establishes a base by which
aberrancies can be identified. There may
be a legitimate reason for a full-time
resident to be formally enrolled in an
approved program for a length of time
that is greater than the norm, but, again,
this would need to be explained and
documented by the provider. If
residents are serving as fellows or chief
residents, they must be doing so under
an approved program to be counted.’’
In this response above, we were
allowing participants in a program that
extends beyond the minimum
accredited length to be counted as
residents for IME (and direct GME)
purposes if the hospital could document
to the intermediary that the majority of
participants were training in the
program for the same length of time.
However, based on what we have
recently learned from the ACGME, this
position expressed in the 1996 letter is
not consistent with the ACGME’s
policy. That is, the time spent in a
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program beyond the minimum
accredited length is not recognized by
the ACGME, even if the majority of the
participants in the program are training
beyond the accredited length for the
same length of time. Accordingly,
effective for cost reporting periods
beginning on or after October 1, 2010,
we are changing our policy regarding
programs that hospitals operate for
longer than the accredited (that is, the
minimum) length. That is, individuals
training in a program that extends
beyond the actual accredited length are
not considered residents for IME and
direct GME payment purposes for the
period of time extending beyond the
minimum accredited length, because
they are no longer training in an
accredited program according to the
ACGME.
Comment: One commenter
recommended that CMS adopt a policy
that in order for a program to be
approved, it should be at least a year in
length. The commenter believed that
this would distinguish formal programs
from shorter continuing medical
education and inservice training of
physicians.
Response: We are sympathetic to the
commenter’s recommendation because
it seems consistent with our existing
policy regarding what an approved,
formal, structured program is. As we
indicated in the proposed rule, since the
early days of Medicare, prior to the
enactment of section 1886(h) of the Act,
when hospitals received payment on a
reasonable cost basis for ‘‘approved
educational activities,’’ we defined such
activities as ‘‘formally organized or
planned programs of study operated or
supported by an institution, as
distinguished from ‘on-the-job,’
‘inservice,’ or similar work-learning
programs’’ (emphasis added) (PRM–I,
section 402.1). However, we do not
believe we need to change the
regulations text to specify that an
approved program must be ‘‘at least 1
year in length’’ because we believe that
programs that meet the definition of
‘‘approved’’ are 1 year in length. We may
consider this recommendation for future
rulemaking if we find that it is
necessary.
Comment: One commenter indicated
that from its experience, certifying
boards do allow unaccredited training
as part of the required training, and the
boards may not want to provide specific
statements regarding the types of
allowable unaccredited training in order
to maintain flexibility in the
requirements. The commenter
mentioned that the requirements listed
by the American Board of Radiology for
certification in vascular and
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interventional radiology include one
year of training in an ACGME accredited
subspecialty program and ‘‘one year of
practice or additional training (one-third
of that time) in the subspecialty.’’
Accordingly, the commenter stated that
a hospital may only be able to document
that unaccredited training was accepted
by a board after a resident achieved
certification.
Response: A distinction should be
made between training that an
individual pursues that is in addition to
the minimum standards required for
completion of the accredited program
and for board certification, and
unaccredited training that is actually
required for board certification. As we
stated in response to a previous
comment, while we understand that
there could be some degree of
personalized consideration when an
individual applies to sit for a board
examination, this does not mean that all
of the training that the individual has
completed is actually required.
Accordingly, GME payments should not
be made with respect to training that
extends beyond the minimum
requirements. With regard to
unaccredited training that is actually
required for board certification, we
understand that, in certain cases, a
board may accept unaccredited training
as fulfilling part of the requirements for
certification. However, the board would
not typically accept only unaccredited
training, nor would a hospital or trainee
know with certainty whether a
particular ‘‘training’’ experience will
ultimately be accepted, if, as the
commenter mentioned (as in the case of
vascular and interventional radiology),
often the training, and its content and
quality, must be verified by the program
director and then reviewed by the
board. Further, we do not believe it is
prudent or practical to wait until after
an individual’s training was accepted by
a board to know if that individual
should be included in the IME and
direct GME resident counts. To
encourage simplicity in administering a
national program, it is not unreasonable
for CMS to establish guidelines for
determining whether an individual
should be included in the FTE count.
Therefore, in the absence of
accreditation and foreknowledge as to
whether unaccredited training would be
accepted by a board, it is simpler and
more practical for such an individual to
be categorized as a physician, not a
resident, even if the particular ‘‘training’’
is ultimately accepted by the board.
In the case of vascular and
interventional radiology subspecialty
programs, the American Board of
Radiology (ABR) states that the
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requirements for board certification in
vascular and interventional radiology
are (in part) as follows: ‘‘You must
successfully complete one year of
fellowship training (after residency) in a
vascular and interventional radiology
program accredited by the ACGME or by
the RCPSC (Canada). You must also
complete one year of practice or
additional approved training, with onethird of that year spent in vascular and
interventional radiology’’ (emphasis
added). (https://www.theabr.org/ic/
ic_vir/ic_vir_req.html). The commenter
excluded the word ‘‘approved’’ from its
comment. We have spoken with the
ABR and learned that ‘‘approved’’ means
some kind of one year experience (July
to June) that the ABR would approve,
not before the training begins, but
during or toward the end of the training
year, when the individual registers with
the ABR in order to schedule the
examination in vascular and
interventional radiology. Again, we
believe that when it is not known with
certainty at the time an individual
begins a course of ‘‘training’’ whether the
board will ultimately accept that
training, that experience should not be
counted as a residency for IME and
direct GME payment purposes.
A clear example of time that may be
counted toward board certification but
certainly should not be considered
residency training for inclusion in the
IME and direct GME resident counts is
practice experience. Regarding the time
spent in ‘‘one year of practice,’’ while the
ABR clearly accepts such time as
counting toward certification, we do not
believe that during that time in which
the individual is ‘‘practicing’’ that he or
she is considered a resident, particularly
not for IME and direct GME payment
purposes. It is appropriate for an
individual who is practicing to be
billing under the MPFS. With regard to
the DIRECT pathway (https://
www.theabr.org/ic/ic_vir/
ic_vir_direct.html), which is another
method of attaining board certification
in vascular and interventional
radiology, PGYs 1 through 6 are training
years that are accredited by the ACGME.
Therefore, the trainee can be considered
a resident during those 6 years.
However, PGY7 is 12 months of clinical
practice, and an individual would be
considered a physician during this year
and should bill under the MPFS
accordingly.
Comment: One commenter urged
CMS to work with the ABMS to identify
unaccredited training programs that the
certifying boards accept toward meeting
the requirements for board certification,
so as to establish more clearcut
guidelines for hospitals to use to
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identify which programs would be
considered residencies for GME
payment purposes under Medicare.
Response: We believe it is important
to consult with the accrediting and
certifying agencies to ensure that our
policies are consistent with theirs, and
we welcome communication with them
now and in the future. However, for the
purpose of this final rule, we are
providing clear policy guidance to
hospitals and Medicare contractors for
purposes of determining whether an
individual should be treated as a
resident or a physician. Essentially, a
resident for IME and direct GME
payment purposes is an individual who,
in accordance with our revised
definition of ‘‘resident’’ at § 413.75(b), is
formally accepted, enrolled, and
participating in an approved medical
residency program, including programs
in osteopathy, dentistry, and podiatry,
as required in order to become certified
by the appropriate specialty board. The
program would be ‘‘approved’’ if it is
either accredited by one of the four
recognized accrediting bodies, or if not
accredited, the individual may be
counted as a ‘‘resident’’ if the individual
actually needs the training in order to
meet the standard board certification
requirements established for that
specialty.
Comment: One commenter noted that,
in addition to clarifying whether an
individual is a resident or a physician,
CMS proposed to revise the definitions
of ‘‘resident’’ and ‘‘primary care resident’’
effective for cost reporting periods
beginning on or after October 1, 2010.
The commenter asked whether these
definitions reflect a clarification of
existing policy, or, as the existence of a
prospective effective date suggests, a
change in policy. If it is a change in
policy, the commenter asked what
criteria should be applied for periods
prior to October 1, 2010, in determining
whether an individual is a resident
because some contractors have been
using criteria similar to those described
in the proposed rule’s preamble to
determine which individuals should be
included in the IME and direct GME
FTE counts.
Response: In the recent past, we had
been made aware of a situation at a
hospital where graduates of allopathic
medical schools were training in
programs that were accredited by the
AOA. The AOA has had a longstanding
policy that only graduates of osteopathic
schools may enroll and participate in
osteopathic residency programs;
graduates of allopathic medical schools
may not be accepted and train in
osteopathic programs. Nevertheless,
despite this rule, a hospital did train
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allopathic individuals in an osteopathic
accredited program and sought to count
those allopathic FTEs in the IME and
direct GME counts. Because the hospital
was able to show that at least one of
those allopathic individuals was able to
use the osteopathic training toward
fulfillment of the allopathic board’s
requirements (and, in fact, successfully
achieved allopathic board certification),
the hospital argued that although the
allopathic individuals were not formally
enrolled in the AOA accredited program
(since doing so was against AOA
policy), the training did count toward
board certification, as evidenced by the
one trainee who did successfully sit for
the allopathic board. Therefore, the
hospital added, the training of these
allopathic individuals in the osteopathic
program was sufficient for all the
allopathic individuals in the osteopathic
program to be counted as residents for
IME and direct GME purposes.
Because the existing definition of
‘‘resident’’ at § 413.75(b) states,
‘‘Resident means an intern, resident, or
fellow who participates in an approved
medical residency program, including
programs in osteopathy, dentistry, and
podiatry, as required in order to become
certified by the appropriate specialty
board’’ (emphasis added), we were
persuaded to allow the hospital to count
as residents those allopathic individuals
who trained in the AOA accredited
program. We were persuaded because
those individuals arguably did
‘‘participate’’ in an otherwise AOAapproved medical residency program as
required ‘‘in order to become certified by
the appropriate specialty board.’’ (We
understand that the hospital has since
stopped training allopathic graduates in
the osteopathic accredited program.) We
note that, in part, the statutory and
regulatory intent behind the definitions
of ‘‘approved medical residency training
program’’ and ‘‘resident’’ is to protect the
‘‘approved’’ status of training in typical
accredited programs for residents who
may participate in the formal program
but, on rare occasions, may not
complete their course of training. We do
not believe the definitions were
intended to include a program such as
the particular hospital’s program,
which, from its inception, in its entirety,
was not accredited by the AOA, and
where only on rare occasions did
participation in the osteopathic program
count towards certification in an
ACGME accredited program. However,
the previous regulation could be read
differently such that if even one trainee
went on to become board certified on
the basis of that training, all participants
in that program could be counted as
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residents for IME and direct GME
payment purposes. We believe that it is
appropriate to close the loopholes that,
for example, had previously allowed the
allopathic graduates to be counted as
residents while inappropriately training
in an AOA program by clarifying that a
resident must actually be formally
enrolled and participating in an
approved medical residency program.
Therefore, we proposed to make a
prospective change to the definition of
‘‘resident,’’ effective for cost reporting
periods beginning on or after October 1,
2010, to emphasize that it is not
sufficient for an individual to merely
‘‘participate’’ in an otherwise approved
medical residency program which may
ultimately be counted toward board
eligibility for his or her own
certification, or the certification of any
of the other trainees in the program.
Rather, under the proposed revised
definition of ‘‘resident’’ and ‘‘primary
care resident’’ which we are finalizing in
this final rule, the individual must be
‘‘formally accepted, enrolled, and
participating in an approved medical
residency program, including programs
in osteopathy, dentistry, and podiatry,
as required in order to become certified
by the appropriate specialty board.’’ We
believe this addition to the definition of
‘‘resident’’ that the individual must be
formally accepted and enrolled in the
program also will further ensure that
junior faculty or other advanced trainees
who merely ‘‘participate’’ in some
training but are not actually formally
accepted and enrolled in the program
are not counted as FTEs for IME and
direct GME purposes.
To respond to the commenter’s
specific question as to what criteria
should be applied for periods prior to
October 1, 2010, in determining whether
an individual is a resident, because
some contractors have been using
criteria similar to those described in the
preamble of the proposed rule to
determine which individuals should be
included in the IME and direct GME
FTE counts, we believe that prior to
October 1, 2010, the existing regulations
text would be controlling. Thus, much
of the policy prior to and after October
1, 2010, is the same. However, as
explained in response to a previous
comment, we are changing our policy
with respect to chief residencies and to
programs that hospitals operate that
extend beyond the accredited length.
Prior to cost reporting periods beginning
on or after October 1, 2010, according to
the September 29, 1989 Federal Register
(54 FR 40305), if it is clear that chief
residents are actually in formally
organized approved programs, they
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could be counted as residents even if
they have completed the requirements
for board certification. However,
effective for cost reporting periods
beginning on or after October 1, 2010,
we are changing our policy regarding
chief residencies that occur after the
accredited program is completed and
when minimum requirements for board
certification are already satisfied. That
is, individuals that act as chief residents
after they have completed the accredited
program and have satisfied minimum
requirements for board certification are
not considered residents for IME and
direct GME payment purposes.
With regard to programs that are
offered for longer than the minimum
accredited length for that specialty,
prior to cost reporting periods beginning
on or after October 1, 2010, we are
allowing participants in a program that
extends beyond the minimum
accredited length to be counted as
residents for IME and direct GME
purposes if the hospital could document
to the fiscal intermediary or MAC that
the majority of participants were
training in the program for the same
length of time. However, effective for
cost reporting periods beginning on or
after October 1, 2010, we are changing
our policy regarding programs that
hospitals extend beyond the minimum
accredited program length for the
specialty. That is, individuals training
in a program that extends beyond the
actual accredited length are not
considered residents for IME and direct
GME purposes for the time extending
beyond the minimum accredited length
because such training is not part of the
accredited program according to the
ACGME. We would expect that an
individual who has trained in an
accredited program for the number of
years for which the program is
accredited (for example, in a surgery
program, this would be 5 years) would
have satisfied the minimum
requirements for board certification in
that specialty.
Comment: One commenter listed
several examples of specialties where
the boards for those specialties require
unaccredited training for certification.
The commenter pointed out that, in
addition to some subspecialties of
radiology, the American Board of
Pathology used to require a
‘‘credentialing’’ year in addition to
ACGME-accredited training in
pathology. In addition, in the late 1990s,
the American Board of Pediatrics
offered several new certificates in
subspecialties such as Adolescent
Medicine, Pediatric Emergency
Medicine, Developmental-Behavioral
Pediatrics, although ACGME
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accreditation for these subspecialties
did not yet exist at that time. Between
2005 to 2009, the Board of Psychology
and Neurology allowed a
‘‘grandfathering period’’ for certain
fellows who did not participate in
ACGME-accredited vascular neurology
programs since 2003. Subspecialties of
obstetrics and gynecology are currently
not accredited by the ACGME, but it is
well known that board certificates are
available from the American Board of
Obstetrics and Gynecology for these
subspecialties. The commenter listed
other examples of unaccredited training
accepted by various boards, with the
point being that CMS should allow
participants in these programs to be
counted in the IME and direct GME FTE
counts.
Response: We understand that,
historically, it was not unusual for a
particular board to begin offering
certificates in a subspecialty prior to the
ACGME’s establishment of accreditation
standards for those programs. Training
in a specialized area may go on for
several years before it is recognized by
ACGME as an accredited sub-specialty.
We understand that the certifying
boards, in certain instances, allow for
individuals who have received
applicable training prior to the existence
of board certification in a subspecialty
to be ‘‘grandfathered’’ and receive a
board certificate even though there was
no board examination in existence yet at
the time of the individual’s training, and
the training was not accredited by
ACGME. However, this practice varies
by board and subspecialty; there is no
uniform policy. Regardless, for
Medicare IME and direct GME purposes,
if at the time of the individual’s
training, there did not exist either
ACGME accreditation or a specific
board certificate in that subspecialty,
those individuals could not be
considered residents during their
training, nor could a hospital
subsequently request reopening of its
contemporaneous cost reports to
include those individuals in the FTE
count after the fact once board
certification or ACGME accreditation
becomes available for that program. As
we stated above, in the absence of
accreditation and foreknowledge as to
whether unaccredited training would be
accepted by a board, the individual
should be categorized as a resident for
IME and direct GME purposes, even if
the particular ‘‘training’’ is ultimately
accepted by the board.
With respect to subspecialties of
obstetrics and gynecology, those
subspecialties continue to not be
accredited by the ACGME. It is widely
known that the American Board of
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Obstetrics and Gynecology
independently recognizes and offers
certification to participants in those
subspecialties. We believe that trainees
in subspecialties of obstetrics and
gynecology for which an explicit board
certification is offered are considered
residents, in accordance with the
definition of ‘‘approved medical
residency training program’’ at
§ 413.75(b).
We received some comments that
were not within the scope of the
proposals, such as funding for second
year pharmacy residencies and what
constitutes a new medical residency
training program. We are not responding
to these comments at this time.
After consideration of the public
comments we received, we are adopting
as final, with some modification, our
proposed revisions. Specifically, we are
clarifying that individuals participating
in a specialized course of training
created by a senior physician, and not
under the auspices of a national
accrediting body, and for which there is
no explicit existing board certification
examination, may not be counted for
IME and direct GME payment purposes.
Such individuals should be treated as
physicians (assuming full licensure) and
their services billed to Medicare for
payment as physicians’ services. If an
individual has already successfully
completed at least one residency
program and has met the generally
applicable requirements to be board
eligible in a specialty (regardless of
whether the individual has passed the
board examination for that specialty),
and is engaged in subsequent training
that will not provide additional
knowledge or skills that could be
applied for board certification in
another different subspecialty, the
individual will be treated and bill for
services provided as a physician
(assuming full licensure). We are
making a technical change to the
definition of ‘‘approved medical
residency program’’ under § 415.152
relating to payment for physician
services in teaching settings. We also are
revising the definition of ‘‘resident’’ at
§ 413.75(b) to mean ‘‘an intern, resident,
or fellow who is formally accepted,
enrolled, and participating in an
approved medical residency program,
including programs in osteopathy,
dentistry, and podiatry, as required in
order to become certified by the
appropriate specialty board.’’ We are
making a conforming change to the
definition of ‘‘primary care resident’’ to
mean ‘‘a resident who is formally
accepted, enrolled, and participating in
an approved medical residency training
program in family medicine, general
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internal medicine, general pediatrics,
preventive medicine, geriatric medicine
or osteopathic general practice.’’ These
change in the definitions of ‘‘resident’’
and ‘‘primary care resident’’ are effective
for IME and direct GME for cost
reporting periods beginning on or after
October 1, 2010. Essentially, a resident
for IME and direct GME purposes is an
individual who, in accordance with our
revised definition of ‘‘resident’’ at
§ 413.75(b), is formally accepted,
enrolled, and participating in an
approved medical residency program,
including programs in osteopathy,
dentistry, and podiatry, as required in
order to become certified by the
appropriate specialty board. The
program would be an ‘‘approved
program’’ if it is either accredited by one
of the four recognized accrediting
bodies, or if not accredited, the
individual who is formally accepted,
enrolled, and participating in the
program actually needs the training in
order to meet the established minimum
standards for board certification
requirements in that specialty.
With regard to chief residencies,
effective for cost reporting periods
beginning on or after October 1, 2010,
we are changing our policy to provide
that individuals that act as chief
residents after they have completed the
accredited program and have satisfied
minimum requirements for board
certification are not considered
residents for IME and direct GME
payment purposes. With regard to
programs that are extended by a hospital
for longer than the minimum accredited
length for that specialty, effective for
cost reporting periods beginning on or
after October 1, 2010, we are changing
our policy to provide that such training
is not part of an approved program. That
is, individuals training in a program that
extends beyond the actual accredited
program length are not considered
residents for IME and direct GME
purposes because they are no longer
training in an accredited program
according to the ACGME.
3. Electronic Submission of Affiliation
Agreements
Sections 1886(h)(4)(F) and
1886(d)(5)(B)(v) of the Act establish
limits on the number of allopathic and
osteopathic FTE residents that hospitals
may count for purposes of calculating
direct GME payments and the IME
adjustment. In addition, under the
authority granted by section
1886(h)(4)(H)(ii) of the Act, the
Secretary issued regulations on May 12,
1998 (63 FR 26358) to allow institutions
that are members of the same Medicare
GME affiliated group to elect to apply
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their direct GME and IME FTE resident
caps based on the aggregate cap of all
hospitals that are part of the Medicare
GME affiliated group. Under the
regulations, specified at § 413.79(f) for
direct GME and at § 412.105(f)(1)(vi) for
IME, hospitals that are part of the same
Medicare GME affiliated group are
permitted to adjust their caps to reflect
the rotation of residents among affiliated
hospitals during an academic year.
Under § 413.75(b), a Medicare GME
affiliated group may be formed by two
or more hospitals (1) If the hospitals are
located in the same urban or rural area
or in a contiguous area and have a
shared rotational arrangement as
specified at § 413.79(f)(2); or (2) if the
hospitals are not located in the same or
in a contiguous area, but have a shared
rotational arrangement and they are
jointly listed as the sponsor, primary
clinical site, or major participating
institution for one or more programs as
these terms are used in the most recent
publication of the Graduate Medical
Education Directory, or are jointly listed
as the sponsor is listed under
‘‘affiliations and outside rotations’’ for
one or more programs in Opportunities,
Directory of Osteopathic Post-doctoral
Education Programs; or (3) effective
beginning July 1, 2003, if the hospitals
are under common ownership and have
a shared rotational arrangement under
§ 413.79(f)(2).
The existing regulations at
§ 413.79(f)(1) specify that each hospital
in a Medicare GME affiliated group
must submit a Medicare GME affiliation
agreement (as defined under § 413.75(b))
to the CMS fiscal intermediary or MAC
servicing the hospital and send a copy
of the agreement to CMS’ Central Office
no later than July 1 of the residency
program year during which the
Medicare GME affiliation agreement
will be in effect. For example, in order
for a hospital to receive a temporary
adjustment to its FTE resident caps to
reflect participation in a Medicare GME
affiliated group for the academic year
July 1, 2009–June 30, 2010, each
hospital in the affiliated group had to
submit a Medicare GME affiliation
agreement to the fiscal intermediary or
MAC servicing the hospital and send a
copy of the agreement to CMS’ Central
Office no later than July 1, 2009.
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule, over the last
several years, we have received
numerous inquiries regarding the
possibility of submitting the Medicare
GME affiliation agreement
electronically. To date, CMS has only
accepted signed hard copies of Medicare
GME affiliation agreements. Facsimile
(FAX) and other electronic submissions
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of affiliation agreements have not been
acceptable means of transmission of
affiliation agreements to CMS Central
Office in order for a hospital to meet the
requirements of §§ 413.79(f) and
412.105(f)(1)(vi).
The increasing frequency of these
inquiries and our concerns regarding the
environment and paperwork reduction
have prompted us to reconsider our
procedure for hospitals to submit
Medicare GME affiliation agreements to
the CMS Central Office. Accordingly, in
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24008) we proposed to
change our policy to provide for
electronic submission of the affiliation
agreement that is required to be sent to
the CMS Central Office. We indicated
that this proposal would not affect the
authority of the fiscal intermediary or
MAC to continue to specify its
requirements for submission for
hospitals in its servicing area.
We proposed an electronic
submission process that would consist
of either an e-mail mailbox or a Web site
where hospitals would submit their
Medicare GME affiliation agreements to
the CMS Central Office. As part of this
process, a copy of the Medicare GME
affiliation agreement would need to be
received through the electronic system
no later than 11:59 p.m. on July 1 of
each academic year. We proposed that
the electronic affiliation agreement
would need to be submitted either as a
scanned copy or a Portable Document
Format (PDF) version of that hard copy
agreement or in another electronic
format that cannot be subject to
manipulation. This requirement will
enable CMS to ensure that the
agreements are signed and dated as
required in the regulations at § 413.75.
Comment: Commenters supported the
proposal for the electronic submission
process for affiliation agreements and
stated that it would help reduce
hospitals’ administrative burdens. Many
commenters also stated that the
proposed electronic process was a
logical and more administratively
simple method of submitting affiliation
agreements. Several commenters
suggested that CMS provide hospitals
with documentation of the agency’s
receipt of the electronic submissions of
their affiliation agreements, due to the
time sensitive nature of this policy.
Response: We appreciate these
commenters’ support for the proposed
process. As we begin the development
of the electronic submission system for
affiliation agreements, we intend to
include a mechanism within that system
for acknowledging receipt of the
agreements to hospitals upon the
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submission of their agreements, as the
commenters suggested.
Comment: One commenter praised
CMS’ efforts to ease the paperwork
burden for hospitals, but also claimed
that the proposal was not far-reaching
enough toward that end. The
commenter requested that CMS
establish an electronic submission
process that was easy to use and that
fiscal intermediaries and MACs are
required to use to receive affiliation
agreements as well. The commenter also
recommended that CMS ease the
Medicare GME affiliation agreement
criteria in general and allow affiliation
agreements to become effective as of the
date that the agreement is filed with the
CMS Central Office.
Response: We appreciate these
comments, and we will take them into
consideration for the future as we plan
to implement the electronic submission
system that will accept affiliation
agreements. One of the goals in
planning the development of the system
is to make the system user-friendly as
possible.
The comments that we received
regarding the criteria for affiliation
agreements are not within the scope of
the proposed rule. Therefore we are not
addressing them in this final rule. We
did not propose to make any additional
changes to our policies regarding
Medicare GME affiliation agreements for
FY 2011.
After consideration of the public
comments we received, we are
finalizing our proposed policy for
accepting electronic submission of
Medicare GME affiliation agreements.
We believe that allowing the electronic
submission of affiliation agreements to
the CMS Central Office will assist CMS
in more effectively tracking the groups
of hospitals that affiliate as well as the
numbers of FTE cap slots that are being
transferred within those groups. In
addition, we believe an electronic
submission process will minimize the
paperwork burden for hospitals.
We are currently in the process of
developing the electronic submission
system for Medicare GME affiliation
agreements. If a system is developed
that is ready to receive affiliation
agreements for the academic year
beginning July 1, 2011, we will notify
teaching hospitals by May 2011 of the
electronic submission process in order
to allow ample time for the preparation
and electronic submission of affiliation
agreements before the July 1, 2011
deadline. We will continue to accept
hard copies of affiliation agreements
even if the electronic submission system
is in operation for the academic year
beginning July 1, 2011. Hard copies of
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affiliation agreements should continue
to be sent to: Director, Division of Acute
Care, Centers for Medicare and
Medicaid Services, Attn: Tzvi Hefter,
Mailstop C4–08–06, 7500 Security
Boulevard, Baltimore, MD 21244.
4. Technical Correction to the
Regulations Relating to the Cost of
Approved Nursing and Allied Health
Education Activities
Medicare has historically paid
providers for the program’s share of the
costs that providers incur in connection
with approved educational activities,
which can be divided into three
categories: (1) The costs of approved
GME programs in medicine, osteopathy,
dentistry and podiatry; (2) approved
nursing and allied health education
activities operated by a provider; and (3)
all other costs that can be categorized as
educational programs and activities that
are considered to be part of normal
operating costs. Existing regulations on
nursing and allied health education
program costs are located at § 413.85.
Costs of approved nursing and allied
health education programs that are
operated by a provider are excluded
from the definition of inpatient hospital
operating costs and are not included in
the calculation of the payment rates for
hospitals paid under the IPPS or in the
calculation of the payments to hospitals
and hospital units excluded from the
IPPS. These costs are separately
identified and ‘‘passed through’’ (that is,
paid separately on a reasonable cost
basis).
We recently discovered that a passage
in the January 12, 2001 Nursing and
Allied Health Education final rule (66
FR 3371) incorrectly states that passthrough payment for the time students
train in hospital outpatient departments
is not allowed. That is, the passage
incorrectly indicates that pass-through
payment is only allowed for training
while providing care directly to hospital
inpatients. The regulations in two
places at § 413.85 also incorrectly limit
the allowable costs to the inpatient areas
of the hospital as follows: (1) ‘‘Approved
educational activities’’ are defined at
§ 413.85(c)(2), in part, as programs that
‘‘Enhance the quality of inpatient care at
the provider,’’ (emphasis added); and (2)
under the general payment rules at
§ 413.85(d)(1)(i)(C), payment for the net
costs of nursing and allied health
education activities is determined on a
reasonable cost basis, if, in part, the
approved medical education activity
‘‘Enhances the quality of inpatient care
at the provider’’ (emphasis added).
However, we note that the Provider
Reimbursement Manual, Part 1, section
402.1.A, states that the ‘‘approved
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educational activity’’ must be ‘‘designed
to enhance the quality of health care in
the institution or to improve the
administration of the institution’’
(emphasis added). The PRM expresses
the correct longstanding policy,
indicating that both inpatient and
outpatient training costs are allowable
for pass-through payment. We are
correcting the regulations at
§ 413.85(c)(2) and § 413.85(d)(1)(i)(C) to
indicate that ‘‘approved educational
activities’’ are those that ‘‘Enhance the
quality of health care at the provider.’’
However, costs of training activities
occurring in areas of the hospital other
than the IPPS or OPPS areas or in
nonprovider settings continue to not be
allowed for pass-through payment.
I. Certified Registered Nurse Anesthetist
(CRNA) Services Furnished in Rural
Hospitals and CAHs (§ 412.113)
Section 2312 of the Deficit Reduction
Act of 1984 (Pub. L. 98–369) provided
for reimbursement to hospitals on a
reasonable cost basis for the costs that
hospitals incur in connection with the
services of certified registered nurse
anesthetists (CRNAs). Section 2312(c)
provided that pass-through of CRNA
costs was effective for cost reporting
periods beginning on or after October 1,
1984, and before October 1, 1987.
Section 9320 of the Omnibus Budget
Reconciliation Act of 1986 (Pub. L. 99–
509) (which established a fee schedule
for the services of nurse anesthetists)
amended section 2312(c) of Pub. L. 98–
369 by extending the CRNA passthrough provision through cost
reporting periods beginning before
January 1, 1989. In addition, Public Law
99–509 amended section 1861 of the Act
to add a new subsection (bb), which
provides that CRNA services include
anesthesia services and related care
furnished by a CRNA. Section 608 of the
Family Support Act of 1988 (Pub. L.
100–485) extended pass-through
payments for CRNA services through
1991 and amended section 9320 of
Public Law 99–509 by including
language referring to eligibility for passthrough payments for CRNA services if
the facility is ‘‘* * * a hospital located
in a rural area (as defined for purposes
of section 1886(d) of the Social Security
Act). * * *’’ Reasonable cost-based
payment for CRNA services was
extended indefinitely by section 6132 of
the Omnibus Budget Reconciliation Act
of 1989 (Pub. L. 101–239).
Section 1886(d) of the Act defines
‘‘rural’’ as any area outside an urban
area. This definition of ‘‘rural’’ was in
effect when Public Law 100–485 was
implemented. In 1999, the Balanced
Budget Refinement Act (Pub. L. 106–
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113) amended section 1886(d)(8) of the
Act by adding a new subparagraph (E),
which permits a hospital physically
located in an urban area to apply for
reclassification to be treated as rural. In
addition, Public Law 106–113 made a
corresponding change to section
1820(c)(2)(B)(i) of the Act, which
specifies the location requirements for
CAH designation, by adding the phrase
‘‘or is treated as being located in a rural
area pursuant to section 1886(d)(8)(E).’’
The regulations implementing passthrough payments for anesthesia
services and related care furnished by
qualified nonphysician anesthetists
employed by a hospital or CAH,
including CRNAs, are located at
§ 412.113(c). Section 412.113(c)(2)(i)(A)
specifies the location requirement for
facilities that furnish these services and
are eligible to be paid based on
reasonable cost for the services. The
regulations require that the hospital or
CAH be located in a rural area as
defined at § 412.62(f) and not be deemed
to be located in an urban area under the
provisions of § 412.64(b)(3). The
regulations at § 412.62(f) mirror section
1886(d)(2)(D) of the Act and define a
rural area as ‘‘* * * any area outside an
urban area.’’ The regulations at
§ 412.64(b)(3) implement section
1886(d)(8)(B) of the Act, also known as
the ‘‘Lugar’’ provision, which requires a
hospital located in a rural county
adjacent to one or more urban areas to
be treated as being located in the urban
metropolitan statistical area to which
the greatest number of workers in the
county commute.
Under existing regulations, neither
CAHs nor hospitals that have
reclassified from urban to rural under
the regulations at § 412.103 and neither
CAHs nor hospitals located in Lugar
counties are eligible to receive passthrough payments for anesthesia
services and related care furnished by
qualified nonphysician anesthetists.
However, because the statute, as revised
by section 608 of Public Law 100–485,
allows reasonable cost payments for
CRNA services if the facility is a
hospital located in a rural area as
defined for purposes of section 1886(d)
of the Act, we believe our regulations
should likewise permit urban hospitals
that have been reclassified as rural
under section 1886(d)(8)(E) of the Act to
qualify for these payments. Therefore, in
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24010), we proposed to
revise § 412.113(c)(2)(i)(A) to state that,
effective for cost reporting periods
beginning on or after October 1, 2010,
CAHs and hospitals that have
reclassified pursuant to section
1886(d)(8)(E) of the Act and § 412.103 of
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the regulations also are rural for
purposes of section 1886(d) of the Act
and, therefore, are eligible to be paid
based on reasonable cost for anesthesia
services and related care furnished by a
qualified nonphysician anesthetist.
We did not propose to change our
regulations to permit Lugar facilities to
be paid based on reasonable cost for
anesthesia services and related care
furnished by qualified nonphysician
anesthetists. As noted above, in order to
be paid based on reasonable cost for
anesthesia services and related care
furnished by a qualified nonphysician
anesthetist, a hospital or CAH must be
considered rural for purposes of section
1886(d) of the Act. Lugar facilities
(facilities that have been reclassified
under §§ 412.63(b)(3) and 412.64(b)(3))
are considered urban for purposes of
section 1886(d) of the Act. As a result,
in the proposed rule, we stated that we
do not believe it would be consistent
with the statute and our regulations to
permit these facilities to also be paid on
a reasonable cost basis for anesthesia
services and related care furnished by
qualified nonphysician anesthetists.
Comment: Several commenters
supported CMS’ proposal to provide for
reasonable cost-based payment for
anesthesia services and related care
furnished by qualified nonphysician
anesthetists in rural hospitals and CAHs
that have reclassified under § 412.103.
One commenter stated there are three
facilities in its State that would now
qualify for CRNA reasonable cost-based
payments and that the State hospital
association had been working with CMS
and Congress for several years to
address this issue. One commenter
stated that the role of CRNAs in small
rural CAHs includes, in addition to
administering and maintaining
anesthesia, airway management, IV
starts, and other triage, trauma, and
emergency services. The commenter
stated that, at its facility, CRNAs take
call 24 hours a day, 7 days a week and
their clinical skills help to provide
constant emergency and obstetric
services. Another commenter in a large
State noted that the proposed policy
would increase access to essential
anesthesia services in rural areas of the
State, allowing CAHs and rural
hospitals to provide continuous surgical
and maternity coverage. One commenter
stated the proposed policy would allow
three CAHs in its State, which
previously received CRNA reasonable
cost-based payments and were excluded
from such payment in 2005, to once
again be paid based on reasonable cost
for anesthesia services and related care
furnished by qualified nonphysician
anesthetists.
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Response: We appreciate the
commenters’ support of CMS’ proposed
policy to provide rural hospitals and
CAHs that have reclassified under
§ 412.103 with reasonable cost-based
payments for anesthesia services and
related care furnished by qualified
nonphysician anesthetists.
Comment: Although commenters
supported the proposed policy
regarding payment for services provided
by qualified nonphysician anesthetists,
the majority of commenters disagreed
with CMS’ statement in the proposed
rule that it was not proposing to change
its policy to provide for reasonable costbased payment for services furnished by
qualified nonphysician anesthetists in
facilities located in Lugar counties (75
FR 24011). Several commenters stated
that, in the proposed rule, CMS
proposed to revise the regulations,
which limited reimbursement for CRNA
services provided in CAHs to the
Medicare Resource-Based Relative
Value Scale, to allow for cost-based
reimbursement for these services. The
commenters stated that while the
proposed rule would allow for
reimbursement for CRNA services based
on cost, the proposal does not include
CAHs located in Lugar counties;
instead, these facilities would continue
to be reimbursed using the Medicare
Physician Fee Schedule. The
commenters stated that this policy
approach is inappropriate. Commenters
stated that they believed there may be
some confusion that CAHs located in
Lugar counties receive a financial
advantage. These commenters stated
that CAHs located in Lugar counties do
not receive any benefit from being
located in such counties because CAHs
are reimbursed based on cost and not
based on Medicare DRG payments.
Commenters stated that CAHs located in
Lugar counties are faced with ‘‘double
jeopardy’’ because these CAHs do not
receive the higher DRG payments that
IPPS hospitals receive as a result of
being located in a Lugar county, nor do
they receive CRNA reasonable costbased payments. Commenters stated
that very few CAHs are located in Lugar
counties and therefore a change in CMS’
policy to enable these CAHs to receive
CRNA reasonable cost-based payments
would have a very small financial
impact on the Medicare program.
Another commenter stated that in its
State, there are at least 13 CAHs that
would be negatively affected by the
proposed provision.
Commenters referenced the FY 2006
IPPS final rule (70 FR 47469), where
CMS stated the Lugar provision does not
apply in determining CAH status
because the Lugar provision applies for
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purposes of payment under the IPPS
and CAHs are not subject to the IPPS.
The commenters stated that as a result
of the policy published in the FY 2006
IPPS final rule, CAHs located in Lugar
counties have not sought to reclassify as
rural for purposes of CAH designation.
Many commenters stated that it is
inappropriate for CMS to state that
Lugar designation does not apply to
CAHs in one context, for determining
CAH eligibility, but does apply for the
purpose of determining whether a CAH
will receive CRNA reasonable costbased payments. One commenter
requested that if CMS does not change
its policy with respect to CAHs located
in Lugar counties and CRNA reasonable
cost-based payment that ‘‘* * * the
broad powers conferred upon the
Secretary by Congress be used to resolve
such conflict and correct this issue for
CAHs located in Lugar counties.’’ One
commenter stated that, in 2005–2006,
CMS issued provisions allowing
facilities already certified as CAHs,
which were classified as urban, an
opportunity to reclassify as rural based
on either the CAH’s ability to comply
with either the Federal or State
definition of rural. The commenter
referenced language included in an
April 25, 2005 memorandum which
referred to a proposal discussed in the
FY 2006 IPPS proposed rule, in which
CMS proposed to clarify that CAHs that
were located in a county that, in FY
2004, was not part of a Lugar county,
but as of FY 2005 were included in such
a county as a result of the labor market
area definitions announced by OMB on
June 6, 2003, had through September 30,
2006, to reclassify as rural under
§ 412.103 of the regulations. The
commenter stated that the two CAHs in
its State located in Lugar counties were
reclassified as rural prior to October
2006, and these facilities were able to
maintain their CAH status. The
commenter stated that ‘‘Excluding CAHs
located in Lugar counties, because of
lack of clarity with [the] definition and
fear [that] Lugar county reimbursement
is an advantage for CRNAs, is not
accurate.’’ One commenter stated that
CMS’ proposal not to permit CAHs
located in Lugar counties to receive
CRNA reasonable cost-based payments
is not supported by section
1886(d)(8)(B) of the Act. The commenter
stated that the only basis for excluding
rural CAHs such as its facility, is that
CMS believes that section 1886(d)(8)(B)
of the Act converts these CAHs into
urban facilities if they are located in
Lugar counties. The commenter quoted
the statutory language at section
1886(d)(8)(B) of the Act: ‘‘For purposes
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of this section, the Secretary shall treat
a hospital located in a rural county
adjacent to one or more urban areas as
being located in the urban metropolitan
statistical area * * *’’ (emphasis added
by commenter). The commenter further
referred to section 1861(e) of the Act,
which states the ‘‘* * * term ‘hospital’
does not include, unless the context
otherwise requires, a critical access
hospital (as defined in section
1861(mm)(1)).’’ The commenter stated
that because section 1886(d)(8)(B) of the
Act describes the geographic
classification for subsection 1886(d)
hospitals, which CAHs are not, ‘‘it is
clear that the ‘context does not require’
incorporating CAHs into the definition
of hospital for such purposes.’’
Therefore, the commenter believes
section 1886(d)(8)(B) of the Act, does
not change CAHs located in Lugar
counties into urban facilities. The
commenter stated that because CAHs in
Lugar counties do not lose their rural
status, they must remain eligible for
CRNA reasonable cost-based payments
despite being located in a Lugar county.
The commenter stated that its facility
did not apply for reclassification under
§ 412.103 when it applied for CAH
designation, which supports the claim
that its facility (a CAH located in a
Lugar county) is a rural facility.
Response: We thank the commenters
for their comments. In response to the
commenters who stated that CMS
proposed to revise a longstanding
regulation that limited Medicare
reimbursement for CRNA services
provided in CAHs to the Medicare
Resource-Based Relative Value Scale
amounts in lieu of cost, we note that
CAHs located in a rural area as defined
at section 1886(d)(2)(D) of the Act were
eligible to receive CRNA reasonable
cost-based payments prior to this final
rule. In response to the commenter who
referred to a provision included in the
FY 2006 IPPS proposed rule, where
CMS proposed to clarify that CAHs
located in Lugar counties as a result of
the labor market areas definitions
announced by OMB on June 6, 2003,
could reclassify as rural through
September 30, 2006, we note that, in the
FY 2006 IPPS final rule, we adopted a
policy that, for purposes of CAH
participation, a CAH located in a Lugar
county is considered to be located in a
rural area. In response to the
commenters who disagreed with our
proposal not to extend reasonable costbased payments for nonphysician
anesthesia services to facilities located
in Lugar counties, we continue to
believe, consistent with the plain
language of the applicable statutory
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50301
provisions, that it is appropriate to
exclude hospitals and CAHs located in
Lugar counties from reasonable costbased payment for anesthesia services
and related care furnished by qualified
nonphysician anesthetists. Section 608
of the Family Support Act of 1988 (Pub.
L. 100–485) amended section 9320 of
the Omnibus Budget Reconciliation Act
of 1986 (Pub. L. 99–509) to state: ‘‘* * *
the amendments made by this section
shall not apply during 1989, 1990, and
1991 to a hospital located in a rural area
(as defined for purposes of section
1886(d) of the Social Security Act)
* * *’’ (emphasis added). Section
1886(d) of the Act includes both
sections 1886(d)(8)(B), the Lugar
provision, and section 1886(d)(8)(E), the
reclassification provision. Section
1886(d)(8)(B) of the Act treats facilities
located in Lugar counties as urban
facilities and section 1886(d)(8)(E),
treats urban facilities that have
reclassified under that section as rural
facilities. Therefore, ‘‘as defined for
purposes of section 1886(d) of the Social
Security Act’’ clearly indicates that
Lugar facilities are urban for purposes of
receiving CRNA reasonable cost-based
payment and those facilities that have
reclassified under section 1886(d)(8)(E)
of the Act are rural for purposes of
receiving CRNA reasonable cost-based
payments.
In response to commenters who stated
CMS’ position that facilities located in
Lugar counties can be granted CAH
status but these same facilities are not
eligible to receive CRNA reasonable
cost-based payments is inconsistent,
CAH status and CRNA reasonable costbased payments are determined through
the application of two separate and
distinct provisions under the Act.
Section 1820(c)(2)(B)(i) of the Act
permits a facility to qualify for
designation as a CAH only if it is
located ‘‘in a rural area (as defined in
section 1886(d)(2)(D)) or is being treated
as being located in a rural area pursuant
to section 1886(d)(8)(E). * * *’’ Because
section 1820(c)(2)(B)(i) of the Act does
not include any reference to the Lugar
provision (section 1886(d)(8)(B) of the
Act), we do not believe that the statute
requires CMS to treat a facility as being
in an urban area for purposes of CAH
participation if it is in a Lugar county.
That is, the specific omission of section
1886(d)(8)(B) from section
1820(c)(2)(B)(i) of the Act indicates that
being located in a Lugar county may be
considered irrelevant for purposes of
CAH designation. Consistent with this
reading of section 1820(c)(2)(B)(i) of the
Act, in the FY 2006 IPPS final rule, we
amended the CAH regulations at
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§ 485.610(b)(1)(i) to remove all
references to a facility being recognized
as urban under the regulations
implementing the Lugar provision. The
effect of this change was that facilities
in Lugar counties are now considered to
be located in rural areas for purposes of
CAH participation. In the FY 2006 IPPS
final rule, we emphasized that this
change was ‘‘effective only for purposes
of CAH participation and will not
otherwise affect the status of hospitals
or CAHs in Lugar counties (70 FR
47469).
In contrast, in order to qualify for
reasonable cost-based payments for
CRNA services, a facility must be rural
‘‘as defined for purposes of section
1886(d) of the Social Security Act,’’
which we believe includes all of the
designations at section 1886(d) of the
Act, including sections 1886(d)(8)(B)
and 1886(d)(8)(E). Because section 608
of the Family Support Act of 1988 refers
to all of section 1886(d) of the Act, we
interpret this to encompass all of the
area designations included in section
1886(d) of the Act, including section
1886(d)(8)(B). That is, because section
608 of the Family Support Act
referenced section 1886(d) of the Act
and not just section 1886(d)(2)(D), we
continue to believe it is appropriate to
preclude CRNA reasonable cost-based
payments to those hospitals and CAHs
located in Lugar counties. In addition,
we believe that if we recognize as rural
the urban-to-rural hospitals that have
reclassified under section 1886(d)(8)(E)
of the Act, we should also recognize as
urban the Lugar hospitals that are
redesignated pursuant to section
1886(d)(8)(B) of the Act. Both of these
provisions are incorporated within
subsection (d), and we believe it is most
internally consistent to recognize both
reclassifications, rather than recognizing
one type of reclassification without
recognizing the other. Finally, we note
that hospitals and CAHs located in
Lugar counties could apply to reclassify
under § 412.103 of the regulations and
thus become eligible to receive
reasonable cost-based payments for
anesthesia services and related care
furnished by qualified nonphysician
anesthetists.
Comment: One commenter opposed
CMS’ proposal to reimburse facilities
that have reclassified under § 412.103 at
100 percent of reasonable cost for
anesthesia and related services provided
by qualified nonphysician anesthetists.
The commenter stated that, starting in
2002, when the regulations were revised
to increase the cap on surgical
procedures from 500 to 800 to qualify
for CRNA reasonable cost-based
payments, the commenter requested that
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CMS review the law and its regulations
to determine whether the regulations
could be revised to include
anesthesiologists in the same reasonable
cost-based payments that other
anesthesia providers receive. The
commenter stated that not providing
equitable payment to anesthesiologists
who work in rural settings prohibits
patients from receiving high-level
anesthesia services, which CRNAs lack
the training or licensure to provide. The
commenter stated CMS’ current
regulations regarding reasonable costbased payment for anesthesia services
discourages rural hospitals from
employing or contracting with
anesthesiologists. The commenter stated
that, due to the lack of anesthesiologists
in rural hospitals, these hospitals are
forced to transfer medically complex
patients to large urban hospitals, which
results in greater risk and inconvenience
to the patient. The commenter urged
CMS not to finalize its proposal until all
anesthesia providers are eligible to be
paid based on reasonable cost. The
commenter stated that not finalizing
CMS’ proposal is reasonable due to the
uncertainty of how many facilities
would be affected by the proposed
change. The commenter urged CMS to
extend reasonable cost-based payments
to services provided by
anesthesiologists in rural hospitals and
CAHs, and if such a change cannot be
made through regulations and CMS
makes this determination publicly, that
CMS recommend to Congress that the
statute be amended to provide for
reasonable cost-based payments for
anesthesiologist services provided by
anesthesiologists in rural hospitals and
CAHs. The commenter requested if CMS
cannot establish the current number of
facilities that would be eligible for
reasonable cost-based payments, prior to
making any change which would
expand the number of facilities that
could be eligible for reasonable costbased payments, CMS should provide a
list of hospitals or CAHs that would
have been eligible to receive reasonable
cost-based payments in previous years.
Response: Reasonable cost-based
payment for anesthesia services and
related care does not apply to physician
anesthesiologists under section 6132 of
the Omnibus Budget Reconciliation Act
of 1989 (Pub. L. 101–239) and prior
applicable legislation. Physician
anesthesiologists receive payment under
the Medicare Physician Fee Schedule.
Therefore, under current law, CMS does
not have the authority to extend
reasonable cost-based payment to rural
hospitals and CAHs for anesthesia
services and related care furnished by
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physician anesthesiologists. We
appreciate the commenter’s concern that
access to high-level anesthesia services
may not be adequate in rural areas
because there may be a limited number
of physician anesthesiologists practicing
in these areas. However, we believe that
not finalizing our proposal to extend
reasonable cost-based payments for
services furnished by qualified
nonphysician anesthetists in rural
hospitals and CAHs that reclassified
under § 412.103 would run counter to
this very concern, that access to
anesthesia services is limited in rural
areas. That is, not extending reasonable
cost-based payment for anesthesia
services and related care furnished by
qualified nonphysician anesthetists to
rural hospitals and CAHs that reclassify
under § 412.103 would, in fact, further
limit access to anesthesia services.
Comment: One commenter requested
that the effective date of the proposed
policy on payment for anesthesia
services and related care for qualified
nonphysician services be changed from
cost reporting periods beginning on or
after October 1, 2010 to calendar years
beginning on or after January 1, 2011
because the CRNA reasonable costbased payment elections are made on a
calendar year basis rather than a cost
reporting year basis. Another
commenter stated CMS should not force
rural hospitals and CAHs affected by
this proposed provision to engage in
appeals of this issue due to CMS’
unwillingness to revise the regulations
as a result of the statute as revised by
the Family Support Act of 1988. The
commenter stated court cases such as
Bayside Community Hospital v. Sebelius
have considered this issue and have
maintained ‘‘It is true that the physical
location of the hospital does not change;
however, Congress has directed that a
hospital qualifying under 1886(d)(8)(E)
be treated as if it were in a rural
location. The purpose of this is to
overcome the actual physical location
and cause a hospital to qualify as rural.
Thus, the deeming provision does
impact the definition of rural at section
1886(d). A regulation does not override
a clearly stated statute.’’ The commenter
stated that, to prevent litigation for all
parties involved, it would be efficient if
CMS modified the proposed provision
as a clarification effective as of 1988 and
direct that for all cost reports that have
an appropriate pending appeal, all open
cost reports, and all cost reports that are
within three years of settlement, CAHs
and hospitals that have reclassified
under section 1886(d)(8)(E) of the Act
are eligible to be paid on a reasonable
cost basis for anesthesia services and
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related care furnished by qualified
nonphysician anesthetists.
Response: The provisions published
in the IPPS final rule for each respective
year are generally effective October 1 of
that respective year. Therefore, we
proposed that this provision be effective
for cost reporting periods beginning on
or after October 1, 2010. Although the
commenter requested that the proposal
be amended to state that it would be
effective for calendar years beginning on
or after January 1, 2011, we do not
believe this change is necessary because
if the provision is effective for cost
reporting periods beginning on or after
October 1, 2010, it will also be in effect
for the calendar year beginning January
1, 2011.
In response to the commenter who
requested that the proposed provision
be applied retroactively to the effective
date of the Family Support Act of 1988,
section 1871(e)(1)(A) of the Act
generally prohibits the Secretary from
making retroactive substantive changes
in policy unless retroactive application
of the change is necessary to comply
with statutory requirements or failure to
apply the change retroactively would be
contrary to the public interest. We do
not believe this provision meets such a
threshold.
Comment: Several commenters
addressed issues regarding reasonable
cost-based payment for on-call services
provided by CRNAs as well as stand-by
costs. In general, commenters requested
that reasonable cost-based payments
include on-call CRNA costs as allowable
costs. One commenter requested that
CMS consider amending the regulations
to provide for an exception to the
requirement that a hospital or CAH
must have employed or contracted with
a qualified nonphysician anesthetist as
of January 1, 1988, as one of the
requirements to be eligible for
reasonable cost-based payments.
Response: We consider these
comments to be outside of the scope of
the proposed rule and, therefore, are not
responding to them in this final rule.
Comment: One commenter requested
that CMS change the CoPs to remove the
requirement for physician supervision
in CAHs.
Response: We consider this comment
to be outside of the scope of the
proposed rule. Therefore we are not
responding to the comment in this final
rule.
After consideration of the public
comments that we received, we are
adopting, as final without modification,
our proposal to revise
§ 412.113(c)(2)(i)(A) to state that,
effective for cost reporting periods
beginning on or after October 1, 2010,
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CAHs and hospitals that have
reclassified pursuant to section
1886(d)(8)(E) of the Act and § 412.103 of
the regulations are also rural for
purposes of section 1886(d) of the Act
and, therefore, are eligible to be paid
based on reasonable cost for anesthesia
services and related care furnished by a
qualified nonphysician anesthetist.
J. Additional Payments for Qualifying
Hospitals With Lowest Per Enrollee
Medicare Spending
1. Background
Section 1109 of Public Law 111–152
provides for additional payments for FY
2011 and 2012 for ‘‘qualifying
hospitals.’’ Section 1109(d) defines a
‘‘qualifying hospital’’ as a ‘‘subsection (d)
hospital * * * that is located in a
county that ranks, based upon its
ranking in age, sex and race adjusted
spending for benefits under parts A and
B * * * per enrollee within the lowest
quartile of such counties in the United
States.’’ Therefore, a ‘‘qualifying
hospital’’ is one that meets the following
conditions: (1) A ‘‘subsection (d)
hospital’’ as defined in section
1886(d)(1)(B) of the Act; and (2) located
in a county that ranks within the lowest
quartile of counties based upon its
spending for benefits under Medicare
Part A and Part B per enrollee adjusted
for age, sex, and race. Section 1109(b) of
Public Law 111–152 makes available
$400 million to qualifying hospitals for
FY 2011 and FY 2012. Section 1109(c)
of Public Law 111–152 requires the
$400 million to be divided among each
qualifying hospital in proportion to the
ratio of the individual qualifying
hospital’s FY 2009 IPPS operating
hospital payments to the sum of total FY
2009 IPPS operating hospital payments
made to all qualifying hospitals.
2. Eligible Counties
Section 1109 of Public Law 111–152
provides $400 million for FYs 2011 and
2012 for supplemental payments to
qualifying hospitals located in counties
that rank within the lowest quartile of
counties in the United States for
spending for benefits under Medicare
Part A and Part B. The provision
requires that the Medicare Part A and
Part B county-level spending per
enrollee be adjusted by age, sex and
race. In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR
30926 through 30960), we proposed our
methodology for determining the bottom
quartile of counties with the lowest
Medicare Part A and Part B spending
adjusted by age, sex, and race and
invited public comment on the
methodology we proposed to use to
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50303
adjust for age, sex, and race described
below. We further proposed that we
would determine this bottom quartile of
counties one time in this FY 2011 IPPS/
LTCH PPS final rule for the purpose of
disbursing the $400 million as required
by section 1109 of Public Law 111–152.
We developed an adjustment model
by age, sex, and race, as required under
the provision. We then applied this
adjustment to the county Medicare Part
A and Part B spending data to account
for the demographics of the Medicare
beneficiaries in those counties. After
those adjustments are applied, we
determined the Medicare Part A and
Part B spending by county per enrollee.
Our proposed methodology to
determine the Medicare Part A and Part
B spending per enrollee by county
adjusted for age, sex, and race is similar
to how we calculate risk adjustment
models for Medicare Advantage (MA)
ratesetting. Risk adjustment for MA
ratesetting is discussed in the annual
announcement of calendar year MA
capitation rates and MA and Part D
payment policies. For more information
on the methodology for risk adjustment
used for MA ratesetting, we refer readers
to the CMS Web site where we
announce MA rates through our 45-day
notice (https://www.cms.gov/
MedicareAdvtgSpecRateStats/
Downloads/Announcement2010.pdf).
a. Development of Risk Adjustment
Model
As required by section 1109(d) of
Public Law 111–152, we proposed a risk
adjustment model that accounts for
differentials in Medicare spending by
age, sex, and race. Consistent with how
we develop our risk adjustment models
for MA ratesetting as described above,
we developed a prospective risk
adjustment model using 2006 data for
beneficiary characteristics and 2007
data for Part A and Part B spending.
However, unlike the risk adjustment
model used for MA which includes
diseases and demographic factors, the
only independent variables or
prospective factors in the model for
payments under section 1109 of Public
Law 111–152 are age, sex and race, as
required by the provision. The
dependent variable was annualized
Medicare Part A and B spending at the
beneficiary level for 2007 as it is the
most recent and complete data
available. The categorization of age, sex,
and race variables are described below.
The age, sex, race (ASR) model(s) was
estimated using 5-percent of the
Standard Analytic Denominator File, a
standard 5-percent sample from the
2007 Denominator File which is also
used to estimate CMS risk adjustment
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models for payment to MA
organizations. We chose to use the 5percent Standard Analytic Denominator
File from 2007 in order to optimize the
amount of time after the timely claim
submission deadlines and the latest
available data; in other words, because
it is the most complete data currently
available. This file has the demographic
and enrollment characteristics of all
Medicare beneficiaries. The
Denominator File is an abbreviated file
of the Enrollment Data Base (EDB). The
Denominator File contains data on all
Medicare beneficiaries enrolled and/or
entitled to be enrolled in Medicare in a
given year while the EDB is the source
of enrollment and entitlement
information for all people who are or
were ever entitled to Medicare. The
model was estimated using all
beneficiaries residing in the community
and long-term care institutions. The
sample had 1,603,998 beneficiaries.
The Denominator File contains a sex
variable where the beneficiaries can
identify themselves as male or female.
The file also contains an age variable
which is defined as the beneficiary’s age
at the end of the prior year.
Beneficiaries with an age greater than 98
are coded as age 98. The race
demographic variable in the
Denominator File is populated by data
from the Social Security Administration
(SSA). The SSA’s data for this race
demographic variable are collected on
Form SS–5. Prior to 1980, Form SS–5
included three categories for race:
White, Black or Other. Since that time,
Form SS–5 instructed a beneficiary to
voluntarily select one of the following
five categories: (1) Asian, AsianAmerican or Pacific Islander;
(2) Hispanic; (3) Black (Not Hispanic);
(4) North American Indian or Alaskan
Native; and (5) White (Not Hispanic).
Form SS–5 is completed when an
individual does the following:
(1) Applies for a Social Security
number;
(2) requests a replacement of the Social
Security card; or (3) requests changes to
personal information on their record
such as a name change. (We refer
readers to the SSA Web site for
instructions at: https://ssa.gov/online/ss5.pdf). Each January, CMS obtains data
from SSA to update the EDB for
beneficiaries who were added during
the previous calendar year as well as all
living beneficiaries whose race is
identified as ‘‘Other’’ or ‘‘Unknown.’’
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Discussed in the context of the ESRD
payment system in the ESRD proposed
rule on September 29, 2009 (74 FR
49962), we noted concerns with using
the EDB as a data source due to missing
data, and that racial and ethnic
categories are not well defined.
However, we believe that the current
EDB, particularly with respect to the
more recent and ongoing updates we
perform, remains a useful source of race
and ethnicity data on 46 million
Medicare beneficiaries. Additionally,
because this is our only currently
available data source on the racial and
ethnic demographics of Medicare
beneficiaries, we proposed to the use
the EDB as our data source for
beneficiary race so that we can fulfill
the requirements of section 1109(d) of
Public Law 111–152 to adjust county
Medicare Part A and Part B spending by
race.
We used the MedPAR claims file as
the source to determine Medicare
inpatient spending. We used the
National Claims History File to
determine spending on DMEPOS and
supplies. The other spending under
Medicare Part A and Part B was
determined using the Standard Analytic
File. The Standard Analytic File and
MedPAR claims file are subsets of the
National Claims History File. These data
files are also used in the MA ratesetting
process and are our data source for
Medicare spending stored at the
beneficiary level.
In order to determine annual
spending (the dependent variable in the
risk adjustment model), we annualized
the Medicare Part A and Part B
spending for beneficiaries with less than
a full year of eligibility, and these
amounts were weighted in the analysis
by the fraction of the year they were in
the data.
We used a linear regression model to
determine the demographic
adjustments. This is consistent with
how we model our risk adjustment for
the MA rates. The linear regression used
24 age-sex regression categories, 12 age
categories each for males and females.
The age categories are as follows; 0–34,
35–44, 45–49, 50–54, 55–59, 60–64, 65–
69, 70–74, 75–79, 80–84, 85–89, and
90+. The age-sex coefficients displayed
in the table below reflect the difference
in Medicare Part A and Part B spending
per enrollee in those age-sex categories
relative to national average Part A and
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Part B spending based on our linear
regression model.
In addition, we used the same linear
regression model to determine how to
adjust Medicare Part A and Part B
spending for race. In addition to the agesex regression categories described
above, we included variables to adjust
for race. We considered two methods to
adjust for race in county spending
because of the way that Form SS–5
collects race information, which is then
reported in the same format in the EDB.
As discussed earlier, the EDB currently
categorizes race by the following five
categories, as reported by the Medicare
beneficiary: (1) Asian, Asian-American
or Pacific Islander; (2) Hispanic;
(3) Black (Not Hispanic); (4) North
American Indian or Alaskan Native; and
(5) White (Not Hispanic). One method
categorized race by White, Black,
Hispanic, and Other (WBHO). The
‘‘Other’’ category includes Asian/Pacific
Islander, American Indian/Alaska
Native, and all others. The second
method categorized race by White,
Black, and Other (WBO), where
beneficiaries who identified themselves
as Hispanic were categorized as Other.
The race/ethnicity categories are
mutually exclusive; if a beneficiary
identified themselves as Hispanic he or
she was not further classified as another
category, such as White or Black. In our
regression modeling, we used the largest
group, White, as the reference group; the
coefficients on the difference in
spending by race, displayed in the table
below, are additive to the reference
group. In other words, the coefficients
for each race category represent the
difference in predicted Medicare Part A
and Part B spending relative to our
reference group. Where the coefficients
are positive, this implies that the
predicted spending for that category is
higher than that of the reference group.
Conversely, where the coefficients are
negative, this implies that the predicted
spending for that category is lower than
that of the reference group.
Below are two tables representing the
coefficients used to adjust Medicare Part
A and Part B spending by county. The
first table shows the coefficients for
each age and sex category. The second
table shows the coefficients for race.
These national coefficients are applied
to each counties’ relative demographic
for age, sex and race, so that each
county has a risk score by age, sex and
race.
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We proposed to adjust for race using
the WBHO method where we separately
account for cost differences associated
with Hispanic beneficiaries. The Office
of Management and Budget (OMB) has
promulgated standards for the
classification of federal data on race and
ethnicity. Under OMB’s classification
standards, the category of Hispanic is
treated as an ethnic category as opposed
to a race category. The current OMB
Standards of 1997 require collection of
specific demographic data using a total
of five race categories, plus other (62 FR
58782 through 58790). The five race
categories are—(1) American Indian or
Alaska Native; (2) Asian; (3) Black or
African American; (4) Native Hawaiian
or Other Pacific Islander; and (5) White.
In addition, OMB specified two separate
ethnic categories—Hispanic or Latino,
and not Hispanic or Latino. However, as
explained above, Hispanic or Latino
ethnicity is treated as a race category by
EDB, and beneficiaries can self-identify
as Hispanic among mutually exclusive
racial categories. Despite the
inconsistency in reporting by the OMB
and the EDB, we proposed to treat the
category of Hispanic as a separate
category for purposes of the race
adjustment required by section 1109 of
Public Law 111–152. We found that the
coefficient for the Hispanic category was
statistically significant, suggesting that
Medicare Part A and Part B spending
associated with this category of
beneficiaries is different from the
spending for our reference group and
that it should be a separate coefficient
to adjust county spending. In addition,
the EDB treats Hispanic as a separate
racial classification, consistent with our
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WBHO method. Therefore, we believe
that our proposal appropriately
interpreted the required race
adjustment. In the supplemental
proposed rule, we proposed to adjust for
race using the WBHO method.
For purposes of the supplemental
proposed rule, we also adjusted county
spending using the WBO methodology
to compare the two approaches. We
found minimal difference in the county
rankings under the two methodologies.
We found that some counties would
qualify as an eligible county only under
the WBO methodology, and others
would no longer qualify as an eligible
county using this alternative. The
decision to use the WBHO methodology
affects whether nine subsection (d)
hospitals, located in five counties,
would be eligible to receive a payment
under section 1109 of Public Law 111–
152. In Table 3 of the supplemental
proposed rule (75 FR 30949 through
30958), we published the differences in
counties, eligible hospitals, and
payments by State under the two
methodologies. This was the first time
we had developed an adjustment for
Medicare spending based on race, and
we welcomed public comment on our
proposal to use the WBHO methodology
to adjust for race as required by section
1109 of Public Law 111–152. We also
welcomed public comment on the WBO
methodology to adjust for race though
we noted that we were not proposing
this methodology at this time.
b. Calculation of County Level Part A
and Part B Spending
In order to rank counties by Medicare
Part A and B spending, we first
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50305
calculated Medicare Part A and Part B
county level spending for each county
in the 50 States and the District of
Columbia using a similar methodology
used to establish county level fee-forservice rates for MA payments. Using a
5-year average of each county’s actual
spending (from 2002 to 2006), our
actuaries calculated an average
geographic adjuster (AGA), which
reflects the county’s expenditure
relative to the national expenditure. We
believe a 5-year average is appropriate,
as it accounts for fluctuations in year-toyear expenditures, which could distort
the counties’ historic level of spending
and is consistent with how MA rates are
calculated. The AGA was then applied
to the 2009 United States Per Capita
Cost (USPCC) estimate, which is the
national average cost per Medicare
beneficiary, to determine 2009 Medicare
Part A and Part B spending for each
county. We welcomed public comment
on this methodology to calculate
county-level Medicare Part A and Part B
spending.
3. Application of the Age/Sex/Race
Adjustment to Part A and Part B County
Spending
To estimate the county level risk
scores for 2009, beneficiary enrollment
information was first extracted from the
EDB. We chose to calculate Medicare
Part A and Part B county spending for
2009 to be consistent with how we are
required to determine qualifying
hospitals’ payment amounts, under
section 1109(c) of Public Law 111–152.
That is, section 1109(c) of Public Law
111–152 requires that qualifying
hospitals located in the bottom quartile
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of counties with the lowest Medicare
Part A and Part B spending per enrollee
will receive a portion of the allotted
$400 million based on their FY 2009
operating payments. Therefore, we
proposed to calculate Medicare Part A
and Part B county spending for 2009 as
well. We only included beneficiaries
enrolled in Medicare Part A and/or Part
B, consistent with the language of
section 1109(d) of Public Law 111–152,
which refers to spending under
Medicare Part A and Part B. Based on
these criteria, there were 30,666,295
beneficiaries included in the adjustment
process. To determine the age, sex and
race makeup of the Part A and/or Part
B beneficiaries for each county, we used
the EDB to identify date of birth, sex,
race, and State/county of residence to
create a person-level file with the data
needed to run the ASR model.
A county-level average risk score was
developed for each county in the United
States by applying the ASR model to
each individual in the county enrolled
in Medicare Part A and/or Part B,
summing the resulting risk scores and
dividing by the number of beneficiaries
by county enrolled in Medicare Part A
and/or Part B. The county-level
Medicare Part A and/or Part B spending
was adjusted by dividing the countylevel Medicare Part A and/or Part B
spending by the county-level average
risk score. The resulting spending
distribution was then sorted lowest to
highest dollars; the 786 counties in the
lowest quartile of spending (that is,
lowest adjusted spending per enrollee)
were determined to be eligible counties
under section 1109 of Public Law 111–
152.
We invited comment on our
methodology for determining the age,
sex, race adjustments for determining
adjusted Medicare Part A and B
spending by county for the purpose of
determining eligible counties under
section 1109 of Public Law 111–152.
Comment: Some commenters
supported the proposed methodology
for determining the eligible counties,
calculating the county rates, identifying
the qualifying hospitals and allocating
the allotted payments.
Response: We appreciate the
comments in support of our
methodology. We are finalizing our
proposed methodology, with a few
adjustments in response to specific
comments discussed below, in this final
rule.
Comment: Some commenters
expressed disappointment that CMS did
not provide data to determine which
hospitals qualify for payments,
including those used for the riskadjustment model, calculation of the
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county-level spending and application
of the risk-adjustments to the Part A and
Part B spending. Commenters requested
that CMS publish the data used to
calculate the ASR model, the county
spending, and the FY 2009 IPPS
operating payments for the qualifying
hospitals.
Response: As the commenters noted,
several data sources were used to
calculate our age-sex-race adjustments,
the county-level Medicare Part A and
Part B spending per enrollee, and our
qualifying providers’ payment
weighting factors. As discussed above,
our data source to calculate the ASR
model was the 2007 Standard Analytic
File, which is a 5-percent sample of the
Denominator File. In addition, to
calculate spending for the ASR model,
we used the MedPAR claims file to
calculate inpatient spending, the
National Claims History File to calculate
DMEPOS and supplies spending, and
the Standard Analytic File to calculate
other Medicare Part A and Part B
spending from 2007. The Standard
Analytic File is available for purchase
from CMS (as discussed in section
IV.J.6. of this preamble). Additional
information on this file can be found on
the CMS Web site at: https://
www.cms.gov/LimitedDataSets/
12_StandardAnalyticalFiles.asp.
As described above, to calculate the
2009 unadjusted county spending, we
used a 5-year average (from 2002 to
2006) of each county’s Medicare Part A
and Part B spending to calculate an
AGA for each county and applied that
to the 2009 USPCC. We calculated the
county age-sex-race risk scores based on
county demographics from the EDB
from 2009 and applied the county agesex-race risk score to the unadjusted
county spending to determine the
Medicare Part A and Part B spending
adjusted for age, sex and race. We
divided this adjusted county-level
spending by the number of Medicare
Part A and Part B beneficiaries from
2009 in each county.
Soon after the publication of the FY
2011 IPPS/LTCH PPS supplemental
proposed rule, we published the
proposed unadjusted county rates, the
age-sex-race adjustments applied to the
county rates, and the county rates
adjusted for age-sex-race for the eligible
counties on the CMS Web site at:
https://www.cms.gov/
AcuteInpatientPPS/IPPS2010/
itemdetail.asp?filterType=none&filter
ByDID=-99&sortByDID=1&
sortOrder=ascending&
itemID=CMS1235590&
intNumPerPage=10.
We are publishing the final
unadjusted county rates, the age-sex-
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race adjustments applied to the county
rates, and the county rates adjusted for
age-sex-race for the eligible counties
that are included in this final rule on
the CMS Web site at: https://
www.cms.gov/AcuteInpatientPPS/
IPPS2011/list.asp#TopOfPage.
To calculate the final payment
weighting factors for the qualifying
hospitals, we used the actual payments
reported on the March 2010 update of
the FY 2009 MedPAR file, which, as
discussed in section IV.J.6. of this
preamble, the public can purchase. As
required by the statute, a hospital
receives the proportion of the $400
million based on its FY 2009 IPPS
operating payments made under section
1886(d) of the Act relative to the FY
2009 IPPS operating payments made to
all the qualifying hospitals under
section 1886(d) of the Act. We defined
IPPS operating payments to include
DRG and wage-adjusted payments made
under the IPPS standardized amount
with add-on payments for operating
DSH, operating IME, operating outliers
and new technology. We excluded
capital PPS payments. As we proposed,
we also included IME MA payments
made to IPPS hospitals because these
payments are made under section
1886(d) of the Act. We only included
section 1886(d) IPPS operating
payments for cases that occurred in
IPPS acute care units of the qualifying
hospitals.
Comment: Some commenters opposed
the proposed methodology to calculate
the Medicare Part A and Part B county
spending per enrollee adjusted for age,
sex and race. Commenters believed that
the methodology should include
adjustments for poor health status,
incidence of chronic disease or other
factors that drive utilization and health
care spending.
Response: Section 1109(d) of the
Public Law 111–152 specified that we
are to calculate Medicare Part A and
Part B spending per enrollee adjusted
for age, sex and race by county. This
specific statutory language did not
provide us with any flexibility to
include, as part of our adjustment, other
factors that may influence Medicare
spending. Therefore, we are finalizing
our proposed model, which only adjusts
Medicare Part A and Part B spending
per enrollee at the county level for age,
sex and race, as specified by the statute.
Comment: Some commenters
requested that CMS use a 3 year’s worth
of spending data to calculate the AGA
instead of our proposal to include 5
years’ worth of Medicare spending data
to reflect fluctuations in year-to-year
spending. Some commenters also
requested that CMS use the most recent
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spending data through 2008 to calculate
the AGA.
Response: In the supplemental
proposed rule (75 FR 30928), we
discussed our rationale for using a
5-year average of each county’s actual
spending from 2002 to 2006 to calculate
the average geographic adjuster, which
reflects a county’s expenditure relative
to the national expenditure. We believe
that a 5-year average accounts for
fluctuations in year-to-year spending
that could distort counties’ level of
spending. As explained in the
supplemental proposed rule, in order to
calculate county spending adjusted for
age, sex and race, we followed a
methodology similar to the development
of the MA fee-for-service (FFS) rates
under section 1853(c)(1)(D) of the Act.
MA FFS ratesetting uses 5 years’ worth
of Medicare spending data to calculate
the fee-for-service county spending
rates. Due to fluctuations in county
spending that occur, particularly in
counties with few Medicare
beneficiaries, our actuaries used 5 years’
worth of county-level fee-for-service
Medicare spending data to minimize
variability for purposes of MA FFS
ratesetting. We chose to apply a
methodology consistent with MA FFS
ratesetting because of our experience
under MAFFS ratesetting in calculating
Medicare Part A and Part B spending
per enrollee at the county level and our
experience under MA FFS ratesetting in
adjusting for factors that can influence
spending such as age and gender. We
believe that, subject to the specific
requirements of section 1109 of Public
Law 111–152, we should use the same
methodology that we use to develop the
fee-for-service rates under section
1853(c)(1)(D) of the Act in MA
ratesetting.
In response to the commenters’
suggestions that we use data through
2008, we are not adopting these
suggestions. Instead, we are using 2002
to 2006 data to calculate the AGA to be
consistent with how 2009 MA FFS rates
were calculated for the reasons
explained above. We note that the
average geographic adjuster using 2002
to 2006 data is then applied to 2009
USPCC to calculate the 2009 spending
rates, where the USPCC includes more
recent spending data.
After consideration of the public
comments we received, we are
finalizing, without change, our
proposed methodology to calculate our
Medicare Part A and Part B county
spending per enrollee, which uses 5
years’ worth of Medicare spending data
from 2002 to 2006 to calculate the AGA
and adjusts for age, sex, and race.
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4. Qualifying Hospitals and Annual
Payment Amounts
We have developed a methodology to
identify the qualifying hospitals located
in our list of eligible counties.
Consistent with section 1109(d) of
Public Law 111–152, a qualifying
hospital is a ‘‘subsection (d) hospital’’ (as
defined for purposes of section 1886(d)
of the Act) that is ‘‘located in’’ an eligible
county (as identified using the
methodology we proposed and discuss
in section IV.J.2. of this preamble). A
subsection (d) hospital is defined in
section 1886(d)(1)(B) of the Act, in part,
as a ‘‘hospital located in one of the 50
States or the District of Columbia’’. The
term ‘‘subsection (d) hospital’’ does not
include hospitals located in the
territories or hospitals located in Puerto
Rico. Section 1886(d)(9)(A) of the Act
separately defines a ‘‘subsection (d)
Puerto Rico hospital’’ as a hospital that
is located in Puerto Rico and that
‘‘would be a subsection (d) hospital
* * * if it were located in one of the 50
States.’’ Therefore, Puerto Rico hospitals
are not eligible for these additional
payments. Indian Health Services
hospitals enrolled as Medicare
providers meet the definition of a
subsection (d) hospital and can qualify
to receive this payment if they are
located in an eligible county. In
addition, hospitals that are MDHs and
SCHs, although they can be paid under
a hospital-specific rate instead of under
the Federal standardized amount under
the IPPS, are ‘‘subsection (d)’’ hospitals.
The statutory definition of a ‘‘subsection
(d)’’ hospital in section 1886(d)(1)(B) of
the Act specifically excludes hospitals
and hospital units excluded from the
IPPS, such as psychiatric, rehabilitation,
long term care, children’s, and cancer
hospitals. In addition, CAHs are not
considered qualifying hospitals because
they do not meet the definition of a
‘‘subsection (d) hospital’’ as they are
paid under section 1814(l) of the Act.
CAHs are not paid under the IPPS.
Rather, they are paid under a reasonable
cost methodology and, therefore, do not
meet the definition of ‘‘qualifying
hospital’’ under section 1109(d) of
Public Law 111–152.
For the purposes of section 1109 of
Public Law 111–152, we proposed to
identify ‘‘qualifying hospitals’’ based on
their Medicare provider number or CMS
certification number (CCN), because one
of these numbers is also how hospitals
identify themselves when they file their
Medicare cost reports. We also proposed
that, in order to meet the definition of
a ‘‘qualifying hospital,’’ the hospital, as
identified by the Medicare provider
number or CCN, must: (1) Have existed
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50307
as a subsection (d) hospital as of April
1, 2010; (2) be geographically located in
an eligible county; and (3) have received
IPPS operating payments (in accordance
with section 1886(d)) of the Act) under
its Medicare provider number or CNN in
FY 2009. We used the Online Survey,
Certification and Reporting (OSCAR)
database to determine a hospital’s
county location associated with that
Medicare provider number or CCN.
County data in OSCAR is supplied by
the U.S Postal Service and is
crosswalked to the address reported by
the provider. Under this proposal, the
address listed for a hospital’s Medicare
provider number must be currently
located in a qualifying county in order
for a hospital to meet the definition of
a ‘‘qualifying hospital.’’
We published a list of the qualifying
IPPS hospitals that we identified based
on the factors described above in Table
3 of the supplemental proposed rule.
We invited comment on our
methodology for identifying qualifying
hospitals. We also invited comment on
whether our list was accurate and
whether any providers were missing
from this list using the methodology
described above.
Comment: Several commenters
identified specific providers that were
located in an eligible county, but were
not included in the listing of qualifying
hospitals in Table 3 of the supplemental
proposed rule. Commenters stated that
Augusta Medical Center (provider
number 490018) and Carilion New River
Valley (provider number 490042) are
located in eligible counties but were not
listed in Table 3 as qualifying hospitals.
Commenters requested that these
providers be included as qualifying
hospitals.
Response: We have verified the
locations of these providers and have
found them to be located in eligible
counties. These providers will receive a
portion of the $400 million for FY 2011
and FY 2012. We have included these
providers in Table 2 of this final rule
and have included a payment weighting
factor for them.
Comment: Commenters stated that the
county locations of certain qualifying
hospitals were mislabeled. Specifically,
commenters stated that the county
locations of Halifax Regional Hospital
(provider number 490013), North
Hawaii Community Hospital, Cibola
General Hospital (provider number
320037) and Acoma Canoncito Laquna
PHS hospital (provider number 320070)
were mislabeled.
Response: We listed these providers
as qualifying hospitals in the proposed
rule, but had misidentified their SSA
county location. (The SSA county
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location is found in the OSCAR
database used to identify hospitals
located in eligible counties.) We have
corrected the SSA county locations of
these providers and they remain
qualifying hospitals under section 1109
of Public Law 111–152 because their
correct SSA county locations are eligible
counties.
Comment: Several commenters stated
that the names associated with the
county codes in supplemental county
data posted on the CMS Web site were
incorrectly labeled. Specifically,
commenters stated that the labels for
both SSA county codes 06064 and
06060 were listed as Boulder County,
CO. In addition, commenters stated that
the labels for both SSA county codes
12020 and 12030 were listed as
Honolulu County, HI.
Response: We verified our SSA
county code listing. We have
determined that SSA county code 06064
is Broomfield County, CO, and SSA
county code 06060 is Boulder County,
CO. We are finalizing that SSA county
code 06064 (Broomfield County CO) is
an eligible county, but SSA county code
06060 (Boulder County CO) is not an
eligible county. In addition, SSA county
code 12020 has been corrected to be the
sole county code for Honolulu County,
HI, and SSA county code 12030 is
corrected to indicate that it refers to
Kalawao County, HI. Hawaii County, HI,
with an SSA county code of 12030, is
an eligible county, as proposed.
Kalawao County, HI, with an SSA
county code of 12030, is not an eligible
county. Correcting the county names
associated with these county codes does
not impact the list of qualifying
hospitals. We have corrected the
supplemental county data that is posted
on the CMS Web site.
Comment: One commenter stated that
CMS had failed to list several Colorado
hospitals located in SSA county code
06060, which the commenter believed
to be an eligible county, and that these
hospitals are qualifying hospitals under
section 1109 of Public Law 111–152. In
addition, the commenter stated that a
hospital located in SSA county code
06500 should be included as a
qualifying hospital.
Response: SSA county code 06060 is
Boulder County, CO. In Table 2 of the
supplemental proposed rule, we
inadvertently labeled SSA county code
06064 as Boulder County, CO, when, as
the commenter stated, SSA county code
06064 is Broomfield County, CO. As
explained above, SSA county code
06064 (Broomfield County CO) is an
eligible county. However, SSA county
code 06060 (Boulder County, CO) is not
an eligible county. Therefore, Colorado
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hospitals located in SSA county code
06060 (Boulder County, CO) are not
qualifying hospitals under section 1109
of Public Law 111–152 using the
methodology we are finalizing in this
final rule. In Table 1 below, we have
corrected the information that appeared
in Table 2 of the supplement proposed
rule.
We disagree that the hospital located
in SSA county code 06500 (Pueblo
County, CO) is a qualifying hospital.
SSA county code 06500 (Pueblo County,
CO) was not listed as an eligible county
using the methodology we proposed in
the supplemental proposed rule, and
remains ineligible in this final rule.
Therefore, IPPS hospitals located in that
county are not qualifying hospitals
under section 1109 of Public Law
111–152.
Comment: Commenters stated that
SSA county code 43650 (Washabaugh
County, SD) was incorrectly listed as a
eligible county. Commenters stated that
this county has been incorporated into
county code 43350 (Jackson County,
SD). Commenters also stated that SSA
county code 49867 (South Boston City,
VA) is incorporated into SSA county
code 49410 (Halifax County, VA).
Response: We verified our SSA
county code listing and agree with the
commenters that Washabaugh County,
SD and Jackson County, SD should not
be listed as separate counties. We have
rerun the relevant calculations for
determining an eligible county using the
methodology finalized in this rule,
treating Washabaugh County, SD and
the Jackson County, SD as a single
county; the result is that Jackson
County, SD remains an eligible county
as proposed. Therefore, we have
removed Washabaugh County, SD from
the eligible county list. In addition,
when we reran the relevant calculations
for determining an eligible county using
the methodology finalized in this rule,
treating Halifax County, VA and South
Boston City, VA as a single county,
Halifax County remains an eligible
county as proposed.
In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule, we had
stated that there were 3,144 counties
nationwide, with 786 counties in the
lowest quartile eligible to receive
payments under section 1109 of the
Public Law 111–152. With these
changes, there are 3,142 counties, with
the lowest quartile having 785.50
eligible counties, which rounds to 786
eligible counties. While the number of
counties in the lowest quartile has
remained the same, the removal of two
counties has allowed two additional
counties to be added. The additional
counties added to the list are SSA
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county code 38060 (Crook County, OR)
and SSA county code 35040 (Bottineu
County, ND). We have not identified
any qualifying IPPS hospitals located in
Crook County, OR or in Bottineu
County, ND.
Because we have replaced two
counties on our list of eligible counties,
we are providing the public an
opportunity to notify CMS whether
there are any qualifying IPPS hospitals
located in either of these two newly
added counties. We note that the list of
eligible counties and qualifying
hospitals is otherwise finalized in this
rule in Tables 2 and 3 in this section
IV.J. We are soliciting public input until
August 30, 2010, solely on the issue of
whether there are any IPPS hospitals
located in Crooks County, OR and
Bottineu County, ND. The public may
submit input via e-mail to Nisha Bhat at
Nisha.Bhat@cms.hhs.gov. All
information must be received by August
30, 2010. If we add qualifying hospitals
in these counties as a result of accurate
notification from the public, we will
publish a revised list of qualifying
hospitals and their payment weighting
factors on the CMS Web site at: https://
www.cms.gov/AcuteInpatientPPS/
IPPS2011/list.asp#TopOfPage.
5. Payment Determination and
Distribution
As mentioned above, under section
1109(b) of Public Law 111–152, the total
pool of payments available to qualifying
hospitals for FY 2011 and FY 2012 is
$400 million. The statute is not specific
as to the timing of these payments.
Because Congress has allocated a set
amount ($400 million) for hospitals for
FYs 2011 and 2012 under this
provision, we believe it is consistent
with the statute to spread these
payments over the 2-year period. In the
supplemental proposed rule, we
proposed to distribute $150 million for
FY 2011 and $250 million for FY 2012.
Because this is a new policy, we
proposed to distribute a smaller amount
of money for the first year, $150 million
for FY 2011 and gave the public an
opportunity to review our policy and
notify us of any possible revisions to the
list of qualifying hospitals, so that we
could adjust payments for FY 2012. This
would ensure that we correctly
identified qualifying hospitals and their
proper payment amounts without
exceeding the program’s funding. We
invited public comment to give
hospitals the opportunity to request
necessary changes to the qualifying
hospital list for FY 2011 in order to
ensure the accuracy of the qualifying
hospital list based on the methodology
that we proposed (and are finalizing in
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this final rule). However, we proposed
to identify eligible counties, qualifying
hospitals, and their payment amounts
under section 1109 of Public Law 111–
152 only once. Because Congress
allocated a specific amount of money,
we proposed to identify eligible
counties, qualifying hospitals, and their
payment amounts once to ensure that
we do not exceed the fixed amount of
money and to ensure predictability of
payments.
We proposed to distribute payments
through the individual hospital’s
Medicare contractor through an annual
one-time payment during each of FY
2011 and FY 2012. We believe that
annual payments made by the fiscal
intermediaries and MACs would be an
expeditious way to give the qualifying
hospitals the money allotted under
section 1109 of Public Law 111–152.
Alternatively, these payments could be
distributed to qualifying hospitals at the
time of cost report settlement for the
qualifying providers’ fiscal year end FY
2011 and FY 2012 cost reports.
However, cost report settlement
typically takes several years beyond a
hospital’s fiscal year end. If we
distributed these additional payments at
the time of cost report settlement, it may
take several years until hospitals receive
these additional payments. Therefore,
we believe our proposal to give
hospitals their section 1109 payments as
annual payments during FY 2011 and
FY 2012 presents the most expedient
method to distribute these payments to
hospitals, and is in the spirit of the
intent of Congress. We welcomed public
comment on our proposal to distribute
$150 million in FY 2011 and $250
million in FY 2012 through an annual
payment in each of those years made to
the qualifying providers through their
fiscal intermediary or MAC.
We proposed that qualifying hospitals
report these additional payments on
their Medicare hospital cost report
corresponding to the appropriate cost
reporting period that the hospitals
receive the payments. The Medicare
hospital cost report, Form 2552, has an
‘‘Other adjustment’’ line on Worksheet E,
Part A, that can used by hospitals to
report the payments received under
section 1109 of Public Law 111–152. We
plan to issue additional cost reporting
instructions for qualifying hospitals to
report these additional payments on a
subscripted line of the ‘‘Other
adjustment’’ line to identify this
payment. We noted that we are
requiring these payments be reported on
the cost report for tracking purposes
only. These additional payments will
not be adjusted or settled by the fiscal
intermediary or MAC on the cost report.
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Comment: One commenter suggested
that, for the purposes of cost reporting,
payments received under the provision
of section 1109 of Public Law 111–152
be reported on Worksheet S–2, instead
of Worksheet E, Part A on the ‘‘other
adjustment’’ line. The commenter
recommended that these payments be
reported on Worksheet S–2 so that the
payments would not be mixed with the
Medicare Part A settlement amounts.
Response: We proposed that hospitals
report this information on the ‘‘Other
adjustment’’ line of Worksheet E, Part A,
on the Medicare hospital cost report,
Form 2552, because the funding from
section 1109 has been allocated from the
Federal Hospital Insurance Trust Fund.
Funding from the Federal Hospital
Insurance Trust Fund is generally
reported on Worksheet E, Part A.
Therefore, we do not believe that it is
appropriate to report these payments on
Worksheet S–2. The funding will not be
reconciled through the Medicare cost
report because payments will be
distributed through a one-time payment
made in FY 2011 and a one-time
payment made in FY 2012 to the
qualifying hospitals by the Medicare
contractor. Rather, hospitals will report
the payments received under this
provision for tracking purposes.
Comment: Several commenters
disagreed with the proposal to distribute
$150 million for FY 2011 and $250
million for FY 2012 and, instead,
recommended that funding be
distributed in equal amounts of $200
million for FY 2011 and $200 million
for FY 2012. One commenter suggested
that, due to the current economic
conditions, $250 million be distributed
for FY 2011 and $150 million for FY
2012. Several commenters requested
that if hospitals are left off the list of
qualifying hospitals for FY 2011 and
added for FY 2012, they should be given
their full share of the $400 million
allotted by Congress.
Response: Section 1109(b) of the
Public Law 111–152 makes available
$400 million from the Federal Hospital
Insurance Trust Fund to be allocated for
FY 2011 and for FY 2012 for qualifying
hospitals. We proposed to allocate $150
million for FY 2011 and $250 million
for FY 2012 because of concerns that we
might need to revise our list of
qualifying hospitals after the
publication of FY 2011 IPPS/LTCH PPS
final rule. If we determine that we need
to revise the list, we also would need to
ensure that we allocated the proper
amount without exceeding the
program’s funding. We invited public
comment on the accuracy of our list of
eligible counties and qualifying
hospitals in those counties. As
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50309
discussed earlier, based on the public
comments that we received, we
identified two additional qualifying
hospitals. We also have added two
additional eligible counties with no
qualifying hospitals and are inviting
public input as to whether there are
qualifying hospitals located in those two
new qualifying counties. Because we are
allowing the public to notify us on the
issue of whether our determination that
there are no qualifying hospitals in the
two additional eligible counties is
accurate, and we want to ensure that we
do not exceed the allotted amount of
funding from the provision, we continue
to believe it is prudent to disburse less
funds in FY 2011. Therefore, we are
finalizing our proposal to distribute
$150 million for FY 2011 and $250
million for FY 2012 through two annual
payments made by the Medicare
contractors.
It was not our intention to allocate a
lesser share of the $400 million to
hospitals that were not on the qualifying
list in this final rule, but later found to
qualify. We are committed to ensuring
that qualifying hospitals, regardless of
when their qualification is confirmed,
receive their appropriate share of the
$400 million. As discussed in the
supplemental proposed rule, because
this is a new provision, we were
uncertain as to whether we had
correctly identified all of the qualifying
hospitals in the eligible counties to
receive money under section 1109 of the
Public Law 111–152. However, based on
the public comments, we believe we
have been able to identify the qualifying
hospitals. In the supplemental proposed
rule, we proposed to make only one
determination of eligible counties and
qualifying hospitals for FY 2011 and FY
2012.
We have concluded that our comment
period allowed the public the
opportunity to comment on the
accuracy of the list of eligible counties
and qualifying hospitals. Therefore,
after consideration of the comments we
received, we are finalizing the list of the
hospitals that qualify to receive their
payments and their payment amounts in
this final rule, with the caveat that we
will accept additional public input on
the limited issue of whether there are
any qualifying hospitals in the two
newly identified eligible counties. We
also are finalizing our proposal to make
only one determination of eligible
counties and qualifying hospitals for FY
2011 and FY 2012, also with the caveat
that we will accept additional public
input on the limited issue of whether
there are any qualifying hospitals in the
two newly identified eligible counties.
We are finalizing our proposal to
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distribute $150 million for FY 2011 and
$250 million for FY 2012. To the extent
that there are qualifying hospitals that
were not identified in this final rule
after we receive any additional public
input, we will review that issue in
future rulemaking, and those hospitals
will be eligible for their allocation of the
entire $400 million.
6. Hospital Weighting Factors
Section 1109(c) of Public Law 111–
152 requires that the payment amount
for a qualifying hospital shall be
determined ‘‘in proportion to the portion
of the amount of the aggregate payments
under section 1886(d) of the Social
Security Act to the hospital for fiscal
year 2009 bears to the sum of all such
payments to all qualifying hospitals for
such fiscal year.’’ We proposed that the
portion of a hospital’s payment under
section 1109 is based on the proportion
of its IPPS operating payments made in
FY 2009 under section 1886(d) of the
Act relative to the total IPPS operating
payments made to all qualifying
hospitals in FY 2009 under section
1886(d) of the Act. These FY 2009 IPPS
operating payments made under section
1886(d) of the Act include DRG and
wage-adjusted payments made under
the IPPS standardized amount with addon payments for operating DSH,
operating IME, operating outliers and
new technology (collectively referred to
in the proposed rule and this final rule
as the IPPS operating payment amount).
We proposed to include IME MA
payments made to IPPS hospitals
because these payments are made under
section 1886(d) of the Act. Under 42
CFR 412.105(g) of the regulations and as
implemented in Transmittal A–98–21
(Change Request 332), hospitals that are
paid under the IPPS and train residents
in approved GME programs may submit
claims associated with MA enrollees to
the fiscal intermediary or MAC for the
purpose of receiving an IME payment.
No IPPS operating payment or other
add-on payment is made for these MA
enrollees. This is consistent with how
the IPPS includes these IME MA
payments when adjusting for budget
neutrality of the IPPS standardized
amounts.
In addition, we included in the FY
2009 IPPS operating payment amount
beneficiary liabilities (coinsurance,
copayments, and deductibles) because
the payments made under section
1886(d) of the Act ‘‘are subject to the
provisions of section 1813.’’ That is, the
payment received by the hospital
includes the amount paid by Medicare,
as well as the amount for which the
beneficiary is responsible, as set forth in
section 1813 of the Act. We proposed to
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exclude IPPS capital payments because
they are payments made under section
1886(g) of the Act. We also proposed to
exclude payments for organ acquisition
costs because they are payments made
under section 1881(d) of the Act. In
addition, we proposed to exclude
payments for blood clotting factor
because they are payments made under
section 1886(a)(4) of the Act.
Consistent with our IPPS ratesetting
process, we proposed to use the FY
2009 MedPAR inpatient claims data to
determine the FY 2009 IPPS operating
payments made to qualifying hospitals
in order to set the ratio for determining
a qualifying hospital’s share of the $400
million payment under section 1109 of
Public Law 111–152. Although these
claim payments may be later changed
and adjusted at cost report settlement,
this settlement generally occurs after FY
2011 and FY 2012. Furthermore, we
believe that the use of the FY 2009
MedPAR inpatient claims data is
consistent with our proposal to make
the payments under section 1109 of
Public Law 111–152 in two annual
payments in FY 2011 and FY 2012
instead of waiting for cost report
settlement. Furthermore, we used
MedPAR data in other areas of the IPPS,
including calculating IPPS MS–DRG
relative weights, budget neutrality
factors, outlier thresholds, and the
standardized amount. The FY 2009
MedPAR data can be ordered to allow
the public to verify qualifying hospitals’
FY 2009 IPPS operating payments.
Interested individuals may order these
files through the CMS Web site at:
https://www.cms.hhs.gov/
LimitedDataSets/ by clicking on
MedPAR Limited Data Set (LDS)—
Hospital (National). This Web page
describes the file and provides
directions and further detailed
instructions for how to order.
Persons placing an order must send
the following: a Letter of Request, the
LDS Data Use Agreement and Research
Protocol (refer to the Web site for further
instructions), the LDS Form, and a
check for $3,655 to:
Mailing address if using the U.S. Postal
Service: Centers for Medicare &
Medicaid Services, RDDC Account,
Accounting Division, P.O. Box 7520,
Baltimore, MD 21207–0520.
Mailing address if using express mail:
Centers for Medicare & Medicaid
Services, OFM/Division of
Accounting—RDDC, Mailstop C3–07–
11, 7500 Security Boulevard,
Baltimore, MD 21244–1850.
For the supplemental proposed rule,
we used the December 2009 update to
the FY 2009 MedPAR claims data file
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(which was the latest available update
to the file at that time) to determine the
proposed qualifying hospitals’ IPPS
operating payment amounts. For this FY
2011 IPPS/LTCH PPS final rule, we
used the March 2010 update to the FY
2009 MedPAR data to determine
qualifying hospitals’ IPPS operating
payment amounts, which is used to set
the hospital weighting factors for FYs
2011 and 2012.
As discussed previously in section
IV.J.3. of this preamble, qualifying
hospitals can include SCHs and MDHs
because they meet the definition of
subsection (d) hospitals. SCHs are paid
in the interim (prior to cost report
settlement) on a claim-by-claim basis at
the amount that is the higher of the
payment based on the hospital-specific
rate or the IPPS Federal rate based on
the standardized amount. At cost report
settlement, the fiscal intermediary or
MAC determines if the hospital would
receive higher IPPS payments in the
aggregate using the hospital’s specific
rate (on all claims) or the Federal rate
(on all claims). The fiscal intermediary
or MAC then assigns the hospital the
higher payment amount (either the
hospital specific rate for all claims or
the Federal rate amount for all claims)
for the cost reporting period. To
determine the FY 2009 operating
payment amount for SCHs that meet the
definition of a qualifying hospital, we
proposed to use the IPPS operating
payment made on the Medicare IPPS
claim in the FY 2009 MedPAR file
rather than the SCH’s final payment rate
that is determined at cost report
settlement. We believe this approach is
consistent with the treatment of other
qualifying hospitals under our proposal,
and again allows for the timely
distribution of funds in two annual
payments, as discussed above. MDHs
are paid the sum of the Federal payment
amount plus 75 percent of the amount
by which the hospital-specific rate
exceeds the Federal payment amount.
This amount is considered their IPPS
operating payment reported on their
Medicare IPPS claims.
In order to calculate payment
amounts consistent with section 1109(c)
of Public Law 111–152, we proposed to
use a weighting factor for each
qualifying hospital that is equal to the
qualifying hospital’s FY 2009 IPPS
operating payment amount (as described
above) divided by the sum of FY 2009
IPPS operating payment amounts for all
qualifying hospitals. We believe this
methodology is consistent with the
requirement of section 1109(c) of Public
Law 111–152, because a qualifying
hospital with a larger proportion of
operating payments would have a
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proportionately higher weighting factor
and would receive the proportionately
larger share of the $400 million, while
a hospital with a smaller proportion of
operating payments would have a
proportionately smaller weighting factor
and would receive proportionately
smaller shares of the $400 million. We
welcomed public comment on our
methodology to determine the amount
of money distributed to qualifying
hospitals consistent with the language
in section 1109(c) of Public Law 111–
152.
Comment: One commenter suggested
that payments made under reasonable
cost contracts under section 1876 of the
Act be included in the calculation of a
qualifying hospital’s payment weighting
factor. The commenter stated that there
are a significant number of Medicare
beneficiaries enrolled in these cost
plans in Hawaii and that they comprise
a large proportion of Hawaii hospitals’
payments. Payments to hospitals are
made using the Medicare fee-for-service
rate or the reasonable cost for treating
inpatients in these cost plans. The
commenter believed that, because these
hospitals are paid at the Medicare feefor-service rate, those payments should
be included in the qualifying hospitals’
payment weighting factors.
Response: Section 1876 reasonable
cost contracts are entered into with
Medicare managed care cost plans
(HMOs/CMPs) that cover Medicareeligible beneficiaries. The commenter
suggested that inpatient hospital
payments for Medicare enrollees in the
section 1876 cost plans that directly pay
for inpatient hospital benefits should be
included in the qualifying hospital’s
weighting factor. Section 1109(c) of
Public Law 111–152 specifies that the
proportion of the $400 million given to
a qualifying hospital is based on the
qualifying hospital’s payments under
section 1886(d) of the Act for FY 2009
relative to the total payments under
section 1886(d) of the Act for all of the
qualifying hospitals for FY 2009.
Payments to hospitals that treat
Medicare enrollees in these managed
care cost plans that pay directly for
inpatient hospital benefits are paid by
the managed care cost plan under
section 1876 of the Act; the payments
are not under section 1886(d) of the Act.
Therefore, we believe that these
payments do not meet the requirement
under section 1109(c) of Public Law
111–152, and we are excluding
inpatient hospital payments made under
section 1876 of the Act from qualifying
hospitals’ payment weighting factors.
Additionally, we proposed to use the
FY 2009 MedPAR inpatient claims data
to determine the FY 2009 IPPS
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operating payments to calculate the
qualifying hospitals’ payment weighting
factors. IPPS hospitals submit these
inpatient claims to receive IPPS
operating payments under section
1886(d) of the Act. Because Medicare
beneficiaries enrolled in these managed
care cost plans have their inpatient
services paid for by their cost plan
under section 1876 of the Act, the
MedPAR file does not have their
hospital inpatient payment information.
Therefore, we believe that hospital
payments received for beneficiaries in
section 1876 reasonable cost plans
should not qualify as a ‘‘payment[ ]
under section 1886(d)’’ of the Act for
purposes of section 1109(c) of Public
Law 111–152.
Comment: One commenter was
concerned with the proposal to base
payments on the FY 2009 MedPAR data
for SCHs and MDHs. The commenter
suggested that MedPAR would not
accurately calculate payments for SCHs
and MDHs, which are IPPS hospitals
that are paid under the higher of the
IPPS Federal rate or the hospitalspecific rate. The commenter stated that
the MedPAR file assumes that a high
level of outlier payments exists for most
SCHs and MDHs, and therefore
disproportionately understates their
actual payment, which is determined at
cost report settlement. The MedPAR file
contains interim payments where
outlier payments may be higher or lower
than the actual outlier payment amount,
which is reconciled at cost report
settlement. The commenter requested
that CMS use the cost report to
determine SCH and MDH payment
weighting factors because the cost report
contains the final IPPS operating
payment amounts.
Response: We note that interim
payments to SCH and MDHs are made
on the basis of the best available data at
the time and can include other interim
payment amounts, such as DSH and
IME. Interim payments can be adjusted
and changed at cost report settlement.
However, these interim payment
changes are not limited to SCHs and
MDHs, as IPPS hospitals that are not
SCHs or MDHs receive interim
payments for DSH and IME that are paid
through the inpatient claim. Therefore,
SCHs and MDHs are not necessarily
more or less disadvantaged than other
IPPS hospitals under our proposal to
use inpatient claims in the MedPAR file
as opposed to finalized cost reports to
determine qualifying hospitals’ payment
weighting factors. Additionally, section
1109(a) of Public Law 111–152 requires
the Secretary to make payments ‘‘to
qualifying hospitals * * * for fiscal
years 2011 and 2012,’’ and section
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50311
1109(b) of Public Law 111–152 makes
$400 million available for payments ‘‘for
fiscal years 2011 and 2012’’ based on
qualifying hospitals’ IPPS operating
payments from FY 2009. It generally
takes several years to finalize hospitals’
Medicare cost report. If we waited for
cost report settlement to finalize interim
values such as DSH, IME, and interim
payment to SCHs and MDHs, we would
be delaying making these additional
payments well beyond FYs 2011 and
2012. As we noted in the preamble to
the supplemental proposed rule (75 FR
30929), we proposed to make payments
under section 1109 of Public Law 111–
152 during FYs 2011 and 2012 based on
available interim MedPAR data, because
of this delay. Although waiting until
cost reports are settled might yield
somewhat more precise payment
information for some qualifying
hospitals receiving interim payments,
including SCHs and MDHs, we believe
it is in the interest of the hospitals to use
the best available at this time to
expedite disbursement of the funds in
FY 2011 and FY 2012. We believe the
FY 2009 MedPAR file contains the best
data available, and using these data is
the most expeditious method to
determine a hospital’s weighting factor
and is consistent with this decision to
make payments in the relevant fiscal
years.
Comment: One commenter supported
determining qualifying hospitals only
once in FY 2011 for the purposes of
making payments in FY 2011 and FY
2012. The commenter stated that this
approach provides certainty to
qualifying hospitals to allow them to
budget for the next 2 fiscal years.
Response: We agree that finalizing the
list of eligible counties and qualifying
hospitals once will ease implementation
of the provision and will allow hospitals
to plan their budgets accordingly. As
discussed earlier, we have modified our
proposed approach because we have
replaced two eligible counties and have
not identified any qualifying IPPS
hospitals located in those counties. We
are allowing the public until August 30,
2010 to give input via e-mail as to
whether there are any qualifying
hospitals located in those two
additional eligible counties. If there are
any changes to the list, we will
republish that information on the CMS
Web site. To the extent that there are
any other issues that arise after the
publication of this final rule, we would
consider those issues in future
rulemaking.
We are finalizing our methodology to
calculate the qualifying hospitals’
payment weighting factors as proposed
using the March 2010 update of the FY
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2009 MedPAR inpatient claims
information. We are finalizing our
proposal to distribute $150 million for
FY 2011 and $250 million for FY 2012.
7. Results
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In calculating county-level Medicare
Part A and B spending and after
consideration of the public comments
we received, we have found that there
are 3,142 counties in the United States.
Therefore, there are 786 counties that
rank in the lowest quartile of counties
with regards to adjusted Medicare Part
A and Part B spending per enrollee. Of
those 786 eligible counties, there are
only 273 counties in which qualifying
hospitals are located, using the
methodology we proposed in section
II.E.3. of the preamble to the
supplemental proposed rule and that we
are finalizing in this final rule. Using
Medicare provider numbers, we
identified 416 IPPS hospitals that are
currently located in those eligible
counties and received IPPS operating
payments in FY 2009.
In accordance with our responses to
the comments and our final
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methodology, we have set out the final
list of eligible counties in Table 1 below.
In addition, we have set out the final list
of qualifying hospitals, location, and
payment weighting factors (subject to
our consideration of any comments we
receive regarding whether there are any
qualifying hospitals in the two newly
added eligible counties) based on the
March 2010 update of the FY 2009
MedPAR in Table 2 below. Finally, we
have set out the payments under section
1109 by State for FY 2011 (again, subject
to our consideration of any public input
we receive regarding whether there are
any qualifying hospitals in the two
newly added eligible counties) in Table
3 below.
8. Finalization of Eligible Counties,
Qualifying Hospitals and Qualifying
Hospitals’ Weighting Factors
We noted in the proposed rule that,
based on public comments, it would be
possible that we finalized a
methodology to determine the list of
eligible counties and hospitals that
differs from our current proposal. A
change in our methodology could, in
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turn, result in changes to the list of
eligible counties or qualifying hospitals.
We note again that we proposed to
identify eligible counties, qualifying
providers, and their payments under
section 1109 of Public Law 111–152
only once in the FY 2011 IPPS/LTCH
PPS final rule, and we are finalizing this
proposal in this final rule. As we
proposed, the methodology for
determining a final list of eligible
counties produced the actual list of
eligible counties that are being finalized
in this FY 2011 IPPS/LTCH PPS final
rule and will not be updated in a future
fiscal year based on updated data.
However, as discussed earlier, we
replaced two counties in the eligible
counties list and did not identify
qualifying hospitals located in those
new counties and we are seeking public
input via e-mail by August 30, 2010, as
to whether there are any qualifying
hospitals located in those counties. If
there are additional changes to our
qualifying hospitals list, we will publish
that information on the CMS Web site
soon after August 30, 2010.
BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C
K. Rural Community Hospital
Demonstration Program
We note that we included a
discussion of continued implementation
of the rural community hospital
demonstration program in the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24011). We issued a supplemental
proposed rule (75 FR 30961) to the FY
2011 proposed rule (75 FR 23852) to
address the provisions of the Affordable
Care Act, which made changes to the
demonstration program, and full
implementation of the program for FY
2011. The discussion below reflects the
provisions of both the proposed rule
and the supplemental proposed rule.
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1. Background
Section 410A(a) of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA),
Public Law 108–173, required the
Secretary to establish a demonstration
program to test the feasibility and
advisability of establishing ‘‘rural
community hospitals’’ to furnish
covered inpatient hospital services to
Medicare beneficiaries. The
demonstration pays rural community
hospitals for such services under a costbased methodology for Medicare
payment purposes for covered inpatient
hospital services furnished to Medicare
beneficiaries. A rural community
hospital, as defined in section
410A(f)(1) of MMA, is a hospital that—
• Is located in a rural area (as defined
in section 1886(d)(2)(D) of the Act) or is
treated as being located in a rural area
under section 1886(d)(8)(E) of the Act;
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• Has fewer than 51 beds (excluding
beds in a distinct part psychiatric or
rehabilitation unit) as reported in its
most recent cost report;
• Provides 24-hour emergency care
services; and
• Is not designated or eligible for
designation as a CAH under section
1820 of the Act.
Section 410A(a)(4) of Public Law 108–
173, in conjunction with subsections (2)
and (3) of section 410A(a), provided that
the Secretary was to select for
participation no more than 15 rural
community hospitals in rural areas of
States that the Secretary identified as
having low population densities. Using
2002 data from the U.S Census Bureau,
we identified the 10 States with the
lowest population density in which
rural community hospitals were to be
located in order to participate in the
demonstration: Alaska, Idaho, Montana,
Nebraska, Nevada, New Mexico, North
Dakota, South Dakota, Utah, and
Wyoming. (Source: U.S. Census Bureau,
Statistical Abstract of the United States:
2003).
We originally solicited applicants for
the demonstration in May 2004; 13
hospitals began participation with cost
reporting years beginning on or after
October 1, 2004. (Four of these 13
hospitals withdrew from the program
and became CAHs). In a notice
published in the Federal Register on
February 6, 2008 (73 FR 6971), we
announced a solicitation for up to 6
additional hospitals to participate in the
demonstration program. Four additional
hospitals were selected to participate
under this solicitation. These four
additional hospitals began under the
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demonstration payment methodology
with the hospital’s first cost reporting
period starting on or after July 1, 2008.
Three hospitals (2 of the hospitals were
among the 13 hospitals that were
original participants in the
demonstration and 1 of the hospitals
was among the 4 hospitals that began
the demonstration in 2008) withdrew
from the demonstration during CY 2009.
(Two of these hospitals indicated that
they will be paid more for Medicare
inpatient services under the rebasing
allowed under the SCH methodology
allowed by the Medicare Improvement
for Patients and Providers Act of 2008
(Pub. L. 110–275). The other hospital
restructured to become a CAH.)
Section 410A(a)(5) of Public Law 108–
173 originally required a 5-year
demonstration period of participation.
Prior to the enactment of the Affordable
Care Act, for the seven currently
participating hospitals that began the
demonstration during FY 2005
(‘‘originally participating hospitals’’), the
demonstration was scheduled to end for
each of these hospitals on the last day
of its cost reporting period that ends in
FY 2010. The end of the participation
for the three participating hospitals that
began the demonstration in CY 2008
was scheduled to be September 30,
2010.
In addition, section 410A(c)(2) of
Public Law 108–173 required that, ‘‘[i]n
conducting the demonstration program
under this section, the Secretary shall
ensure that the aggregate payments
made by the Secretary do not exceed the
amount which the Secretary would have
paid if the demonstration program
under this section was not
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implemented.’’ This requirement is
commonly referred to as ‘‘budget
neutrality.’’
Generally, when we implement a
demonstration program on a budget
neutral basis, the demonstration
program is budget neutral in its own
terms; in other words, the aggregate
payments to the participating hospitals
do not exceed the amount that would be
paid to those same hospitals in the
absence of the demonstration program.
Typically, this form of budget neutrality
is viable when, by changing payments
or aligning incentives to improve overall
efficiency, or both, a demonstration
program may reduce the use of some
services or eliminate the need for others,
resulting in reduced expenditures for
the demonstration program’s
participants. These reduced
expenditures offset increased payments
elsewhere under the demonstration
program, thus ensuring that the
demonstration program as a whole is
budget neutral or yields savings.
However, the small scale of this
demonstration program, in conjunction
with the payment methodology, makes
it extremely unlikely that this
demonstration program could be viable
under the usual form of budget
neutrality. Specifically, cost-based
payments to participating small rural
hospitals are likely to increase Medicare
outlays without producing any
offsetting reduction in Medicare
expenditures elsewhere. Therefore, a
rural community hospital’s
participation in this demonstration
program is unlikely to yield benefits to
the participant if budget neutrality were
to be implemented by reducing other
payments for these same hospitals.
In the past six IPPS final regulations,
spanning the period for which the
demonstration has been implemented,
we have adjusted the national inpatient
PPS rates by an amount sufficient to
account for the added costs of this
demonstration program, thus applying
budget neutrality across the payment
system as a whole rather than merely
across the participants in the
demonstration program. As we
discussed in the FY 2005, FY 2006, FY
2007, FY 2008, FY 2009, and FY 2010
IPPS final rules (69 FR 49183; 70 FR
47462; 71 FR 48100; 72 FR 47392; 73 FR
48670; and 74 FR 43922, respectively),
we believe that the language of the
statutory budget neutrality requirements
permits the agency to implement the
budget neutrality provision in this
manner.
In light of the statute’s budget
neutrality requirement, we proposed in
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24012) a methodology to
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calculate a budget neutrality adjustment
factor to the FY 2011 national IPPS
rates. In the FY 2011 IPPS/LTCH PPS
proposed rule, the only amount that was
identified to be offset for the FY 2011
IPPS/LTCH final rule was that by which
the costs of the demonstration program,
as indicated by settled cost reports
beginning in FY 2007 for hospitals
participating in the demonstration
during FY 2007, exceeded the amount
that was identified in the FY IPPS 2007
final rule as the budget neutrality offset
for FY 2007. No dollar amount was
specified for purpose of this offset,
because of a delay in the settlement
process of FY 2007 cost reports. Due to
the timing of the proposed rule in
relation to the enactment of the
Affordable Care Act, we were unable to
include in the proposed budget
neutrality adjustment factor to the FY
2011 national IPPS rates an offset that
would account for the estimated
financial impact that the demonstration
would have for certain timeframes
under the extension required by the
Affordable Care Act.
2. Changes to the Demonstration
Program Made by the Affordable Care
Act
Section 3123 of Public Law 111–148
and section 10313 of Public Law 111–
152 amended section 410A of Public
Law 108–173 which established the
rural community hospital
demonstration program. Sections 3123
and 10313 of the Affordable Care Act
changed the rural community hospital
demonstration program in several ways.
First, the Secretary is required to
conduct the demonstration program for
an additional 5-year period that begins
on the date immediately following the
last day of the initial 5-year period
under section 410A(a)(5) of Public Law
108–173, as amended (section
410A(g)(1) of Public Law 108–173, as
added by section 3123(a) of the
Affordable Care Act and further
amended by section 10313 of such Act).
Further, the Affordable Care Act
requires that, in the case of a rural
community hospital that is participating
in the demonstration program as of the
last day of the initial 5-year period, the
Secretary shall provide for the
continued participation of such rural
hospital in the demonstration program
during the 5-year extension, unless the
hospital makes an election, in such form
and manner as the Secretary may
specify, to discontinue participation
(section 410A(g)(4)(A) of Public Law
108–173, as added by section 3123(a) of
the Affordable Care Act and further
amended by section 10313 of such Act).
In addition, the Affordable Care Act
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provides that during the 5-year
extension period, the Secretary shall
expand the number of States with low
population densities determined by the
Secretary to 20 (section 410A(g)(2) of
Public Law 108–173, as added by
section 3123(a) and amended by section
10313 of the Affordable Care Act).
Further, the Secretary is required to use
the same criteria and data that the
Secretary used to determine the States
under section 410A(a)(2) of Public Law
108–173 for purposes of the initial 5year period. The Affordable Care Act
also allows not more than 30 rural
community hospitals in such States to
participate in the demonstration during
the 5-year extension period (section
410A(g)(3) of Public Law 108–173, as
added by section 3123(a) of the
Affordable Care Act and as further
amended by section 10313 of such Act).
Additionally, the Affordable Care Act
provides that the amount of payment
under the demonstration program for
covered inpatient hospital services
furnished in a rural community
hospital, other than services furnished
in a psychiatric or rehabilitation unit of
the hospital that is a distinct part, is the
reasonable costs of providing such
services for discharges occurring in the
first cost reporting period beginning on
or after the first day of the 5-year
extension period (section 410A(g)(4)(b)
of Public Law 108–173, as added by
section 3123(a) of the Affordable Care
Act and as further amended by section
10313 of such Act). For discharges
occurring in a subsequent cost reporting
period paid under the demonstration,
the formula in section 410A(b)(1)(B) of
Public Law 108–173, as amended,
would apply. In addition, various other
technical and conforming changes were
made to section 410A of Public Law
108–173 by section 3123(a) of the
Affordable Care Act and as further
amended by section 10313 of such Act.
3. FY 2011 Budget Neutrality
Adjustment
In order to ensure that the
demonstration is budget neutral as is
required by the statute, in the June 2,
2010 supplemental proposed rule, we
proposed to adjust the national IPPS
rates in the FY 2011 IPPS final rule to
account for any added costs attributable
to the demonstration. Specifically, the
proposed budget neutrality adjustment
would account for: (1) The estimated
costs of the demonstration in FY 2011
for the 10 currently participating
hospitals; (2) the estimated FY 2010
costs of the demonstration that were not
accounted for in the FY 2010 IPPS/RY
2010 LTCH PPS final rule for the 7
‘‘originally participating hospitals’’
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because we estimated those hospitals’
FY 2010 costs under the assumption
that the demonstration would be
concluding before the end of FY 2010
for those hospitals; (3) the estimated FY
2011 costs for up to 20 new hospitals
selected to participate in the
demonstration; and (4) the amount by
which the costs of the demonstration
program, as indicated by settled cost
reports for cost reporting periods
beginning in FY 2007 for hospitals
participating in the demonstration
during FY 2007, exceeded the amount
that was identified in the FY 2007 IPPS
final rule as the budget neutrality offset
for FY 2007.
a. Component of the FY 2011 Budget
Neutrality Adjustment That Accounts
for Estimated FY 2011 Costs of the
Demonstration of the 10 Currently
Participating Hospitals
In the June 2, 2010 supplemental
proposed rule (75 FR 30962 and 30963),
we indicated that the component of the
proposed FY 2011 budget neutrality
adjustment to the national IPPS rates
that accounts for the estimated cost of
the demonstration in FY 2011 for the 10
currently participating hospitals would
be calculated by utilizing separate
methodologies for the 7 hospitals that
have participated in the demonstration
since its inception and that we consider
to be continuing to participate in the
demonstration (‘‘originally participating
hospitals’’), and the 3 hospitals that are
currently participating in the
demonstration that were among the 4
hospitals that joined the demonstration
in 2008. Different methods are used
because fiscal intermediaries’ most
recent final settlements of cost reports
are for periods beginning in FY 2006 for
the ‘‘originally participating hospitals,’’
whereas we relied on available
submitted documentation for the
hospitals that began participation in the
demonstration in 2008. Because the
hospitals that began the demonstration
in 2008 have no settled cost reports for
the demonstration, we proposed to use
‘‘as submitted’’ cost reports. The
proposed budget neutrality analysis was
based on the assumption that all 10 of
these hospitals would continue in the
demonstration under the 5-year
extension provided by the Affordable
Care Act. We note that all 10
participating hospitals, whether they
began participation in 2005 or in 2008,
have elected to continue participation in
the extension period mandated by the
Affordable Care Act.
The estimate of the portion of the
proposed budget neutrality adjustment
that accounts for the estimated costs of
the demonstration in FY 2011 for the 7
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‘‘originally participating hospitals’’ was
based on data from their second year
cost reports—that is, for cost reporting
periods beginning in FY 2006. We
proposed to use these cost reports
because they were the most recent
complete cost reports and, thus, we
believed they enabled us to estimate FY
2011 costs as accurately as possible. In
addition, we estimated the cost of the
demonstration in FY 2011 for 2 of the
4 hospitals that joined the
demonstration in 2008 based on data
from each of their cost reporting periods
beginning January 1, 2008. Similarly, we
proposed to use these cost reports
because they were the most recent cost
reports and, thus, we believed they
enabled us to estimate FY 2011 costs for
these 2 hospitals as accurately as
possible. Because 1 of the 4 hospitals
that began in 2008 has withdrawn, there
is 1 hospital remaining among those that
began in that year. The remaining
hospital of the 4 hospitals that began in
2008 is an Indian Health Service
provider. Historically, the hospital has
not filed standard Medicare cost reports.
Therefore, in order to estimate its costs,
we proposed to use an analysis of
Medicare inpatient costs and payments
submitted by the hospital for the cost
reporting period of October 1, 2005
through September 30, 2006. In
addition, we proposed that we may
revise this estimate [that is, the
estimated cost of the demonstration in
FY 2011 for the 10 currently
participating hospitals] for the final rule
if updated cost report data became
available. This is because we believe
that updated data would enable us to
estimate costs as accurately as possible.
For this final rule, we are finalizing an
estimate of the costs of the
demonstration in FY 2011 for the 10
currently participating hospitals.
Consistent with our proposal, updated
data have become available for this final
rule, and we are using them to estimate
the costs of the demonstration in FY
2011. The finalized amount differs from
that stated in the proposed rule in two
respects: (1) A more recently available
IPPS market basket update factor for FY
2011 is applied to the difference
between the dollar amount attributable
to Medicare inpatient costs calculated
under the applicable reasonable cost
methodology in section 410A of Public
Law 108–173, as amended, and what
would have otherwise been paid under
the IPPS. (An IPPS market basket update
is applied for every year between the
year of the respective cost report and
2011.) (2) The updated cost report data
have become available for the Indian
Health Service provider because the
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provider has filed a full cost report for
its cost reporting period ending
September 30, 2009.
For this final rule, the estimated costs
under the demonstration for FY 2011 for
the 10 currently participating hospitals
is calculated as follows: Consistent with
the proposed rule, in order to estimate
the FY 2011 costs of the demonstration
for the seven ‘‘originally participating
hospitals,’’ for each hospital we
subtracted the amount it would have
been paid under the IPPS from the
amount paid for FY 2006 under the
applicable reasonable cost methodology
in section 410A of Public Law 108–173
as amended. We summed these
differences for the seven hospitals and
applied the IPPS market basket updates
and a 2-percent annual volume
adjustment for the years between 2006
and 2011. As proposed, for this final
rule for the two hospitals that began the
demonstration in 2008, for each of these
hospitals we subtracted the amount it
would have been paid under the IPPS
from the amount to be paid under the
applicable reasonable cost methodology
in section 410A of Public Law 108–173
as amended for FY 2008 using as
submitted 2008 cost reports. We
summed these differences and applied
the IPPS market basket updates and a
2-percent annual volume adjustment for
the years between 2008 and 2011. For
the Indian Health Service provider, we
used its as submitted cost report ending
in September 2009 to estimate its FY
2011 costs under the applicable
reasonable cost methodology set forth in
section 410A of Public Law 108–173 as
amended and what its Medicare
inpatient payment would have been
absent the demonstration. We added the
amounts for all 10 hospitals, resulting in
an estimated amount of $21,331,721.
b. Portion of the FY 2011 Budget
Neutrality Adjustment That Accounts
for Estimated FY 2010 Costs of the
Demonstration That Were Not
Accounted for in the FY 2010 IPPS/RY
2010 LTCH PPS Final Rule for the
Seven ‘‘Originally Participating
Hospitals’’
As explained above, section
410A(g)(4)(A) of Public Law 108–173, as
added by section 3123(a) of the
Affordable Care Act and further
amended by section 10313 of such Act,
provided for the continued participation
of rural community hospitals that were
participating in the demonstration as of
the last day of the initial 5-year
[demonstration] period. One of the
effects of this extension is that the seven
‘‘originally participating hospitals’’
(those hospitals that have participated
in the demonstration since its inception
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and that continue to participate in the
demonstration or were participating in
the demonstration as of the last day of
their initial 5-year demonstration
period, that is, the two rural community
hospitals that concluded their initial
period of performance in December
2009) that were scheduled to end their
participation in the demonstration
before the end of FY 2010 would
continue to participate for the
remainder of FY 2010 and beyond, as
applicable. However, we note that the
portion of the FY 2010 budget neutrality
adjustment to the national IPPS rates
that was included in the FY 2010 IPPS
final rule that accounted for the
estimated costs of the demonstration in
FY 2010 did not take into account costs
of the demonstration for those hospitals
beyond the anticipated end date of their
initial demonstration period. (For
example, for a hospital whose cost
report ended in June 30, 2010, we
counted only 9 months for the budget
neutrality adjustment for the FY 2010
IPPS/LTCH PPS final rule. Under our
proposal, we would adjust the national
IPPS rates to account for the estimated
costs for this hospital for the remaining
3 months of FY 2010.) Therefore, as
proposed, in this final rule, we are
including a component in the FY 2011
budget neutrality adjustment to account
for the estimated costs of the
demonstration in FY 2010 that were not
accounted for in the FY 2010 IPPS/RY
2010 LTCH PPS final rule for the seven
‘‘originally participating hospitals’’
because we calculated the FY 2010 cost
estimate for that year’s final rule
assuming that the demonstration would
end before the end of that fiscal year for
those hospitals. As we proposed, we are
using the following methodology to
account for such estimated costs:
• Step One. For each of the seven
‘‘originally participating hospitals,’’ we
divide the number of months that were
not included in the estimate of the FY
2010 demonstration costs included in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule by 12. This step is necessary
to determine for each of the seven
‘‘originally participating hospitals’’ the
fraction of FY 2010 for which the
estimate of the FY 2010 demonstration
was not included.
• Step Two. For each of the seven
‘‘originally participating hospitals,’’ the
percentage that results in step one is
multiplied by the estimate of the cost
attributable to the demonstration in FY
2010 for the hospital. The estimate for
the fraction of the hospital’s cost for FY
2010 not included in the estimate in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule is arrived at by multiplying this
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fraction by the estimate of costs for the
entire year.
The estimate of the costs of the
demonstration for FY 2010 for the seven
‘‘originally participating’’ hospitals is
derived from data found in their cost
reports for cost reporting years
beginning in FY 2006. These cost
reports show dollar amounts for costs
for Medicare inpatient services (that is,
the Medicare payment amount in that
cost reporting year for Medicare
inpatient services that results from
application of the applicable
methodology set forth in section 410A
of Pub. L. 108–173) and the dollar
amount that would have been paid
under the IPPS. Because these cost
reporting years all ended during FY
2007, this difference (that is, the
difference between the Medicare
payment amount in that cost reporting
year for Medicare inpatient services that
is calculated under the methodology set
forth in section 410A of Pub. L. 108–173
and the dollar amount that would have
been paid under the IPPS), respective to
each of the seven ‘‘originally
participating hospitals,’’ is updated
according to the market basket updates
for inpatient hospital costs reported by
the CMS Office of the Actuary for the
years from FY 2008 through FY 2011.
(We also have assumed an annual 2
percent volume increase in accordance
with guidance from the CMS Office of
the Actuary.) The difference for each
hospital is summed to arrive at the
estimate of additional costs attributable
to the demonstration in FY 2010 for
such hospitals. (This calculation is not
necessary for the hospitals that began
participating in the demonstration in
2008 because the portion of the FY 2010
budget neutrality adjustment that
accounts for estimated FY 2010
demonstration costs in the FY 2010
IPPS/RY 2010 LTCH PPS final rule
incorporates a cost estimate for each of
these hospitals based on the entirety of
the Federal fiscal year.) The estimate of
additional costs attributable to the
demonstration in FY 2010 for the seven
‘‘originally participating hospitals’’ that
were not accounted for in the FY 2010
final rule is $6,488,221.
c. Portion of the FY 2011 Budget
Neutrality Adjustment That Accounts
for Estimated FY 2011 Costs for
Hospitals Newly Selected To Participate
in the Demonstration
Section 410A(g)(3) of Public Law 108–
173, as added by section 3123 of the
Affordable Care Act and as further
amended by section 10313 of such Act,
provides that ‘‘[n]otwithstanding
subsection (a)(4), during the 5-year
extension period, not more than 30 rural
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community hospitals may participate in
the demonstration program under this
section.’’ Consequently, up to 20
additional hospitals may be added to
the demonstration (30 hospitals minus
the 10 currently participating hospitals).
In order to ensure budget neutrality for
20 new participating hospitals, as we
proposed in the June 2, 2010
supplemental proposed rule, we are
including a component in the budget
neutrality adjustment factor to the FY
2011 national IPPS rates to account for
the estimated FY 2011 costs of those
new hospitals. As proposed, for this
final rule, for purposes of estimating the
FY 2011 costs of the demonstration for
20 new hospitals, we are estimating
such costs from the average annual cost
per hospital derived from the estimate
of the 10 currently participating
hospitals’ costs attributable to the
demonstration for FY 2011. Because the
statute allows the potential for 20
additional hospitals for the
demonstration, we are basing this
estimate on the assumption that 20
hospitals will join. Our experience
analyzing the cost reports so far for
demonstration hospitals shows a wide
variation in costs among the hospitals.
Given the wide variation in cost profiles
that might occur for additional
hospitals, we believe that estimating the
total demonstration cost for FY 2011 for
20 additional hospitals from the average
annual cost of the currently existing
hospitals yields the most accurate
prediction because it is reflective of the
historical trend of participant behavior
under the demonstration and should
give an accurate as possible prediction
of future participant behavior. We
believe that, although there is variation
in costs, formulating an estimate from
the average costs of as many as 10
hospitals gives as good as possible a
prediction of what the demonstration
costs for each of 20 additional hospitals
would be. We are estimating the average
cost for each of the 20 additional
hospitals, not a range of costs.
According to the estimate of this average
cost per hospital, obtained by dividing
$21,331,721, the cost amount for FY
2011 identified for the 10 participating
hospitals in IV.F.3.a. of this preamble,
by 10 and then multiplying by 20, the
estimate for costs attributable to the
demonstration for 20 additional
hospitals in FY 2011 is $42,663,442. (In
the proposed rule, we neglected to state
that the estimated costs attributable to
the demonstration for 20 additional
hospitals in FY 2011 was the average
cost attributable to the demonstration
per hospital for FY 2011 times 20,
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although the estimated costs for such
hospitals reflected this calculation).
d. Portion of the FY 2011 Budget
Neutrality Adjustment To Offset the
Amount by Which the Costs of the
Demonstration in FY 2007 Exceeded the
Amount That Was Identified in the FY
2007 IPPS Final Rule as the Budget
Neutrality Offset for FY 2007
In addition, in order to ensure that the
demonstration in FY 2007 was budget
neutral, in the June 2, 2010
supplemental proposed rule (75 FR
30964), we proposed to incorporate a
component into the budget neutrality
adjustment factor to the FY 2011
national IPPS rates, which would offset
the amount by which the costs of the
demonstration program as indicated by
settled cost reports beginning in FY
2007 for hospitals participating in the
demonstration during FY 2007 exceeded
the amount that was identified in the FY
2007 IPPS final rule as the budget
neutrality offset for FY 2007.
Specifically, we proposed the following
methodology:
• Step One: Calculate the FY 2007
costs of the demonstration program
according to the settled cost reports that
began in FY 2007 for the then
participating hospitals (which represent
the third year of the demonstration for
each of the then participating hospitals).
(We proposed to use these settled cost
reports, which represent the third year
of the demonstration for each of the
then participating hospitals, because
they correspond most precisely to FY
2007 and, therefore, we believe correctly
represent FY 2007 inpatient costs for the
demonstration during that period.)
• Step Two: Subtract the amount that
was offset by the budget neutrality
adjustment for FY 2007 ($9,197,870)
from the costs of the demonstration in
FY 2007 as calculated in step one.
• Step Three: The result of step two
is a dollar amount, for which we would
calculate a factor that would offset such
amounts and would be incorporated
into the overall budget neutrality
adjustment to national IPPS rates for FY
2011. This specific component to the
overall budget neutrality adjustment for
FY 2011 would account for the
difference between the costs of the
demonstration in FY 2007 and the
amount of the budget neutrality
adjustment published in the FY 2007
IPPS final rule and, therefore, would
ensure that the demonstration is budget
neutral for FY 2007.
Because the settlement process for the
demonstration hospitals’ third year cost
reports, that is, for cost reporting
periods starting in FY 2007, had
experienced a delay, for the FY 2011
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IPPS/LTCH PPS proposed rule and the
supplemental propose rule, we were
unable to state the costs of the
demonstration corresponding to FY
2007 and as a result were unable to
propose the specific numeric
adjustment representing this offsetting
process that would be applied to the
national IPPS rates. Due to operational
issues in the cost report settlement
process, settled cost reports for the
hospitals that participate in the
demonstration in FY 2007 are not
available in time for this final rule
either, although we expected them to be
available. Therefore, the estimated
adjustment to the national IPPS rates in
this final rule cannot include a
component to account for these costs.
We anticipate that this information may
be available for the FY 2012 IPPS/LTCH
PPS proposed rule, at which time we
would include a similar proposal.
For this final FY 2011 IPPS/LTCH
PPS final rule, the estimated amount for
the adjustment to the national IPPS rates
is the sum of the amounts specified in
sections V.K.3.a. through c. of this final
rule, which is $70,483,384. Section
V.K.3.a. through c. of this final rule state
dollar amounts, which represent
estimated costs attributable to the
demonstration for the respective
component of the overall estimated
calculation of the budget neutrality
factor for FY 2011. This estimated
amount is based on the specific
assumptions identified, as well as from
data sources that are used because they
represent either the most recently
finalized or, if as submitted, recent
available cost reports.
We did not receive any public
comments on the proposed provisions
for extension of the rural hospital
community demonstration program.
L. Technical Change to Regulations
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43939 through
43940), in response to public comments
we received on the FY 2010 proposed
rule relating to the effects on CAH status
arising from the redesignation by OMB
of three Micropolitan Statistical Areas
as MSAs, we amended our regulations
at § 485.610 by adding a paragraph (b)(4)
to provide for a transition period for the
CAHs that are located in counties that
are reclassified from rural to urban to
obtain a rural redesignation. However,
when we added the new paragraph
(b)(4) to § 485.610, we inadvertently
failed to make a conforming change to
the introductory text of paragraph (b) to
include a reference to paragraph (b)(4)
as one of the requirements that the CAH
must meet in order to satisfy the
conditions of participation for CAHs. In
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the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23998), we proposed to
make this conforming change. We did
not receive any public comments on our
proposal. Therefore, we are adopting the
proposed conforming change as final
without modification.
M. Interim Final Rule With Comment
Period: Bundling of Payments for
Services Provided to Outpatients Who
Later Are Admitted as Inpatients: 3-Day
Payment Window
1. Introduction
On June 25, 2010, the Preservation of
Access to Care for Medicare
Beneficiaries and Pension Relief Act of
2010 (Pub. L. 111–192) was enacted.
Section 102 of Public Law 111–192
pertains to Medicare’s policy for
payment of outpatient services provided
on either the day of or during the 3 days
(or, in the case of a hospital that is not
a subsection (d) hospital, during the 1
day) prior to a Medicare beneficiary’s
inpatient admission. This policy is
generally known as the ‘‘3-day payment
window’’. Under the 3-day payment
window, a hospital (or an entity that is
wholly owned or wholly operated by
the hospital) must include on the claim
for a Medicare beneficiary’s inpatient
stay, the charges for all outpatient
diagnostic services and admissionrelated nondiagnostic services provided
during the payment window. The new
law makes the policy pertaining to
admission-related nondiagnostic
services more consistent with common
hospital billing practices. Section 102 is
effective for services furnished on or
after the date of enactment, June 25,
2010.
2. Background for Policy
Section 1886(a)(4) of the Act
originally defined the operating costs of
inpatient hospital services to include
‘‘all routine operating costs, ancillary
service operating costs, and special care
unit operating costs with respect to
inpatient hospital services as such costs
are determined on an average per
admission or per discharge basis.’’ On
November 5, 1990, the Omnibus Budget
Reconciliation Act of 1990 (Pub. L. 101–
508) was enacted. Section 4003(a) of
Public Law 101–508 amended the
statutory definition of ‘‘operating costs
of inpatient hospital services’’ to include
the costs of certain services furnished
prior to admission. These preadmission
services are to be included on the
Medicare Part A bill for the subsequent
inpatient stay. As amended, section
1886(a)(4) of the Act defines the
operating costs of inpatient hospital
services to include diagnostic services
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(including clinical diagnostic laboratory
tests) or other services related to the
admission (as defined by the Secretary)
furnished by the hospital (or by an
entity that is wholly owned or wholly
operated by the hospital) to the patient
during the 3 days prior to the date of the
patient’s admission to the hospital. The
provisions of section 4003(b) of Public
Law 101–508 were fully implemented
by October 1, 1991.
On January 12, 1994, we published an
interim final rule with comment period
(59 FR 1654) regarding section 4003 of
Public Law 101–508. In that final rule
with comment period, we revised the
regulations at 42 CFR 412.2 relating to
hospitals paid under the IPPS (also
referred to as ‘‘subsection (d) hospitals’’)
and 42 CFR 413.40(c) relating to
hospitals excluded from the IPPS (also
referred to as ‘‘non-subsection (d)
hospitals’’). Specifically, we added
§ 412.2 (c)(5) and revised § 413.40(c) to
provide that a hospital is considered the
sole operator of an entity if the hospital
has exclusive responsibility for
conducting or overseeing the entity’s
routine operations, regardless of
whether the hospital also has
policymaking authority over the entity.
In addition, we stated that ambulance
services are excluded from
preadmission services subject to the
payment window and defined ‘‘services
related to the admission’’ as those
nondiagnostic services that are
furnished in connection with the
principal diagnosis that requires the
beneficiary to be admitted as an
inpatient.
Section 1886(a)(4) of the Act was
further amended by section 110 of the
Social Security Amendments of 1994
(Pub. L. 103–432, enacted on October
31, 1994). That provision revised the
payment window for hospitals that are
excluded from the IPPS to include only
those services furnished by the hospital
or an entity wholly owned or operated
by the hospital during the 1 day (not 3
days) prior to a patient’s hospital
inpatient admission. In a September 1,
1995 final rule (60 FR 45840), we
revised § 413.40(c)(2) of the regulations
to provide for the 1-day payment
window for hospitals and hospital units
excluded from the IPPS. The hospitals
and hospital units excluded from the
IPPS and affected by this policy are
psychiatric hospitals and units,
inpatient rehabilitation hospitals and
units, long-term care hospitals (LTCHs),
children’s hospitals, and cancer
hospitals. CMS also noted that the term
‘‘day’’ refers to the entire calendar day
immediately preceding the date of
admission, not the 24-hour time period
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that immediately precedes the hour of
admission.
On February 11, 1998, we published
a final rule (63 FR 6864) that responded
to public comments received on the
January 12, 1994 interim final rule with
comment period. In that final rule, CMS
stated again that ambulance services are
excluded from the payment window
provision and also stated that chronic
maintenance renal dialysis are
excluded, as reflected in
§§ 412.2(c)(5)(iii) and §§ 413.40(c)(2)(iii)
of the regulations. We also clarified in
that final rule that the payment window
applies to outpatient services that are
otherwise billable under Part B and does
not apply to nonhospital services that
are generally covered under Part A
(such as home health, skilled nursing
facility, and hospice). In addition, we
further clarified the terms ‘‘admissionrelated’’ and ‘‘wholly owned or
operated.’’
In an April 2006 update to the
Medicare Claims Processing Manual
(Pub. 100–4), Chapter 3, section 40.3
(Change Request 4089, Transmittal 714),
we revised the manual instructions to
clarify that the 3-day (or 1-day) payment
window policy also applies to
outpatient services provided on the date
of a beneficiary’s admission, consistent
with Medicare’s longstanding
administrative policy for treating
preadmission outpatient services as
inpatient. We also clarified that critical
access hospitals (CAHs) are not subject
to the 3-day (nor 1-day) payment
window.
3. Requirements of Section 102 of Public
Law 111–192
Section 102(a)(1) of Public Law 111–
192 added a provision to section
1886(a)(4) of the Act to specify that the
term ‘‘other services related to the
admission’’ includes ‘‘all services that
are not diagnostic services (other than
ambulance and maintenance renal
dialysis services) for which payment
may be made under this title [Title
XVIII] that are provided by a hospital (or
an entity wholly owned or wholly
operated by the hospital) to a patient—
(A) on the date of the patient’s inpatient
admission; or (B) during the 3 days (or,
in the case of a hospital that is not a
subsection (d) hospital, during the 1
day) immediately preceding the date of
admission unless the hospital
demonstrates (in a form and manner,
and at a time, specified by the Secretary)
that such services are not related (as
determined by the Secretary) to such
admission.’’
Section 102(b) specifies that the
amendments made by section 102(a) of
the law apply ‘‘to services furnished on
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50347
or after the date of the enactment’’ (that
is, June 25, 2010).
The law makes no changes to the
billing of ‘‘diagnostic services’’ furnished
during this period, which are included
in the ‘‘operating costs of inpatient
hospital services’’ pursuant to section
1886(a)(4) of the Act (which we discuss
in our regulations and in section
40.3(B), Chapter 3, of the Medicare
Claims Processing Manual). All
diagnostic services provided to a
Medicare beneficiary by a hospital (or
an entity wholly owned or operated by
the hospital) on the date of the
beneficiary’s inpatient admission and
during the 3 calendar days (1 calendar
day for a nonsubsection (d) hospital)
immediately preceding the date of
admission would continue to be
required to be included on the bill for
the inpatient stay.
Section 102(c) of Public Law 111–192
also prohibits Medicare from reopening
a claim, adjusting a claim, or making
payments pursuant to any request for
payment under Title 18, submitted by
an entity (including a hospital or an
entity wholly owned or operated by the
hospital), for services (as described in
section 102(c)(2) of Pub. L. 111–192), for
purposes of treating, as unrelated to a
patient’s inpatient admission, services
provided during the 3 days (or, in the
case of a hospital that is not a
subsection (d) hospital, during the
1 day) immediately preceding the date
of the patient’s inpatient admission.
Services described in section 102(c)(2)
of Public Law 111–192 are other
services related to the admission which
were previously included on a claim or
request for payment submitted under
part A of Title XVIII for which a
reopening, adjustment, or request for
payment under part B of Title XVIII,
was not submitted prior to June 25, 2010
for purposes of treating, as unrelated to
a patient’s inpatient admission.
4. Application of the Provisions of
Section 102 of Public Law 111–192
In accordance with section 1886(a)(4)
of the Act, outpatient nondiagnostic
services that are related to an inpatient
admission must be bundled with the
billing for the inpatient stay. An
outpatient service is related to the
admission if it is clinically associated
with the reason for a patient’s inpatient
admission. In accordance with section
102 of Public Law 111–192, for
outpatient services furnished on or after
June 25, 2010, all nondiagnostic
services, other than ambulance and
maintenance renal dialysis services,
provided by the hospital (or an entity
wholly owned or wholly operated by
the hospital) on the date of a
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beneficiary’s inpatient admission are
deemed related to the admission and,
therefore, must be billed with the
inpatient stay. In addition, outpatient
nondiagnostic services, other than
ambulance and maintenance renal
dialysis services, provided by the
hospital (or an entity wholly owned or
wholly operated by the hospital) on the
first, second, and third calendar days
(first calendar day for nonsubsection (d)
hospitals) preceding the date of a
beneficiary’s admission are deemed
related to the admission and, therefore,
must be billed with the inpatient stay,
unless the hospital attests to certain
nondiagnostic services as unrelated to
the hospital claim (that is, the
preadmission services are clinically
distinct or independent from the reason
for the beneficiary’s admission).
Outpatient nondiagnostic services
provided during the applicable payment
window that are unrelated to the
admission, and are covered by Medicare
Part B, should be separately billed to
Medicare Part B.
We intend to establish a process for
hospitals to attest to nondiagnostic
services as being unrelated to the
hospital claim when a hospital submits
an outpatient claim. As part of the
process, hospitals would be required to
maintain documentation in the
beneficiary’s medical record to support
their claim that the outpatient
nondiagnostic services are unrelated to
the beneficiary’s inpatient admission.
We note that hospitals have experience
with making similar attestations on the
outpatient or inpatient claim. For
example, under Medicare’s current
policy, when a patient is discharged or
transferred from an acute care
prospective payment system (PPS)
hospital, and is readmitted to the same
acute care PPS hospital on the same day
for symptoms related to the prior stay,
the second stay is bundled into payment
for the first stay and not separately paid.
However, when a patient is discharged
or transferred from an acute care PPS
hospital and is readmitted to the same
acute care PPS hospital on the same day
for symptoms unrelated to the prior
stay, hospitals can place condition code
(CC) B4 on the inpatient claim that
contains an admission date equal to the
prior admissions discharge date that
would allow the second stay to be paid
separately. If the condition code is not
included on the claim for a same day
readmission, edits will bundle the claim
for the second admission into the first
one and Medicare will only pay for one
inpatient discharge. (We refer readers to
section 40.2.5, Chapter 3 of the
Medicare Claims Processing Manual and
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the FY 2003 IPPS final rule (68 FR
45404–06) for further details of
Medicare’s policy on this issue.) We
plan to develop a similar process using
a condition code, modifier, or some
other indicator for the 3-day (1-day)
payment window.
In accordance with the requirements
of section 1886(a)(4) of the Act, as
amended by section 102(a) of Public
Law 111–192, we are modifying the
Medicare regulations at § 412.2 by
revising paragraph (c)(5) and adding a
new paragraph (c)(5)(iv) to specify that
all nondiagnostic services provided on
or after June 25, 2010, other than
ambulance and maintenance renal
dialysis services, provided by a
subsection (d) hospital (or by an entity
wholly owned or operated by the
subsection (d) hospital) on the date of a
beneficiary’s inpatient admission are
deemed related to and, therefore, part of
the beneficiary’s inpatient stay. In
addition, outpatient nondiagnostic
services provided on the first, second,
and third calendar day prior to
admission by a subsection (d) hospital
are also deemed related to and,
therefore, part of the beneficiary’s
inpatient stay, unless a hospital attests
that specific nondiagnostic services are
clinically unrelated to the inpatient
admission (that is, the preadmission
services are distinct or independent
from the admission) when the hospital
submits an outpatient claim.
For nonsubsection (d) hospitals, in
accordance with section 1886(a)(4) of
the Act, the payment window is 1 day.
Therefore, in this interim final rule with
comment period, we are amending
§ 413.40 by revising paragraph (c)(2) and
(c)(2)(iii) and adding a new paragraph
(c)(2)(iv) to provide that all
nondiagnostic services provided on or
after June 25, 2010 (other than
ambulance and maintenance renal
dialysis services) that are provided on
the date of a beneficiary’s admission by
a nonsubsection (d) hospital (or by an
entity wholly owned or operated by the
nonsubsection (d) hospital) are deemed
related to and, thus, part of the
beneficiary’s inpatient stay at that
nonsubsection (d) hospital. In addition,
nondiagnostic services provided by a
nonsubsection (d) hospital (or by an
entity wholly owned or operated by the
nonsubsection (d) hospital) during the
1 calendar day immediately preceding
the date of admission to that
nonsubsection (d) hospital are deemed
related to and, thus, part of the inpatient
stay, unless the hospital attests that
specific nondiagnostic services are
clinically unrelated to the inpatient
admission when the hospital submits an
outpatient claim.
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In this interim final rule with
comment period, we also are codifying
the same statutory requirements of the
payment window for IPFs, LTCHs, and
IRFs by adding a new § 412.405
applicable to payments to IPFs for
treating preadmission services as
inpatient operating costs under the IPF
prospective payment system, a new
§ 412.540 applicable to payments to
LTCHs for treating preadmission
services as inpatient operating costs
under the LTCH prospective payment
system, and a new paragraph (f)
(existing paragraph (f) is redesignated as
paragraph (g)) to § 412.604 to be
applicable to payments to IRFs for
treating preadmission services as
inpatient operating costs under the IRF
PPS.
In addition, we are making a technical
correction to our existing regulation at
§ 412.521(b)(1), which sets forth our
policy under the LTCH PPS for what
constitutes payment in full to providers
for covered operating costs for inpatient
services. This is a conforming change
that is necessary to recognize the
addition of § 412.540 described
previously. Consequently, we are
amending the cross-reference at
§ 412.521(b) to read instead
‘‘§ 412.2(c)(1) through (c)(4) of this Part
and § 412.540.’’ This correction results
in an accurate description of the policy
under the LTCH PPS for determining
Medicare payment in full for inpatient
operating costs.
Section 102(c) of Public Law 111–192
also prohibits Medicare from reopening
a claim, adjusting a claim, or making
payments pursuant to any request for
payment under Title XVIII, submitted
by an entity (including a hospital or an
entity wholly owned or operated by the
hospital), for services (as described
under section 102(c)(2) of Pub. L. 111–
192) for purposes of treating, as
unrelated to a patient’s inpatient
admission, services provided during the
3 days (or, in the case of a hospital that
is not a subsection (d) hospital, during
the 1 day) immediately preceding the
date of the patient’s inpatient
admission. Services described in section
102(c)(2) of Public Law 111–192 are
other services related to the admission
which were previously included on a
claim or request for payment submitted
under Part A of Title XVIII for which a
reopening, adjustment, or request for
payment under Part B of Title XVIII,
was not submitted prior to June 25, 2010
for purposes of treating, as unrelated to
a patient’s inpatient admission.
For example, if a beneficiary
presented with chest pain at the
emergency department of a subsection
(d) hospital on June 1, 2010, was
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retained for observation until admitted
as an inpatient on June 3, 2010 (with a
principal diagnosis of myocardial
infarction), was released from the
hospital on June 7, 2010, and the
hospital billed Medicare Part A on June
10, 2010, for the beneficiary’s entire stay
(bundling all of the outpatient charges
and procedures on the inpatient stay
bill), Medicare will make no payment to
the hospital for any Part A adjustment
claims submitted on or after June 25,
2010, to remove unrelated outpatient
nondiagnostic services, nor for any new
Part B claims submitted on or after June
25, 2010, to separately bill Medicare for
unrelated outpatient nondiagnostic
services, that the hospital had
previously included on its June 10, 2010
bill for services furnished to the
beneficiary.
In the near future, we also expect to
update the instructions in the Medicare
Claims Processing Manual, Chapter 3,
section 40.3, to conform to the
requirements of section 102 of Public
Law 111–192. Even before the final
regulations, instructions, and process
for attesting to certain services as being
unrelated to an admission are in place,
hospitals are required by law to comply
with the requirements of section 102 of
Public Law 111–192. That is, hospitals
must include on a Medicare claim for a
beneficiary’s inpatient stay the
diagnoses, procedures, and charges for
all outpatient preadmission diagnostic
services and all outpatient preadmission
nondiagnostic services that meet the
requirements of section 1886(a)(4) of the
Act, as amended by section 102 of
Public Law 111–192. If a hospital
believes that outpatient nondiagnostic
services provided during the first,
second, and third calendar days (first
calendar day for a nonsubsection (d)
hospital) preceding the date of a
beneficiary’s admission are unrelated to
the inpatient admission, the hospital
may separately bill for the service to
Medicare Part B, provided that the
hospital can document, and maintain
such documentation as part of the
beneficiary’s medical record to support
its belief, that the service is unrelated to
the admission. Such separately billed
outpatient preadmission services may
be subject to subsequent CMS review.
5. Waiver of Notice of Proposed
Rulemaking
In section IV.M. of this document, we
are implementing section 102 of Pub. L.
111–192, which addresses Medicare
payment for outpatient services
provided prior to a Medicare
beneficiary’s inpatient admission,
through an interim final rule with
comment period. We ordinarily publish
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a notice of proposed rulemaking in the
Federal Register to provide for public
comment before the provisions of a rule
take effect, in accordance with section
553(b) of the Administrative Procedure
Act (APA) and section 1871 of the Act.
This process may be waived, however,
if an agency finds good cause that a
notice and comment procedure is
impracticable, unnecessary, or contrary
to the public interest. In such cases, the
agency must incorporate a statement of
this finding and its reasons in the rule,
or explain that the agency is
promulgating interpretive rules, general
statements of policy, or rules of agency
procedure or practice outside the scope
of notice and comment rulemaking.
We believe that there is good cause to
implement the requirements of section
102 of Public Law 111–192 through an
interim final rule with comment period.
Notice and comment rulemaking would
be unnecessary and contrary to the
public interest in this case. The
provisions of section 102 are selfimplementing; we are conforming our
regulations to specific statutory
requirements contained in that section
or that directly result from those
statutory requirements and informing
the public of the procedures and
practices the agency will follow to
ensure compliance with those statutory
provisions. Moreover, section 102 of
Public Law 111–192 was effective on
June 25, 2010, and it is imperative that
the regulatory provisions be set forth as
soon as possible to deliver the guidance
necessary for providers to comply with
requirements that are already in place.
In addition, the requirements of
section 102 of Public Law 111–192 may
be implemented as an interim final rule
with comment period because they fall
under the exception to notice and
comment rulemaking contained in
section 1871(b)(1)(B) of the Act. Section
1871(b)(1)(B) of the Act provides that
the Secretary is not required to issue a
notice of proposed rulemaking before
issuing a final rule if ‘‘a statute
establishes a specific deadline for the
implementation of a provision and the
deadline is less than 150 days after the
date of the enactment of the statute in
which the deadline is contained.’’
Section 102 of Public Law 111–192 was
effective on the date of enactment,
thereby meeting this requirement.
Section 553(d) of the APA and section
1871(e)(1)(B)(i) of the Act ordinarily
require that a regulation be effective no
earlier than 30 days after publication.
Under section 553(d)(3), this
requirement can be waived for good
cause, and under section
1871(e)(1)(B)(ii) of the Act, this
requirement can be waived if necessary
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50349
to comply with statutory requirements,
or if a delay is contrary to the public
interest. As noted above, section 102 of
Public Law 111–192 is required by
statute to be in effect on the date of
enactment. For the reasons identified
above for waiving notice and comment
procedures under the APA and the Act,
we find good cause to waive the 30-day
delay in effective date that would
otherwise apply.
In addition, 5 U.S.C. 801 generally
requires that agencies submit major
rules to the Congress 60 days before the
rules are scheduled to become effective.
This delay does not apply, however,
when there has been a finding of good
cause for waiver of prior notice and
comment as set forth above.
6. Collection of Information
Requirements
This document does not impose any
new 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.
7. Response to Public Comments
Because of the large number of public
comments we normally receive on
Federal Register documents, we are not
able to acknowledge or respond to them
individually. We will consider all
public comments we receive by the date
and time specified in the DATES section
of this preamble, and, when we proceed
with a subsequent document, we will
respond to the comments in the
preamble of that document.
8. Regulatory Impact Analysis
We have examined the impacts of this
final rule as required by Executive
Order 12866 (September 1993,
Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, the Unfunded Mandates Reform
Act of 1995 (Pub. L. 104–4), Executive
Order 13132 on Federalism, and the
Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs
agencies to assess all costs and benefits
of available regulatory alternatives and,
if regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). A regulatory impact
analysis (RIA) must be prepared for
major rules with economically
significant effects ($100 million or more
in any 1 year).
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Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules and Regulations
As discussed earlier in this interim
final rule with comment period, section
1886(a)(4) of the Act defines the
operating costs of inpatient hospital
services to include diagnostic services
(including clinical diagnostic laboratory
tests) or other services related to the
admission (as defined by the Secretary)
furnished by the hospital (or by an
entity that is wholly owned or wholly
operated by the hospital) to the patient
during the 3 days (or, in the case of a
hospital that is not a subsection (d)
hospital, during the 1 day) prior to the
date of the patient’s admission to the
hospital. This policy is generally known
as the ‘‘3-day payment window.’’ Section
102(a)(1) of Public Law 111–192,
enacted June 25, 2010, added a
provision to section 1886(a)(4) of the
Act to specify that the term ‘‘other
services related to the admission’’
includes ‘‘all services that are not
diagnostic services (other than
ambulance and maintenance renal
dialysis services) for which payment
may be made under this title [Title
XVIII] that are provided by a hospital (or
an entity wholly owned or wholly
operated by the hospital) to a patient (A)
on the date of the patient’s inpatient
admission; or (B) during the 3 days (or,
in the case of a hospital that is not a
subsection (d) hospital, during the
1 day) immediately preceding the date
of admission unless the hospital
demonstrates (in a form and manner,
and at a time, specified by the Secretary)
that such services are not related (as
determined by the Secretary) to such
admission.’’ Section 102(b) specifies that
the amendments made by section 102(a)
of Public Law 111–192 apply ‘‘to
services furnished on or after the date of
the enactment’’ (that is, June 25, 2010).
The law makes no changes to the
existing policy regarding billing of
‘‘diagnostic services’’ furnished during
this period, which are included in the
‘‘operating costs of inpatient hospital
services’’ pursuant to section 1886(a)(4)
(which we discuss in our regulations
and in section 40.3(B), Chapter 3, of the
MCPM). All diagnostic services
provided to a Medicare beneficiary by a
hospital (or an entity wholly owned or
operated by the hospital) on the date of
the beneficiary’s inpatient admission
and during the 3 calendar days
(1 calendar day for a nonsubsection (d)
hospital) immediately preceding the
date of admission would continue to be
required to be included on the bill for
the inpatient stay.
Section 102(c) of Public Law 111–192
also prohibits Medicare from reopening
a claim, adjusting a claim, or making
payments pursuant to any request for
payment under Title 18, submitted by
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an entity (including a hospital or an
entity wholly owned or operated by the
hospital), for services (as described in
section 102(c)(2) of Public Law 111–
192), for purposes of treating, as
unrelated to a patient’s inpatient
admission, services provided during the
3 days (or, in the case of a hospital that
is not a subsection (d) hospital, during
the 1 day) immediately preceding the
date of the patient’s inpatient
admission. Services described in section
102(c)(2) of Public Law 111–192 are
other services related to the admission
which were previously included on a
claim or request for payment submitted
under part A of Title 18 for which a
reopening, adjustment, or request for
payment under part B of Title 18, was
not submitted prior to June 25, 2010 for
purposes of treating the services as
unrelated to a patient’s inpatient
admission.
We note that, in a final rule published
on February 11, 1998 (63 FR 6864), we
had defined ‘‘other services’’ as being
‘‘related to the admission’’ only when
there was an exact match (for all 5
digits, if applicable) between the
principal (or primary) ICD–9–CM
diagnosis codes assigned for both the
preadmission services (provided by the
admitting hospital or by an entity that
is wholly owned or operated by the
admitting hospital) and the inpatient
stay. If hospitals, prior to the June 25,
2010 effective date of section 102 of
Public Law 111–192, were applying the
definition of ‘‘related’’ as adopted in that
final rule, we estimate that the impact
of the provisions of section 102 of
Public Law 111–192, for FY 2011,
would be a savings of approximately
$2.6 billion to Medicare Part B, and the
impact on Medicare Part A would be
negligible. In addition, we estimate that
the impact on beneficiaries would be a
savings of about $0.5 billion for FY
2011. However, we were informed by
many hospitals, Medicare contractors,
and others in the hospital community
that the policy established in 1998 was
generally unknown to hospitals and that
the policy being enacted under section
102(a) is more consistent with hospitals’
longstanding billing practices. The
hospitals and others asserted that, for
the most part, hospitals have been
treating virtually all outpatient services
furnished to a patient during the
payment window as admission-related
and bundling the services onto the Part
A claim for the patient’s inpatient stay,
particularly when a patient is admitted
as an inpatient directly from an
outpatient department of the hospital,
such as the emergency department. If
this assertion is correct, then the impact
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of the provisions of section 102 of
Public Law 111–192 for FY 2011 on the
Medicare program and its beneficiaries
would be negligible.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis for any proposed or
final rule that may have a significant
impact on the operations of a substantial
number of small rural hospitals. This
analysis must conform to the provisions
of section 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 and LTCH PPS, we continue
to classify these hospitals as urban
hospitals. We believe that this rule will
not have a significant impact on small
rural hospitals. Accordingly, the
Secretary certifies that this interim final
rule with comment period would not
have a significant economic impact on
the operations of a substantial number
of small rural 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. That threshold
level is currently approximately $133
million. This interim final rule with
comment period would not mandate
any requirements for State, local, or
tribal governments, nor would it affect
private sector costs.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
Because this interim final rule with
comment period does not impose any
costs on State or local government, the
requirements of Executive Order 13132
are not applicable.
In accordance with the provisions of
Executive Order 12866, this interim
final rule with comment period was
reviewed by the Office of Management
and Budget.
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N. Changes in the Inpatient Hospital
Market Basket Update
Below we discuss the adjustments to
the FY 2010 and FY 2011 market basket
as required by the Affordable Care Act
and our incorporation of the statutory
provisions in the Medicare regulations.
In this final rule, we are not addressing
the provisions of section 3401 of the
Affordable Care Act that provide for a
productivity adjustment for FY 2012
and subsequent fiscal years. This
statutory change will be addressed in
future rulemaking.
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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 equal to
the rate-of-increase in the hospital
market basket for IPPS hospitals in all
areas, subject to the hospital submitting
quality data 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
quality 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, in the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule, we finalized an applicable
percentage increase equal to 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 of the
Affordable Care Act amended section
1886(b)(3)(B)(i) of the Act. As amended,
section 1886(b)(3)(B)(i) sets the FY 2010
applicable percentage increase for IPPS
hospitals equal to the rate-of-increase in
the hospital market basket for IPPS
hospitals in all areas minus a 0.25
percentage point, subject to the hospital
submitting quality data 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,
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the update is equal to the market basket
percentage increase minus 0.25
percentage point less an additional 2.0
percentage points. Section 3401(a)(4) of
the Affordable Care Act further states
that these amendments may result in the
applicable percentage increase being
less than zero. Although these
amendments modify the applicable
percentage increase applicable to the FY
2010 rates under the IPPS, section
3401(p) of the Affordable Care Act states
that the amendments do 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, the rate 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.
In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR
30922), we proposed to revise the
regulations at 42 CFR 412.64(d) to
reflect current law. Specifically, in
accordance with section 1886(b)(3)(B)(i)
of the Act as amended by sections
3401(a) and 10319(a) of the Affordable
Care Act, we proposed to revise
§ 412.64(d) to state that, for the first half
of FY 2010 (that is, discharges on or
after October 1, 2009 through March 30,
2010), the applicable percentage change
equals the market basket index for IPPS
hospitals (which is defined under
§ 413.40(a)) 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 points for hospitals that fail
to submit quality data in accordance
with our rules. As noted above, 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. In addition, in
the supplemental proposed rule, we
proposed to revise § 412.64(d) to state
that, for the second half of FY 2010
(discharges on or after April 1, 2010
through September 30, 2010), in
accordance with section 3401(a) of the
Affordable Care Act, the applicable
percentage change 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, we
proposed to specify that the market
basket index for IPPS hospitals is
reduced by an additional 2.0 percentage
points (which is in addition to the 0.25
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50351
percentage point reduction required by
section 1886(b)(3)(B)(i) of the Act as
amended by section 3401(a) of the
Affordable Care Act and as further
amended by section 10319(a) of that
Act). Based on IHS Global Insight, Inc.’s
second quarter 2009 forecast of the FY
2010 market basket increase, the FY
2010 applicable percentage change that
applies to rates for inpatient hospital
operating costs under the IPPS for
discharges occurring in the second half
of FY 2010 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-ofincrease of 1.85 percent minus 2.0
percentage points). We received one
public comment which we respond to
below on our proposal to revise
§ 412.64(d) to reflect current law.
However, due to the statutory
requirement, in this final rule, we are
adopting as final, without modification,
the proposed changes to § 412.64(d).
Section 1886(b)(3)(B)(iv) of the Act
provides that the applicable percentage
increase applicable to the hospitalspecific 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 Act sets the update factor for SCHs
and MDHs equal to the update factor for
all 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) made by
section 3401(a) of the Affordable Care
Act. 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 are 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
are based on an update 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. In the FY 2011 IPPS/LTCH
PPS supplemental proposed rule, we
proposed to revise §§ 412.73(c)(15),
412.75(d), 412.77(e), 412.78(e), and
412.79(d) to reflect current law. We did
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not receive any public comments on this
proposal. Therefore, in this final rule,
we are adopting as final, without
modification, the proposed changes to
§§ 412.73(c)(15), 412.75(d), 412.77(e),
412.78(e), and 412.79(d).
2. FY 2011 Inpatient Hospital Update
As with the FY 2010 applicable
percentage increase, sections 3401(a)
and 10319(a) of the Affordable Care Act
amended section 1886(b)(3)(B)(i) of the
Act to provide that the FY 2011
applicable percentage increase for IPPS
hospitals equals the rate-of-increase in
the hospital market basket for IPPS
hospitals in all areas reduced by 0.25
percentage point, subject to the hospital
submitting quality data 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 a 0.25
percentage point less an additional 2.0
percentage points. Section 3401(a)(4) of
the Affordable Care Act further states
that this amendment may result in the
applicable percentage increase being
less than zero.
In Appendix B of the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24321),
we announced that due to the timing of
the passage of the Affordable Care Act,
we were unable to address those
provisions in the proposed rule. In that
proposed rule, consistent with current
law, based on IHS Global Insight, Inc.’s
first quarter 2010 forecast, with
historical data through the 2009 fourth
quarter, of the FY 2011 IPPS market
basket increase, we estimated that the
FY 2011 update to the operating
standardized amount would be 2.4
percent (that is, the current estimate of
the market basket rate-of-increase) for
hospitals in all areas, provided the
hospital submits quality data in
accordance with our rules. For hospitals
that do not submit quality data, we
estimated that the update to the
operating standardized amount would
be 0.4 percent (that is, the current
estimate of the market basket rate-ofincrease minus 2.0 percentage points).
In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR
30923), we stated that, consistent with
the amendments to section
1886(b)(3)(B)(i) of the Act made by
section 3401 of the Affordable Care Act,
for FY 2011 we are required to reduce
the hospital market basket update by a
0.25 percentage point. Therefore, based
on IHS Global Insight, Inc.’s first quarter
2010 forecast of the FY 2011 market
basket increase, the estimated update to
the FY 2011 operating standardized
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amount was 2.15 percent (that is, the FY
2011 estimate of the market basket rateof-increase of 2.4 percent minus 0.25
percentage point) 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 estimated update to the
operating standardized amount is 0.15
percent (that is, the adjusted FY 2011
estimate of the market basket rate-ofincrease of 2.15 percent minus 2.0
percentage points). Since publication of
the FY 2011 IPPS/LTCH PPS
supplemental proposed rule, our
estimate of the market basket for FY
2011 has been updated based on more
recently available data. Therefore, based
on IHS Global Insight, Inc.’s second
quarter 2010 forecast of the FY 2011
market basket increase, the update to
the FY 2011 operating standardized
amount is 2.35 percent (that is, the FY
2011 estimate of the market basket rateof-increase of 2.6 percent minus 0.25
percentage point) 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 update to the operating
standardized amount is 0.35 percent
(that is, the adjusted FY 2011 market
basket rate-of-increase of 2.35 percent
minus 2.0 percentage points). In the FY
2011 IPPS/LTCH PPS supplemental
proposed rule, we proposed to revise
§ 412.64(d) to reflect the provisions of
section 3401(a) of the Affordable Care
Act for FY 2011.
Comment: Some commenters opposed
the reduction to the market basket by
0.25 percentage point for updating the
operating standardized amounts for FY
2010 and FY 2011 that was mandated by
the Affordable Care Act. The
commenters believed that the reduction
of payments due to the reduction of the
market basket would cause serious harm
to hospitals.
Response: As stated above, the
reduction to the market basket for
updating the operating standardized
amounts is a statutory requirement that
must be implemented for FY 2010 and
FY 2011. Therefore, in this final rule,
we are adopting as final, without
modification, the proposed changes to
§ 412.64(d) to reflect current law.
Section 1886(b)(3)(B)(iv) of the Act
provides that the FY 2011 applicable
percentage increase in the hospitalspecific 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). Similar to
the FY 2010 applicable percentage
increase in the hospital-specific rates,
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because the Act requires us to apply to
the hospital-specific rates the update
factor for all other IPPS hospitals, the
update to the hospital-specific rates for
SCHs and MDHs is also subject to
section 1886(b)(3)(B)(i) of the Act, as
amended by the Affordable Care Act.
Accordingly, the update to the hospitalspecific rates applicable to SCHs and
MDHs for FY 2011 is 2.35 percent for
hospitals that submit quality data or
0.35 percent for hospitals that fail to
submit quality data. In the FY 2010
IPPS/LTCH PPS supplemental proposed
rule (75 FR 30923), we proposed to
revise §§ 412.73(c)(15), 412.75(d),
412.77(e), 412.78(e), and 412.79(d) to
incorporate these provisions.
We did not receive any public
comments on this proposal. Therefore,
we are adopting as final, without
modification, the proposed changes to
§§ 412.73(c)(15), 412.75(d), 412.77(e),
412.78(e), and 412.79(d).
3. FY 2010 and FY 2011 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 applicable
percentage increase applied 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(d)(4) of the Act. Section
1886(e)(4)(1) of the Act in turn directs
the Secretary to recommend an
appropriate change factor for Puerto
Rico hospitals 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
under the IPPS 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 made to section
1886(b)(3)(B)(i) of the Act by sections
3401(a) and 10319(a) of the Affordable
Care Act affected only the update factor
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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 consideration of
public comments. Therefore, as we
indicated in the FY 2011 IPPS/LTCH
PPS supplemental proposed rule, we do
not believe we have the authority to set
the FY 2010 update factor for the Puerto
Rico-specific operating standardized
amount for the second half of FY 2010
equal to the update factor applicable to
the national standardized amount or the
hospital-specific rates (that is the market
basket minus a 0.25 percentage point).
Accordingly, the FY 2010 update to the
Puerto Rico-specific operating
standardized amount is 2.1 percent (that
is, the FY 2010 estimate of the market
basket rate-of-increase) for the entire
FY 2010.
For FY 2011, consistent with our past
practice of applying the same update
factor to the Puerto Rico-specific
standardized amount as applied to the
national standardized amount, in the FY
2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30923), we
proposed to revise § 412.211(c) to set the
update factor for FY 2011 for the Puerto
Rico-specific operating standardized
amount equal to the update factor
applied to the national standardized
amount for all IPPS hospitals. We
proposed an update factor for the Puerto
Rico-specific standardized amount
equal to the FY 2011 IPPS operating
market basket rate-of-increase, which at
that time was estimated to be 2.4
percent minus 0.25 percentage points,
or 2.15 percent, for FY 2011. Since
publication of the FY 2011 IPPS/LTCH
PPS supplemental proposed rule, the
estimate of the market basket for FY
2011 has been updated based on more
recently available data. Therefore, based
on the current estimate of the IPPS
operating market basket rate-of-increase,
the update factor for the Puerto Ricospecific standardized amount is 2.6
percent minus 0.25 percentage point, or
2.35 percent, for FY 2011. We did not
receive any public comments on our
proposal to revise § 412.211(c) to set the
update factor for FY 2011 for the Puerto
Rico-specific operating standardized
amount equal to the update factor
applied to the national standardized
amount for all IPPS hospitals. Therefore,
we are adopting as final, without
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modification, the proposed changes to
§ 412.211(c).
V. Changes to the IPPS for CapitalRelated Costs
On March 23, 2010, the Patient
Protection and Affordable Care Act
(PPACA), Public Law 111–148 was
enacted. Following the 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. A
number of the provisions of Public Law
111–148, as amended by Public Law
111–152 (collectively referred to as the
Affordable Care Act) affected the IPPS
and the LTCH PPS and the providers
and suppliers addressed in this
proposed rule. However, due to the
timing of the passage of the legislation,
we were unable to address those
provisions in the FY 2011 IPPS/LTCH
PPS proposed rule issued in the Federal
Register on May 4, 2010 (75 FR 23852).
On June 2, 2010, we issued a
supplemental proposed rule to the FY
2011 IPPS/LTCH PPS proposed rule
(75 FR 30918) that included proposed
policies and payment rates to
implement certain provisions of the
Affordable Care Act.
Although the provisions of the
Affordable Care Act do not directly
affect the payment rates and policies for
the IPPS for capital-related costs, in
section II. of the Addendum of the June
2, 2010 supplemental proposed rule, we
proposed revised capital IPPS standard
Federal rates for FY 2011. This was
necessary because the wage index
changes required by the provisions of
the Affordable Care Act (discussed in
section III. of this preamble) affected the
proposed budget neutrality adjustment
factor for changes in DRG classifications
and weights and the geographic
adjustment factor (GAF) (that were
issued in the FY 2011 IPPS/LTCH PPS
proposed rule) because the GAF values
are derived from the wage index values
(§ 412.316(a)). In addition, certain
provisions of the Affordable Care Act
also necessitated a revision to the
proposed outlier payment adjustment
factor that were issued in the FY 2011
IPPS/LTCH PPS proposed rule because
a single set of thresholds is used to
identify outlier cases for both inpatient
operating and inpatient capital-related
payments (§ 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
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to the estimated proportion of capitalrelated outlier payments to total
inpatient capital-related PPS payments.
The revised proposed capital IPPS
standard Federal rates for FY 2011 were
discussed in section II. of the
Addendum to the June 2, 2010
supplemental proposed rule and are
discussed and being finalized in section
III. of the Addendum to this final rule.
A. Overview
Section 1886(g) of the Act requires the
Secretary to pay for the capital-related
costs of inpatient acute hospital services
‘‘in accordance with a prospective
payment system established by the
Secretary.’’ Under the statute, the
Secretary has broad authority in
establishing and implementing the IPPS
for acute care hospital inpatient capitalrelated costs. We initially implemented
the IPPS for capital-related costs in the
Federal fiscal year (FY) 1992 IPPS final
rule (56 FR 43358), in which we
established a 10-year transition period
to change the payment methodology for
Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective
methodology (based fully on the Federal
rate).
FY 2001 was the last year of the
10-year transition period established to
phase in the IPPS for hospital inpatient
capital-related costs. For cost reporting
periods beginning in FY 2002, capital
IPPS payments are based solely on the
Federal rate for almost all acute care
hospitals (other than hospitals receiving
certain exception payments and certain
new hospitals). (We refer readers to the
FY 2002 IPPS final rule (66 FR 39910
through 39914) for additional
information on the methodology used to
determine capital IPPS payments to
hospitals both during and after the
transition period.) The basic
methodology for determining capital
prospective payments using the Federal
rate is set forth in § 412.312 of the
regulations. For the purpose of
calculating payments for each discharge,
currently the standard Federal rate is
adjusted as follows:
(Standard Federal Rate) × (DRG
Weight) × (Geographic Adjustment
Factor (GAF)) × (COLA for hospitals
located in Alaska and Hawaii) × (1 +
Capital DSH Adjustment Factor +
Capital IME Adjustment Factor, if
applicable).
B. Exception Payments
The regulations at § 412.348(f)
provide that a hospital may request an
additional payment if the hospital
incurs unanticipated capital
expenditures in excess of $5 million due
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to extraordinary circumstances beyond
the hospital’s control. This policy was
originally established for hospitals
during the 10-year transition period, but
as we discussed in the FY 2003 IPPS
final rule (67 FR 50102), we revised the
regulations at § 412.312 to specify that
payments for extraordinary
circumstances are also made for cost
reporting periods after the transition
period (that is, cost reporting periods
beginning on or after October 1, 2001).
Additional information on the exception
payment for extraordinary
circumstances in § 412.348(f) can be
found in the FY 2005 IPPS final rule (69
FR 49185 and 49186).
During the transition period, under
§§ 412.348(b) through (e), eligible
hospitals could receive regular
exception payments. These exception
payments guaranteed a hospital a
minimum payment percentage of its
Medicare allowable capital-related costs
depending on the class of the hospital
(§ 412.348(c)), but were available only
during the 10-year transition period.
After the end of the transition period,
eligible hospitals can no longer receive
this exception payment. However, even
after the transition period, eligible
hospitals receive additional payments
under the special exceptions provisions
at § 412.348(g), which guarantees all
eligible hospitals a minimum payment
of 70 percent of its Medicare allowable
capital-related costs provided that
special exceptions payments do not
exceed 10 percent of total capital IPPS
payments. Special exceptions payments
may be made only for the 10 years from
the cost reporting year in which the
hospital completes its qualifying
project, and the hospital must have
completed the project no later than the
hospital’s cost reporting period
beginning before October 1, 2001. Thus,
an eligible hospital may receive special
exceptions payments for up to 10 years
beyond the end of the capital IPPS
transition period. Hospitals eligible for
special exceptions payments are
required to submit documentation to the
fiscal intermediary or MAC indicating
the completion date of their project. (For
more detailed information regarding the
special exceptions policy under
§ 412.348(g), we refer readers to the FY
2002 IPPS final rule (66 FR 39911
through 39914) and the FY 2003 IPPS
final rule (67 FR 50102).)
C. New Hospitals
Under the IPPS for capital-related
costs, § 412.300(b) of the regulations
defines a new hospital as a hospital that
has operated (under current or previous
ownership) for less than 2 years. For
example, the following hospitals are not
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considered new hospitals: (1) A hospital
that builds new or replacement facilities
at the same or another location, even if
coincidental with a change of
ownership, a change in management, or
a lease arrangement; (2) a hospital that
closes and subsequently reopens; (3) a
hospital that has been in operation for
more than 2 years but has participated
in the Medicare program for less than 2
years; and (4) a hospital that changes its
status from a hospital that is excluded
from the IPPS to a hospital that is
subject to the capital IPPS. For more
detailed information, we refer readers to
the FY 1992 IPPS final rule (56 FR
43418). During the 10-year transition
period, a new hospital was exempt from
the capital IPPS for its first 2 years of
operation and was paid 85 percent of its
reasonable costs during that period.
Originally, this provision was effective
only through the transition period and,
therefore, ended with cost reporting
periods beginning in FY 2002. Because,
as discussed in the FY 2003 IPPS final
rule (67 FR 50101), we believe that
special protection to new hospitals is
also appropriate even after the transition
period, we revised the regulations at
§ 412.304(c)(2) to provide that, for cost
reporting periods beginning on or after
October 1, 2002, a new hospital (defined
under § 412.300(b)) is paid 85 percent of
its Medicare allowable capital-related
costs through its first 2 years of
operation, unless the new hospital
elects to receive full prospective
payment based on 100 percent of the
Federal rate. (We refer readers to the FY
2003 IPPS final rule (67 FR 50101
through 50102) for a detailed discussion
of the special payment provisions for
new hospitals under the capital IPPS
after the 10-year transition period.)
D. Hospitals Located in Puerto Rico
Section 412.374 of the regulations
provides for the use of a blended
payment amount for prospective
payments for capital-related costs to
hospitals located in Puerto Rico.
Accordingly, under the capital IPPS, we
compute a separate payment rate
specific to Puerto Rico hospitals using
the same methodology used to compute
the national Federal rate for capitalrelated costs. In general, hospitals
located in Puerto Rico are paid a blend
of the applicable capital IPPS Puerto
Rico rate and the applicable capital IPPS
Federal rate.
Prior to FY 1998, hospitals in Puerto
Rico were paid a blended capital IPPS
rate that consisted of 75 percent of the
capital IPPS Puerto Rico specific rate
and 25 percent of the capital IPPS
Federal rate. However, effective October
1, 1997 (FY 1998), in conjunction with
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the change to the operating IPPS blend
percentage for hospitals located in
Puerto Rico required by section 4406 of
Public Law 105–33, we revised the
methodology for computing capital IPPS
payments to hospitals in Puerto Rico to
be based on a blend of 50 percent of the
capital IPPS Puerto Rico rate and 50
percent of the capital IPPS Federal rate.
Similarly, in conjunction with the
change in operating IPPS payments to
hospitals located in Puerto Rico for FY
2005 required by section 504 of Public
Law 108–173, we again revised the
methodology for computing capital IPPS
payments to hospitals located in Puerto
Rico to be based on a blend of 25
percent of the capital IPPS Puerto Rico
rate and 75 percent of the capital IPPS
Federal rate effective for discharges
occurring on or after October 1, 2004.
E. Changes for FY 2011: MS–DRG
Documentation and Coding Adjustment
1. Background on the Prospective MS–
DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
In the FY 2008 IPPS final rule with
comment period (72 FR 47175 through
47186), we adopted the MS–DRG
patient classification system for the
IPPS, effective October 1, 2007, to better
recognize patient severity of illness in
Medicare payment rates. Adoption of
the MS–DRGs resulted in the expansion
of the number of DRGs from 538 in FY
2007 to 745 in FY 2008. (Currently,
there are 746 MS–DRGs, including one
additional MS–DRG created in FY 2009.
For FY 2011, there are 747 DRGs with
the finalization of our proposal in this
final rule to delete one MS–DRG and to
create two new MS–DRGs.) By
increasing the number of DRGs and
more fully taking into account patient
severity of illness in Medicare payment
rates, the MS–DRGs encourage hospitals
to change their documentation and
coding of patient diagnoses. In that
same final rule with comment period
(72 FR 47183), we indicated that we
believe the adoption of the MS–DRGs
had the potential to lead to increases in
aggregate payments without a
corresponding increase in actual patient
severity of illness due to the incentives
for changes in documentation and
coding. Accordingly, we established
adjustments to both the national
operating standardized amount and the
national capital Federal rate to eliminate
the estimated effect of changes in
documentation and coding resulting
from the adoption of the MS–DRGs that
do not reflect real changes in case-mix.
Specifically, we established prospective
documentation and coding adjustments
of ¥1.2 percent for FY 2008, ¥1.8
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percent for FY 2009, and ¥1.8 percent
for FY 2010. However, to comply with
section 7(a) of Public Law 110–90,
enacted on September 29, 2007, in a
final rule published in the Federal
Register on November 27, 2007 (72 FR
66886 through 66888), we modified the
documentation and coding adjustment
for FY 2008 to ¥0.6 percent, and
consequently revised the FY 2008 IPPS
operating and capital payment rates,
factors, and thresholds accordingly,
with these revisions effective October 1,
2007.
For FY 2009, section 7(a) of Public
Law 110–90 required a documentation
and coding adjustment of ¥0.9 percent
instead of the ¥1.8 percent adjustment
established in the FY 2008 IPPS final
rule with comment period. As discussed
in the FY 2008 IPPS final rule with
comment period (72 FR 48447 and
48733 through 48774), we applied a
documentation and coding adjustment
of 7¥0.9 percent to the FY 2009 IPPS
national standardized amounts and the
capital Federal rate. The documentation
and coding adjustments established in
the FY 2009 IPPS final rule, as amended
by Pub. L. 110–90, are cumulative. As
a result, the ¥0.9 percent
documentation and coding adjustment
in FY 2009 was in addition to the ¥0.6
percent adjustment in FY 2008, yielding
a combined effect of ¥1.5 percent. (For
additional details on the development
and implementation of the
documentation and coding adjustments
for FY 2008 and FY 2009, we refer
readers to section II.D. of this preamble
and the following rules published in the
Federal Register: August 22, 2007 (72
FR 47175 through 47186 and 47431
through 47432); November 27, 2007 (72
FR 66886 through 66888); and August
19, 2008 (73 FR 48447 through 48450
and 48773 through 48775).)
2. Retrospective Evaluation of FY 2008
Claims Data
In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule, we presented the
results of a retrospective evaluation of
the FY 2008 data for claims paid
through December 2008. Based on this
evaluation, our actuaries determined
that implementation of the MS–DRG
system resulted in a 2.5 percent change
due to documentation and coding that
did not reflect real changes in case-mix
for discharges occurring during FY 2008
(74 FR 24092 through 24101). We also
sought public comment on our
methodology and analysis and the
proposed ¥1.9 percent prospective
adjustment to address the effect of
documentation and coding changes
unrelated to changes in real case-mix in
FY 2008 (that is, the estimated ¥2.5
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percent documentation and coding
effect for FY 2008 minus the ¥0.6
percent documentation and coding
adjustment that was applied to the
national capital Federal rate for FY
2008). In addition, we sought public
comment on addressing in the FY 2011
rulemaking cycle any differences
between the increase in FY 2009 casemix due to documentation and coding
changes that do not reflect real changes
in case-mix for discharges occurring
during FY 2009 and the ¥0.9 percent
prospective documentation and coding
adjustment applied in determining the
FY 2009 capital Federal rate established
in the FY 2009 IPPS final rule. However,
after consideration of the public
comments received on the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule,
consistent with the application of the
documentation and coding adjustment
to the operating IPPS standardized
amounts, we determined that it would
be appropriate to postpone the adoption
of any additional documentation and
coding adjustments to the capital IPPS
rates until a full analysis of FY 2009
case-mix changes could be completed.
We stated that although we only
proposed to make a ¥1.9 percent
adjustment to account for the portion of
the estimated 2.5 percent change in FY
2008 case-mix due to documentation
and coding changes that exceeds the
¥0.6 percent prospective
documentation and coding adjustment
applied to the FY 2008 capital Federal
rate (that is, ¥2.5 percent minus ¥0.6
percent = ¥1.9 percent), our then
current estimate of the MS–DRG
documentation and coding effect for FY
2009 was 2.3 percent (that is, the 4.8
percent total increase minus the 2.5
percent increase from FY 2008). We
indicated that if the estimated
documentation and coding effect
determined based on a full analysis of
FY 2009 claims data is more or less than
our then current estimates, it would
change the anticipated cumulative
adjustments that we then estimated we
would have to make for FY 2008 and FY
2009 combined. We indicated that, in
future rulemaking, we would consider
applying a prospective documentation
and coding adjustment to the capital
IPPS rates based on a complete analysis
of FY 2008 and FY 2009 claims data (74
FR 43926 through 43928).
3. Retrospective Analysis of FY 2009
Claims Data
For the FY 2011 IPPS/LTCH PPS
proposed rule, we performed a thorough
retrospective evaluation of the most
recent available claims data, and the
results of this evaluation were used by
our actuaries to determine any
necessary payment adjustments beyond
the cumulative ¥1.5 percent adjustment
that has already been applied to the
national capital Federal rate to ensure
budget neutrality for the
implementation of MS–DRGs (75 FR
24014). Specifically, as discussed in
greater detail in section II.D.5. of the
preamble of the proposed rule and this
final rule, we performed a retrospective
evaluation of the FY 2009 claims data
updated through December 2009 using
the same analysis methodology as we
did for FY 2008 claims in the FY 2010
IPPS/RY 2010 LTCH PPS proposed and
final rules. Based on this evaluation, our
actuaries determined that the
implementation of the MS–DRG system
resulted in a 5.4 percent change in casemix due to documentation and coding
that did not reflect real changes in casemix for discharges occurring during FY
2009. We also noted our intent to
update our analysis with FY 2009 data
on claims paid through March 2009 (sic)
for this FY 2011 IPPS/LTCH PPS final
rule. (We note that the March 2009
update date for claims paid data in the
proposed rule should have been March
2010.) As intended, we have updated
our analysis with FY 2009 data on
claims paid through March 2010 in this
FY 2011 IPPS/LTCH PPS final rule.
For this final rule, applying the same
analysis methodology as we did for the
proposed rule to an FY 2009 claims data
updated through March 2010 verified
the 5.4 percent change in case-mix due
to documentation and coding that did
not reflect real changes in case-mix for
discharges occurring during FY 2009.
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24014),
the 5.4 percent estimate of the
cumulative effect of changes in
documentation and coding under the
MS–DRG system that did not reflect real
changes in case-mix for FYs 2008 and
2009 exceeds the cumulative ¥1.5
percent prospective documentation and
coding adjustment that has already been
applied to the national capital Federal
rate by 3.9 percentage points (5.4
percent minus 1.5 percent). We
indicated that an additional cumulative
adjustment of ¥3.9 percent to the
national capital Federal rate would be
necessary to eliminate the full effect of
the documentation and coding changes
due to the adoption of the MS–DRGs on
future payments.
4. Prospective MS–DRG Documentation
and Coding Adjustment to the National
Capital Federal Rate for FY 2011 and
Subsequent Years
We continue to believe that it is
appropriate to make adjustments to the
capital IPPS rates to eliminate the effect
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of any documentation and coding
changes as a result of the
implementation of the MS–DRGs. These
adjustments are intended to ensure that
future annual aggregate IPPS payments
are the same as payments that otherwise
would have been made had the
prospective adjustments for
documentation and coding applied in
FY 2008 and FY 2009 accurately
reflected the change due to
documentation and coding that
occurred in those years. As noted in
section V.A. of this preamble, under
section 1886(g) of the Act, the Secretary
has broad authority in establishing and
implementing the IPPS for acute care
hospital inpatient capital-related costs
(that is, the capital IPPS). We have
consistently stated since the initial
implementation of the MS–DRG system
that we do not believe it is appropriate
for Medicare expenditures under the
capital IPPS to increase due to MS–DRG
related changes in documentation and
coding. Accordingly, we believe that it
is appropriate under the Secretary’s
broad authority under section 1886(g) of
the Act, in conjunction with section
1886(d)(3)(A)(vi) of the Act and section
7(b) of Public Law 110–90, to make
adjustments to the capital Federal rate
to eliminate the full effect of the
documentation and coding changes
resulting from the adoption of the
MS–DRGs. We believe that this is
appropriate because, in absence of such
adjustments, the effect of the
documentation and coding changes
resulting from the adoption of the
MS–DRGs results in inappropriately
high capital IPPS payments because that
portion of the increase in aggregate
payments is not due to an increase in
patient severity of illness (and costs).
As we discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24014)
and as noted above, based on our
retrospective evaluation of the FY 2009
claims, our actuaries’ determined that
implementation of the MS–DRG system
resulted in a 5.4 percent change in casemix due to documentation and coding
that did not reflect real changes in casemix for discharges occurring during FY
2009. The estimated 5.4 percent
cumulative documentation and coding
effect for FYs 2008 and 2009 exceeds
the cumulative 1.5 percent prospective
documentation and coding reduction
that has already been applied to the
national capital Federal rate. In that
same proposed rule, we also discussed
that for FY 2011, we proposed a
retrospective adjustment of ¥2.9
percent under the authority of section
7(b)(1)(B) of Public Law 110–90. Under
that proposal, although an additional
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cumulative adjustment of ¥3.9 percent
would be necessary to meet the
requirements of section 7(b)(1)(A) of
Public Law 110–90 to make an
appropriate prospective adjustment to
the IPPS operating average standardized
amounts in order to eliminate the full
effect of the documentation and coding
changes on future payments, we did not
proposed a prospective adjustment to
the IPPS operating average standardized
amounts under section 7(b)(1)(A) of
Public Law 110–90 for FY 2011.
Given the increase in IPPS payments
that we have determined is due to
documentation and coding (discussed
above in this section), in the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24014), we explained that we believe it
is necessary and appropriate under the
Secretary’s broad authority under
section 1886(g) of the Act, consistent
with section 1886(d)(3)(A)(vi) of the Act
and section 7(b) of Public Law 110–90,
to make further adjustments to the
capital Federal rate to eliminate the full
effect of the documentation and coding
changes resulting from the adoption of
the MS–DRGs. We also discussed that it
is often our practice to phase in rate
adjustments over more than one year in
order to moderate the effect on rates in
any one year. Therefore, consistent with
transitional policies we have adopted in
many similar cases and in order to
maintain consistency as far as possible
with the adjustments that we proposed
to apply to IPPS hospitals, under the
Secretary’s broad authority under
section 1886(g) of the Act, in
conjunction with section
1886(d)(3)(A)(vi) of the Act and section
7(b) of Public Law 110–90, we proposed
an adjustment of ¥2.9 percent in FY
2011 to the national capital Federal rate
to account for a portion of the
cumulative effect of the estimated
changes in documentation and coding
changes under the MS–DRG system
through FY 2009 that did not reflect real
changes in case-mix. We stated that we
believe that this proposed adjustment
would allow us to moderate the effects
to hospitals in one year and to maintain
equity between hospitals paid on the
basis of different prospective rates.
Furthermore, consistent with our
proposal for the hospital-specific rates
under the operating IPPS, we proposed
to leave that proposed ¥2.9 percent
adjustment in place for subsequent
fiscal years to account for the effect of
that documentation and coding change
in subsequent years. We also sought
public comment on the proposed ¥2.9
percent prospective adjustment to the
national capital Federal rate for FY 2011
and our plans to address in future
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rulemaking cycles the cumulative effect
of changes in case-mix due to changes
in documentation and coding that do
not reflect real changes in case-mix
based on an analysis of occurring during
FY 2008 and FY 2009, noting that our
current estimates of the remaining
adjustment to the national capital
Federal rate is ¥1.0 percent (that is, the
estimated cumulative effect of
documentation and coding changes
under the MS–DRG system for FYs 2008
and 2009 of ¥5.4 percent minus the
existing ¥0.6 percent and ¥0.9
adjustments and the proposed FY 2011
of ¥2.9 percent adjustment).
Comment: Several commenters
opposed the proposed ¥2.9 percent
prospective adjustment to the national
capital Federal rate for FY 2011 to
partially account for the cumulative
effect of the estimated changes in
documentation and coding changes
under the MS–DRG system that did not
reflect real changes in case-mix. Most of
these commenters cited the potentially
severe negative fiscal impact that would
be experienced by providers if the
proposed documentation and coding
adjustment were to be implemented.
Response: We understand
commenters’ concern about the possible
financial disruption that may be caused
by the proposed documentation and
coding improvement payment
adjustment. However, as discussed in
the FY 2011 IPPS/LTCH PPS proposed
rule and reiterated above, given the
increase in IPPS payments that we have
determined is due to changes in
documentation and coding under the
MS–DRG system, we believe it is
necessary and appropriate under the
Secretary’s broad authority under
section 1886(g) of the Act, consistent
with section 1886(d)(3)(A)(vi) of the Act
and section 7(b) of Public Law 110–90,
to make further adjustments to the
capital Federal rate to eliminate the full
effect of the documentation and coding
changes resulting from the adoption of
the MS–DRGs which have resulted in an
inappropriate increase in IPPS
payments. These payment adjustments
are necessary to correct these past
overpayments due to increases in
aggregate payments that do not reflect
real change in case-mix severity of
illness levels, but instead are caused
solely by documentation and coding
improvements. In addition, we
proposed a transitional implementation
of the full adjustment to provide
hospitals with time to adjust to future
payment differences and to moderate
the effect of this adjustment in any
given year.
Comment: In its public comments,
MedPAC discussed that ‘‘the shift to
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MS–DRGs was taken to improve the
distribution of payments, not change the
aggregate level of payments.’’ MedPAC
performed an independent analysis of
claims data to determine the effect of
documentation and coding in FYs 2008
and 2009. MedPAC stated, ‘‘In our
judgment, CMS’s analytic methods are
valid. Using similar methods, our
analysis of Medicare hospital inpatient
claims for 2007–2009 confirms all of
CMS’s findings.’’ Consistent with our
analysis, MedPAC’s analysis
demonstrated that the cumulative effect
of documentation and coding in FY
2009 is 5.4 percent and they recommend
for both the operating and capital IPPS
that ‘‘overpayments should be stopped
[and] all overpayment should be
recovered.’’ In making that
recommendation, MedPAC directed
CMS to its March 2010 Report to
Congress where it recommended that
Congress change the law to require CMS
to recover all overpayments with
interest. MedPAC noted that this would
shift CMS’ focus to the prevention of
future overpayments in the operating
and capital IPPS. Such a shift might be
implemented as prospective
adjustments and would result in slower
accumulation of future overpayments. A
detailed summary of MedPAC’s
comment on our proposed
documentation and coding adjustments
for FY 2011 for all hospitals paid under
the operating and capital IPPS and our
full response can be found in section
II.D.7. of the preamble of this final rule.
Response: We appreciate MedPAC’s
independent validation and support of
our methodology, which corroborates
our estimate of the cumulative
documentation and coding effect net of
measurement error of 5.4 percent.
Furthermore, we agree with MedPAC’s
conclusions on the overall financial
implications of implementing our
proposed ¥2.9 percent payment rate
adjustment. We share MedPAC’s
concerns about delaying the prevention
of future overpayments in both the
capital and operating IPPS, but we
appreciate its acknowledgment of CMS’
discretion on this policy and of the
potential financial disruption from
implementation of the full prospective
reduction in FY 2011 (¥3.9 percent).
As discussed in section II.D.7. of the
preamble of this final rule, after
considering the public comments we
received, as well as MedPAC’s detailed
analysis, we believe that the
methodology we have employed to
determine the cumulative effect of
documentation and coding changes is
sound. Therefore, we have decided to
finalize our proposal to make an
adjustment to the national capital
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Federal rate of ¥2.9 percent, which
represents a portion of the remaining
prospective adjustment of 3.9 percent
(5.4 percent documentation and coding
effect minus the 1.5 percent adjustment
already applied the national capital
Federal rate). The adjustment we are
finalizing in this final rule is consistent
with the magnitude of the retrospective
adjustment of ¥2.9 percent that we are
applying under section 7(b)(1)(B) of
Public Law 110–90 to the operating
IPPS standardized amount for FY 2011
(discussed in section II.D.7. of this
preamble). As discussed above, while
we are sympathetic to the concerns
expressed by many commenters about
the potential adverse financial effects on
hospitals, given the increase in IPPS
payments that we have determined is
due to changes in documentation and
coding under the MS–DRG system, as
we proposed, we believe it is necessary
and appropriate to make further
adjustments to the capital Federal rate
to eliminate the full effect of the
documentation and coding changes
resulting from the adoption of the MS–
DRGs. We also believe the proposed
transitional approach is a reasonable
and fair way to accomplish the
elimination of the full effect of these
documentation and coding changes
while moderating the fiscal impact on
hospitals.
Therefore, in this final rule, under the
Secretary’s broad authority under
section 1886(g) of the Act, consistent
with section 1886(d)(3)(A)(vi) of the Act
and section 7(b) of Public Law 110–90,
as we proposed, in FY 2011 we are
implementing an adjustment to the
capital Federal rate of ¥2.9 percent to
account for the effect of the estimated
changes in documentation and coding
changes under the MS–DRG system that
occurred in FYs 2008 and 2009 that did
not reflect real changes in case-mix.
Furthermore, consistent with our
proposal and the policy we are adopting
in this final rule for the hospital-specific
rates under the operating IPPS, we will
leave the ¥2.9 percent adjustment in
place for subsequent fiscal years to
account for the effect of that
documentation and coding change in
subsequent years. As discussed in the
FY 2011 IPPS/LTCH PPS proposed rule
and reiterated above, we intend to
address in future rulemaking cycles the
remaining estimated adjustment to the
national capital Federal rate of ¥1.0
percent (that is, the estimated effect of
documentation and coding changes
under the MS–DRG system of ¥5.4
percent minus the existing ¥0.6 percent
and ¥0.9 percent adjustments and the
¥2.9 percent adjustment for FY 2011).
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50357
5. Documentation and Coding
Adjustment to the Puerto Rico-Specific
Capital Rate
Under § 412.74, Puerto Rico hospitals
are currently paid based on 75 percent
of the national capital Federal rate and
25 percent of the Puerto Rico-specific
capital rate. In the FY 2009 IPPS final
rule (73 FR 48775), consistent with our
development of the FY 2009 Puerto
Rico-specific operating standardized
amount, we did not apply the additional
¥0.9 percent documentation and
coding adjustment (or the cumulative
¥1.5 percent adjustment) to the FY
2009 Puerto Rico-specific capital rate.
However, the statute gives broad
authority to the Secretary under section
1886(g) of the Act, with respect to the
development of and adjustments to a
capital PPS, and therefore we would not
be outside the authority of section
1886(g) of the Act in applying the
documentation and coding adjustment
to the Puerto Rico-specific portion of the
capital payment rate. To date, we had
not applied a documentation and coding
adjustment to the Puerto Rico-specific
capital rate because we have historically
made changes to the capital IPPS
consistent with those changes made to
the operating IPPS. We stated that we
may propose to apply such an
adjustment to the Puerto Rico capital
rates in the future.
As discussed in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43928), when we performed a
retrospective evaluation of the FY 2008
claims data of hospitals located in
Puerto Rico using the same
methodology discussed above, we found
that the change in case-mix due to
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2008
from hospitals located in Puerto Rico
was approximately 1.3 percent. Given
this case-mix increase due to changes in
documentation and coding under the
MS–DRGs, we had proposed to adjust
the Puerto Rico-specific capital rate by
¥1.3 percent in FY 2010 for the FY
2008 increase in case-mix due to
changes in documentation and coding
under the MS–DRGs. However, in that
same final rule, we postponed the
adoption of any documentation and
coding adjustments to the capital IPPS
rates until a full analysis of FY 2009
case-mix changes could be completed.
We indicated that any future
documentation and coding adjustment
to the capital Puerto Rico-specific IPPS
rates based on a complete analysis of FY
2008 and FY 2009 claims data for Puerto
Rico hospitals would be established
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through the notice and comment
rulemaking process.
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24015),
when we performed a retrospective
evaluation of the FY 2009 claims data
from the December 2009 update of the
MedPAR file of hospitals located in
Puerto Rico using the same
methodology to estimate documentation
and coding changes under IPPS for nonPuerto Rico hospitals, we found that the
change in case-mix due to
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FYs 2008
and 2009 from hospitals located in
Puerto Rico was approximately 2.4
percent. (As discussed in section
II.D.10.b. of this preamble, our updated
analysis of FY 2009 claims paid through
March 2010 using the same
methodology as the one used for the
proposed rule, shows that the change in
case-mix due to documentation and
coding that did not reflect real changes
in case-mix for discharges occurring
during FYs 2008 and 2009 from
hospitals located in Puerto Rico is
approximately 2.6 percent.) Given this
case-mix increase due to changes in
documentation and coding under the
MS–DRGs, consistent with our proposal
to adjust the FY 2011 capital Federal
rate (discussed above) and consistent
with our proposed adjustment to the FY
2011 Puerto Rico-specific standardized
amount discussed in section II.D.9. of
the preamble of that same proposed
rule, under the Secretary’s broad
authority under section 1886(g) of the
Act, we proposed to adjust the Puerto
Rico-specific capital rate by ¥2.4
percent in FY 2011 for the cumulative
increase in case-mix due to changes in
documentation and coding under the
MS–DRGs for FYs 2008 and 2009. In
addition, consistent with our other
proposals concerning prospective
MS–DRG documentation and coding
adjustments to the capital Federal rate
and operating IPPS standardized
amounts presented in this proposed
rule, we proposed to leave that
proposed ¥2.4 percent adjustment in
place for subsequent fiscal years in
order to ensure that changes in
documentation and coding resulting
from the adoption of the MS–DRGs do
not lead to an increase in aggregate
payments not reflective of an increase in
real case-mix.
In the FY 2011 IPPS/LTCH PPS
proposed rule, we sought public
comment on the proposed prospective
adjustment of ¥2.4 percent to Puerto
Rico-specific standardized amount and
the Puerto Rico-specific capital rate. We
noted our intent to update our analysis
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with FY 2009 data on ‘‘claims paid
through March 2009’’ (sic) for this FY
2011 IPPS/LTCH PPS final rule. (We
note that the March 2009 update date
for claims paid data in the proposed
rule should have been March 2010.) As
intended, we have updated our analysis
with FY 2009 data on claims paid
through March 2010 in this FY 2011
IPPS/LTCH PPS final rule, as discussed
below.
As described section II.D.10.b. of this
preamble, MedPAC responded to our
request for comments regarding the
level of adjustment for special categories
of hospitals, such as Puerto Rico
hospitals, by pointing out that these
hospitals have the same financial
incentives for documentation and
coding improvements and the same
ability to benefit from increased
payments that do not reflect real change
in case-mix. Therefore, MedPAC
recommended that ‘‘all IPPS hospitals
should be treated the same.’’ At the same
time, MedPAC also stateds that
‘‘delaying prevention of overpayments
* * * creates a problem because
overpayments will continue to
accumulate in 2010 and later years until
the effect of documentation and coding
improvement is fully offset in the
payment rates.’’
We agree with MedPAC that Puerto
Rico hospitals have had the same
financial incentives to improve
documentation and coding as other IPPS
hospitals. We further agree with
MedPAC that it is appropriate to focus
on minimizing the accumulation of
overpayments; we interpret this
statement to mean that MedPAC
recommends that CMS should move
forward as quickly as possible with
appropriate prospective adjustments.
We appreciate MedPAC’s guidance that
‘‘all hospitals be treated the same,’’ and
we agree that it is important to treat
various classes of hospitals that are
similarly situated with respect to their
ability to adjust their documentation
and coding changes consistently in our
payment policy determinations.
Therefore, consistent with the policy
we are implementing to adjust the FY
2011 capital Federal rate (discussed
above) and consistent with the
adjustment we are establishing in FY
2011 Puerto Rico-specific standardized
amount (discussed in section II.D.10.b.
of this preamble), under the Secretary’s
broad authority under section 1886(g) of
the Act, we are finalizing our proposal
to adjust the Puerto Rico-specific capital
rate in FY 2011 for the increase in casemix due to changes in documentation
and coding under the MS–DRGs through
FY 2009. As discussed in section
II.D.10.b. of this preamble and as noted
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above, our updated analysis of FY 2009
claims paid through March 2010 using
the same methodology as the one used
for the proposed rule, shows that the
change in case-mix due to
documentation and coding that did not
reflect real changes in case-mix for
discharges occurring during FY 2009
from hospitals located in Puerto Rico is
approximately 2.6 percent. Accordingly,
in this final rule, we are establishing an
adjustment of ¥2.6 percent to the
Puerto Rico-specific capital rate in FY
2011 to account for changes in case-mix
due to documentation and coding that
did not reflect real changes in case-mix.
As we proposed, we will leave this
¥2.6 percent adjustment in place for
subsequent fiscal years in order to
ensure that changes in documentation
and coding resulting from the adoption
of the MS–DRGs do not lead to an
increase in aggregate payments not
reflective of an increase in real casemix. We continue to believe that such
an adjustment is appropriate because, as
MedPAC noted, all hospitals have the
same financial incentives for
documentation and coding
improvements, and the same ability to
benefit from the resulting increase in
aggregate payments that do not reflect
real changes in case-mix.
As we proposed, the ¥2.6 percent
documentation and coding adjustment
that we are establishing in this final rule
applies to the Puerto Rico-specific
capital rate that accounts for 25 percent
of capital IPPS payments to hospitals
located in Puerto Rico, with the
remaining 75 percent based on the
national capital Federal rate, which is
being further adjusted for the effects of
documentation and coding as described
above. Consequently, the overall
reduction to the FY 2011 payment rates
for hospitals located in Puerto Rico to
account for documentation and coding
changes is slightly less than the
reduction for IPPS hospitals paid based
on 100 percent of the national capital
Federal rate. As discussed above, the
Puerto Rico-specific capital rate was not
adjusted for the cumulative effects of
documentation and coding changes in
FY 2008 or FY 2009 as is the case with
the national capital Federal rate.
F. Other Changes for FY 2011
The final annual update to the capital
IPPS national Federal and Puerto Ricospecific rates, as provided for at
§ 412.308(c), for FY 2011 is discussed in
section III. of the Addendum to this
final rule.
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VI. Changes for Hospitals Excluded
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A. Excluded Hospitals
Historically, hospitals and hospital
units excluded from the prospective
payment system received payment for
inpatient hospital services they
furnished on the basis of reasonable
costs, subject to a rate-of-increase
ceiling. A per discharge limit (the target
amount as defined in § 413.40(a)) was
set for each hospital or hospital unit
based on the hospital’s own cost
experience in its base year, and updated
annually by a rate-of-increase
percentage. The updated target amount
was multiplied by total Medicare
discharges during that period and
applied as an aggregate upper limit (the
ceiling as defined in § 413.40(a)) on total
inpatient operating costs for a hospital’s
cost reporting period. Prior to October 1,
1997, these payment provisions applied
consistently to all categories of excluded
providers, which included
rehabilitation hospitals and units (now
referred to as IRFs), psychiatric
hospitals and units (now referred to as
IPFs), LTCHs, children’s hospitals, and
cancer hospitals.
Payment to children’s hospitals and
cancer hospitals that are excluded from
the IPPS continues to be subject to the
rate-of-increase ceiling based on the
hospital’s own historical cost
experience. (We note that, in accordance
with § 403.752(a) of the regulations,
RNHCIs are also subject to the rate-ofincrease limits established under
§ 413.40 of the regulations.)
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24016), we
proposed that the rate-of-increase
percentage to be applied to the target
amount for cancer and children’s
hospitals and RNHCIs was the proposed
FY 2011 percentage increase in the IPPS
operating market basket. Beginning with
FY 2006, we have used the percentage
increase in the IPPS operating market
basket to update the target amounts for
children’s and cancer hospitals. As
explained in the FY 2006 IPPS final rule
(70 FR 47396 through 47398), with IRFs,
IPFs, and LTCHs being paid under their
own PPS, the remaining number of
providers being paid based on
reasonable cost subject to a ceiling (that
is, children’s and cancer hospitals and
RNHCIs) is too small and the cost report
data are too limited to be able to create
a market basket solely for these
hospitals. For FY 2011, we proposed to
continue to use the IPPS operating
market basket to update the target
amounts for children’s and cancer
hospitals and RNHCIs for the reasons
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discussed in the FY 2006 IPPS final
rule.
In the FY 2011 IPPS/LTCH PPS we
proposed to use the revised and rebased
FY 2006-based IPPS operating market
basket to update the target amounts for
children’s and cancer hospitals and
RNHCIs for FY 2011. Therefore, based
on IHS Global Insight, Inc.’s 2010 first
quarter forecast, with historical data
through the 2009 fourth quarter, we
estimated that the FY 2011 update to the
IPPS operating market basket would be
2.4 percent (that is, the estimate of the
market basket rate-of-increase).
Consistent with our historical
approach, we calculated the proposed
rate-of-increase in the IPPS operating
market basket for FY 2011 using the
most recent data available. However, we
proposed that if more recent data
became available for the final rule, we
would use them to calculate the IPPS
operating market basket update for FY
2011. Therefore, based on IHS Global
Insight’s 2010 second quarter forecast,
with historical data through the 2010
first quarter, the final IPPS operating
market basket update factor for FY 2011
is 2.6 percent. Moreover, consistent
with our proposal that the percentage
increase in the rate-of-increase limits for
cancer and children’s hospitals and
RNHCIs would be the percentage
increase in the FY 2011 IPPS operating
market basket, the FY 2011 rate-ofincrease percentage that is applied to
the FY 2010 target amounts in order to
calculate the final FY 2011 target
amounts for cancer and children’s
hospitals and RNHCIs is 2.6 percent, in
accordance with the applicable
regulations in 42 CFR 413.40.
We note that IRFs, IPFs, and LTCHs,
which were paid previously under the
reasonable cost methodology, now
receive payment under their own
prospective payment systems, in
accordance with changes made to the
statute. In general, the prospective
payment systems for IRFs, IPFs, and
LTCHs provided transition periods of
varying lengths during which time a
portion of the prospective payment was
based on cost-based reimbursement
rules under part 413. (However, certain
providers do not receive a transition
period or may elect to bypass the
transition period as applicable under 42
CFR part 412, subparts N, O, and P.) We
note that the various transition periods
provided for under the IRF PPS, the IPF
PPS, and the LTCH PPS have ended.
The IRF PPS, the IPF PPS, and the
LTCH PPS are updated annually. We
refer readers to section IV. of the
Addendum to this final rule for the
specific proposed update changes to the
Federal payment rates for LTCHs under
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50359
the LTCH PPS for FY 2011. The annual
updates for the IRF PPS and the IPF PPS
are issued by the agency in separate
Federal Register documents.
B. Critical Access Hospitals (CAHs)
1. Background
Section 1820 of the Act provides for
the establishment of Medicare Rural
Hospital Flexibility Programs (MRHFPs)
under which individual States may
designate certain facilities as critical
access hospitals (CAHs). Facilities that
are so designated and that meet the CAH
conditions of participation under 42
CFR part 485, subpart F, will be
certified as CAHs by CMS. Regulations
governing payments to CAHs for
services to Medicare beneficiaries are
located in 42 CFR part 413.
2. CAH Optional Method Election for
Payment of Outpatient Services
Section 1834(g) of the Act establishes
the payment rules for outpatient
services furnished by a CAH. Section
403(d) of Public Law 106–113 (BBRA)
amended section 1834(g) of the Act to
provide for two methods of payment for
outpatient services furnished by a CAH.
Specifically, section 1834(g)(1) of the
Act, as amended by Public Law 106–
113, provided that the amount of
payment for outpatient services
furnished by a CAH is equal to the
reasonable cost of providing such
services (unless the CAH makes an
election, under section 1834(g)(2) of the
Act). The physician or other practitioner
providing the professional service
receives payment under the Medicare
Physician Fee Schedule (MPFS). In the
alternative, the CAH may make an
election under section 1834(g)(2) of the
Act to receive amounts that are equal to
the ‘‘reasonable costs’’ of the CAH for
facility services, plus, with respect to
the professional services, the amount
otherwise paid for professional services
under Medicare, less the applicable
Medicare deductible and coinsurance
amount. The election made under
section 1834(g)(2) of the Act is
sometimes referred to as ‘‘method II’’ or
‘‘the optional method.’’ Throughout this
section of this preamble, we refer to this
election as the ‘‘optional method.’’
Section 202 of Public Law 106–554
(BIPA) amended section 1834(g)(2)(B) of
the Act to increase the payment for
professional services under the optional
method to 115 percent of the amount
otherwise paid for professional services
under Medicare. In addition, section
405(a)(1) of Pub. L. 108–173 (MMA)
amended section 1834(g)(l) of the Act by
inserting the phrase ‘‘equal to 101
percent of’’ before the phrase ‘‘the
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reasonable costs.’’ However, the MMA
made no changes to the amount of
reasonable cost payment under the
optional method at section 1834(g)(2)(A)
of the Act.
Accordingly, section 1834(g) of the
Act provides for two methods of
payment for outpatient CAH services.
Under the method specified at section
1834(g)(1) of the Act, facility services
are paid at 101 percent of reasonable
costs to the CAH through the Medicare
fiscal intermediary or the Medicare Part
A/B MAC, while payments for
physician and other professional
services are made to the physician or
other practitioner under the MPFS
through the Medicare carriers. Under
section 1834(g)(2) of the Act (the
optional method), a CAH submits bills
for both the facility and the professional
services to its Medicare fiscal
intermediary or its Medicare Part A/B
MAC. If a CAH chooses this optional
method for outpatient services, the
physician or other practitioner must
reassign his or her billing rights to the
CAH to bill the Medicare program for
those services. In accordance with
section 1834(g)(2) of the Act in effect
prior to implementation of section 3128
of the Affordable Care Act, under this
optional method, the CAH received
reasonable cost payment for its facility
costs and, with respect to the
professional services, 115 percent of the
amount otherwise paid for professional
services under Medicare. (We refer
readers to section VI.B.3. of this
preamble for a discussion of the policy
changes to payments for outpatient
facility services made by section 3128 of
the Affordable Care Act.)
The existing regulations at
§ 413.70(b)(3)(i)(A) require that if a CAH
wishes to elect the optional method,
that election must be made in writing,
made on an annual basis, and delivered
to the fiscal intermediary servicing the
CAH at least 30 days before the start of
the cost reporting period for which the
election is made. The regulations at
§ 413.70(b)(3)(i)(B) specify that once an
election is made for a cost reporting
period, that election remains in effect
for all of that period. Therefore, under
the existing regulations, a CAH that is
being paid under the optional method is
required to submit an election on an
annual basis if it wishes to continue to
be paid under the optional method for
a subsequent cost reporting period.
We have been informed that, in past
years, there have been instances where
some CAHs have submitted their
elections several days late, which has
caused these CAHs to lose their optional
method election for the entire cost
reporting year and has resulted in
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financial hardship for these providers.
Such untimely submission of the
optional method election may be due to
staffing turnovers at the CAH as well as
a change in fiscal intermediary or MAC
assignments because, in the past, some
CAHs received correspondence from
their fiscal intermediaries or MACs
reminding them to elect the optional
method on an annual basis. Due to the
significant consequences if a CAH fails
to make a timely election, in the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 24017), we proposed to amend the
regulations at § 413.70(b)(3)(i) to state
that, effective for CAH cost reporting
periods beginning on or after October 1,
2010, if a CAH has elected the optional
method for its most recent cost reporting
period beginning prior to October 1,
2010 or chooses to elect the optional
method for its upcoming cost reporting
period, that election will remain in
place until it is terminated.
We believe that removing the annual
election requirement will reduce any
perceived burden associated with the
election process and make it easier for
CAHs to maintain their election if they
experience administrative staffing
changes. If a CAH is being paid under
the traditional method and wishes to
elect the optional method, it must
submit its election in writing to its
servicing fiscal intermediary or MAC at
least 30 days prior to the first cost
reporting period for which the election
is effective. Once that initial election is
made, it will remain in place until it is
terminated.
We proposed to revise the regulations
to include a mechanism for CAHs that
are being paid under the optional
method to terminate that election.
Specifically, we proposed that if a CAH
is being paid under the optional method
and wishes to terminate that election, it
must submit its termination request to
the fiscal intermediary or MAC
servicing the CAH at least 30 days prior
to the start of the next cost reporting
period. Because the proposed effective
date for this provision was for cost
reporting periods beginning on or after
October 1, 2010, we acknowledged that
CAHs that have cost reporting periods
beginning in October 2010 or November
2010 may not have sufficient time to
terminate their optional method election
at least 30 days prior to the start of the
cost reporting period. Therefore, we
proposed that CAHs that have cost
reporting periods beginning in October
2010 or November 2010 and elected the
optional method in 2009 that wish to
terminate that election would have until
December 1, 2010, to terminate their
prior year election. The termination
would be effective for the entire FY
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2011 cost reporting period. Thus, if a
CAH with a cost reporting period
beginning in October 2010 or November
2010 terminates its optional method
election after the beginning of its cost
reporting period but before December 1,
2010, the fiscal intermediary or MAC
would be instructed to reprocess any
payments made under the optional
method for services provided during
that period, as efficiently as possible.
Section 1834(g)(2)(B) of the Act
provides that if a CAH elects the
optional method, it is not required that
each physician or other practitioner
providing professional services in the
CAH must reassign billing rights with
respect to the services. Rather, the
reassignment of billing rights is
physician/practitioner specific. For this
reason, the optional payment method
should not apply to the computation of
payments to the CAH for its facility
services in conjunction with services
furnished by physicians and
practitioners who have not reassigned
such billing rights. Accordingly, if a
physician or practitioner has not
reassigned his or her billing rights to the
CAH, the CAH will be paid for its
facility services at 101 percent of
reasonable cost, as specified at
§ 413.70(b)(2)(i) of the regulations. If a
CAH experiences changes in its
physician or practitioner staffing, there
may be a change in which physicians or
practitioners choose to reassign their
billing rights in order to permit the CAH
to bill for their professional services. In
order to ensure appropriate payments,
and specifically, in order to ensure that
there is no duplicate billing for a
physician’s or practitioner’s
professional services by the CAH to the
fiscal intermediary or MAC and by the
physician or practitioner providing the
service to the carrier, a CAH must
continue to notify its fiscal intermediary
or MAC when changes in reassignment
occur.
Comment: Many commenters
supported the proposal that, effective
for cost reporting periods beginning on
or after October 1, 2010, if a CAH has
elected the optional method for its most
recent cost reporting period beginning
prior to October 1, 2010, or chooses to
elect the optional method for its
upcoming cost reporting period, that
election will remain in place until it is
terminated. The commenters stated the
proposed change would reduce CAHs’
administrative burdens and ensure
continued access to payment under the
optional method. One commenter stated
its State has 77 CAHs and the proposed
change would help provide continued
access to the optional method. Another
commenter stated that most CAHs in its
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State have elected the optional method
and the proposed change would save
staff time and help prevent billing
errors. One commenter stated
approximately 72 out of 82 CAHs in its
State have elected the optional method
and the proposed change will help
eliminate an annual administrative
burden. Another commenter stated the
proposed change would help ensure
continued access to care in rural areas
of its State.
Response: We thank the commenters
for their support of the proposed
provision, which we are adopting as
final in this final rule.
Comment: One commenter stated that
because physician bills under the
traditional method (the method
specified at section 1834(g)(1) of the
Act) are paid by the carrier instead of by
the fiscal intermediary or the MAC, the
CAH should be required to inform the
carrier, in addition to the fiscal
intermediary or the MAC, of any billing
assignment changes.
Response: In the proposed rule, we
stated that in order to ensure there is no
duplicate billing and that appropriate
payments are made, a CAH must
continue to notify its fiscal intermediary
or MAC when changes in reassignment
occur. We agree with the commenter
that the carrier should be notified of any
billing reassignment changes. Therefore,
if a physician/practitioner reassignment
changes such that there is a change in
which physician/practitioner bills
would be paid by the carrier, in addition
to notifying the fiscal intermediary or
MAC, the CAH must also notify the
carrier. We believe this practice will
help ensure appropriate payments are
made to the CAH and the physician/
practitioner.
Comment: Several commenters
requested that CMS apply the same
policy as it proposed for the CAH
optional method election to hospitals
redesignated under section
1886(d)(8)(B) of the Act.
Response: We did not propose any
changes to the redesignation
requirements. Therefore, these requests
are not within the scope of this final
rule. We will consider these comments
as we develop future rulemaking.
Accordingly, after consideration of
the public comments we received, we
are adopting our proposal as final, as
follows: We are adopting as final, with
some technical revisions discussed
below, the proposed revision of
§ 413.70(b)(3)(i) to specify that for CAH
cost reporting periods beginning on or
after October 1, 2010, once a CAH elects
the optional method, including an
election made for its most recent cost
reporting period beginning prior to
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October 1, 2010, its election will remain
in place until it is terminated. That is,
CAHs will no longer be required to
make an annual election in order to
continue to be paid under the optional
method in a subsequent year. However,
we are making some technical revisions
to the proposed language of
§ 413.70(b)(3)(i)(A)(2) in order to state
more clearly that if a CAH did not elect
the optional method in its most recent
preceding cost reporting period and
chooses to be paid under the optional
method for a cost reporting period
beginning on or after October 1, 2010, it
must submit a request in writing to the
fiscal intermediary or MAC at least 30
days prior to the start of the cost
reporting period for which the election
is to be effective. Finally, we are
adopting as final our revision of the
regulations to specify that if a CAH
wishes to terminate its optional method
election, it must submit its termination
request to the fiscal intermediary or
MAC servicing the CAH at least 30 days
prior to the start of the next cost
reporting period. CAHs will have until
December 1, 2010, to terminate their
prior year election if they have cost
reporting periods beginning in October
2010 or November 2010, had elected the
optional method in 2009, and wish to
terminate that election in 2010. The
termination will be effective for the
entire FY 2011 cost reporting period.
We also are adopting as final the
conforming change to § 413.70
(b)(3)(i)(D).
3. Changes in Payments to CAHs Made
by the Affordable Care Act
As stated earlier in this preamble,
section 1834(g) of the Act establishes
the payment rules for outpatient
services furnished by a CAH. Section
403(d) of Public Law 106–113 (BBRA)
amended section 1834(g) of the Act to
provide for two methods of payment for
outpatient services furnished by a CAH.
Section 1834(g)(1) of the Act, as
amended by Public Law 106–113,
provided that the amount of payment
for outpatient services furnished by a
CAH is equal to the reasonable costs of
the CAH in providing such services.
Under the optional method, described
under section 1834(g)(2) of the Act, the
CAH may make an election to receive
amounts that are equal to ‘‘the
reasonable costs’’ of the CAH for facility
services plus, with respect to
professional services, the amount
otherwise paid for professional services
under Medicare, less the applicable
Medicare deductible and coinsurance
amount. Section 202 of Public Law
106–554 (BIPA) amended section
1834(g)(2)(B) of the Act to increase the
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payment for professional services under
the optional method to 115 percent of
the amount otherwise paid for
professional services under Medicare. In
addition, section 405(a)(1) of Public Law
108–173 (MMA) amended section
1834(g)(l) of the Act by inserting the
phrase ‘‘equal to 101 percent of’’ before
the phrase ‘‘the reasonable costs.’’
However, the MMA made no changes to
the amount of payment under the
optional method at section 1834(g)(2)(A)
of the Act.
Section 1834(l)(8), as added by
section 205 of Public Law 106–554,
establishes the payment methodology
for ambulance services furnished by a
CAH or by an entity that is owned and
operated by a CAH. This provision
states that payment is made based on
the reasonable costs incurred in
furnishing ambulance services if such
services are furnished by a CAH (as
defined in section 1861(mm)(1) of the
Act), or by an entity that is owned and
operated by a CAH, but only if the CAH
or entity is the only provider or supplier
of ambulance services that is located
within a 35-mile drive of such CAH.
Section 3128(a) of the Affordable Care
Act amended sections 1834(g)(2)(A) and
1834(l)(8) of the Act by inserting ‘‘101
percent of’’ before ‘‘the reasonable costs.’’
As such, section 3128(a) increases
payment for outpatient facility services
under the optional method and payment
for ambulance services furnished by a
CAH or an entity owned and operated
by a CAH, to 101 percent of reasonable
costs. Section 3128(b) of the Affordable
Care Act states that the amendments
made under section 3128(a) shall take
effect as if they were included in the
enactment of section 405(a) of Public
Law 108–173. Section 405(a) of Public
Law 108–173 provided that, in general,
inpatient, outpatient, and covered SNF
services provided by a CAH would be
reimbursed at 101 percent of reasonable
costs, and was applicable to payments
for services furnished during cost
reporting periods beginning on or after
January 1, 2004.
Because of the date of enactment of
the Affordable Care Act, we were unable
to include these provisions in the FY
2011 IPPS/LTCH PPS proposed rule.
Therefore, in a separate supplemental
proposed rule which appeared in the
Federal Register on June 2, 2010 (75 FR
30965), we included proposals to
implement the changes made by section
3128. The final policies discussed below
take into consideration public
comments that we received on the
supplemental proposed rule.
In order to implement section 3128 of
the Affordable Care Act, in the
supplemental proposed rule, we
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proposed to amend the regulations at
§ 413.70(b)(3)(ii)(A) to state that,
effective for cost reporting periods
beginning on or after January 1, 2004,
under the optional method, payment for
facility services will be made at 101
percent of reasonable costs.
Accordingly, regardless of whether a
physician or practitioner has reassigned
his or her billing rights to the CAH,
payment for CAH facility services
would be made at 101 percent of
reasonable costs. In addition, we
proposed to implement the change in
payment for ambulance services
provided by section 3128 of the
Affordable Care Act by amending the
regulations at § 413.70(b)(5)(i) to state
that, effective for cost reporting periods
beginning on or after January 1, 2004,
payment for ambulance services
furnished by a CAH or an entity that is
owned and operated by a CAH is 101
percent of the reasonable costs of the
CAH or the entity in furnishing those
services, but only if the CAH or the
entity is the only provider or supplier of
ambulance services located within a
35-mile drive of the CAH or the entity.
Comment: Several commenters
supported the proposed provisions
implementing section 3128 of the
Affordable Care Act. One commenter
stated that, in Iowa, there are 82 CAHs
and 72 of them have elected to be paid
under the optional method. The
commenter stated the proposed
provision will have a positive impact on
these small hospitals.
Another commenter disagreed with
CMS’ finalized policy in the FY 2010
IPPS/LTCH PPS final rule, which
reduced payment for CAH facility
services under the optional method to
100 percent of reasonable costs. The
commenter had requested CMS ‘‘* * *
to reference the MMA conference report
which clearly indicated that Congress
intended to set all CAH outpatient
reimbursement at 101 percent of
reasonable cost.’’ The commenter further
stated that, as part of the supplemental
proposed rule, ‘‘CMS proposed to restore
101 percent of cost-based
reimbursement for CAHs election
Method II billing, and is proposing to
extend this change retroactively to FFY
2010.’’
Response: We appreciate the
commenters’ support of the proposed
implementation of the provision to
increase payment for CAH outpatient
facility services paid under the optional
method and increase payment for CAH
ambulance services to 101 percent of
reasonable costs. In the response to the
commenter who stated we were
proposing to extend this change
retroactively to FY 2010, we note that
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we proposed to make this change in
payment to 101 percent of reasonable
costs effective for cost reporting periods
beginning on or after January 1, 2004, to
conform to the requirements of section
3128(b) of the Affordable Care Act.
After consideration of the public
comments we received, we are adopting
our proposed revisions to the
regulations at §§ 413.70(b)(3)(ii)(A) and
413.70(b)(5)(i) as final, without
modification. Accordingly, effective for
cost reporting periods beginning on or
after January 1, 2004, CAHs that are
paid under the optional method will be
paid based on 101 percent of reasonable
costs for outpatient facility services and
all CAHs will be paid based on 101
percent of reasonable cost for
ambulance services. We note that, as we
indicated in the proposed rule, we do
not believe these revisions will result in
additional payments to CAHs for prior
periods because we believe, in fact, that
CMS has paid CAHs for these services
at 101 percent of reasonable costs
during these prior periods.
4. Costs of Provider Taxes as Allowable
Costs for CAHs
a. Background and Statutory Basis
Currently, certain taxes assessed
against a provider may be allowable
costs under Medicare to the extent that
such taxes are related to the reasonable
and necessary cost of providing patient
care and represent costs actually
incurred. Reasonable cost
reimbursement is addressed in section
1861(v)(1)(A) of the Act. Section
1861(v)(1)(A) of the Act defines
‘‘reasonable cost,’’ in part, as the cost
actually incurred, excluding costs found
to be unnecessary in the efficient
delivery of needed health services and
are determined in accordance with
regulations establishing the method or
methods to be used and the items to be
included. Section 1861(v)(1)(A) of the
Act does not specifically address the
determination of reasonable costs, but
authorizes the Secretary to promulgate
regulations and principles to be applied
in determining reasonable costs.
We have issued regulations
implementing this provision of the Act,
including 42 CFR 413.9(a), which
provide that the determination of
reasonable cost ‘‘must be based on the
reasonable cost of services covered
under Medicare and related to the care
of beneficiaries.’’ In addition, § 413.9(c)
requires that the provision for payment
of reasonable cost of services is
intended to meet the actual costs
incurred in providing services.
Therefore, in accordance with the
statute, the regulations include two
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principles that help guide the
determination of which expenses may
be considered allowable reasonable
costs that can be paid under Medicare;
that is, such costs must be ‘‘related’’ to
the care of Medicare beneficiaries, and
such costs must actually be ‘‘incurred.’’
Consistent with these provisions, we
also have issued policy instructions in
the Provider Reimbursement Manual,
Part 1 (PRM–1) for determining
allowable reasonable costs under
Medicare. Specifically, section 2122 of
the PRM–1 sets forth Medicare policy
on determining when taxes levied on
providers are allowable costs and
provides a list of taxes that are
considered unallowable costs.
Specifically, section 2122.1 (General
Rule) of the PRM–1 states: ‘‘The general
rule is that taxes assessed against the
provider, in accordance with the levying
enactments of the several States and
lower levels of government and for
which the provider is liable for
payment, are allowable costs. Tax
expenses should not include fines and
penalties.’’ Section 2122.2 (Taxes Not
Allowable as Costs) of the PRM–1 lists
certain taxes that are levied on
providers that are not allowable costs.
The listed taxes are:
• Federal income and excess profit
taxes, including any interest or penalties
paid thereon (A).
• State or local income and excess
profit taxes (B).
• Taxes in connection with financing,
refinancing, or refunding operations,
such as taxes on the issuance of bonds,
property transfers, issuance or transfer
of stocks, etc. Generally, these costs are
either amortized over the life of the
securities or depreciated over the life of
the asset. However, they are not
recognized as tax expense. (C)
• Taxes from which exemptions are
available to the provider. (D)
• Special assessments on land which
represent capital improvements such as
sewers, water, and pavements should be
capitalized and depreciated over their
estimated useful lives. (E)
• Taxes on property which is not
used in the rendition of covered
services. (F)
• Taxes, such as sales taxes, levied
against the patient and collected and
remitted by the provider. (G)
• Self-employment (FICA) taxes
applicable to individual proprietors,
partners, members of a joint venture,
etc. (H)
b. Clarification of Payment Policy for
Provider Taxes
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24019), we stated
that we have learned that there is some
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confusion relating to the determination
of whether a tax is an allowable cost.
We believe that much of this confusion
has arisen because it may be possible to
read sections 2122.1 and 2122.2 of the
PRM–1 as permitting all taxes assessed
on a provider by a State that are not
specifically listed in section 2122.2 to
be treated as allowable costs. Section
2122 of the PRM–1 was last updated in
1979 when States typically raised
revenue only from income, sales, and
property taxes. The list in section
2212.2 is incomplete now, as it does not
reflect the variety of provider taxes
imposed by States. In addition, we are
concerned that, even if a particular tax
may be an allowable cost that is related
to the care of Medicare beneficiaries,
providers may not, in fact, ‘‘incur’’ the
entire amount of these assessed taxes.
For example, in accordance with the
Medicaid statute and regulations, some
States levy tax assessments on hospitals.
The assessed taxes may be paid by the
hospitals into a fund that includes all
taxes paid, all Federal matching monies,
and any penalties for nonpayment. The
State is then authorized to disburse
monies from the fund to the hospitals.
We believe that these types of
subsequent disbursements to providers
are associated with the assessed taxes
and may, in fact, offset some, if not all,
of the taxes originally paid by the
hospitals.
We believe that the treatment of these
types of payments on the Medicare cost
report should be analogous to the
adjustments described at § 413.98 of the
regulations. Specifically, § 413.98(d)
provides that the ‘‘true cost of the goods
or services is the net amount actually
paid for them.’’ Section 413.98
specifically addresses the purchase of
goods and services and reflects the
statutory mandate that a provider’s
allowable costs are the net expenses it
incurs for items and services. In
situations in which payments that are
associated with the assessed tax are
made to providers specifically to make
the provider whole or partly whole for
the tax expenses, Medicare should
similarly recognize only the net expense
incurred by the provider. Thus, while a
tax may be an allowable Medicare cost
in that it is related to beneficiary care,
the provider may only treat as a
reasonable cost the net tax expense; that
is, the tax paid by the provider, reduced
by payments the provider received that
are associated with the assessed tax. In
addition, we do not believe that
determinations made regarding whether
the structure of specific taxes and
subsequent reimbursements are
consistent with Medicaid ‘‘hold
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harmless’’ provisions necessarily require
the Medicare program to find that the
same tax is an allowable cost. The
Medicare statute and regulations set
forth a different standard that requires a
determination of how much of the
allowable tax expense is actually
‘‘incurred’’ by the provider.
Therefore, in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 24018), we
proposed to clarify our policy
concerning when provider taxes may be
considered allowable costs under
Medicare. As stated above, section 2122
of the PRM was last updated in 1979,
and it no longer reflects the variety of
provider taxes that may be imposed by
States. Although some of the more
recently enacted provider taxes may be
allowable costs, we were concerned that
some of these taxes may not be ‘‘related
to the care of beneficiaries’’ and that
some, if not all, of the costs of these
taxes might not be actually ‘‘incurred’’
by the providers. This payment policy
may not directly affect providers that
are paid under a Medicare prospective
payment system unless a cost-based
prospective payment system is rebased
on more current reported reasonable
costs. However, we stated that this
policy clarification could impact certain
providers that are paid on the basis of
their incurred reasonable costs, such as
CAHs. Therefore, we proposed to clarify
the policy set forth in sections 2122.1
and 2122.2 of the PRM–1 to reflect our
concerns set forth above regarding when
certain provider taxes may be allowable
costs under the Medicare program.
Comment: Commenters disagreed
with our statement that the provision in
the proposed rule was a clarification in
policy. They expressed concern that the
provision was a policy change that
could be applied retroactively and could
potentially have serious negative fiscal
impact. A number of commenters also
raised concern that the language in the
proposed rule did not clearly articulate
the revisions to the PRM and is vague
regarding when certain provider taxes
may be allowable. Specifically, the
commenters were concerned that
Medicare would not reimburse the cost
of these taxes. Specifically, the
commenters were concerned that the
payment of the net expense of a
provider tax, as reported on a CAH’s
Medicare cost report, would have a
negative financial impact on the CAH.
Response: We believe that this
provision, as articulated in the proposed
rule, is a clarification of our current,
longstanding policy which requires that
‘‘reasonable costs’’ claimed by providers
must be ‘‘actually incurred.’’ Currently,
CMS and its Medicare contractors apply
the longstanding reasonable cost
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principles at section 1861(v)(1)(A) of the
Act and at 42 CFR 413.9 of the
regulations to determine if a particular
expense is an allowable cost under
Medicare. One such principle, as
discussed above, is that a ‘‘reasonable
cost’’ must be ‘‘actually incurred.’’
We disagree that sections 2122.1 and
2122.2 of the PRM–1 take a contrary
position. The discussion of taxes and
allowable costs in the PRM–1 does not
specifically address the requirement
that costs must be ‘‘actually incurred.’’
However, the discussion of provider
taxes in the PRM–1 should be
considered in conjunction with the
reasonable costs requirements set forth
in the statute and regulations. To the
extent that providers considered the list
in section 2122.2 of the PRM–1 to
permit a facility from counting, as part
of its allowable costs, all but the listed
provider taxes, regardless of whether the
taxes listed were ‘‘actually incurred,’’ we
are now clarifying that this approach is
inconsistent with reasonable cost
principles.
We believe that it is consistent with
the current and longstanding principles
of cost reimbursement, as set forth in
the statute and regulations, to remind
both providers and our contractors, that
although a particular tax may be an
allowable cost, the amount of that tax
that providers may claim for reasonable
cost purposes, must reflect the amount
of these assessed taxes that are actually
incurred. Thus, in accordance with the
Medicare statute, regulations, and PRM
policies, Medicare contractors will
continue to apply the current reasonable
cost principles to determine if a
provider tax incurred is an allowable
cost and how much of that allowable
cost is actually incurred to determine
reimbursement.
As stated in the proposed rule, we
intended to address the potential
confusion that arises when providers
interpret sections of the PRM–1 to allow
taxes assessed against a provider that
are not specifically listed in section
2122.2, regardless of whether those
costs are actually incurred. We believe
that clarifying the PRM–1 to explain
that the list of taxes is only an example
of the enumerated taxes is consistent
with the current and longstanding
reasonable cost principles. Moreover, to
the extent that a particular tax might be
an allowable expense, it still must be
‘‘actually incurred.’’
This clarification will not have an
effect of disallowing any particular tax
but rather make clear that our Medicare
contractors will continue to make a
determination of whether a provider tax
is allowable, on a case-by-case basis,
using our current and longstanding
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reasonable cost principles. In addition,
the Medicare contractors will continue
to determine if an adjustment to the
amount of allowable provider taxes is
warranted to account for payments a
provider receives that are associated
with the assessed tax.
After consideration of the public
comments we received, we are adopting
our proposed clarification, as final,
without modification. We will modify
section 2122 of the PRM–1 to
specifically reference our current,
longstanding reasonable cost principles.
C. Report of Adjustment (Exceptions)
Payments
Section 4419(b) of Public Law 105–33
requires the Secretary to publish
annually in the Federal Register a report
describing the total amount of
adjustment payments made to excluded
hospitals and hospital units by reason of
section 1886(b)(4) of the Act, during the
previous fiscal year.
The process of requesting, adjusting,
and awarding an adjustment payment is
requested in order to have a completed
application. However, in an attempt to
provide interested parties with data on
the most recent adjustments for which
we do have data, we are publishing data
on adjustment payments that were
processed by the fiscal intermediary or
MAC or CMS during FY 2009.
The table below includes the most
recent data available from the fiscal
intermediaries or MACs and CMS on
adjustment payments that were
adjudicated during FY 2009. As
indicated above, the adjustments made
during FY 2009 only pertain to cost
reporting periods ending in years prior
to FY 2008. Total adjustment payments
given to excluded hospitals and hospital
units during FY 2009 are $7,824,339.
The table depicts for each class of
hospitals, in the aggregate, the number
of adjustment requests adjudicated, the
excess operating costs over the ceiling,
and the amount of the adjustment
payments.
likely to occur over a 2-year period or
longer. First, generally, an excluded
hospital or an excluded unit of a
hospital must file its cost report for a
fiscal year in accordance with
§ 413.24(f)(2). The fiscal intermediary or
MAC reviews the cost report and issues
a notice of program reimbursement
(NPR). Once the hospital receives the
NPR, if its operating costs are in excess
of the ceiling, the hospital or hospital
unit may file a request for an adjustment
payment. After the fiscal intermediary
or MAC receives the hospital’s or
hospital unit’s request in accordance
with applicable regulations, the fiscal
intermediary or MAC or CMS,
depending on the type of adjustment
requested, reviews the request and
determines if an adjustment payment is
warranted. This determination is
sometimes not made until more than 6
months after the date the request is filed
because there are times when the
applications are incomplete and
additional information must be
Class of hospital
Excess cost
over ceiling
Number
Adjustment
payments
Psychiatric ....................................................................................................................................
Children’s .....................................................................................................................................
Cancer .........................................................................................................................................
Religious Nonmedical Health Care Institution (RNHCI) ..............................................................
4
3
2
7
$2,878,357
1,414,635
12,949,901
1,570,555
$1,396,564
902,889
4,753,072
771,814
Total ......................................................................................................................................
........................
........................
7,824,339
VII. Changes to the Long-Term Care
Hospital Prospective Payment System
(LTCH PPS) for FY 2011
A. Background of the LTCH PPS
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1. Legislative and Regulatory Authority
Section 123 of the Medicare,
Medicaid, and SCHIP (State Children’s
Health Insurance Program) Balanced
Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106–113) as amended by
section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits
Improvement and Protection Act of
2000 (BIPA) (Pub. L. 106–554) provides
for payment for both the operating and
capital-related costs of hospital
inpatient stays in long-term care
hospitals (LTCHs) under Medicare Part
A based on prospectively set rates. The
Medicare prospective payment system
(PPS) for LTCHs applies to hospitals
that are described in section
1886(d)(1)(B)(iv) of the Social Security
Act (the Act), effective for cost reporting
periods beginning on or after October 1,
2002.
Section 1886(d)(1)(B)(iv)(I) of the Act
defines a LTCH as ‘‘a hospital which has
an average inpatient length of stay (as
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determined by the Secretary) of greater
than 25 days.’’ Section
1886(d)(1)(B)(iv)(II) of the Act also
provides an alternative definition of
LTCHs: specifically, a hospital that first
received payment under section 1886(d)
of the Act in 1986 and has an average
inpatient length of stay (LOS) (as
determined by the Secretary of Health
and Human Services (the Secretary)) of
greater than 20 days and has 80 percent
or more of its annual Medicare inpatient
discharges with a principal diagnosis
that reflects a finding of neoplastic
disease in the 12-month cost reporting
period ending in FY 1997.
Section 123 of the BBRA requires the
PPS for LTCHs to be a ‘‘per discharge’’
system with a diagnosis-related group
(DRG) based patient classification
system that reflects the differences in
patient resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among
other things, mandates that the
Secretary shall examine, and may
provide for, adjustments to payments
under the LTCH PPS, including
adjustments to DRG weights, area wage
adjustments, geographic reclassification,
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outliers, updates, and a disproportionate
share adjustment.
In the August 30, 2002 Federal
Register, we issued a final rule that
implemented the LTCH PPS authorized
under the BBRA and BIPA (67 FR
55954). For the initial implementation
of the LTCH PPS (FYs 2003) through FY
2007, the system used information from
LTCH patient records to classify
patients into distinct long-term care
diagnosis-related groups (LTC–DRGs)
based on clinical characteristics and
expected resource needs. Beginning in
FY 2008, we adopted the Medicare
Severity-long-term care diagnosisrelated groups (MS–LTC–DRGs) as the
patient classification system used under
the LTCH PPS. Payments are calculated
for each MS–LTC–DRG and provisions
are made for appropriate payment
adjustments. Payment rates under the
LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the
reasonable cost-based payment system
under the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA)
(Pub. L. 97–248) for payments for
inpatient services provided by a LTCH
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with a cost reporting period beginning
on or after October 1, 2002. (The
regulations implementing the TEFRA
reasonable cost-based payment
provisions are located at 42 CFR part
413.) With the implementation of the
PPS for acute care hospitals authorized
by the Social Security Amendments of
1983 (Pub. L. 98–21), which added
section 1886(d) to the Act, certain
hospitals, including LTCHs, were
excluded from the PPS for acute care
hospitals and were paid their reasonable
costs for inpatient services subject to a
per discharge limitation or target
amount under the TEFRA system. For
each cost reporting period, a hospitalspecific ceiling on payments was
determined by multiplying the
hospital’s updated target amount by the
number of total current year Medicare
discharges. (Generally, in section VIII. of
this preamble, when we refer to
discharges, the intent is to describe
Medicare discharges.) The August 30,
2002 final rule further details the
payment policy under the TEFRA
system (67 FR 55954).
In the August 30, 2002 final rule, we
provided for a 5-year transition period.
During this 5-year transition period, a
LTCH’s total payment under the PPS
was based on an increasing percentage
of the Federal rate with a corresponding
decrease in the percentage of the LTCH
PPS payment that is based on
reasonable cost concepts. However,
effective for cost reporting periods
beginning on or after October 1, 2006,
total LTCH PPS payments are based on
100 percent of the Federal rate.
In addition, in the August 30, 2002
final rule, we presented an in-depth
discussion of the LTCH PPS, including
the patient classification system,
relative weights, payment rates,
additional payments, and the budget
neutrality requirements mandated by
section 123 of the BBRA. The same final
rule that established regulations for the
LTCH PPS under 42 CFR part 412,
subpart O also contained LTCH
provisions related to covered inpatient
services, limitation on charges to
beneficiaries, medical review
requirements, furnishing of inpatient
hospital services directly or under
arrangement, and reporting and
recordkeeping requirements. We refer
readers to the August 30, 2002 final rule
for a comprehensive discussion of the
research and data that supported the
establishment of the LTCH PPS (67 FR
55954).
In the June 6, 2003 Federal Register,
we published a final rule that set forth
the FY 2004 annual update of the
payment rates for the Medicare PPS for
inpatient hospital services furnished by
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LTCHs (68 FR 34122). It also changed
the annual period for which the
payment rates were to be effective, such
that the annual updated rates were
effective from July 1 through June 30
instead of from October 1 through
September 30. We referred to the July
through June time period as a ‘‘long-term
care hospital rate year’’ (LTCH PPS rate
year). In addition, we changed the
publication schedule for the annual
update to allow for an effective date of
July 1. The payment amounts and
factors used to determine the annual
update of the LTCH PPS Federal rate are
based on a LTCH PPS rate year. In the
past, while the LTCH payment rate
updates were effective July 1, the annual
update of the DRG classifications and
relative weights for LTCHs continued to
be linked to the annual adjustments of
the acute care hospital inpatient DRGs
and were effective each October 1.
As discussed in detail in the RY 2009
LTCH PPS final rule (73 FR 26797
through 26798), we again changed the
schedule for the annual updates of the
LTCH PPS Federal payment rates
beginning with RY 2010. We
consolidated the rulemaking cycle for
the annual update of the LTCH PPS
Federal payment rates and description
of the methodology and data used to
calculate these payment rates with the
annual update of the MS–LTC–DRG
classifications and associated weighting
factors for LTCHs so that the updates to
the rates and the weights now occur on
the same schedule and appear in the
same publication. As a result, the
updates to the rates and the weights are
now effective on October 1 (on a Federal
fiscal year schedule), and the annual
updates to the LTCH PPS Federal rates
are no longer published with a July 1
effective date.
Public Law 110–173 (MMSEA),
enacted on December 29, 2007, included
provisions that have various effects on
the LTCH PPS. In addition to amending
section 1861 of the Act to add a
subsection (ccc) which provided an
additional definition of LTCHs, Public
Law 110–173 also required the Secretary
to submit, no later than 18 months after
the date of enactment of the law, a
report to Congress on a study of national
long-term care hospital facility and
patient criteria that included
‘‘recommendations for such legislation
and administrative actions, including
timelines for the implementation of
LTCH patient criteria or other actions,
as the Secretary determines
appropriate.’’ The payment policy
provisions under sections 114(c)(1) and
114(c)(2) of Pub. L. 110–173 focused on
providing 3 years of relief for certain
LTCHs from the percentage threshold
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50365
payment adjustment policy at 42 CFR
412.534 and 412.536. However, because
of the original implementation schedule
of those sections of the regulations, the
payment provisions had varying
timeframes of applicability (73 FR
29701 through 29704). In addition,
section 114(c)(3) of Public Law 110–173
provided that the Secretary shall not
apply, for the 3-year period beginning
on the date of enactment of the Act the
revision to the short-stay outlier (SSO)
policy that was finalized in the RY 2008
LTCH PPS final rule (72 FR 26904 and
26992). In addition, section 114(c)(4) of
Public Law 110–173 provided that the
Secretary shall not, for the 3-year period
beginning on the date of enactment of
the Act, make the one-time adjustment
to the payment rates provided for in
§ 412.523(d)(3) or any similar provision
(73 FR 26800 through 26804). The
statute also provided that the base rate
for RY 2008 be the same as the base rate
for RY 2007 (the revised base rate,
however, does not apply to discharges
occurring on or after July 1, 2007, and
before April 1, 2008) (73 FR 24875
through 24877). Section 114(d) of Public
Law 110–173 established a 3-year
moratorium (with specified exceptions)
on the establishment and classification
of new LTCHs, LTCH satellites, and on
the increase in the number of LTCH
beds in existing LTCHs or satellite
facilities. Finally, section 114(f) of
Public Law 110–173 provided for an
expanded review of medical necessity
for admission and continued stay at
LTCHs.
In the RY 2009 LTCH PPS final rule
(73 FR 26804 through 26812), we
established the applicable Federal rates
for RY 2009, consistent with section
1886(m)(2) of the Act as amended by
Public Law 110–173. We also revised
the regulations at § 412.523(d)(3) to
change the methodology for the onetime budget neutrality adjustment and
to comply with section 114(c)(4) of
Public Law 110–173. Other policy
revisions that were necessary as a result
of the statutory changes of Public Law
110–173 were addressed in separate
interim final rules with comment period
(73 FR 24871 and 73 FR 29699). In the
FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43976 through 43990), we
addressed all of the public comments
received and finalized these two interim
final rules with comment period.
Section 4302 of the ARRA, Public
Law 111–5, enacted on February 17,
2009, included several amendments to
the provisions set forth in section 114 of
Public Law 110–173. Specifically,
section 4302(a) modified the effective
dates of the provisions of section 114(c)
of Public Law 110–173, described
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above, and added an additional category
of LTCHs or satellite facilities that
would not be subject to the percentage
threshold payment adjustment at
§ 412.536 for a 3-year period. In
addition, section 4302(a)(2)(A) of Public
Law 111–5 added ‘‘grandfathered’’
satellites (specified in § 412.22(h)(3)(i)
of the regulations) to those ‘‘applicable’’
LTCHs (specified in § 412.534(g) of the
regulations) originally granted relief
under section 114(c) of Pub. L. 110–173.
We issued instructions to the fiscal
intermediaries and MACs interpreting
the provisions of section 4302 of Public
Law 111–5 (Change Request 6444). In
addition, in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (43990 through
43992), we implemented the provisions
of section 4302 of Public Law 111–5
through an interim final rule with
comment period. We received one piece
of timely correspondence regarding the
provisions of section 4302 of Public Law
111–5 that were implemented through
the interim final rule with comment
period that was included in the FY 2010
IPPS/RY 2010 LTCH PPS final rule. We
address this public comment and
finalize the interim final rule with
comment period in section VII.F. of the
preamble of this final rule.
As discussed in section I.C. of this
preamble, a number of the provisions of
the Affordable Care Act affected the
policies, payment rates and factors
under the LTCH PPS. Due to the timing
of the passage of the legislation, we
were unable to address those provisions
in the May 4, 2010 FY 2011 IPPS/LTCH
PPS proposed rule, and some of the
proposed policies and payment rates in
that proposed rule did not reflect the
new legislation. On June 2, 2010, we
issued a FY 2011 IPPS/LTCH PPS
supplemental proposed rule that
addressed the provisions of the
Affordable Care Act that affected our
proposed policies and payment rates for
FY 2011 under the LTCH PPS. In this
final rule, we address both the
provisions of the May 4, 2010 proposed
rule and the June 2, 2010 supplemental
proposed rule and respond to public
comments received.
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2. Criteria for Classification as a LTCH
a. Classification as a LTCH
Under the existing regulations at
§ 412.23(e)(1) and (e)(2)(i), which
implement section 1886(d)(1)(B)(iv)(I) of
the Act, to qualify to be paid under the
LTCH PPS, a hospital must have a
provider agreement with Medicare and
must have an average Medicare
inpatient length of stay (LOS) of greater
than 25 days. Alternatively,
§ 412.23(e)(2)(ii) states that for cost
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reporting periods beginning on or after
August 5, 1997, a hospital that was first
excluded from the PPS in 1986 and can
demonstrate that at least 80 percent of
its annual Medicare inpatient discharges
in the 12-month cost reporting period
ending in FY 1997 have a principal
diagnosis that reflects a finding of
neoplastic disease must have an average
inpatient length of stay for all patients,
including both Medicare and nonMedicare inpatients, of greater than 20
days.
b. Hospitals Excluded From the LTCH
PPS
The following hospitals are paid
under special payment provisions, as
described in § 412.22(c), and therefore,
are not subject to the LTCH PPS rules:
• Veterans Administration hospitals.
• Hospitals that are reimbursed under
State cost control systems approved
under 42 CFR Part 403.
• Hospitals that are reimbursed in
accordance with demonstration projects
authorized under section 402(a) of the
Social Security Amendments of 1967
(Pub. L. 90–248) (42 U.S.C. 1395b–1) or
section 222(a) of the Social Security
Amendments of 1972 (Pub. L. 92–603)
(42 U.S.C. 1395b–1 (note)) (Statewide
all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the
Act).
• Nonparticipating hospitals
furnishing emergency services to
Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002 final rule, we
presented an in-depth discussion of
beneficiary liability under the LTCH
PPS (67 FR 55974 through 55975). In the
RY 2005 LTCH PPS final rule (69 FR
25676), we clarified that the discussion
of beneficiary liability in the August 30,
2002 final rule was not meant to
establish rates or payments for, or define
Medicare-eligible expenses. Under
§ 412.507, if the Medicare payment to
the LTCH is the full LTC–DRG payment
amount, as consistent with other
established hospital prospective
payment systems, a LTCH may not bill
a Medicare beneficiary for more than the
deductible and coinsurance amounts as
specified under § 409.82, § 409.83, and
§ 409.87 and for items and services as
specified under § 489.30(a). However,
under the LTCH PPS, Medicare will
only pay for days for which the
beneficiary has coverage until the SSO
threshold is exceeded. Therefore, if the
Medicare payment was for a SSO case
(§ 412.529) that was less than the full
LTC–DRG payment amount because the
beneficiary had insufficient remaining
Medicare days, the LTCH could also
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charge the beneficiary for services
delivered on those uncovered days
(§ 412.507).
4. Administrative Simplification
Compliance Act (ASCA) and Health
Insurance Portability and
Accountability Act (HIPAA)
Compliance
Claims submitted to Medicare must
comply with both the Administrative
Simplification Compliance Act (ASCA)
(Pub. L. 107–105), and the Health
Insurance Portability and
Accountability Act of 1996 (HIPAA)
(Pub. L. 104–191). Section 3 of the
ASCA requires that the Medicare
Program deny payment under Part A or
Part B for any expenses incurred for
items or services ‘‘for which a claim is
submitted other than in an electronic
form specified by the Secretary.’’ Section
1862(h) of the Act (as added by section
3(a) of the ASCA) provides that the
Secretary shall waive such denial in two
specific types of cases and may also
waive such denial ‘‘in such unusual
cases as the Secretary finds appropriate’’
(68 FR 48805). Section 3 of the ASCA
operates in the context of the HIPAA
regulations, which include, among other
provisions, the transactions and code
sets standards requirements codified as
45 CFR parts 160 and 162, subparts A
and I through R (generally known as the
Transactions Rule). The Transactions
Rule requires covered entities, including
covered health care providers, to
conduct certain electronic healthcare
transactions according to the applicable
transactions and code sets standards.
B. Medicare Severity Long-Term Care
Diagnosis-Related Group (MS–LTC–
DRG) Classifications and Relative
Weights
1. Background
Section 123 of the BBRA requires that
the Secretary implement a PPS for
LTCHs (that is, a per discharge system
with a diagnosis-related group (DRG)based patient classification system
reflecting the differences in patient
resources and costs). Section 307(b)(1)
of the BIPA modified the requirements
of section 123 of the BBRA by requiring
that the Secretary examine ‘‘the
feasibility and the impact of basing
payment under such a system [the longterm care hospital (LTCH) PPS] on the
use of existing (or refined) hospital
DRGs that have been modified to
account for different resource use of
LTCH patients, as well as the use of the
most recently available hospital
discharge data.’’
When the LTCH PPS was
implemented for cost reporting periods
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beginning on or after October 1, 2002,
we adopted the same DRG patient
classification system (that is, the CMS
DRGs) that was utilized at that time
under the IPPS. As a component of the
LTCH PPS, we refer to this patient
classification system as the ‘‘long-term
care diagnosis-related groups (LTC–
DRGs).’’ Although the patient
classification system used under both
the LTCH PPS and the IPPS are the
same, the relative weights are different.
The established relative weight
methodology and data used under the
LTCH PPS result in relative weights
under the LTCH PPS that reflect ‘‘the
differences in patient resource use
* * *’’ of LTCH patients (section
123(a)(1) of the BBRA (Pub. L. 106–
113)).
As part of our efforts to better
recognize severity of illness among
patients, in the FY 2008 IPPS final rule
with comment period (72 FR 47130), the
MS–DRGs and the Medicare severity
long-term care diagnosis-related groups
(MS–LTC–DRGs) were adopted under
the IPPS and the LTCH PPS,
respectively, effective beginning
October 1, 2007 (FY 2008). For a full
description of the development and
implementation and rationale for the
use of the MS–DRGs and MS–LTC–
DRGs, we refer readers to the FY 2008
IPPS final rule with comment period (72
FR 47141 through 47175 and 47277
through 47299). (We note that, in that
same final rule, we revised the
regulations at § 412.503 to specify that
for LTCH discharges occurring on or
after October 1, 2007, when applying
the provisions of 42 CFR part 412,
subpart O applicable to LTCHs for
policy descriptions and payment
calculations, all references to LTC–
DRGs would be considered a reference
to MS–LTC–DRGs. For the remainder of
this section, we present the discussion
in terms of the current MS–LTC–DRG
patient classification system unless
specifically referring to the previous
LTC–DRG patient classification system
that was in effect before October 1,
2007.) We believe the MS–DRGs (and by
extension, the MS–LTC–DRGs)
represent a substantial improvement
over the previous CMS DRGs in their
ability to differentiate cases based on
severity of illness and resource
consumption.
The MS–DRGs adopted in FY 2008
represent an increase in the number of
DRGs by 207 (that is, from 538 to 745)
(72 FR 47171). In FY 2009, an additional
MS–DRG was adopted for a total of 746
distinct groupings (73 FR 48497). For
FY 2011, we are finalizing our proposal
to delete one MS–DRG and create two
new MS–DRGs, for a net gain of one
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MS–DRG, as noted in section II. of the
preamble of this final rule. This results
in 747 distinct MS–DRG groupings for
FY 2011. Consistent with section 123 of
the BBRA, as amended by section
307(b)(1) of the BIPA, and § 412.515, we
use information derived from LTCH PPS
patient records to classify LTCH
discharges into distinct MS–LTC–DRGs
based on clinical characteristics and
estimated resource needs. We then
assign an appropriate weight to the MS–
LTC–DRGs to account for the difference
in resource use by patients exhibiting
the case complexity and multiple
medical problems characteristic of
LTCHs.
In a departure from the IPPS, and as
discussed in greater detail below in
section VII.B.3.f. of this preamble, we
use low-volume MS–LTC–DRGs (that is,
MS–LTC–DRGs with less than 25 LTCH
cases) in determining the MS–LTC–DRG
relative weights because LTCHs do not
typically treat the full range of
diagnoses as do acute care hospitals. For
purposes of determining the relative
weights for the large number of lowvolume MS–LTC–DRGs, we group all of
the low-volume MS–LTC–DRGs into
five quintiles based on average charge
per discharge. (A detailed discussion of
the initial development and application
of the quintile methodology appears in
the August 30, 2002 LTCH PPS final
rule (67 FR 55978).) We also account for
adjustments to payments for short-stay
outlier (SSO) cases (that is, cases where
the covered LOS at the LTCH is less
than or equal to five-sixths of the
geometric ALOS for the MS–LTC–DRG).
Furthermore, we make adjustments to
account for nonmonotonically
increasing weights, when necessary.
That is, theoretically, cases under the
MS–LTC–DRG system that are more
severe require greater expenditure of
medical care resources and will result in
higher average charges such that, in the
severity levels within a base MS–LTC–
DRG, the weights should increase
monotonically with severity from the
lowest to highest severity level. (We
discuss nonmonotonicity in greater
detail and our methodology to adjust the
RY 2010 MS–LTC–DRG relative weights
to account for nonmonotonically
increasing relative weights in section
VII.B.3.g. (Step 6) of this preamble).
2. Patient Classifications Into MS–LTC–
DRGs
a. Background
The MS–DRGs (used under the IPPS)
and the MS–LTC–DRGs (used under the
LTCH PPS) are based on the CMS DRG
structure. As noted above in this
section, we refer to the DRGs under the
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LTCH PPS as MS–LTC–DRGs although
they are structurally identical to the
MS–DRGs used under the IPPS.
The MS–DRGs are organized into 25
major diagnostic categories (MDCs),
most of which are based on a particular
organ system of the body; the remainder
involve multiple organ systems (such as
MDC 22, Burns). Within most MDCs,
cases are then divided into surgical
DRGs and medical DRGs. Surgical DRGs
are assigned based on a surgical
hierarchy that orders operating room
(O.R.) procedures or groups of O.R.
procedures by resource intensity. The
GROUPER software program does not
recognize all ICD–9–CM procedure
codes as procedures affecting DRG
assignment. That is, procedures that are
not surgical (for example, EKG), or
minor surgical procedures (for example,
biopsy of skin and subcutaneous tissue
(procedure code 86.11)) do not affect the
MS–LTC–DRG assignment based on
their presence on the claim.
Generally, under the LTCH PPS, a
Medicare payment is made at a
predetermined specific rate for each
discharge and that payment varies by
the MS–LTC–DRG to which a
beneficiary’s stay is assigned. Cases are
classified into MS–LTC–DRGs for
payment based on the following six data
elements:
• Principal diagnosis;
• Additional or secondary diagnoses;
• Surgical procedures;
• Age;
• Sex; and
• Discharge status of the patient.
Through FY 2010, the number of
secondary or additional diagnoses and
the number of surgical procedures
considered for MS–DRG assignment was
limited to eight and six, respectively.
Elsewhere in this final rule, however, as
proposed, we are establishing that, for
claims submitted on the 5010 format
beginning January 1, 2011, we will
increase the capacity to process
diagnosis and procedure codes up to 25
diagnoses and 25 procedures. This will
include one principal diagnosis and up
to 24 secondary diagnoses for severity of
illness determinations. We refer readers
to section II.G.11.c. of this preamble for
a complete discussion of this change.
Upon the discharge of the patient
from a LTCH, the LTCH must assign
appropriate diagnosis and procedure
codes from the most current version of
the International Classification of
Diseases, Ninth Revision, Clinical
Modification (ICD–9–CM). HIPAA
Transactions and Code Sets Standards
regulations at 45 CFR parts 160 and 162
require that no later than October 16,
2003, all covered entities must comply
with the applicable requirements of
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Subparts A and I through R of Part 162.
Among other requirements, those
provisions direct covered entities to use
the ASC X12N 837 Health Care Claim:
Institutional, Volumes 1 and 2, Version
4010, and the applicable standard
medical data code sets for the
institutional health care claim or
equivalent encounter information
transaction (45 CFR 162.1002 and 45
CFR 162.1102). For additional
information on the ICD–9–CM Coding
System, we refer readers to the FY 2008
IPPS final rule with comment period (72
FR 47241 through 47243 and 47277
through 47281). We also refer readers to
the detailed discussion on correct
coding practices in the August 30, 2002
LTCH PPS final rule (67 FR 55981
through 55983). Additional coding
instructions and examples are published
in the Coding Clinic for ICD–9–CM, a
product of the American Hospital
Association. (We refer readers to section
II.G.11. of this preamble for additional
information on the annual revisions to
the ICD–9–CM codes.)
With respect to the ICD–9–CM coding
system, we have been discussing the
conversion to the ICD–10–CM and the
ICD–10–PCS coding systems for many
years. As is discussed in detail in
section II.G.11. of this preamble, the
ICD–10 coding systems applicable to
hospital inpatient services will be
implemented on October 1, 2013. In
order for the industry to make the
necessary conversions from ICD–9–CM
to ICD–10–CM and ICD–10–PCS, we
proposed, through the ICD–9–CM
Coordination and Maintenance
Committee, to consider a moratorium on
updates to the ICD–9–CM and ICD–10
coding sets. We refer readers to section
II.G.11. of this preamble for additional
information on the adoption of ICD–10–
CM and ICD–10–PCS.
To create the MS–DRGs (and by
extension, the MS–LTC–DRGs),
individual DRGs were subdivided
according to the presence of specific
secondary diagnoses designated as
complications or comorbidities (CCs)
into three, two, or one level, depending
on the impact of the CCs on resources
used for those cases. Specifically, there
are sets of MS–DRGs that are split into
2 or 3 subgroups based on the presence
or absence of a CC or a major
complication and comorbidity (MCC).
We refer readers to section II.D. of the
FY 2008 IPPS final rule with comment
period for a detailed discussion about
the creation of MS–DRGs based on
severity of illness levels (72 FR 47141
through 47175).
Medicare contractors (that is, fiscal
intermediaries and MACs) enter the
clinical and demographic information
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submitted by LTCHs into their claims
processing systems and subject this
information to a series of automated
screening processes called the Medicare
Code Editor (MCE). These screens are
designed to identify cases that require
further review before assignment into a
MS–LTC–DRG can be made. During this
process, certain cases are selected for
further development (74 FR 43949).
After screening through the MCE,
each claim is classified into the
appropriate MS–LTC–DRG by the
Medicare LTCH GROUPER software on
the basis of diagnosis and procedure
codes and other demographic
information (age, sex, and discharge
status). The GROUPER software used
under the LTCH PPS is the same
GROUPER software program used under
the IPPS. Following the MS–LTC–DRG
assignment, the Medicare contractor
determines the prospective payment
amount by using the Medicare PRICER
program, which accounts for hospitalspecific adjustments. Under the LTCH
PPS, we provide an opportunity for
LTCHs to review the MS–LTC–DRG
assignments made by the Medicare
contractor and to submit additional
information within a specified
timeframe as provided in § 412.513(c).
The GROUPER software is used both
to classify past cases to measure relative
hospital resource consumption to
establish the MS–LTC–DRG weights and
to classify current cases for purposes of
determining payment. The records for
all Medicare hospital inpatient
discharges are maintained in the
MedPAR file. The data in this file are
used to evaluate possible MS–DRG and
MS–LTC–DRG classification changes
and to recalibrate the MS–DRG and MS–
LTC–DRG relative weights during our
annual update under both the IPPS
(§ 412.60(e)) and the LTCH PPS
(§ 412.517), respectively.
b. Changes to the MS–LTC–DRGs for
FY 2011
As specified by our regulations at
§ 412.517(a), which requires that the
LTC–MS–DRG classifications and
relative weights be updated annually
and consistent with our historical
practice of using the same patient
classification system under the LTCH
PPS as is used under the IPPS, in this
final rule, as was proposed we are
updating the MS–LTC–DRG
classifications effective October 1, 2010,
through September 30, 2011 (FY 2011)
consistent with the changes to specific
MS–DRG classifications presented
above in section II.G. of this final rule
(that is, GROUPER Version 28.0).
Therefore, the MS–LTC–DRGs for FY
2011 presented in this final rule are the
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same as the MS–DRGs that will be used
under the IPPS for FY 2011. In addition,
because the MS–LTC–DRGs for FY 2011
are the same as the MS–DRGs for FY
2011, the other changes that affect MS–
DRG (and by extension MS–LTC–DRG)
assignments under Version 28.0 of the
GROUPER discussed in section II.G. of
the preamble of this final rule, including
the changes to the MCE software and
changes to the ICD–9–CM coding
system, are also applicable under the
LTCH PPS for FY 2011.
3. Development of the FY 2011
MS–LTC–DRG Relative Weights
a. General Overview of the Development
of the MS–LTC–DRG Relative Weights
As we stated in the August 30, 2002
LTCH PPS final rule (67 FR 55984), one
of the primary goals for the
implementation of the LTCH PPS is to
pay each LTCH an appropriate amount
for the efficient delivery of medical care
to Medicare patients. The system must
be able to account adequately for each
LTCH’s case-mix in order to ensure both
fair distribution of Medicare payments
and access to adequate care for those
Medicare patients whose care is more
costly. To accomplish these goals, we
have annually adjusted the LTCH PPS
standard Federal prospective payment
system rate by the applicable relative
weight in determining payment to
LTCHs for each case.
Although the adoption of the
MS–LTC–DRGs resulted in some
modifications of existing procedures for
assigning weights in cases of zero
volume and/or nonmonotonicity (as
discussed in the FY 2008 IPPS final rule
with comment period (72 FR 47289
through 47295) and the FY 2009 IPPS
final rule (73 FR 48542 through 48550)),
the basic methodology for developing
the FY 2011 MS–LTC–DRG relative
weights in this final rule continues to be
determined in accordance with the
general methodology established in the
August 30, 2002 LTCH PPS final rule
(67 FR 55989 through 55991). Under the
LTCH PPS, relative weights for each
MS–LTC–DRG are a primary element
used to account for the variations in cost
per discharge and resource utilization
among the payment groups (§ 412.515).
To ensure that Medicare patients
classified to each MS–LTC–DRG have
access to an appropriate level of services
and to encourage efficiency, we
calculate a relative weight for each MS–
LTC–DRG that represents the resources
needed by an average inpatient LTCH
case in that MS–LTC–DRG. For
example, cases in an MS–LTC–DRG
with a relative weight of 2 will, on
average, cost twice as much to treat as
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b. Development of the MS–LTC–DRG
Relative Weights for FY 2011
Beginning with the FY 2008 update,
we established a budget neutral
requirement for the annual update to the
MS–LTC–DRG classifications and
relative weights at § 412.517(b) (in
conjunction with § 412.503), such that
estimated aggregate LTCH PPS
payments would be unaffected, that is,
would be neither greater than nor less
than the estimated aggregate LTCH PPS
payments that would have been made
without the classification and relative
weight changes (RY 2008 LTCH PPS
final rule (May 11, 2007; 72 FR 26882
through 26884)). Consistent with
§ 412.517(b), we apply a two-step
budget neutrality methodology, which is
based on the current year MS–LTC–DRG
classifications and relative weights.
(For additional information on the
established two-step budget neutrality
methodology, we refer readers to the FY
2008 IPPS final rule (72 FR 47295
through 47296).) As was proposed, for
this final rule the annual update to the
MS–LTC–DRG classifications and
relative weights for FY 2011 is based on
the FY 2010 MS–LTC–DRG
classifications and relative weights.
c. Data
In both the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24023 through 24043) and the June 2,
2010 FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR
30970 and 30971), we proposed to
calculate the proposed MS–LTC–DRG
relative weights for FY 2011 using total
charges from FY 2009 Medicare LTCH
bill data from the December 2009
update of the FY 2009 MedPAR file,
which were the best available data at
that time, and to use the proposed
Version 28.0 of the GROUPER to classify
LTCH cases. We also proposed that if
more recent data become available, we
would use those data and the finalized
Version 28.0 of the GROUPER in
establishing the FY 2011 MS–LTC–DRG
relative weights in the final rule.
In this final rule, to calculate the MS–
LTC–DRG relative weights for FY 2011,
we obtained total charges from FY 2009
Medicare LTCH bill data from the
March 2010 update of the MedPAR file,
which are the best available data at this
time, and used the final Version 28.0 of
the GROUPER to classify LTCH cases.
Consistent with our historical
methodology, we proposed to exclude
the data from LTCHs that are allinclusive rate providers and LTCHs that
are reimbursed in accordance with
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demonstration projects authorized
under section 402(a) of Public Law 90–
248 or section 222(a) of Public Law 92–
603. In addition, as is the case with the
IPPS, Medicare Advantage (Part C)
claims are now included in the MedPAR
files (74 FR 43808). Consistent with
IPPS policy, we proposed to exclude
such claims in the calculations for the
relative weights under the LTCH PPS
that are used to determine payments for
fee-for-service Medicare claims.
Specifically, we added an edit to the
relative weight calculation to remove
any claims from the MedPAR files that
have a GHO Paid indicator value of ‘‘1,’’
which effectively removes Medicare
Advantage claims from the relative
weight calculations (73 FR 48532). We
received one comment on these
proposals. Therefore, in the
development of the FY 2011 MS–LTC–
DRG relative weights in this final rule,
as we proposed, we excluded the data
of 13 all-inclusive rate providers and the
2 LTCHs that are paid in accordance
with demonstration projects that had
claims in the FY 2009 MedPAR file, as
well as any Medicare Advantage claims.
Comment: One commenter expressed
concern that the proposed FY 2011
MS–LTC–DRG relative weights were
computed using covered charges instead
of total charges. The commenter
requested that CMS explain the
rationale if it changed its methodology
for computing the MS–LTC–DRG
relative weights using covered charges.
Response: When we implemented the
LTCH PPS in the FY 2003 LTCH PPS
final rule (67 FR 55984), we established
a policy of determining the LTC–DRG
relative weights and average length of
stay based on total charges and total
days. Consistent with our established
policy, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24024), we
proposed to calculate the proposed MS–
LTC–DRG relative weights for FY 2011
using ‘‘total’’ charges from FY 2009
Medicare LTCH bill data from the
MedPAR file. We did not change our
methodology and we have verified that
the proposed FY 2011 MS–LTC–DRG
relative weights were calculated using
total charges, not covered charges.
Furthermore, as stated above, the FY
2011 MS–LTC–DRG relative weights
established in this final rule were
calculated using total charges.
d. Hospital-Specific Relative Value
(HSRV) Methodology
By nature, LTCHs often specialize in
certain areas, such as ventilatordependent patients and rehabilitation
and wound care. Some case types
(DRGs) may be treated, to a large extent,
in hospitals that have, from a
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perspective of charges, relatively high
(or low) charges. This nonrandom
distribution of cases with relatively high
(or low) charges in specific
MS–LTC–DRGs has the potential to
inappropriately distort the measure of
average charges. To account for the fact
that cases may not be randomly
distributed across LTCHs, consistent
with the methodology we have used
since the implementation of the LTCH
PPS, as we proposed, we continue to
use a hospital-specific relative value
(HSRV) methodology to calculate the
MS–LTC–DRG relative weights. We
believe this method removes this
hospital-specific source of bias in
measuring LTCH average charges (67 FR
55985). Specifically, we reduce the
impact of the variation in charges across
providers on any particular MS–LTC–
DRG relative weight by converting each
LTCH’s charge for a case to a relative
value based on that LTCH’s average
charge.
Under the HSRV methodology, we
standardize charges for each LTCH by
converting its charges for each case to
hospital-specific relative charge values
and then adjust those values for the
LTCH’s case-mix. The adjustment for
case-mix is needed to rescale the
hospital-specific relative charge values
(which, by definition, average 1.0 for
each LTCH). The average relative weight
for a LTCH is its case-mix, so it is
reasonable to scale each LTCH’s average
relative charge value by its case-mix. In
this way, each LTCH’s relative charge
value is adjusted by its case-mix to an
average that reflects the complexity of
the cases it treats relative to the
complexity of the cases treated by all
other LTCHs (the average case-mix of all
LTCHs).
In accordance with our established
methodology, as we proposed, we
continue to standardize charges for each
case by first dividing the adjusted
charge for the case (adjusted for SSOs
under § 412.529 as described in section
VII.B.3.g. (step 3) of the preamble of this
final rule) by the average adjusted
charge for all cases at the LTCH in
which the case was treated. SSO cases
are cases with a length of stay that is
less than or equal to five-sixths the
average length of stay of the MS–LTC–
DRG (§ 412.529 and § 412.503). The
average adjusted charge reflects the
average intensity of the health care
services delivered by a particular LTCH
and the average cost level of that LTCH.
The resulting ratio is multiplied by that
LTCH’s case-mix index to determine the
standardized charge for the case. (67 FR
55989)
Multiplying by the LTCH’s case-mix
index accounts for the fact that the same
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relative charges are given greater weight
at a LTCH with higher average costs
than they would at a LTCH with low
average costs, which is needed to adjust
each LTCH’s relative charge value to
reflect its case-mix relative to the
average case-mix for all LTCHs. Because
we standardize charges in this manner,
we count charges for a Medicare patient
at a LTCH with high average charges as
less resource intensive than they would
be at a LTCH with low average charges.
For example, a $10,000 charge for a case
at a LTCH with an average adjusted
charge of $17,500 reflects a higher level
of relative resource use than a $10,000
charge for a case at a LTCH with the
same case-mix, but an average adjusted
charge of $35,000. We believe that the
adjusted charge of an individual case
more accurately reflects actual resource
use for an individual LTCH because the
variation in charges due to systematic
differences in the markup of charges
among LTCHs is taken into account.
relative weights: (1) If a MS–LTC–DRG
has at least 25 cases, it is assigned its
own relative weight; (2) if a MS–LTC–
DRG has between 1 and 24 cases, it is
assigned to a quintile for which we
compute a relative weight for all of the
MS–LTC–DRGs assigned to that
quintile; and (3) if a MS–LTC–DRG has
no cases, it is cross-walked to another
MS–LTC–DRG based upon clinical
similarities to assign an appropriate
relative weight (as described below in
detail in Step 5 of section VII.B.3.g. of
this preamble). Furthermore, in
determining the FY 2011 MS–LTC–DRG
relative weights, when necessary, as we
proposed, we made adjustments to
account for nonmonotonicity, as
discussed in greater detail below in Step
6 of section VII.B.3.g. of this preamble.
We refer readers to the discussion in the
FY 2010 IPPS/RY LTCH PPS final rule
for our rationale for including an
adjustment for nonmonotonicity (74 FR
43953 through 43954).
e. Treatment of Severity Levels in
Developing the MS–LTC–DRG Relative
Weights
For purposes of determining the MS–
LTC–DRG relative weights, there are
three different categories of DRGs based
on volume of cases within specific MS–
LTC–DRGs. MS–LTC–DRGs with at least
25 cases are each assigned a unique
relative weight; low-volume MS–LTC–
DRGs (that is, MS–LTC–DRGs that
contain between 1 and 24 cases based
on a given year’s claims data) are
grouped into quintiles (as described
below) and assigned the relative weight
of the quintile. No-volume MS–LTC–
DRGs (that is, no cases in the given
year’s claims data were assigned to
those MS–LTC–DRGs) are cross-walked
to other MS–LTC–DRGs based on the
clinical similarities and assigned the
relative weight of the cross-walked MS–
LTC–DRG (as described in greater detail
below). (We provide in-depth
discussions of our policy regarding
weight-setting for low-volume MS–
LTC–DRGs in section VII.B.3.f. of the
preamble of this final rule and for novolume MS–LTC–DRGs, under Step 5 in
section VII.B.3.g. of the preamble of this
final rule.)
As also noted above, while the LTCH
PPS and the IPPS use the same patient
classification system, the methodology
that is used to set the DRG relative
weights for use in each payment system
differs because the overall volume of
cases in the LTCH PPS is much less
than in the IPPS. In general, consistent
with our existing methodology, as we
proposed, we used the following steps
to determine the FY 2011 MS–LTC–DRG
f. Low-Volume MS–LTC–DRGs
In order to account for MS–LTC–
DRGs with low volume (that is, with
fewer than 25 LTCH cases), consistent
with our existing methodology and as
we proposed, for purposes of
determining the MS–LTC–DRG relative
weights, we continue to employ the
quintile methodology for low-volume
MS–LTC–DRGs, such that we group
those ‘‘low-volume MS–LTC–DRGs’’
(that is, MS–LTC–DRGs that contained
between 1 and 24 cases annually) into
one of five categories (quintiles) based
on average charges (67 FR 55984
through 55995 and 72 FR 47283 through
47288). In determining the FY 2011
MS–LTC–DRG relative weights in this
final rule, in cases where the initial
assignment of a low-volume MS–LTC–
DRG to quintiles resulted in
nonmonotonicity within a base-DRG, in
order to ensure appropriate Medicare
payments, consistent with our historical
methodology and as we proposed, we
made adjustments to the treatment of
low-volume MS–LTC–DRGs to preserve
monotonicity, as discussed in detail
below in section VII.B.3.g. (Step 6) in
this preamble.
In this final rule, using LTCH cases
from the March 2010 update of the FY
2009 MedPAR file, we identified 283
MS–LTC–DRGs that contained between
1 and 24 cases. This list of MS–LTC–
DRGs was then divided into one of the
5 low-volume quintiles, each containing
a minimum of 56 MS–LTC–DRGs (283/
5 = 56 with 3 MS–LTC–DRG as the
remainder). We assigned a low-volume
MS–LTC–DRG to a specific low-volume
quintile by sorting the low-volume MS–
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LTC–DRGs in ascending order by
average charge in accordance with our
established methodology. Furthermore,
because the number of MS–LTC–DRGs
with less than 25 cases was not evenly
divisible by 5, the average charge of the
low-volume quintile was used to
determine which of the low-volume
quintiles would contain the 3 additional
low-volume MS–LTC–DRGs.
Specifically, after organizing the MS–
LTC–DRGs by ascending order by
average charge, we assigned the first
fifth (1st through 56th) of low-volume
MS–LTC–DRGs (with the lowest average
charge) into Quintile 1. The MS–LTC–
DRGs with the highest average charge
cases are assigned into Quintile 5.
Because the average charge of the 57th
low-volume MS–LTC–DRG in the sorted
list is closer to the average charge of the
56th low-volume MS–LTC–DRG
(assigned to Quintile 1) than to the
average charge of the 58th low-volume
MS–LTC–DRG (assigned to Quintile 2),
we assigned it to Quintile 1 (such that
Quintile 1 contains 57 low-volume MS–
LTC–DRGs before any adjustments for
nonmonotonicity, as discussed below).
This process was repeated through the
remaining low-volume MS–LTC–DRGs
so that 2 of the 5 low-volume quintiles
contain 56 MS–LTC–DRGs (Quintiles 4
and 5) and the other 3 low-volume
quintiles contain 57 MS–LTC–DRGs
(Quintiles 1, 2, and 3).
Accordingly, in order to determine
the FY 2011 relative weights for the
MS–LTC–DRGs with low volume, we
used the 5 low-volume quintiles
described above. The composition of
each of the 5 low-volume quintiles
shown in the chart below was used in
determining the FY 2011 MS–LTC–DRG
relative weights (as shown in Table 11
of the Addendum to this final rule). We
determined a relative weight and
(geometric) average length of stay for
each of the 5 low-volume quintiles
using the methodology that we applied
to the MS–LTC–DRGs (25 or more
cases), as described in section VII.B.3.g.
of the preamble of this final rule. We
assigned the same relative weight and
average length of stay to each of the lowvolume MS–LTC–DRGs that make up an
individual low-volume quintile. We
note that, as this system is dynamic, it
is possible that the number and specific
type of MS–LTC–DRGs with a low
volume of LTCH cases will vary in the
future. We used the best available
claims data in the MedPAR file to
identify low-volume MS–LTC–DRGs
and to calculate the relative weights
based on our methodology.
BILLING CODE 4120–01–P
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We note that we will continue to
monitor the volume (that is, the number
of LTCH cases) in the low-volume
quintiles to ensure that our quintile
assignments used in determining the
MS–LTC–DRG relative weights result in
appropriate payment for such cases and
do not result in an unintended financial
incentive for LTCHs to inappropriately
admit these types of cases.
g. Steps for Determining the FY 2011
MS–LTC–DRG Relative Weights
In the FY 2011 IPPS/LTCH PPS
proposed and supplemental proposed
rules, we proposed, in general, to
determine the FY 2011 MS–LTC–DRG
relative weights based on our existing
methodology. We received no comment
on this proposal and are adopting it as
final in this final rule. For additional
information on the original
development of this methodology, and
modifications to it since the adoption of
the MS–LTC–DRGs, we refer readers to
the August 30, 2002 LTCH PPS final
rule (67 FR 55989 through 55995) and
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43951 through 43966).
In summary, for FY 2011, to
determine the FY 2011 MS–LTC–DRG
relative weights, we grouped LTCH
cases to the appropriate MS–LTC–DRG,
while taking into account the lowvolume MS–LTC–DRGs (as described
above). After grouping the cases to the
appropriate MS–LTC–DRG (or lowvolume quintile), we calculated the FY
2011 relative weights by first removing
statistical outliers and cases with a
length of stay of 7 days or less (as
discussed in greater detail below). Next,
we adjusted the number of cases in each
MS–LTC–DRG (or low-volume quintile)
for the effect of SSO cases (step 3
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below). After removing statistical
outliers (step 1 below) and cases with a
length of stay of less than 8 days (step
2 below), the SSO adjusted discharges
and corresponding charges were then
used to calculate ‘‘relative adjusted
weights’’ for each MS–LTC–DRG (or
low-volume quintile) using the HSRV
method.
Below we discuss in detail the steps
for calculating the FY 2011 MS–LTC–
DRG relative weights. We received no
comments on our proposed steps for
calculating the FY 2011 MS–LTC–DRG
relative weights. Therefore, for the
reasons described above, we are
employing our proposed methodology
to calculate the FY 2011 MS–LTC–DRG
relative weights discussed below. We
note that, as we stated in section
VII.B.3.c. of this preamble, we excluded
the data of all-inclusive rate LTCHs,
LTCHs that are paid in accordance with
demonstration projects, and any
Medicare Advantage claims in the FY
2009 MedPAR file.
Step 1—Remove statistical outliers.
The first step in the calculation of the
FY 2011 MS–LTC–DRG relative weights
is to remove statistical outlier cases.
Consistent with our historical relative
weight methodology, we continue to
define statistical outliers as cases that
are outside of 3.0 standard deviations
from the mean of the log distribution of
both charges per case and the charges
per day for each MS–LTC–DRG. These
statistical outliers are removed prior to
calculating the relative weights because
we believe that they may represent
aberrations in the data that distort the
measure of average resource use.
Including those LTCH cases in the
calculation of the relative weights could
result in an inaccurate relative weight
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that does not truly reflect relative
resource use among the MS–LTC–DRGs.
(For additional information on this step
of the relative weight methodology, we
refer readers to 67 FR 55989 and 74 FR
43959.)
Step 2—Remove cases with a length
of stay of 7 days or less.
The MS–LTC–DRG relative weights
reflect the average of resources used on
representative cases of a specific type.
Generally, cases with a length of stay of
7 days or less do not belong in a LTCH
because these stays do not fully receive
or benefit from treatment that is typical
in a LTCH stay, and full resources are
often not used in the earlier stages of
admission to a LTCH. If we were to
include stays of 7 days or less in the
computation of the FY 2011 MS–LTC–
DRG relative weights, the value of many
relative weights would decrease and,
therefore, payments would decrease to a
level that may no longer be appropriate.
We do not believe that it would be
appropriate to compromise the integrity
of the payment determination for those
LTCH cases that actually benefit from
and receive a full course of treatment at
a LTCH by including data from these
very short-stays. Therefore, consistent
with our historical relative weight
methodology, in determining the FY
2011 MS–LTC–DRG relative weights, as
proposed, we removed LTCH cases with
a length of stay of 7 days or less. (For
additional information on this step of
the relative weight methodology, we
refer readers to 67 FR 55989 and 74 FR
43959.)
Step 3—Adjust charges for the effects
of SSOs.
After removing cases with a length of
stay of 7 days or less, we are left with
cases that have a length of stay of greater
than or equal to 8 days. As the next step
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in the calculation of the FY 2011 MS–
LTC–DRG relative weights, consistent
with our historical relative weight
methodology, as proposed, we adjusted
each LTCH’s charges per discharge for
those remaining cases for the effects of
SSOs (as defined in § 412.529(a) in
conjunction with § 412.503).
We make this adjustment by counting
an SSO case as a fraction of a discharge
based on the ratio of the length of stay
of the case to the average length of stay
for the MS–LTC–DRG for non-SSO
cases. This has the effect of
proportionately reducing the impact of
the lower charges for the SSO cases in
calculating the average charge for the
MS–LTC–DRG. This process produces
the same result as if the actual charges
per discharge of an SSO case were
adjusted to what they would have been
had the patient’s length of stay been
equal to the average length of stay of the
MS–LTC–DRG.
Counting SSO cases as full discharges
with no adjustment in determining the
RY 2011 MS–LTC–DRG relative weights
would lower the FY 2011 MS–LTC–DRG
relative weight for affected MS–LTC–
DRGs because the relatively lower
charges of the SSO cases would bring
down the average charge for all cases
within an MS–LTC–DRG. This would
result in an ‘‘underpayment’’ for nonSSO cases and an ‘‘overpayment’’ for
SSO cases. Therefore, as proposed, we
adjust for SSO cases under § 412.529 in
this manner because it results in more
appropriate payments for all LTCH
cases. (For additional information on
this step of the relative weight
methodology, we refer readers to 67 FR
55989 and 74 FR 43959.)
Step 4—Calculate the FY 2011 MS–
LTC–DRG relative weights on an
iterative basis.
Consistent with our historical relative
weight methodology, we calculate the
FY 2011 MS–LTC–DRG relative weights
using the HSRV methodology, which is
an iterative process. First, for each
LTCH case, we calculate a hospitalspecific relative charge value by
dividing the SSO adjusted charge per
discharge (see Step 3) of the LTCH case
(after removing the statistical outliers
(see Step 1)) and LTCH cases with a
length of stay of 7 days or less (see Step
2) by the average charge per discharge
for the LTCH in which the case
occurred. The resulting ratio is then
multiplied by the LTCH’s case-mix
index to produce an adjusted hospitalspecific relative charge value for the
case. An initial case-mix index value of
1.0 is used for each LTCH.
As proposed, for each MS–LTC–DRG,
the FY 2011 relative weight was
calculated by dividing the average of the
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adjusted hospital-specific relative
charge values (from above) for the MS–
LTC–DRG by the overall average
hospital-specific relative charge value
across all cases for all LTCHs. Using
these recalculated MS–LTC–DRG
relative weights, each LTCH’s average
relative weight for all of its cases (that
is, its case-mix) was calculated by
dividing the sum of all the LTCH’s MS–
LTC–DRG relative weights by its total
number of cases. The LTCHs’ hospitalspecific relative charge values above
were multiplied by these hospitalspecific case-mix indexes. These
hospital-specific case-mix adjusted
relative charge values were then used to
calculate a new set of MS–LTC–DRG
relative weights across all LTCHs. This
iterative process was continued until
there was convergence between the
weights produced at adjacent steps, for
example, when the maximum difference
was less than 0.0001.
Step 5—Determine a FY 2011 relative
weight for MS–LTC–DRGs with no
LTCH cases.
As we stated above, as proposed, we
determined the FY 2011 relative weight
for each MS–LTC–DRG using total
Medicare allowable total charges
reported in the best available LTCH
claims data (that is, the March 2010
update of the FY 2009 MedPAR file for
this final rule). Using these data, we
identified a number of MS–LTC–DRGs
for which there were no LTCH cases in
the database, such that no patients who
would have been classified to those
MS–LTC–DRGs were treated in LTCHs
during FY 2009 and, therefore, no
charge data were available for these
MS–LTC–DRGs. Thus, in the process of
determining the MS–LTC–DRG relative
weights, we were unable to calculate
relative weights for the MS–LTC–DRGs
with no LTCH cases using the
methodology described in Steps 1
through 4 above. However, because
patients with a number of the diagnoses
under these MS–LTC–DRGs may be
treated at LTCHs, consistent with our
historical methodology, as proposed, we
assigned a relative weight to each of the
no-volume MS–LTC–DRGs based on
clinical similarity and relative costliness
(with the exception of ‘‘transplant’’ MS–
LTC–DRGs and ‘‘error’’ MS–LTC–DRGs,
as discussed below). (For additional
information on this step of the relative
weight methodology, we refer readers to
67 FR 55991 and 74 FR 43959 through
43960.)
In general, we determined FY 2011
relative weights for the MS–LTC–DRGs
with no LTCH cases in the FY 2009
MedPAR file used in this final rule (that
is, ‘‘no-volume’’ MS–LTC–DRGs) by
cross-walking each no-volume MS–
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LTC–DRG to another MS–LTC–DRG
with a calculated relative weight
(determined in accordance with the
methodology described above). Then,
the ‘‘no-volume’’ MS–LTC–DRG was
assigned the same relative weight (and
average length of stay) of the MS–LTC–
DRG to which it was cross-walked (as
described in greater detail below).
Of the 747 MS–LTC–DRGs for FY
2011, we identified 223 MS–LTC–DRGs
for which there were no LTCH cases in
the database (including the 8
‘‘transplant’’ MS–LTC–DRGs and 2
‘‘error’’ MS–LTC–DRGs). As stated
above, as proposed, for this final rule we
assigned relative weights for each of the
213 no-volume MS–LTC–DRGs (with
the exception of the 8 ‘‘transplant’’ MS–
LTC–DRGs and the 2 ‘‘error’’ MS–LTC–
DRGs, which are discussed below)
based on clinical similarity and relative
costliness to one of the remaining 524
(747¥223 = 524) MS–LTC–DRGs for
which we were able to determine
relative weights based on FY 2009
LTCH claims data using the steps
described above. (For the remainder of
this discussion, we refer to the ‘‘crosswalked’’ MS–LTC–DRGs as the MS–
LTC–DRGs to which we crosswalk one
of the 213 ‘‘no volume’’ MS–LTC–DRGs
for purposes of determining a relative
weight.) Then, we assigned the novolume MS–LTC–DRG the relative
weight of the cross-walked MS–LTC–
DRG. (As explained below in Step 6,
when necessary, we made adjustments
to account for nonmonotonicity.)
For this final rule, there are the same
213 ‘‘no volume’’ MS–LTC–DRGs that
there were in the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24036 through 24041). We did not
receive any public comments on our
proposed methodology for determining
FY 2011 relative weights for these novolume MS–LTC–DRGs and, therefore,
for the reasons described above, we are
adopting it as final. For reference, below
we describe the methodology that was
used to determine FY 2011 relative
weights for the no-volume MS–LTC–
DRGs. We crosswalked the no-volume
MS–LTC–DRG to a MS–LTC–DRG for
which there were LTCH cases in the FY
2009 MedPAR file and to which it was
similar clinically in intensity of use of
resources and relative costliness as
determined by criteria such as care
provided during the period of time
surrounding surgery, surgical approach
(if applicable), length of time of surgical
procedure, postoperative care, and
length of stay. We evaluated the relative
costliness in determining the applicable
MS–LTC–DRG to which a no-volume
MS–LTC–DRG was cross-walked in
order to assign an appropriate relative
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weight for the no-volume MS–LTC–
DRGs in FY 2011. (For more detail on
our process for evaluating relative
costliness, we refer readers to the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(73 FR 48543).) We believe in the rare
event that there would be a few LTCH
cases grouped to one of the no-volume
MS–LTC–DRGs in FY 2011, the relative
weights assigned based on the crosswalked MS–LTC–DRGs would result in
an appropriate LTCH PPS payment
because the crosswalks, which are based
on similar clinical similarity and
relative costliness, generally require
equivalent relative resource use.
We then assigned the relative weight
of the cross-walked MS–LTC–DRG as
the relative weight for the no-volume
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MS–LTC–DRG such that both of these
MS–LTC–DRGs (that is, the no-volume
MS–LTC–DRG and the cross-walked
MS–LTC–DRG) have the same relative
weight for FY 2011. We note that if the
cross-walked MS–LTC–DRG had 25
cases or more, its relative weight, which
was calculated using the methodology
described in Steps 1 through 4 above,
was assigned to the no-volume MS–
LTC–DRG as well. Similarly, if the MS–
LTC–DRG to which the no-volume MS–
LTC–DRG is cross-walked had 24 or less
cases and, therefore, was designated to
one of the low-volume quintiles for
purposes of determining the relative
weights, we assigned the relative weight
of the applicable low-volume quintile to
the no-volume MS–LTC–DRG such that
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both of these MS–LTC–DRGs (that is,
the no-volume MS–LTC–DRG and the
cross-walked MS–LTC–DRG) have the
same relative weight for FY 2011. (As
we noted above, in the infrequent case
where nonmonotonicity involving a novolume MS–LTC–DRG results,
additional adjustments as described in
Step 6 are required in order to maintain
monotonically increasing relative
weights.)
For this final rule, a list of the novolume MS–LTC–DRGs and the MS–
LTC–DRG to which it is cross-walked
(that is, the cross-walked MS–LTC–
DRG) for FY 2011 is shown in the chart
below.
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To illustrate this methodology for
determining the relative weights for the
FY 2011 MS–LTC–DRGs with no LTCH
cases, we are providing the following
example, which refers to the no-volume
MS–LTC–DRGs crosswalk information
for FY 2011 provided in the chart above.
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Example: There were no cases in the
FY 2009 MedPAR file used for this final
rule for MS–LTC–DRG 61 (Acute
Ischemic Stroke with Use of
Thrombolytic Agent with MCC). We
determined that MS–LTC–DRG 70
(Nonspecific Cebrovascular Disorders
with MCC) was similar clinically and
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based on resource use to MS–LTC–DRG
61. Therefore, we assigned the same
relative weight of MS–LTC–DRG 70 of
0.9165 for FY 2011 to MS–LTC–DRG 61
(Table 11 of the Addendum to this final
rule).
Again, we note that, as this system is
dynamic, it is entirely possible that the
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number of MS–LTC–DRGs with no
volume of LTCH cases based on the
system will vary in the future. We used
the most recent available claims data in
the MedPAR file to identify no-volume
MS–LTC–DRGs and to determine the
relative weights in this final rule.
Furthermore, for FY 2011, consistent
with our historical relative weight
methodology and as we proposed, we
established MS–LTC–DRG relative
weights of 0.0000 for the following
transplant MS–LTC–DRGs: Heart
Transplant or Implant of Heart Assist
System with MCC (MS–LTC–DRG 1);
Heart Transplant or Implant of Heart
Assist System without MCC (MS–LTC–
DRG 2); Liver Transplant with MCC or
Intestinal Transplant (MS–LTC–DRG 5);
Liver Transplant without MCC (MS–
LTC–DRG 6); Lung Transplant (MS–
LTC–DRG 7); Simultaneous Pancreas/
Kidney Transplant (MS–LTC–DRG 8);
Pancreas Transplant (MS–LTC–DRG 10);
and Kidney Transplant (MS–LTC–DRG
652). This is because Medicare will only
cover these procedures if they are
performed at a hospital that has been
certified for the specific procedures by
Medicare and presently no LTCH has
been so certified. At the present time,
we include these eight transplant MS–
LTC–DRGs in the GROUPER program
for administrative purposes only.
Because we use the same GROUPER
program for LTCHs as is used under the
IPPS, removing these MS–LTC–DRGs
would be administratively burdensome.
(For additional information regarding
our treatment of transplant MS–LTC–
DRGs, we refer readers to the RY 2010
LTCH PPS final rule (74 FR 43964).)
Step 6—Adjust the FY 2011 MS–LTC–
DRG relative weights to account for
nonmonotonically increasing relative
weights.
As discussed earlier in this section,
the MS–DRGs contain base DRGs that
have been subdivided into one, two, or
three severity of illness levels. Where
there are three severity levels, the most
severe level has at least one code that is
referred to as an MCC (that is, major
complication or comorbidity). The next
lower severity level contains cases with
at least one code that is a CC (that is,
complication or comorbidity). Those
cases without an MCC or a CC are
referred to as ‘‘without CC/MCC.’’ When
data do not support the creation of three
severity levels, the base DRG is
subdivided into either two levels or the
base DRG is not subdivided. The twolevel subdivisions could consist of the
DRG with CC/MCC and the DRG
without CC/MCC. Alternatively, the
other type of two-level subdivision may
consist of the DRG with MCC and the
DRG without MCC.
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In those base MS–LTC–DRGs that are
split into either two or three severity
levels, cases classified into the ‘‘without
CC/MCC’’ MS–LTC–DRG are expected to
have a lower resource use (and lower
costs) than the ‘‘with CC/MCC’’ MS–
LTC–DRG (in the case of a two-level
split) or both the ‘‘with CC’’ and the
‘‘with MCC’’ MS–LTC–DRGs (in the case
of a three-level split). That is,
theoretically, cases that are more severe
typically require greater expenditure of
medical care resources and will result in
higher average charges. Therefore, in the
three severity levels, relative weights
should increase by severity, from lowest
to highest. If the relative weights
decrease as severity decreased (that is,
if within a base MS–LTC–DRG, an MS–
LTC–DRG with CC has a higher relative
weight than one with MCC, or the MS–
LTC–DRG without CC/MCC has a higher
relative weight than either of the
others), they are nonmonotonic. We
continue to believe that utilizing
nonmonotonic relative weights to adjust
Medicare payments would result in
inappropriate payments because the
payment for the cases in the higher
severity level in a base MS–LTC–DRG
(which are generally expected to have
higher resource use and costs) would be
lower than the payment for cases in a
lower severity level within the same
base MS–LTC–DRG (which are generally
expected to have lower resource use and
costs). Consequently, in determining the
FY 2011 MS–LTC–DRG relative weights
in this rule, consistent with our
historical methodology and as we
proposed, we combined MS–LTC–DRG
severity levels within a base MS–LTC–
DRG for the purpose of computing a
relative weight when necessary to
ensure that monotonicity is maintained.
For a comprehensive description of our
existing methodology to adjust for
nonmonotonicity, we refer readers to
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43964 through 43966).
Any adjustments for nonmonotonicity
that were made in determining the FY
2011 MS–LTC–DRG relative weights in
this final rule by applying this
methodology are denoted in Table 11 of
the Addendum to this final rule.
Step 7—Calculate the FY 2011 budget
neutrality factor.
As we established in the RY 2008
LTCH PPS final rule (72 FR 26882),
under the broad authority conferred
upon the Secretary to develop the LTCH
PPS under section 123 of Public Law
106–113, as amended by section 307(b)
of Public Law 106–554, beginning with
the MS–LTC–DRG update for FY 2008,
the annual update to the MS–LTC–DRG
classifications and relative weights is
done in a budget neutral manner such
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that estimated aggregate LTCH PPS
payments would be unaffected, that is,
would be neither greater than nor less
than the estimated aggregate LTCH PPS
payments that would have been made
without the MS–LTC–DRG classification
and relative weight changes
(§ 412.517(b) in conjunction with
§ 412.503). (For a detailed discussion on
the establishment of the budget
neutrality requirement for the annual
update of the MS–LTC–DRG
classifications and relative weights, we
refer readers to the RY 2008 LTCH PPS
final rule (72 FR 26881).)
The MS–LTC–DRG classifications and
relative weights are updated annually
based on the most recent available
LTCH claims data to reflect changes in
relative LTCH resource use (§ 412.517(a)
in accordance with § 412.503). Under
the budget neutrality requirement at
§ 412.517(b), for each annual update, the
MS–LTC–DRG relative weights are
uniformly adjusted to ensure that
estimated aggregate payments under the
LTCH PPS would not be affected (that
is, decreased or increased). Consistent
with that provision, in both the May 4,
2010 FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24042 through 24043) and
the June 2, 2010 FY 2011 IPPS/LTCH
PPS supplemental proposed rule (75 FR
30970 through 30971), we proposed to
update the MS–LTC–DRG classifications
and relative weights for FY 2011 based
on the most recent available LTCH data,
and to apply a budget neutrality
adjustment in determining the FY 2011
MS–LTC–DRG relative weights.
Comment: One commenter objected to
the budget neutrality requirement for
the annual update to the MS–LTC–DRG
relative weights. The commenter
asserted that LTCHs with high acuity
patients are being penalized because of
the growth in lower acuity cases, and
that CMS’ budget neutrality
methodology dilutes the LTCH aggregate
case-mix from year-to-year.
Response: We disagree with the
commenter that our budget neutrality
methodology dilutes a LTCH’s case-mix
or that LTCHs with more resourceintensive cases are being penalized
because of the growth in lower resourceintensive cases. By definition, the MS–
LTC–DRG relative weights ‘‘reflect the
estimated relative cost of hospital
resources used with that group
compared to discharges classified
within other groups’’ (§ 412.515). Thus,
the relative weights themselves are not
intended to increase or decrease
aggregate payments under the LTCH
PPS. If in fact there is growth in less
intensive, lower acuity cases, then our
established budget neutrality
methodology would act to increase the
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relative weights for all MS–LTC–DRGs.
This is because under our established
budget neutrality methodology, each MS
LTC DRG relative weight is uniformly
adjusted to ensure that estimated
aggregate payments under the LTCH
PPS would not be affected. As we
discussed when we established the
budget neutrality requirement for the
annual update of the MS–LTC–DRG
classifications and relative weights, we
believe the LTC–DRG relative weights
should reflect the true costs of treating
LTCH patients and should be updated
annually, based on the latest available
data, to reflect relative LTCH resource
without affecting aggregate LTCH PPS
(72 FR 26881 through 26883). For these
reasons, we continue to believe that it
is appropriate to update the MS–LTC–
DRG classifications and relative weights
in a budget neutral manner, and are not
modifying our existing budget neutrality
requirement or methodology in this
final rule.
As noted above, in section VII.A.1. of
this preamble, a number of the
provisions of the Affordable Care Act
affected the policies, payment rates and
factors under the LTCH PPS. Due to the
timing of the passage of the legislation,
we were unable to address those
provisions in the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule, and the
proposed policies and payment rates in
that proposed rule did not reflect the
new legislation. On June 2, 2010, we
issued a FY 2011 IPPS/LTCH PPS
supplemental proposed rule that
addressed the provisions of the
Affordable Care Act that affected our
proposed policies and payment rates for
FY 2011 under the LTCH PPS. In that
supplemental proposed rule, we
proposed a standard Federal rate for FY
2011 that incorporates the ‘‘other
adjustment’’ required in section
1886(m)(3)(A)(ii) as amended and
described in section 1886(m)(4) as
amended. This revision to the proposed
standard Federal rate for FY 2011 also
required us to revise the proposed
relative weights for the MS–LTC–DRGs
for FY 2011 since our established
methodology for updating the annual
update to the MS–LTC–DRG
classifications and relative weights in a
budget neutral manner requires that
estimated aggregate LTCH PPS
payments would be unaffected. That is,
under the budget neutrality requirement
estimated aggregate LTCH PPS
payments would be neither greater than
nor less than the estimated aggregate
LTCH PPS payments that would have
been made without the MS–LTC–DRG
classification and relative weight
changes. (75 FR 30970)
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To ensure budget neutrality in the
update to the MS–LTC–DRG
classifications and relative weights
under § 412.517(b), in both the May 4,
2010 FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24042 through 24043) and
the June 2, 2010 FY 2011 IPPS/LTCH
PPS supplemental proposed rule (75 FR
30970 through 30971), we proposed to
continue to use our established two-step
budget neutrality methodology. We
received no specific comments on our
proposal to continue to apply our
established two-step budget neutrality
methodology in determining the FY
2011 MS–LTC–DRG relative weights.
Therefore, we are adopting it in this
final rule. In this final rule, in the first
step of our MS–LTC–DRG budget
neutrality methodology, we calculated
and applied a normalization factor to
the recalibrated relative weights (the
result of Steps 1 through 6 above) to
ensure that estimated payments are not
influenced by changes in the
composition of case types or the
changes to the classification system.
That is, the normalization adjustment is
intended to ensure that the recalibration
of the MS–LTC–DRG relative weights
(that is, the process itself) neither
increases nor decreases the average CMI.
To calculate the normalization factor
for FY 2011 (the first step of our budget
neutrality methodology), we used the
following three steps: (1.a.) We used the
most recent available LTCH claims data
(FY 2009) and grouped them using the
FY 2011 GROUPER (Version 28.0) and
the recalibrated FY 2011 MS–LTC–DRG
relative weights (determined in steps 1
through 6 of the Steps for Determining
the FY 2011 MS–LTC–DRG Relative
Weights above) to calculate the average
CMI; (1.b.) we grouped the same LTCH
claims data (FY 2009) using the FY 2010
GROUPER (Version 27.0) and FY 2010
MS–LTC–DRG relative weights and
calculated the average CMI; and (1.c) we
computed the ratio of these average
CMIs by dividing the average CMI for
FY 2010 (determined in Step 1.b.) by the
average CMI for FY 2011 (determined in
step 1.a.). In determining the MS–LTC–
DRG relative weights for FY 2011, each
recalibrated MS–LTC–DRG relative
weight was multiplied by 1.10382 in the
first step of the budget neutrality
methodology, which produced
‘‘normalized relative weights.’’
In this final rule, in the second step
of our MS–LTC–DRG budget neutrality
methodology, we determined a budget
neutrality factor to ensure that estimated
aggregate LTCH PPS payments (based
on the most recent available LTCH
claims data) after reclassification and
recalibration (that is, the FY 2011 MS–
LTC–DRG classifications and relative
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weights) are equal to estimated
aggregate LTCH PPS payments before
reclassification and recalibration (that
is, the FY 2010 MS–LTC–DRG
classifications and relative weights).
Accordingly, consistent with our
existing methodology, we used FY 2009
discharge data to simulate payments
and compare estimated aggregate LTCH
PPS payments using the FY 2010 MS–
LTC–DRGs and relative weights to
estimate aggregate LTCH PPS payments
using the FY 2011 MS–LTC–DRGs and
relative weights. Furthermore,
consistent with our historical policy of
using the best available data, we used
the most recently available claims data
for determining the budget neutrality
adjustment factor in the final rule, that
is, data from the March 2010 update of
the FY 2009 MedPAR file.
For this final rule, we determined the
FY 2011 budget neutrality adjustment
factor using the following three steps:
(2.a.) We simulated estimated total
LTCH PPS payments using the
normalized relative weights for FY 2011
and GROUPER Version 28.0 (as
described above); (2.b.) we simulated
estimated total LTCH PPS payments
using the FY 2010 GROUPER (Version
27.0) and the FY 2010 MS–LTC–DRG
relative weights shown in Table 11 of
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44183 through 44192);
and (2.c.) we calculated the ratio of
these estimated total LTCH PPS
payments by dividing the estimated
total LTCH PPS payments using the FY
2010 GROUPER (Version 27.0) and the
FY 2010 MS–LTC–DRG relative weights
(determined in step 2.b.) by the
estimated total LTCH PPS payments
using the FY 2011 GROUPER (Version
28.0) and the normalized MS–LTC–DRG
relative weights for FY 2011
(determined in Step 2.a.). In
determining the FY 2011 MS–LTC–DRG
relative weights, each normalized
relative weight was multiplied by a
budget neutrality factor of 0.988124 in
the second step of the budget neutrality
methodology to determine the budget
neutral FY 2011 relative weight for each
MS–LTC–DRG.
Accordingly, in determining the FY
2011 MS–LTC–DRG relative weights in
this final rule, consistent with our
existing methodology and as we
proposed, we applied a normalization
factor of 1.10382 and a budget neutrality
factor of 0.988124 (computed as
described above). Table 11 in the
Addendum to this final rule lists the
MS–LTC–DRGs and their respective
relative weights, geometric mean length
of stay, and five-sixths of the geometric
mean length of stay (used in
determining SSO payments under
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§ 412.529) for FY 2011. The FY 2011
MS–LTC–DRG relative weights in Table
11 in the Addendum to this final rule
reflect both the normalization factor of
1.10382 and the budget neutrality factor
of 0.988124.
C. Changes to the LTCH Payment Rates
and Other Changes to the FY 2011
LTCH PPS
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1. Overview of Development of the
LTCH Payment Rates
The LTCH PPS was effective
beginning with a LTCH’s first cost
reporting period beginning on or after
October 1, 2002. Effective beginning
with that cost reporting period, LTCHs
were paid, during a 5-year transition
period, a total LTCH prospective
payment that was comprised of an
increasing proportion of the LTCH PPS
Federal rate and a decreasing proportion
based on reasonable cost-based
principles, unless the hospital made a
one-time election to receive payment
based on 100 percent of the Federal rate,
as specified in § 412.533. New LTCHs
(as defined at § 412.23(e)(4)) are paid
based on 100 percent of the Federal rate,
with no phase-in transition payments.
The basic methodology for
determining LTCH PPS Federal
prospective payment rates is set forth at
§ 412.515 through § 412.536. In this
section, we discuss the factors that will
be used to update the LTCH PPS
standard Federal rate for FY 2011, that
is, effective for LTCH discharges
occurring on or after October 1, 2010
through September 30, 2011.
For further details on the
development of the FY 2003 standard
Federal rate, we refer readers to the
August 30, 2002 LTCH PPS final rule
(67 FR 56027 through 56037). For
subsequent updates to the LTCH PPS
Federal rate, we refer readers to the
following final rules: RY 2004 LTCH
PPS final rule (68 FR 34134 through
34140), RY 2005 LTCH PPS final rule
(69 FR 25682 through 25684), RY 2006
LTCH PPS final rule (70 FR 24179
through 24180), RY 2007 LTCH PPS
final rule (71 FR 27819 through 27827),
RY 2008 LTCH PPS final rule (72 FR
26870 through 27029), RY 2009 LTCH
PPS final rule (73 FR 26800 through
26804), and RY 2010 LTCH PPS final
rule (74 FR 44021 through 44030). The
update to the LTCH PPS standard
Federal rate for FY 2011 is presented in
section V.A. of the Addendum to this
final rule. The two components of the
update to the LTCH PPS standard
Federal rate for FY 2011 are discussed
below.
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2. Market Basket for LTCHs Reimbursed
Under the LTCH PPS
a. Overview
Historically, the Medicare program
has used a market basket to account for
price increases in the services furnished
by providers. The market basket used
for the LTCH PPS includes both
operating and capital-related costs of
LTCHs because the LTCH PPS uses a
single payment rate for both operating
and capital-related costs. With the
initial implementation of the LTCH PPS
for FY 2003, we established the use of
the excluded hospital with capital
market basket as the LTCH PPS market
basket (67 FR 56016 through 56017).
The development of the initial LTCH
PPS standard Federal rate for FY 2003,
using the excluded hospital with capital
market basket, is discussed in further
detail in the August 30, 2002 LTCH PPS
final rule (67 FR 56027 through 56033).
For further details on the development
of the excluded hospital with capital
market basket, we refer readers to the
RY 2004 LTCH PPS final rule (68 FR
34134 through 34137).
Beginning in RY 2007, we adopted the
rehabilitation, psychiatric, long-term
care (RPL) hospital market basket based
on FY 2002 data as the appropriate
market basket of goods and services
under the LTCH PPS for discharges
occurring on or after July 1, 2006. As
discussed in the RY 2007 LTCH PPS
final rule (71 FR 27810), based on our
research, we did not develop a market
basket specific to LTCH services. We
were unable to create a separate market
basket specifically for LTCHs at that
time due to the small number of
facilities and the limited amount of data
that was reported.
For further details on the
development of the FY 2002-based RPL
market basket, we refer readers to the
RY 2007 LTCH PPS final rule (71 FR
27810 through 27817).
b. Revision of Certain Market Basket
Updates as Required by the Affordable
Care Act
As discussed in the FY 2011 IPPS/
LTCH PPS supplemental proposed rule
issued on June 2, 2010 (75 FR 30965
through 30971), several provisions of
the Affordable Care Act affected the
policies and payment rates for RY 2010
and FY 2011 under the LTCH PPS.
Section 1886(m)(3)(A)(ii) of the Act, as
added by section 3401(c) of the
Affordable Care Act, specifies that for
each of rate years 2010 through 2019,
any annual update to the standard
Federal rate shall be reduced by the
other adjustment specified in new
section 1886(m)(4) of the Act.
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Furthermore, section 1886(m)(3)(A)(i) of
the Act specifies that, for rate year 2012
and subsequent rate years, any annual
update to the standard Federal rate shall
be reduced by the productivity
adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. Section
1886(m)(3)(A)(ii) and sections
1886(m)(4)(A) and (B) of the Act require
a 0.25 percentage point reduction for
rate year 2010 and a 0.50 percentage
point reduction for rate year 2011.
Section 1886(m)(3)(B) of the Act
provides that the application of
paragraph (3) of section 1886(m) of the
Act may result in the annual update
being less than zero for a rate year, and
may result in payment rates for a rate
year being less than such payment rates
for the preceding rate year. Furthermore,
section 3401(p) of the Affordable Care
Act specifies that the amendments made
by section 3401(c) of such Act shall not
apply to discharges occurring before
April 1, 2010. (75 FR 30968 through
30971)
We note that in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24026
through 24027), since the annual update
to the LTCH PPS policies, rates and
factors now occurs on October 1, we
proposed to adopt the term ‘‘fiscal year’’
(FY) rather than ‘‘rate year’’ (RY) under
the LTCH PPS beginning October 1,
2010, to conform with the standard
definition of the Federal fiscal year
(October 1 through September 30) used
by other PPSs, such as the IPPS.
Consequently, in that proposed rule and
in the FY 2011 IPPS/LTCH PPS
supplemental proposed rule, for
purposes of clarity, when discussing the
annual update for the LTCH PPS, we
employed ‘‘fiscal year’’ rather than ‘‘rate
year’’ because it is our intent that the
phrase ‘‘fiscal year’’ be used
prospectively in all circumstances
dealing with the LTCH PPS. Similarly,
although the language of section 3401(c)
and section 10319 and section 1105(b)
of the Affordable Care Act refer to years
2010 and thereafter under the LTCH
PPS as ‘‘rate year,’’ consistent with our
proposal to change the terminology used
under the LTCH PPS from ‘‘rate year’’ to
‘‘fiscal year,’’ for purposes of clarity, in
both the FY 2011 IPPS/LTCH PPS
proposed and supplemental proposed
rules, when discussing the annual
update for the LTCH PPS, including the
provisions of the Affordable Care Act,
we employed ‘‘fiscal year’’ rather than
‘‘rate year’’ for 2011 and subsequent
years because it is our intent that ‘‘fiscal
year’’ be used prospectively in all
circumstances dealing with the LTCH
PPS. (As discussed below in VII.D. of
this preamble, we are finalizing our
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proposal to adopt the term ‘‘fiscal year’’
(FY) rather than ‘‘rate year’’ (RY) under
the LTCH PPS beginning October 1,
2010. Therefore, in this final rule, we
employ ‘‘fiscal year’’ rather than ‘‘rate
year’’ for 2011 and subsequent years in
all circumstances dealing with the
LTCH PPS.)
c. Change to Reflect the Market Basket
Update for LTCHs for RY 2010
(§ 412.523(c)(3)(vi))
In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule appearing in the Federal
Register on August 27, 2009 (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). Several
provisions of the Affordable Care Act
affected some of the policies, payment
rates, and factors for determining
payments under the LTCH PPS for RY
2010. In a notice issued on June 2, 2010
in the Federal Register (75 FR 31128
through 31130), we established revised
RY 2010 LTCH PPS rates and factors
consistent with the provisions of
sections 1886(m)(3) and (4) of the Act,
as added and amended by sections
3401(c), 3401(p), 10319(b), and 1105(b)
of the Affordable Care Act. Section
1886(m)(3)(A)(ii) of the Act provides for
each of RYs 2010 through 2019, the
annual update to the standard Federal
rate is reduced by the ‘‘other
adjustment’’ described in section
1886(m)(4) of the Act. Specifically,
sections 1886(m)(3)(A)(ii) and (m)(4)(A)
of the Act require a 0.25 percentage
point reduction to the annual update to
the standard Federal rate for RY 2010.
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. Section 3401(p) of the
Affordable Care Act 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 the Affordable Care Act
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.
As discussed in the June 2, 2010
Federal Register notice (75 FR 31128
through 31129), consistent with our
historical practice and the methodology
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used in the FY 2010 IPPS/RY 2010 final
rule, we announced an update to the
LTCH PPS standard Federal rate for RY
2010 of 1.74 percent. This annual
update for RY 2010 is based on the full
forecasted estimated increase in the
LTCH PPS market basket for RY 2010 of
2.5 percent, adjusted by the 0.25
percentage point reduction required by
sections 1886(m)(3)(A)(ii) and (m)(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. In the FY 2011 IPPS/
LTCH PPS supplemental proposed rule
(75 FR 30969), under the authority of
sections 1886(m)(3)(A)(ii) and (m)(4)(A)
of the Act, we proposed to amend
§ 412.523(c)(3)(vi) to specify 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.
Furthermore, in that same supplemental
proposed rule, consistent with section
3401(p) of the Affordable Care Act, we
also proposed to revise
§ 412.523(c)(3)(vi) to 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 specified under
§ 412.523(c)(3)(v) updated by 2.0
percent (that is, a standard Federal rate
of $39,896.65 (74 FR 44022)). We also
noted that the provisions of the law that
add sections 1886(m)(3) and (m)(4) of
the Act are self-implementing, and in
the FY 2011 IPPS/LTCH PPS
supplemental proposed rule, we
proposed to incorporate existing law
regarding the 0.25 percentage point
reduction to the annual update to the
standard Federal rate for RY 2010
(including the application of the revised
standard Federal rate that reflects that
0.25 percentage point reduction in
making payments for discharges on or
after April 1, 2010) into the regulations
at § 412.529(c)(3)(vi) to reflect this
required policy change.
Comment: One commenter on the
June 2, 2010 notice stated that the
methodology CMS used to apply the
market basket adjustment required by
the Affordable Care Act appears to be a
departure from what is intended by the
statute and questions why CMS did not
simply subtract the required 0.25
percentage point reduction for RY 2010
from the previously established RY 2010
update (implemented in the FY 2010
IPPS/RY 2010 LTCH PPS final rule).
The commenter believed that the
required market basket reduction should
be implemented by subtraction and
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requested that CMS explain its method
for implementing the required 0.25
percentage point reduction for RY 2010.
Response: We disagree with the
commenter that our implementation of
the required market basket reduction for
RY 2010 required by the Affordable Care
Act is inconsistent with the intent of
that statutory provision. As we stated in
the notice that implemented the
required 0.25 percentage point
reduction for RY 2010, ‘‘consistent with
sections 1886(m)(3)(A)(ii) and (m)(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 point
required by sections 1886(m)(3)(A)(ii)
and (m)(4)(A) of the Act.)’’ (emphasis
added; 75 FR 31128). Thus, we
implemented the statutorily required
market basket reduction (0.25
percentage point for RY 2010) by
subtraction from the full market basket
update (2.5 percent) that was
established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (2.5 percent
minus 0.25 percentage point = 2.25
percent).
However, in addition to the full
market basket update, in determining
the update for the standard Federal rate
for RY 2010, we applied an adjustment
to account for the increase in case-mix
due to changes in documentation and
coding in a prior period that do not
reflect increased severity of illness.
Specifically, in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR
43972), we established a ¥0.5 percent
adjustment to account for the increase
in case-mix due to changes in
documentation and coding in a prior
period (FY 2007) that do not reflect
increased severity of illness. Therefore,
consistent with our methodology for
determining the update to the standard
Federal rate for RY 2010 (74 FR 44022),
in the June 2, 2010 notice (75 FR 31128),
we established an update factor to the
standard Federal rate for RY 2010 of
1.74 percent calculated as 1.0225 × (1
divided by 1.005) = 1.0174 or 1.74
percent. For the reasons explained
above, we believe the determination of
the 1.74 percent update for RY 2010
based on the market basket update of
2.25 percent (computed as the full RY
2010 market basket increase of 2.5
percent minus the 0.25 percentage point
required by sections 1886(m)(3)(A)(ii)
and (m)(4)(A) of the Act) and an
adjustment of ¥0.5 percent to account
for the increase in case-mix due to
changes in documentation and coding
in a prior period that do not reflect
increased severity of illness is
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consistent with the provisions of the
Affordable Care Act.
In this final rule, we are adopting as
final the proposed changes to the update
for RY 2010 to the standard Federal rate
at § 412.523(c)(3)(vi) to reflect the
provisions of the Affordable Care Act.
Accordingly, under the authority of
sections 1886(m)(3)(A)(ii) and (m)(4)(A)
of the Act, we are revising
§ 412.523(c)(3)(vi) to specify 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.
Furthermore, consistent with section
3401(p) of the Affordable Care Act, we
also are revising § 412.523(c)(3)(vi) to
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)(3)(v) updated by 2.0
percent.
d. Market Basket Under the LTCH PPS
for FY 2011
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24044),
when we initially created the FY 2002based RPL market basket, we were
unable to create a separate market
basket specifically for LTCHs due, in
part, to the small number of facilities
and the limited data that were provided
in the Medicare cost reports. Over the
last several years, however, the number
of LTCH facilities submitting valid
Medicare cost report data has increased.
Based on this development, as well as
our desire to move from one RPL market
basket to three stand-alone and
provider-specific market baskets (for
IRFs, IPFs, and LTCHs, respectively), we
plan to begin exploring the viability of
creating these market baskets for future
use. However, as we discussed in the
RY 2010 LTCH PPS final rule (74 FR
43967 through 43968), we are
conducting further research to assist us
in understanding the reasons for the
variations in costs and cost structure
between freestanding IRFs and hospitalbased IRFs. We also are researching the
reasons for similar variations in costs
and cost structure between freestanding
IPFs and hospital-based IPFs. Therefore,
as we continue to explore the
development of stand-alone market
baskets for LTCHs, IRFs and IPFs,
respectively, as we stated in the FY
2011 IPPS/LTCH PPS proposed rule, we
believe that it is appropriate to continue
to use the FY 2002-based RPL market
basket for LTCHs, IRFs and IPFs under
their respective PPSs.
As we also stated in the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
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24044), for the reasons discussed when
we adopted the RPL market basket for
use under the LTCH PPS in the RY 2007
LTCH PPS final rule (71 FR 27810
through 27817), we continue to believe
that the RPL market basket
appropriately reflects the cost structure
of LTCHs. For the reasons explained
above, in that same proposed rule, we
proposed to continue to use the FY
2002-based RPL market basket under the
LTCH PPS for FY 2011. We also stated
that we are hopeful that progress can be
made in the near future with respect to
creating stand-alone market baskets for
LTCHs, IRFs, and IPFs and, as a result,
may propose to rebase the appropriate
market basket(s) for subsequent updates
in the future.
Comment: One commenter stated that
there are sufficient LTCHs now to
support the development of a separate
LTCH market basket. The commenter
stated that in order for the LTCH PPS to
accurately reflect the costs of providing
services in an LTCH, CMS should adopt
a market basket that is limited to LTCH
goods and services.
Response: As stated in the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24044), we continue to explore the
possibility of implementing three
separate, stand-alone market baskets for
hospitals excluded from the IPPS, rather
than use a single RPL market basket for
IRFs, IPFs, and LTCHs. We addressed a
similar comment in the FY 2010 IPPS/
LTCH PPS final rule (74 FR 43968)
where we stated that while the number
of LTCHs submitting cost report data
has increased, we believe further
research is required to determine the
feasibility of developing stand-alone
market baskets for LTCHs, IRFs, and
IPFs. Furthermore, we stated that we
will be exploring the viability and
technical appropriateness of a standalone market basket. At this time, we are
still conducting further research to
assist us in understanding the reasons
for the variations in costs and cost
structure between freestanding and
hospital based providers, specifically
IRFs and IPFs. Therefore, as we
continue to explore the development of
stand-alone market baskets for LTCHs,
IRFs and IPFs, respectively, we believe
that it is appropriate to continue to use
the FY 2002-based RPL market basket
for LTCHs, IRFs and IPFs under their
respective PPSs.
In this final rule, under the authority
of section 123 of the BBRA as amended
by section 307(b) of the BIPA, we are
establishing the continued use of the FY
2002-based RPL market basket under the
LTCH PPS for FY 2011. For the reasons
explained above in this section, we
continue to believe that the RPL market
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50389
basket appropriately reflects the cost
structure of LTCHs.
e. Market Basket Update for LTCHs for
FY 2011
Consistent with our historical
practice, we estimate the RPL market
basket update based on IHS Global
Insight, Inc.’s forecast using the most
recent available data. IHS Global
Insight, Inc. is a nationally recognized
economic and financial forecasting firm
that contracts with CMS to forecast the
components of the hospital market
baskets. In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24044), based on
IHS Global Insight Inc.’s first quarter
2010 forecast, the proposed FY 2011
market basket estimate for the LTCH
PPS using the FY 2002-based RPL
market basket was 2.4 percent, as this
was the best available data at that time.
In addition, consistent with our
historical practice of using market
basket estimates based on the most
recent available data, we proposed that
if more recent data are available when
we develop the final rule, we would use
such data, if appropriate.
Section 1886(m)(3)(A)(ii) of the Act as
added by section 3401(c) of the
Affordable Care Act specifies that, for
each of RYs 2010 through 2019, any
annual update to the standard Federal
rate shall be reduced by the other
adjustment specified in new section
1886(m)(4) of the Act. Furthermore,
section 1886(m)(3)(A)(i) of the Act
specifies that, for rate year 2012 and
each subsequent rate year, any annual
update to the standard Federal rate shall
be reduced by the productivity
adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act.
As discussed in the FY 2011 IPPS/
LTCH PPS supplemental proposed rule
(75 FR 30969 through 30970), for FY
2011, section 1886(m)(4)(B) of the Act,
as added and amended by sections
3401(c), 10319(b), and 1105(b) of the
Affordable Care Act, requires a 0.50
percentage point reduction to the
annual update to the standard Federal
rate for rate year 2011. Therefore in that
same supplemental proposed rule, we
proposed a market basket update under
the LTCH PPS for FY 2011 of 1.9
percent (that is, the most recent estimate
of the LTCH PPS market basket update
at that time of 2.4 percent minus the
0.50 percentage point required in
section 1886(m)(4)(B) of the Act. Again,
consistent with our historical practice of
using market basket estimates based on
the most recent available data, we
proposed that if more recent data are
available when we develop the final
rule, we would use such data, if
appropriate, in determining the final
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market basket update under the LTCH
PPS for FY 2011. (We note that in the
FY 2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30969 through
30970), we proposed to update the
LTCH PPS standard Federal rate by
¥0.59 percent for FY 2011, which
reflected the proposed market basket
update of 1.9 percent (discussed above)
and a proposed adjustment to account
for the increase in case-mix in the prior
periods that resulted from changes in
documentation and coding practices
rather than increases in patients’
severity of illness (discussed in the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 24045 through 24046)).
We did not receive any public
comments on our proposed market
basket update under the LTCH PPS for
FY 2011 of 1.9 percent. However, we
received a few comments that stated
that the market basket update for FY
2011 should not be adjusted to account
for the increase in case-mix in the prior
periods that resulted from changes in
documentation and coding practices
rather than increases in patients’
severity of illness. We summarize and
respond to these comments below in
section VII.C.3. of this preamble.
In this final rule, as proposed and
consistent with our historical practice,
we estimate the RPL market basket
update based on IHS Global Insight,
Inc.’s forecast using the most recent
available data. IHS Global Insight, Inc.
is a nationally recognized economic and
financial forecasting firm that contracts
with CMS to forecast the components of
the hospital market baskets. Based on
IHS Global Insight, Inc.’s second quarter
2010 forecast, the FY 2011 market
basket estimate for the LTCH PPS using
the FY 2002-based RPL market basket is
2.5 percent.
As discussed above, for FY 2011,
section 1886(m)(4)(B) of the Act as
added and amended by sections 3401(c),
10319 and 1105(b) of the Affordable
Care Act, requires a 0.50 percentage
point reduction to the annual update to
the standard Federal rate for rate year
2011. Therefore, in this final rule, we
are establishing a market basket update
under the LTCH PPS for FY 2011 of 2.0
percent (that is, the most recent estimate
of the LTCH PPS market basket of 2.5
percent minus the 0.50 percentage point
required in section 1886(m)(4)(B) of the
Act. (We note that in section III.A. of the
Addendum to this final rule, for FY
2011, we are establishing an update to
the LTCH PPS standard Federal rate of
¥0.49 percent, based on the market
basket update for FY 2011 of 2.0 percent
(discussed above) and an adjustment of
¥2.5 percent to account for the increase
in case-mix in the prior periods that
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resulted from changes in documentation
and coding practices rather than
increases in patient severity of illness
(discussed below in section VII.C.3. of
this preamble).)
f. Labor-Related Share Under the LTCH
PPS for FY 2011
As discussed in section V.B. of the
Addendum to this final rule, under the
authority of section 123 of the BBRA as
amended by section 307(b) of the BIPA,
we established an adjustment to the
LTCH PPS payments to account for
differences in LTCH area wage levels at
§ 412.525(c). The labor-related portion
of the LTCH PPS Federal rate, hereafter
referred to as the labor-related share, is
adjusted to account for geographic
differences in area wage levels by
applying the applicable LTCH PPS wage
index.
The labor-related share is determined
by identifying the national average
proportion of operating and capital costs
that are related to, influenced by, or
vary with the local labor market. We
continue to classify a cost category as
labor-related if the costs are laborintensive and vary with the local labor
market. In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24044), consistent
with our proposal to continue to use the
FY 2002-based RPL market basket under
the LTCH PPS for FY 2011 discussed
above, we proposed to continue to
define the labor-related share as the
national average proportion of operating
costs that are attributable to wages and
salaries, employee benefits, contract
labor, professional fees, labor-intensive
services, and a labor-related portion of
capital based on the FY 2002-based RPL
market basket. (Additional information
on the development of the FY 2002based RPL market basket used under the
LTCH PPS can be found in the RY 2007
LTCH PPS final rule (71 FR 27809
through 27818).) Furthermore,
consistent with our historical practice of
using the best available data, in the FY
2011 IPPS/LTCH PPS proposed rule, we
proposed to use IHS Global Insight,
Inc.’s first quarter 2010 forecast of the
FY 2002-based RPL market basket for
FY 2011 to determine the proposed
labor-related share for the LTCH PPS for
FY 2011 that would be effective for
discharges occurring on or after October
1, 2010, and through September 30,
2011, as these were the most recent
available data at that time. Consistent
with our historical practice of using the
best data available, we also proposed
that if more recent data are available to
determine the labor-related share used
under the LTCH PPS for FY 2011, we
would use these data for determining
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Fmt 4701
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the FY 2011 LTCH PPS labor-related
share in the final rule.
As discussed in the FY 2011 IPPS/
LTCH PPS proposed rule, the laborrelated share for FY 2011 would
continue to be determined as the sum of
the FY 2011 relative importance of each
labor-related cost category, and would
reflect the different rates of price change
for these cost categories between the
base year (FY 2002) and FY 2011. Using
the best available data at that time and
our proposed methodology, we
proposed a labor-related share of 75.407
percent for use under the LTCH PPS in
FY 2011. We did not receive any public
comments on our proposed labor-related
share for FY 2011. Therefore, we are
adopting our proposed methodology for
determining the labor-related share as
final and applying it to the best
available data consistent with our
historical practice in this final rule.
In this final rule, as we proposed, for
FY 2011 we continue to define the
labor-related share as the national
average proportion of operating costs
that are attributable to wages and
salaries, employee benefits, contract
labor, professional fees, labor-intensive
services, and a labor-related portion of
capital based on the FY 2002-based RPL
market basket. Consistent with our
historical practice of using the best
available data, for this final rule, we are
using IHS Global Insight, Inc.’s second
quarter 2010 forecast of the FY 2002based RPL market basket for FY 2011 to
determine the labor-related share under
the LTCH PPS for FY 2011 that will be
effective for discharges occurring on or
after October 1, 2010, and through
September 30, 2011, as these are the
most recent available data.
Based on IHS Global Insight, Inc.’s
second quarter 2010 forecast of the FY
2002-based RPL market based basket for
FY 2011, which is currently the best
available data, the sum of the relative
importance for FY 2011 for operating
costs (wages and salaries, employee
benefits, professional fees, and all-other
labor-intensive services) is 71.384
percent, as shown in the chart below. As
stated in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24044), the
portion of capital that is influenced by
the local labor market is estimated to be
46 percent. Because the relative
importance for capital in FY 2011 is
8.450 percent of the FY 2002-based RPL
market basket, we are taking 46 percent
of 8.450 percent to determine the laborrelated share of capital for FY 2011. The
result is 3.887 percent, which we added
to 71.384 percent for the operating cost
amount to determine the total laborrelated share for FY 2011. Accordingly,
under the authority set forth in section
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changes in documentation and coding
and measurement by the measurement
effect (74 FR 43970).
For the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule, we performed a
retrospective evaluation of the FY 2007
and FY 2008 data for LTCH claims paid
through December 2008. Based on this
evaluation, our actuaries determined
that case-mix increased 0.5 percent in
FY 2011 LABOR-RELATED SHARE
BASED ON THE FY 2002-BASED FY 2007 and 1.3 percent in FY 2008 due
to documentation and coding that did
RPL MARKET BASKET
not reflect real changes in case-mix. In
light of this analysis, in the FY 2010
FY 2011
relative
IPPS/RY 2010 LTCH PPS proposed rule,
Cost category
importance we proposed to apply a cumulative
(percent)
adjustment for the effect of
Wages and Salaries .................
52.449 documentation and coding that do not
Employee Benefits ....................
13.971 reflect an increase in patients’ severity
Professional Fees .....................
2.855 of illness of ¥1.8 percent (that is, ¥0.5
All Other Labor-Intensive Servpercent for FY 2007 plus ¥1.3 percent
ices ........................................
2.109 for FY 2008). We also invited public
comment on our proposed methodology
Subtotal .............................
71.384
and analysis. (For additional
Labor-Related Share of Capital
Costs (46 percent × 8.450) ...
3.887 information on our methodology and
the results of the retrospective
Total Labor-Related Share
75.271 evaluation, we refer reader to sections
VIII.C.3. of the preamble of the FY 2010
IPPS/RY 2010 LTCH PPS proposed and
3. Adjustment for Changes in LTCHs’
final rules (74 FR 24229 through 24230
Case-Mix Due to Changes in
and 74 FR 43970 through 43972,
Documentation and Coding Practices
respectively).)
That Occurred in a Prior Period
In the FY 2010 IPPS/RY 2010 LTCH
a. Background
PPS final rule, we responded to
Beginning in RY 2007, in updating the comments on our methodology for the
standard Federal rate for the LTCH PPS, retrospective evaluation of FY 2007 and
we have accounted for increases in
FY 2008 claims data, as well as our
payments from a past period that were
proposed ¥1.8 percent documentation
due to changes in case-mix due to
and coding adjustment for RY 2010. In
changes in documentation and coding
that same final rule, we finalized our
practices. For additional information on proposal and established an adjustment
the adjustments established for changes of ¥0.5 percent to account for the effect
in LTCHs’ case-mix due to changes in
of documentation and coding increase
documentation and coding practices
that occurred in FY 2007. After
that occurred in a prior period, we refer consideration of public comments, and
readers to the following final rules
consistent with the decision to postpone
published in the Federal Register: the
the application of the prospective
RY 2007 LTCH PPS final rule (71 FR
adjustment for estimated FY 2008
27820); the RY 2008 LTCH PPS final
documentation and coding effect under
rule (72 FR 26880 through 26890); the
the IPPS, we delayed the application of
RY 2009 LTCH PPS final rule (73 FR
the FY 2008 documentation and coding
26805 through 26812); and the FY 2010
adjustment of ¥1.3 percent that was
IPPS/RY 2010 LTCH PPS final rule (74
proposed under the LTCH PPS for RY
FR 43969 through 43970).
2010. We also stated our intent to
For RY 2010, we performed an
address any future documentation and
analysis of LTCHs’ case-mix index
coding adjustment to the LTCH PPS
(CMI) changes in the prior periods (FY
standard Federal rate based on our
2007 and FY 2008) and established a
analysis of the FY 2008 LTCH claims
methodology to determine if an
data in the FY 2011 rulemaking cycle
adjustment to account for changes in
through the notice-and-comment
documentation and coding practices
rulemaking process. (74 FR 43970
was applicable (74 FR 43969 through
through 43972)
43970). This methodology is consistent
b. Evaluation of FY 2009 Claims Data
with the methodology established for
case-mix analysis under the IPPS. In
For the FY 2011 IPPS/LTCH PPS
general, under our established
proposed rule (75 FR 24045 through
methodology, in order to isolate the
24046), we performed a thorough
documentation and coding effect, we
retrospective evaluation of the most
divided the combined effect of the
recent available claims data (that is, FY
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123 of the BBRA as amended by section
307(b) of the BIPA, we are establishing
a labor-related share of 75.271 percent
under the LTCH PPS for the FY 2011.
The chart below shows the FY 2011
relative importance labor-related share
using the FY 2002-based RPL market
basket.
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50391
2009 claims updated through December
2009) using the methodology that was
adopted in the FY 2010 IPPS/RY 2010
LTCH PPS final rule and that was used
to assess whether an adjustment for RY
2010 to account for the effect of
documentation and coding practices
that occurred in a prior period was
appropriate. (We refer readers to the
explanation of our rationale for adopting
this methodology as well as its intended
purpose in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43970
through 43972).) Based on the results of
this analysis, we estimated that the
effect of documentation and coding
changes that occurred in FYs 2008 and
2009 was 2.5 percent. (We refer readers
to the discussion in the FY 2011 IPPS/
LTCH PPS proposed rule (74 FR 24045
through 24046) for additional details on
the methodology and results of the
retrospective evaluation of the FY 2009
claims updated through December
2009.) We also noted in the FY 2010
IPPS/RY 2010 LTCH PPS proposed and
final rules that we applied our
methodology separately to FY 2007 and
FY 2008 LTCH claims data because
those data were generated under
different patient classification systems
(that is, FY 2007 was the last year under
the CMS LTC–DRGs and FY 2008 was
the first year under the MS–LTC–DRGs).
Because the same patient classification
system was in effect for both FY 2008
and FY 2009 (that is, the MS–LTC–
DRGs), consistent with the application
of this methodology under the IPPS, in
the FY 2011 IPPS/LTCH PPS proposed
rule, we explained that we believe it is
appropriate to propose to apply our
established methodology for
determining the cumulative effects of
documentation and coding for FYs 2008
and 2009, rather than proposing to
applying the methodology separately to
FY 2008 and FY 2009 LTCH claims
data. We sought public comment on this
proposal. We did not receive any public
comments on the proposal to apply our
established methodology for
determining the cumulative effects of
documentation and coding for FYs 2008
and 2009. Therefore, we are adopting
this proposal as final in this final rule.
For this final rule, consistent with our
historical practice and as we proposed,
we updated our analysis using FY 2010
claims updated through March 2010 and
the same methodology employed in the
FY 2011 IPPS/LTCH PPS proposed rule.
This analysis also resulted in an
estimated effect of documentation and
coding in FYs 2008 and 2009 of 2.5
percent. We received several comments
on our proposed methodology for
estimating the effect of documentation
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and coding in FYs 2008 and 2009 and
our proposal to apply an adjustment for
the effect of documentation and coding
in a prior period (FYs 2008 and 2009)
that do not reflect an increase in
severity of illness of ¥2.5 percent
(discussed below), especially from
national LTCH associations, hospital
systems, and individual hospitals.
MedPAC also commented on these
proposals. A summary of these
comments and our responses are
presented below in the section VII.C.3.c.
of this preamble.
c. FY 2011 Documentation and Coding
Adjustment
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24046), based on
retrospective analysis of FY 2009 LTCH
claims data (discussed above), we
proposed to apply an adjustment for
changes in documentation and coding
in a prior period (FYs 2008 and 2009)
that do not reflect an increase in
severity of illness of ¥2.5 percent.
Accordingly, we proposed to update the
standard Federal rate for FY 2011 based
on the most recent estimate of the
market basket increase, including the
required percentage point reduction and
a proposed adjustment to account for
changes in documentation and coding
practices of ¥2.5 percent. We received
the following public comments on that
proposal:
Comment: MedPAC concurred with
CMS’ methodology used to estimate the
documentation and coding effect for
LTCH and CMS’ proposal to reduce
LTCH payment rates by 2.5 percent,
noting that the implementation of MS–
LTC–DRGs in 2008 gave LTCHs a
financial incentive to improve
documentation and coding to more fully
account for each patient’s severity of
illness and that there was a need for
‘‘counterbalancing adjustments to LTCH
payments to offset the effects of casemix increases due to changes in
documentation and coding practice.’’
Response: We appreciate MedPAC’s
independent validation and support of
our methodology, and its support of our
proposal to reduce LTCH payment rates
by 2.5 percent to prevent overpayments
under the LTCH PPS.
Comment: Most commenters
questioned our proposed methodology
for determining the magnitude of the
effect of documentation and coding due
to the adoption of the MS–LTC–DRGs.
As commenters have argued in response
to prior rulemaking, most of these
commenters again asserted that our
proposed methodology made
assumptions about the cause of the casemix increase that were unsupported and
that failed to consider ‘‘other
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explanations’’ for those case-mix
changes, in particular whether actual
patient severity of illness (that is, ‘‘real’’
case-mix) has increased or whether the
adoption of a more refined patient
classification system (that is, the MS–
LTC–DRGs) by its design reflects
increased case-mix.
Response: We disagree that the
methodology employed by our actuaries
to determine the effect of
documentation and coding due to the
adoption of the MS–LTC–DRGs is based
on unsupported assumptions. As
discussed in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43971),
overall case-mix change is
predominately comprised of three
factors: ‘‘real’’ case-mix change; a
documentation and coding effect
(‘‘apparent’’ change); and a measurement
effect. Because our proposed
methodology uses the same year of
claims data, it is not necessary to
account for ‘‘real’’ case-mix-growth. This
is because there can be no real case-mix
growth measured if the same claims are
used since the same set of patients (that
is, the same claims data) is being used
under the two GROUPERs
classifications and relative weights.
We agree that the MS–LTC–DRGs
were designed to better recognize
severity of illness among patients and
may reflect case-mix increase. However,
consistent with the budget neutrality
requirement that was established
concurrent with the adoption of the
MS–LTC–DRG patient classification
system in FY 2008, the annual update
to the classifications and weights should
not increase or decrease aggregate LTCH
PPS payments. In other words, these
changes were intended to be done in a
budget neutral manner. Therefore, to the
extent that the adoption of the MS–
LTC–DRGs themselves reflects a change
in case-mix that results in an increase or
decrease in aggregate LTCH PPS
payments, it is appropriate to make an
adjustment to account for such changes.
In other words, a documentation and
coding adjustment is now necessary
because the changes in the
classifications and weights associated
with the adoption of the MS–LTC–DRGs
should not increase or decrease the
aggregate LTCH PPS payments.
Furthermore, as summarized above, in
its public comments on our proposal,
MedPAC concurred with our proposed
methodology to estimate the
documentation and coding effect for
LTCH and independently verified our
results that the effect is 2.5 percent.
MedPAC also noted that the
implementation of MS–LTC–DRGs in
2008 gave LTCHs a financial incentive
to improve documentation and coding
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to more fully account for each patient’s
severity of illness.
Accordingly, we continue to find the
methodology used by our actuaries and
endorsed by MedPAC to determine the
magnitude of the increase in case-mix
due to the changes in documentation
and coding in FYs 2008 and 2009 that
do not reflect patient severity of illness
to be the most appropriate methodology.
Comment: Most commenters opposed
the proposed ¥2.5 percent adjustment
to account for the increase in case-mix
due to the effects of documentation and
coding in FYs 2008 and 2009 that do not
reflect severity of illness. As in prior
rulemaking on this issue, most
commenters again questioned the
methodology used by our actuaries and
endorsed by MedPAC to estimate LTCH
case-mix increase due to the effects of
documentation and coding that do not
reflect increased severity of illness.
Many of these comments were similar to
or referenced the comment by NALTH,
which in summary stated: ‘‘NALTH
takes issue with the proposed
adjustment of ¥2.5 percent to the
update factor for changes in
documentation and coding practices
that CMS claims occurred between FYs
2007 through 2009. * * * In summary,
we have made findings that CMS’
methodology does not result in an
accurate identification of ‘apparent’ as
differentiated from ‘real’ case-mix
severity change from FY 2007 to FY
2009.’’
NALTH asserted that this conclusion
is supported by a number of factors.
First, NALTH stated that changes in the
law have led to changes in the
distribution of patients admitted to
LTCHs between FY 2007 and FY 2009.
Second, NALTH asserted that, under
our methodology, a finding of no
increase in case-mix due to
documentation and coding changes
‘‘could only occur by pure chance’’ and
that the adoption of the ‘‘decompressed’’
MS–LTC–DRG GROUPER results in a
more accurate measurement of severity
for high acuity patients. Third, NALTH
indicated that changes between primary
and secondary diagnosis codes led to a
decrease, not increase, in case-mix.
Fourth, NALTH used a regression
analysis to compare the actual and
predicted prevalence of diagnoses and
procedure codes for FY 2009 LTCH
discharges. Fifth, NALTH cited
standards of ethical coding applied by
coding professionals that prevent
changing a primary diagnosis to a
secondary diagnosis to maximize
reimbursement. Sixth, NALTH cited
‘‘resequencing guidelines’’ that have
been in effect since 2005 and the SSO
policy, under which NALTH believes
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that 50 percent to 60 percent of all
LTCH cases are typically paid less than
a full MS–LTC–DRG payment, as
reasons that there is no evidence to
conclude that documentation and
coding practices contribute significantly
to case-mix changes. Lastly, NALTH
stated that approximately 60 percent of
the change in FY 2009 GROUPER casemix from FY 2007 to FY 2009 is due to
a redistribution in case-mix from FY
2007 through FY 2009 and
approximately 25 percent of the casemix growth is due to an increase in the
comorbidities of certain high volume
ICD–9–CM codes from FY 2007 through
FY 2009. NALTH stated that the
remaining 15 percent could be due to an
‘‘apparent’’ increase in case-mix and,
therefore, believed that, at most, the
proposed coding adjustment should be
¥0.8 percent.
Response: Both the adoption of the
severity-adjusted MS–LTC–DRGs as the
patient classification system under the
LTCH PPS and the establishment of the
budget neutrality requirement for the
annual update to the MS–LTC–DRG
classifications and relative weights were
effective beginning in FY 2008. The
changes in the classifications and
relative weights associated with FY
2008 and FY 2009 MS–LTC–DRGs were
established to improve the accuracy of
the distribution of payments among
LTCH patients, not to increase or
decrease aggregate LTCH PPS payments.
In other words, these changes were
intended to be done in a budget neutral
manner. A retrospective review of LTCH
claims data allows a determination to be
made as to the extent to which these
changes resulted in an increase or
decrease in aggregate LTCH PPS
payments, so an offsetting budget
neutrality adjustment can be made.
Specifically, a retrospective analysis of
the LTCH claims data can examine the
change in the average case-mix under
the old (for example, FY 2007) and new
(for example, FY 2009) classifications
and weights. As stated above in our
discussion of the documentation and
classification adjustment for IPPS
hospitals in section II.D. of this
preamble and also in prior rulemaking
(74 FR 43771 and 43971), overall casemix change is predominately comprised
of three factors: ‘‘real’’ case-mix change;
a documentation and coding effect
(‘‘apparent’’ change); and a measurement
effect. Because year-to-year changes in
real case-mix are not intended to be
budget neutral, this must be accounted
for in the analysis of case-mix change.
The simplest and most straightforward
way to account for changes in real casemix is to directly remove them from the
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calculation. This is exactly what the
proposed methodology employed by our
actuaries and endorsed by MedPAC
does. Our actuaries compare the casemix calculated using the same FY 2009
cases grouped using the FY 2009 MS–
LTC–DRG classifications and relative
weights and the FY 2007 LTC–DRG
classifications and relative weights to
determine the combined effect of
documentation and coding changes and
measurement. An adjustment is then
made to net out the measurement effect.
Therefore, differences in case-mix
calculated using the FY 2007 and FY
2009 classifications and relative weights
on the FY 2009 data are not affected by
real case-mix change, by definition,
because the same set of patients (that is,
the same claims data) is being used
under the two GROUPERs
classifications and relative weights. This
simple fact refutes the NALTH assertion
that our methodology ‘‘does not result in
an accurate identification of ‘apparent’
as differentiated from ‘real’ case mix
severity change from FY 2007 to FY
2009.’’
Furthermore, none of the supporting
factors listed by NALTH refute our
methodology. The first factor, changes
in the distribution of patients admitted
to LTCHs between FY 2007 and FY
2009, and the portion of the seventh
factor involving increases in patient
acuity, would influence the change in
real case-mix. As explained above, our
methodology directly removes the
changes in real case-mix from the
determination of the increase in casemix due to the effects of documentation
and coding in FYs 2008 and 2009 that
do not reflect increased severity of
illness.
A number of the remaining factors
(specifically, factors two, three, four and
seven) listed by NALTH involve
differences in the distribution of cases
between FY 2007 and FY 2009. Again,
the purpose of the proposed
documentation and coding adjustment
is to ensure that the changes in the
classification and relative weights
associated with FY 2008 and FY 2009
MS–LTC–DRGs do not increase or
decrease the aggregate LTCH PPS
payments. We agree that there is a
difference between the distribution of
cases in FY 2007 and the distribution of
cases in FY 2009. However, this is not
a refutation of our methodology. In fact,
it supports the necessity of our
proposed documentation and coding
adjustment. Had we known the actual
distribution of FY 2009 cases when we
initially determined the FY 2009 budget
neutral update to the MS–LTC–DRG
classifications and relative weights back
in 2008, we would have used this
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information at that time and no further
adjustment would now be necessary to
ensure that the FY 2009 update did not
increase or decrease the aggregate LTCH
PPS payments. As this information was
unknown in 2008, we used the most
recent full year of LTCH claims data
available to us to update the MS–LTC–
DRG classifications and relative weights
for FY 2009 in a budget neutrality
manner. A finding that the actual
distribution of cases differs from the
distribution used in determining the
initial budget neutral relative weights is
precisely the reason that an additional
adjustment is now necessary: we do not
want changes in the classifications and
weights associated with FY 2008 and FY
2009 MS–LTC–DRGs to increase or
decrease the aggregate LTCH PPS
payments.
In response to the assertion that the
standards of ethical coding applied by
coding professionals prevent changing a
primary diagnosis to a secondary
diagnosis to maximize reimbursement,
we have never asserted that any party
acted inappropriately, unethically, or
otherwise in bad faith by employing
documentation and coding
improvement practices associated with
the adoption the MS–LTC–DRG system.
Under the previous DRG definitions, it
was possible for high-severity cases to
be paid the same as cases with lower
severity if they grouped to the same
DRG. The MS–LTC–DRGs were
introduced as part of the effort to ensure
that the relative Medicare payment rates
that hospitals received more reasonably
matched the resources hospitals
expended in furnishing care, and CMS
encouraged hospitals to code as
accurately as possible with that goal in
mind. However, it is our finding that the
systematic effect of changing
documentation and coding practices has
led to an increase in LTCHs’ overall
case-mix that does not reflect a
commensurate increase in LTCH patient
severity of illness, and as we discuss in
greater detail below, it is appropriate to
adjust the LTCH PPS payment rates to
account for the increased level of LTCH
PPS payments due to such
documentation and coding.
The sixth factor noted by NALTH,
which contends that ‘‘resequencing
guidelines’’ that have been effective
since April 2005 and the SSO policy
may result in a decrease in payment
upon the adoption of the MS–LTC–
DRGs, is not evidence that changes in
documentation and coding practices do
not contribute significantly to case-mix
changes. We agree that, in some cases,
the ICD–9–CM coding guidelines may
result in a case being grouped to a MS–
LTC–DRG with a lower weight
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compared to an alternative sequencing
of ICD–9–CM codes for that case and,
therefore, will receive a lower payment.
However, in other instances, the ICD–9–
CM coding guidelines may result in a
case being grouped to a MS–LTC–DRG
with a higher weight and, therefore, will
receive a higher payment. This fact
demonstrates that documentation and
coding practices have an impact on
case-mix and, therefore, also on
aggregate LTCH PPS payments. As we
have discussed above, we believe it is
appropriate to make an adjustment to
the LTCH PPS payment rates to account
for any changes in aggregate LTCH PPS
payments due to such documentation
and coding under the MS–LTC–DRGs as
compared to the effect of the CMS LTC–
DRGs (that were in effect prior to the
adoption of the MS–LTC–DRGs) on
LTCHs’ case-mix.
Similarly, with regard to the SSO
policy, we agree that when a case is
grouped to a higher weighted MS–LTC–
DRG for FY 2009 (relative to the weight
of the FY 2007 LTC–DRG to which it
groups), it may become a SSO case (and
receive a payment that is less than the
full LTC–DRG payment). This is the
case because the average length of stay
for the ‘‘higher weighted’’ FY 2009 MS
LTC–DRG is based on the data for
higher severity, more resource intensive
cases, which generally have a relatively
longer length of stay. However, it is also
true that the cases in a ‘‘lower weighted’’
FY 2009 MS–LTC–DRGs will generally
have a relatively shorter length of stay
under the MS–LTC–DRGs, as compared
to the FY 2007 LTC–DRGs, because the
lower weighted MS–LTC–DRG will
require less resources. Therefore, a case
that would have been a SSO under the
FY 2007 LTC–DRG classifications may
no longer be a SSO case under the FY
2009 MS–LTC–DRGs (and is paid a full
MS–LTC–DRG payment).
As discussed above, under our budget
neutrality requirement for the annual
update to the MS–LTC–DRGs, we
believe it is appropriate to make an
adjustment to the LTCH PPS payment
rates to account for any changes in
aggregate LTCH PPS payments as a
result of the transition from the LTC–
DRGs to the MS–LTC–DRGs.
Furthermore, we disagree with the
commenter that 50 percent to 60 percent
of all LTCH cases are typically paid less
than a full MS–LTC–DRG payment
under the SSO policy. Historically,
approximately 30 to 35 percent of all
LTCH cases are typically paid under the
SSO policy. Specifically, an analysis of
FY 2009 LTCH claims data shows that
approximately 31 percent of all LTCH
cases were paid under the SSO policy
(and received less than a full MS–LTC–
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DRG payment). Moreover, of those cases
paid under the SSO policy, the payment
for approximately 40 percent of those
SSO cases is determined in part based
on the MS–LTC–DRG relative weight for
the case. Thus, the LTCH PPS payment
to the vast majority of LTCH cases is
determined based on the MS–LTC–DRG
relative weight. Therefore,
documentation and coding under the FY
2009 MS–LTC–DRGs that results in the
aggregate grouping to a higher weighted
MS–LTC–DRG do affect aggregate LTCH
PPS payments. To the extent this
occurs, as discussed in greater detail
above, it is appropriate to make an
adjustment to the LTCH PPS payment
rates to account for any changes in
aggregate LTCH PPS payments.
After consideration of these public
comments, we continue to find the
methodology used by our actuaries and
endorsed by MedPAC to determine the
magnitude of the increase in case-mix
due to the effects of documentation and
coding resulting from the adoption of
the MS–LTC–DRGs in FYs 2008 and
2009 that do not reflect increased
severity of illness to be the most
appropriate methodology because it
directly removes real changes in casemix from the calculation. The
distributional analyses submitted by
NALTH also indicate that the
classifications and relative weights
associated with FY 2008 and FY 2009
MS–LTC–DRGs increased aggregate
LTCH PPS payments and support the
need for a documentation and coding
adjustment.
Comment: In addition to challenging
the proposed methodology for
determining the proposed ¥2.5 percent
documentation and coding adjustment,
some commenters argued, as they have
in response to past rulemaking, that
there is no statutory authority to apply
the proposed ¥2.5 percent
documentation and coding adjustment.
Again, these commenters stated that
Public Law 110–90 contains explicit
authority to make a documentation and
coding adjustment to IPPS hospitals, but
does not extend that authority to
hospitals paid under the LTCH PPS.
One commenter argues that the
Secretary lacks the authority to make a
documentation and coding adjustment
under the LTCH PPS based on the
statutory construct, wherein the LTCH
PPS is explicitly omitted from the
requirements of Public Law 110–90. The
commenter also asserted that the
Secretary’s ‘‘broad authority’’ under
section 123 of the BBRA, as amended by
section 307(b) of the BIPA, is
‘‘misplaced,’’ given such a statutory
construct.
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Response: We continue to disagree
with commenters that the Secretary’s
broad authority under section 123 of the
BBRA, as amended by section 307(b) of
the BIPA, ‘‘to provide for appropriate
adjustments,’’ including updates, is
misplaced and cannot be applied in this
instance. We have discussed the basis
for applying an adjustment for the
effects of documentation and coding
that do not reflect increased severity of
illness in prior rules (most recently in
the FY 2010 IPPS/RY 2010 LTCH final
rule (74 FR 43970)) and do not agree
that the omission of the applicability of
the requirements of Pub. L. 110–90 to
the LTCH PPS limits our authority
under section 123 of the BBRA, as
amended by section 307(b) of the BIPA,
to make such an adjustment.
Comment: Some commenters believed
that, in proposing a ¥2.5 percent
adjustment to account for ‘‘apparent’’
case-mix increases from prior years,
CMS is not appropriately applying the
market basket update, whose purpose is
to account for the expected increase in
the prices of goods and services for the
upcoming year. The commenters stated
that CMS provides no data that prices in
FY 2011 will increase less than the full
market basket estimate, nor does CMS
explain how case-mix changes relate to
the changes in the price of inputs
measured by the market basket. A few
commenters also argued that there is no
basis in the existing regulations to
adjust for changes in case-mix in
determining an appropriate market
basket increase. The commenters stated
that CMS should update the standard
Federal rate by ‘‘the full market basket
update’’ for FY 2011.
Response: In the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24046), we proposed to update to the
standard Federal rate for FY 2011 based
on the most recent estimate of the full
market basket increase at that time and
based on a proposed adjustment to
account for changes in documentation
and coding practices. As noted above,
due to the timing of the passage of the
Affordable Care Act, we were unable to
address those provisions in the May 4,
2010 FY 2011 IPPS/LTCH PPS proposed
rule, and the proposed policies and
payment rates in that proposed rule did
not reflect the new legislation.
Consequently, in the June 2, 2010 FY
2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30968 through
30970), we revised our proposed update
to the standard Federal rate for FY 2011,
consistent with the provisions of the
Affordable Care Act, which added
sections 1886(m)(3)(A)(ii) and
1886(m)(4)(B) to the Act that require a
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0.50 percentage point reduction to the
annual update for rate year 2011.
Consistent with this requirement, in
that same supplemental proposed rule,
we proposed an update to the standard
Federal rate for FY 2011 based on the
most recent estimate of the full market
basket increase at that time minus the
0.50 percentage point required in
section 1886(m)(4)(B) of the Act and
based on a proposed adjustment to
account for changes in documentation
and coding practices. Therefore, we
disagree with the commenters that we
did not appropriately apply the market
basket update because our proposed
update did include the full market
basket increase to account for the
expected increase in prices for FY 2011,
adjusted by the statutorily required 0.50
percentage point reduction. However,
the full market basket increase
(including the required statutory
reduction) is not the only factor used in
determining our proposed update for FY
2011. As discussed above, the Secretary
has broad authority under the statute to
determine appropriate updates under
the LTCH PPS, and we believe it is
appropriate that the update to the
standard Federal rate reflect an
adjustment to account for changes in
case-mix due to the effects of
documentation and coding that do not
reflect increased patient severity of
illness and costs (‘‘apparent’’ case-mix
changes).
The component of our proposed
update to the standard Federal rate for
FY 2011 to account for ‘‘apparent’’ casemix changes is not intended to adjust
for the expected changes in the price of
inputs for the upcoming year, FY 2011
(as measured by the market basket), but
to prospectively adjust the rate so that
the increased level of payments that
occurred due to the effects of
documentation and coding that do not
reflect increased patient severity of
illness do not continue into future years.
As MedPAC stated in its public
comment, LTCH payment rates should
be reduced by the proposed adjustment
for the effects of documentation and
coding in FYs 2008 and 2009 that do not
reflect increased severity of illness ‘‘to
prevent further overpayments.’’
We disagree that prior annual updates
to the LTCH PPS have addressed the
effects of documentation and coding
practices in FYs 2008 and 2009.
Although we have made adjustments for
the effects of documentation and coding
practices that do not reflect increased
patient severity of illness in establishing
an update to the standard Federal rate
for the past 4 years (RYs 2007 through
2010), those adjustments were based on
LTCH claims data from FYs 2004
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through 2007, respectively. To date, we
have never based any adjustment based
on the change in case-mix identified in
FYs 2008 or FY 2009 claims data.
Specifically, in the FY 2008 and FY
2009 final rules, we explained that we
believe that the adoption of the MS–
LTC–DRGs would create a risk of
increased aggregate levels of payment as
a result of changes in documentation
and coding practices. However, we did
not establish any prospective
adjustment to account for the effect of
documentation and coding for FY 2008
or FY 2009 resulting from the adoption
of the MS–LTC–DRG system because, at
the time, we had not been able to
determine an appropriate adjustment
factor for LTCHs and because we had an
established mechanism to adjust LTCH
PPS payments to account for the effects
of documentation and coding practices
in a prior period based on actual LTCH
data. Instead, we indicated that we
would continue to monitor the LTCH
payment system, and should we find
any ‘‘apparent’’ case-mix increase due to
the adoption of the MS–LTC–DRG
classification system, we would propose
appropriate adjustments to account for
that case-mix increase that is not due to
increased severity of illness. We also
discussed our intended future
evaluation of LTCH claims data and
resulting case-mix growth from the
implementation of the MS–LTC–DRG
system, similar to the evaluation that we
intended for the MS–DRG system under
the IPPS, and stated that the analysis,
findings, and any resulting proposals to
adjust payments to offset the estimated
amount of increase or decrease in
aggregate payments that occurred in FY
2008 and FY 2009 for LTCHs as a result
of the effect of documentation and
coding, will be discussed in future
years’ proposed rules, which would be
open for public comment. ((72 FR 47297
through 47299) and (73 FR 26809))
With respect to the comment that
there is no basis in the existing
regulations to adjust for changes in casemix in determining an appropriate
market basket increase, as we discuss
above, we are not accounting for casemix changes in determining an
appropriate market basket increase.
Rather, as explained above, our
proposed update to the standard Federal
rate for FY 2011 is based on the full
market increase (including the required
statutory reduction) and a separate
component to adjust for the effect of
case-mix changes in a prior period (FYs
2008 and 2009). Furthermore, we point
out that the existing regulations in 42
CFR part 412, subpart 0 (the subpart
governing the LTCH PPS) do not
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50395
address future updates to the standard
Federal rate, including the update for
FY 2011.
Comment: Many of the commenters
expressed concern that many of the
proposals affecting the LTCH PPS
payment rates for FY 2011, including
the proposed decrease to the standard
Federal rate and the proposed increase
to the fixed-loss amount, violates the
premise that the Medicare program will
adequately reimburse LTCHs for the
costs of treating Medicare beneficiaries
and will result in payments that are
below the costs incurred for treating
these patients. The commenters
contended that CMS did not consider all
of its payment rate and policy changes
in developing its proposals for FY 2011,
especially the impact of the proposed
increase in the high-cost outlier
threshold, nor did CMS consider the
combined impact of the proposed ¥2.5
percent documentation and coding
adjustment and the reductions to the
market basket update mandated by the
Affordable Care Act.
Response: We understand the
commenters’ concern regarding the
possible financial impact that may be
caused by the proposed changes to the
LTCH payment rates and factors for FY
2011. However, we disagree that we did
not consider the overall impact of all
proposed policy changes in developing
our proposals for FY 2011 under the
LTCH PPS. As we discussed in greater
detail above in this preamble and in
section V. of the Addendum of this final
rule, we believe that the changes we
proposed (and are finalizing) to the
payment rates and factors for FY 2011
will result in an appropriate level of
payments under the LTCH PPS.
Specifically, with regard to the update
to the standard Federal rate, which
includes the reductions to the market
basket update mandated by the
Affordable Care Act (discussed in V. of
the Addendum to this final rule), we
agree with MedPAC that it is
appropriate to focus on minimizing the
accumulation of overpayments resulting
from the effects of documentation and
coding practices that do not reflect
increased severity of illness (and costs)
and should not further delay making the
¥2.5 percent adjustment to account for
changes in documentation and coding
practices in FYs 2008 and 2009 that do
not reflect patient severity of illness.
With regard to the increase to the highcost outlier fixed-loss amount, as
discussed in section V. C. of the
Addendum of this final rule, based on
the latest available data and payment
rate changes we are establishing in this
final rule, it is necessary to increase the
fixed-loss amount for FY 2011 in order
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to maintain the regulatory requirement
that estimated high-cost outlier
payments would be equal to 8 percent
of estimated aggregate LTCH PPS
payments.
Comment: Some commenters
contended that the proposed ¥2.5
percent adjustment to account for the
increase in case-mix due to the effects
of documentation and coding practices
that do not reflect increased severity of
illness is ‘‘punitive,’’ ‘‘excessive’’ and
‘‘unprecedented,’’ stating that ‘‘the size,
scope and timing of the proposed
adjustment will have a severe impact on
LTCHs.’’ The commenters pointed out
that CMS has never imposed an
adjustment for the effect of
documentation and coding practices
that reduced the standard Federal rate to
a level that falls below the rate of the
prior year. The commenters stated
further that CMS has never
implemented a single adjustment based
on multiple years of data, and asserted
that adopting a reduction to the rates in
a single fiscal year to reflect changes in
case-mix that occurred over a 2-year
period will have a significant financial
impact on LTCHs. Although disagreeing
that the proposed ¥2.5 percent
adjustment to account for the increase
case-mix due to the effects of
documentation and coding practices
that do not reflect increased severity of
illness is warranted, the commenters
recommended that, to mitigate the
financial impact, CMS maintain the RY
2010 standard Federal rate or phase-in
the proposed 2.5 percent reduction over
a 3-year period.
Response: We understand the
commenters’ concern regarding the
possible financial impact that may be
caused by the proposed changes to the
LTCH payment rates and factors for FY
2011. However, we disagree that we did
not consider the overall impact of all
proposed policy changes in developing
our proposals for FY 2011 under the
LTCH PPS. As we discussed in the
regulatory impact analysis of the June 2,
2010 supplemental proposed rule,
which reflected the provisions of the
Affordable Care Act as well as other
proposed rate and policy, we believe
that the changes we proposed to the
payment rates and factors for FY 2011
will result in an appropriate level of
payments under the LTCH PPS. In that
impact analysis, we projected an
average 0.3 percent increase in aggregate
LTCH PPS payments in FY 2011 as
compared to RY 2010. In this final rule,
we projected an average 0.5 percent
increase in aggregate LTCH PPS
payments in FY 2011, as compared to
RY 2010.
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It is true that we never implemented
an adjustment for the effect of
documentation and coding practices
that reduced the standard Federal rate to
a level below the rate that is currently
in effect. It is also true that we
previously have not implemented a
single adjustment based on multiple
years of data. However, as we have
discussed in great detail in this section,
we believe that documentation and
coding adjustments to LTCH payments
is necessary to offset the effects of casemix increases due to documentation and
coding practices under the MS–LTC–
DRGs. We have consistently stated since
the adoption of the MS–LTC–DRGs
beginning in FY 2008 that we believe
that the adoption of the MS–LTC–DRGs
would create a risk of increased
aggregate levels of payment as a result
of the effects of documentation and
coding practices. However, we did not
establish any prospective adjustment to
account for improved coding practices
for FY 2008 or FY 2009 resulting from
the adoption of the MS–LTC–DRG
system because, at the time, we had not
been able to determine an appropriate
adjustment factor for LTCHs and
because we had an established
mechanism to adjust LTCH PPS
payments to account for the effects in
documentation and coding practices in
a prior period based on actual LTCH
data. Furthermore, as stated above, we
agree with MedPAC that it is
appropriate to focus on minimizing the
accumulation of overpayments resulting
from the effects of documentation and
coding practices that do not reflect
increased severity of illness (and costs)
and should not further delay making the
¥2.5 percent adjustment to account for
the effects of documentation and coding
practices in FYs 2008 and 2009 that do
not reflect severity of illness. Therefore,
we are not adopting the commenters’
suggestion to limit the adjustment so
that the standard Federal rate remains at
its current level or to phase-in the
adjustment over more than one year.
Accordingly, for the reasons discussed
above, in this final rule, we are
finalizing our proposal to apply a ¥2.5
percent adjustment to account for the
effect of documentation and coding
practices that do not reflect an increase
in severity of illness due to the adoption
of the MS–LTC–DRGs.
Therefore, in this final rule, under the
Secretary’s broad authority under
section 123 of the BBRA, as amended by
section 307(b) of the BIPA, to provide
for appropriate adjustments, including
updates, we are applying an adjustment
for the effect of documentation and
coding in a prior period (FYs 2008 and
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2009) that do not reflect an increase in
patient severity of illness of ¥2.5
percent. Accordingly, as discussed in
section V. of the Addendum to this final
rule, the update to the standard Federal
rate for FY 2011 is ¥0.49 percent,
which is based on the most recent
estimate of the market basket increase,
including the required percentage point
reduction, of 2.0 percent and an
adjustment to account for the effect of
documentation and coding practices of
¥2.5 percent.
D. Change in Terminology From ‘‘Rate
Year’’ to ‘‘Fiscal Year’’
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24046), we made
several proposals that were designed to
promote clarity regarding the changes
that have been made to the schedule
and terminology associated with the
annual update for the LTCH standard
Federal payment rates and the MS–
LTC–DRG relative weights as well as the
publication cycle for rulemaking for the
LTCH PPS. A historical review of these
changes is as follows:
• Initially, the standard Federal rates
and the LTC–DRG classification and
relative weights were established on a
Federal Fiscal year (FY) cycle of October
1 through September, beginning October
1, 2002 (FY 2003).
• In the June 6, 2003 Federal Register
(68 FR 34125), the LTCH PPS final rule
changed the annual update of the
standard Federal rate to a July 1 to June
30 cycle (the LTCH PPS rate year (RY))
while it continued to provide for an
update of the LTC–DRG classification
and relative weights on the FY
schedule, effective from October 1
through September 30 in conformity
with the IPPS.
• Beginning with the annual update
to the LTCH PPS that took effect on
October 1, 2009, we consolidated the
rulemaking cycle for the annual update
of the LTCH PPS Federal payment rates
with the annual update of the MS–LTC–
DRG classifications and weights for
LTCHs so that the updates to the rates
and factors have an October 1 effective
date and occur on the same schedule
and appear in the same Federal Register
document. To reflect this change to the
annual payment rate update cycle, we
revised the regulations at § 412.503 to
specify that, beginning on or after
October 1, 2009, the LTCH PPS rate year
is defined as October 1 through
September 30 (73 FR 26797 through
26798 and 26838).
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24046 and 24047),
we proposed to change the terminology
used under the LTCH PPS with respect
to the annual update to the standard
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Federal rate and the MS–LTC–DRG
relative weight recalibration cycle.
Specifically, we proposed to change
from using the term ‘‘rate year’’ to ‘‘fiscal
year,’’ in order to conform with the
standard definition of the Federal fiscal
year (October 1 through September 30)
used by the IPPS. Because the annual
updates to both the LTCH PPS standard
Federal rate (and associated factors) and
the MS–LTC–DRG classifications and
relative weights now occur at the same
time as the annual updates under the
IPPS, we believe this change eliminates
any possible confusion that may be
caused by continuing to identify the
LTCH update cycle as a ‘‘rate year.’’
Therefore, we proposed to use the term
‘‘fiscal year’’ when referring to the
annual updates for the LTCH standard
Federal payment rates and the MS–
LTC–DRG relative weights as well as to
the publication cycle for rulemaking for
the LTCH PPS. We proposed to add a
definition of ‘‘long-term care hospital
prospective payment system fiscal year’’
at § 412.503 (75 FR 24058). We also
proposed to revise our definition of
‘‘long-term care hospital prospective
payment system rate year’’ in the
regulations at § 412.503 to reflect that
such term does not apply to time
periods after September 30, 2010 (75 FR
24046 and 24058).
For a detailed description of our
rationale regarding the above-described
proposed changes, we refer the reader to
the discussion in the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 24046
and 24047).
In addition, we proposed to add a
definition of ‘‘long-term care hospital
prospective payment system payment
year’’ to § 412.503 in order to encompass
both the long-term care hospital
prospective payment system rate year
and the long-term care hospital
prospective payment system fiscal year.
It is our intent that this term would be
used when describing ongoing policy
features of the LTCH PPS for which,
depending upon the time period, either
the term ‘‘long-term care hospital
prospective payment system rate year’’
or ‘‘long-term care hospital prospective
payment system fiscal year’’ would be
applicable. We refer readers to the FY
2011 IPPS/LTCH PPS proposed rule (75
FR 24046) for a discussion of our
rationale for this change. Also, as a
conforming change, we proposed to
change the terminology in
§ 412.525(a)(1) and (a)(2), which
describes the high-cost outlier policy
(an ongoing feature of the LTCH PPS
from its inception), from ‘‘long-term care
hospital prospective payment system
rate year’’ to ‘‘long-term care hospital
prospective payment system payment
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year.’’ We believe that this change,
which would reference the proposed
new definition of the long-term care
hospital prospective payment system
payment year period at § 412.503,
reflects the application of the high-cost
outlier policy for the period
encompassed by both the current ‘‘rate
year’’ terminology and the proposed
change to ‘‘fiscal year’’ terminology,
described above. We believe that these
changes present a straightforward way
to provide additional clarity to our
regulations in a circumstance that
reflects changes in terminology but does
not entail any change to the high-cost
outlier policy.
We received several comments on this
proposed clarification and revision of
terminology, all of them strongly in
favor of the proposed changes.
Therefore, for the reasons set forth in
the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24046 through 24047) and
in light of the public’s support for our
proposals, we are adopting as final
without modification the proposed
change in terminology from LTCH PPS
‘‘rate year’’ to LTCH PPS ‘‘fiscal year’’
beginning October 1, 2010 (FY 2011)
and the proposed changes to § 412.503
with the addition of the definition of
‘‘long-term care hospital prospective
payment system fiscal year’’ and the
modification of the definition of ‘‘longterm care hospital prospective payment
system rate year.’’ We also are finalizing
the addition of the term ‘‘long-term care
hospital prospective payment system
payment year’’ at § 412.503 and the
conforming regulation text changes at
§ 412.525(a)(1) and (a)(2) to capture this
new term.
E. Finalization of Interim Final Rule
With Comment Period Implementing
Section 4302 of the American Recovery
and Reinvestment Act of 2009 (Pub. L.
111–5) Relating to Payments to LTCHs
and LTCH Satellite Facilities
1. Background
On August 27, 2009, we published in
the Federal Register (74 FR 43990
through 43992), an interim final rule
with comment period to implement
certain provisions of section 4302 of the
American Recovery and Reinvestment
Act of 2009 (ARRA) (Pub. L. 111–5).
Section 4302 of the ARRA amended
several provisions of section 114 of the
MMSEA relating to LTCHs. Specifically,
section 4302(a) amended sections
114(c)(1) and (c)(2) of the MMSEA, and
section 4302(b) amended section
114(d)(3)(A) of the MMSEA. In both
cases, these ARRA provisions were to be
effective and applicable as if the
amendments had been included in the
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MMSEA. (The enactment of the
Affordable Care Act amended certain
provisions of the MMSEA which had
been amended by the ARRA.) Below we
briefly review the amendments made to
sections 114(c)(1) and (c)(2) and section
114(d) of the MMSEA by section 4302(a)
and (b), respectively, of the ARRA,
respond to the one public comment that
we received on the August 27, 2009
interim final rule with comment period,
and finalize the policies as described
below. (We note that the timeframes in
these provisions were subsequently
amended by the provisions of the
Affordable Care Act as discussed below
in section VII.F. of this preamble.)
2. Amendments Relating to Payment
Adjustment to LTCHs and LTCH
Satellite Facilities Made by Section
4302 of the ARRA
Section 114(c)(1)(A) and (B) of the
MMSEA established a 3-year delay, for
cost reporting periods beginning on or
after December 29, 2007, for
freestanding LTCHs (defined at
§ 412.23(e)(5)) and ‘‘grandfathered’’ longterm care hospitals-within-hospitals
(HwHs), from the application of the
percentage threshold payment
adjustment established under § 412.536
or § 412.534, respectively, or any similar
provision. Section 4302(a)(1) of the
ARRA amended the provisions of
sections 114(c)(1)(A) and (B) of the
MMSEA as follows:
First, under section 4302(a)(1)(A) of
the ARRA, the heading of section
114(c)(1) is changed to ‘‘Delay in
Application of 25 Percent Patient
Threshold Payment Adjustment’’ from
the original ‘‘No Application of 25
Percent Patient Threshold Payment
Adjustment to Freestanding and
Grandfathered LTCHs.’’
Second, under section 4302(a)(1)(B) of
the ARRA, the effective date of the delay
in application of the 25-percent patient
threshold payment adjustment found in
section 114(c)(1) of the MMSEA is
changed from the date of enactment of
the MMSEA (that is, December 29, 2007)
to July 1, 2007. As a result, for a
‘‘grandfathered’’ long-term care HwH or
a ‘‘freestanding’’ LTCH with a cost
reporting period beginning before
December 29, 2007, the applicable
payment adjustments at § 412.534(h)
and § 412.536 would be delayed 3 years.
This is the case because our regulations
at § 412.534(h), with respect to
‘‘grandfathered’’ LTCHs, and § 412.536
with respect to all LTCHs, were to be
effective beginning with cost reporting
periods beginning on or after July 1,
2007. Therefore, the amendment made
by section 4302(a)(1)(B) of the ARRA to
section 114(c)(1) of the MMSEA results
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in a uniform application of the statutory
3-year relief from the 25 percentage
threshold payment adjustment.
Third, section 4302(a)(1)(C) of the
ARRA added, for 3 years, a third
category of LTCHs that will not be
subject to §§ 412.534 and 412.536, or
any similar provisions of the regulations
for a 3-year period for cost reporting
periods beginning on or after July 1,
2007. Specifically, section 4302(a)(1)(C)
of the ARRA extended the 3-year
exemption from the percentage
threshold payment adjustments at
§§ 412.534 and 412.536 to include
‘‘* * * a long-term care hospital, or
satellite facility, that as of December 29,
2007, was co-located with an entity that
is a provider-based, off-campus location
of a subsection (d) hospital which did
not provide services payable under
section 1886(d) of the Social Security
Act at the off-campus location * * *.’’
Therefore, no percentage threshold (and
therefore, no payment adjustment) will
be applied for patients discharged from
an acute care hospital who are admitted
to a LTCH or LTCH satellite facility that
is co-located with an entity that is a
provider-based, off-campus location of
an acute care hospital (as set forth in our
regulations at § 413.65) as long as there
are no inpatient acute care hospital
services payable under section 1886(d)
of the Act offered at that off-campus
location. For example, this would apply
to a situation where an acute care
hospital, that Medicare pays under the
IPPS, is located on the main campus of
a multicampus entity and, on a second
campus of that acute care hospital, the
LTCH shares a building with an IRF unit
or an outpatient clinic that is providerbased to the acute care hospital as long
as there are no services payable under
the IPPS hospital provided at that
second campus.
Section 114(c)(2) of the MMSEA
provided, for a 3-year period, increases
in the percentage thresholds (‘‘payment
adjustments’’) established under
§ 412.534 for ‘‘applicable’’ LTCHs or
satellite facilities for cost reporting
periods beginning on or after December
29, 2007. Specifically, if the threshold
percentage would have been 25 percent,
for 3 years it will increase to 50 percent;
and if the threshold would have been 50
percent prior to the enactment of the
MMSEA, it will increase to 75 percent.
The term ‘‘applicable’’ was defined as
‘‘* * * a hospital or satellite facility that
is subject to the transition rules under
section 412.534(g) of title 42 of the Code
of Federal Regulations.’’ The revisions
made by section 114(c)(2) of the
MMSEA were limited to a hospital or a
satellite subject to the transition rules at
§ 412.534(g) of the regulations.
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However, because ‘‘grandfathered’’
LTCH satellite facilities are subject to
the transition at § 412.534(h) of the
regulations, not at § 412.534(g), the
percentage increase resulting from the
application of section 114(c)(2) did not
apply to them (73 FR 29703).
Section 4302(a)(2)(A) of the ARRA
modified the definition of ‘‘applicable
long-term care hospital or satellite
facility.’’ This provision amended
section 114(c)(2)(B)(ii) of the MMSEA
by specifying that those ‘‘grandfathered
satellites’’ described in § 412.22(h)(3)(i)
of the regulations were to be included
in the definition. (Under
§ 412.22(h)(3)(i), ‘‘grandfathered’’
satellites were exempted from
compliance with the ‘‘separateness and
control’’ rules specified in § 412.22(h) if
they had been structured as a satellite
facility on or before September 30,
1999.) However, we note that
‘‘grandfathered satellites’’ under
§ 412.22(h)(3) continue to be subject to
the applicable percentage thresholds
outlined in § 412.536 for patients
admitted from any individual hospital
with which they were not co-located
because there were no exceptions for
such entities for purposes of payment as
provided in § 412.536. Section
4302(a)(1)(C) of the ARRA provided that
grandfathered satellite facilities under
§ 412.22(h)(3) will not be subject to
§§ 412.534 and 412.536, or any similar
provision of the regulations, for a 3-year
period for cost reporting periods
beginning on or after July 1, 2007.
Specifically, under section 4302(a)(1)(C)
of the ARRA that amended section
114(c)(1) of the MMSEA, no percentage
threshold (and, therefore, no payment
adjustment) will be applied for patients
discharged from an acute care hospital
who are admitted to a LTCH or LTCH
satellite facility that, as of December 29,
2007, was co-located with an entity that
is a provider-based, off-campus location
of an acute care hospital (as set forth in
the regulations at § 413.65) as long as
there are no inpatient acute care
hospital services payable under section
1886(d) of the Act provided at that offcampus location.
Section 114(c)(2)(C) of the MMSEA
applied the 3-year increase in the
percentage thresholds at § 412.534 of the
regulations for cost reporting periods
beginning on or after the date of
enactment of the MMSEA (December 29,
2007). Section 4302(a)(2)(B) of the
ARRA revised the effective date of the
MMSEA provisions to cost reporting
periods beginning on or after October 1,
2007, for LTCHs and LTCH satellite
facilities that were subject to the
transition rules under § 412.534(g) and
also established the effective date as
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cost reporting periods beginning on or
after July 1, 2007, ‘‘* * * in the case of
a satellite facility described in section
412.22(h)(3)(i) of title 42 of the Code of
Federal Regulations.’’ (Different dates
are applicable because the effective date
for the 25 percent threshold payment
adjustment policy for LTCHs and LTCH
satellite facilities governed under
§ 412.534(g) was October 1, 2005, while
the percent threshold for
‘‘grandfathered’’ LTCH satellite facilities
policy was effective for cost reporting
periods beginning on or after July 1,
2007.)
The result of this modification in the
effective date of the 3-year increase in
the percentage threshold for
‘‘applicable’’ LTCHs and LTCH satellite
facilities (now including ‘‘grandfathered
satellites’’) is that LTCHs and LTCH
satellite facilities will not have the fully
phased-in 25 percentage threshold
payment adjustment applied for cost
reporting periods beginning on or after
October 1, 2007, and ‘‘grandfathered’’
satellite facilities will not be subject to
the transition to the 25 percentage
threshold for cost reporting periods
beginning on or after July 1, 2007.
To implement the provisions of
section 4302 of the ARRA, in the August
27, 2009 interim final rule with
comment period, we revised the
regulations at §§ 412.534 and 412.536 to
reflect the statutory revisions described
above.
Comment: One commenter stated that
CMS had failed to specify that a
‘‘grandfathered’’ LTCH satellite facility
that met the description of the third
category of LTCHs and LTCH satellite
facilities included in the amendment to
section 114(c)(1) of the MMSEA by
section 4302(a)(1)(C) of the ARRA (that
is, ‘‘* * * a long-term care hospital, or
satellite facility, that as of December 29,
2007, was co-located with an entity that
is a provider-based, off-campus location
of a subsection (d) hospital which did
not provide services payable under
section 1886(d) of the Social Security
Act at the off-campus location’’) was
also exempt from compliance with the
25-percent policy for 3 years.
Response: We agree all those LTCH
satellite facilities described above are
exempt from the 25-percent policy at
§ 412.536 for 3 years.
In this final rule, we are finalizing the
provisions of the August 27, 2009
interim final rule with comment period
which revised the regulations at
§§ 412.534 and 412.536 to reflect the
ARRA statutory revisions.
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3. Amendment to the Moratorium on the
Increase in Number of Beds in Existing
LTCHs or LTCH Satellite Facilities
Made by Section 4302 of the ARRA
Section 114(d) of the MMSEA
provided a 3-year moratorium on any
increase in the number of hospital beds
in existing LTCHs and LTCH satellite
facilities. (The definition of an existing
LTCH and LTCH satellite facility for
purposes of this policy is codified at
§ 412.23(e)(7)(i).) Section 114(d) of the
MMSEA included an exception to the
moratorium on the increase in hospital
beds in existing LTCHs and LTCH
satellite facilities. Specifically, section
114(d)(3)(A) of the MMSEA provided
that the moratorium on the increase in
beds in an existing LTCH or LTCH
satellite facility would not apply to an
increase in beds if an existing LTCH or
LTCH satellite facility is ‘‘located in a
State where there is only one other longterm care hospital; and requests an
increase in beds following the closure or
the decrease in the number of beds of
another long-term care hospital in the
State.’’
Section 4302(b) of the ARRA added
an additional exception to the bedincrease moratorium in an existing
LTCH or LTCH satellite facility ‘‘* * *
if the hospital or facility obtained a
certificate of need for an increase in
beds that is in a State for which such
certificate of need is required and that
was issued on or after April 1, 2005, and
before December 29, 2007.’’
Accordingly, in the August 27, 2009
interim final rule with comment period,
we revised our regulations at
§ 412.23(e)(7)(ii)(B) to include the new
exception to the moratorium on an
increase in the number of beds in
existence in an existing LTCH or LTCH
satellite facility beyond those in
existence on December 29, 2007.
Section 4302(c) of the ARRA specifies
that the ‘‘* * * effective date of the
amendments made by this section shall
be effective and apply as if included in
the enactment of the Medicare,
Medicaid, and SCHIP Extension Act of
2007’’ (Pub. L. 110–173).
We did not receive any public
comments on this provision in the
August 27, 2009 interim final rule with
comment period. Therefore, we are
finalizing, without modification, our
revision of § 412.23(e)(7)(ii)(B) to
include the new exception to the
moratorium on an increase in the
number of beds in existence in an
existing LTCH or LTCH satellite facility
beyond those in existence on December
29, 2007.
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F. Extension of Certain Payment Rules
for LTCH Services and Moratorium on
the Establishment of Certain Hospitals
and Facilities and the Increase in
Number of Beds in Existing LTCHs or
LTCH Satellite Facilities
1. Background
As explained in the June 2, 2010 FY
2011 IPPS/LTCH PPS supplemental
proposed rule, sections 114(c) and (d) of
MMSEA (Pub. L. 110–173, enacted
December 29, 2007), made various
changes to certain LTCH PPS policies.
These changes were implemented in
two interim final rules published in
May 2008 (73 FR 24871 and 73 FR
29699). The ARRA (Pub. L. 111–5) was
enacted on February 17, 2009, and
section 4302 of the ARRA amended
sections 114(c) and (d) of the MMSEA.
These changes were implemented in an
interim final rule with comment period,
which was published with the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74
FR 43990 through 43994). In that same
rule, the MMSEA provisions that were
not affected by the passage of ARRA
were finalized. (For a more complete
description of the MMSEA, as amended
by ARRA changes to LTCH PPS policies,
we refer readers to the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43976
through 43990).
Subsequent to the passage of the
ARRA, the Patient Protection and
Affordable Care Act and the Health Care
Education Reconciliation Act of 2010
(collectively referred to as the
Affordable Care Act) was passed.
Sections 3106 and 10312 of the
Affordable Care Act together provide for
a 2-year extension to the payment
policies applicable to LTCHs and LTCH
satellite facilities set forth in sections
114(c) and (d)(1) of the MMSEA, as
amended by the ARRA. Specifically,
sections 3106 and 10312 of the
Affordable Care Act together result in
the phrase ‘‘3-year period’’ being
replaced with the phrase ‘‘5-year period’’
each place it appears in sections 114(c)
and (d)(1) of MMSEA, as amended by
the ARRA. (The ARRA amendments,
which were implemented in the FY
2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43990 through 43994) are
finalized in section VII. E. of this final
rule.) We note that the changes required
by sections 3106 and 10312 of the
Affordable Care Act are selfimplementing and were announced in
the FY 2011 IPPS/LTCH PPS
supplemental proposed rule. In that
same proposed rule, we also proposed
to revise the regulation text to
incorporate such existing law.
Sections 3106 and 10312 of the
Affordable Care Act, which amended
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50399
sections 114(c) and (d)(1) of the
MMSEA, as amended by the ARRA,
result in the following:
• An additional 2-year delay in the
application of the SSO payment
adjustment, which would have applied
the additional payment option of an
‘‘IPPS comparable’’ payment to LTCHs
for certain SSO cases where the covered
length of stay is less than or equal to the
‘‘IPPS comparable threshold’’ (75 FR
30966 and 72 FR 26904 through 26918).
Therefore, the Secretary will not apply
this SSO payment adjustment for the
5-year period beginning on the date of
enactment of MMSEA (December 29,
2007). As proposed, in this final rule the
regulations at § 412.529(c)(2) and (c)(3)
are revised to incorporate this
additional 2-year delay provided for
under the Affordable Care Act.
• An additional 2-year delay in the
one-time prospective budget neutrality
adjustment to the standard Federal rate
(§ 412.523(d)(3)). Thus, the Secretary is
precluded from making the one-time
adjustment to standard Federal rate
until December 29, 2012. For a detailed
description of this change, we refer
readers to the discussion in the FY 2011
IPPS/LTCH PPS supplemental proposed
rule (75 FR 30966). As proposed, in this
final rule the regulations at
§ 412.523(d)(3) are revised to
incorporate this additional 2-year delay.
• An increase from 3 years to 5 years
to the timeframes set forth in section
114(c) of the MMSEA as amended by
the ARRA, thereby extending for an
additional 2 years the delay in the
application of the 25-percent payment
threshold policy for certain LTCHs and
LTCH satellite facilities (§§ 412.534 and
412.536), and extending for an
additional 2 years, the increased
percentage thresholds outlined at
section 114(c)(2) of the MMSEA as
amended by the ARRA (which is
discussed in detail in section VII. E. of
this final rule). As proposed, in this
final rule we are amending the
regulations at § 412.534(c)(1) through
(c)(3), (d)(1) through (d)(3), (e)(1)
through (e)(3), (h)(4) through (h)(5) and
§ 412.536(a)(2) to incorporate the 2-year
delay and extension, as applicable,
provided for under the Affordable Care
Act. For a detailed description of
sections 114(c)(1) and (c)(2) of the
MMSEA as amended by the ARRA and
the regulations implementing those
provisions, we refer readers to the LTCH
PPS interim final rule with comment
period at 73 FR 29701 through 29704,
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule at 74 FR 43980 through 43984,
and section VII. E. of this final rule
where we finalize the interim final rule
with comment period implementing
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section 4302 of the ARRA, which we
published in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43990
through 43993).
• Additional 2-year extensions of the
moratorium on the establishment of new
LTCHs and LTCH satellite facilities and
the moratorium on the increase of LTCH
beds in existing LTCHs or satellite
facilities as provided by section 114(d)
of the MMSEA as amended by the
ARRA. In general, section 114(d) of the
MMSEA as amended by the ARRA
precluded the establishment and
classification of new LTCHs or LTCH
satellite facilities or additional beds
from being added to existing LTCHs or
LTCH satellite facilities unless one of
the specified exceptions to the
particular moratorium was met. For a
detailed description of the moratoriums,
we refer readers to the discussions at 73
FR 29704 through 29707, 74 FR 43985
through 43992, and 75 FR 30968. As
proposed, in this final rule we are
amending the regulations at
§ 412.23(e)(6)(i) and (e)(7)(ii) to
incorporate the additional 2-year
extension of the moratoriums, discussed
above.
We did not receive any public
comments on the provisions as
presented in the June 2, 2010
supplemental proposed rule, and
therefore, in this final rule, we are
finalizing these provisions as presented.
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VIII. Effective Date of Provider
Agreements and Supplier Approvals
A. Background
Section 1866 of the Act states that any
provider of services as defined under
section 1861(u) of the Act (except a fund
designated for purposes of sections
1814(g) and 1835(e) of the Act) shall be
qualified to participate in the Medicare
program and shall be eligible for
Medicare payments if it files with the
Secretary a Medicare provider
agreement and abides by the
requirements applicable to Medicare
provider agreements. These
requirements are incorporated into our
regulations in 42 CFR part 489, subparts
A and B. Section 1866(b)(2) of the Act
provides that the Secretary may refuse
to enter into, or may terminate, an
agreement with a provider for various
reasons, including the provider’s failure
to comply with the provisions of the
agreement and if it has been determined
that the provider fails to meet the
applicable provisions of section 1861 of
the Act, including health and safety
standards. Certain suppliers are also
required under the Act to meet health
and safety standards specified by the
Secretary: Section 1861(aa)(2)(K), with
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respect to rural health clinics; section
1832(a)(2)(F)(i), with respect to
ambulatory surgical centers; and section
1881(b)(1)(A), with respect to providers
of renal dialysis services.
Under section 1864(a) of the Act, the
Secretary enters into agreements with
State agencies to determine if providers
and suppliers meet the requisite
Medicare requirements. Section 1865 of
the Act permits CMS to ‘‘deem’’ facilities
that have been accredited by a national
accreditation organization under a CMSapproved accreditation program as
having met the Medicare health and
safety standards. Section 1871 of the Act
authorizes the Secretary to adopt such
regulations as may be necessary to carry
out the requirements of Title XVIII of
the Act.
On August 18, 1997, we adopted
regulations, effective September 17,
1997 (1997 final rule), establishing
uniform criteria for determining the
effective dates of provider agreements
and supplier approvals in the Medicare
and Medicaid programs (62 FR 43931).
Included in these regulations was 42
CFR 489.13, governing the
determination of the effective date of a
Medicare provider agreement or
supplier approval for health care
facilities that are subject to survey and
certification. Facilities subject to survey
and certification are those that must
comply with Medicare health and safety
standards, that is, the conditions of
participation (CoPs), long-term care
requirements, conditions for coverage
(CfC), or conditions for certification,
depending on the type of facility. (The
regulations exempt clinical laboratories,
community mental health centers, and
federally qualified health centers from
its general provisions, establishing
alternative requirements for these
entities.) Compliance with the
applicable health and safety standards is
determined through an onsite survey by
a State survey agency, CMS, or a CMS
contractor, or, in accordance with
section 1865 of the Act, CMS may
‘‘deem’’ an entity to have satisfied these
requirements if it has been accredited by
a national accreditation program
approved by CMS. Currently, we have
approved 15 accreditation programs
offered by 7 national accreditation
organizations for the following types of
providers or suppliers: Hospitals, CAHs,
HHAs, hospices, and ambulatory
surgical centers.
Under § 489.13(b) of the regulations,
the date the survey is completed is the
effective date of the provider agreement
or supplier approval, if all applicable
Federal requirements have been met on
that date. Similarly, § 489.13(d)
provides that the effective date for a
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provider or supplier accredited by a
national accreditation organization
under a CMS-approved program, and
which is subject to additional
requirements not contained in the
approved program, is the date on which
all Federal requirements have been met,
including the additional requirements.
We have interpreted these provisions to
mean not only that the survey/
accreditation decision must show that
the prospective provider or supplier is
in compliance with all of the applicable
health and safety standards, but also
that all other Federal requirements
related to the prospective provider’s or
supplier’s participation in the Medicare
program have been met.
Other Federal requirements include,
but are not limited to, the submission of
an application to enroll in the Medicare
program that has been reviewed by our
legacy fiscal intermediaries, legacy
carriers, or MACs, as applicable, and
has been found to meet the enrollment
requirements established in 42 CFR part
424, subpart P. Other Federal
requirements also include, for
providers, compliance with Office for
Civil Rights requirements. There also
are additional Federal requirements
specific to certain provider types, such
as IPPS exclusion requirements for
certain types of hospitals, capitalization
and surety bond requirements for home
health agencies, among others.
Under our current process, section
2003B of the State Operations Manual
(SOM) (Publication No. 100–07) states
that: ‘‘The SA [State Survey agency]
should not perform a survey of a new
facility until it has received notice from
the FI [fiscal intermediary] or carrier
that the information provided on the
enrollment application has been
verified.’’ Section 2005 of the SOM
further states: ‘‘The MAC/legacy FI will
process the Form CMS–855A and the
MAC/legacy Carrier will process the
Form CMS–855B, depending on which
contractor is responsible for processing
bills or claims for the provider/supplier.
* * * The State Survey Agency will be
responsible for surveying initial
applicants following the contractor’s
recommendation for approval, and
providing the initial certification
package.’’ (Emphasis added.)
In accordance with § 488.8(a)(2) of the
regulations, one of the requirements for
our approval of a national accreditation
program is the comparability of its
survey process to that of State survey
agencies. Consistent with this
requirement, in Survey and Certification
Policy Memorandum S&C–09–08, dated
October 17, 2008, we indicated that a
CMS-approved national accreditation
organization also must not conduct a
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survey of a facility seeking a Medicare
provider agreement or supplier approval
until after the MAC, the legacy fiscal
intermediary, or the legacy carrier has
completed its review of the enrollment
application and notified the applicant
that its review has been completed and
a recommendation has been made to
CMS.
Therefore, historically, in the normal
course of events, the survey (including
the Life Safety Code survey, if
applicable) of a prospective provider or
supplier has usually occurred after it
has demonstrated that it meets the
Medicare enrollment requirements (that
is, CMS contractor processing of the
Form CMS–855 application), and, as a
result, the effective date of a provider
agreement or supplier approval is
generally later than the date when the
contractor has verified that all
enrollment requirements have been met.
However, on occasion, a survey can take
place before the CMS contractor has
verified that enrollment requirements
have been met. This has tended to
happen more frequently in the case of
facilities that seek to satisfy Medicare
participation requirements through
accreditation by a CMS-approved
accreditation program, because the
accreditation organization relies upon
the facility to advise it when it has
received notice of completion of the
review of its enrollment application.
This can result in the date of an
accreditation decision preceding the
date when the CMS contractor
determination has occurred. In addition,
in order to prevent fraud and abuse,
there may be other situations in which
the CMS contractor performs additional
enrollment verification activities even
after a health and safety survey has been
performed.
In cases where the CMS contractor
finds that the prospective provider’s or
supplier’s compliance with enrollment
requirements did not occur until after a
survey by the State survey agency or
after the accreditation survey and
accreditation decision take place, it is
our policy, consistent with our
interpretation of § 489.13(b), to make the
effective date of the provider agreement
or supplier approval the date when the
enrollment requirements are considered
to have been met. Specifically, the
effective date would be the date that
CMS determines, pursuant to its
contractor review and verification
activities, that the applicant is in
compliance with all enrollment
requirements and CMS is prepared to
convey Medicare billing privileges to
the provider or supplier. However, if
there are still other Federal
requirements that remain to be satisfied,
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such as submission of required civil
rights compliance documentation or
satisfaction of the specialized
requirements governing IPPS-excluded
hospitals, the effective date would be
the date when the last requirement has
been satisfied, as determined by CMS.
B. Departmental Appeals Board
Decision
In a decision dated September 28,
2009, the Appellate Division of the
Departmental Appeals Board (DAB), in
the case of Renal CarePartners of Delray
Beach, LLC v. Centers for Medicare and
Medicaid Services (DAB Decision No.
2271), rejected our longstanding
interpretation of § 489.13(b). In this
case, a State survey agency completed
an initial certification survey on July 6,
2007, of an end-stage renal disease
supplier, Renal CarePartners, prior to
the CMS contractor’s November 21,
2007 recommendation of approval of the
supplier’s enrollment application. The
DAB concluded that there was no basis
in regulation or policy issuances for our
position that CMS contractor approval is
a requirement a supplier must satisfy
‘‘before it may furnish services for which
it will be reimbursed under Medicare
once it is enrolled and obtains billing
privileges’’ (DAB Decision No. 2271,
page 2). The DAB further characterized
the issue as ‘‘* * * not whether the
effective date may be earlier than the
date Renal CarePartners complied with
a prerequisite it was required to meet in
order to enroll, but whether the effective
date must be delayed until the date the
Medicare contractor notified CMS that
the requirements were met’’ (DAB
Decision No. 2271, page 5) (emphasis in
original). The DAB agreed with Renal
CarePartners that the requirement for
the Medicare contractor to verify and
determine whether an application
should be approved is not a requirement
for the supplier to meet, but a
requirement for Medicare contractor
action (DAB Decision No. 2271, page 5).
The DAB further cited the provisions of
§ 489.13(d), concerning accredited
facilities, as an example to bolster its
contention that there is precedent for
providers or suppliers to be
retroactively reimbursed for services
provided before the date of approval of
the supplier or provider agreement
(DAB Decision No. 2271, page 7).
We disagree with the DAB’s reading
of our existing regulations. We believe
that the intent of the existing regulations
is to require that all applicable Federal
requirements, including a determination
of whether the enrollment requirements
have been satisfied, must be met before
a provider agreement or supplier
approval may be effective. Any other
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reading of the regulations could result
in a provider or supplier being
permitted to bill the Medicare program
for services provided at a time when its
compliance with Medicare’s
requirements is unknown and possibly
deficient. For example, in the event a
State survey precedes the CMS
contractor’s review of the enrollment
application of a prospective provider or
supplier, it might be possible that the
application originally submitted to the
CMS contractor is not complete or
accurate, or both, and the applicant
must provide additional information to
the CMS contractor to demonstrate
compliance with the enrollment
requirements. It would not be consistent
with our duty to protect the Medicare
Trust Funds from unsupported claims
against it to permit payment for services
furnished by a health care facility after
it has passed a State survey or been
accredited, but before it has satisfied all
other Medicare participation
requirements, including enrollment
requirements.
Such a reading also might undermine
the incentives inherent in our
longstanding policy, affirmed in the
June 1, 1994 decision of the U.S. Court
of Appeals for the Fifth Circuit in U.S.
v. Vernon Home Health, Inc. (21 F. 3d
693 (5th Cir. 1994), cert. denied, 115
S.Ct. 575 (1994)).
Under CMS regulations at 42 CFR
489.18(c), a ‘‘change of ownership’’
includes accepting assignment of the
seller’s existing provider agreement or
supplier approval. Section 489.18(d)
states that the provider or supplier
continues to be subject to the same
statutes and regulations, and to the
terms and conditions under which it
was originally issued. This means that
the new owner receives the assets and
liabilities associated with that
agreement or approval. This has proven
to be an important tool in protecting the
Medicare Trust Funds through
continuity in the ability to recover
outstanding overpayments.
Under that policy, if a buyer of a
Medicare-participating facility chooses
not to accept assignment of the provider
agreement or supplier approval, the
provider agreement or supplier approval
terminates. Then, the new owner must
be treated as an initial applicant to the
Medicare program. In this situation,
Medicare will not reimburse the
provider or supplier for services it
provides before the date on which the
provider or supplier qualifies as an
initial applicant.
Any requirement to make payments
retroactive to the date of a State survey
or accreditation decision, despite the
fact that all other Federal requirements
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may not yet have been met, could
provide an incentive for more buyers to
refuse assumption of the seller’s
provider agreement or supplier
approval, because there would
potentially be no break in payments.
Therefore, effectively, a buyer who does
not accept assignment of the seller’s
active provider agreement could
potentially begin receiving Medicare
payments immediately (assuming it
meets all the requirements), but not be
responsible for any existing liabilities of
the provider agreement. This would also
be an incentive for existing providers or
suppliers with civil money penalties or
overpayments to sell their facilities in
order to escape any financial
responsibility to the Medicare program.
C. Revisions to Regulations
In the FY 2011 IPPS/LTCH proposed
rule (75 FR 24047), we proposed to
amend § 489.13 and make a technical
amendment to § 489.1 in order to clarify
our policy. Specifically, we proposed to
revise § 489.13(a) to make it clearer that
it is only CMS that determines whether
health care facilities have satisfied the
requirements for participation in the
Medicare program, not State survey
agencies or national accreditation
organizations. We noted that, although
this CMS determination is sometimes
referred to as a ‘‘certification,’’ or
‘‘certification decision,’’ § 488.1 defines
‘‘certification’’ as ‘‘a recommendation
made by the State survey agency on the
compliance of providers and suppliers
with the conditions of participation,
requirements (for SNFs and NFs), and
conditions of coverage.’’ Further,
§ 488.12 provides that CMS makes the
determination on whether a provider or
supplier is eligible to participate in or
be covered by the Medicare program,
based on the State survey agency’s
recommendation, or on the facility’s
accreditation.
We also proposed to add language to
§ 489.13(a) in order to clarify that
surveys of nonaccredited facilities may
be conducted not only by State survey
agencies, but also by CMS staff or
contractors, as appropriate. We have
used contractors to conduct certain
types of surveys, such as life safety
code, transplant program and
psychiatric hospital special conditions
surveys, and may continue to do so in
the future. In addition, certain types of
facilities, such as Indian Health Services
(IHS) facilities and RNHCIs, have
traditionally been surveyed by CMS
employees rather than State survey
agencies.
We proposed to revise § 489.13(b) to
make explicit that the effective date of
a provider agreement or supplier
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approval may not be earlier than the
latest of the dates on which each
applicable Federal requirement is
determined to be met. We also proposed
to state explicitly that ‘‘Federal
requirements’’ include, but are not
limited to, the enrollment requirements
established in 42 CFR part 424, subpart
P, that have been determined by CMS to
have been met. In addition, we
proposed to revise § 489.13(b) to include
language concerning accredited
facilities, to assure that accredited and
nonaccredited facilities are treated in
the same manner.
In the proposed rule, we further
explained the rationale behind the
proposed change to § 489.13(b),
particularly with respect to the
requirements in the provider/supplier
enrollment process.
A CMS contractor will review and
conduct an initial assessment of a
prospective provider’s or supplier’s
enrollment. If the contractor finds that
a prospective provider or supplier meets
the basic enrollment requirements to
participate in the Medicare program for
its identified certified provider or
supplier type, the contractor will notify
the appropriate CMS Regional Office.
Essentially, the contractor’s initial
assessment means that it has concluded
its preliminary review of the enrollment
application and has concluded that the
survey and certification process can be
initiated, and, consequently, it issues a
recommendation of approval. In order to
help ensure compliance with
enrollment requirements throughout
this process, the contractor may
continue to perform a number of
enrollment verification tasks even after
it has issued a recommendation for
approval. These include, but are not
limited to, conducting onsite visits of
the prospective provider or supplier to
ensure that it is still operational;
verifying an HHA applicant’s
compliance with the capitalization
provisions in 42 CFR 489.28; and
requesting the provider or supplier
applicant to reaffirm the accuracy of the
information it furnished on its initial
enrollment application. Given the
potentially significant length of time
between when the contractor issues its
recommendation of approval after its
initial assessment and when the health
and safety survey (or accreditation) and
certification process is completed, we
believe that it is essential for the
contractor to verify that a provider or
supplier applicant continues to meet
enrollment requirements prior to the
issuance of a Medicare provider
agreement or supplier approval and the
issuance of Medicare billing privileges.
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To that end, we believe that the CMS
contractor should verify that a provider
or supplier is in compliance with all
enrollment requirements when an
enrollment application is submitted,
during the period in which a provider
or supplier is undergoing the health and
safety survey and certification process
and before the issuance of a Medicare
provider agreement or supplier approval
and billing privileges. If a provider or
supplier is determined to be in
compliance with all Medicare
requirements, including the enrollment
requirements, the enrollment and initial
certification process will be completed,
and the Medicare provider agreement or
supplier approval and billing privileges
will be issued to the applicant.
However, if a provider or supplier is
determined to be out of compliance
with Medicare enrollment requirements
prior to the issuance of a Medicare
provider agreement or supplier approval
and billing privileges to the applicant,
we believe that CMS must deny
Medicare billing privileges using the
applicable denial reason found in 42
CFR 424.530 and afford the applicant
with the applicable Medicare appeal
rights.
We proposed to revise § 489.13(c) to
make clear that this paragraph addresses
those situations in which a facility has
met all other Federal requirements but,
upon survey, has been found to not
meet all applicable CoPs, long-term care
requirements, CfCs, or conditions for
certification. We also proposed to revise
this paragraph to include language
concerning accredited facilities, to
assure that accredited and
nonaccredited facilities are treated in
the same manner.
We proposed to remove § 489.13(d),
concerning the determination of the
effective date for accredited facilities.
We indicated that we saw no reason for
differential treatment of accredited and
nonaccredited facilities with respect to
the determination of their effective date,
and, in practice, we have not treated
them differentially. In particular, as a
matter of policy, we noted that we have
not exercised the discretion permitted
under § 489.13(d)(2) to grant accredited
facilities an effective date retroactive up
to 1 year prior to what otherwise would
be their effective date. Permitting such
retroactive payment would provide
accredited facilities an unwarranted
advantage when compared to
nonaccredited facilities. It would also
seriously undermine our policy
concerning change of ownership
without assumption of the seller’s
provider agreement or supplier
approval. However, the existence of this
discretionary provision appears to cause
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confusion among accredited providers
and suppliers who incorrectly believe
they are entitled to a retroactive
effective date.
In the proposed rule, we explained
that this discretionary provision was
included in the 1997 final rule as a
result of public comments that
concerned the Medicaid program. The
commenters were concerned that the
proposed rule would not have allowed
for a retroactive agreement for a facility
that was already accredited and cited
two Medicaid program scenarios to
illustrate their concern. In one scenario,
a facility participates in its own State’s
Medicaid program and provides services
to a Medicaid recipient from another
State. In the other scenario, a facility
does not participate in Medicaid but
provides services to a Medicaid
recipient before learning of the
individual’s Medicaid status. Neither of
these scenarios is pertinent to the
Medicare program because Medicare
beneficiary enrollment is managed
nationally. However, the stated intent of
the 1997 final rule was to use a standard
approach for both Medicare and
Medicaid to determine the effective date
of a provider agreement and a supplier
approval, and, as a result, the provisions
of § 489.13(d)(2) are identical to those at
§ 431.108(d)(2) for the Medicaid
program.
Upon further consideration, we
believe it is important to recognize the
significant differences resulting from a
State-based versus national system of
beneficiary enrollment, and to ensure
that the provisions of § 489.13 are
tailored to the requirements of the
Medicare program. As stated, as a matter
of longstanding policy, reflected in
issuances dating back at least as far as
1994, we have required new owners
who do not accept the seller’s Medicare
provider agreement or supplier approval
to be treated as initial applicants to the
Medicare program. In a 1999 issuance,
reaffirmed in several subsequent
issuances, including the 2004
publication of the online version of the
SOM and in Survey and Certification
Memorandum S&C–09–08 issued on
October 17, 2008, we explicitly state
that this policy applies to accredited
facilities as well. Therefore, in the
proposed rule, we stated that we
believed it was appropriate to remove
§ 489.13(d), and to instead make
appropriate reference to the situation of
accredited facilities in §§ 489.13(b)
and (c).
Finally, we proposed to make several
technical amendments to § 489.1.
Specifically, we proposed to revise that
section to add a reference to section
1865 of the Act, which permits CMS to
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‘‘deem’’ facilities that have been
accredited by a national accreditation
organization under a CMS-approved
accreditation program as having met the
Medicare health and safety standards.
We also proposed to revise and
renumber the existing provision of
§ 489.1 and to add references to ‘‘the
Act’’ where the section refers to a
provision of the Social Security Act.
Comment: One commenter expressed
concern that the new post-survey
reviews by the contractor [that is, the
Medicare Administrative Contractor
(MAC) or legacy fiscal intermediary or
carrier] will significantly delay the
effective date of new provider
agreements, particularly for home health
agencies that must meet certain
capitalization requirements. The
commenter recommended that CMS
direct its contractors to perform all
possible tasks in the pre-survey
timeframe and to limit the post-survey
tasks. The commenter also called for the
contractor in the post-survey review of
a home health agency application to
merely require certification that the
provider retains capitalization for the
first 3 months of operation. The
commenter further recommended that
CMS establish processing timeframes for
the post-survey activities of its
contractors, and also require the
contractors to notify the applicant’s
accreditation organization when the
contractor recommends approval of
enrollment. Finally, the commenter
recommended that CMS require the
accreditation organization to notify the
contractor and the CMS Regional Office
when a provider applicant has satisfied
accreditation requirements.
Response: CMS has the regulatory
authority to verify the information on an
enrollment application at any time,
including post-survey or postaccreditation. Further, the regulatory
requirements in § 489.13 can
accommodate whatever contractor
(MAC or legacy fiscal intermediary/
carrier) verification processes for
providers and suppliers that CMS
employs; such contractor verification
processes are governed by the
regulations under 42 CFR part 424 and
associated policy instructions issued by
CMS. In the proposed rule at
§ 489.13(b)(1), it states that CMS
determines the date on which the
completeness and accuracy of the
enrollment application has been verified
by the CMS contractor. However, we
note that a second contractor review
that takes place after the survey will
only delay the effective date of a
provider agreement or supplier approval
if that review identifies noncompliance
with any Federal requirements. If a
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50403
provider or supplier that is subject to
§ 489.13 is found upon a post-survey
second contractor review to continue to
meet all requirements, there would be
no change in the compliance
determination date previously provided
by the contractor to the CMS Regional
Office or State survey agency. On the
other hand, if the provider or supplier
does not meet all Federal requirements,
there would be a delay in the effective
date of any provider agreement or
supplier approval that might eventually
be issued to the applicant.
The issues of processing timeframes
or the criteria to be used in the case of
a post-survey review of a home health
agency applicant by the contractor, such
as for capitalization, as well as the issue
of notices to or from accreditation
organizations are matters that are
specified through manual and policy
instructions by CMS rather than through
regulation. However, with respect to the
accreditation organizations, we note that
they are already required to provide
notice of their survey results and
accreditation decisions to the CMS
Regional Office. Further, the contractor
is already required to notify the
applicant when it has completed its presurvey review of an enrollment
application, and CMS instructs
accreditation organizations not to
conduct a survey related to an initial
application for Medicare participation
until the applicant provides evidence to
the accreditation organization of the
notice from the contractor.
Comment: One commenter expressed
concern in response to our statement in
the proposal that other Federal
requirements that must be satisfied
before a provider agreement could be
effective included compliance with
Office of Civil Rights (OCR)
requirements. The commenter stated
that the proposal to include OCR
clearance before the provider agreement
is made effective will significantly delay
the effective date of the agreement for
all but the largest entities that have a
Corporate Agreement with OCR. The
commenter noted that currently the
provider agreement is made effective
while OCR performs its compliance
review. The commenter recommended
that the State survey agencies and
accreditation organizations review the
provider’s civil rights policies and
procedures as part of the survey process.
The commenter referred to the
requirements at 42 CFR 484.12 for home
health agencies and 42 CFR 418.116 for
hospices as evidence of the commenter’s
view that State survey agencies and
accreditation organizations already
perform assessments of compliance with
OCR requirements.
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Response: We do not intend to change
our current policy related to OCR
compliance. Currently, in the
transmittal letter sent to a prospective
provider or supplier informing that a
provider agreement (including its
effective date) is being issued, it states
that the applicant’s Medicare
participation is contingent upon
compliance with all civil rights
requirements, as determined by OCR,
usually at a date later than the effective
date of the provider agreement. Thus,
the commenter’s concern that we are
changing this policy, with the result that
the effective date of a provider
agreement would be delayed until OCR
completes its review, is unfounded;
therefore, it is not necessary to consider
adopting the commenter’s
recommendation concerning how to
ameliorate the impact of a change by
having State survey agency or
accreditation organization assessment of
OCR compliance. In our proposal, we
referred to ‘‘submission of required civil
rights compliance documentation’’ as an
example of other Federal requirements
that must be met. There are occasions
where an applicant’s required
documentation of assurance of
compliance with civil rights laws and
regulations, Form HHS–690, and related
documents, are not submitted until after
a survey is conducted. In such cases, the
effective date of the provider agreement
may not be prior to the date when the
complete required civil rights
compliance documentation was
received by CMS.
Although it is not necessary to
consider the commenter’s
recommendation of State or
accreditation organization assessment of
compliance with OCR requirements in
view of there being no change in our
current practice concerning OCR
compliance determinations, we do note
that the commenter’s assumption
concerning who makes such compliance
determinations is not correct. OCR has
the authority to determine compliance
with Federal civil rights requirements;
CMS does not have such authority.
Although there generally are
requirements in the various CMS
regulations for providers, including
home health and hospice agencies, to
comply with applicable Federal, State,
and local law, such requirements do not
mean that CMS has in all, or even most,
cases the authority to determine
compliance with such law. Where CMS
does not have such authority, CMS and
the State survey agencies and
accreditation organizations must rely
upon the determinations of the agencies
that do have such authority before they
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find a provider to be noncompliant with
a CMS provision requiring compliance
with other laws.
Comment: Two commenters
expressed concern with the proposal to
remove the provisions of § 489.13(d)(2),
which gives CMS the discretion to make
the effective date of a provider
agreement or supplier approval
retroactive up to 1 year. One commenter
stated that this would remove an
important flexibility in how the
effective date is established, resulting in
unnecessary delays in enrollment, and
may inadvertently limit access to
Medicare services or inappropriately
shift the costs of caring for Medicare
beneficiaries to providers. This
commenter indicated that CMS
provided no analysis of how this change
would reduce fraud and abuse. Another
commenter stated that a ‘‘snafu’’ in an
accreditation organization may result in
excessive delay in its issuing its
accreditation decision, and
recommended that CMS retain its
authority for retroactive effective dates
for deemed accredited facilities and
specify in the regulation that such
authority will be exercised only when
equity so requires and when the
accrediting determination delay was
due to no fault of the provider or
supplier.
Response: The commenters’ concerns
that removal of § 489.13(d)(2) would
eliminate a current flexibility and,
therefore, would result in unnecessary
delays in Medicare enrollment are not
warranted because we have not
exercised the discretion afforded to us
in this provision. This was a
discretionary provision that we have not
utilized for the reasons noted in the
preamble to the proposed rule. Further,
we do not believe that the accreditation
of a facility should afford the facility
preferential treatment in its provider
agreement or supplier approval effective
date determination compared to a
nonaccredited facility that chooses to be
surveyed by the State agency or CMS.
With respect to the rationale for
deleting this provision in order to
protect the Medicare Trust Funds, as we
stated in the proposed rule, exercising
the discretion to permit such retroactive
effective dates for accredited facilities
would seriously undermine our policy
concerning accepting assignment of the
seller’s provider agreement or supplier
approval. As a matter of longstanding
policy reflected in issuances dating as
far back as 1994, new owners of existing
providers or suppliers who do not
accept the seller’s existing Medicare
provider agreement or supplier approval
and who intend to continue Medicare
participation are treated as new
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applicants to the Medicare program and
must submit to the same process as any
new provider or supplier. This process
necessarily entails a break in Medicare
payment for services provided during
the period between the termination of
the seller’s provider agreement and the
issuance of a new provider agreement to
the new owner. As a result, new owners
of a Medicare participating facility must
carefully weigh the costs and benefits of
their decision of whether or not to
assume the seller’s existing Medicare
provider agreement. Thus, the Medicare
Trust Funds are better protected because
new owners generally decide to assume
the seller’s provider agreement,
including outstanding liabilities (such
as any overpayments or money
penalties) owed to the Medicare
program. In some cases, this would also
result in the new owner receiving any
outstanding Medicare underpayments
owed under the existing agreement. In
the State Operations Manual (Pub. 100–
07) and in the October 17, 2008 Survey
and Certification Memorandum S&C–
09–08, we explicitly stated that
accredited facilities also are subject to
the policy requiring new owners who
reject assignment of the seller’s existing
provider agreement to be treated as an
initial applicant to the Medicare
program, with the break in coverage that
this entails. If, on the other hand, a new
owner of an accredited provider who
chooses not to accept assignment of the
seller’s existing Medicare provider
agreement could be issued a new
provider agreement on the basis of
deemed status with a retroactive
effective date that bridged the coverage
gap since the termination of the seller’s
provider agreement, then this would
provide a strong incentive for new
owners to routinely refuse to accept
assignment of the seller’s provider
agreement. The resulting impact on the
Medicare Trust Funds would be
negative, in terms of both any
outstanding liabilities owed to the
Medicare program under the seller’s
terminated provider agreement or
supplier approval and the cost of paying
for services provided by a new applicant
prior to the date when that applicant
satisfies all Federal requirements.
Finally, delay in issuance of an
accreditation decision due solely to
internal administrative issues within the
accreditation organization should not,
contrary to the commenter’s concern,
delay the effective date of the
accreditation decision, and thus the
effective date of the applicant’s provider
agreement or supplier approval. The
standard practice expected for
Medicare-approved accreditation
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programs is for the accreditation
organizations to make their
accreditation decision effective as of the
date that all accreditation program
requirements were met, regardless of
when the decision is actually issued.
We are revising the regulatory text upon
adoption to make this clearer. In view
of this standard practice and in light of
the fact that the retroactive effective
date provision for accredited providers
and suppliers has not been utilized by
us, we do not believe there is need to
retain the ability to make retroactive
provider agreement or supplier approval
effective date determinations in the case
of accredited facilities.
Comment: One commenter stated that
it was not clear whether CMS intended
§ 489.13 to apply to durable medical
equipment, prosthetics, orthotics, and
supplies (DMEPOS) applicants, but
indicated that the issues presented in
the proposed rule do not apply to
DMEPOS supplier enrollment.
Response: We did not propose any
changes with respect to the entities that
are covered by the provisions of
§ 489.13. Generally, these provisions do
not apply to DMEPOS applicants
because they are not subject to our
survey and certification process.
However, because there are now
Medicare accreditation requirements for
certain types of suppliers that are not
subject to the survey and certification
process, we understand why the
commenter was unclear about this
application. As a result, we have revised
the final regulatory text at
§ 489.13(a)(1)(ii) to indicate that this
provision applies to providers and
suppliers that are subject to survey by
a State survey agency or CMS, or, in lieu
of such survey, are accredited by an
accreditation organization whose
program has CMS approval in
accordance with section 1865 of the Act
at the time of the accreditation survey
and accreditation decision. Because
accreditation requirements for certain
Medicare suppliers, such as DMEPOS
and imaging services suppliers, are
established under sections 1834(a) and
(e) of the Act rather than section 1865
of the Act, this revision to the regulation
makes it clear that the provisions of
§ 489.13 do not apply to these other
supplier types.
After consideration of the public
comments we received, we are adopting
as final our proposed revisions of
§ 489.13(a), (b), and (c), removal of
existing § 489.13(d), and technical
amendments to § 489.1, with the
following modifications and technical
corrections:
We have revised § 489.13(a)(1)(i) to
delete the word ‘‘staff’’ after ‘‘CMS’’. This
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word was inadvertently included in the
proposed text, but, as we stated in the
preamble to the proposed rule, the
intent is to cover surveys conducted by
CMS staff or contractors.
We have revised § 489.13(a)(1)(ii) to
add a reference to accreditation
programs approved in accordance with
section 1865 of the Act, thus making it
clear that § 489.13 is applicable only to
providers and suppliers that are subject
to CMS or State survey or, in lieu of
such survey, are accredited by an
accreditation organization whose
program has CMS approval in
accordance with section 1865 of the Act.
Also, we are adding the word ‘‘survey’’
in paragraph (a)(1)(ii) so that it states
‘‘State survey agency’’; this change will
make this paragraph consistent with
§ 489.13(a)(1)(i).
We have revised § 489.13(b) to add
the word ‘‘effective’’ prior to ‘‘date of the
accreditation decision’’ in order to make
clear our intent that we are referring to
the date an accreditation organization
indicates its accreditation was effective.
We have revised § 489.13(c) to reword
the final sentence of the introductory
text as follows: ‘‘However, if other
Federal requirements remain to be
satisfied, notwithstanding the
provisions of paragraphs (c)(1) through
(c)(3) of this section, the effective date
of the agreement or approval may not be
earlier than the latest of the dates on
which CMS determines that each
applicable Federal requirement is met’’
We added the phrase ‘‘CMS determines
that’’ prior to ‘‘each applicable Federal
requirement is met’’ to correct an
inadvertent omission that could have
created ambiguity as to our intent and
makes the language in paragraph (c)
match that employed in § 489.13(b) for
the same purpose. We also added the
above language to make it clear that the
provisions in paragraphs (c)(1) through
(c)(3) apply when all other Federal
requirements have been met, but where
this is not the case, the effective date
would be the latest date.
We have renumbered proposed
§ 489.13(c)(2)(ii)(C) as final
§ 489.13(c)(3), which was our original
intent; this paragraph is a logically
distinct provision from other provisions
contained in § 489.13(c)(2).
We have made conforming changes to
§ 424.510(c) and § 424.520(a) by
removing the cross-reference to
paragraph (d) of § 489.13.
IX. Medicare Hospital Conditions of
Participation Affecting Rehabilitation
Services and Respiratory Care Services
Recently, CMS received several public
requests for clarification of the Medicare
conditions of participation (CoPs) for
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hospitals relating to rehabilitation
services at § 482.56 and respiratory care
services at § 482.57. The questions
concerning these conditions have been
in the context of apparent
inconsistencies between the two CoPs
themselves, and between the two CoPs
and many State laws, regarding which
practitioners are allowed to order
rehabilitation and respiratory care
services in the hospital setting.
Many States, under their scope-ofpractice laws and other regulations,
allow only specific qualified, licensed
practitioners (including physicians,
nurse practitioners (NPs), and physician
assistants (PAs)) to order rehabilitation
services and respiratory care services, in
addition to other common hospital
services such as dietary and social work
services. However, the current standard
at § 482.56(b) (Delivery of services)
requires only that hospital rehabilitation
services (for example, physical therapy,
occupational therapy, audiology, and
speech-pathology services) be ordered
by ‘‘practitioners who are authorized by
the medical staff to order the services.’’
We believe that this requirement is too
open to interpretation and does not
explicitly acknowledge various State
laws that limit the ordering of hospital
services (including diagnostic tests,
drugs and biologicals, and inpatient
treatment modalities) to specific
qualified, licensed practitioners who are
responsible for the care of the patient.
By contrast, the current requirement
for respiratory care services at
§ 482.57(b)(3), which explicitly states
that these services ‘‘must be provided
only on, and in accordance with, the
orders of a doctor of medicine or
osteopathy,’’ is too narrow. While
doctors of medicine or doctors of
osteopathy have the option of delegating
this task to NPs and PAs, this delegation
requires physicians to countersign all
orders by NPs or PAs for respiratory
care services. We have not found any
evidence that indicates that the ordering
of respiratory care services should be
kept to a different, and possibly higher,
standard than rehabilitation and other
hospital services. Nor have we found
any documented studies indicating that
qualified, licensed practitioners such as
NPs and PAs should be restricted from
ordering these necessary services for
their patients. Further, we believe that
the process of physician
countersignature of orders written by
qualified, licensed NPs and PAs,
specifically for common hospital
services such as rehabilitation and
respiratory care services, is burdensome
to practitioners (physicians as well as
NPs and PAs) and the hospitals that
they serve. In addition, we believe that
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this process also runs counter to what
many States have already decided for
NPs and PAs in their individual State
regulations and scope-of-practice laws.
As a result of our analysis of the
issues surrounding conflict of the
Medicare CoPs with State laws, and
conflict of the Medicare CoPs with each
other, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24050), we
proposed several revisions to the
existing regulations. We proposed to
revise § 482.56 to clarify the types of
practitioners that are allowed to order
rehabilitation services. Further, we
proposed to limit those types of
individuals to qualified, licensed
practitioners who are responsible for the
care of the patient and who are acting
within the scope of practice under State
law. We also proposed that these
practitioners would need to be
authorized to order rehabilitation
services by the hospital’s medical staff,
in accordance with both hospital
policies and procedures and State laws.
In addition, we proposed changes to
the existing requirements for the
ordering of respiratory care services at
§ 482.57. Existing requirements only
allow for services to be provided on the
orders of a doctor of medicine or
osteopathy. As stated above, we recently
received several public requests
(including requests from various
hospitals as well as from The Joint
Commission) for clarification of this
requirement in the context of what is
currently allowed under many State
laws. Many States, under their scope-ofpractice laws and other regulations,
allow qualified, licensed practitioners
(including NPs and PAs) to order
respiratory care services. We proposed
to revise the existing requirements at
§ 482.57 to allow these practitioners, in
addition to physicians as currently
allowed, to order these services as long
as such privileges are authorized by the
medical staff and are in accordance with
both hospital policies and procedures
and State laws. As is required under the
CoPs for all patient orders, the ordering
practitioner must also be an individual
who is responsible for the care of the
patient.
In both of the CoPs for rehabilitation
services and respiratory care services,
we also proposed that all orders for
these services be documented in
accordance with the requirements at
§ 482.24, Medical records.
Comment: The majority of
commenters supported the proposed
changes for the CoPs for rehabilitation
services and respiratory care services.
Some of the commenters commended
CMS for proposing changes that they
believed accurately reflected current
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standards of practice. Many of the
commenters supported the proposed
changes focused exclusively on the
proposed requirements for respiratory
care services.
Response: We appreciate the
commenters’ support for the proposed
changes. We believe that many of the
commenters focused exclusively on the
proposed revisions to the respiratory
care services CoP because these
revisions would allow for qualified,
licensed practitioners, such as NPs and
PAs, to order respiratory care services in
addition to physicians, that is, doctors
of medicine and doctors of osteopathy,
as is currently allowed under the
requirements. While we believe that the
proposed change to the rehabilitation
services CoP is more of a clarification of
which types of practitioners (as
delineated by State law, hospital policy,
and medical staff authorization) would
be allowed to order such services, we
believe that the proposed revision to the
respiratory care services CoP represents
a regulatory recognition of the
qualifications that nonphysician
practitioners, such as NPs and PAs,
bring to hospital patient care and that
this recognition accounts for many of
the commenters focusing exclusively on
the change to this CoP.
Comment: Several commenters
questioned what they saw as an
exclusion from the proposed rule of
other types of advanced practice
registered nurses (APRNs) (for example,
clinical nurse specialists (CNSs),
certified registered nurse anesthetists
(CRNAs), and certified nurse midwives
(CNMs)), as well as rehabilitation
professionals such as physical therapists
(PTs) and speech-language pathologists
(SLPs).
Response: Our intention was not to
exclude other types of nonphysician
practitioners such as APRNs, PTs, SLPs,
or other types of rehabilitation
professionals from the proposed rule
provisions. We recognize the important
role that these practitioners and
professionals play in the delivery of
quality care to hospital patients. We
point out that the proposed regulatory
language does not specifically mention
any ‘‘type ‘‘of practitioner, including
NPs and PAs. Instead, the proposed
revisions to both CoPs would require
that services be provided only under the
orders of a qualified, licensed
practitioner, responsible for the care of
the patient, acting within his or her
scope of practice, and authorized by the
medical staff to order the services in
accordance with hospital policies and
procedures and all State laws. Although
NPs and PAs were the only examples of
practitioner types that we used in our
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discussion of the proposed changes in
the preamble of the proposed rule, our
intention, as reflected in the proposed
regulation text, is to include those
qualified, licensed practitioners who
meet the parameters of the proposed
requirements discussed above.
Comment: A few commenters took
exception to our discussion in the
preamble of conflict of interest and
coordination of care issues in the
context of rehabilitation professionals
(such as PTs and SLPs) who might order
their own rehabilitation services for a
hospital patient without the knowledge
of the attending physician or of the
practitioner responsible for the overall
care of the patient (such as APRNs and
PAs). They questioned ‘‘why CMS
would conclude that these problems
[conflict of interest and coordination of
care] would occur in the outpatient
hospital setting when patients receive
rehabilitation services,’’ and asked that
the final rule not adopt language that
would exclude rehabilitation
professionals from acting within their
individual State’s scope of practice. One
commenter suggested that language
distinguishing between hospital
inpatient and outpatient rehabilitation
services be added to the proposed
requirement at § 482.56(b).
Response: The proposed requirements
would apply to both inpatient and
outpatient hospital services. Because the
language allows for the ordering of
rehabilitation services based on (and in
deference to) State laws and scope-ofpractice acts, medical staff
authorization, and hospital policies and
procedures, we firmly believe that
nothing in our proposed requirement
would preclude a hospital rehabilitation
professional from acting within the
scope of practice under State law. For
this reason also, we disagree that the
requirement needs to make distinctions
between inpatients and outpatients.
Comment: A few commenters
correctly pointed out that the hospital
CoPs apply to both inpatient and
outpatient services. With regard to this
application of the hospital CoPs to the
outpatient services of a hospital, they
commented that the proposed changes
would be in direct conflict with both
CMS payment policy, which they state
allows for rehabilitation professionals to
order their own services for hospital
outpatients without physician referral,
and the regulations of some States,
which they state allow for ‘‘direct
access’’ to rehabilitation services for
hospital outpatients.
Response: As we have previously
stated, we do not believe that the
proposed changes would conflict with
either CMS payment policy or State
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regulations. In fact, we have drafted the
regulatory text in a way that would not
only defer to hospital policy and
medical staff authority in granting
ordering privileges for these services to
qualified, licensed practitioners, but
also to State laws and scope-of-practice
acts. We believe that these proposed
regulations would give hospitals and
their medical staffs as much flexibility
in determining which types of
practitioners could order these services
as they would choose to exercise within
the constraints of their own State laws
and regulations.
Comment: One commenter noted that
as many as 35 States have some form of
regulatory language that states, in effect,
that hospital respiratory care services
orders must be ‘‘written by a licensed
physician only.’’
Response: As stated in our previous
response, the proposed regulations are
written in such a way as to avoid the
preemption of State law and regulation.
We expect hospitals to apply the laws
of their respective States to their policy
regarding which types of practitioners
would be allowed to order respiratory
care services. For those States that allow
APRNs and PAs to order respiratory
care services without the need for a
physician co-signature, we expect
hospitals in those States to determine
which types of practitioners would be
authorized by the medical staff to write
these orders in accordance with State
law. We also expect that practitioners
will act within the limitations of their
individual State laws and hospitals’
policies.
Comment: One commenter requested
that changes similar to the ones
proposed be made to other hospital
CoPs, such as nuclear medicine and
dietary services, and their interpretive
guidelines, and also specifically
proposed changes to § 482.25(b)(6) to
require that ‘‘drug administration errors,
adverse drug reactions, and
incompatibilities be immediately
reported to the ordering practitioner.’’ In
addition, the commenter recommended
that the interpretative guidelines issued
for § 482.24(c)(1) be revised.
Response: While we appreciate the
input from the commenter regarding the
other hospital CoPs and the
interpretative guidelines, changes to
other CoPs are outside the scope of this
final rule. Any revisions to the
interpretative guidelines are outside the
purview of the rulemaking process.
Comment: A few commenters, in
addition to voicing full support for the
proposed changes, encouraged CMS to
revise the CoPs and interpretative
guidelines regarding the administration
of propofol (a rapidly acting, short
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duration, intravenous hypnotic
anesthetic induction agent used as a
general anesthetic or as an adjunct to
anesthesia) by an anesthesiologist or
CRNA in the context of recognition of
State laws addressing this issue.
Response: As we stated in our
previous response, while we appreciate
the input from commenters, we cannot
address it at this time because the issues
are outside the scope of this rule.
Furthermore, any revision of the
interpretative guidelines would be
outside the purview of the rulemaking
process.
After consideration of the public
comments we received, we are adopting
as final without modification, our
proposals to revise § 482.56 and
§ 482.57 to clarify the types of
practitioners who are allowed to order
rehabilitation services and respiratory
care services, respectively in accordance
with both hospital policies and
procedures and State laws; and to
provide that all orders for these services
be documented in accordance with
existing requirements at § 482.24.
X. Changes to the Accreditation
Requirements for Medicaid Providers of
Inpatient Psychiatric Services for
Individuals Under Age 21
A. Background
Inpatient psychiatric services
provided to individuals under the age of
21 were authorized as part of the
Medicaid program by the Social
Security Amendments of 1972 (Pub. L.
92–603). At that time, these services
were only permitted to be provided by
psychiatric hospitals accredited by the
Joint Commission on Accreditation of
Hospitals (later renamed as the Joint
Commission on Accreditation of
Healthcare Organizations and now
named The Joint Commission). In 1984,
Congress eliminated the requirement
that such hospitals be accredited
exclusively by The Joint Commission
(section 2340(b) of Pub. L. 98–369).
Through statutory and regulatory
amendments, inpatient psychiatric
services provided to individuals under
the age of 21 were also authorized to be
provided in inpatient psychiatric
programs within hospitals and in
psychiatric facilities other than
hospitals, called psychiatric residential
treatment facilities (PRTFs). While
PRTFs were given flexibility through
rulemaking in 1998 to obtain
accreditation from several specific
accrediting organizations, or any other
accrediting body with comparable
standards recognized by the State,
accreditation by The Joint Commission
has remained a Federal regulatory
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requirement for psychiatric hospitals
and inpatient psychiatric programs
within hospitals.
We have been contacted by several
psychiatric hospitals and hospitals with
inpatient psychiatric programs asking
for relief from The Joint Commission
accreditation requirement. In addition,
The Joint Commission has previously
expressed concern with the mandate for
Joint Commission accreditation
contained in existing regulation, as its
policy is for facilities to seek
accreditation voluntarily.
B. Revision of Policy and Regulations
In response to the concerns described
above, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24051), we
proposed to remove the requirement
that psychiatric hospitals and hospitals
with inpatient psychiatric programs
providing inpatient psychiatric services
to individuals under age 21 obtain
accreditation from The Joint
Commission in order to provide these
services under the Medicaid program.
Under our proposed policy change,
psychiatric hospitals would have the
choice of undergoing a State survey to
determine whether the hospital meets
the requirements to participate in
Medicare as a psychiatric hospital under
42 CFR 482.60 or obtaining
accreditation from a national accrediting
organization whose psychiatric hospital
accrediting program has been approved
by CMS. Likewise, hospitals with
inpatient psychiatric programs would
have the choice of undergoing a State
survey to determine whether the
hospital meets the requirements for
participation in Medicare as a hospital
as specified in 42 CFR Part 482 or
obtaining accreditation from a national
accrediting organization whose hospital
accreditation program has been
approved by CMS. These national
accreditation bodies must provide
reasonable assurance to CMS that their
hospital accrediting programs require
adherence to requirements that are at
least as stringent as the Medicare
requirements.
In addition, we proposed to revise the
accreditation requirements for PRTFs by
removing any specific references to
accreditation organizations, to afford
them flexibility in obtaining
accreditation by a national accrediting
organization whose program has been
approved by CMS, or by any other
accrediting organization with
comparable standards that is recognized
by the State. This proposed revision
would have removed specific reference
to national accrediting bodies to provide
appropriate administrative flexibility to
account for any changes in qualifying
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accrediting organizations. Accrediting
bodies approved by CMS must have
accrediting requirements for a provider
or supplier type that are comparable to
the CMS requirements for the type of
provider or supplier, and must have
survey procedures comparable to those
of State survey agencies. For the reasons
described below, we are not finalizing
this proposed change to the PRTF
accreditation requirements, and will
retain the language currently set out at
42 CFR 440.160 (b)(2) and
441.151(a)(2)(ii).
To incorporate the proposed changes
described above in our regulations, we
proposed to revise § 440.160(b)(1) and
§ 441.151(a)(2)(i) by removing the
requirement for accreditation by The
Joint Commission of psychiatric
hospitals and hospitals with inpatient
psychiatric programs. We also proposed
to revise § 440.160(b)(2) and
§ 441.151(a)(2)(ii) by removing
references to specific accreditation
organizations.
Comment: Several commenters
supported the proposed revisions. These
commenters agreed with CMS’
assessment that allowing increased
flexibility for psychiatric hospitals and
inpatient psychiatric programs within
general hospitals to either obtain
accreditation from a CMS-approved
accrediting organization or adhere to
Medicare standards would not
negatively impact the quality of service
provision. Most of these commenters
were silent regarding the proposed
changes to the PRTF language, which
would have removed reference to
specific accrediting organizations.
However, one commenter expressed
support for this proposed change as
well.
Response: We appreciate the
commenters’ support. However, we are
not finalizing the proposed changes to
the PRTF accreditation requirements.
We have decided that changes to these
provisions are unnecessary because our
regulations already permit a PRTF to be
accredited by a variety of accrediting
bodies. Our current provisions are not
proscriptive. The Joint Commission on
Accreditation of Healthcare
Organizations, the Council on
Accreditation of Services for Families
and Children, and the Commission on
Accreditation of Rehabilitation
Facilities will remain available to
accredit PRTFS, as will any other
accrediting organizations with
comparable standards that are
recognized by the States.
Comment: One comment indicated
that ‘‘CMS must remain the sole
accreditation agency for psychiatric
facilities as well as emergency rooms
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(ERs)’’. The commenter further stated
that third party accreditation would not
maintain the same level of adherence to
the restraint and seclusion regulatory
requirement.
Response: We have never been the
‘‘sole accreditation agency’’ for these
providers. CMS approves third party
accrediting organizations to perform the
accreditation reviews. The restraint and
seclusion CoP is a requirement that is
surveyed by CMS and/or the
accreditation organizations, as
applicable.
Comment: One commenter offered
suggestions to improve the care
provided to individuals in psychiatric
settings. The commenter’s suggestions
included telling patients the names of
all medications being given; developing
a written treatment plan; keeping
patients clean; and utilizing a ‘‘comfort
room’’ for patients who are in critical
condition.
Response: Although we appreciate
these suggestions, they fall outside the
scope of the proposed rule. We did
solicit public comments on our
proposed accreditation revisions for
inpatient psychiatric services provided
to children. However, these comments
appear to address the overall care
furnished in psychiatric settings.
Existing regulations governing
psychiatric hospitals, general hospitals,
and PRTFs currently require that the
beneficiary receive care based upon an
individualized treatment plan. We do
not anticipate that patients in critical
condition (life-threatening medical
situations) would be maintained in the
psychiatric inpatient setting, but rather
would be transferred to a medically
appropriate facility. We encourage all
providers, including those furnishing
inpatient psychiatric services to
individuals under age 21, to bring an
attitude of respect to the treatment
process, caring for patients in a way that
maximizes information sharing and
comprehensive care. However, we are
not modifying the regulations for this
specific service to include these
suggestions.
After consideration of the public
comments we received, we are adopting
as final, without modification, our
proposed revision of § 440.160(b)(1) and
§ 441.151(a)(2)(i) by removing the
requirement for accreditation by The
Joint Commission of psychiatric
hospitals and hospitals with inpatient
psychiatric programs. Under the final
regulations, psychiatric hospitals will
have the choice of undergoing a State
survey to determine whether the
hospital meets the requirements to
participate in Medicare as a psychiatric
hospital under 42 CFR 482.60 or
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obtaining accreditation from a national
accrediting organization whose
psychiatric hospital accrediting program
has been approved by CMS. Likewise,
hospitals with inpatient psychiatric
programs will have the choice of
undergoing a State survey to determine
whether the hospital meets the
requirements for participation in
Medicare as a hospital as specified in 42
CFR part 482 or obtaining accreditation
by a national accrediting organization
whose hospital accrediting program has
been approved by CMS.
As described above, we are not
finalizing our proposed revision of
§ 440.160(b)(2) and § 441.151(a)(2)(ii) to
remove specific references to
accreditation organizations to afford
PRTFs the flexibility in obtaining
accreditation by a national accrediting
organization whose program has been
approved by CMS, or by any other
accrediting organization with
comparable standards that is recognized
by the State. The language currently
specified in § 440.160(b)(2) and
§ 441.151(a)(2)(ii) is being retained.
XI. MedPAC Recommendations
Under section 1886(e)(4)(B) of the
Act, the Secretary must consider
MedPAC’s recommendations regarding
hospital inpatient payments. Under
section 1886(e)(5) of the Act, the
Secretary must publish in the annual
proposed and final IPPS rules the
Secretary’s recommendations regarding
MedPAC’s recommendations. We have
reviewed MedPAC’s March 2010
‘‘Report to the Congress: Medicare
Payment Policy’’ and have given the
recommendations in the report
consideration in conjunction with the
policies set forth in this final rule.
MedPAC’s Recommendation 2A–1
states that ‘‘The Congress should
increase payment rates for the acute
inpatient and outpatient prospective
payment systems in 2011 by the
projected rate of increase in the hospital
market basket index, concurrent with
implementation of a quality incentive
payment program.’’ This
recommendation for the IPPS is
discussed in Appendix B to this final
rule.
MedPAC’s Recommendation 2A–2
states that ‘‘To restore budget neutrality,
the Congress should require the
Secretary to fully offset increases in
inpatient payments due to hospitals’
documentation and coding
improvements. To accomplish this goal,
the Secretary must reduce payment rates
in the inpatient prospective payment
system by the same percentage (not to
exceed 2 percentage points) each year in
2011, 2012, and 2013. The lower rates
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would remain in place until
overpayments are fully recovered.’’
Response to Recommendation 2A–2:
Beginning in FY 2008, CMS adopted the
new MS–DRG patient classification
system for the IPPS to better recognize
severity of illness in Medicare payment
rates. Adoption of the MS–DRGs
resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in
FY 2008. The increase in the number of
DRGs provides incentives for hospitals
to change documentation and coding
that can increase Medicare expenditures
without any corresponding increase in
underlying patient severity. Consistent
with the statutory requirement to
maintain budget neutrality, we
established prospective documentation
and coding adjustments of ¥1.2 percent
for FY 2008, ¥1.8 percent for FY 2009,
and ¥1.8 percent for FY 2010 when the
new MS–DRG system was implemented
in FY 2008. Subsequent to issuance of
the FY 2008 IPPS final rule, section 7 of
the TMA of 2007 (Pub. L. 110–90)
divided in half the documentation and
coding adjustments for the MS–DRG
system that we adopted in the FY 2008
IPPS final rule to ¥0.6 percent for FY
2008 and ¥0.9 percent for FY 2009.
Section 7 requires that, if the
implementation of the new MS–DRG
payment system resulted in actual
changes in documentation and coding
in FY 2008 or FY 2009, or both years,
that are different from those reflected in
the ¥0.6 percent and ¥0.9 percent
documentation and coding adjustments
applied to payment rates in FY 2008
and FY 2009, respectively, the Secretary
further adjust operating IPPS rates. This
further adjustment must offset the
estimated amount of the increase or
decrease in aggregate payments for
discharges occurring during FY 2008
and FY 2009, and must be made during
FY 2010, FY 2011, and/or FY 2012.
These adjustments are referred to as the
recoupment adjustments and apply only
to acute IPPS operating payments. In
addition, the law requires that the
Secretary eliminate the effect of all
actual documentation and coding
changes occurring in FY 2008 and FY
2009 incorporated into FY 2010 IPPS
operating rates not already accounted
for beyond the ¥0.6 and ¥0.9 percent
adjustments. These adjustments are
referred to as the prospective
adjustments. As discussed in section
II.D. of the preamble of this final rule,
our current estimate is that an aggregate
adjustment of 9.7 percent (in addition to
the ¥0.6 percent adjustment and the
¥0.9 percent adjustment previously
made in FY 2008 and FY 2009,
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respectively) is necessary to satisfy
these requirements.
We discuss the public comments we
received on the FY 2011 IPPS/LTCH
PPS proposed rule, and our responses,
regarding our proposed adjustments to
correct for the effects of improved
documentation and coding on Medicare
payments to hospitals in section II.D. of
the preamble of this final rule for IPPS
operating payments, in section V.E. of
the preamble of this final rule for IPPS
capital payments, and in section VII.C.3.
of the preamble of this final rule for
LTCH PPS payments. In this context, we
note that, in considering whether to
adopt MedPAC’s recommendation, we
took into consideration the statutory
requirement that the adjustment must
offset the estimated amount of the
increase or decrease in aggregate
payments for discharges occurring
during FY 2008 and FY 2009 must be
made during FY 2010, FY 2011, and/or
FY 2012.
For further information relating
specifically to the MedPAC reports or to
obtain a copy of the reports, contact
MedPAC at (202) 653–7226, or visit
MedPAC’s Web site at: https://
www.medpac.gov.
XII. Other Required Information
A. Requests for Data From the Public
In order to respond promptly to
public requests for data related to the
prospective payment system, we have
established a process under which
commenters can gain access to raw data
on an expedited basis. Generally, the
data are now available on compact disc
(CD) format. However, many of the files
are available on the Internet at: https://
www.cms.hhs.gov/AcuteInpatientPPS.
We listed the data files and the cost for
each file, if applicable, in the FY 2011
IPPS/LTCH PPS proposed rule (75 FR
24052 and 24053).
Commenters interested in discussing
any data used in constructing this final
rule should contact Nisha Bhat at (410)
786–5320.
B. Collection of Information
Requirements
1. Legislative Requirement for
Solicitation of Comments
Under the Paperwork Reduction Act
of 1995, we are required to provide 60day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
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50409
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
2. Requirements in Regulation Text
In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24054 through
24056), we solicited public comment on
each of these issues listed in section
XII.B.1. of this preamble for the
following sections of this document that
contain information collection
requirements (ICRs). We discuss and
respond to any public comments we
received in each individual section.
a. ICRs Regarding Withdrawing an
Application, Terminating an Approved
3-Year Reclassification, or Canceling a
Previous Withdrawal or Termination
(Revised § 412.273)
We have revised much of § 412.273 to
make the provisions clearer and more
easily understood. Although the
majority of the information collections
under this section exist under current
law, as we are modifying the provision,
in this section we discuss the
information collections that will exist
under the revised § 412.273.
As discussed in section III.I. of this
preamble, revised § 412.273(b) states
that the MGCRB allows a hospital, or
group of hospitals, to withdraw its
application or to terminate an already
existing 3-year reclassification. Revised
§ 412.273(c) further specifies the timing
requirements for the withdrawal or
termination requirements. Revised
§ 412.273(c)(1) provides that a request
for withdrawal must be received by the
MGCRB at any time before the MGCRB
issues a decision on the application; or
after the MGCRB issues a decision,
provided that the request for withdrawal
is received by the MGCRB within 45
days of publication of CMS’ annual
notice of proposed rulemaking
concerning changes to the IPPS and
proposed payment rates for the fiscal
year for which the application has been
filed.
The burden associated with this
requirement is the time and effort
necessary for a hospital to submit a
written withdrawal request to the
MGCRB. While this requirement is
subject to the PRA, we cannot
accurately quantify the burden
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associated with this requirement. We
currently review each request on a caseby-case basis. We believe the associated
burden is thereby exempt from the PRA
as stipulated under 5 CFR 1320.3(h)(6).
Revised § 412.273(c)(2) provides that
a request for termination must be
received by the MGCRB within 45 days
of the publication of CMS’ annual notice
of proposed rulemaking concerning
changes to the IPPS and proposed
payment rates for the fiscal year for
which the termination is to apply. The
burden associated with this requirement
is the time and effort necessary for a
hospital to submit a written termination
request to the MGCRB. While this
requirement is subject to the PRA, we
cannot accurately quantify the burden
associated with this requirement. We
currently review each request on a caseby-case basis. We believe the associated
burden is thereby exempt from the PRA
as stipulated under 5 CFR 1320.3(h)(6).
Revised § 412.273(d)(1) states that a
hospital (or group of hospitals) may
cancel a withdrawal or termination in a
subsequent year and request the MGCRB
to reinstate the wage index
reclassification for the remaining fiscal
year(s) of the 3-year period. Revised
§ 412.273(d)(2) requires that
cancellation requests be received in
writing by the MGCRB no later than the
deadline for submitting reclassification
applications for the following fiscal
year, as specified in § 412.256(a)(2). The
burden associated with this requirement
is the time and effort necessary for a
hospital to submit a written request to
the MGCRB, requesting that the current
withdrawal or termination request be
cancelled. While this requirement is
subject to the PRA, we cannot
accurately quantify the burden
associated with this requirement. We
currently review each request on a caseby-case basis. We believe the associated
burden is thereby exempt from the PRA
as stipulated under 5 CFR 1320.3(h)(6).
Section 412.273(d)(3) states that a
hospital will be able to apply for
reclassification to a different area (that
is, an area different from the one to
which it was originally reclassified for
the 3-year period). If the application is
approved, the reclassification will be
effective for 3 years. Once a 3-year
reclassification becomes effective, a
hospital may no longer cancel a
withdrawal or termination of another
3-year reclassification, regardless of
whether the withdrawal or termination
request is made within 3 years from the
date of the withdrawal or termination.
The burden associated with the
reapplication requirement is the time
and effort necessary for a hospital to
submit a reclassification request to the
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MGCRB. While this requirement is
subject to the PRA, the associated
burden is approved under OMB control
number 0938–0573, with an expiration
date of December 31, 2011.
Section 412.273(f)(1) states that a
hospital may file an appeal of the
MGCRB’s denial of its request for
withdrawal or termination, or of the
MGCRB’s denial of its request for a
cancellation of such withdrawal or
termination, to the Administrator. The
appeal must be received within 15 days
of the date of the notice of the denial.
The burden associated with this
requirement is the time and effort
necessary for a hospital to file a written
appeal of the MGCRB’s denial. While
this requirement is subject the PRA, the
associated burden is exempt under 5
CFR 1320.4. The burden associated with
collection information as part of or
subsequent to an administrative action
is not subject to the PRA.
b. ICRs Regarding Condition of
Participation: Respiratory Care Services
(§ 482.57)
Section IX. of this preamble discusses
the revisions to § 482.57(b)(4), which
impose a recordkeeping requirement.
Section 482.57(b)(4) requires all
respiratory care services orders to be
documented in the patient’s medical
record in accordance with the
requirements at § 482.24. The burden
associated with this requirement is the
time and effort necessary for hospital
staff to document and maintain the
respiratory care services orders in a
patient’s medical record. While these
requirements are subject to the PRA, the
associated burden is exempt from the
PRA under 5 CFR 1320.3(b)(2). We
believe hospitals will not incur any
burden above and beyond that
associated with the usual and customary
business practice of maintaining
detailed patient medical records.
3. Additional Information Collection
Requirements
This final rule imposes collection of
information requirements as outlined in
the regulation text and specified above.
However, this final rule also makes
reference to several associated
information collections that are not
discussed in the regulation text
contained in this document. The
following is a discussion of these
information collections, some of which
have already received OMB approval.
a. Present on Admission (POA)
Indicator Reporting
Section II.F.6. of the preamble of this
final rule discusses the POA indicator
reporting program. As stated earlier,
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collection of POA indicator data is
necessary to identify which conditions
were acquired during hospitalization for
the HAC payment provision and for
broader public health uses of Medicare
data. Through Change Request 5499
dated May 11, 2007, CMS issued
instructions that require IPPS hospitals
to submit POA indicator data for all
diagnosis codes on Medicare claims.
The burden associated with this
requirement is the time and effort
necessary to place the appropriate POA
indicator codes on Medicare claims.
This requirement is subject to the PRA;
however, the associated burden is
currently approved under OMB control
number 0938–0997, with an expiration
date of October 31, 2012.
b. Add-On Payments for New Services
and Technologies
Section II.I.1. of the preamble of this
final rule discusses add-on payments for
new services and technologies.
Specifically, this section states that
applicants for add-on payments for new
medical services or technologies for FY
2011 must submit a formal request. A
formal request includes a full
description of the clinical applications
of the medical service or technology and
the results of any clinical evaluations
demonstrating that the new medical
service or technology represents a
substantial clinical improvement. In
addition, the request must contain a
significant sample of the data to
demonstrate that the medical service or
technology meets the high-cost
threshold. We detailed the burden
associated with this requirement in the
September 7, 2001, IPPS final rule (66
FR 46902). As stated in that final rule,
collection of the information for this
requirement is conducted on an
individual case-by-case basis. We
believe the associated burden is thereby
exempt from the PRA as stipulated
under 5 CFR 1320.3(h)(6). Similarly, we
also believe the burden associated with
this requirement is exempt from the
PRA under 5 CFR 1320.3(c), which
defines the agency collection of
information subject to the requirements
of the PRA as information collection
imposed on 10 or more persons within
any 12-month period. This information
collection does not impact 10 or more
entities in a 12-month period. In FYs
2008, 2009, 2010, and 2011, we received
1, 4, 5, and 3 applications, respectively.
c. Reporting of Hospital Quality Data for
Annual Hospital Payment Update
As discussed in section IV.A. of this
final rule, the RHQDAPU program was
originally established to implement
section 501(b) of Public Law 108–173.
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The RHQDAPU program originally
consisted of a ‘‘starter set’’ of 10 quality
measures. OMB approved the collection
of data associated with the original
starter set of quality measures under
OMB control number 0938–0918, with a
current expiration date of January 31,
2011.
As part of our implementation of
section 5001(a) of the DRA, we
expanded the number of quality
measures reported in the RHQDAPU
program. Specifically, section
1886(b)(3)(B)(viii)(III) of the Act, added
by section 5001(a) of the DRA, requires
that the Secretary expand the ‘‘starter
set’’ of 10 quality measures that were
established by the Secretary as of
November 1, 2003, to include measures
‘‘that the Secretary determines to be
appropriate for the measurement of the
quality of care (including medication
errors) furnished by hospitals in
inpatient settings.’’ Under this
provision, we established additional
program measures to bring the total
number of measures to 30. The burden
associated with these reporting
requirements is currently approved
under OMB control number 0938–1022,
with a current expiration date of June
30, 2011.
In the FY 2010 IPPS proposed rule
(74 FR 24168), we solicited public
comments on several considerations for
expanding and updating quality
measures. We responded to the public
comments received in the FY 2010
IPPS/RY 2010 LTCH PPS final rule
(74 FR 43866 through 43868). We also
expanded and finalized the RHQDAPU
program measure set for the FY 2011
payment determination. As part of the
expansion effort, we finalized 46
measures in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43872).
In the FY 2011 IPPS/LTCH PPS
proposed rule, we proposed to retire one
measure for the FY 2011 payment
determination (75 FR 23961). For the FY
2012 through FY 2014 payment
determinations, we proposed to retain
the remaining 45 of the 46 current
measures; and for FY 2012, to add 10
new measures and to require all-patient
volume data for selected MS–DRGs that
relate to RHQDAPU program measures;
for FY 2013, to retain the FY 2012
measures and add 35 new measures;
and for FY 2014, to retain the FY 2013
measures and to add 4 new measures. In
addition, we listed 28 new measures
that are under consideration for
adoption in future years. We proposed
that, beginning with CY 2011
discharges, hospitals submit some of the
new measure data to a qualified registry.
We also solicited public comments on
retiring one or more of the 11 additional
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measures suggested by commenters in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule based on topped out
performance and other rationales.
In summary, we proposed to retire
one measure for the FY 2011 annual
payment update and sought comments
on whether to retire 11 additional
measures suggested by commenters in
the FY 2010 IPPS/RY 2010 LTCH PPS
final rule. In addition, we proposed to
expand the RHQDAPU program
measure set to: 55 measures for the FY
2012 annual payment update (taking
into account our proposal to retire one
measure for the FY 2011 annual
payment update); 90 measures for the
FY 2013 annual payment update, and 94
measures for the FY 2014 annual
payment update. We also proposed 28
possible measures and topics for future
years. Finally, we proposed that,
beginning with the FY 2012 annual
payment update, hospitals that
participate in the RHQDAPU program
submit all-patient volume data for
selected MS–DRGs that relate to
RHQDAPU program measures beginning
with CY 2011 discharges.
We submitted a revised version of the
information collection request approved
under OMB control number 0938–1022,
to obtain approval for the proposed new
measures.
Section IV.A.10. of the FY 2011 IPPS/
LTCH PPS proposed rule addressed the
reconsideration and appeal procedures
for a hospital that we believe did not
meet the RHQDAPU program
requirements. If a hospital disagrees
with our determination, it may submit
a written request to CMS to reconsider
our decision. The hospital’s request for
reconsideration must explain the
reasons why it believes it satisfied the
RHQDAPU program requirements.
While this is a reporting requirement,
the burden associated with it is not
subject to the PRA under 5 CFR
1320.4(a)(2). The burden associated
with information collection
requirements imposed subsequent to an
administrative action is not subject to
the PRA.
For the FY 2011 annual payment
update, we are retiring the AHRQ
mortality for selected surgical
procedures composite measure. We refer
readers to section IV.A.3. of this final
rule for the list of RHQDAPU measures
that we are adopting as final for FY 2012
through FY 2014. Over the three year
period, we are retiring 2 additional
measures from the measurement set
(PN–2, and PN–7) and adding 17 new
measures to the measure set, for a total
of 60 measures. We are not adopting any
of our proposed registry-based
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measures, or our proposal for all-patient
volume reporting.
In summary, after consideration of the
public comments we received, we are:
• Retiring one measure for the FY
2011 annual payment update.
• Retaining the measures used for the
FY 2011 annual payment update (except
for the 1 we are retiring) and adopting
10 additional claims—based measures
for reporting in 2011 that will be used
to determine the FY 2012 annual
payment update.
• Retaining the measures used for the
FY 2012 annual payment update and
adopting an additional 1 chartabstracted measure and 1 HAI measure
(to be reported through the NHSN) for
reporting in 2011 that will be used to
determine the FY 2013 annual payment
update.
• Retaining the measures used for the
FY 2013 annual payment update (except
for 2 measures we are retiring) and
adopting 5 additional measures for
reporting in 2012 that will be used to
determine the FY 2014 annual payment
update.
d. Occupational Mix Adjustment to the
FY 2011 Index (Hospital Wage Index
Occupational Mix Survey)
Section II.D. of the preamble of this
final rule discusses the occupational
mix adjustment to the FY 2011 wage
index. While the preamble does not
contain any new ICRs, it is important to
note that there is an OMB approved
information collection request
associated with the hospital wage index.
Section 304(c) of Public Law 106–554
amended section 1886(d)(3)(E) of the
Act to require CMS to collect data at
least once every 3 years on the
occupational mix of employees for each
short-term, acute care hospital
participating in the Medicare program
in order to construct an occupational
mix adjustment to the wage index. We
collect the data via the occupational mix
survey.
The burden associated with this
information collection requirement is
the time and effort required to collect
and submit the data in the Hospital
Wage Index Occupational Mix Survey to
CMS. The aforementioned burden is
subject to the PRA; however, it is
currently approved under OMB control
number 0938–0907, with an expiration
date of February 28, 2013.
e. Hospital Applications for Geographic
Reclassifications by the MGCRB
Section III.I.3. of the preamble of this
final rule discusses revisions to the
wage index based on hospital
redesignations. As stated in that section,
under section 1886(d)(10) of the Act, the
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MGCRB has the authority to accept
short-term IPPS hospital applications
requesting geographic reclassification
for wage index or standardized payment
amounts and to issue decisions on these
requests by hospitals for geographic
reclassification for purposes of payment
under the IPPS.
The burden associated with this
application process is the time and
effort necessary for an IPPS hospital to
complete and submit an application for
reclassification to the MGCRB. While
this requirement is subject to the PRA,
the associated burden is currently
approved under OMB control number
0938–0573, with an expiration date of
December 31, 2011.
f. Direct GME Payments: General
Requirements
Existing regulations at § 413.75(b)
permit hospitals that share residents to
elect to form a Medicare GME affiliated
group if they are in the same or
contiguous urban or rural areas, if they
are under common ownership, or if they
are jointly listed as program sponsors or
major participating institutions in the
same program. The purpose of a
Medicare GME affiliated group is to
provide flexibility to hospitals in
structuring rotations under an aggregate
FTE resident cap when they share
residents. The existing regulations at
§ 413.79(f)(1) specify that each hospital
in a Medicare GME affiliated group
must submit a Medicare GME affiliation
agreement (as defined under § 413.75(b))
to the Medicare fiscal intermediary or
MAC servicing the hospital and send a
copy to CMS’ Central Office no later
than July 1 of the residency program
year during which the Medicare GME
affiliation agreement will be in effect.
In section V.H.3. of the preamble of
this final rule, as we proposed, we are
allowing hospitals to electronically
submit the copy of the affiliation
agreement that is required to be sent to
the CMS Central Office. As stated earlier
in the preamble, the electronic
submission process will consist of either
an e-mail mailbox or a Web site where
hospitals will submit their Medicare
GME affiliation agreements to the CMS
Central Office to a designated online
mailbox. We are providing that a copy
of the Medicare GME affiliation
agreement will need to be received
through the electronic system no later
than 11:59 p.m. on July 1 of each
academic year. We are specifying that
the electronic affiliation agreement will
need to be submitted either as a scanned
copy or a Portable Document Format
(PDF) version of that hard copy
agreement; we will not accept an
agreement in any electronic format that
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could be subject to manipulation. The
scanned and/or PDF format will enable
CMS to ensure that the agreements are
signed and dated as required in the
regulations at § 413.75. Under this
policy, hospitals will have the option to
continue to submit a hard copy of its
affiliation agreement to the CMS Central
Office. In addition, each fiscal
intermediary or MAC will continue to
have the authority to specify its
requirements for submittal of the
Medicare GME affiliation agreement by
hospitals that are part of the affiliation.
The burden associated with this
requirement is the time and effort it
would take for the new hospital to
develop and submit the Medicare GME
affiliation agreement, to submit the
agreement to its fiscal intermediary or
MAC, and to submit a copy to CMS. In
the proposed and final rules that
published on May 22, 2009 (74 FR
24080) and August 27, 2009 (74 FR
43754), we stated that it was difficult for
us to estimate the annual burden
associated with this requirement
because we cannot estimate the
additional number of hospitals that will
be permitted to submit Medicare GME
affiliation agreements in any given year
as a result of the change. However, we
now have better data available to
quantify the burden associated with the
existing requirement for hospitals to
submit GME affiliation agreements to
the fiscal intermediary or MAC
servicing the hospital and new
requirement for the electronic
submission of a copy of the affiliation
agreement to CMS. We are submitting a
new information collection request to
OMB for review and approval of the
associated burden.
We anticipate receiving between 100
and 150 GME affiliation agreements
annually. For the purposes of our
information collection request, we
estimate that we will receive 125
agreements annually. CMS provides a
two-page sample agreement for
hospitals; however, some facilities may
submit additional information that is
not required. We estimate that it will
take 1 hour for a hospital to develop a
GME affiliation agreement or to follow
the format provided by CMS. Similarly,
we estimate that it will take each
hospital 15 minutes to submit a hard
copy of the affiliation agreement to its
fiscal intermediary or MAC. Finally, we
estimate that it will take each hospital
5 minutes to submit an electronic copy
of its GME affiliation agreement to CMS.
The total annual burden associated with
developing the affiliation agreement is
125 hours. The total annual burden
associated with submitting a hard copy
of the affiliation agreement is 31 hours.
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The total annual burden associated with
submitting the agreement electronically
is 10 hours. The total annual burden
associated with all of the requirements
in this section is 166 hours. The total
cost associated with this requirement is
$5,000 ($40.00 × 125 agreements).
List of Subjects
42 CFR Part 412
Administrative practice and
procedure, Health facilities, Medicare,
Puerto Rico, Reporting and
recordkeeping requirements.
42 CFR Part 413
Health facilities, Kidney diseases,
Medicare, Puerto Rico, Reporting and
recordkeeping requirements.
42 CFR Part 415
Health facilities, Health professions,
Medicare and Reporting and
recordkeeping requirements.
42 CFR Part 424
Conditions for Medicare payment.
42 CFR Part 440
Grant program—health, Medicaid.
42 CFR Part 441
Family planning, Grant program—
health, Infants and children, Medicaid,
Penalties, Prescription drugs, Reporting
and recordkeeping requirements.
42 CFR Part 482
Grant program—health, Hospitals,
Medicaid, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 485
Grant programs—health, Health
facilities, Medicaid, Medicare,
Reporting and recordkeeping
requirements.
42 CFR Part 489
Health facilities, Medicare, Reporting
and recordkeeping requirements.
■ For the reasons stated in the preamble
of this final rule, the Centers for
Medicare & Medicaid Services is
amending 42 CFR chapter IV as follows:
PART 412—PROSPECTIVE PAYMENT
SYSTEMS FOR INPATIENT HOSPITAL
SERVICES
1. The authority citation for part 412
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh), and sec. 124 of Pub. L. 106–113
(113 Stat. 1501A–332).
2. Section 412.2 is amended by—
a. Revising paragraph (c)(5)
introductory text.
■
■
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b. Revising paragraph (c)(5)(iii).
c. Adding a new paragraph (c)(5)(iv).
The revision and addition read as
follows:
■
■
§ 412.2
*
§ 412.23
*
*
*
*
(c) * * *
(5) Preadmission services otherwise
payable under Medicare Part B
furnished to a beneficiary on the date of
the beneficiary’s admission to the
hospital and during the 3 calendar days
immediately preceding the date of the
beneficiary’s admission to the hospital
that meet the condition specified in
paragraph (c)(5)(i) of this section and at
least one of the conditions specified in
paragraphs (c)(5)(ii) through (c)(5)(iv).
*
*
*
*
*
(iii) For services furnished on or after
October 1, 1991, through June 24, 2010,
the services are furnished in connection
with the principal diagnosis that
requires the beneficiary to be admitted
as an inpatient and are not the
following:
(A) Ambulance services.
(B) Maintenance renal dialysis.
(iv) Nondiagnostic services furnished
on or after June 25, 2010, other than
ambulance services and maintenance
renal dialysis services, that are
furnished on the date of the
beneficiary’s inpatient admission or on
the first, second, or third calendar day
immediately preceding the date of the
beneficiary’s inpatient admission and
the hospital does not attest that such
services are unrelated to the
beneficiary’s inpatient admission.
■ 3. Section 412.4 is amended by—
■ a. Republishing the introductory text
of paragraph (b).
■ b. Removing the word ‘‘or’’ at the end
of paragraph (b)(1).
■ c. Removing the period at the end of
paragraph (b)(2) and adding in its place
a semicolon.
■ d. Adding new paragraphs (b)(3) and
(b)(4).
The additions read as follows:
Discharges and transfers.
mstockstill on DSKH9S0YB1PROD with RULES2
*
*
*
*
*
(b) Acute care transfers. A discharge
of a hospital inpatient is considered to
be a transfer for purposes of payment
under this part if the patient is
readmitted the same day (unless the
readmission is unrelated to the initial
discharge) to another hospital that is—
*
*
*
*
*
(3) An acute care hospital that would
otherwise be eligible to be paid under
the IPPS, but does not have an
agreement to participate in the Medicare
program; or
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[Amended]
4. In § 412.23, paragraphs (e)(6)(i) and
(e)(7)(ii) are amended by removing the
date ‘‘December 28, 2010’’ and adding
the date ‘‘December 28, 2012’’ in its
place.
■ 5. Section 412.64 is amended by—
■ a. Revising paragraphs (d)(1) and
(e)(4).
■ b. Adding a new paragraph (m).
■
Basis of payment.
*
§ 412.4
(4) A critical access hospital.
*
*
*
*
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§ 412.64 Federal rates for inpatient
operating costs for Federal fiscal year 2005
and subsequent fiscal years.
*
*
*
*
*
(d) * * *
(1) Subject to the provisions of
paragraph (d)(2) of this section, the
applicable percentage change for
updating the standardized amount is—
(i) For fiscal year 2005 through fiscal
year 2009, the percentage increase in the
market basket index for prospective
payment hospitals (as defined in
§ 413.40(a) of this subchapter) for
hospitals in all areas.
(ii) For fiscal year 2010, for
discharges—
(A) On or after October 1, 2009 and
before April 1, 2010, the percentage
increase in the market basket index for
prospective payment hospitals (as
defined in § 413.40(a) of this
subchapter) for hospitals in all areas;
and
(B) On or after April 1, 2010 and
before October 1, 2010, the percentage
increase in the market basket index
minus 0.25 percentage points for
prospective payment hospitals (as
defined in § 413.40(a) of this
subchapter) for hospitals in all areas.
(iii) For fiscal year 2011, the
percentage increase in the market basket
index minus 0.25 percentage points for
prospective payment hospitals (as
defined in § 413.40(a) of this
subchapter) for hospitals in all areas.
*
*
*
*
*
(e) * * *
(4) CMS makes an adjustment to the
wage index to ensure that aggregate
payments after implementation of the
rural floor under section 4410 of the
Balanced Budget Act of 1997 (Pub. L.
105–33) and the imputed floor under
paragraph (h)(4) of this section are equal
to the aggregate prospective payments
that would have been made in the
absence of such provisions as follows:
(i) Beginning October 1, 2008, such
adjustment is transitioned from a
nationwide to a statewide adjustment as
follows:
(A) From October 1, 2008 through
September 30, 2009, the wage index is
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50413
a blend of 20 percent of a wage index
with a statewide adjustment and 80
percent of a wage index with a
nationwide adjustment.
(B) From October 1, 2009 through
September 30, 2010, the wage index is
a blend of 50 percent of a wage index
with a statewide adjustment and 50
percent of a wage index with a
nationwide adjustment.
(ii) Beginning October 1, 2010, such
adjustment is a full nationwide
adjustment.
*
*
*
*
*
(m) Adjusting the wage index to
account for the Frontier State floor.
(1) General criteria. For discharges
occurring on or after October 1, 2010,
CMS adjusts the hospital wage index for
hospitals located in qualifying States to
recognize the wage index floor
established for frontier States. A
qualifying frontier State meets both of
the following criteria:
(i) At least 50 percent of counties
located within the State have a reported
population density less than 6 persons
per square mile.
(ii) The State does not receive a
nonlabor-related share adjustment
determined by the Secretary to take into
account the unique circumstances of
hospitals located in Alaska and Hawaii.
(2) Amount of wage index adjustment.
A hospital located in a qualifying State
will receive a wage index value not less
than 1.00.
(3) Process for determining and
posting wage index adjustments. (i)
CMS uses the most recent Population
Estimate data published by the U.S.
Census Bureau to determine county
definitions and population density. This
analysis will be periodically revised,
such as for updates to the decennial
census data.
(ii) CMS will include a listing of
qualifying frontier States and denote the
hospitals receiving a wage index
increase attributable to this provision in
its annual updates to the hospital
inpatient prospective payment system
published in the Federal Register.
■ 6. Section 412.73 is amended by—
■ a. Revising paragraph (c)(15).
■ b. Adding a new paragraph (c)(16).
The revision and addition read as
follows:
§ 412.73 Determination of the hospitalspecific rate based on a Federal fiscal year
1982 base period.
*
*
*
*
*
(c) * * *
(15) For Federal fiscal year 2003
through Federal fiscal year 2009. For
Federal fiscal year 2003 through Federal
fiscal year 2009, the update factor is the
percentage increase in the market basket
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index for prospective payment hospitals
(as defined in § 413.40(a) of this
chapter).
(16) For Federal fiscal year 2010 and
subsequent years. For Federal fiscal year
2010 and subsequent years, the update
factor is the percentage increase
specified in § 412.64(d).
*
*
*
*
*
§ 412.75
[Amended]
7. In § 412.75, paragraph (d) is
amended by removing the citation
‘‘§ 412.73(c)(15)’’ and adding the citation
‘‘§ 412.73(c)(15) and § 412.73(c)(16)’’ in
its place.
■
§ 412.77
[Amended]
8. In § 412.77, paragraph (e) is
amended by removing the reference
‘‘(c)(15)’’ and adding the reference
‘‘(c)(16)’’ in its place.
■
§ 412.78
[Amended]
9. In § 412.78, paragraph (e) is
amended by removing the citation
‘‘§ 412.73(c)(15)’’ and adding the citation
‘‘§ 412.73(c)(15) and § 412.73(c)(16)’’ in
its place.
■
§ 412.79
[Amended]
10. In § 412.79, paragraph (d) is
amended by removing the phrase ‘‘and
(c)(15)’’ and adding the phrase ‘‘through
(c)(16)’’ in its place.
■ 11. Section 412.101 is revised to read
as follows:
■
mstockstill on DSKH9S0YB1PROD with RULES2
§ 412.101 Special treatment: Inpatient
hospital payment adjustment for lowvolume hospitals.
(a) Definitions. Beginning in FY 2011,
the terms used in this section are
defined as follows:
Medicare discharges means discharge
of inpatients entitled to Medicare Part
A, including discharges associated with
individuals whose inpatient benefits are
exhausted or whose stay was not
covered by Medicare and also
discharges of individuals enrolled in a
MA organization under Medicare Part C.
Road miles means ‘‘miles’’ as defined
in § 412.92(c)(1).
(b) General considerations. (1) CMS
provides an additional payment to a
qualifying hospital for the higher
incremental costs associated with a low
volume of discharges. The amount of
any additional payment for a qualifying
hospital is calculated in accordance
with paragraph (c) of this section.
(2) In order to qualify for this
adjustment, a hospital must meet the
following criteria:
(i) For FY 2005 through FY 2010 and
FY 2013 and subsequent fiscal years, a
hospital must have fewer than 200 total
discharges, which includes Medicare
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Jkt 220001
and non-Medicare discharges, during
the fiscal year, based on the hospital’s
most recently submitted cost report, and
be located more than 25 road miles (as
defined in paragraph (a) of this section)
from the nearest ‘‘subsection (d)’’
(section 1886(d) of the Act) hospital.
(ii) For FY 2011 and FY 2012, a
hospital must have fewer than 1,600
Medicare discharges, as defined in
paragraph (a) of this section, during the
fiscal year, based on the hospital’s
Medicare discharges from the most
recently available MedPAR data as
determined by CMS, and be located
more than 15 road miles, as defined in
paragraph (a) of this section, from the
nearest ‘‘subsection (d)’’ (section 1886(d)
of the Act) hospital.
(3) In order to qualify for the
adjustment, a hospital must provide its
fiscal intermediary or Medicare
administrative contractor with sufficient
evidence that it meets the distance
requirement specified under paragraph
(b)(2) of this section. The fiscal
intermediary or Medicare administrative
contractor will base its determination of
whether the distance requirement is
satisfied upon the evidence presented
by the hospital and other relevant
evidence, such as maps, mapping
software, and inquiries to State and
local police, transportation officials, or
other government officials.
(c) Determination of the adjustment
amount. The low-volume adjustment for
hospitals that qualify under paragraph
(b) of this section is as follows for the
applicable fiscal year:
(1) For FY 2005 through FY 2010 and
FY 2013 and subsequent fiscal years, the
adjustment is an additional 25 percent
for each Medicare discharge.
(2) For FY 2011 and FY 2012, the
adjustment is as follows:
(i) For low-volume hospitals with 200
or fewer Medicare discharges (as
defined in paragraph (a) of this section),
the adjustment is an additional 25
percent for each Medicare discharge.
(ii) For low-volume hospitals with
Medicare discharges (as defined in
paragraph (a) of this section) of more
than 200 and fewer than 1,600, the
adjustment for each Medicare discharge
is an additional percent calculated using
the formula [(4/14)—(number of
Medicare discharges/5600)]. The
‘‘number of Medicare discharges’’ is
determined as described in paragraph
(b)(2)(ii) of this section.
(d) Eligibility of new hospitals for the
adjustment. For FYs 2005 through 2010
and FY 2013 and subsequent fiscal
years, a new hospital will be eligible for
a low-volume adjustment under this
section once it has submitted a cost
report for a cost reporting period that
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indicates that it meets discharge
requirements during the applicable
fiscal year and has provided its fiscal
intermediary or Medicare administrative
contractor with sufficient evidence that
it meets the distance requirement, as
specified under paragraph (b)(2) of this
section.
§ 412.106
[Amended]
12. Section 412.106 is amended by—
a. In paragraph (b)(2)(i)(B), removing
the word ‘‘or’’ and adding in its place the
word ‘‘including’’.
■ b. In paragraph (b)(2)(iii)(B), removing
the word ‘‘or’’ and adding in its place the
word ‘‘including’’.
■
■
§ 412.108
[Amended]
13. Section 412.108 is amended as
follows:
■ a. In paragraph (a)(1) introductory
text, the phrase ‘‘before October 1, 2011’’
is removed and the phrase ‘‘before
October 1, 2012’’ is added in its place.
■ b. In paragraph (a)(1)(iii) introductory
text, the word ‘‘receiving’’ is removed
and the phrase ‘‘entitled to’’ is added in
its place.
■ c. In paragraph (c)(2)(iii) introductory
text, the phrase ‘‘before October 1, 2011’’
is removed and the phrase ‘‘before
October 1, 2012’’ is added in its place.
■ 14. Section 412.113 is amended by
revising paragraph (c)(2)(i)(A) to read as
follows:
■
§ 412.113
Other payments.
*
*
*
*
*
(c) * * *
(2)(i) * * *
(A) The hospital or CAH is located in
a rural area as defined in § 412.62(f) and
is not deemed to be located in an urban
area under the provisions of
§ 412.64(b)(3). For cost reporting periods
beginning on or after October 1, 2010,
the hospital or CAH is either located in
a rural area as defined in § 412.62(f) and
is not deemed to be located in an urban
area under the provisions of
§ 412.64(b)(3) or the hospital or CAH
has reclassified as rural under the
provisions at § 412.103.
*
*
*
*
*
■ 15. Section 412.211 is amended by
revising paragraph (c) to read as follows:
§ 412.211 Puerto Rico rates for Federal
fiscal year 2004 and subsequent fiscal
years.
*
*
*
*
*
(c) Computing the standardized
amount. CMS computes a Puerto Rico
standardized amount that is applicable
to all hospitals located in all areas. The
applicable percentage change for
updating the Puerto Rico specific
standardized amount is as follows:
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(1) For fiscal year 2004 through fiscal
year 2009, increased by the applicable
percentage change specified in
§ 412.64(d)(1)(ii)(A).
(2) For fiscal year 2010, increased by
the market basket index for prospective
payment hospitals (as defined in
§ 413.40(a) of this subchapter) for
hospitals in all areas.
(3) For fiscal year 2011, increased by
the applicable percentage change
specified in § 412.64(d)(1)(iii).
*
*
*
*
*
§ 412.230
[Amended]
16. In § 412.230 paragraph (d)(1)(iv)(E)
is amended by removing the figures ‘‘86’’
and ‘‘88’’ adding the figures ‘‘82’’ and
‘‘84’’ in their place, respectively.
■
§ 412.232
[Amended]
17. In § 412.232, paragraph (c)(3) is
amended by removing the figure ‘‘88’’
and adding the figure ‘‘85’’ in its place.
■
§ 412.234
[Amended]
18. In § 412.234, paragraph (b)(3) is
amended by removing the figure ‘‘88’’
and adding the figure ‘‘85’’ in its place.
■ 19. Section 412.273 is revised to read
as follows:
■
mstockstill on DSKH9S0YB1PROD with RULES2
§ 412.273 Withdrawing an application,
terminating an approved 3-year
reclassification, or canceling a previous
withdrawal or termination.
(a) Definitions. For purposes of this
section, the following definitions apply.
Termination refers to the termination
of an already existing 3-year MGCRB
reclassification where such
reclassification has already been in
effect for 1 or 2 years, and there are 1
or 2 years remaining on the 3-year
reclassification. A termination is
effective only for the full fiscal year(s)
remaining in the 3-year period at the
time the request is received. Requests
for terminations for part of a fiscal year
are not considered.
Withdrawal refers to the withdrawal
of a 3-year MGCRB reclassification that
has not yet gone into effect or where the
MGCRB has not yet issued a decision on
the application.
(b) General rule. The MGCRB allows
a hospital, or group of hospitals, to
withdraw its application or to terminate
an already existing 3-year
reclassification, in accordance with this
section.
(c) Timing. (1) A request for
withdrawal must be received by the
MGCRB—
(i) At any time before the MGCRB
issues a decision on the application; or
(ii) After the MGCRB issues a
decision, provided that the request for
withdrawal is received by the MGCRB
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within 45 days of publication of CMS’
annual notice of proposed rulemaking
concerning changes to the inpatient
hospital prospective payment system
and proposed payment rates for the
fiscal year for which the application has
been filed.
(2) A request for termination must be
received by the MGCRB within 45 days
of the publication of CMS’ annual notice
of proposed rulemaking concerning
changes to the inpatient hospital
prospective payment system and
proposed payment rates for the fiscal
year for which the termination is to
apply.
(d) Reapplication within the approved
3-year period, cancellations of
terminations and withdrawals, and
prohibition on overlapping
reclassification approvals. (1)
Cancellation of terminations or
withdrawals. Subject to the provisions
of this section, a hospital (or group of
hospitals) may cancel a withdrawal or
termination in a subsequent year and
request the MGCRB to reinstate the
wage index reclassification for the
remaining fiscal year(s) of the 3-year
period. (Withdrawals may be cancelled
only in cases where the MGCRB issued
a decision on the geographic
reclassification request.)
(2) Timing and process of cancellation
request. Cancellation requests must be
received in writing by the MGCRB no
later than the deadline for submitting
reclassification applications for the
following fiscal year, as specified in
§ 412.256(a)(2).
(3) Reapplications. A hospital may
apply for reclassification to a different
area (that is, an area different from the
one to which it was originally
reclassified for the 3-year period). If the
application is approved, the
reclassification will be effective for 3
years. Once a 3-year reclassification
becomes effective, a hospital may no
longer cancel a withdrawal or
termination of another 3-year
reclassification, regardless of whether
the withdrawal or termination request is
made within 3 years from the date of the
withdrawal or termination.
(4) Termination of existing 3-year
reclassification. In a case in which a
hospital with an existing 3-year wage
index reclassification applies to be
reclassified to another area, its existing
3-year reclassification will be
terminated when a second 3-year wage
index reclassification goes into effect for
payments for discharges on or after the
following October 1.
(e) Written request only. A request to
withdraw an application must be made
in writing to the MGCRB by all hospitals
that are party to the application. A
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50415
request to terminate an approved
reclassification must be made in writing
to the MGCRB by an individual hospital
or by an individual hospital that is party
to a group classification.
(f) Appeal of the MGCRB’s denial of
a hospital’s request for withdrawal or
termination, or for cancellation of a
withdrawal or termination. (1) A
hospital may file an appeal of the
MGCRB’s denial of its request for
withdrawal or termination, or of the
MGCRB’s denial of its request for a
cancellation of such withdrawal or
termination, to the Administrator. The
appeal must be received within 15 days
of the date of the notice of the denial.
(2) Within 20 days of receipt of the
hospital’s request for appeal, the
Administrator affirms or reverses the
denial.
■ 20. A new § 412.405 is added to read
as follows:
§ 412.405 Preadmission services as
inpatient operating costs under the
inpatient psychiatric facility prospective
payment system.
The prospective payment system
includes payment for inpatient
operating costs of preadmission services
if the inpatient operating costs are for—
(a) Preadmission services otherwise
payable under Medicare Part B
furnished to a beneficiary on the date of
the beneficiary’s inpatient admission,
and during the calendar day
immediately preceding the date of the
beneficiary’s inpatient admission, to the
inpatient psychiatric facility that meet
the following conditions:
(1) The services are furnished by the
inpatient psychiatric facility or by an
entity wholly owned or wholly operated
by the inpatient psychiatric facility. An
entity is wholly owned by the inpatient
psychiatric facility if the inpatient
psychiatric facility is the sole owner of
the entity. An entity is wholly operated
by an inpatient psychiatric facility if the
inpatient psychiatric facility has
exclusive responsibility for conducting
and overseeing the entity’s routine
operations, regardless of whether the
inpatient psychiatric facility also has
policymaking authority over the entity.
(2) The services are diagnostic
(including clinical diagnostic laboratory
tests).
(3) The services are nondiagnostic
when furnished on the date of the
beneficiary’s inpatient admission, the
services are nondiagnostic when
furnished on the calendar day preceding
the date of the beneficiary’s inpatient
admission and the hospital does not
demonstrate that such services are
unrelated to the beneficiary’s inpatient
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admission, and are not one of the
following:
(i) Ambulance services.
(ii) Maintenance renal dialysis
services.
(b) The preadmission services are
furnished on or after June 25, 2010.
■ 21. Section 412.503 is amended by—
■ a. Adding a definition of ‘‘Long-term
care hospital prospective payment
system fiscal year’’.
■ b. Adding a definition of ‘‘Long-term
care hospital prospective payment
system payment year’’.
■ c. Revising paragraph (3) of the
definition of ‘‘Long-term care hospital
prospective payment system rate year’’.
The additions and revision read as
follows:
§ 412.503
Definitions.
*
*
*
*
*
Long-term care hospital prospective
payment system fiscal year means,
beginning October 1, 2010, the 12month period of October 1 through
September 30.
Long-term care hospital prospective
payment system payment year means
the general term that encompasses both
the definition of ‘‘long-term care
hospital prospective payment system
rate year’’ and ‘‘long-term care hospital
prospective payment system fiscal year’’
specified in this section.
Long-term care hospital prospective
payment system rate year means—
*
*
*
*
*
(3) From October 1, 2009 through
September 30, 2010, the 12-month
period of October 1 through September
30.
*
*
*
*
*
§ 412.521
[Amended]
22. In paragraph (b)(1) of § 412.521,
remove the reference ‘‘§ 412.2(c)’’ and
add in its place the reference
‘‘§§ 412.2(c)(1) through (c)(4) of this Part
and § 412.540’’.
■ 23. Section 412.523 is amended by—
■ a. Revising paragraph (c)(3)(vi).
■ b. Adding paragraph (c)(3)(vii).
■ c. In paragraph (d)(3), removing the
phrase ‘‘December 29, 2010, and by no
later than October 1, 2012’’ and adding
the phrase ‘‘December 29, 2012,’’ in its
place.
The revision and addition read as
follows:
mstockstill on DSKH9S0YB1PROD with RULES2
■
§ 412.523 Methodology for calculating the
Federal prospective payment rates.
*
*
*
*
*
(c) * * *
(3) * * *
(vi) For long-term care hospital
prospective payment system rate year
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beginning October 1, 2009 and ending
September 30, 2010. (A) The standard
Federal rate for long-term care hospital
prospective payment system rate year
beginning October 1, 2009 and ending
September 30, 2010 is the standard
Federal rate for the previous long-term
care hospital prospective payment
system rate year updated by 1.74
percent. The standard Federal rate is
adjusted, as appropriate, as described in
paragraph (d) of this section.
(B) 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
paragraph (c)(3)(v) of this section
updated by 2.0 percent.
(vii) For long-term care hospital
prospective payment system fiscal year
beginning October 1, 2010, and ending
September 30, 2011. The standard
Federal rate for the long-term care
hospital prospective payment system
fiscal year beginning October 1, 2010,
and ending September 30, 2011, is the
standard Federal rate for the previous
long-term care hospital prospective
payment system rate year updated by
¥0.49 percent. The standard Federal
rate is adjusted, as appropriate, as
described in paragraph (d) of this
section.
*
*
*
*
*
■ 24. Section 412.525 is amended by
revising paragraphs (a)(1) and (a)(2) to
read as follows:
§ 412.525 Adjustments to the Federal
prospective payment.
(a) * * *
(1) CMS provides for an additional
payment to a long-term care hospital if
its estimated costs for a patient exceed
the adjusted LTC–MS–DRG payment
plus a fixed-loss amount. For each longterm care hospital prospective payment
system payment year, as described in
§ 412.503, CMS determines a fixed-loss
amount that is the maximum loss that
a hospital can incur under the
prospective payment system for a case
with unusually high costs.
(2) The fixed-loss amount is
determined for the long-term care
hospital prospective payment system
payment year, as defined in § 412.503,
using the LTC–MS–DRG relative
weights that are in effect at the start of
the applicable long-term care hospital
prospective payment system payment
year, as defined in § 412.503.
*
*
*
*
*
§ 412.529
[Amended]
25. In § 412.529, paragraphs (c)(2)
introductory text and (c)(3) introductory
text are amended by removing the date
■
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‘‘December 29, 2010’’ and adding in its
place the date ‘‘December 29, 2012’’ each
time it appears.
§ 412.534
[Amended]
26. Section 412.534 is amended as
follows:
■ a. Paragraphs (c)(1) introductory text,
(c)(1)(i), (c)(1)(ii), (c)(2) introductory
text, (d)(1) introductory text, (d)(1)(i),
(d)(2) introductory text, (e)(1)
introductory text, (e)(1)(i), and (e)(2)
introductory text are amended by
removing the date ‘‘October 1, 2010’’ and
adding in its place the date ‘‘October 1,
2012’’ each time it appears.
■ b. Paragraphs (c)(3), (d)(3), (e)(3),
(h)(4), and (h)(5) are amended by
removing the date ‘‘July 1, 2010’’ and
adding in its place the date ‘‘July 1,
2012’’ each time it appears.
■
§ 412.536
[Amended]
27. In § 412.536, paragraph (a)(2)
introductory text is amended by
removing the date ‘‘July 1, 2010’’ and
adding in its place the date ‘‘July 1,
2012’’ in its place.
■ 28. A new § 412.540 is added to read
as follows:
■
§ 412.540 Method of payment for
preadmission services under the long-term
care hospital prospective payment system.
The prospective payment system
includes payment for inpatient
operating costs of preadmission services
that are—
(a) Otherwise payable under Medicare
Part B;
(b) Furnished to a beneficiary on the
date of the beneficiary’s inpatient
admission, and during the calendar day
immediately preceding the date of the
beneficiary’s inpatient admission, to the
long-term care hospital, or to an entity
wholly owned or wholly operated by
the long-term care hospital; and
(1) An entity is wholly owned by the
long-term care hospital if the long-term
care hospital is the sole owner of the
entity.
(2) An entity is wholly operated by a
long-term care hospital if the long-term
care hospital has exclusive
responsibility for conducting and
overseeing the entity’s routine
operations, regardless of whether the
long-term care hospital also has
policymaking authority over the entity.
(c) Related to the inpatient stay. A
preadmission service is related if—
(1) It is diagnostic (including clinical
diagnostic laboratory tests); or
(2) It is nondiagnostic when furnished
on the date of the beneficiary’s inpatient
admission; or
(3) On or after June 25, 2010, it is
nondiagnostic when furnished on the
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calendar day preceding the date of the
beneficiary’s inpatient admission and
the hospital does not attest that such
service is unrelated to the beneficiary’s
inpatient admission.
(d) Not one of the following—
(1) Ambulance services.
(2) Maintenance renal dialysis
services.
29. Section 412.604 is amended by—
a. Redesignating paragraph (f) as
paragraph (g).
■ b. Adding a new paragraph (f).
The addition reads as follows:
■
■
§ 412.604 Conditions for payment under
the prospective payment system for
inpatient rehabilitation services.
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*
*
*
*
*
(f) The prospective payment system
includes payment for inpatient
operating costs of preadmission services
that are—
(1) Otherwise payable under Medicare
Part B;
(2) Furnished to a beneficiary on the
date of the beneficiary’s inpatient
admission, and during the calendar day
immediately preceding the date of the
beneficiary’s inpatient admission, to the
inpatient rehabilitation facility, or to an
entity wholly owned or wholly operated
by the inpatient rehabilitation facility;
and
(i) An entity is wholly owned by the
inpatient rehabilitation facility if the
inpatient rehabilitation facility is the
sole owner of the entity.
(ii) An entity is wholly operated by an
inpatient rehabilitation facility if the
inpatient rehabilitation facility has
exclusive responsibility for conducting
and overseeing the entity’s routine
operations, regardless of whether the
inpatient rehabilitation facility also has
policymaking authority over the entity.
(3) Related to the inpatient stay. A
preadmission service is related if—
(i) It is diagnostic (including clinical
diagnostic laboratory tests); or
(ii) It is nondiagnostic when furnished
on the date of the beneficiary’s inpatient
admission; or
(iii) On or after June 25,, 2010, it is
nondiagnostic when furnished on the
calendar day preceding the date of the
beneficiary’s inpatient admission and
the hospital does not attest that such
service is unrelated to the beneficiary’s
inpatient admission.
(4) Not one of the following—
(i) Ambulance services.
(ii) Maintenance renal dialysis
services.
*
*
*
*
*
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PART 413—PRINCIPLES OF
REASONABLE COST
REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE
SERVICES; OPTIONAL
PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED
NURSING FACILITIES
30. The authority citation for part 413
continues to read as follows:
■
Authority: Secs. 1102, 1812(d), 1814(b),
1815, 1833(a), (i), and (n), 1861(v), 1871,
1881, 1883, and 1886 of the Social Security
Act (42 U.S.C. 1302, 1395d(d), 1395f(b),
1395g, 1395l(a), (i), and (n), 1395x(v),
1395hh, 1395rr, 1395tt, and 1395ww); and
sec. 124 of Pub. L. 106–133 (113 Stat. 1501A–
332).
31. Section 413.40 is amended by—
a. Revising paragraph (c)(2)
introductory text.
■ b. Revising paragraph (c)(2)(iii).
■ c. Adding a new paragraph (c)(2)(iv).
The revision and addition read as
follows:
■
■
§ 413.40 Ceiling on the rate of increase in
hospital inpatient costs.
*
*
*
*
*
(c) * * *
(2) Preadmission services otherwise
payable under Medicare Part B
furnished to a beneficiary on the date of
the beneficiary’s admission to the
hospital and during the calendar day
immediately preceding the date of the
beneficiary’s admission to the hospital
that meet the condition specified in
paragraph (c)(2)(i) of this section and at
least one of the conditions specified in
paragraphs (c)(2)(ii) through (c)(2)(iv):
*
*
*
*
*
(iii) For services furnished on or after
October 1, 1991 through June 24, 2010,
the services are furnished in connection
with the principal diagnosis that
requires the beneficiary to be admitted
as an inpatient and are not the
following:
(A) Ambulance services.
(B) Maintenance renal dialysis
services.
(iv) Nondiagnostic services furnished
on or after June 25, 2010, other than
ambulance services and maintenance
renal dialysis services, that are
furnished on the date of the
beneficiary’s inpatient admission or on
the calendar day immediately preceding
the date of the beneficiary’s inpatient
admission and the hospital does not
attest that such services are unrelated to
the beneficiary’s inpatient admission.
*
*
*
*
*
■ 32. Section 413.70 is amended by—
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a. Revising paragraph (b)(3)(i)(A).
b. Revising paragraph (b)(3)(i)(B).
c. Revising paragraph (b)(3)(i)(D).
d. Revise paragraph (b)(3)(ii)(A).
e. Redesignate paragraph (b)(5)(i) as
(b)(5)(i)(A).
■ f. In newly redesignated paragraph
(b)(5)(i)(A), the phrase ‘‘on or after
December 21, 2000,’’ is removed and the
phrase ‘‘on or after December 21, 2000
and on or before December 31, 2003,’’ is
added in its place.
■ g. Add a new paragraph (b)(5)(i)(B).
The revision and addition read as
follows:
■
■
■
■
■
§ 413.70
Payment for services of a CAH.
*
*
*
*
*
(b) * * *
(3) * * *
(i) * * *
(A)(1) For cost reporting periods
beginning before October 1, 2010. The
election must be made in writing, made
on an annual basis, and delivered to the
fiscal intermediary or MAC servicing
the CAH at least 30 days before the start
of the cost reporting period for which
the election is made. An election, once
made for a cost reporting period,
remains in effect for all of that period.
(2) For cost reporting periods
beginning on or after October 1, 2010. If
a CAH had elected the method specified
in paragraph (b)(3)(i) of this section in
its most recent cost reporting period
beginning prior to October 1, 2010, that
election remains in effect for all of that
period and for all subsequent cost
reporting periods, unless the CAH
submits a termination request to the
fiscal intermediary or MAC servicing
the CAH at least 30 days before the start
of the next cost reporting period.
However, for cost reporting periods
beginning in October 2010 and
November 2010, if a CAH wishes to
terminate its previous election, the CAH
must submit a termination request to the
fiscal intermediary or MAC servicing
the CAH prior to December 1, 2010. If
a CAH had no election in effect in its
most recent preceding cost reporting
period and chooses to elect the method
specified in paragraph (b)(3)(i) of this
section on or after October 1, 2010, the
election must be made in writing and
delivered to the fiscal intermediary or
MAC servicing the CAH at least 30 days
before the start of the first cost reporting
period for which the election is made.
Once the election is made, it remains in
effect for all of that period and for all
subsequent cost reporting periods
unless the CAH submits a termination
request to the fiscal intermediary or
MAC servicing the CAH at least 30 days
before the start of the next cost reporting
period.
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(B) An election of the payment
method specified under paragraph
(b)(3)(i) of this section applies to all
services furnished to outpatients by a
physician or other practitioner who has
reassigned his or her rights to bill for
those services to the CAH in accordance
with subpart F of part 424 of this
chapter. If a physician or other
practitioner does not reassign his or her
billing rights to the CAH in accordance
with subpart F of Part 424 of this
chapter, payment for the physician’s or
practitioner’s services furnished to CAH
outpatients will be made on a fee
schedule or other applicable basis as
specified in subpart B of part 414 of this
subchapter.
*
*
*
*
*
(D) An election made under paragraph
(b)(3)(i) of this section is effective as
provided for under paragraph
(b)(3)(i)(A) or paragraph (b)(3)(i)(C) of
this section and does not apply to an
election that was terminated prior to the
start of the cost reporting period for
which it would otherwise apply.
(ii) * * *
(A) Effective for cost reporting periods
beginning on or after January 1, 2004,
for facility services not including any
services for which payment may be
made under paragraph (b)(3)(ii)(B) of
this section, 101 percent of the
reasonable costs of the services as
determined under paragraph (b)(2)(i) of
this section; and
*
*
*
*
*
(5) * * *
(i) * * *
(B) Effective for cost reporting periods
beginning on or after January 1, 2004,
payment for ambulance services
furnished by a CAH or an entity that is
owned and operated by a CAH is 101
percent of the reasonable costs of the
CAH or the entity in furnishing those
services, but only if the CAH or the
entity is the only provider or supplier of
ambulance services located within a 35mile drive of the CAH or the entity.
*
*
*
*
*
■ 33. Section 413.75(b) is amended by
revising the definitions of ‘‘Primary care
resident’’, and ‘‘Resident’’ to read as
follows:
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*
*
*
*
(b) * * *
Primary care resident is a resident
who is enrolled in an approved medical
residency training program in family
medicine, general internal medicine,
general pediatrics, preventive medicine,
geriatric medicine or osteopathic
general practice. Effective for cost
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§ 413.85 Cost of approved nursing and
allied health education activities.
*
*
*
*
*
(c) * * *
(2) Enhance the quality of health care
at the provider; and
*
*
*
*
*
(d) * * *
(1) * * *
(i) * * *
(C) Enhance the quality of health care
at the provider.
*
*
*
*
*
PART 415—SERVICES FURNISHED BY
PHYSICIANS IN PROVIDERS,
SUPERVISING PHYSICIANS IN
TEACHING SETTINGS, AND
RESIDENTS IN CERTAIN SETTINGS
35. The authority citation for Part 415
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
36. In § 415.152, the definition of
‘‘Approved graduate medical education’’
is amended by revising paragraph (1) to
read as follows:
■
§ 413.75 Direct GME payments: General
requirements.
*
reporting periods beginning on or after
October 1, 2010, primary care resident
is a resident who is formally accepted,
enrolled, and participating in an
approved medical residency training
program in family medicine, general
internal medicine, general pediatrics,
preventive medicine, geriatric medicine
or osteopathic general practice.
*
*
*
*
*
Resident means an intern, resident, or
fellow who participates in an approved
medical residency program, including
programs in osteopathy, dentistry, and
podiatry, as required in order to become
certified by the appropriate specialty
board. Effective for cost reporting
periods beginning on or after October 1,
2010, resident means an intern,
resident, or fellow who is formally
accepted, enrolled, and participating in
an approved medical residency
program, including programs in
osteopathy, dentistry, and podiatry, as
required in order to become certified by
the appropriate specialty board.
*
*
*
*
*
■ 34. Section 413.85 is amended by—
■ a. Revising paragraph (c)(2).
■ b. Revising paragraph (d)(1)(i)(C).
The revisions read as follows:
§ 415.152
Definitions.
*
*
*
*
*
Approved graduate medical
education program means one of the
following:
(1) A residency program approved by
the Accreditation Council for Graduate
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Medical Education, by the American
Osteopathic Association, by the
Commission on Dental Accreditation of
the American Dental Association, or by
the Council on Podiatric Medical
Education of the American Podiatric
Medical Association.
*
*
*
*
*
PART 424—CONDITIONS FOR
MEDICARE PAYMENT
37. The authority citation for part 424
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
§ 424.510
[Amended]
38. In 424.510, paragraph (c), remove
the reference ‘‘§ 489.13(d)’’ and add the
reference ‘‘§ 489.13’’ in its place.
■
§ 424.520
[Amended]
39. In 424.520, paragraph (a), remove
the reference ‘‘§ 489.13(d)’’ and add the
reference ‘‘§ 489.13’’ in its place.
■
PART 440—SERVICES: GENERAL
PROVISIONS
40. The authority citation for part 440
continues to read as follows:
■
Authority: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
41. Section 440.160 is amended by
revising paragraph (b)(1) to read as
follows:
■
§ 440.160 Inpatient psychiatric services for
individuals under age 21.
*
*
*
*
*
(b) * * *
(1) A psychiatric hospital that
undergoes a State survey to determine
whether the hospital meets the
requirements for participation in
Medicare as a psychiatric hospital as
specified in § 482.60 of this chapter, or
is accredited by a national organization
whose psychiatric hospital accrediting
program has been approved by CMS; or
a hospital with an inpatient psychiatric
program that undergoes a State survey
to determine whether the hospital meets
the requirements for participation in
Medicare as a hospital, as specified in
part 482 of this chapter, or is accredited
by a national accrediting organization
whose hospital accrediting program has
been approved by CMS.
*
*
*
*
*
PART 441—SERVICES:
REQUIREMENTS AND LIMITS
APPLICABLE TO SPECIFIC SERVICES
42. The authority citation for part 441
continues to read as follows:
■
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Authority: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
43. Section 441.151 is amended by
revising paragraph (a)(2)(i) to read as
follows:
■
§ 441.151
General requirements.
(a) * * *
(2) * * *
(i) A psychiatric hospital that
undergoes a State survey to determine
whether the hospital meets the
requirements for participation in
Medicare as a psychiatric hospital as
specified in § 482.60 of this chapter, or
is accredited by a national organization
whose psychiatric hospital accrediting
program has been approved by CMS; or
a hospital with an inpatient psychiatric
program that undergoes a State survey
to determine whether the hospital meets
the requirements for participation in
Medicare as a hospital, as specified in
part 482 of this chapter, or is accredited
by a national accrediting organization
whose hospital accrediting program has
been approved by CMS.
*
*
*
*
*
PART 482—CONDITIONS OF
PARTICIPATION FOR HOSPITALS
(b) * * *
(3) Services must only be provided
under the orders of a qualified and
licensed practitioner who is responsible
for the care of the patient, acting within
his or her scope of practice under State
law, and who is authorized by the
hospital’s medical staff to order the
services in accordance with hospital
policies and procedures and State laws.
(4) All respiratory care services orders
must be documented in the patient’s
medical record in accordance with the
requirements at § 482.24.
PART 485—CONDITIONS OF
PARTICIPATION: SPECIALIZED
PROVIDERS
47. The authority citation for part 485
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395(hh)).
48. Section 485.610 is amended by
revising the introductory text of
paragraph (b) to read as follows:
■
§ 485.610 Condition of participation:
Status and location.
*
45. Section 482.56 is amended by
revising paragraph (b) to read as follows:
*
*
*
*
(b) Standard: Location in a rural area
or treatment as rural. The CAH meets
the requirements of either paragraph
(b)(1) or (b)(2) of this section or the
requirements of either (b)(3) or (b)(4) of
this section.
*
*
*
*
*
§ 482.56 Condition of participation:
Rehabilitation services.
PART 489—PROVIDER AGREEMENTS
AND SUPPLIER APPROVAL
*
■
44. The authority citation for part 482
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395(hh)).
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■
*
*
*
*
(b) Standard: Delivery of services.
Services must only be provided under
the orders of a qualified and licensed
practitioner who is responsible for the
care of the patient, acting within his or
her scope of practice under State law,
and who is authorized by the hospital’s
medical staff to order the services in
accordance with hospital policies and
procedures and State laws.
(1) All rehabilitation services orders
must be documented in the patient’s
medical record in accordance with the
requirements at § 482.24.
(2) The provision of care and the
personnel qualifications must be in
accordance with national acceptable
standards of practice and must also
meet the requirements of § 409.17 of this
chapter.
■ 46. Section 482.57 is amended by
revising paragraph (b)(3) and by adding
paragraph (b)(4) to read as follows:
§ 482.57 Condition of participation:
Respiratory care services.
*
*
*
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*
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49. The authority citation for part 489
continues to read as follows:
Authority: Secs. 1102, 1819, 1820(e), 1861,
1864(m), 1866, 1869, and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395i–3, 1395x,
1395aa(m), 1395cc, 1395ff, and 1395hh).
50. Section 489.1 is revised to read as
follows:
■
§ 489.1
Statutory basis.
(a) This part implements section 1866
of the Social Security Act (the Act).
Section 1866 of the Act specifies the
terms of provider agreements, the
grounds for terminating a provider
agreement, the circumstances under
which payment for new admissions may
be denied, and the circumstances under
which payment may be withheld for
failure to make timely utilization
review. The sections of the Act specified
in paragraphs (a)(1) through (a)(4) of this
section are also pertinent.
(1) Section 1861 of the Act defines the
services covered under Medicare and
the providers that may be reimbursed
for furnishing those services.
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50419
(2) Section 1864 of the Act provides
for the use of State survey agencies to
ascertain whether certain entities meet
the conditions of participation.
(3) Section 1865(a)(1) of the Act
provides that an entity accredited by a
national accreditation body found by
the Secretary to satisfy the Medicare
conditions of participation, conditions
for coverage, or conditions of
certification or requirements for
participation shall be treated as meeting
those requirements. Section 1865(a)(2)
of the Act requires the Secretary to
consider when making such a finding,
among other things, the national
accreditation body’s accreditation
requirements and survey procedures.
(4) Section 1871 of the Act authorizes
the Secretary to prescribe regulations for
the administration of the Medicare
program.
(b) Although section 1866 of the Act
speaks only to providers and provider
agreements, the effective date rules in
this part are made applicable also to the
approval of suppliers that meet the
requirements specified in § 489.13.
(c) Section 1861(o)(7) of the Act
requires each HHA to provide CMS with
a surety bond.
■ 52. Section 489.13 is revised to read
as follows:
§ 489.13 Effective date of agreement or
approval.
(a) Applicability—(1) General rule.
Except as provided in paragraph (a)(2)
of this section, this section applies to
Medicare provider agreements with, and
supplier approval of, entities that, as a
basis for participation in Medicare are
subject to a determination by CMS on
the basis of—
(i) A survey conducted by the State
survey agency or CMS surveyors; or
(ii) In lieu of such State survey agency
or CMS conducted survey, accreditation
by an accreditation organization whose
program has CMS approval in
accordance with section 1865 of the Act
at the time of the accreditation survey
and accreditation decision.
(2) Exceptions. (i) For an agreement
with a community mental health center
(CMHC) or a federally qualified health
center (FQHC), the effective date is the
date on which CMS accepts a signed
agreement which assures that the CMHC
or FQHC meets all Federal
requirements.
(ii) A Medicare supplier approval of a
laboratory is effective only while the
laboratory has in effect a valid CLIA
certificate issued under part 493 of this
chapter, and only for the specialty and
subspecialty tests it is authorized to
perform.
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(b) All health and safety standards are
met on the date of survey. The
agreement or approval is effective on the
date the State agency, CMS, or the CMS
contractor survey (including the Life
Safety Code survey, if applicable) is
completed, or on the effective date of
the accreditation decision, as
applicable, if on that date the provider
or supplier meets all applicable Federal
requirements as set forth in this chapter.
(If the agreement or approval is timelimited, the new agreement or approval
is effective on the day following the
expiration of the current agreement or
approval.) However, the effective date of
the agreement or approval may not be
earlier than the latest of the dates on
which CMS determines that each
applicable Federal requirement is met.
Federal requirements include, but are
not limited to—
(1) Enrollment requirements
established in part 424, subpart P, of
this chapter. CMS determines, based
upon its review and verification of the
prospective provider’s or supplier’s
enrollment application, the date on
which enrollment requirements have
been met;
(2) The requirements identified in
§§ 489.10 and 489.12; and
(3) The applicable Medicare health
and safety standards, such as the
applicable conditions of participation,
the requirements for participation, the
conditions for coverage, or the
conditions for certification.
(c) All health and safety standards are
not met on the date of survey. If, on the
date the survey is completed, the
provider or supplier has failed to meet
any one of the applicable health and
safety standards, the following rules
apply for determining the effective date
of the provider agreement or supplier
approval, assuming that no other
Federal requirements remain to be
satisfied. However, if other Federal
requirements remain to be satisfied,
notwithstanding the provisions of
paragraphs (c)(1) through (c)(3) of this
section, the effective date of the
agreement or approval may not be
earlier than the latest of the dates on
which CMS determines that each
applicable Federal requirement is met.
(1) For an agreement with an SNF, the
effective date is the date on which—
(i) The SNF is in substantial
compliance (as defined in § 488.301 of
this chapter) with the requirements for
participation; and
(ii) CMS or the State survey agency
receives from the SNF, if applicable, an
approvable waiver request.
(2) For an agreement with, or an
approval of, any other provider or
supplier, (except those specified in
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paragraph (a)(2) of this section), the
effective date is the earlier of the
following:
(i) The date on which the provider or
supplier meets all applicable conditions
of participation, conditions for coverage,
or conditions for certification; or, if
applicable, the date of a CMS-approved
accreditation organization program’s
positive accreditation decision, issued
after the accreditation organization has
determined that the provider or supplier
meets all applicable conditions.
(ii) The date on which a provider or
supplier is found to meet all conditions
of participation, conditions for coverage,
or conditions for certification, but has
lower-level deficiencies, and—
(A) CMS or the State survey agency
receives an acceptable plan of correction
for the lower-level deficiencies (the date
of receipt is the effective date regardless
of when the plan of correction is
approved); or, if applicable, a CMSapproved accreditation organization
program issues a positive accreditation
decision after it receives an acceptable
plan of correction for the lower-level
deficiencies; or
(B) CMS receives an approvable
waiver request (the date of receipt is the
effective date regardless of when CMS
approves the waiver request).
(3) For an agreement with any other
provider or an approval of any other
supplier (except those specified in
paragraph (a)(2) of this section) that is
found to meet all conditions of
participation, conditions for coverage,
or conditions for certification, but has
lower-level deficiencies and has
submitted both an approvable plan of
correction/positive accreditation
decision and an approvable waiver
request, the effective date is the later of
the dates that result when calculated in
accordance with paragraph (c)(2)(ii)(A)
or (c)(2)(ii)(B) of this section.
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; Program No. 93.774, Medicare—
Supplementary Medical Insurance Program;
and Program No. 93.778, Medical Assistance)
Dated: July 23, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: July 28, 2010
Kathleen Sebelius,
Secretary.
Note: The following Addendum will not
appear in the Code of Federal Regulations.
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Addendum—Schedule of Standardized
Amounts, Update Factors, and Rate-ofIncrease Percentages Effective With
Cost Reporting Periods Beginning on or
After October 1, 2010
I. Summary and Background
Several provisions of the Affordable Care
Act affect the hospital inpatient update for
both FYs 2010 and 2011. However, due to the
timing of the passage of the legislation, we
were unable to address those provisions in
the FY 2011 IPPS/LTCH PPS proposed rule
issued in the Federal Register on May 4,
2010 (75 FR 23852). On June 2, 2010, we
issued a supplemental proposed rule to the
FY 2011 IPPS/LTCH PPS proposed rule (75
FR 30756) to address these provisions. The
discussion below reflects both the provisions
of the initial FY 2011 proposed rule and the
supplemental proposed rule relative to the
FY 2011 payment rates and factors and any
public comments that we received on both
documents.
In this Addendum, we are setting forth a
description of the methods and data we used
to determine the prospective payment rates
for Medicare hospital inpatient operating
costs and Medicare hospital inpatient capitalrelated costs for FY 2011 for acute care
hospitals. In this final rule, we also are
setting forth the final rate-of-increase
percentages for updating the target amounts
for certain hospitals excluded from the IPPS
for FY 2011. We note that, because certain
hospitals excluded from the IPPS are paid on
a reasonable cost basis subject to a rate-ofincrease ceiling (and not by the IPPS), these
hospitals are not affected by the figures for
the standardized amounts, offsets, and
budget neutrality factors. Therefore, in this
final rule, we are finalizing the rate-ofincrease percentages for updating the target
amounts for certain hospitals excluded from
the IPPS that are effective for cost reporting
periods beginning on or after October 1,
2010.
In addition, we are setting forth a
description of the methods and data we used
to determine the final standard Federal rate
that will be applicable to Medicare LTCHs for
FY 2011.
In general, except for SCHs, MDHs, and
hospitals located in Puerto Rico, each
hospital’s payment per discharge under the
IPPS is based on 100 percent of the Federal
national rate, also known as the national
adjusted standardized amount. This amount
reflects the national average hospital cost per
case from a base year, updated for inflation.
Currently, SCHs are paid based on
whichever of the following rates yields the
greatest aggregate payment: the Federal
national rate; the updated hospital-specific
rate based on FY 1982 costs per discharge;
the updated hospital-specific rate based on
FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs
per discharge; or the updated hospitalspecific rate based on the FY 2006 costs per
discharge.
Under section 1886(d)(5)(G) of the Act,
MDHs historically have been paid based on
the Federal national rate or, if higher, the
Federal national rate plus 50 percent of the
difference between the Federal national rate
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and the updated hospital-specific rate based
on FY 1982 or FY 1987 costs per discharge,
whichever was higher. However, section
5003(a)(1) of Public Law 109–171 extended
and modified the MDH special payment
provision that was previously set to expire on
October 1, 2006, to include discharges
occurring on or after October 1, 2006, but
before October 1, 2011. Section 3124(a) of the
Affordable Care Act amended sections
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of
the Act to extend the MDH program and
payment methodology from the end of FY
2011 to the end of FY 2012, by striking
‘‘October 1, 2011’’ and inserting ‘‘October 1,
2012’’. Section 3124(b) of the Affordable Care
Act also made conforming amendments to
sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv)
of the Act. Section 3124(b)(2) of the
Affordable Care Act also amended section
13501(e)(2) of OBRA 1993 to extend the
provision permitting hospitals to decline
reclassification as an MDH through FY 2012.
In section IV.G.2. of the preamble to this final
rule, we are adopting as final the proposed
changes to § 412.108(a)(1) and (c)(2)(iii) to
reflect the legislative extension of the MDH
program for an additional year, through FY
2012. Under section 5003(b) of Pub. L. 109–
171, if the change results in an increase to
an MDH’s target amount, we must rebase an
MDH’s hospital-specific rates based on its FY
2002 cost report. Section 5003(c) of Public
Law 109–171 further required that MDHs be
paid based on the Federal national rate or, if
higher, the Federal national rate plus 75
percent of the difference between the Federal
national rate and the updated hospitalspecific rate. Further, based on the provisions
of section 5003(d) of Public Law 109–171,
MDHs are no longer subject to the 12-percent
cap on their DSH payment adjustment factor.
For hospitals located in Puerto Rico, the
payment per discharge is based on the sum
of 25 percent of an updated Puerto Ricospecific rate based on average costs per case
of Puerto Rico hospitals for the base year and
75 percent of the Federal national rate. (We
refer readers to section II.D.3. of this
Addendum for a complete description.)
As discussed below in section II. of this
Addendum, we are making changes in the
determination of the prospective payment
rates for Medicare inpatient operating costs
for acute care hospitals for FY 2011. In
section III. of this Addendum, we discuss our
policy changes for determining the
prospective payment rates for Medicare
inpatient capital-related costs for FY 2011. In
section IV. of this Addendum, we are setting
forth our changes for determining the rate-ofincrease limits for certain hospitals excluded
from the IPPS for FY 2011. In section V. of
this Addendum, we are making changes in
the determination of the standard Federal
rate for LTCHs under the LTCH PPS for FY
2011. The tables to which we refer in the
preamble of this final rule are presented in
section VI. of this Addendum.
II. Changes to Prospective Payment Rates for
Hospital Inpatient Operating Costs for Acute
Care Hospitals for FY 2011
The basic methodology for determining
prospective payment rates for hospital
inpatient operating costs for acute care
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hospitals for FY 2005 and subsequent fiscal
years is set forth at § 412.64. The basic
methodology for determining the prospective
payment rates for hospital inpatient
operating costs for hospitals located in Puerto
Rico for FY 2005 and subsequent fiscal years
is set forth at §§ 412.211 and 412.212. Below
we discuss the factors used for determining
the prospective payment rates for FY 2011.
In summary, the standardized amounts set
forth in Tables 1A, 1B, and 1C of section VI.
of this Addendum reflect—
• Equalization of the standardized
amounts for urban and other areas at the
level computed for large urban hospitals
during FY 2004 and onward, as provided for
under section 1886(d)(3)(A)(iv)(II) of the Act.
• The labor-related share that is applied to
the standardized amounts and Puerto Ricospecific standardized amounts to give the
hospital the highest payment, as provided for
under sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act.
• Updates of 2.35 percent for all areas (that
is, the estimated full market basket
percentage increase of 2.6 percent minus 0.25
percentage points), as required by section
1886(b)(3)(B)(i) of the Act, as amended by
sections 3401(a) and10319(a) of the
Affordable Care Act, and reflecting the
requirements of section 1886(b)(3)(B)(viii) of
the Act, as added by section 5001(a)(3) of
Public Law 109–171, to reduce the applicable
percentage increase by 2.0 percentage points
for a hospital that fails to submit data, in a
form and manner, and at the time specified
by the Secretary, relating to the quality of
inpatient care furnished by the hospital.
• An update of 2.35 percent to the Puerto
Rico-specific standardized amount (that is,
the estimated full market basket percentage
increase of 2.6 percent minus 0.25 percentage
point), as finalized in the preamble of this
final rule under § 412.211(c), which states
that we update the Puerto Rico-specific
standardized amount using the percentage
increase specified in § 412.64(d)(1), or the
percentage increase in the market basket
index for prospective payment hospitals for
all areas.
• An adjustment to the standardized
amount to ensure budget neutrality for DRG
recalibration and reclassification, as provided
for under section 1886(d)(4)(C)(iii) of the Act.
• An adjustment to ensure the wage index
changes are budget neutral, as provided for
under section 1886(d)(3)(E)(i) of the Act. We
note that section 1886(d)(3)(E)(i) of the Act
requires that we do not consider the laborrelated share of 62 percent to compute wage
index budget neutrality.
• An adjustment to ensure the effects of
geographic reclassification are budget
neutral, as provided for in section
1886(d)(8)(D) of the Act, by removing the FY
2010 budget neutrality factor and applying a
revised factor.
• An adjustment to ensure the effects of
the rural community hospital demonstration
required under section 410A of Public Law
108–173 as amended by sections 3123 and
10313 of Public Law 111–148 which extends
the demonstration for an additional 5 years
are budget neutral, as required under section
410A (c)(2) of Public Law 108–173.
• An adjustment to remove the FY 2010
outlier offset and apply an offset for FY 2011,
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as provided for in section 1886(d)(3)(B) of the
Act.
• As discussed below and in section II.D.
of the preamble to this final rule, an
adjustment to meet the requirements of
section 7(b)(1)(B) of Public Law 110–90 to
adjust the standardized amounts to offset the
estimated amount of the increase in aggregate
payments (including interest) due to the
effect of documentation and coding that did
not reflect real changes in case-mix for
discharges occurring during FY 2008 and FY
2009.
We note that, beginning in FY 2008, we
applied the budget neutrality adjustment for
the rural floor to the hospital wage indices
rather than the standardized amount. As we
did for FY 2010, for FY 2011, we are
continuing to apply the rural floor budget
neutrality adjustment to hospital wage
indices rather than the standardized amount.
In addition, instead of applying the budget
neutrality adjustment for the imputed floor
adopted under section 1886(d)(3)(E) of the
Act to the standardized amount, for FY 2011,
we are continuing to apply the imputed floor
budget neutrality adjustment to the wage
indices. For this final rule, consistent with
section 3141 of the Affordable Care Act,
instead of applying a State level rural floor
budget neutrality adjustment on the wage
index, we are restoring the budget neutrality
adjustment for the rural and imputed floors
to a uniform, national adjustment, beginning
with the FY 2011 wage index.
A. Calculation of the Adjusted Standardized
Amount
1. Standardization of Base-Year Costs or
Target Amounts
In general, the national standardized
amount is based on per discharge averages of
adjusted hospital costs from a base period
(section 1886(d)(2)(A) of the Act), updated
and otherwise adjusted in accordance with
the provisions of section 1886(d) of the Act.
For Puerto Rico hospitals, the Puerto Ricospecific standardized amount is based on per
discharge averages of adjusted target amounts
from a base period (section 1886(d)(9)(B)(i) of
the Act), updated and otherwise adjusted in
accordance with the provisions of section
1886(d)(9) of the Act. The September 1, 1983
interim final rule (48 FR 39763) contained a
detailed explanation of how base-year cost
data (from cost reporting periods ending
during FY 1981) were established for urban
and rural hospitals in the initial development
of standardized amounts for the IPPS. The
September 1, 1987 final rule (52 FR 33043
and 33066) contains a detailed explanation of
how the target amounts were determined and
how they are used in computing the Puerto
Rico rates.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of
the Act require us to update base-year per
discharge costs for FY 1984 and then
standardize the cost data in order to remove
the effects of certain sources of cost
variations among hospitals. These effects
include case-mix, differences in area wage
levels, cost-of-living adjustments for Alaska
and Hawaii, IME costs, and costs to hospitals
serving a disproportionate share of lowincome patients.
In accordance with section 1886(d)(3)(E) of
the Act, the Secretary estimates, from time-
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to-time, the proportion of hospitals’ costs that
are attributable to wages and wage-related
costs. In general, the standardized amount is
divided into labor-related and nonlaborrelated amounts; only the proportion
considered to be the labor-related amount is
adjusted by the wage index. Section
1886(d)(3)(E) of the Act requires that 62
percent of the standardized amount be
adjusted by the wage index, unless doing so
would result in lower payments to a hospital
than would otherwise be made. (Section
1886(d)(9)(C)(iv)(II) of the Act extends this
provision to the labor-related share for
hospitals located in Puerto Rico.)
For FY 2011, we are continuing to use a
labor-related share of 68.8 percent for
discharges occurring on or after October 1,
2010 for the national standardized amounts
and 62.1 percent for the Puerto Rico-specific
standardized amount. Consistent with
section 1886(d)(3)(E) of the Act, we are
applying the wage index to a labor-related
share of 62 percent for all IPPS hospitals
whose wage index values are less than or
equal to 1.0000. For all IPPS hospitals whose
wage indices are greater than 1.0000, we are
applying the wage index to a labor-related
share of 68.8 percent of the national
standardized amount. For FY 2011, all Puerto
Rico hospitals have a wage index less than
1.0. Therefore, the national labor-related
share will always be 62 percent because the
wage index for all Puerto Rico hospitals is
less than 1.0.
For hospitals located in Puerto Rico, we are
applying a labor-related share of 62.1 percent
if its Puerto Rico-specific wage index is
greater than 1.0000. For hospitals located in
Puerto Rico whose Puerto-Rico specific wage
index values are less than or equal to 1.0000,
we are applying a labor share of 62 percent.
The standardized amounts for operating
costs appear in Table 1A, 1B, and 1C of the
Addendum to this final rule.
2. Computing the Average Standardized
Amount
Section 1886(d)(3)(A)(iv)(II) of the Act
requires that, beginning with FY 2004 and
thereafter, an equal standardized amount be
computed for all hospitals at the level
computed for large urban hospitals during FY
2003, updated by the applicable percentage
update. Section 1886(d)(9)(A)(ii)(II) of the
Act equalizes the Puerto Rico-specific urban
and rural area rates. Accordingly, we are
calculating the FY 2011 national and Puerto
Rico standardized amounts irrespective of
whether a hospital is located in an urban or
rural location.
3. Updating the Average Standardized
Amount
In accordance with section 1886(b)(3)(B)(i)
of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act, we
are updating the standardized amount for FY
2011 by the estimated market basket
percentage increase minus 0.25 percentage
points for hospitals in all areas. Section
3401(a)(4) of Pub. L. 111–148 further states
that this amendment may result in the
applicable percentage increase being less
than zero. The percentage increase in the
market basket reflects the average change in
the price of goods and services comprising
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routine, ancillary, and special care unit
hospital inpatient services. Based on IHS
Global Insight, Inc.’s 2010 second quarter
forecast of the hospital market basket
increase (as discussed in Appendix B of this
final rule), the most recent forecast of the
hospital market basket increase for FY 2011
is 2.6 percent. Thus, for FY 2011, the update
to the average standardized amount is 2.35
percent for hospitals in all areas (that is, the
estimated full market basket percentage
increase of 2.6 percent minus 0.25 percentage
point).
Section 1886(b)(3)(B) of the Act specifies
the applicable percentage increase used to
update the standardized amount for payment
for inpatient hospital operating costs. Section
1886(b)(3)(B)(viii) of the Act, as added by
section 5001(a)(3) of Public Law 109–171,
provides for a reduction of 2.0 percentage
points from the applicable percentage
increase (the market basket update) for FY
2007 and each subsequent fiscal year for any
‘‘subsection (d) hospital’’ that does not submit
quality data, as discussed in section V.A. of
the preamble of this final rule. Thus, for
hospitals that do not submit quality data, the
estimated update to the operating
standardized amount is 0.35 percent (that is,
the adjusted FY 2011 estimate of the market
basket rate-of-increase of 2.35 percent minus
2.0 percentage points). The standardized
amounts in Tables 1A through 1C of section
VI. of this Addendum reflect these
differential amounts.
Section 412.211(c) states that we update
the Puerto Rico-specific standardized amount
using the percentage increase specified in
§ 412.64(d)(1), or the percentage increase in
the market basket index for prospective
payment hospitals for all areas. As finalized
in the preamble to this final rule, we are
applying the full rate-of-increase in the
hospital market basket minus 0.25 percentage
point to the Puerto Rico-specific
standardized amount. Therefore, the update
to the Puerto Rico-specific standardized
amount is also 2.35 percent.
Although the update factors for FY 2011
are set by law, we are required by section
1886(e)(4) of the Act to recommend, taking
into account MedPAC’s recommendations,
appropriate update factors for FY 2011 for
both IPPS hospitals and hospitals and
hospital units excluded from the IPPS.
Section 1886(e)(5)(A) of the Act requires that
we publish our proposed recommendations
in the Federal Register for public comment.
Our recommendation on the update factors is
set forth in Appendix B of this final rule.
4. Other Adjustments to the Average
Standardized Amount
As in the past, we are adjusting the FY
2011 standardized amount to remove the
effects of the FY 2010 geographic
reclassifications and outlier payments before
applying the FY 2011 updates. We then
apply budget neutrality offsets for outliers
and geographic reclassifications to the
standardized amount based on FY 2011
payment policies.
We do not remove the prior year’s budget
neutrality adjustments for reclassification
and recalibration of the DRG weights and for
updated wage data because, in accordance
with sections 1886(d)(4)(C)(iii) and
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1886(d)(3)(E) of the Act, estimated aggregate
payments after updates in the DRG relative
weights and wage index should equal
estimated aggregate payments prior to the
changes. If we removed the prior year’s
adjustment, we would not satisfy these
conditions.
Budget neutrality is determined by
comparing aggregate IPPS payments before
and after making changes that are required to
be budget neutral (for example, changes to
DRG classifications, recalibration of the DRG
relative weights, updates to the wage index,
and different geographic reclassifications).
We include outlier payments in the
simulations because they may be affected by
changes in these parameters.
Similar to last year, because IME Medicare
Advantage payments are made to IPPS
hospitals under section 1886(d) of the Act,
we believe these payments must be part of
these budget neutrality calculations.
However, we note that it is not necessary to
include Medicare Advantage IME payments
in the outlier threshold calculation or the
outlier offset to the standardized amount
because the statute requires that outlier
payments be not less than 5 percent nor more
than 6 percent of total ‘‘operating DRG
payments,’’ which does not include IME and
DSH payments. In order to account for these
Medicare Advantage IME payments in
determining the budget neutrality
adjustments for this final rule, we identified
Medicare Advantage claims from IPPS
teaching hospitals in the MedPAR data. The
GHO Paid indicator with a value of ‘‘1’’ on the
MedPAR file indicates that the claim was
paid by a Medicare Advantage plan (other
than the IPPS IME payment specified at
§ 412.105(g)). We note that we also modified
our method for identifying MA claims from
IPPS teaching hospitals in the MedPAR data
pursuant to public comment. We describe
this modification below in our response to
that comment. For these Medicare Advantage
claims from IPPS teaching hospitals, we
computed a transfer-adjusted CMI by
provider based on the FY 2009 MS–DRG
GROUPER Version 27.0 assignment and
relative weights. We also computed a
transfer-adjusted CMI for these Medicare
Advantage claims from IPPS teaching
hospitals based on the FY 2010 MS–DRG
GROUPER Version 28.0 assignments and
relative weights. These transfer-adjusted
CMIs (and corresponding case counts) were
used to calculate an IME teaching add-on
payment in accordance with § 412.105(g).
The total Medicare Advantage IME payment
amount was then added to the total Federal
payment amount for each provider (where
applicable) in order to account for the
Medicare Advantage IME payment in
determining the budget neutrality
adjustments. We note that we did not include
Medicare Advantage IME claims when
estimating outlier payments for providers
because Medicare Advantage claims are not
eligible for outlier payments under the IPPS.
Comment: Commenters noted that it
appeared CMS had inadvertently included
approximately 74,000 MA claims submitted
by teaching hospitals as regular IPPS claims
instead of identifying these claims as MA
claims. The commenter explained that these
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claims lacked an ‘‘HMO Paid’’ designation but
the only payment made on the claim was the
IME payment. Therefore, in the commenters
opinion these claims should have been
considered MA IME claims for the purpose
of our calculations.
Response: We examined the MedPAR file
and have determined that there are claims
that do not have a GHO Paid indicator with
a value of ‘‘1’’ but the IME payment field is
equal to the DRG payment field. We agree
with the commenter and included these
claims in our determination of the total
Medicare Advantage IME payment amount.
Specifically, we first searched the MedPAR
file for all claims with an IME payment
greater than zero. We then filtered these
claims for a subset of claims with a GHO Paid
indicator with a value of ‘‘1’’ or with the IME
payment field equal to the DRG payment
field. As mentioned above, we then added
the total Medicare Advantage IME payment
amount to the total Federal payment amount
for each provider (where applicable) in order
to account for the Medicare Advantage IME
payment in determining the budget neutrality
adjustments.
Comment: Commenters also noted that it is
likely that CMS included charges for anti
hemophilic blood factor for the budget
neutrality adjustments.
Response: With respect to charges for anti
hemophilic blood factor, we examined the
MedPAR and have removed pharmacy
charges with an indicator of ‘3’ for blood
clotting with a revenue code of ‘0636’from
the covered charge field. We also removed
organ acquisition charges from the covered
charge field since organ acquisition is a pass
through payment not paid under the IPPS.
We finally note that on June 2, 2010, we
issued a notice that contains the final wage
indices, hospital reclassifications, payment
rates, impacts, and other related tables
effective for the FY 2010 IPPS and RY 2010
LTCH PPS. The rates, tables, and impacts
included in the FY 2010 IPPS/LTCH PPS
notice reflect changes required by or
resulting from the implementation of several
provisions from the Affordable Care Act.
Specifically, sections 3401(a) and 10319(a) of
the Affordable Care Act amended section
1886(b)(3)(B)(i) of the Act to set the FY 2010
applicable percentage increase for IPPS
hospitals equal to the rate-of-increase in the
hospital market basket for IPPS hospitals in
all areas minus a 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. Section
1886(b)(3)(B)(i) of the Act establishes the
applicable percentage increase used for
annual updates to the Federal rates. Section
1886(b)(3)(B)(xii)(I) explicitly adjusts the
applicable percentage for the FY 2010
Federal rates. Section 3401(p) of the
Affordable Care Act 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 together, we believe sections
1886(b)(3)(B)(i) and 1886(b)(3)(B)(xii) of the
Act and section 3401(p) of the Affordable
Care Act provide for revised FY 2010 Federal
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rates for the entire fiscal year; however,
discharges occurring on or after October 1,
2009 and before April 1, 2010, are not paid
be based on the updated FY 2010 standard
Federal rate. When we refer to FY 2010
payments in the discussion below, these
payments are modeled for the entire FY 2010
based on the revised rates consistent with the
Affordable Care Act. Also, because there
were no updates to the pre-reclassified wage
file for FY 2010, when we refer below to the
pre-reclassified wage data for FY 2010, this
is the same pre reclassified wage data from
the FY 2010 IPPS/LTCH PPS final rule.
a. Recalibration of DRG Weights and Updated
Wage Index—Budget Neutrality Adjustment
Section 1886(d)(4)(C)(iii) of the Act
specifies that, beginning in FY 1991, the
annual DRG reclassification and recalibration
of the relative weights must be made in a
manner that ensures that aggregate payments
to hospitals are not affected. As discussed in
section II. of the preamble of this final rule,
we normalized the recalibrated DRG weights
by an adjustment factor so that the average
case weight after recalibration is equal to the
average case weight prior to recalibration.
However, equating the average case weight
after recalibration to the average case weight
before recalibration does not necessarily
achieve budget neutrality with respect to
aggregate payments to hospitals because
payments to hospitals are affected by factors
other than average case weight. Therefore, as
we have done in past years, we are making
a budget neutrality adjustment to ensure that
the requirement of section 1886(d)(4)(C)(iii)
of the Act is met.
Section 1886(d)(3)(E)(i) of the Act requires
us to update the hospital wage index on an
annual basis beginning October 1, 1993. This
provision also requires us to make any
updates or adjustments to the wage index in
a manner that ensures that aggregate
payments to hospitals are not affected by the
change in the wage index. Section
1886(d)(3)(E)(i) of the Act requires that we
implement the wage index adjustment in a
budget neutral manner. However, section
1886(d)(3)(E)(ii) of the Act sets the laborrelated share at 62 percent for hospitals with
a wage index less than or equal to 1.0, and
section 1886(d)(3)(E)(i) of the Act provides
that the Secretary shall calculate the budget
neutrality adjustment for the adjustments or
updates made under that provision as if
section 1886(d)(3)(E)(ii) of the Act had not
been enacted. In other words, this section of
the statute requires that we implement the
updates to the wage index in a budget neutral
manner, but that our budget neutrality
adjustment should not take into account the
requirement that we set the labor-related
share for hospitals with indices less than or
equal to 1.0 at the more advantageous level
of 62 percent. Therefore, for purposes of this
budget neutrality adjustment, section
1886(d)(3)(E)(i) of the Act prohibits us from
taking into account the fact that hospitals
with a wage index less than or equal to 1.0
are paid using a labor-related share of 62
percent. Consistent with current policy, for
FY 2011, we are adjusting 100 percent of the
wage index factor for occupational mix. We
describe the occupational mix adjustment in
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50423
section III.D. of the preamble of this final
rule.
For FY 2011, to comply with the
requirement that DRG reclassification and
recalibration of the relative weights be budget
neutral for the Puerto Rico standardized
amount and the hospital-specific rates, we
used FY 2009 discharge data to simulate
payments and compared aggregate payments
using the FY 2010 labor-related share
percentages, the FY 2010 relative weights,
and the FY 2010 pre-reclassified wage data
to aggregate payments using the FY 2010
labor-related share percentages, the FY 2011
relative weights, and the FY 2010 prereclassified wage data. Based on this
comparison, we computed a budget
neutrality adjustment factor equal to
0.996731. As discussed in section IV. of this
Addendum, we apply the DRG
reclassification and recalibration budget
neutrality factor of 0.996731 to the hospitalspecific rates that are to be effective for cost
reporting periods beginning on or after
October 1, 2010.
Comment: One commenter commented
that CMS’ current methodology for
reclassifying and recalibrating the DRGs does
not comport with the statutory requirement
in section 1886(d)(4)(C)(iii) of the Act. The
commenter noted that CMS attempts to
achieve budget neutrality by calculating a
separate, subsequent budget neutrality factor,
which it then applies to the standardized
amount and the HSP, rather than to the DRG
weights. The commenter further noted that
CMS has broad discretion in implementing
the technical details of the Medicare
program, and the commenter understood the
rationale for CMS’s methodology. However,
the commenter maintains that this
methodology fails to satisfy the express
directive set forth in section 1886(d)(4)(C)(iii)
of the Act. The commenter explained that
section 1886(d)(4)(C)(iii) of the Act provides
that the annual adjustments to DRG
classifications and weighting factors must ‘‘be
made in a manner that assures’’ budget
neutrality. The commenter believes that the
statute directs that the budget neutrality
adjustment and the reclassifications and
recalibrations themselves are the subject of
the budget neutrality requirement (instead of
applying an adjustment factor to the payment
rates). The commenter asserts that this
meaning is evident on the face of the statute.
Response: As stated above, section
1886(d)(4)(C)(iii) of the Act specifies that,
beginning in FY 1991, the annual DRG
reclassification and recalibration of the
relative weights must be made in a manner
that ensures that aggregate payments to
hospitals are not affected. In order to ensure
budget neutrality, we normalize the
recalibrated DRG weights by an adjustment
factor so that the average case weight after
recalibration is equal to the average case
weight prior to recalibration. However,
equating the average case weight after
recalibration to the average case weight
before recalibration does not necessarily
achieve budget neutrality with respect to
aggregate payments to hospitals because
payments to hospitals are affected by factors
other than average case weight. Therefore, we
make a budget neutrality adjustment to the
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payment rates to ensure that the requirement
of section 1886(d)(4)(C)(iii) of the Act is met.
We believe our methodology of applying the
DRG reclassification and recalibration budget
neutrality adjustment to the payment rates is
the correct interpretation of the statute since
this ensures that ‘‘aggregate payments to
hospitals’’ are not affected, which is
consistent with the statute in section
1886(d)(4)(C)(iii) of the Act.
In order to meet the statutory requirements
that we do not take into account the laborrelated share of 62 percent when computing
wage index budget neutrality, it was
necessary to use a three-step process to
comply with the requirements that DRG
reclassification and recalibration of the
relative weights and the updated wage index
and labor-related share have no effect on
aggregate payments for IPPS hospitals. We
first determined a DRG reclassification and
recalibration budget neutrality factor of
0.996731 by using the same methodology
described above to determine the DRG
reclassification and recalibration budget
neutrality factor for the Puerto Rico
standardized amount and hospital-specific
rates. Secondly, to compute a budget
neutrality factor for wage index and laborrelated share changes, we used FY 2009
discharge data to simulate payments and
compared aggregate payments using FY 2011
relative weights and FY 2010 pre-reclassified
wage indices, and applied the FY 2010 laborrelated share of 68.8 percent to all hospitals
(regardless of whether the hospital’s wage
index was above or below 1.0) to aggregate
payments using the FY 2011 relative weights
and the FY 2011 pre-reclassified wage
indices, and applied the labor-related share
for FY 2011 of 68.8 percent to all hospitals
(regardless of whether the hospital’s wage
index was above or below 1.0). In addition,
we applied the DRG reclassification and
recalibration budget neutrality factor (derived
in the first step) to the rates that were used
to simulate payments for this comparison of
aggregate payments from FY 2010 to FY
2011. By applying this methodology, we
determined a budget neutrality factor of
1.000013 for changes to the wage index.
Finally, we multiplied the DRG
reclassification and recalibration budget
neutrality factor of 0.996731 (derived in the
first step) by the budget neutrality factor of
1.000013 for changes to the wage index
(derived in the second step) to determine the
DRG reclassification and recalibration and
updated wage index budget neutrality factor
of 0.996744.
b. Reclassified Hospitals—Budget Neutrality
Adjustment
Section 1886(d)(8)(B) of the Act provides
that, effective with discharges occurring on
or after October 1, 1988, certain rural
hospitals are deemed urban. In addition,
section 1886(d)(10) of the Act provides for
the reclassification of hospitals based on
determinations by the MGCRB. Under section
1886(d)(10) of the Act, a hospital may be
reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the
Secretary is required to adjust the
standardized amount to ensure that aggregate
payments under the IPPS after
implementation of the provisions of sections
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1886(d)(8)(B) and (C) and 1886(d)(10) of the
Act are equal to the aggregate prospective
payments that would have been made absent
these provisions. We note that the wage
index adjustments provided under section
1886(d)(13) of the Act are not budget neutral.
Section 1886(d)(13)(H) of the Act provides
that any increase in a wage index under
section 1886(d)(13) shall not be taken into
account ‘‘in applying any budget neutrality
adjustment with respect to such index’’ under
section 1886(d)(8)(D) of the Act. To calculate
the budget neutrality factor for FY 2011, we
used FY 2009 discharge data to simulate
payments and compared total IPPS payments
with FY 2011 relative weights, FY 2011 labor
share percentages, and FY 2011 wage data
prior to any reclassifications under sections
1886(d)(8)(B) and (C) and 1886(d)(10) of the
Act to total IPPS payments with FY 2011
relative weights, FY 2011 labor share
percentages, and FY 2011 wage data after
such reclassifications. Based on these
simulations, we calculated an adjustment
factor of 0.991264 to ensure that the effects
of these provisions are budget neutral,
consistent with the statute.
The FY 2011 budget neutrality adjustment
factor is applied to the standardized amount
after removing the effects of the FY 2010
budget neutrality adjustment factor. We note
that the FY 2011 budget neutrality
adjustment reflects FY 2011 wage index
reclassifications approved by the MGCRB or
the Administrator. We note that for this final
rule, as discussed in section III.B. of the
preamble to this final rule, section 3137(c) of
Public Law 111–148 resulted in some
additional hospitals receiving
reclassifications, or some hospitals receiving
reclassifications to a different area. These
reclassifications are included in the
calculation of reclassification budget
neutrality.
c. Rural Floor and Imputed Floor Budget
Neutrality Adjustment
We make an adjustment to the wage index
to ensure that aggregate payments after
implementation of the rural floor under
section 4410 of the BBA (Pub. L. 105–33) and
the imputed floor under § 412.64(h)(4) of the
regulations are made in a manner that
ensures that aggregate payments to hospitals
are not affected. As discussed in section III.B.
of the preamble of the FY 2009 IPPS final
rule (73 FR 48570 through 48574), we
adopted as final State level budget neutrality
for the rural and imputed floors, effective
beginning with the FY 2009 wage index. In
response to the public’s concerns and taking
into account the potentially significant
payment cuts that could occur to hospitals in
some States if we implemented this change
with no transition, we decided to phase in,
over a 3-year period, the transition from the
national rural floor budget neutrality
adjustment on the wage index to the State
level rural floor budget neutrality adjustment
on the wage index. In the FY 2011 IPPS/
LTCH PPS proposed rule, in the absence of
provisions of Public Law 111–148, the
proposed adjustment would have been
completely transitioned to the State level
methodology, such that the wage index that
was proposed in the FY 2011 IPPS/LTCH
PPS proposed rule was determined by
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applying 100 percent of the State level
budget neutrality adjustment. However,
section 3141 of Public Law 111–148 restores
the budget neutrality adjustment for the rural
and imputed floors to a uniform, national
adjustment, beginning with the FY 2011
wage index.
Using the same methodology in prior final
rules to calculate the national rural and
imputed floor budget neutrality adjustment
factor (which was part of the methodology to
calculate the blended rural and imputed floor
budget neutrality adjustment factors), to
determine the wage index adjusted by the
national rural and imputed floor budget
neutrality adjustment, we used FY 2009
discharge data and FY 2011 wage indices to
simulate IPPS payments. First, we compared
the national simulated payments without the
rural and imputed floors applied to national
simulated payments with the rural and
imputed floors applied to determine the
national rural and imputed floor budget
neutrality adjustment factor of 0.996641. This
national adjustment was then applied to the
wage indices to produce a national rural and
imputed floor budget neutral wage index.
d. Case-Mix Budget Neutrality Adjustment
(1) Adjustment to the FY 2011 IPPS
Standardized Amount
As stated earlier, beginning in FY 2008, we
adopted the MS–DRG patient classification
system for the IPPS to better recognize
patients’ severity of illness in Medicare
payment rates. In the FY 2008 IPPS final rule
with comment period (73 FR 47175 through
47186), we indicated that we believe the
adoption of the MS–DRGs had the potential
to lead to increases in aggregate payments
without a corresponding increase in actual
patient severity of illness due to the
incentives for changes in documentation and
coding. In that final rule, using the
Secretary’s authority under section
1886(d)(3)(A)(vi) of the Act to maintain
budget neutrality by adjusting the national
standardized amounts to eliminate the effect
of changes in documentation and coding that
do not reflect real change in case-mix, we
established prospective documentation and
coding adjustments of ¥1.2 percent for FY
2008, ¥1.8 percent for FY 2009, and ¥1.8
percent for FY 2010 (for a total adjustment
of ¥4.8 percent). On September 29, 2007,
Public Law 110–90 was enacted. Section 7 of
Public Law 110–90 included a provision that
reduces the documentation and coding
adjustment for the MS–DRG system that we
adopted in the FY 2008 IPPS final rule with
comment period to ¥0.6 percent for FY 2008
and ¥0.9 percent for FY 2009. To comply
with the provision of section 7(a) of Pub. L.
110–90, in a final rule that appeared in the
Federal Register on November 27, 2007 (72
FR 66886), we changed the IPPS
documentation and coding adjustment for FY
2008 to ¥0.6 percent, and revised the FY
2008 national standardized amounts (as well
as other payment factors and thresholds)
accordingly, with these revisions being
effective as of October 1, 2007. For FY 2009,
section 7(a) of Public Law 110–90 required a
documentation and coding adjustment of
¥0.9 percent instead of the ¥1.8 percent
adjustment specified in the FY 2008 IPPS
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final rule with comment period. As required
by statute, we applied a documentation and
coding adjustment of ¥0.9 percent to the FY
2009 IPPS national standardized amounts.
The documentation and coding adjustments
established in the FY 2008 IPPS final rule
with comment period are cumulative. As a
result, the ¥0.9 percent documentation and
coding adjustment in FY 2009 was in
addition to the ¥0.6 percent adjustment in
FY 2008, yielding a combined effect of ¥1.5
percent.
In the FY 2010 IPPS proposed and final
rules, we discussed our analysis of FY 2008
claims data which showed an increase in
case-mix of 2.5 percent due to changes in
documentation and coding that do not reflect
real changes in case-mix for discharges
occurring during FY 2008. For FY 2010, we
proposed to reduce the average standardized
amounts under section 1886(d) of the Act in
FY 2010 by ¥1.9 percent, which represents
the difference between changes in
documentation and coding that do not reflect
real changes in case-mix for discharges
occurring during FY 2008 and the
prospective adjustment applied under Public
Law 110–90. As discussed in section II.D. of
the preamble of the FY 2010 IPPS final rule,
after consideration of the public comments
we received on our analysis and proposals
presented in the proposed rule, we decided
to postpone adopting documentation and
coding adjustments as authorized under
section 7(a) of Public Law 110–90 and
section 1886(d)(3)(A)(vi) of the Act until a
full analysis of FY 2009 case-mix changes
could be completed. Accordingly, in the FY
2010 IPPS final rule, for FY 2010, we did not
apply any additional documentation and
coding adjustments to the average
standardized amounts under section 1886(d)
of the Act.
As indicated in section II.D.4 in the
preamble to this final rule, the change due to
documentation and coding that did not
reflect real changes in case mix for discharges
occurring during FY 2008 and FY 2009
exceeded the ¥0.6 and ¥0.9 percent
prospective documentation and coding
adjustment applied under section 7(a) of
Public Law 110–90 for those 2 years
respectively by 1.9 percentage points in FY
2008 and 3.9 percentage points in FY 2009.
In total, this change exceeded the cumulative
prospective adjustments by 5.8 percentage
points. Our actuaries currently estimate that
this 5.8 percentage point increase resulted in
an increase in aggregate payments of
approximately $6.9 billion. We note that
there may be a need to actuarially adjust the
recoupment adjustment in FY 2012 to
accurately reflect accumulated interest.
Therefore, an aggregate adjustment of ¥5.8
percent in FYs 2011 and 2012, subject to
actuarial adjustment to reflect accumulated
interest, is necessary in order to meet the
requirements of section 7(b)(1)(B) of Public
Law 110–90 to adjust the standardized
amounts for discharges occurring in FYs
2010, 2011, and/or 2012 to offset the
estimated amount of the cumulative increase
in aggregate payments (including interest) in
FYs 2008 and 2009. We refer the reader to
section II.D. of the preamble to this final rule
for more discussion.
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It is often our practice to phase in rate
adjustments over more than one year in order
to moderate the effect on rates in any one
year. Therefore, we are making an adjustment
in FY 2011 to the standardized amount of
¥2.9 percent, representing half of the
aggregate adjustment required under section
7(b)(1)(B) of Public Law 110–90, for FY 2011.
As we have previously noted, unlike the
prospective adjustment to the standardized
amounts under section 7(b)(1)(A) of Public
Law 110–90 described earlier, the
recoupment or repayment adjustment to the
standardized amounts under section
7(b)(1)(B) of Public Law 110–90 is not
cumulative, but would be removed for
subsequent fiscal years once we have offset
the increase in aggregate payments for
discharges for FY 2008 expenditures and FY
2009 expenditures. We note that we are not
establishing an adjustment for the further
implementation of section 7(b)(1)(B) of
Public Law 110–90 in FY 2012 in this final
rule.
(2) Adjustment to the FY 2011 HospitalSpecific Rates for SCHs and MDHs
As discussed in section II.D. of the
preamble of this final rule, because hospitals
(SCHs and MDHs) paid based in whole or in
part on the hospital-specific rate use the
same MS–DRG system as other hospitals, we
believe they have the potential to realize
increased payments from documentation and
coding changes that do not reflect real
increases in patients’ severity of illness.
Under section 1886(d)(3)(A)(vi) of the Act,
Congress stipulated that hospitals paid based
on the standardized amount should not
receive additional payments based on the
effect of documentation and coding changes
that do not reflect real changes in case-mix.
Similarly, we believe that hospitals paid
based on the hospital-specific rate should not
have the potential to realize increased
payments due to documentation and coding
changes that do not reflect real increases in
patients’ severity of illness. While we
continue to believe that section
1886(d)(3)(A)(vi) of the Act does not provide
explicit authority for application of the
documentation and coding adjustment to the
hospital-specific rates, we believe that we
have the authority to apply the
documentation and coding adjustment to the
hospital-specific rates using our special
exceptions and adjustment authority under
section 1886(d)(5)(I)(i) of the Act.
As discussed in the FY 2010 IPPS/RY 2010
LTCH PPS proposed rule, based on our
analysis of FY 2008 claims data, we found
that, independently for both SCHs and
MDHs, the change due to documentation and
coding that did not reflect real changes in
case-mix for discharges occurring during FY
2008 slightly exceeded the 2.5 percent result
discussed earlier, but did not significantly
differ from that result.
Therefore, in FY 2010, we proposed to use
our authority under section 1886(d)(5)(I)(i) of
the Act to prospectively adjust the hospitalspecific rates by ¥2.5 percent in FY 2011 for
our estimated documentation and coding
effect in FY 2008 that does not reflect real
changes in case-mix. We also noted that,
unlike the national standardized rates, the FY
2010 hospital-specific rates were not
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50425
previously reduced in order to account for
anticipated changes in documentation and
coding that do not reflect real changes in
case-mix resulting from the adoption of the
MS–DRGs.
Consistent with our approach for
determining the national average
standardized amounts discussed earlier, after
consideration of the public comments we
received on our analysis and proposals
presented in the FY 2010 IPPS proposed rule,
for FY 2010, we also postponed adoption of
a documentation and coding adjustment to
the hospital-specific rate until a full analysis
of FY 2009 case-mix changes could be
completed. Accordingly, for FY 2010, we did
not apply a documentation and coding
adjustment to the hospital-specific rates.
As we discuss in section II.D. of the
preamble of this final rule, because SCHs and
MDHs use the same DRG system as all other
hospitals, we believe they have the potential
to realize increased payments from
documentation and coding changes that do
not reflect real increases in patients’ severity
of illness. Therefore, we believe they should
be equally subject to a prospective budget
neutrality adjustment that we are applying
for adoption of the MS–DRGs to all other
hospitals. While the findings of the effects of
documentation and coding are different for
SCHs/MDHs and other IPPS hospitals, we
continue to believe that the documentation
and coding adjustments for all subsection (d)
hospitals should be the same. We continue to
believe that this is the appropriate policy so
as to neither advantage nor disadvantage
different types of providers.
As we have also discussed in section II.D
of the preamble to this final rule, our best
estimate, based on the most recently
available data, is that a cumulative
adjustment of ¥5.4 percent is required to
eliminate the full effect of the documentation
and coding changes on future payments.
Unlike the case of standardized amounts paid
to IPPS hospitals, we have not made any
previous adjustments to the hospital specific
rates paid to SCHs and MDHs to account for
documentation and coding changes.
Therefore, the entire ¥5.4 percent
adjustment remains to be implemented.
Consequently, in order to maintain
consistency as far as possible with the
adjustments applied to IPPS hospitals, we are
making an adjustment of ¥2.9 percent in FY
2011 to the hospital-specific rates paid to
SCHs and MDHs. We believe that this
adjustment is the most appropriate means to
take into full account the effect of
documentation and coding changes on
payments, and to maintain equity between
hospitals paid on the basis of different
prospective rates.
(3) Adjustment to the FY 2011 Puerto Rico
Standardized Amount
As stated in section II.D. of the preamble
of this final rule, we believe that we have the
authority to apply the documentation and
coding adjustment to the Puerto Rico-specific
standardized amount using our special
exceptions and adjustment authority under
section 1886(d)(5)(I)(i) of the Act. Similar to
SCHs and MDHs that are paid based on the
hospital-specific rate, we believe that Puerto
Rico hospitals that are paid based on the
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Puerto Rico-specific standardized amount
should not have the potential to realize
increased payments due to documentation
and coding changes that do not reflect real
increases in patients’ severity of illness. In
the FY 2010 IPPS proposed rule, we
discussed our analysis of FY 2008 claims
data for Puerto Rico hospitals, which showed
that, for Puerto Rico hospitals, the increase
in payments for discharges occurring during
FY 2008 due to documentation and coding
changes that did not reflect real changes in
case-mix for discharges occurring during FY
2008 was approximately 1.1 percent. We
noted that, unlike the national standardized
rates, the FY 2009 Puerto Rico-specific
standardized amount was not previously
reduced in order to account for anticipated
changes in documentation and coding that do
not reflect real changes in case-mix resulting
from the adoption of the MS–DRGs.
Therefore, for FY 2010, we proposed to use
our authority under section 1886(d)(5)(I)(i) of
the Act to adjust the Puerto Rico-specific
standardized amount by ¥1.1 percent in FY
2010 to account for the FY 2008
documentation and coding changes that are
not due to changes in real case-mix and to
leave that adjustment in place for subsequent
fiscal years.
Consistent with our approach for
determining the national average
standardized amounts and hospital-specific
rates of SCHs and MDHs discussed above,
after consideration of the public comments
we received on our analysis and proposals
presented in the FY 2010 IPPS proposed rule,
for FY 2010, we also postponed adoption of
a documentation and coding adjustment to
the Puerto Rico-specific rates until a full
analysis of FY 2009 case-mix changes could
be completed. Accordingly, in the FY 2010
IPPS final rule, for FY 2010, we did not apply
a documentation and coding adjustment to
the Puerto Rico-specific rates.
As we have noted above, similar to SCHs
and MDHs, hospitals in Puerto Rico use the
same DRG system as all other hospitals and
we believe they have the potential to realize
increased payments from documentation and
coding changes that do not reflect real
increases in patients’ severity of illness.
Therefore, we believe they should be equally
subject to a prospective budget neutrality
adjustment that we are applying for adoption
of the MS–DRGs to all other hospitals.
As we have discussed in section II.D. of the
preamble of this final rule, our best estimate,
based on the most recently available data, is
that a cumulative adjustment of ¥2.6 percent
is required to eliminate the full effect of the
documentation and coding changes on future
payments from the Puerto Rico-specific rate.
Unlike the case of standardized amounts paid
to IPPS hospitals, we have not made any
previous adjustments to the hospital-specific
rates paid to Puerto Rico hospitals to account
for documentation and coding changes.
Therefore, the entire ¥2.6 percent
adjustment remains to be implemented. In
order to maintain consistency as far as
possible with the adjustments applied to
IPPS hospitals but to take into consideration
the fact that the cumulative impact was
smaller in Puerto Rico hospitals, we are
therefore making an adjustment of ¥2.6
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percent in FY 2011 to the Puerto Ricospecific rate that accounts for 25 percent of
payments to Puerto Rico hospitals, with the
remaining 75 percent based on the national
standardized amount, which we are adjusting
as described above. Consequently, the overall
reduction to rates for Puerto Rico hospitals to
account for the documentation and coding
changes will be slightly less than the
reduction for IPPS hospitals based on 100
percent of the national standardized amount.
We note that this ¥2.6 percent prospective
adjustment would eliminate the full effect of
the documentation and coding changes on
future payments from the Puerto Ricospecific rate. We believe that this adjustment
is the most appropriate means to take into
full account the effect of documentation and
coding changes on payments, and to
maintain equity between hospitals paid on
the basis of different prospective rates.
e. Rural Community Hospital Demonstration
Program Adjustment
As discussed in section IV.K. of the
preamble to this final rule, section 410A of
Public Law 108–173 originally required the
Secretary to establish a demonstration that
modifes reimbursement for inpatient services
for up to 15 small rural hospitals. Section
410A(c)(2) of Public Law 108–173 requires
that ‘‘[i]n conducting the demonstration
program under this section, the Secretary
shall ensure that the aggregate payments
made by the Secretary do not exceed the
amount which the Secretary would have paid
if the demonstration program under this
section was not implemented.’’ In the May 4,
2010 FY 2011 IPPS/LTCH PPS proposed rule,
although we proposed to apply an
adjustment to the IPPS rates to account for
the amount by which the costs of the
demonstration as indicated by the settled
cost reports beginning in FY 2007 for
hospitals participating in the demonstration
during FY 2007 exceeded the amount that
was identified in the FY 2007 IPPS final rule
as the budget neutrality offset for 2007, we
were unable to calculate a numeric
adjustment to the standardized amount to
ensure the effects of the rural community
hospital demonstration are budget neutral.
This is because we were waiting for settled
cost reports. In addition, we noted that the
proposed rule did not account for changes to
the demonstration required by the Affordable
Care Act. Specifically, among other things,
sections 3123 and 10313 of the Affordable
Care Act extended the demonstration for an
additional 5 year period, and allow not more
than 30 hospitals to participate in 20 States
with low population densities determined by
the Secretary. (In determining which States
to include in the expansion, the Secretary is
required to use the same criteria and data
that the Secretary used to determine the
States for purposes of the initial 5-year
period.) In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule, we proposed to
adjust the IPPS rate by an amount sufficient
to account for the added costs of this
demonstration. We proposed an adjustment
factor to account for the added costs
associated with the demonstration for certain
time periods as a result of the Affordable
Care Act, as explained at 75 FR 30961
through 30965, as well as proposed to offset
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the IPPS standardized rate for the added
costs of the demonstration in FY 2007,
although we were unable to propose a
specific numeric adjustment to correspond to
FY 2007 in the supplemental proposed rule.
In order to achieve budget neutrality, as
proposed (except as indicated later in this
section and elsewhere in the preamble of this
final rule), we are making an adjustment to
the national IPPS rates by an amount
sufficient to account for the added costs of
this demonstration as described in section
IV.K of this final rule. In other words, we are
applying budget neutrality across the
payment system as a whole rather than
merely across the participants of this
demonstration, consistent with past practice.
We believe that the language of the statutory
budget neutrality requirement permits the
agency to implement the budget neutrality
provision in this manner. The statutory
language requires that ‘‘aggregate payments
made by the Secretary do not exceed the
amount which the Secretary would have paid
if the demonstration * * * was not
implemented,’’ but does not identify the
range across which aggregate payments must
be held equal. As mentioned in section IV.K
of the preamble to this final rule, the
estimated amount for the adjustment to the
national IPPS rates for FY 2011 is
$70,483,384. Accordingly, to account for the
changes to the demonstration required by the
Affordable Care Act for specific time periods
as explained in detail in section IV.K of this
final rule, for FY 2011 we computed a factor
of 0.999302 for the rural community hospital
demonstration program adjustment that will
be applied to the IPPS standardized rate. We
note that because the settlement process for
the demonstration hospitals’ third year cost
reports, that is, for cost reporting periods
starting in FY 2007, has experienced a delay,
for the FY 2011 IPPS/LTCH PPS proposed
rule and the supplemental proposed rule, we
were unable to state the costs of the
demonstration corresponding to FY 2007 and
as a result were unable to propose the
specific numeric adjustment representing
this offsetting process that would be applied
to the national IPPS rates. Due to operational
issues in the cost report settlement process,
settled cost reports for the hospitals that
participated in the demonstration in FY 2007
are not available in time for this final rule
either although we expected them to be
available. Therefore, the estimated
adjustment to the national IPPS rate in this
final rule cannot include a component to
account for these costs. We anticipate that
this information may be available for the FY
2012 IPPS/LTCH PPS proposed rule, at
which time we would include a similar
proposal.
f. Outlier Payments
Section 1886(d)(5)(A) of the Act provides
for payments in addition to the basic
prospective payments for ‘‘outlier’’ cases
involving extraordinarily high costs. To
qualify for outlier payments, a case must
have costs greater than the sum of the
prospective payment rate for the DRG, any
IME and DSH payments, any new technology
add-on payments, and the ‘‘outlier threshold’’
or ‘‘fixed-loss’’ amount (a dollar amount by
which the costs of a case must exceed
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payments in order to qualify for an outlier
payment). We refer to the sum of the
prospective payment rate for the DRG, any
IME and DSH payments, any new technology
add-on payments, and the outlier threshold
as the outlier ‘‘fixed-loss cost threshold.’’ To
determine whether the costs of a case exceed
the fixed-loss cost threshold, a hospital’s CCR
is applied to the total covered charges for the
case to convert the charges to estimated costs.
Payments for eligible cases are then made
based on a marginal cost factor, which is a
percentage of the estimated costs above the
fixed-loss cost threshold. The marginal cost
factor for FY 2011 is 80 percent, the same
marginal cost factor we have used since FY
1995 (59 FR 45367).
In accordance with section
1886(d)(5)(A)(iv) of the Act, outlier payments
for any year are projected to be not less than
5 percent nor more than 6 percent of total
operating DRG payments plus outlier
payments. We note that the statute requires
outlier payments to be not less than 5 percent
nor more than 6 percent of total ‘‘operating
DRG payments’’ (which does not include IME
and DSH payments) plus outlier payments.
When setting the outlier threshold, we
compute the 5.1 percent target by dividing
the total operating outlier payments by the
total operating DRG payments plus outlier
payments. We do not include any other
payments such as IME and DSH within the
outlier target amount. Therefore, it is not
necessary to include Medicare Advantage
IME payments in the outlier threshold
calculation. Section 1886(d)(3)(B) of the Act
requires the Secretary to reduce the average
standardized amount by a factor to account
for the estimated proportion of total DRG
payments made to outlier cases. Similarly,
section 1886(d)(9)(B)(iv) of the Act requires
the Secretary to reduce the average
standardized amount applicable to hospitals
located in Puerto Rico to account for the
estimated proportion of total DRG payments
made to outlier cases. More information on
outlier payments may be found on the CMS
Web site at https://www.cms.hhs.gov/
AcuteInpatientPPS/
04_outlier.asp#TopOfPage.
(1) FY 2011 Outlier Fixed-Loss Cost
Threshold
The FY 2011 IPPS/LTCH PPS
supplemental proposed rule contained a
summary of the provisions from the
Affordable Care Act that affected the initial
FY 2011 proposed outlier threshold and then
specified our proposed revised FY 2011
outlier threshold (74 FR 30975). The revised
FY 2011 proposed outlier threshold used the
same methodology as the initial FY 2011
proposed outlier threshold but did not repeat
the entire methodology that was discussed in
the FY 2011 IPPS/LTCH PPS proposed rule
(74 FR 24068 through 24069). Below we
discuss in full the methodology used to
compute the revised FY 2011 proposed
outlier threshold.
For FY 2011, we proposed to continue to
use the same methodology used for FY 2009
(73 FR 48763 through 48766) to calculate the
outlier threshold. Similar to the methodology
used in the FY 2009 IPPS final rule, for FY
2011, we proposed to apply an adjustment
factor to the CCRs to account for cost and
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charge inflation (as explained below). As we
have done in the past, to calculate the
proposed FY 2011 outlier threshold, we
simulated payments by applying FY 2011
rates and policies using cases from the FY
2009 MedPAR files. Therefore, in order to
determine the proposed FY 2011 outlier
threshold, we inflated the charges on the
MedPAR claims by 2 years, from FY 2009 to
FY 2011.
We proposed to continue to use a refined
methodology that takes into account the
lower inflation in hospital charges that are
occurring as a result of the outlier final rule
(68 FR 34494), which changed our
methodology for determining outlier
payments by implementing the use of more
current CCRs. Our refined methodology uses
more recent data that reflect the rate-ofchange in hospital charges under the new
outlier policy.
Using the most recent data available, we
calculated the 1-year average annualized rateof-change in charges-per-case from the last
quarter of FY 2008 in combination with the
first quarter of FY 2009 (July 1, 2008 through
December 31, 2008) to the last quarter of FY
2009 in combination with the first quarter of
FY 2010 (July 1, 2009 through December 31,
2009). This rate of change was 5.16 percent
(1.0516) or 10.59 percent (1.1059) over 2
years.
As we have done in the past, we
established the proposed FY 2011 outlier
threshold using hospital CCRs from the
December 2009 update to the ProviderSpecific File (PSF)—the most recent available
data at the time of the proposed rule. This
file includes CCRs that reflect
implementation of the changes to the policy
for determining the applicable CCRs that
became effective August 8, 2003 (68 FR
34494).
As discussed in the FY 2007 IPPS final rule
(71 FR 48150), we worked with the Office of
Actuary to derive the methodology described
below to develop the CCR adjustment factor.
For FY 2011, we proposed to continue to use
the same methodology to calculate the CCR
adjustment by using the FY 2009 operating
cost per discharge increase in combination
with the actual FY 2009 operating market
basket percentage increase determined by
IHS Global Insight, Inc., as well as the charge
inflation factor described above to estimate
the adjustment to the CCRs. (We note that the
FY 2009 actual (otherwise referred to as
‘‘final’’) operating market basket percentage
increase reflects historical data, whereas the
published FY 2009 operating market basket
update factor was based on IHS Global
Insight, Inc.’s 2008 second quarter forecast
with historical data through the first quarter
of 2008. We also note that while the FY 2009
published operating market basket update
was based on the FY 2002-based IPPS market
basket, the actual or ‘‘final’’ market basket
percentage increase is based on the FY 2006based IPPS market basket. Similarly, the FY
2009 published capital market basket update
factor was based on the FY 2002-based
capital market basket and the actual or ‘‘final’’
capital market basket percentage increase is
based on the FY 2006-based capital market
basket.) By using the operating market basket
percentage increase and the increase in the
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average cost per discharge from hospital cost
reports, we are using two different measures
of cost inflation. For FY 2011, we determined
the adjustment by taking the percentage
increase in the operating costs per discharge
from FY 2007 to FY 2008 (1.0513) from the
cost report and dividing it by the final
operating market basket percentage increase
from FY 2008 (1.040). This operation
removes the measure of pure price increase
(the market basket) from the percentage
increase in operating cost per discharge,
leaving the nonprice factors in the cost
increase (for example, quantity and changes
in the mix of goods and services). We
repeated this calculation for 2 prior years to
determine the 3-year average of the rate of
adjusted change in costs between the
operating market basket percentage increase
and the increase in cost per case from the
cost report (the FY 2005 to FY 2006
percentage increase of operating costs per
discharge of 1.0577 divided by the FY 2006
final operating market basket percentage
increase of 1.040, the FY 2006 to FY 2007
percentage increase of operating costs per
discharge of 1.0466 divided by FY 2007 final
operating market basket percentage increase
of 1.036). For FY 2011, we averaged the
differentials calculated for FY 2006, FY 2007,
and FY 2008, which resulted in a mean ratio
of 1.0127. We multiplied the 3-year average
of 1.0127 by the FY 2009 final operating
market basket percentage increase of 1.027,
which resulted in an operating cost inflation
factor of 4.00 percent or 1.0400. We then
divided the operating cost inflation factor by
the 1-year average change in charges (1.0515)
and applied an adjustment factor of 0.989016
to the operating CCRs from the PSF
(calculation performed on unrounded
numbers).
As stated in the FY 2009 IPPS final rule
(73 FR 48763), we continue to believe it is
appropriate to apply only a 1-year adjustment
factor to the CCRs. On average, it takes
approximately 9 months for a fiscal
intermediary or MAC to tentatively settle a
cost report from the fiscal year end of a
hospital’s cost reporting period. The average
‘‘age’’ of hospitals’ CCRs from the time the
fiscal intermediary or the MAC inserts the
CCR in the PSF until the beginning of FY
2009 is approximately 1 year. Therefore, as
stated above, we believe a 1-year adjustment
factor to the CCRs is appropriate.
We used the same methodology for the
capital CCRs and determined the adjustment
by taking the percentage increase in the
capital costs per discharge from FY 2007 to
FY 2008 (1.0800) from the cost report and
dividing it by the final capital market basket
percentage increase from FY 2008 (1.015).
We repeated this calculation for 2 prior years
to determine the 3-year average of the rate of
adjusted change in costs between the capital
market basket percentage increase and the
increase in cost per case from the cost report
(the FY 2005 to FY 2006 percentage increase
of capital costs per discharge of 1.0464
divided by the FY 2006 final capital market
basket percentage increase of 1.011, the FY
2006 to FY 2007 percentage increase of
capital costs per discharge of 1.0512 divided
by the FY 2007 final capital market basket
percentage increase of 1.012). For FY 2011,
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we averaged the differentials calculated for
FY 2006, FY 2007, and FY 2008, which
resulted in a mean ratio of 1.0459. We
multiplied the 3-year average of 1.0459 by
the FY 2009 final capital market basket
percentage increase of 1.014, which resulted
in a capital cost inflation factor of 6.06
percent or 1.0606. We then divided the
capital cost inflation factor by the 1-year
average change in charges (1.0516) and
applied an adjustment factor of 1.008534 to
the capital CCRs from the PSF (calculation
performed on unrounded numbers). We
proposed to use the same charge inflation
factor for the capital CCRs that was used for
the operating CCRs. The charge inflation
factor is based on the overall billed charges.
Therefore, we believe it is appropriate to
apply the charge factor to both the operating
and capital CCRs.
As stated above, for FY 2011, we applied
the proposed FY 2011 rates and policies
using cases from the FY 2009 MedPAR files
in calculating the proposed outlier threshold.
As discussed in section II.A. of the preamble
to the FY 2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30975), in accordance
with section 10324(a) of Public Law 111–148,
beginning in FY 2011, we created a wage
index floor of 1.00 for all hospitals located
in States determined to be frontier States. We
noted that the frontier State floor adjustments
will be calculated and applied after rural and
imputed floor budget neutrality adjustments
are calculated for all labor market areas, so
as to ensure that no hospital in a frontier
State will receive a wage index lesser than
1.00 due to the rural and imputed floor
adjustment. In accordance with section
10324(a) of the Affordable Care Act, the
frontier State adjustment will not be subject
to budget neutrality, and will only be
extended to hospitals geographically located
within a frontier State. However, for
purposes of estimating the proposed outlier
threshold for FY 2011, it was necessary to
apply this provision by adjusting the wage
index of those eligible hospitals in a Frontier
State when calculating the outlier threshold
that results in outlier payments being 5.1
percent of total payments for FY 2011. If we
did not take into account this provision, our
estimate of total FY 2011 payments would be
too low, and as a result, our proposed outlier
threshold would be too high, such that
estimated outlier payments would be less
than our projected 5.1 percent of total
payments.
Also, in FY 2010, for purposes of
estimating the proposed outlier threshold, we
took into account the remaining projected
case-mix growth when calculating the outlier
threshold that results in outlier payments
being 5.1 percent of total payments for FY
2010. As explained in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 44008), for
the FY 2010 analysis, we inflated the FY
2008 claims data by an additional 1.6 percent
for the additional case-mix growth projected
to have occurred since FY 2008. If we did not
take into account the remaining 1.6 percent
projected case-mix growth, our estimate of
total FY 2010 payments would have been too
low, and, as a result, the FY 2010 final outlier
threshold would have been too high, such
that estimated outlier payments would be
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less than our projected 5.1 percent of total
payments. For the proposed rule, we used the
FY 2009 claims data to calculate the FY 2011
proposed outlier threshold. Our estimate of
the cumulative effect of changes in
documentation and coding due to the
adoption of the MS–DRGs through FY 2009
is 5.4 percent, which is already included
within the claims data (FY 2009 MedPAR
files) used to calculate the proposed FY 2011
outlier threshold. Furthermore, we estimated
that there would be no continued changes in
documentation and coding in FYs 2010 and
2011. Therefore, the cumulative effect of
documentation and coding that has occurred
is already reflected within the FY 2009
MedPAR claims data, and we do not believe
there is any need to inflate FY 2009 claims
data for any additional case-mix growth
projected to have occurred since FY 2009.
Using this methodology, in the
supplemental proposed rule, we proposed an
outlier fixed-loss cost threshold for FY 2011
equal to the prospective payment rate for the
DRG, plus any IME and DSH payments, and
any add-on payments for new technology,
plus $24,165.
As we did in establishing the FY 2009
outlier threshold (73 FR 57891), in our
projection of FY 2011 outlier payments, we
did not propose to make any adjustments for
the possibility that hospitals’ CCRs and
outlier payments may be reconciled upon
cost report settlement. We continue to
believe that, due to the policy implemented
in the June 9, 2003 outlier final rule (68 FR
34494), CCRs will no longer fluctuate
significantly and, therefore, few hospitals
will actually have these ratios reconciled
upon cost report settlement. In addition, it is
difficult to predict the specific hospitals that
will have CCRs and outlier payments
reconciled in any given year. We also noted
that reconciliation occurs because hospitals’
actual CCRs for the cost reporting period are
different than the interim CCRs used to
calculate outlier payments when a bill is
processed. Our simulations assume that CCRs
accurately measure hospital costs based on
information available to us at the time we set
the outlier threshold. For these reasons, we
proposed not to make any assumptions about
the effects of reconciliation on the outlier
threshold calculation.
Comment: Many commenters, including
major hospital associations, noted that CMS
currently estimates outlier payments in FY
2010 at 4.7 percent of total payments. The
commenters commended CMS for making
refinements such as applying an adjustment
factor to CCRs when computing the outlier
threshold but noted that, because CMS is still
not reaching the 5.1 percent target, there is
still room for improvement. The commenters
further stated that although CMS currently
projects outlier payments in FY 2010 to be
estimated at 4.7 percent of total payments,
which is lower than the 5.1 percent target,
this estimate is based on discharges from a
prior year (2009) and will likely not reflect
the actual result. The commenters noted that
in prior years when CMS provided its
projected estimate of outlier payments for a
given fiscal year, once the actual claims were
available to determine the actual outlier
payment (in the following fiscal year), the
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estimate declined between 0.2 percent and
0.3 percent from the projection.
The commenters also suggested that the
methodology developed by the CMS Office of
the Actuary to determine a cost adjustment
factor to the CCRs (which is then divided by
the charge adjustment factor) is unnecessarily
complicated and does not lead to a more
accurate result. The commenters urged CMS
to adopt a methodology that uses recent
historical industry wide average rate of
change, similar to the methodology used to
develop the charge inflation factor. Further,
in addition to recommending that CMS apply
a cost adjustment to the CCRs based on
historical data, the commenters suggested
that the charge adjustment to the CCRs be
projected over different periods of time, some
less or more than one year, based on
variations in hospital fiscal year ends. The
commenters opposed CMS’s use of the
December 2009 update of the PSF without
projecting CCRs over different periods of
time for purposes of estimating FY 2010
outlier payments and asserted that CMS’s
methodology is oversimplified. The
commenters believed that their methodology
would more accurately project the decline in
CCRs.
The commenters also suggested that if CMS
did not incorporate their recommended
changes to the methodology for estimating
outlier payments, that they would
recommend incorporating an ‘‘estimate
adjustment factor’’ into the outlier
projections. The commenters explained that
outlier payments have been underpaid in
every year since 2004. Based on actual
payments, the commenters estimate that
underpayment has exceeded 0.24 percent in
all years. The commenters recommended that
CMS maintain the outlier threshold at 5.1
percent but should apply an estimate
adjustment factor when projecting the outlier
threshold. The commenters provided an
example and computed this factor for FY
2008 and FY 2009 by taking the average
variance in the actual payment (from the
annual estimate of maintaining outliers at 5.1
percent) for FY 2008 and FY 2009 which was
0.385 percent. Based on this factor, the
commenters suggest CMS would model the
threshold to a level of 5.485 percent (5.1 plus
.385 percent). If CMS were to overpay
outliers in a specific year, then the
adjustment would be become negative. The
commenters stated that this would fulfill the
statutory requirement in section
1886(d)(5)(A) of the Act that requires that
CMS establish thresholds such that outlier
payments will be projected to achieve at least
5.1 percent of DRG payments and would
more closely achieve a result that is fully
consistent with the statute.
Response: Commenters to previous rules
have raised similar concerns regarding our
estimates of outlier payments. We refer
readers to a similar discussion in the FY 2008
final rule (72 FR 47418). As we have
mentioned in the past, in response to the
comment that CCRs should be projected over
different periods of time, it is possible that
some of the CCRs in the March PSF will be
used in FY 2009 for actual outlier payments,
while other CCRs may be one year old.
Therefore, we apply a 1-year adjustment to
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the CCRs. With respect to the comment on
our methodology used to adjust the CCRs, as
we stated in the FY 2008 IPPS final rule with
comment period (72 FR 47418), we continue
to believe this calculation of an adjustment
to the CCRs is more accurate and stable than
the commenter’s methodology because it
takes into account the costs per discharge
and the market basket percentage increase
when determining a cost adjustment factor.
There are times where the market basket and
the cost per discharge will be constant, while
other times these values will differ from each
other, depending on the fiscal year.
Therefore, as mentioned above, using the
market basket in conjunction with the cost
per discharge takes into account two sources
that measure potential cost inflation and
ensures a more accurate and stable cost
adjustment factor. Therefore, we continue to
believe that our methodology for adjusting
the cost-to-charge ratios is an appropriate
method for use in determining the outlier
threshold. We also note that with respect to
FY 2009 calculations, we are currently
projecting FY 2009 payments at an estimate
of 5.4 percent of overall payments. The
commenter noted that once actual data is
available to determine the outlier payment,
the outlier estimate tends to decline by 0.2
percent or 0.3 percent. If this trend stays
constant, it appears the FY 2009 threshold
would result in an outlier payout very close
to 5.1 percent according to the commenters.
With respect to the comment of computing
an ‘‘estimate adjustment factor’’, our outlier
policy is intended to reimburse hospitals for
treating extraordinarily costly cases and,
under the statute, outlier payments are
intended to approximate the marginal cost of
providing care above the outlier fixed-loss
cost threshold. Any ‘‘estimate adjustment
factor’’ to the outlier threshold or
standardized amount in a given year to
account for ‘‘overpayments’’ or
‘‘underpayments’’ of outliers in other years
would result in us making outlier payments
that were not directly related to the cost of
furnishing care in extraordinarily costly
cases. Additionally, when we conduct our
modeling to determine the outlier threshold,
we factor all in all payments and policies that
would affect actual payments for the fiscal
year at hand (as discussed above, including
the frontier wage index for FY 2011 and the
cumulative effect of documentation and
coding that has occurred that is already
reflected within the FY 2009 MedPAR claims
data) in order to ensure accuracy when
determining outlier payments that are 5.1
percent of total DRG payments. Including an
‘‘estimate adjustment factor’’ that is not
relative to the current fiscal year does not
lend greater accuracy to the estimate of
payments that are 5.1 percent of total DRG
payments. Finally, consistent with the policy
and statutory interpretation we have
maintained since the inception of the IPPS,
we do not make retroactive adjustments to
outlier payments to ensure that total outlier
payments in a past year are equal to 5.1
percent of total DRG payments. In short, we
believe our outlier policies are consistent
with the statute and the goals of the
prospective payment system.
Comment: One commenter was concerned
that CMS did not include outlier
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reconciliations in developing the outlier
threshold. The commenter requested that
CMS disclose in the final rule and future
proposed and final IPPS rules the amount of
money it has recovered through
reconciliation. The commenter explained
that this information will allow others to
comment specifically on how this provision
would impact the threshold.
Response: We thank the commenter for
their concern regarding not including outlier
reconciliation within the development of the
outlier threshold. However, as stated above,
we continue to believe that, due to the policy
implemented in the June 9, 2003 outlier final
rule (68 FR 34494), CCRs will no longer
fluctuate significantly and, therefore, few
hospitals will actually have these ratios
reconciled upon cost report settlement. In
addition, it is difficult to predict the specific
hospitals that will have CCRs and outlier
payments reconciled in any given year. We
also noted that reconciliation occurs because
hospitals’ actual CCRs for the cost reporting
period are different than the interim CCRs
used to calculate outlier payments when a
bill is processed. Our simulations assume
that CCRs accurately measure hospital costs
based on information available to us at the
time we set the outlier threshold. For these
reasons, we proposed and are finalizing our
policy not to make any assumptions about
the effects of reconciliation on the outlier
threshold calculation.
Comment: Commenters noted that it
appears CMS has inadvertently included
approximately 74,000 MA claims submitted
by teaching hospitals, which appear in the
MedPAR file when hospitals submit no-pay
bills for purposes of IME payment. The
commenter explained that these claims
lacked an ‘‘HMO Paid’’ designation but the
only payment made on the claim was the
IME payment. The commenter recommended
that CMS exclude these claims from the
outlier threshold calculation since they are
not paid under the IPPS.
Commenters also noted that it is likely that
CMS included charges for anti hemophilic
blood factor, which are paid separately under
the IPPS. The commenter further noted that
in the FY 2010 IPPS/LTCH PPS final rule,
CMS agreed that the clotting factor issue was
a problem and CMS stated it would seek a
solution in future years. The commenter
requested that CMS disclose if a solution has
been determined.
Response: We examined the MedPAR file
and have determined that there are claims
that do not have a GHO Paid indicator with
a value of ‘‘1’’ but the IME payment field is
equal to the DRG payment field. We agree
with the commenter and have excluded
claims from the outlier calculation that have
a GHO Paid indicator with a value of ‘‘1’’ or
do not have a GHO Paid indicator with a
value of ‘‘1’’ but do have an IMEPAY filed
equal to the DRGPAY field since these are
probably MA claims that are likely not paid
under the IPPS and therefore would not incur
an outlier payment.
With respect to charges for anti hemophilic
blood factor, we examined the MedPAR and
have removed pharmacy charges with an
indicator of ‘‘3’’ for blood clotting with a
revenue code of ‘‘0636’’from the covered
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50429
charge field. We also removed organ
acquisition charges from the covered charge
field since organ acquisition is a pass through
payment not paid under the IPPS.
Because we are not making any changes to
our methodology for this final rule, for FY
2011, we are using the same methodology we
proposed to calculate the outlier threshold.
Using the most recent data available, we
calculated the 1-year average annualized rateof-change in charges-per-case from the first
quarter of FY 2009 in combination with the
second quarter of FY 2009 (October 1, 2008
through March 31, 2009) to the first quarter
of FY 2010 in combination with the second
quarter of FY 2010 (October 1, 2009 through
March 31, 2010). This rate of change was
4.8257 percent (1.048257) or 9.8843 percent
(1.098843) over 2 years.
As we have done in the past, we
established the final FY 2011 outlier
threshold using hospital CCRs from the
March 2010 update to the Provider-Specific
File (PSF)—the most recent available data at
the time of this final rule. This file includes
CCRs that reflect implementation of the
changes to the policy for determining the
applicable CCRs that became effective August
8, 2003 (68 FR 34494).
For FY 2010, we calculated the CCR
adjustment by using the operating cost per
discharge increase in combination with the
actual FY 2009 operating market basket
percentage increase determined by IHS
Global Insight, Inc., as well as the charge
inflation factor described above to estimate
the adjustment to the CCRs. (We note that the
FY 2009 actual—otherwise referred to as
‘‘final’’—operating market basket percentage
increase reflects historical data, whereas the
published FY 2009 operating market basket
update factor was based on IHS Global
Insight, Inc.’s 2008 second quarter forecast
with historical data through the first quarter
of 2008. We also note that while the FY 2009
published operating market basket update
was based on the FY 2002-based IPPS market
basket, the actual or ‘‘final’’ market basket
percentage increase is based on the FY 2006based IPPS market basket. Similarly, the FY
2009 published capital market basket update
factor was based on the FY 2002-based
capital market basket and the actual or ‘‘final’’
capital market basket percentage increase is
based on the FY 2006-based capital market
basket.) By using the operating market basket
percentage increase and the increase in the
average cost per discharge from hospital cost
reports, we are using two different measures
of cost inflation. For FY 2011, we determined
the adjustment by taking the percentage
increase in the operating costs per discharge
from FY 2007 to FY 2008 (1.0511) from the
cost report and dividing it by the final
operating market basket percentage increase
from FY 2008 (1.040). This operation
removes the measure of pure price increase
(the market basket) from the percentage
increase in operating cost per discharge,
leaving the nonprice factors in the cost
increase (for example, quantity and changes
in the mix of goods and services). We
repeated this calculation for 2 prior years to
determine the 3-year average of the rate of
adjusted change in costs between the
operating market basket percentage increase
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and the increase in cost per case from the
cost report (the FY 2005 to FY 2006
percentage increase of operating costs per
discharge of 1.0574 divided by the FY 2006
final operating market basket percentage
increase of 1.040, the FY 2006 to FY 2007
percentage increase of operating costs per
discharge of 1.0464 divided by FY 2007 final
operating market basket percentage increase
of 1.036). For FY 2011, we averaged the
differentials calculated for FY 2006, FY 2007,
and FY 2008, which resulted in a mean ratio
of 1.0125. We multiplied the 3-year average
of 1.0125 by the FY 2009 final operating
market basket percentage increase of 1.026,
which resulted in an operating cost inflation
factor of 3.88 percent or 1.0388. We then
divided the operating cost inflation factor by
the 1-year average change in charges
(1.048257) and applied an adjustment factor
of 0.990983 to the operating CCRs from the
PSF (calculation performed on unrounded
numbers).
We used the same methodology for the
capital CCRs and determined the adjustment
by taking the percentage increase in the
capital costs per discharge from FY 2007 to
FY 2008 (1.0813) from the cost report and
dividing it by the final capital market basket
percentage increase from FY 2008 (1.015).
We repeated this calculation for 2 prior years
to determine the 3-year average of the rate of
adjusted change in costs between the capital
market basket percentage increase and the
increase in cost per case from the cost report
(the FY 2005 to FY 2006 percentage increase
of capital costs per discharge of 1.0470
divided by the FY 2006 final capital market
basket percentage increase of 1.011, the FY
2006 to FY 2007 percentage increase of
capital costs per discharge of 1.0504 divided
by the FY 2007 final capital market basket
percentage increase of 1.013). For FY 2011,
we averaged the differentials calculated for
FY 2006, FY 2007, and FY 2008, which
resulted in a mean ratio of 1.0459. We
multiplied the 3-year average of 1.0459 by
the FY 2009 final capital market basket
percentage increase of 1.014, which resulted
in a capital cost inflation factor of 6.06
percent or 1.0606. We then divided the
capital cost inflation factor by the 1-year
average change in charges (1.048257) and
applied an adjustment factor of 1.011768 to
the capital CCRs from the PSF (calculation
performed on unrounded numbers). We are
using the same charge inflation factor for the
capital CCRs that was used for the operating
CCRs. The charge inflation factor is based on
the overall billed charges. Therefore, we
believe it is appropriate to apply the charge
factor to both the operating and capital CCRs.
As stated above, for FY 2011, we applied
the FY 2011 rates and policies using cases
from the FY 2009 MedPAR files in
calculating the final outlier threshold. As
discussed in section II.B.3. of the preamble
to this final rule, in accordance with section
10324(a) of Public Law 111–148, beginning
in FY 2011, we created a wage index floor
of 1.00 for all hospitals located in States
determined to be Frontier States. We noted
that the Frontier State floor adjustments will
be calculated and applied after rural and
imputed floor budget neutrality adjustments
are calculated for all labor market areas, so
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as to ensure that no hospital in a Frontier
State will receive a wage index lesser than
1.00 due to the rural and imputed floor
adjustment. In accordance with section
10324(a) of the Affordable Care Act, the
frontier State adjustment will not be subject
to budget neutrality, and will only be
extended to hospitals geographically located
within a frontier State. However, for
purposes of estimating the final outlier
threshold for FY 2011, it was necessary to
apply this provision by adjusting the wage
index of those eligible hospitals in a Frontier
State when calculating the outlier threshold
that results in outlier payments being 5.1
percent of total payments for FY 2011. If we
did not take into account this provision, our
estimate of total FY 2011 payments would be
too low, and as a result, our final outlier
threshold would be too high, such that
estimated outlier payments would be less
than our projected 5.1 percent of total
payments.
Also, in FY 2010, for purposes of
estimating the final outlier threshold, we
took into account the remaining projected
case-mix growth when calculating the outlier
threshold that results in outlier payments
being 5.1 percent of total payments for FY
2010. As explained in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 44008), for
the FY 2010 analysis, we inflated the FY
2008 claims data by an additional 1.6 percent
for the additional case-mix growth projected
to have occurred since FY 2008. If we did not
take into account the remaining 1.6 percent
projected case-mix growth, our estimate of
total FY 2010 payments would have been too
low, and, as a result, the FY 2010 final outlier
threshold would have been too high, such
that estimated outlier payments would be
less than our projected 5.1 percent of total
payments. For the final rule, we used the FY
2009 claims data to calculate the FY 2011
final outlier threshold. Our estimate of the
cumulative effect of changes in
documentation and coding due to the
adoption of the MS–DRGs through FY 2009
is 5.4 percent, which is already included
within the claims data (FY 2009 MedPAR
files) used to calculate the final FY 2011
outlier threshold. Furthermore, we estimate
that there would be no continued changes in
documentation and coding in FYs 2010 and
2011. Therefore, the cumulative effect of
documentation and coding that has occurred
is already reflected within the FY 2009
MedPAR claims data, and we do not believe
there is any need to inflate FY 2009 claims
data for any additional case-mix growth
projected to have occurred since FY 2009.
Using this methodology, we calculated a
final outlier fixed-loss cost threshold for FY
2011 equal to the prospective payment rate
for the DRG, plus any IME and DSH
payments, and any add-on payments for new
technology, plus $23,075.
We note that the final threshold is lower
than the proposed outlier threshold in the FY
2011 IPPS/LTCH PPS supplemental proposed
rule (and is similar to the estimate of the
outlier threshold calculated by the
commenters above). We believe that the
increase in the market basket from 2.15
percent in the FY 2011 IPPS/LTCH PPS
supplemental proposed rule (that is, the
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estimated full market basket percentage
increase of 2.4 percent minus 0.25 percentage
point) to 2.35 percent for this final rule (that
is, the estimated full market basket
percentage increase of 2.6 percent minus 0.25
percentage point) contributed to a lower final
fixed loss outlier threshold for FY 2011.
Specifically, adding an extra 0.2 percent to
the standardized amount increases funds to
typical cases and requires that we lower the
outlier threshold to increase the amount of
atypical cases in order to reach the 5.1
percent target.
(2) Other Changes Concerning Outliers
As stated in the FY 1994 IPPS final rule (58
FR 46348), we establish an outlier threshold
that is applicable to both hospital inpatient
operating costs and hospital inpatient
capital-related costs. When we modeled the
combined operating and capital outlier
payments, we found that using a common
threshold resulted in a lower percentage of
outlier payments for capital-related costs
than for operating costs. We project that the
thresholds for FY 2011 will result in outlier
payments that will equal 5.1 percent of
operating DRG payments and 5.96 percent of
capital payments based on the Federal rate.
In accordance with section 1886(d)(3)(B) of
the Act, we are reducing the FY 2011
standardized amount by the same percentage
to account for the projected proportion of
payments paid as outliers.
The outlier adjustment factors that would
be applied to the standardized amount based
on the FY 2011 outlier threshold are as
follows:
Operating
standardized
amounts
National .............
Puerto Rico .......
0.948999
0.948079
Capital
Federal
rate
0.940415
0.918951
We are applying apply the outlier
adjustment factors to the FY 2011 rates after
removing the effects of the FY 2010 outlier
adjustment factors on the standardized
amount.
To determine whether a case qualifies for
outlier payments, we apply hospital-specific
CCRs to the total covered charges for the
case. Estimated operating and capital costs
for the case are calculated separately by
applying separate operating and capital
CCRs. These costs are then combined and
compared with the outlier fixed-loss cost
threshold.
Under our current policy at § 412.84, for
hospitals for which the fiscal intermediary or
MAC computes operating CCRs greater than
1.175 or capital CCRs greater than 0.159, or
hospitals for which the fiscal intermediary or
MAC is unable to calculate a CCR (as
described at § 412.84(i)(3) of our regulations),
we use statewide average CCRs to determine
whether a hospital qualifies for outlier
payments.21 Table 8A in this Addendum
contains the statewide average operating
CCRs for urban hospitals and for rural
21 These figures represent 3.0 standard deviations
from the mean of the log distribution of CCRs for
all hospitals.
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hospitals for which the fiscal intermediary or
MAC is unable to compute a hospital-specific
CCR within the above range. Effective for
discharges occurring on or after October 1,
2010, these statewide average ratios would
replace the ratios published in the IPPS final
rule for FY 2010 (74 FR 44159). Table 8B in
this Addendum contains the comparable
statewide average capital CCRs. Again, the
CCRs in Tables 8A and 8B would be used
during FY 2011 when hospital-specific CCRs
based on the latest settled cost report are
either not available or are outside the range
noted above. Table 8C contains the statewide
average total CCRs used under the LTCH PPS
as discussed in section V. of this Addendum.
We finally note that we published a
manual update (Change Request 3966) to our
outlier policy on October 12, 2005, which
updated Chapter 3, Section 20.1.2 of the
Medicare Claims Processing Manual. The
manual update covered an array of topics,
including CCRs, reconciliation, and the time
value of money. We encourage hospitals that
are assigned the statewide average operating
and/or capital CCRs to work with their fiscal
intermediary or MAC on a possible
alternative operating and/or capital CCR as
explained in Change Request 3966. Use of an
alternative CCR developed by the hospital in
conjunction with the fiscal intermediary or
MAC can avoid possible overpayments or
underpayments at cost report settlement,
thus ensuring better accuracy when making
outlier payments and negating the need for
outlier reconciliation. We also note that a
hospital may request an alternative operating
or capital CCR ratio at any time as long as
the guidelines of Change Request 3966 are
followed. To download and view the manual
instructions on outlier and CCRs, we refer
readers to CMS Web site: https://
www.cms.hhs.gov/manuals/downloads/
clm104c03.pdf.
(3) FY 2009 and FY 2010 Outlier Payments
In the FY 2010 IPPS final rule (74 FR
44012), we stated that, based on available
data, we estimated that actual FY 2009
outlier payments would be approximately 5.4
percent of actual total DRG payments. This
estimate was computed based on simulations
using the FY 2008 MedPAR file (discharge
data for FY 2008 claims). That is, the
estimate of actual outlier payments did not
reflect actual FY 2009 claims, but instead
reflected the application of FY 2009 rates and
policies to available FY 2008 claims.
Our current estimate, using available FY
2009 claims data, is that actual outlier
payments for FY 2009 were approximately
5.3 percent of actual total DRG payments.
Thus, the data indicate that, for FY 2009, the
percentage of actual outlier payments relative
to actual total payments is higher than we
projected for FY 2009. Consistent with the
policy and statutory interpretation we have
maintained since the inception of the IPPS,
we do not plan to make retroactive
adjustments to outlier payments to ensure
that total outlier payments for FY 2009 are
equal to 5.1 percent of total DRG payments.
We currently estimate that actual outlier
payments for FY 2010 will be approximately
4.7 percent of actual total DRG payments,
approximately 0.4 percentage points lower
than the 5.1 percent we projected when
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setting the outlier policies for FY 2010. This
estimate of 4.7 percent is based on
simulations using the FY 2009 MedPAR file
(discharge data for FY 2009 claims).
Comment: Commenters requested that
CMS clarify and review how the actual
outlier payments for FY 2009, as reported in
the proposed rule, were calculated. The
commenters noted that in the proposed rule,
CMS indicated that the actual outlier
payments for FY 2009 will be 5.3 percent of
actual DRG payments. However, the
commenter performed their own analysis
using payment information in the MedPAR
and concluded that actual outlier payments
for FY 2009 would be 4.9 percent of actual
DRG payments. The commenter
recommended that CMS determine the FY
2009 outlier payment percentage using a data
element that they asserted represented actual
payments rather than using a modeled
estimate of actual payments. The commenter
also noted that, while they differed on the FY
2009 estimate, they were able to match the
FY 2010 and FY 2011 outlier percentages we
published in the proposed rule.
Response: We believe that modeling the
estimated actual payments for FY 2009 is a
reasonable approach to approximating the
outlier payment percentage for FY 2009. In
modeling the FY 2009 payments we use the
same programming approach used in
determining the FY 2010 and FY 2011 outlier
payment percentages. We continue to believe
that our modeling approach is sound; we
note that the commenters were able to match
our published percentages for FY 2010 and
2011 using their own models,. In calculating
the estimated FY 2009 outlier payment
percentage we use the FY 2009 payment
rates, rules and factors and the latest update
of the FY 2009 MedPAR file. This is
consistent with our approach for the rate
setting for FY 2011 (which also models the
FY 2010 payments for use in the FY 2011 rate
setting). Although the MedPAR file contains
a field labeled the DRG PRICE that represents
the actual amounts paid to hospitals by
claim, we believe that modeling enhances the
completeness and the accuracy of our
estimates of actual payments. While accurate
at the time the MedPAR file is constructed,
claims can be cancelled, edited and
resubmitted to NCH after the MedPAR file is
built, and therefore the payment field shown
on MedPAR is subject to change and does not
necessarily represent the final payment on
that claim. Additionally, various payment
exceptions under the IPPS such as the
hospital specific rate payment adjustment for
Sole Community Hospitals and Medicare
Dependant Hospitals complicate the use of
the payment field shown on the MedPAR
file. PRICER, the IPPS payment software,
calculates payments on a claim by claim
basis and consequently claims may be paid
on either the federal rate or the hospital
specific rate depending on which produces a
greater payment; the payments to these
hospitals are not finalized until the cost
report settlement and at that time must either
be based on one hundred percent of either
the hospital specific amount or the federal
amount. Due to these additional concerns,
the DRG PRICE field would also only
generate an estimate, rather than an actual,
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50431
amount of outlier payments. For these
reasons, we continue to believe that
modeling is an acceptable and accurate
approach to estimating the outlier payment
percentage in a given year. We also note that
our model has been replicated by the
commenters.
5. FY 2011 Standardized Amount
The adjusted standardized amount is
divided into labor-related and nonlaborrelated portions. Tables 1A and 1B of this
Addendum contain the national standardized
amounts that we are applying to all hospitals,
except hospitals located in Puerto Rico, for
FY 2011. The Puerto Rico-specific amounts
are shown in Table 1C of this Addendum.
The amounts shown in Tables 1A and 1B
differ only in that the labor-related share
applied to the standardized amounts in Table
1A is the labor-related share of 68.8 percent,
and Table 1B is 62 percent. In accordance
with sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act, we are applying
a labor-related share of 62 percent, unless
application of that percentage would result in
lower payments to a hospital than would
otherwise be made. In effect, the statutory
provision means that we will apply a laborrelated share of 62 percent for all hospitals
(other than those in Puerto Rico) whose wage
indices are less than or equal to 1.0000.
In addition, Tables 1A and 1B include the
standardized amounts reflecting the
applicable percentage increase of 2.35
percent update for FY 2011, and
standardized amounts reflecting the 2.0
percentage point reduction to that update
(a 0.35 percent update) applicable for
hospitals that fail to submit quality data
consistent with section 1886(b)(3)(B)(viii) of
the Act.
Under section 1886(d)(9)(A)(ii) of the Act,
the Federal portion of the Puerto Rico
payment rate is based on the dischargeweighted average of the national large urban
standardized amount (this amount is set forth
in Table 1A). The labor-related and nonlaborrelated portions of the national average
standardized amounts for Puerto Rico
hospitals for FY 2011 are set forth in Table
1C of this Addendum. This table also
includes the Puerto Rico standardized
amounts. The labor-related share applied to
the Puerto Rico specific standardized amount
is the labor-related share of 62.1 percent, or
62 percent, depending on which provides
higher payments to the hospital. (Section
1886(d)(9)(C)(iv) of the Act, as amended by
section 403(b) of Public Law 108–173,
provides that the labor-related share for
hospitals located in Puerto Rico be 62
percent, unless the application of that
percentage would result in lower payments
to the hospital.)
The following table illustrates the changes
from the FY 2010 national standardized
amount. The second column shows the
changes from the FY 2010 standardized
amounts for hospitals that satisfy the quality
data submission requirement for receiving
the update of 2.35 percent. The third column
shows the changes for hospitals receiving the
reduced update of 0.35 percent. The first row
of the table shows the updated (through FY
2010) average standardized amount after
restoring the FY 2010 offsets for outlier
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recalibration wage index budget neutrality
BILLING CODE 4120–01–C
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payments, demonstration budget neutrality
and the geographic reclassification budget
neutrality. The DRG reclassification and
make an adjustment to the labor-related
portion of the national and Puerto Rico
prospective payment rates, respectively, to
account for area differences in hospital wage
levels. This adjustment is made by
multiplying the labor-related portion of the
adjusted standardized amounts by the
appropriate wage index for the area in which
the hospital is located. In section III. of the
preamble of this final rule, we discuss the
data and methodology for the FY 2011 wage
index.
B. Adjustments for Area Wage Levels and
Cost-of-Living
Tables 1A through 1C, as set forth in this
Addendum, contain the labor-related and
nonlabor-related shares that we are using to
calculate the prospective payment rates for
hospitals located in the 50 States, the District
of Columbia, and Puerto Rico for FY 2011.
This section addresses two types of
adjustments to the standardized amounts that
are made in determining the prospective
payment rates as described in this
Addendum.
1. Adjustment for Area Wage Levels
Sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act require that we
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factors are cumulative. Therefore, the FY
2010 factor is not removed from this table.
BILLING CODE 4120–01–P
2. Adjustment for Cost-of-Living in Alaska
and Hawaii
hospitals in Alaska and Hawaii. Higher laborrelated costs for these two States are taken
into account in the adjustment for area wages
described above. For FY 2011, we are
adjusting the payments for hospitals in
Alaska and Hawaii by multiplying the
nonlabor-related portion of the standardized
amount by the applicable adjustment factor
contained in the table below. These factors
were obtained from the U.S. Office of
Personnel Management (OPM) and are the
same as the factors currently in use under the
IPPS for FY 2010.
Section 1886(d)(5)(H) of the Act authorizes
the Secretary to make an adjustment to take
into account the unique circumstances of
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50432
(The above factors are based on data obtained
from the U.S. Office of Personnel
Management Web site at: https://
www.opm.gov/oca/cola/rates.asp.)
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C. MS–DRG Relative Weights
As discussed in section II.H. of the
preamble of this final rule, we have
developed relative weights for each MS–DRG
that reflect the resource utilization of cases
in each MS–DRG relative to Medicare cases
in other MS–DRGs. Table 5 of this
Addendum contains the relative weights that
we are applying to discharges occurring in
FY 2011. These factors have been
recalibrated as explained in section II. of the
preamble of this final rule.
D. Calculation of the Prospective Payment
Rates
General Formula for Calculation of the
Prospective Payment Rates for FY 2011
In general, the operating prospective
payment rate for all hospitals paid under the
IPPS located outside of Puerto Rico, except
SCHs and MDHs, for FY 2011 equals the
Federal rate.
Currently, SCHs are paid based on
whichever of the following rates yields the
greatest aggregate payment: The Federal
national rate; the updated hospital-specific
rate based on FY 1982 costs per discharge;
the updated hospital-specific rate based on
FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs
per discharge; or the updated hospitalspecific rate based on the FY 2006 costs per
discharge to determine the rate that yields
the greatest aggregate payment.
The prospective payment rate for SCHs for
FY 2011 equals the higher of the applicable
Federal rate, or the hospital-specific rate as
described below. The prospective payment
rate for MDHs for FY 2011 equals the higher
of the Federal rate, or the Federal rate plus
75 percent of the difference between the
Federal rate and the hospital-specific rate as
described below. For MDHs, the updated
hospital-specific rate is based on FY 1982, FY
1987 or FY 2002 costs per discharge,
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whichever yields the greatest aggregate
payment.
The prospective payment rate for hospitals
located in Puerto Rico for FY 2011 equals 25
percent of the Puerto Rico rate plus 75
percent of the applicable national rate.
1. Federal Rate
The Federal rate is determined as follows:
Step 1—Select the applicable average
standardized amount depending on whether
the hospital submitted qualifying quality data
(full update for qualifying hospitals, update
minus 2.0 percentage points for
nonqualifying hospitals).
Step 2—Multiply the labor-related portion
of the standardized amount by the applicable
wage index for the geographic area in which
the hospital is located or the area to which
the hospital is reclassified.
Step 3—For hospitals in Alaska and
Hawaii, multiply the nonlabor-related
portion of the standardized amount by the
applicable cost-of-living adjustment factor.
Step 4—Add the amount from Step 2 and
the nonlabor-related portion of the
standardized amount (adjusted, if applicable,
under Step 3).
Step 5—Multiply the final amount from
Step 4 by the relative weight corresponding
to the applicable MS–DRG (see Table 5 of
this Addendum).
The Federal rate as determined in Step 5
may then be further adjusted if the hospital
qualifies for either the IME or DSH
adjustment. In addition, for hospitals that
qualify for a low-volume payment adjustment
under section 1886(d)(12) of the Act and 42
CFR 412.101(b), the payment in Step 5 would
be increased by 25 percent.
2. Hospital-Specific Rate (Applicable Only to
SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
Section 1886(b)(3)(C) of the Act provides
that currently SCHs are paid based on
whichever of the following rates yields the
greatest aggregate payment: The Federal rate;
the updated hospital-specific rate based on
FY 1982 costs per discharge; the updated
hospital-specific rate based on FY 1987 costs
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50433
per discharge; the updated hospital-specific
rate based on FY 1996 costs per discharge; or
the updated hospital-specific rate based on
the FY 2006 costs per discharge to determine
the rate that yields the greatest aggregate
payment.
As discussed previously, currently MDHs
are paid based on the Federal national rate
or, if higher, the Federal national rate plus 75
percent of the difference between the Federal
national rate and the greater of the updated
hospital-specific rates based on either FY
1982, FY 1987 or FY 2002 costs per
discharge.
Hospital-specific rates have been
determined for each of these hospitals based
on the FY 1982 costs per discharge, the FY
1987 costs per discharge, or, for SCHs, the FY
1996 costs per discharge or the FY 2006 costs
per discharge, and for MDHs, the FY 2002
cost per discharge. For a more detailed
discussion of the calculation of the hospitalspecific rates, we refer the reader to the FY
1984 IPPS interim final rule (48 FR 39772);
the April 20, 1990 final rule with comment
period (55 FR 15150); the FY 1991 IPPS final
rule (55 FR 35994); and the FY 2001 IPPS
final rule (65 FR 47082). In addition, for both
SCHs and MDHs, the hospital-specific rate
effective is adjusted by the DRG
reclassification and recalibration budget
neutrality factor of 0.996731 as discussed in
section III. of this Addendum. The resulting
rate will be used in determining the payment
rate an SCH or MDH will receive for its
discharges beginning on or after October 1,
2010.
b. Updating the FY 1982, FY 1987, FY 1996,
FY 2002, and FY 2006 Hospital-Specific
Rates for FY 2011
Section 1886(b)(3)(B)(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 Act sets the
update factor for SCHs and MDHs equal to
the update factor for all other IPPS hospitals,
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the update to the hospital specific rates for
SCHs and MDHs is subject to the
amendments to section 1886(b)(3)(B)(i) of the
Act made by section 3401(a) of the
Affordable Care Act. Accordingly, the
applicable percentage increase to the
hospital-specific rates applicable to SCHs
and MDHs is 2.35 percent (that is, the FY
2011 estimate of the market basket rate-ofincrease of 2.6 percent minus 0.25 percentage
points) for hospitals that submit quality data
or 0.35 percent (that is, the FY 2011
applicable percentage increase of 2.35
percent minus 2.0 percentage points) for
hospitals that fail to submit quality data.
3. General Formula for Calculation of
Prospective Payment Rates for Hospitals
Located in Puerto Rico Beginning On or After
October 1, 2010, and Before October 1, 2011
Section 1886(d)(9)(E)(iv) of the Act
provides that, effective for discharges
occurring on or after October 1, 2004,
hospitals located in Puerto Rico are paid
based on a blend of 75 percent of the national
prospective payment rate and 25 percent of
the Puerto Rico-specific rate.
a. Puerto Rico Rate
The Puerto Rico prospective payment rate
is determined as follows:
Step 1—Select the applicable average
standardized amount considering the
applicable wage index (Table 1C of this
Addendum).
Step 2—Multiply the labor-related portion
of the standardized amount by the applicable
Puerto Rico-specific wage index.
Step 3—Add the amount from Step 2 and
the nonlabor-related portion of the
standardized amount.
Step 4—Multiply the amount from Step 3
by the applicable MS–DRG relative weight
(Table 5 of this Addendum).
Step 5—Multiply the result in Step 4 by 25
percent.
b. National Rate
The national prospective payment rate is
determined as follows:
Step 1—Select the applicable average
standardized amount.
Step 2—Multiply the labor-related portion
of the standardized amount by the applicable
wage index for the geographic area in which
the hospital is located or the area to which
the hospital is reclassified.
Step 3—Add the amount from Step 2 and
the nonlabor-related portion of the national
average standardized amount.
Step 4—Multiply the amount from Step 3
by the applicable MS–DRG relative weight
(Table 5 of this Addendum).
Step 5—Multiply the result in Step 4 by 75
percent.
The sum of the Puerto Rico rate and the
national rate computed above equals the
prospective payment for a given discharge for
a hospital located in Puerto Rico. This rate
would then be further adjusted if the hospital
qualifies for either the IME or DSH
adjustment.
III. Changes to Payment Rates for Acute Care
Hospital Inpatient Capital-Related Costs for
FY 2011
The PPS for acute care hospital inpatient
capital-related costs was implemented for
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cost reporting periods beginning on or after
October 1, 1991. Effective with that cost
reporting period, hospitals were paid during
a 10-year transition period (which extended
through FY 2001) to change the payment
methodology for Medicare acute care hospital
inpatient capital-related costs from a
reasonable cost-based methodology to a
prospective methodology (based fully on the
Federal rate).
The basic methodology for determining
Federal capital prospective rates is set forth
in the regulations at 42 CFR 412.308 through
412.352. Below we discuss the factors that
we used to determine the capital Federal rate
for FY 2011, which will be effective for
discharges occurring on or after October 1,
2010.
The 10-year transition period ended with
hospital cost reporting periods beginning on
or after October 1, 2001 (FY 2002). Therefore,
for cost reporting periods beginning in FY
2002, all hospitals (except ‘‘new’’ hospitals
under § 412.304(c)(2)) are paid based on the
capital Federal rate. For FY 1992, we
computed the standard Federal payment rate
for capital-related costs under the IPPS by
updating the FY 1989 Medicare inpatient
capital cost per case by an actuarial estimate
of the increase in Medicare inpatient capital
costs per case. Each year after FY 1992, we
update the capital standard Federal rate, as
provided at § 412.308(c)(1), to account for
capital input price increases and other
factors. The regulations at § 412.308(c)(2)
provide that the capital Federal rate be
adjusted annually by a factor equal to the
estimated proportion of outlier payments
under the capital Federal rate to total capital
payments under the capital Federal rate. In
addition, § 412.308(c)(3) requires that the
capital Federal rate be reduced by an
adjustment factor equal to the estimated
proportion of payments for (regular and
special) exceptions under § 412.348. Section
412.308(c)(4)(ii) requires that the capital
standard Federal rate be adjusted so that the
effects of the annual DRG reclassification and
the recalibration of DRG weights and changes
in the geographic adjustment factor (GAF) are
budget neutral.
For FYs 1992 through 1995, § 412.352
required that the capital Federal rate also be
adjusted by a budget neutrality factor so that
aggregate payments for inpatient hospital
capital costs were projected to equal 90
percent of the payments that would have
been made for capital-related costs on a
reasonable cost basis during the respective
fiscal year. That provision expired in FY
1996. Section 412.308(b)(2) describes the 7.4
percent reduction to the capital Federal rate
that was made in FY 1994, and
§ 412.308(b)(3) describes the 0.28 percent
reduction to the capital Federal rate made in
FY 1996 as a result of the revised policy for
paying for transfers. In FY 1998, we
implemented section 4402 of Public Law
105–33, which required that, for discharges
occurring on or after October 1, 1997, the
budget neutrality adjustment factor in effect
as of September 30, 1995, be applied to the
unadjusted capital standard Federal rate and
the unadjusted hospital-specific rate. That
factor was 0.8432, which was equivalent to
a 15.68 percent reduction to the unadjusted
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capital payment rates. An additional 2.1
percent reduction to the rates was effective
from October 1, 1997 through September 30,
2002, making the total reduction 17.78
percent. As we discussed in the FY 2003
IPPS final rule (67 FR 50102) and
implemented in § 412.308(b)(6), the 2.1
percent reduction was restored to the
unadjusted capital payment rates effective
October 1, 2002.
To determine the appropriate budget
neutrality adjustment factor and the regular
exceptions payment adjustment during the
10-year transition period, we developed a
dynamic model of Medicare inpatient
capital-related costs; that is, a model that
projected changes in Medicare inpatient
capital-related costs over time. With the
expiration of the budget neutrality provision,
the capital cost model was only used to
estimate the regular exceptions payment
adjustment and other factors during the
transition period. As we explained in the FY
2002 IPPS final rule (66 FR 39911), beginning
in FY 2002, an adjustment for regular
exception payments is no longer necessary
because regular exception payments were
only made for cost reporting periods
beginning on or after October 1, 1991, and
before October 1, 2001 (see § 412.348(b)).
Because payments are no longer made under
the regular exception policy effective with
cost reporting periods beginning in FY 2002,
we discontinued use of the capital cost
model. The capital cost model and its
application during the transition period are
described in Appendix B of the FY 2002 IPPS
final rule (66 FR 40099).
Section 412.374 provides for blended
payments to hospitals located in Puerto Rico
under the IPPS for acute care hospital
inpatient capital-related costs. Accordingly,
under the capital PPS, we compute a separate
payment rate specific to hospitals located in
Puerto Rico using the same methodology
used to compute the national Federal rate for
capital-related costs. In accordance with
section 1886(d)(9)(A) of the Act, under the
IPPS for acute care hospital operating costs,
hospitals located in Puerto Rico are paid for
operating costs under a special payment
formula. Prior to FY 1998, hospitals located
in Puerto Rico were paid a blended operating
rate that consisted of 75 percent of the
applicable standardized amount specific to
Puerto Rico hospitals and 25 percent of the
applicable national average standardized
amount. Similarly, prior to FY 1998,
hospitals located in Puerto Rico were paid a
blended capital rate that consisted of 75
percent of the applicable capital Puerto Ricospecific rate and 25 percent of the applicable
capital Federal rate. However, effective
October 1, 1997, in accordance with section
4406 of Public Law 105–33, the methodology
for operating payments made to hospitals
located in Puerto Rico under the IPPS was
revised to make payments based on a blend
of 50 percent of the applicable standardized
amount specific to Puerto Rico hospitals and
50 percent of the applicable national average
standardized amount. In conjunction with
this change to the operating blend
percentage, effective with discharges
occurring on or after October 1, 1997, we also
revised the methodology for computing
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capital payments to hospitals located in
Puerto Rico to be based on a blend of 50
percent of the Puerto Rico capital rate and 50
percent of the national capital Federal rate.
As we discussed in the FY 2005 IPPS final
rule (69 FR 49185), section 504 of Public Law
108–173 increased the national portion of the
operating IPPS payments for hospitals
located in Puerto Rico from 50 percent to
62.5 percent and decreased the Puerto Rico
portion of the operating IPPS payments from
50 percent to 37.5 percent for discharges
occurring on or after April 1, 2004 through
September 30, 2004 (refer to the March 26,
2004 One-Time Notification (Change Request
3158)). In addition, section 504 of Public Law
108–173 provided that the national portion of
operating IPPS payments for hospitals
located in Puerto Rico is equal to 75 percent
and the Puerto Rico-specific portion of
operating IPPS payments is equal to 25
percent for discharges occurring on or after
October 1, 2004. Consistent with that change
in operating IPPS payments to hospitals
located in Puerto Rico, for FY 2005 (as we
discussed in the FY 2005 IPPS final rule), we
revised the methodology for computing
capital payments to hospitals located in
Puerto Rico to be based on a blend of 25
percent of the Puerto Rico-specific capital
rate and 75 percent of the national capital
Federal rate for discharges occurring on or
after October 1, 2004.
A. Determination of Federal Hospital
Inpatient Capital-Related Prospective
Payment Rate Update
In the correction notice to the FY 2010
IPPS/RY 2010 LTCH PPS final rule published
on October 7, 2009 (74 FR 51499), we
established a capital Federal rate of $429.26
for FY 2010. However, as discussed earlier in
this final rule, in the June 2, 2010 Federal
Register, we announced the revised policies
and payment rates for FY 2010 under the
IPPS that reflected the provisions of the
Affordable Care Act. Specifically, in the FY
2010 IPPS/RY 2010 LTCH PPS final notice
(75 FR 31127), we established a capital
Federal rate of $429.56 for FY 2010. For
comparison purposes, the payment rates and
factors in this section are based on the
revised FY 2010 rates and factors announced
in that final notice published in Federal
Register on June 2, 2010.
As also discussed previously in this final
rule, several provisions of the Affordable
Care Act affected our proposed IPPS policies
and payment rates for FY 2011. However,
due to the timing of the passage of that
legislation we were unable to address those
provisions in the May 4, 2010 FY 2011 IPPS/
LTCH PPS proposed rule, and the proposed
policies and payment rates in that proposed
rule did not reflect the new legislation.
Although the provisions of the Affordable
Care Act do not directly affect capital IPPS
payment rates and factors, we revised our
proposed FY 2011 capital rates and factors in
the June 2, 2010 FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR 30977
through 30972) due to the effect of certain
provisions of the Affordable Care Act.
In the discussion that follows, we explain
the factors that we used to determine the
capital Federal rate for FY 2011. In
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particular, we explain why the FY 2011
capital Federal rate will decrease
approximately 2.27 percent, compared to the
FY 2010 capital Federal rate. As discussed in
the impact analysis in Appendix A of this
final rule, we estimate that capital payments
per discharge will decrease 0.5 percent
during that same period. Because capital
payments constitute about 10 percent of
hospital payments, a 1-percent change in the
capital Federal rate yields only about a 0.1
percent change in actual payments to
hospitals.
1. Projected Capital Standard Federal Rate
Update
a. Description of the Update Framework
Under § 412.308(c)(1), the capital standard
Federal rate is updated on the basis of an
analytical framework that takes into account
changes in a capital input price index (CIPI)
and several other policy adjustment factors.
Specifically, we adjust the projected CIPI
rate-of-increase as appropriate each year for
case-mix index-related changes, for intensity,
and for errors in previous CIPI forecasts. The
update factor for FY 2011 under that
framework is 1.5 percent based on the best
data available at this time. The update factor
under that framework is based on a projected
1.2 percent increase in the CIPI, a 0.0 percent
adjustment for intensity, a 0.0 percent
adjustment for case-mix, a 0.0 percent
adjustment for the FY 2009 DRG
reclassification and recalibration, and a
forecast error correction of 0.3 percent. As
discussed below in section III.C. of this
Addendum, we continue to believe that the
CIPI is the most appropriate input price
index for capital costs to measure capital
price changes in a given year. We also
explain the basis for the FY 2011 CIPI
projection in that same section of this
Addendum. We note, as discussed in section
VI.E.1. of the preamble of this final rule, we
applied a ¥2.9 percent adjustment to the
capital rate in FY 2011 to account for the
cumulative effect of changes in
documentation and coding under the MS–
DRGs that do not correspond to changes in
real increases in patients’ severity of illness.
Below we describe the policy adjustments
that we applied in the update framework for
FY 2011.
The case-mix index is the measure of the
average DRG weight for cases paid under the
IPPS. Because the DRG weight determines
the prospective payment for each case, any
percentage increase in the case-mix index
corresponds to an equal percentage increase
in hospital payments.
The case-mix index can change for any of
several reasons:
• The average resource use of Medicare
patients changes (‘‘real’’ case-mix change);
• Changes in hospital documentation and
coding of patient records result in higher
weight DRG assignments (‘‘coding effects’’);
and
• The annual DRG reclassification and
recalibration changes may not be budget
neutral (‘‘reclassification effect’’).
We define real case-mix change as actual
changes in the mix (and resource
requirements) of Medicare patients as
opposed to changes in documentation and
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coding behavior that result in assignment of
cases to higher weighted DRGs but do not
reflect higher resource requirements. The
capital update framework includes the same
case-mix index adjustment used in the
former operating IPPS update framework (as
discussed in the May 18, 2004 IPPS proposed
rule for FY 2005 (69 FR 28816)). (We no
longer use an update framework to make a
recommendation for updating the operating
IPPS standardized amounts as discussed in
section II. of Appendix B in the FY 2006 IPPS
final rule (70 FR 47707).)
Absent any increase in case-mix resulting
from changes in documentation and coding
due to the adoption of the MS–DRGs, for FY
2011, we are projecting a 1.0 percent total
increase in the case-mix index. We estimated
that the real case-mix increase will also equal
1.0 percent for FY 2011. The net adjustment
for change in case-mix is the difference
between the projected real increase in casemix and the projected total increase in casemix. Therefore, the net adjustment for casemix change in FY 2011 is 0.0 percentage
points.
The capital update framework also
contains an adjustment for the effects of DRG
reclassification and recalibration. This
adjustment is intended to remove the effect
on total payments of prior year’s changes to
the DRG classifications and relative weights,
in order to retain budget neutrality for all
case-mix index-related changes other than
those due to patient severity. Due to the lag
time in the availability of data, there is a
2-year lag in data used to determine the
adjustment for the effects of DRG
reclassification and recalibration. For
example, we have data available to evaluate
the effects of the FY 2009 DRG
reclassification and recalibration as part of
our update for FY 2011. To adjust for
reclassification and recalibration effects,
under our historical methodology, we ran the
FY 2009 cases through the FY 2008
GROUPER and through the FY 2009
GROUPER. The resulting ratio of the casemix indices equated to 1.0. If the resulting
ratio of the case-mix indices had not equated
to 1.0 under our historical methodology, in
the update framework for FY 2011 we would
have made an adjustment to adjust for the
reclassification and recalibration effects in
FY 2009. As discussed in detail in section
II.B. of the preamble of this final rule,
however, when we adopted the MS–DRGs
beginning in FY 2008 to better recognize
severity of illness in Medicare payment rates,
we also recognized that changes in
documentation and coding could potentially
lead to increases in aggregate payments
without a corresponding increase in patients’
severity of illness (that is, increased case-mix
index other than real case-mix index
increase). To maintain budget neutrality for
the adoption of the MS–DRGs, as discussed
in greater detail in section V.E. of the
preamble of this final rule, we made an
adjustment to the capital Federal rate for FY
2011 based on actuarial estimates of the
cumulative effects of documentation and
coding changes that occurred in FYs 2008
and 2009 (based on FYs 2008 and 2009
claims data). Therefore, as we proposed, we
did not adjust for reclassification and
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recalibration effects from FY 2009 in the
update framework for FY 2011 because it is
already accounted for in the documentation
and coding adjustment to the capital Federal
rates for FY 2011. Consequently, there is a
0.0 percent adjustment for DRG
reclassification and recalibration in the FY
2011 update framework.
The capital update framework also
contains an adjustment for forecast error. The
input price index forecast is based on
historical trends and relationships
ascertainable at the time the update factor is
established for the upcoming year. In any
given year, there may be unanticipated price
fluctuations that may result in differences
between the actual increase in prices and the
forecast used in calculating the update
factors. In setting a prospective payment rate
under the framework, we make an
adjustment for forecast error only if our
estimate of the change in the capital input
price index for any year is off by 0.25
percentage points or more. There is a 2-year
lag between the forecast and the availability
of data to develop a measurement of the
forecast error. A forecast error of 0.3
percentage points was calculated for the FY
2011 update. That is, current historical data
indicate that the forecasted FY 2009 CIPI (1.4
percent) used in calculating the FY 2009
update factor slightly understated the actual
realized price increases (1.7 percent) by 0.3
percentage points. This is due to the prices
associated with both the depreciation and
interest cost categories growing faster than
anticipated. Historically, when the
estimation of the change in the CIPI is greater
than 0.25 percentage points, it is reflected in
the update recommended under this
framework. Therefore, we made a 0.3 percent
adjustment for forecast error in the update for
FY 2011.
Under the capital IPPS update framework,
we also make an adjustment for changes in
intensity. Historically, we have calculated
this adjustment using the same methodology
and data that were used in the past under the
framework for operating IPPS. The intensity
factor for the operating update framework
reflects how hospital services are utilized to
produce the final product, that is, the
discharge. This component accounts for
changes in the use of quality-enhancing
services, for changes within DRG severity,
and for expected modification of practice
patterns to remove non-cost-effective
services. Our intensity measure is based on
a 5-year average.
Historically, we have calculated case-mix
constant intensity as the change in total
charges per admission, adjusted for price
level changes (the CIPI for hospital and
related services) and changes in real casemix. Without reliable estimates of the
proportions of the overall annual intensity
increases that are due, respectively, to
ineffective practice patterns and the
combination of quality-enhancing new
technologies and complexity within the DRG
system, we assume that one-half of the
annual increase is due to each of these
factors. The capital update framework thus
provides an add-on to the input price index
rate of increase of one-half of the estimated
annual increase in intensity, to allow for
increases within DRG severity and the
adoption of quality-enhancing technology.
We have developed a Medicare-specific
intensity measure based on a 5-year average.
Past studies of case-mix change by the RAND
Corporation (Has DRG Creep Crept Up?
Decomposing the Case Mix Index Change
Between 1987 and 1988 by G.M. Carter, J.P.
Newhouse, and D.A. Relles, R–4098–HCFA/
ProPAC (1991)) suggest that real case-mix
change was not dependent on total change,
but was usually a fairly steady increase of 1.0
to 1.5 percent per year. However, we used 1.4
percent as the upper bound because the
RAND study did not take into account that
hospitals may have induced doctors to
document medical records more completely
in order to improve payment.
As we noted above, in accordance with
§ 412.308(c)(1)(ii), we began updating the
capital standard Federal rate in FY 1996
using an update framework that takes into
account, among other things, allowable
changes in the intensity of hospital services.
For FYs 1996 through 2001, we found that
case-mix constant intensity was declining,
and we established a 0.0 percent adjustment
for intensity in each of those years. For FYs
2002 and 2003, we found that case-mix
constant intensity was increasing, and we
established a 0.3 percent adjustment and a
1.0 percent adjustment for intensity,
respectively. For FYs 2004 and 2005, we
found that the charge data appeared to be
skewed as a result of hospitals attempting to
maximize outlier payments, while lessening
costs, and we established a 0.0 percent
adjustment in each of those years.
Furthermore, we stated that we would
continue to apply a 0.0 percent adjustment
for intensity until any increase in charges can
be tied to intensity rather than attempts to
maximize outlier payments. For FYs 2006
through 2010, we continued to apply a 0.0
percent adjustment for intensity in the
capital update framework.
In an effort to further refine the intensity
adjustment and more accurately reflect
allowable changes in hospital intensity, as
we proposed, we used changes in hospital
costs per discharge over a 5-year average
rather than changes in hospital charges,
which have been the basis of the intensity
adjustment in prior years. The unique nature
of capital—how and when it is purchased, its
longevity, and how it is financed—creates a
greater degree of variance in capital cost
among hospitals than does operating cost. We
believe that using changes in capital costs per
discharge as the basis for the intensity
adjustment in lieu of changes in charges will
decrease some of the variability of this
adjustment. A case in point is the charge data
over much of the last decade: The annual
change in hospital charges has fluctuated
erratically from as little as 3 percent to as
large as 16 percent. As we have discussed for
several years in past rulemaking, we believe
the effects of hospitals’ charge practices prior
to the implementation of the outlier policy
revisions established in the June 9, 2003 final
rule were the main cause of the variability
and large annual increases in hospital
charges for much of the past decade.
However, even after the outlier policy was
implemented, we continued to see evidence
of these charge practices in the data, as it
may have taken hospitals some time to adopt
changes in their behavior in response to the
new outlier policy. Thus, we believe that the
charge data for much of the past decade was
skewed because if hospitals were treating
new or different types of cases, which would
result in an appropriate increase in charges
per discharge, we would expect hospitals’
case-mix to increase proportionally, and it
did not.
Therefore, for the reasons discussed above,
we believe it would be more appropriate to
use our intensity adjustment based on the
change in capital cost per discharge. To
determine the intensity adjustment for FY
2011, and as we proposed, we replaced
charge data with capital cost per discharge
data. As expected, there are significantly
smaller increases in cost per discharge over
this time period and less fluctuation from
year to year. As we did when using charge
data, we based the intensity measure on a
5-year average. Therefore, the intensity
measure for FY 2011 is based on an average
of cost per discharge data from the 5-year
period beginning with FY 2004 and
extending through FY 2008. Based on these
data, we estimated that case-mix constant
intensity declined during FYs 2004 through
2008. In the past (FYs 1996 through 2001)
when we found intensity to be declining, we
believed a zero (rather than negative)
intensity adjustment was appropriate.
Because we estimated that intensity declined
during that 5-year period, we believe that it
is appropriate to continue to apply a zero
intensity adjustment for FY 2011. Therefore,
we made a 0.0 percent adjustment for
intensity in the update for FY 2011.
Above, we described the basis of the
components used to develop the 1.5 percent
capital update factor under the capital update
framework for FY 2011 as shown in the table
below.
CMS FY 2011 UPDATE FACTOR TO THE CAPITAL FEDERAL RATE
Capital Input Price Index .............................................................................................................................................................................
Intensity ........................................................................................................................................................................................................
Case-Mix Adjustment Factors:
Real Across DRG Change ...................................................................................................................................................................
Projected Case-Mix Change ................................................................................................................................................................
¥1.0
1.0
Subtotal .........................................................................................................................................................................................
1.2
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CMS FY 2011 UPDATE FACTOR TO THE CAPITAL FEDERAL RATE—Continued
Effect of FY 2009 Reclassification and Recalibration .................................................................................................................................
Forecast Error Correction .....................................................................................................................................................................
0.0
0.3
Total Update .........................................................................................................................................................................................
1.5
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b. Comparison of CMS and MedPAC Update
Recommendation
In its March 2010 Report to Congress,
MedPAC did not make a specific update
recommendation for capital IPPS payments
for FY 2011. (MedPAC’s Report to the
Congress: Medicare Payment Policy, March
2010, Section 2A.)
2. Outlier Payment Adjustment Factor
Section 412.312(c) establishes a unified
outlier payment methodology for inpatient
operating and inpatient capital-related costs.
A single set of thresholds is used to identify
outlier cases for both inpatient operating and
inpatient capital-related payments. Section
412.308(c)(2) provides that the standard
Federal rate for inpatient capital-related costs
be reduced by an adjustment factor equal to
the estimated proportion of capital-related
outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds
are set so that operating outlier payments are
projected to be 5.1 percent of total operating
IPPS DRG payments.
For FY 2010, we estimated that outlier
payments for capital would equal 5.22
percent of inpatient capital-related payments
based on the capital Federal rate in FY 2010.
Based on the thresholds as set forth in
section II.A. of this Addendum, we estimate
that outlier payments for capital-related costs
will equal 5.96 percent for inpatient capitalrelated payments based on the capital
Federal rate in FY 2011. Therefore, we
applied an outlier adjustment factor of 0.9404
in determining the capital Federal rate. Thus,
we estimate that the percentage of capital
outlier payments to total capital standard
payments for FY 2011 would be higher than
the percentage for FY 2010. This increase in
capital outlier payments is primarily due to
the estimated decrease in capital IPPS
payments per discharge. That is, because
capital payments per discharge are projected
to be slightly lower in FY 2011 compared to
FY 2010, as shown in Table III. in section
VIII. of Appendix A to this final rule, more
cases would qualify for outlier payments.
The outlier reduction factors are not built
permanently into the capital rates; that is,
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they are not applied cumulatively in
determining the capital Federal rate. The FY
2011 outlier adjustment of 0.9404 is a ¥0.78
percent change from the FY 2010 outlier
adjustment of 0.9478. Therefore, the net
change in the outlier adjustment to the
capital Federal rate for FY 2011 is 0.9922
(0.9404/0.9478). Thus, the outlier adjustment
decreases the FY 2011 capital Federal rate by
0.78 percent compared with the FY 2010
outlier adjustment.
3. Budget Neutrality Adjustment Factor for
Changes in DRG Classifications and Weights
and the GAF
Section 412.308(c)(4)(ii) requires that the
capital Federal rate be adjusted so that
aggregate payments for the fiscal year based
on the capital Federal rate after any changes
resulting from the annual DRG
reclassification and recalibration and changes
in the GAF are projected to equal aggregate
payments that would have been made on the
basis of the capital Federal rate without such
changes. Because we implemented a separate
GAF for Puerto Rico, we apply separate
budget neutrality adjustments for the
national GAF and the Puerto Rico GAF. We
apply the same budget neutrality factor for
DRG reclassifications and recalibration
nationally and for Puerto Rico. Separate
adjustments were unnecessary for FY 1998
and earlier because the GAF for Puerto Rico
was implemented in FY 1998.
In the past, we used the actuarial capital
cost model (described in Appendix B of the
FY 2002 IPPS final rule (66 FR 40099)) to
estimate the aggregate payments that would
have been made on the basis of the capital
Federal rate with and without changes in the
DRG classifications and weights and in the
GAF to compute the adjustment required to
maintain budget neutrality for changes in
DRG weights and in the GAF. During the
transition period, the capital cost model was
also used to estimate the regular exception
payment adjustment factor. As we explained
in section III.A. of this Addendum, beginning
in FY 2002, an adjustment for regular
exception payments was no longer necessary.
Therefore, we no longer use the capital cost
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model. Instead, we use historical data based
on hospitals’ actual cost experiences to
determine the exceptions payment
adjustment factor for special exceptions
payments.
To determine the factors for FY 2011, we
compared (separately for the national capital
rate and the Puerto Rico capital rate)
estimated aggregate capital Federal rate
payments based on the FY 2010 MS–DRG
classifications and relative weights and the
FY 2010 GAF to estimated aggregate capital
Federal rate payments based on the FY 2010
MS–DRG classifications and relative weights
and the FY 2011 GAFs. In making the
comparison, we set the exceptions reduction
factor to 1.00. To achieve budget neutrality
for the changes in the national GAFs, based
on calculations using updated data, we
applied an incremental budget neutrality
adjustment of 0.9999 for FY 2011 to the
previous cumulative FY 2010 adjustment of
0.9911, yielding an adjustment of 0.9910,
through FY 2011 (calculated with unrounded
numbers). For the Puerto Rico GAFs, we
applied an incremental budget neutrality
adjustment of 1.0005 for FY 2011 to the
previous cumulative FY 2010 adjustment of
0.9969, yielding a cumulative adjustment of
0.9974 through FY 2011.
We then compared estimated aggregate
capital Federal rate payments based on the
FY 2010 DRG relative weights and the FY
2011 GAFs to estimated aggregate capital
Federal rate payments based on the
cumulative effects of the FY 2011 MS–DRG
classifications and relative weights and the
FY 2011 GAFs. The incremental adjustment
for DRG classifications and changes in
relative weights is 0.9991 both nationally and
for Puerto Rico. The cumulative adjustments
for MS–DRG classifications and changes in
relative weights and for changes in the GAFs
through FY 2011 are 0.9902 nationally and
0.9965 for Puerto Rico. The following table
summarizes the adjustment factors for each
fiscal year:
BILLING CODE 4120–01–P
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The methodology used to determine the
recalibration and geographic adjustment
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factor (GAF/DRG) budget neutrality
adjustment is similar to the methodology
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used in establishing budget neutrality
adjustments under the IPPS for operating
costs. One difference is that, under the
operating IPPS, the budget neutrality
adjustments for the effect of geographic
reclassifications are determined separately
from the effects of other changes in the
hospital wage index and the DRG relative
weights. Under the capital IPPS, there is a
single GAF/DRG budget neutrality
adjustment factor (the national capital rate
and the Puerto Rico capital rate are
determined separately) for changes in the
GAF (including geographic reclassification)
and the DRG relative weights. In addition,
there is no adjustment for the effects that
geographic reclassification has on the other
payment parameters, such as the payments
for DSH or IME.
For FY 2010, we calculated a revised final
GAF/DRG budget neutrality factor of 0.9994
(75 FR 31125). For FY 2011, we established
a GAF/DRG budget neutrality factor of
0.9990. 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 2010 to FY 2011 is 0.9990. The
cumulative change in the capital Federal rate
due to this adjustment is 0.9902 (the product
of the incremental factors for FYs 1995
though 2010 and the incremental factor of
0.9990 for FY 2011). (We note that averages
of the incremental factors that were in effect
during FYs 2005 and 2006, respectively, were
used in the calculation of the cumulative
adjustment of 0.9902 for FY 2011.)
The factor accounts for the MS–DRG
reclassifications and recalibration and for
changes in the GAFs. It also incorporates the
effects on the GAFs of FY 2011 geographic
reclassification decisions made by the
MGCRB compared to FY 2010 decisions.
However, it does not account for changes in
payments due to changes in the DSH and
IME adjustment factors.
4. Exceptions Payment Adjustment Factor
Section 412.308(c)(3) of our regulations
requires that the capital standard Federal rate
be reduced by an adjustment factor equal to
the estimated proportion of additional
payments for both regular exceptions and
special exceptions under § 412.348 relative to
total capital PPS payments. In estimating the
proportion of regular exception payments to
total capital PPS payments during the
transition period, we used the actuarial
capital cost model originally developed for
determining budget neutrality (described in
Appendix B of the FY 2002 IPPS final rule
(66 FR 40099)) to determine the exceptions
payment adjustment factor, which was
applied to both the Federal and hospitalspecific capital rates.
An adjustment for regular exception
payments is no longer necessary in
determining the FY 2011 capital Federal rate
because, in accordance with § 412.348(b),
regular exception payments were only made
for cost reporting periods beginning on or
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after October 1, 1991 and before October 1,
2001. Accordingly, as we explained in the FY
2002 IPPS final rule (66 FR 39949), in FY
2002 and subsequent fiscal years, no
payments are made under the regular
exceptions provision. However, in
accordance with § 412.308(c), we still need to
compute a budget neutrality adjustment for
special exception payments under
§ 412.348(g). We describe our methodology
for determining the exceptions adjustment
used in calculating the FY 2011 capital
Federal rate below.
Under the special exceptions provision
specified at § 412.348(g)(1), eligible hospitals
include SCHs, urban hospitals with at least
100 beds that have a disproportionate share
percentage of at least 20.2 percent or qualify
for DSH payments under § 412.106(c)(2), and
hospitals with a combined Medicare and
Medicaid inpatient utilization of at least 70
percent. An eligible hospital may receive
special exceptions payments if it meets the
following criteria: (1) A project need
requirement as described at § 412.348(g)(2),
which, in the case of certain urban hospitals,
includes an excess capacity test as described
at § 412.348(g)(4); (2) an age of assets test as
described at § 412.348(g)(3); and (3) a project
size requirement as described at
§ 412.348(g)(5).
Based on information compiled from our
fiscal intermediaries and MACs, six hospitals
have qualified for special exceptions
payments under § 412.348(g). One of these
hospitals closed in May 2005. Because we
have cost reports covering FY 2008 for four
of these five hospitals, we calculated the
adjustment based on actual cost experience.
(We note that the one hospital for which we
do not have FY 2008 cost report data has had
zero special exception payments for all
available past cost reports. Consequently, we
expect that this hospital would not have any
special exceptions payments in FY 2008, and
the lack of this hospital’s FY 2008 cost report
data would not distort the calculation of the
adjustment.) Using data from cost reports
covering FY 2008 from the March 2010
update of the HCRIS data, we divided the
capital special exceptions payment amounts
for the four available hospitals that qualified
for special exceptions by the total capital PPS
payment amounts (including special
exception payments) for all hospitals. Based
on the data from cost reports covering FY
2008, this ratio rounds to 0.0004, and we
made an adjustment of 0.0004. Because
special exceptions are budget neutral, we
offset the capital Federal rate by 0.04 percent
for special exceptions payments for FY 2011.
Therefore, the exceptions adjustment factor is
equal to 0.9996 (1 ¥ 0.0004) to account for
special exceptions payments in FY 2011.
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44019), we estimated that
total (special) exceptions payments for FY
2010 would equal 0.02 percent of aggregate
payments based on the capital Federal rate.
Therefore, we applied an exceptions
adjustment factor of 0.9998 (1 ¥ 0.0002) to
determine the FY 2010 capital Federal rate.
As we stated above, we applied an
exceptions payment adjustment factor of
0.9996 (1 ¥ 0.0004) to the capital Federal
rate for FY 2011 based on our estimate that
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50439
exceptions payments in FY 2011 would equal
0.04 percent of aggregate payments based on
the FY 2011 capital Federal rate. The
exceptions reduction factors are not built
permanently into the capital rates; that is, the
factors are not applied cumulatively in
determining the capital Federal rate.
Therefore, the net change in the exceptions
adjustment factor used in determining the FY
2011 capital Federal rate is 0.9998 (0.9996/
0.9998).
5. Capital Standard Federal Rate for FY 2011
For FY 2010, we established a final capital
Federal rate of $429.56. Consistent with
section 3401(p) of Public Law 111–148, this
rate is applicable to discharges occurring on
or after April 1, 2010 (75 FR 31127). We
established an update of 1.5 percent in
determining the FY 2011 capital Federal rate
for all hospitals. However, as discussed in
greater detail in section V.E. of the preamble
of this final rule, under the statutory
authority at section 1886(g) of the Act,
consistent with section 1886(d)(3)(A)(vi) of
the Act and section 7(b) of Public Law 110–
90, we are making an additional 2.9 percent
reduction to the national capital Federal
payment rate in FY 2011. The ¥2.9 percent
adjustment is based on our actuary’s analysis
of the effect of changes in case-mix resulting
from documentation and coding changes that
do not reflect real changes in the case-mix in
light of the adoption of MS–DRGs.
Accordingly, we applied a cumulative
documentation and coding adjustment factor
of 0.9574 in determining the FY 2011 capital
Federal rate (that is, the existing ¥0.6
percent adjustment in FY 2008 plus the ¥0.9
percent adjustment in FY 2009 plus the
additional ¥2.9 percent adjustment,
computed as 1 divided by (1.006 × 1.009 ×
1.029). (We note that we did not apply a
documentation and coding adjustment to the
capital Federal rate in FY 2010 (74 FR
43927).) As a result of the 1.5 percent update
and other budget neutrality factors discussed
above, we established a national capital
Federal rate of $420.01 for FY 2011. The
national capital Federal rate for FY 2011 was
calculated as follows:
• The FY 2011 update factor is 1.015, that
is, the update is 1.5 percent.
• The FY 2011 budget neutrality
adjustment factor that is applied to the
capital standard Federal payment rate for
changes in the MS–DRG classifications and
relative weights and changes in the GAFs is
0.9990.
• The FY 2011 outlier adjustment factor is
0.9404.
• The FY 2011 (special) exceptions
payment adjustment factor is 0.9996.
• The cumulative adjustment factor for FY
2011 applied to the national capital Federal
rate for changes in documentation and
coding under the MS–DRGs is 0.9574.
Because the capital Federal rate has
already been adjusted for differences in casemix, wages, cost-of-living, indirect medical
education costs, and payments to hospitals
serving a disproportionate share of lowincome patients, we did not make additional
adjustments in the capital standard Federal
rate for these factors, other than the budget
neutrality factor for changes in the MS–DRG
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VI.E.1. of the preamble of this final rule, a
cumulative adjustment of ¥1.5 percent (that
is, the ¥0.6 percent in FY 2008 and ¥0.9
percent in FY 2009) or a cumulative
adjustment factor of 0.985 has already been
applied to the FY 2010 capital Federal rate
for changes in documentation and coding
that do not reflect real changes in patients’
severity of illness. We did not apply any
additional documentation and coding
adjustments to the capital Federal rate in FY
2010). The combined effect of all the changes
will decrease the national capital Federal rate
by approximately 2.2 percent compared to
the FY 2010 national capital Federal rate.
Federal rate differs from the proposed FY
2011 capital Federal rate as presented in the
June 2, 2010 FY 2011 IPPS/LTCH PPS
supplemental proposed rule.
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ER16AU10.132
the capital Federal rate by 0.78 percent
compared to the FY 2010 capital Federal rate.
The FY 2011 exceptions payment adjustment
factor has the effect of decreasing the capital
Federal rate by 0.02 percent compared to the
FY 2010 capital Federal rate. Furthermore, as
shown in the chart below, the resulting
cumulative adjustment for changes in
documentation and coding that do not reflect
real changes in patients’ severity of illness
(that is, the cumulative adjustment factor of
0.9574 has the net effect of decreasing the FY
2011 national capital Federal rate by 2.80
percent as compared to the FY 2010 national
capital Federal rate. (As discussed in section
We also are providing the following chart
that shows how the final FY 2011 capital
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classifications and relative weights and for
changes in the GAFs.
We are providing the following chart that
shows how each of the factors and
adjustments for FY 2011 affects the
computation of the FY 2011 national capital
Federal rate in comparison to the FY 2010
national capital Federal rate. The FY 2011
update factor has the effect of increasing the
capital Federal rate by 1.5 percent compared
to the FY 2010 capital Federal rate. The GAF/
DRG budget neutrality factor of 0.9990 has
the effect of decreasing the capital Federal
rate by 0.10 percent. The FY 2011 outlier
adjustment factor has the effect of decreasing
6. Special Capital Rate for Puerto Rico
Hospitals
Section 412.374 provides for the use of a
blended payment system for payments to
hospitals located in Puerto Rico under the
PPS for acute care hospital inpatient capitalrelated costs. Accordingly, under the capital
PPS, we compute a separate payment rate
specific to hospitals located in Puerto Rico
using the same methodology used to compute
the national Federal rate for capital-related
costs. Under the broad authority of section
1886(g) of the Act, as discussed in section V.
of the preamble of this final rule, beginning
with discharges occurring on or after October
1, 2004, capital payments to hospitals located
in Puerto Rico are based on a blend of 25
percent of the Puerto Rico capital rate and 75
percent of the capital Federal rate. The
Puerto Rico capital rate is derived from the
costs of Puerto Rico hospitals only, while the
capital Federal rate is derived from the costs
of all acute care hospitals participating in the
IPPS (including Puerto Rico).
To adjust hospitals’ capital payments for
geographic variations in capital costs, we
apply a GAF to both portions of the blended
capital rate. The GAF is calculated using the
operating IPPS wage index, and varies
depending on the labor market area or rural
area in which the hospital is located. We use
the Puerto Rico wage index to determine the
GAF for the Puerto Rico part of the capitalblended rate and the national wage index to
determine the GAF for the national part of
the blended capital rate.
Because we implemented a separate GAF
for Puerto Rico in FY 1998, we also apply
separate budget neutrality adjustments for
the national GAF and for the Puerto Rico
GAF. However, we apply the same budget
neutrality factor for DRG reclassifications and
recalibration nationally and for Puerto Rico.
The national GAF budget neutrality factor is
1.0005 and the DRG adjustment is 0.9991, for
a combined cumulative adjustment of 0.9965.
In computing the payment for a particular
Puerto Rico hospital, the Puerto Rico portion
of the capital rate (25 percent) is multiplied
by the Puerto Rico-specific GAF for the labor
market area in which the hospital is located,
and the national portion of the capital rate
(75 percent) is multiplied by the national
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GAF for the labor market area in which the
hospital is located (which is computed from
national data for all hospitals in the United
States and Puerto Rico). In FY 1998, we
implemented a 17.78 percent reduction to the
Puerto Rico capital rate as a result of Pub. L.
105–33. In FY 2003, a small part of that
reduction was restored.
For FY 2010, the special capital rate for
hospitals located in Puerto Rico was $203.57
(75 FR 31128). Consistent with our
development of the FY 2010 Puerto Ricospecific operating standardized amount, we
have not applied the ¥0.6 percent
adjustment in FY 2008 or the ¥0.9 percent
documentation and coding adjustment in FY
2009 (that is, the cumulative ¥1.5 percent
adjustment) that was applied to the national
capital Federal rate to the Puerto Ricospecific capital rate. However, we noted in
the FY 2009 IPPS final rule (73 FR 48449
through 48550) that we may propose to apply
such an adjustment to the Puerto Rico
operating and capital rates in the future.
As noted above and discussed in greater
detail in section V.E.4. of the preamble of this
final rule, consistent with our development
of the Puerto Rico-specific operating
standardized amount, we applied a ¥2.6
percent adjustment to account for changes in
documentation and coding that resulted from
the adoption of the MS–DRGs in determining
the FY 2011 Puerto Rico-specific capital rate.
With the changes we made to the other
factors used to determine the capital rate, the
FY 2011 special capital rate for hospitals in
Puerto Rico is $197.66.
B. Calculation of the Inpatient CapitalRelated Prospective Payments for FY 2011
Because the 10-year capital PPS transition
period ended in FY 2001, all hospitals
(except ‘‘new’’ hospitals under § 412.324(b)
and under § 412.304(c)(2)) are paid based on
100 percent of the capital Federal rate in FY
2011.
For purposes of calculating payments for
each discharge during FY 2011, the capital
standard Federal rate is adjusted as follows:
(Standard Federal Rate) × (DRG weight) ×
(GAF) × (COLA for hospitals located in
Alaska and Hawaii) × (1 + DSH Adjustment
Factor + IME Adjustment Factor, if
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50441
applicable). The result is the adjusted capital
Federal rate.
Hospitals also may receive outlier
payments for those cases that qualify under
the thresholds established for each fiscal
year. Section 412.312(c) provides for a single
set of thresholds to identify outlier cases for
both inpatient operating and inpatient
capital-related payments. The outlier
thresholds for FY 2011 are in section II.A. of
this Addendum. For FY 2011, a case would
qualify as a cost outlier if the cost for the case
plus the (operating) IME and DSH payments
is greater than the prospective payment rate
for the MS–DRG plus the fixed-loss amount
of $23,075.
An eligible hospital may also qualify for a
special exceptions payment under
§ 412.348(g) up through the 10th year beyond
the end of the capital transition period if it
meets the following criteria: (1) A project
need requirement described at
§ 412.348(g)(2), which in the case of certain
urban hospitals includes an excess capacity
test as described at § 412.348(g)(4); and (2) a
project size requirement as described at
§ 412.348(g)(5). Eligible hospitals include
SCHs, urban hospitals with at least 100 beds
that have a DSH patient percentage of at least
20.2 percent or qualify for DSH payments
under § 412.106(c)(2), and hospitals that have
a combined Medicare and Medicaid inpatient
utilization of at least 70 percent. Under
§ 412.348(g)(8), the amount of a special
exceptions payment is determined by
comparing the cumulative payments made to
the hospital under the capital PPS to the
cumulative minimum payment level. This
amount is offset by: (1) Any amount by
which a hospital’s cumulative capital
payments exceed its cumulative minimum
payment levels applicable under the regular
exceptions process for cost reporting periods
beginning during which the hospital has
been subject to the capital PPS; and (2) any
amount by which a hospital’s current year
operating and capital payments (excluding 75
percent of operating DSH payments) exceed
its operating and capital costs. Under
§ 412.348(g)(6), the minimum payment level
is 70 percent for all eligible hospitals. We
note that this was a 10-year provision.
Therefore, FY 2012 is the final year hospitals
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will be eligible for the special exceptions
payment.
Currently, as provided in § 412.304(c)(2),
we pay a new hospital 85 percent of its
reasonable costs during the first 2 years of
operation unless it elects to receive payment
based on 100 percent of the capital Federal
rate. Effective with the third year of
operation, we pay the hospital based on 100
percent of the capital Federal rate (that is, the
same methodology used to pay all other
hospitals subject to the capital PPS).
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C. Capital Input Price Index
1. Background
Like the operating input price index, the
capital input price index (CIPI) is a fixedweight price index that measures the price
changes associated with capital costs during
a given year. The CIPI differs from the
operating input price index in one important
aspect—the CIPI reflects the vintage nature of
capital, which is the acquisition and use of
capital over time. Capital expenses in any
given year are determined by the stock of
capital in that year (that is, capital that
remains on hand from all current and prior
capital acquisitions). An index measuring
capital price changes needs to reflect this
vintage nature of capital. Therefore, the CIPI
was developed to capture the vintage nature
of capital by using a weighted-average of past
capital purchase prices up to and including
the current year.
We periodically update the base year for
the operating and capital input price indexes
to reflect the changing composition of inputs
for operating and capital expenses. In the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 44021), we rebased and revised the CIPI
to a FY 2006 base year to reflect the more
current structure of capital costs in hospitals.
A complete discussion of this rebasing is
provided in section IV. of the preamble of
that final rule.
2. Forecast of the CIPI for FY 2011
Based on the latest forecast by IHS Global
Insight, Inc. (second quarter of 2010), we are
forecasting the FY 2006-based CIPI to
increase 1.2 percent in FY 2011. This reflects
a projected 1.7 percent increase in vintageweighted depreciation prices (building and
fixed equipment, and movable equipment),
and a 1.6 percent increase in other capital
expense prices in FY 2011, partially offset by
2.1 percent decline in vintage-weighted
interest expenses in FY 2011. The weighted
average of these three factors produces the
1.2 percent increase for the FY 2006-based
CIPI as a whole in FY 2011.
IV. Changes to Payment Rates for Excluded
Hospitals: Rate-of-Increase Percentages
Historically, hospitals and hospital units
excluded from the prospective payment
system received payment for inpatient
hospital services they furnished on the basis
of reasonable costs, subject to a rate-ofincrease ceiling. An annual per discharge
limit (the target amount as defined in
§ 413.40(a)) was set for each hospital or
hospital unit based on the hospital’s own
cost experience in its base year, and updated
annually by a rate-of-increase percentage.
The updated target amount for that period
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was multiplied by the Medicare discharges
during that period and applied as an
aggregate upper limit (the ceiling as defined
in § 413.40(a)) on total inpatient operating
costs for a hospital’s cost reporting period.
Prior to October 1, 1997, these payment
provisions applied consistently to all
categories of excluded providers
(rehabilitation hospitals and units (now
referred to as IRFs), psychiatric hospitals and
units (now referred to as IPFs), LTCHs,
children’s hospitals, and cancer hospitals).
Payments for services furnished in
children’s hospitals and cancer hospitals that
are excluded from the IPPS continue to be
subject to the rate-of-increase ceiling based
on the hospital’s own historical cost
experience. (We note that, in accordance
with § 403.752(a), RNHCIs are also subject to
the rate-of-increase limits established under
§ 413.40 of the regulations.)
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24016 and 24082), we proposed
that the FY 2011 rate-of-increase percentage
for updating the target amounts for cancer
and children’s hospitals and RNHCIs was the
estimated percentage increase in the FY 2011
IPPS operating market basket, estimated to be
2.4 percent, in accordance with applicable
regulations at § 413.40. We also proposed to
use the most recent data when determining
the estimated percentage increase for the FY
2011 IPPS market basket for the final rule, to
the extent these data were available. For this
final rule, we are using the most recent data
available to determine the FY 2011 IPPS
operating market basket. Based on IHS Global
Insight, Inc.’s second quarter 2010 forecast,
with historical data through the 2010 first
quarter, the IPPS operating market basket is
2.6 percent for FY 2011. Therefore, for cancer
and children’s hospitals and RNHCIs, the FY
2011 rate-of-increase percentage that is
applied to the FY 2010 target amounts in
order to determine the FY 2011 target amount
is 2.6 percent.
IRFs, IPFs, and LTCHs were previously
paid under the reasonable cost methodology.
However, the statute was amended to provide
for the implementation of prospective
payment systems for IRFs, IPFs, and LTCHs.
In general, the prospective payment systems
for IRFs, IPFs, and LTCHs provide
transitioning periods of varying lengths of
time during which a portion of the
prospective payment is based on cost-based
reimbursement rules under 42 CFR part 413
(certain providers do not receive a
transitioning period or may elect to bypass
the transition as applicable under 42 CFR
part 412, subparts N, O, and P.) We note that
all of the various transitioning periods
provided for under the IRF PPS, the IPF PPS,
and the LTCH PPS have ended.
The IRF PPS, the IPF PPS, and the LTCH
PPS are updated annually. We refer readers
to section VII. of the preamble and section V.
of the Addendum to this final rule for the
update changes to the Federal payment rates
for LTCHs under the LTCH PPS for FY 2011.
The annual updates for the IRF PPS and the
IPF PPS are issued by the agency in separate
Federal Register documents.
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V. Changes to the Payment Rate for the
LTCH PPS for FY 2011
A. LTCH PPS Standard Federal Rate for FY
2011
1. Background
In section VII. of the preamble of this final
rule, we discuss our changes to the payment
rates, factors, and specific policies under the
LTCH PPS for FY 2011. As discussed earlier,
we note that the Affordable Care Act made
a number of changes that affected the LTCH
PPS for FY 2010 and FY 2011. Because we
were unable to incorporate the provisions of
the Affordable Care Act in the FY 2011 IPPS/
LTCH PPS proposed rule that appeared in the
Federal Register on May 4, 2010 due to the
timing of enactment of the Affordable Care
Act, we issued in the Federal Register on
June 2, 2010, a supplemental proposed rule
that proposed to implement the provisions of
the Affordable Care Act affecting the IPPS
and LTCH PPS for FY 2011. The final
policies and payment rates in this final rule
reflect the applicable provisions of this new
legislation and address the public comments
that we received on both the May 4, 2010
proposed rule and the June 2, 2010
supplemental proposed rule. We also note
that we issued a final notice in the Federal
Register on June 2, 2010, to implement the
provisions of the Affordable Care Act that
affect the policies and payment rates for RY
2010 under the LTCH PPS.
At § 412.523(c)(3)(ii) of the regulations, for
LTCH PPS rate years beginning RY 2004
through RY 2006, we updated the standard
Federal rate by a factor to adjust for the most
recent estimate of the increases in prices of
an appropriate market basket of goods and
services for LTCHs. We established a policy
of annually updating the standard Federal
rate because, at that time, we believed that
was the most appropriate method for
updating the LTCH PPS standard Federal rate
annually for years after the initial
implementation of the LTCH PPS in FY 2003.
Thus, under § 412.523(c)(3)(ii), for RYs 2004
through 2006, the annual update to the LTCH
PPS standard Federal rate was equal to the
previous rate year’s Federal rate updated by
the most recent estimate of increases in the
appropriate market basket of goods and
services included in covered inpatient LTCH
services.
In determining the annual update to the
standard Federal rate for RY 2007, based on
our ongoing monitoring activity, we believed
that, rather than solely using the most recent
estimate of the LTCH PPS market basket as
the basis of the update factor, it was
appropriate to adjust the standard Federal
rate to account for the effect of
documentation and coding in a prior period
that was unrelated to patients’ severity of
illness (71 FR 27818). Accordingly, we
established regulations at § 412.523(c)(3)(iii)
to specify that the update to the standard
Federal rate for RY 2007 was zero percent
based on the most recent estimate of the
LTCH PPS market basket at that time, offset
by an adjustment to account for changes in
case-mix in prior periods due to the effect of
documentation and coding that were
unrelated to patients’ severity of illness in FY
2004. For RYs 2008 through 2010, we also
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considered the effect of documentation and
coding that was unrelated to patients’
severity of illness in establishing the annual
update to the standard Federal rate as set
forth in the regulations at §§ 412.523(c)(3)(iv)
through (c)(3)(vi). (We note that section
114(e)(1) of Public Law 110–173 provided
that the standard Federal rate for RY 2008
shall be the same as the standard Federal rate
for RY 2007. In addition, section 114(e)(2) of
Public Law 110–173 specified that the
revised standard Federal rate provided for
under section 114(e)(1) ‘‘shall not apply to
discharges occurring on or after July 1, 2007,
and before April 1, 2008,’’ effectively
resulting in a delay of the application of the
updated standard Federal rate for RY 2007
established in the RY 2008 LTCH PPS final
rule (72 FR 26890).)
Consistent with our historical practice, in
the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 44022), we established an annual
update to the standard Federal rate for RY
2010 based on the most recent estimate of the
increase in the LTCH PPS market basket at
that time of 2.5 percent and an adjustment of
¥0.5 percent to account for the increase in
case-mix in a prior period (FY 2007) due to
the effect of documentation and coding
unrelated to an increase in patients’ severity
of illness. Accordingly, we established
regulations at § 412.523(c)(3)(vi) to specify
that the update to the standard Federal rate
for RY 2010 is 2.0 percent. However, as noted
above, the Affordable Care Act revised the
update to the standard Federal rate for RY
2010. Newly added section 1886(m)(3)(A)(ii)
of the Act provides that, for each of RYs 2010
through 2019, any annual update to the
standard Federal rate is reduced by the ‘‘other
adjustment’’ described in section 1886(m)(4)
of the Act. Specifically, newly added sections
1886(m)(3)(A)(ii) and (m)(4)(A) of the Act
require a 0.25 percentage point reduction to
the annual update to the standard Federal
rate for RY 2010. 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. Section 3401(p) of
Public Law 111–148 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 paid
based on the revised RY 2010 standard
Federal rate (and will be paid based on the
standard Federal rate of $39,896.65 as
established in the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44022)).
Accordingly, in the June 2, 2010 FY 2010
IPPS/RY 2010 LTCH PPS notice (75 FR
31128), we established an update to the
LTCH PPS standard Federal rate for RY 2010
of 1.74 percent, based on the full forecasted
estimated increase in the LTCH PPS market
basket (2.5 percent), adjusted by the 0.25
percentage point reduction required by
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sections 1886(m)(3)(A)(ii) and (m)(4)(A) of
the Act, and an adjustment to account for the
increase in case-mix in a prior period (FY
2007) resulting from the effect of
documentation and coding of ¥0.5 percent.
As discussed in section VII.C.2.c. of the
preamble of this final rule, we are finalizing
the proposal contained in the June 2, 2010
FY 2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30969) to revise
§ 412.523(c)(3)(vi) to specify 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. Furthermore, consistent with
section 3401(p) of Public Law 111–148, in
this final rule, we also are finalizing our
proposal to revise § 412.523(c)(3)(vi) to
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)(3)(v)
updated by 2.0 percent (75 FR 30969).
2. Development of the FY 2011 LTCH PPS
Standard Federal Rate
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
effect of documentation and coding practices
that does not reflect increased severity of
illness. Such an adjustment protects the
integrity of the Medicare Trust Funds by
ensuring that the LTCH PPS payment rates
better reflect the true costs of treating LTCH
patients. Furthermore, as we discussed most
recently in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 44022), we did not
establish a case-mix budget neutrality factor
(that is, a documentation and coding
adjustment for changes in case-mix that are
not due to changes in patients’ severity of
illness) for the adoption of the severity
adjusted MS–LTC–DRG patient classification
system. Rather, we noted that, consistent
with past LTCH payment policy, we would
continue to monitor LTCH data, and we
could propose to make adjustments when
updating the LTCH PPS standard Federal rate
in the future to account for the effect of
documentation and coding that does not
reflect any real changes in case-mix during
these years that we are implementing MS–
LTC–DRGs. As described above, in the FY
2010 IPPS/RY 2010 LTCH PPS final rule, we
applied a ¥0.5 percent adjustment to
account for the effect of documentation and
coding on the increase in case-mix in FY
2007. Although we proposed a ¥1.3 percent
adjustment to account for the effect of
documentation and coding on the increase in
case-mix in FY 2008, in that same final rule
after consideration of public comments and
consistent with IPPS policy, we delayed the
application of that adjustment (74 FR 43970
through 43972).
For FY 2011, as discussed in the May 4,
2010 FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 24045 through 24047), we performed
a case-mix analysis using the most recent
available LTCH claims data (FY 2009) under
both the current MS–LTC–DRG and the
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50443
former CMS LTC–DRG patient classification
systems. Based on this evaluation, we
determined that there was a cumulative
increase in LTCH case-mix of 2.5 percent due
to the effect of documentation and coding
that did not reflect real changes in severity
of illness for LTCH discharges occurring in
FY 2008 and FY 2009. Consistent with our
historical practice, in that same proposed
rule, we proposed to update the LTCH PPS
standard Federal rate for FY 2011 based on
the full proposed LTCH PPS market basket
increase estimate at that time (2.4 percent)
and a proposed adjustment to account for the
increase in case-mix in prior periods (FYs
2008 and 2009) that resulted from the effect
of documentation and coding practices of
¥2.5 percent. As noted above in this section,
although a number of the provisions of the
Affordable Care Act affect the LTCH PPS, due
to the timing of the passage of that
legislation, we were unable to address those
provisions in the May 4, 2010 FY 2011 IPPS/
LTCH PPS proposed rule. Therefore, the
proposed policies and payment rates in that
proposed rule did not reflect the new
legislation. We addressed the provisions of
the Affordable Care Act that affected our
proposed policies and payment rates for FY
2011 under the LTCH PPS in the June 2, 2010
IPPS/LTCH PPS supplemental proposed rule
(75 FR 30918).
As discussed in the June 2, 2010 FY 2010
IPPS/LTCH PPS supplemental proposed rule
(75 FR 30969), section 1886(m)(3)(A)(ii) of
the Act provides that, for each of RYs 2010
through 2019, any annual update to the
standard Federal rate is reduced by the ‘‘other
adjustment’’ described in section 1886(m)(4)
of the Act. Specifically, sections
1886(m)(3)(A)(ii) and (m)(4)(B) of the Act
require a 0.50 percentage point reduction to
the annual update to the standard Federal
rate for FY 2011. Consistent with our
historical practice, in that same supplemental
proposed rule, we proposed to update the
LTCH PPS standard Federal rate for FY 2011
based on the full proposed LTCH PPS market
basket increase estimate at that time (2.4
percent), adjusted by the 0.50 percentage
point reduction required by sections
1886(m)(3)(A)(ii) and (m)(4)(B) of the Act,
and a proposed adjustment to account for the
increase in case-mix in prior periods (FYs
2008 and 2009) that resulted from the effect
of documentation and coding practices (¥2.5
percent). Consequently, we proposed an
update factor to the standard Federal rate for
FY 2011 of ¥0.59 percent (that is, we
proposed to apply a factor of 0.9941 in
determining the LTCH PPS standard Federal
rate for FY 2011, calculated as 1.019 × 1
divided by 1.025 = 0.9941 or ¥0.59 percent
(0.9941 minus 1 equals 0.59 percent)).
Consistent with our historical practice of
updating the standard Federal rate for the
previous rate year, we applied the proposed
update factor of 0.9941 to the revised RY
2010 standard Federal rate that was
established in accordance with the
provisions of sections 1886(m)(3)(A)(ii) and
(m)(4)(A) of the Act (that is, $39,794.95 as
established in the FY 2010 IPPS/RY 2010
LTCH PPS final notice (75 FR 31128 through
31129). Consequently, the proposed standard
Federal rate for FY 2011 was $39,560.16.
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Furthermore, in the June 2, 2010 FY 2010
IPPS/LTCH PPS supplemental proposed rule
(75 FR 30971), we proposed to amend
§ 412.523 to add a new paragraph (c)(3)(vii)
to specify that the standard Federal rate for
discharges occurring on or after October 1,
2010 through September 30, 2011, is the
standard Federal rate for the previous rate
year updated by ¥0.59 percent. We also
proposed that if more recent data become
available, we would use those data, if
appropriate, to determine the update to the
standard Federal rate for FY 2011 in the final
rule, and, thus, the standard Federal rate
update specified in the proposed regulation
text at § 412.523(c)(3)(vii) could change
accordingly.
In this final rule, as discussed in greater
detail in section VII.C.3. of the preamble of
this final rule, we are finalizing our proposal
to apply a ¥2.5 percent adjustment to the
standard Federal rate to account for the effect
of documentation and coding that did not
reflect real changes in patient severity of
illness for LTCH discharges that occurred in
FYs 2008 and 2009 based on our case-mix
analysis using the most recent available
LTCH claims data (FY 2009) under both the
current MS–LTC–DRG and the former CMS
LTC–DRG patient classification systems. At
this time, as discussed in section VII.C.2. of
the preamble of this final rule, the most
recent estimate of the increase in the LTCH
PPS market basket (that is, the FY 2002-based
RPL market basket) for FY 2011 is 2.5
percent. Consistent with our historical
practice and as we proposed, in this final
rule, we are establishing an update to the
LTCH PPS standard Federal rate for FY 2011
based on the full LTCH PPS market basket
increase estimate, including the statutorily
required 0.50 percentage point reduction, of
2.0 percent and an adjustment to account for
the increase in case-mix in prior periods (FYs
2008 and 2009) that resulted from the effect
of documentation and coding practices of
¥2.5 percent. Accordingly, the update factor
to the standard Federal rate for FY 2011 is
¥0.49 percent (that is, we are applying a
factor of 0.9951 in determining the LTCH
PPS standard Federal rate for FY 2011,
calculated as 1.020 × 1 divided by 1.025 =
0.9951 or ¥0.49 percent).
Therefore, in this final rule, under the
broad authority conferred upon the Secretary
under the BBRA and the BIPA to determine
appropriate updates under the LTCH PPS
and under the authority of sections
1886(m)(3)(A)(ii) and (m)(4)(B) of the Act,
consistent with our proposal, we are revising
§ 412.523 to add a new paragraph (c)(3)(vii)
to specify that the standard Federal rate for
discharges occurring on or after October 1,
2010 through September 30, 2011, is the
standard Federal rate for the previous rate
year updated by ¥0.49 percent. Consistent
with our historical practice, and as we
proposed, in determining the standard
Federal rate for FY 2011, we are applying the
update factor of 0.9951 to the RY 2010
Federal rate of $39,794.95 (as established in
the June 2, 2010 FY 2010 IPPS/RY 2010
LTCH PPS notice (75 FR 31128 through
31129)). Consequently, in this final rule, we
are establishing a standard Federal rate for
FY 2011 of $39,599.95, which will apply to
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LTCH PPS discharges occurring on or after
October 1, 2010 through September 30, 2011.
B. Adjustment for Area Wage Levels Under
the LTCH PPS for FY 2011
1. Background
Under the authority of section 123 of the
BBRA as amended by section 307(b) of the
BIPA, we established an adjustment to the
LTCH PPS standard Federal rate to account
for differences in LTCH area wage levels at
§ 412.525(c). The labor-related share of the
LTCH PPS standard Federal rate is adjusted
to account for geographic differences in area
wage levels by applying the applicable LTCH
PPS wage index. The applicable LTCH PPS
wage index is computed using wage data
from inpatient acute care hospitals without
regard to reclassification under section
1886(d)(8) or section 1886(d)(10) of the Act.
As we discussed in the August 30, 2002
LTCH PPS final rule (67 FR 56015), when we
implemented the LTCH PPS, we established
a 5-year transition to the full wage index
adjustment. The wage index adjustment was
completely phased in for cost reporting
periods beginning in FY 2007. Therefore, for
cost reporting periods beginning on or after
October 1, 2006, the applicable LTCH wage
index values are the full (five-fifths) LTCH
PPS wage index values calculated based on
acute care hospital inpatient wage index data
without taking into account geographic
reclassification under section 1886(d)(8) and
section 1886(d)(10) of the Act. For additional
information on the phase-in of the wage
index adjustment under the LTCH PPS, we
refer readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56017 through 56019)
and the RY 2008 LTCH PPS final rule (72 FR
26891).
2. Updates to the Geographic Classifications/
Labor Market Area Definitions
a. Background
As discussed in the August 30, 2002 LTCH
PPS final rule, which implemented the LTCH
PPS (67 FR 56015 through 56019), in
establishing an adjustment for area wage
levels, the labor-related portion of a LTCH’s
Federal prospective payment is adjusted by
using an appropriate wage index based on
the labor market area in which the LTCH is
located. Specifically, the application of the
LTCH PPS wage index adjustment at
§ 412.525(c) is made on the basis of the
location of the LTCH in either an urban area
or a rural area as defined in § 412.503.
Currently under the LTCH PPS at § 412.503,
an ‘‘urban area’’ is defined as a Metropolitan
Statistical Area (which would include a
metropolitan division, where applicable) as
defined by the Executive OMB and a ‘‘rural
area’’ is defined as any area outside of an
urban area.
In the RY 2006 LTCH PPS final rule (70 FR
24184 through 24185), in regulations at
§ 412.525(c), we revised the labor market area
definitions used under the LTCH PPS
effective for discharges occurring on or after
July 1, 2005, based on the Executive OMB’s
CBSA designations, which are based on 2000
Census data. We made this revision because
we believe that the CBSA-based labor market
area definitions will ensure that the LTCH
PPS wage index adjustment most
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appropriately accounts for and reflects the
relative hospital wage levels in the
geographic area of the hospital as compared
to the national average hospital wage level.
We note that these are the same CBSA-based
designations implemented for acute care
hospitals under the IPPS at § 412.64(b),
effective October 1, 2004 (69 FR 49026
through 49034). (For further discussion of the
CBSA-based labor market area (geographic
classification) definitions currently used
under the LTCH PPS, we refer readers to the
RY 2006 LTCH PPS final rule (70 FR 24182
through 24191).) We have updated the LTCH
PPS CBSA-based labor market area
definitions annually since they were adopted
for RY 2006 (73 FR 26812 through 26814, and
74 FR 44023 through 44204).
b. Update to the CBSA-Based Labor Market
Area Titles and Principal Cities
On December 1, 2009, the Executive OMB
announced changes to the principal cities
and titles of a number of CBSAs and
Metropolitan Divisions (OMB Bulletin No.
10–02). In the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24084), under the broad
authority conferred upon the Secretary by
section 123 of the BBRA, as amended by
section 307(b) of BIPA, to determine
appropriate adjustments under the LTCH
PPS, we presented the following update to
our titles and definitions using the Executive
OMB’s bulletin, which is effective for
discharges occurring on or after October 1,
2010. We did not receive any public
comments on our update to the CBSA titles
and definitions for FY 2011.
For FY 2011, as presented in the FY 2011
IPPS/LTCH PPS proposed rule, the following
CBSAs have new titles and new principal
cities:
• San Marcos, TX qualifies as a new
principal city of the Austin-Round Rock, TX
CBSA. The new title is Austin-Round RockSan Marcos, TX CBSA (CBSA Code 12420).
• Delano, CA qualifies as a new principal
city of the Bakersfield, CA CBSA. The new
title: Bakersfield-Delano, CA CBSA (CBSA
Code 12540).
• Conroe, TX qualifies as a new principal
city of the Houston-Sugar Land-Baytown, TX
CBSA (CBSA Code 26420). The CBSA title is
unchanged.
• North Port, FL qualifies as a new
principal city of the Bradenton-SarasotaVenice, FL CBSA (currently CBSA Code
14600). The new title is North PortBradenton-Sarasota, FL CBSA. The new code
is CBSA 35840.
• Sanford, FL qualifies as a new principal
city of the Orlando-Kissimmee, FL CBSA
(CBSA Code 36740). The new title is
Orlando-Kissimmee-Sanford, FL CBSA.
• Glendale, AZ qualifies as a new
principal city of the Phoenix-MesaScottsdale, AZ CBSA. The new title is
Phoenix-Mesa-Glendale, AZ CBSA (CBSA
Code 38060).
• Palm Desert, CA qualifies as a new
principal city of the Riverside-San
Bernardino-Ontario, CA CBSA (CBSA Code
40140). The CBSA title is unchanged.
• New Braunfels, TX qualifies as a new
principal city of the San Antonio, TX CBSA.
The new title is San Antonio-New Braunfels,
TX CBSA (CBSA Code 41700).
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• Auburn, WA qualifies as a new principal
city of the Seattle-Tacoma-Bellevue, WA
CBSA (CBSA Code 42644). The CBSA title is
unchanged.
In addition, the following CBSAs have new
titles as a result of changes to the order of
principal cities based on population:
• Rockville, MD replaces Frederick, MD as
the second most populous principal city in
the Bethesda-Frederick-Rockville, MD
Metropolitan Division. The new title is
Bethesda-Rockville-Frederick, MD
Metropolitan Division (CBSA Code 13644).
• Rock Hill, SC replaces Concord, NC as
the third most populous principal city in the
Charlotte-Gastonia-Concord, NC-SC CBSA.
The new title is Charlotte-Gastonia-Rock Hill,
NC-SC CBSA (CBSA Code 16740).
• Joliet, IL replaces Naperville, IL as the
second most populous principal city in the
Chicago-Naperville-Joliet, IL Metropolitan
Division. The new title is Chicago-JolietNaperville, IL Metropolitan Division (CBSA
Code 16974).
• Crestview, FL replaces Fort Walton
Beach, FL as the most populous principal
city in the Fort Walton Beach-CrestviewDestin, FL CBSA (currently CBSA Code
23020). The new title is Crestview-Fort
Walton Beach-Destin, FL CBSA. The new
code is 18880.
• Hillsboro, OR replaces Beaverton, OR as
the third most populous principal city in the
Portland-Vancouver-Beaverton, OR-WA
CBSA. The new title is Portland-VancouverHillsboro, OR-WA CBSA (CBSA Code 38900).
• Steubenville, OH replaces Weirton, WV
as the most populous principal city in the
Weirton-Steubenville, WV-OH CBSA
(currently CBSA Code 48260). The new title
is Steubenville-Weirton, OH-WV CBSA. The
new CBSA code is 44600.
OMB Bulletin No. 10–02 is available on the
OMB Web site at https://www.whitehouse.gov/
OMB—go to ‘‘Bulletins’’ or ‘‘Statistical
Programs and Standards.’’
The FY 2011 LTCH PPS wage index values
presented in Tables 12A and 12B in the
Addendum of this final rule reflect the
updates to the CBSA-based labor market area
titles and codes described above.
3. LTCH PPS Labor-Related Share
As noted above in this section, under the
adjustment for difference in area wage levels
at § 412.525(c), the labor-related share of a
LTCH’s PPS Federal prospective payment is
adjusted by the applicable wage index for the
labor market area in which the LTCH is
located. The LTCH PPS labor-related share
represents the sum of the labor-related
portion of operating costs (wages and
salaries, employee benefits, professional fees,
and all other labor-intensive services) and a
labor-related portion of capital costs using
the applicable LTCH PPS market basket.
Currently, as established in the RY 2007
LTCH PPS final rule (71 FR 27829 through
27830), the LTCH PPS labor-related share is
based on the relative importance of the laborrelated share of operating costs and capital
costs of the rehabilitation psychiatric longterm care (hospital) (RPL) market basket
based on FY 2002 data, as they are the best
available data that reflect the cost structure
of LTCHs. For the past 3 years (RYs 2008,
2009, and 2010), we updated the LTCH PPS
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labor-related share annually based on the
latest available data for the RPL market
basket. For RY 2010, the labor-related share
is 75.779 percent, as established in the RY
2010 LTCH PPS final rule (74 FR 43968 and
44024). (Additional background information
on the historical development of the laborrelated share under the LTCH PPS and the
development of the RPL market basket can be
found in the RY 2007 LTCH PPS final rule
(71 FR 27810 through 27817 and 27829
through 27830) and the RY 2010 LTCH PPS
final rule (74 FR 43968).)
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24085), we proposed a laborrelated share under the LTCH PPS for FY
2011 of 75.407 percent based on IHS Global
Insight, Inc.’s first quarter 2010 forecast of
the FY 2002-based RPL market basket for FY
2011, as these were the most recent available
data at that time. Consistent with our
historical practice of using the best data
available, we also proposed that if more
recent data were available to determine the
labor-related share used under the LTCH PPS
for FY 2011, we would use these data for
determining the FY 2011 LTCH PPS laborrelated share in the final rule. We did not
receive any public comments on our
proposed update to the labor-related share for
FY 2011.
As discussed in greater detail in section
VII.C.2.d. of the preamble of this final rule,
we are using IHS Global Insight, Inc.’s second
quarter 2010 forecast of the FY 2002-based
RPL market basket for FY 2011 to determine
the labor-related share for the LTCH PPS for
FY 2011 that will be effective for discharges
occurring on or after October 1, 2010, and
through September 30, 2011, as these are the
most recent available data. As we proposed,
the labor-related share for FY 2011 is the sum
of the FY 2011 relative importance of each
labor-related cost category, and reflects the
different rates of price change for these cost
categories between the base year (FY 2002)
and FY 2011. The sum of the relative
importance for FY 2011 for operating costs
(wages and salaries, employee benefits,
professional fees, and all-other laborintensive services) is 71.384 percent and the
labor-related share of capital costs is 3.887
percent. Thus, under the authority set forth
in section 123 of the BBRA as amended by
section 307(b) of the BIPA, we are
establishing a labor-related share of 75.271
percent (71.384 percent + 3.887 percent)
under the LTCH PPS for the FY 2011, as
shown in the chart in section VII.C.2.d. of the
preamble of this final rule.
4. LTCH PPS Wage Index for FY 2011
Historically, under the LTCH PPS, we have
established LTCH PPS wage index values
calculated from acute care IPPS hospital
wage data without taking into account
geographic reclassification under sections
1886(d)(8) and 1886(d)(10) of the Act (67 FR
56019). The wage adjustment established
under the LTCH PPS is based on a LTCH’s
actual location without regard to the urban or
rural designation of any related or affiliated
provider.
In the RY 2010 LTCH PPS final rule (74 FR
44024 through 44026), we calculated the
LTCH PPS wage indices using the same data
used for the FY 2010 acute care hospital IPPS
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50445
(that is, data from cost reporting periods
beginning during FY 2006), without taking
into account geographic reclassification
under sections 1886(d)(8) and 1886(d)(10) of
the Act.
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24085 through 24086), to
determine the applicable wage index values
under the LTCH PPS for FY 2011, consistent
with our historical methodology, we
proposed to use wage data collected from
cost reports submitted by IPPS hospitals for
cost reporting periods beginning during FY
2007, without taking into account geographic
reclassification under sections 1886(d)(8) and
1886(d)(10) of the Act, because these data
(FY 2007) are the most recent complete data
available. These are the same data used to
compute the proposed FY 2011 acute care
hospital inpatient wage index, as discussed
in section III. of the preamble of that
proposed rule. (For our rationale for using
IPPS hospital wage data as a proxy for
determining the wage index values used
under the LTCH PPS, we refer readers to the
FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44024 through 44025).) In that same
proposed rule, we proposed to compute the
FY 2011 LTCH PPS wage index values
consistent with the urban and rural
geographic classifications (labor market
areas) and consistent with the prereclassified IPPS wage index policy (that is,
our historical policy of not taking into
account IPPS geographic reclassifications in
determining payments under the LTCH PPS).
We also proposed to continue to use our
existing policy for determining wage index
values in areas where there are no IPPS wage
data. We received no comments on our
proposed wage index for FY 2011, and are
adopting our proposed methodology as final
in this final rule, which is described below.
For this final rule, consistent with our
historical methodology and as we proposed,
to determine the applicable wage index
values under the LTCH PPS for FY 2011,
under the broad authority conferred upon the
Secretary by section 123 of the BBRA, as
amended by section 307(b) of BIPA, to
determine appropriate adjustments under the
LTCH PPS, we are using wage data collected
from cost reports submitted by IPPS hospitals
for cost reporting periods beginning during
FY 2007, without taking into account
geographic reclassification under sections
1886(d)(8) and 1886(d)(10) of the Act. We are
using FY 2007 data because these data are the
most recent complete data available. These
are the same data used to compute the FY
2011 acute care hospital inpatient wage
index, as discussed in section III. of the
preamble of this final rule. (As noted above,
for our rationale for using IPPS hospital wage
data as a proxy for determining the wage
index values used under the LTCH PPS, we
refer readers to the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 44024 through
44025).)
As we proposed, the FY 2011 LTCH PPS
wage index values we are establishing in this
final rule are computed consistent with the
urban and rural geographic classifications
(labor market areas) discussed above in
section V.B.2. of the Addendum to this final
rule and consistent with the pre-reclassified
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IPPS wage index policy (that is, our historical
policy of not taking into account IPPS
geographic reclassifications in determining
payments under the LTCH PPS). As we noted
in the proposed rule, as with the IPPS wage
data, wage data for multicampus hospitals
with campuses located in different labor
market areas (CBSAs) are apportioned to each
CBSA where the campus or campuses are
located (discussed in section III.C. of the
preamble of this final rule). Furthermore, as
we proposed, in determining the FY 2011
LTCH PPS wage index values in this final
rule, we continued to use our existing policy
for determining wage index values in areas
where there are no IPPS wage data.
As discussed in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 2408), we
established a methodology for determining a
LTCH PPS wage index values for areas that
have no IPPS wage data in the RY 2009 LTCH
PPS final rule, and as we proposed, we
continued to use this methodology for FY
2011. (We refer readers to 73 FR 26817
through 26818 for an explanation of and
rationale for our policy.) Under this
methodology, the LTCH PPS wage index
value for urban CBSAs with no IPPS wage
data is determined by using an average of all
of the urban areas within the State. As was
the case in RY 2010, there are currently no
LTCHs located in labor areas without IPPS
hospital wage data (or IPPS hospitals) for FY
2011. However, we calculate LTCH PPS wage
index values for these areas using our
established methodology in the event that, in
the future, a LTCH should open in one of
those areas.
Based on the FY 2007 IPPS wage data that
we are using to determine the FY 2011 LTCH
PPS wage index values in this final rule,
there are no IPPS wage data for the urban
area Hinesville-Fort Stewart, GA (CBSA
25980). (We note, based on the data used for
the proposed rule, there were no IPPS wage
data for the urban area of Anderson, SC
(CBSA 11340). However, based on the
updated IPPS wage data used for this final
rule, there is now data to compute a wage
index value for CBSA 11340; therefore, it is
no longer necessary to use our established
methodology for determining a wage index
value for areas that have no IPPS wage data
for CBSA 11340 for FY 2011 in this final
rule.) Consistent with the methodology
discussed above, as proposed, we calculated
the FY 2011 wage index value for CBSA
25980 as the average of the wage index
values for all of the other urban areas within
the State of Georgia (that is, CBSAs 10500,
12020, 12060, 12260, 15260, 16860, 17980,
19140, 23580, 31420, 40660, 42340, 46660
and 47580) (reflected in Table 12A of the
Addendum to this final rule). (As noted
above, there are currently no LTCHs located
in CBSA 25980.) As noted in the proposed
rule, as IPPS wage data are dynamic, it is
possible that urban areas without IPPS wage
data will vary in the future.
As we proposed, in this final rule for FY
2011, using our established methodology, we
calculated a LTCH PPS wage index value for
rural areas with no IPPS wage data using the
unweighted average of the wage indices from
all of the CBSAs that are contiguous to the
rural counties of the State (for an explanation
of this policy, we refer readers to 73 FR
26818). For this purpose, we define
‘‘contiguous’’ as sharing a border. Based on
the FY 2007 IPPS wage data that we are using
to determine the FY 2011 LTCH PPS wage
index values in this final rule, there are no
IPPS wage data for the rural area of
Massachusetts (CBSA code 22). Consistent
with the methodology discussed above, as
proposed, the FY 2011 wage index value for
rural Massachusetts is computed using the
unweighted average of the wage indices from
all of the CBSAs contiguous to the rural
counties in that State. Specifically, the entire
Massachusetts rural area consists of Dukes
and Nantucket counties. The borders of
Dukes and Nantucket counties are
‘‘contiguous’’ with Barnstable County, MA,
and Bristol County, MA. Therefore, the FY
2011 LTCH PPS wage index value for rural
Massachusetts is computed as the
unweighted average of the FY 2011 wage
indexes for Barnstable County and Bristol
County (reflected in Tables 12A and 12B in
the Addendum to this final rule). (There are
currently no LTCHs located in rural
Massachusetts.) As noted above, as IPPS
wage data are dynamic, it is possible that
rural areas without IPPS wage data will vary
in the future.
The FY 2011 LTCH wage index values that
will be applicable for LTCH discharges
occurring on or after October 1, 2010,
through September 30, 2011, are presented in
Table 12A (for urban areas) and Table 12B
(for rural areas) in the Addendum of this
final rule.
5. LTCH PPS Cost-of-Living Adjustment for
LTCHs Located in Alaska and Hawaii
In the August 30, 2002 final rule (67 FR
56022), we established, under § 412.525(b), a
cost-of-living adjustment (COLA) for LTCHs
located in Alaska and Hawaii to account for
the higher costs incurred in those States. In
the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 44026) (under the broad authority
conferred upon the Secretary by section 123
of the BBRA as amended by section 307(b)
of BIPA to determine appropriate
adjustments under the LTCH PPS), for RY
2010, we applied a COLA to payments to
LTCHs located in Alaska and Hawaii by
multiplying the standard Federal payment
rate by the factors listed in Table III of that
same rule.
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24086), for FY 2011, consistent
with our current policy, we proposed to
apply a COLA to payments to LTCHs located
in Alaska and Hawaii by multiplying the
standard Federal payment rate by the factors
listed in the chart in section V.B.5. of the
Addendum to the proposed rule because
those factors were the most recent available
data at that time. The proposed factors were
obtained from the U.S. Office of Personnel
Management (OPM) and were also proposed
to be used under the IPPS, effective October
1, 2010 (section II.B.2. of the Addendum to
the proposed rule). We also noted that there
had been no change in the COLA factors
since the current factors were established in
the FY 2010 IPPS/RY 2010 LTCH PPS final
rule. Furthermore, we proposed that if OPM
released revised COLA factors before
publication of the final rule, we would use
the revised factors for the development of
LTCH PPS payments for FY 2011 and publish
those revised COLA factors in the final rule.
We did not receive any public comments on
our proposed COLA to payments to LTCHs
located in Alaska and Hawaii for FY 2011.
We note OPM has not released revised COLA
factors since the publication of the proposed
rule.
In this final rule, for FY 2011, under the
broad authority conferred upon the Secretary
by section 123 of the BBRA, as amended by
section 307(b) of BIPA, to determine
appropriate adjustments under the LTCH
PPS, consistent with our current policy, we
will apply a COLA to payments to LTCHs
located in Alaska and Hawaii by multiplying
the standard Federal payment rate by the
factors listed in the chart below because they
are the most recent available data at this
time. These factors were obtained from the
U.S. Office of Personnel Management (OPM)
and will also be used under the IPPS,
effective October 1, 2010 (section II.B.2. of
the Addendum to this final rule). As noted
above, there has been no change in the COLA
factors since the current factors were
established in the FY 2010 IPPS/RY 2010
LTCH PPS final rule.
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COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS FOR THE LTCH PPS FOR FY 2011
Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by road .........................................................................................................
City of Fairbanks and 80-kilometer (50-mile) radius by road ..........................................................................................................
City of Juneau and 80-kilometer (50-mile) radius by road ..............................................................................................................
All other areas of Alaska ..................................................................................................................................................................
Hawaii:
City and County of Honolulu ............................................................................................................................................................
County of Hawaii ..............................................................................................................................................................................
County of Kauai ................................................................................................................................................................................
County of Maui and County of Kalawao ..........................................................................................................................................
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2. Determining LTCH CCRs Under the LTCH
PPS
1. Background
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C. Adjustment for LTCH PPS High-Cost
Outlier (HCO) Cases
a. Background
The following is a discussion of CCRs that
are used in determining payments for HCO
and SSO cases under the LTCH PPS, at
§ 412.525(a) and § 412.529, respectively.
Although this section is specific to HCO
cases, because CCRs and the policies and
methodologies pertaining to them are used in
determining payments for both HCO and SSO
cases (to determine the estimated cost of the
case at § 412.529(d)(2)), we are discussing the
determination of CCRs under the LTCH PPS
for both of these types of cases
simultaneously.
In determining both HCO payments (at
§ 412.525(a)) and SSO payments (at
§ 412.529), we calculate the estimated cost of
the case by multiplying the LTCH’s overall
CCR by the Medicare allowable charges for
the case. In general, we use the LTCH’s
overall CCR, which is computed based on
either the most recently settled cost report or
the most recent tentatively settled cost report,
whichever is from the latest cost reporting
period, in accordance with
§ 412.525(a)(4)(iv)(B) and § 412.529(f)(4)(ii)
for HCOs and SSOs, respectively. (We note
that, in some instances, we use an alternative
CCR, such as the statewide average CCR in
accordance with the regulations at
§ 412.525(a)(4)(iv)(C) and § 412.529(f)(4)(iii),
or a CCR that is specified by CMS or that is
requested by the hospital under the
provisions of the regulations at
§ 412.525(a)(4)(iv)(A) and § 412.529(f)(4)(i).)
Under the LTCH PPS, a single prospective
payment per discharge is made for both
inpatient operating and capital-related costs.
Therefore, we compute a single ‘‘overall’’ or
‘‘total’’ LTCH-specific CCR based on the sum
of LTCH operating and capital costs (as
described in Section 150.24, Chapter 3, of the
Medicare Claims Processing Manual (Pub.
100–4)) as compared to total charges.
Specifically, a LTCH’s CCR is calculated by
dividing a LTCH’s total Medicare costs (that
is, the sum of its operating and capital
inpatient routine and ancillary costs) by its
total Medicare charges (that is, the sum of its
operating and capital inpatient routine and
ancillary charges).
b. LTCH Total CCR Ceiling
Generally, a LTCH is assigned the
applicable statewide average CCR if, among
other things, a LTCH’s CCR is found to be in
excess of the applicable maximum CCR
threshold (that is, the LTCH CCR ceiling).
This is because CCRs above this threshold are
most likely due to faulty data reporting or
entry, and, therefore, CCRs based on
erroneous data should not be used to identify
and make payments for outlier cases. Thus,
under our established policy, generally, if a
LTCH’s calculated CCR is above the
applicable ceiling, the applicable LTCH PPS
statewide average CCR is assigned to the
LTCH instead of the CCR computed from its
most recent (settled or tentatively settled)
cost report data.
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44027), in accordance with
§ 412.525(a)(4)(iv)(C)(2) for HCOs and
§ 412.529(f)(4)(iii)(B) for SSOs, using our
Under the broad authority conferred upon
the Secretary by section 123 of the BBRA as
amended by section 307(b) of BIPA, in the
regulations at § 412.525(a), we established an
adjustment for additional payments for
outlier cases that have extraordinarily high
costs relative to the costs of most discharges.
We refer to these cases as high cost outliers
(HCOs). Providing additional payments for
outliers strongly improves the accuracy of the
LTCH PPS in determining resource costs at
the patient and hospital level. These
additional payments reduce the financial
losses that would otherwise be incurred
when treating patients who require more
costly care and, therefore, reduce the
incentives to underserve these patients. We
set the outlier threshold before the beginning
of the applicable rate year so that total
estimated outlier payments are projected to
equal 8 percent of total estimated payments
under the LTCH PPS.
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
payment for the MS–LTC–DRG plus a fixedloss 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 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.
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50447
established methodology for determining the
LTCH total CCR ceiling, based on IPPS total
CCR data from the March 2009 update of the
PSF, we established a total CCR ceiling of
1.232 under the LTCH PPS, effective October
1, 2009, through September 30, 2010. (For
further detail on our current methodology for
annually determining the LTCH total CCR
ceiling, we refer readers to the FY 2007 IPPS
final rule (71 FR 48119 through 48121).)
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24087), in accordance with
§ 412.525(a)(4)(iv)(C)(2) for HCOs and
§ 412.529(f)(4)(iii)(B) for SSOs, using our
established methodology for determining the
LTCH total CCR ceiling (described above),
based on IPPS total CCR data from the
December 2009 update of the PSF, we
proposed to establish a total CCR ceiling of
1.230 under the LTCH PPS that would be
effective for discharges occurring on or after
October 1, 2010, through September 30, 2011.
In this final rule, in accordance with
§ 412.525(a)(4)(iv)(C)(2) for HCOs and
§ 412.529(f)(4)(iii)(B) for SSOs, consistent
with our policy of using the best available
data and using our established methodology
for determining the LTCH total CCR ceiling
(described above), based on IPPS total CCR
data from the March 2010 update of the PSF,
we are establishing a total CCR ceiling of
1.231 under the LTCH PPS that will be
effective for discharges occurring on or after
October 1, 2010, through September 30, 2011.
c. LTCH Statewide Average CCRs
Our general methodology established for
determining the statewide average CCRs used
under the LTCH PPS is similar to our
established methodology for determining the
LTCH total CCR ceiling (described above)
because it is based on ‘‘total’’ IPPS CCR data.
Under the LTCH PPS HCO policy at
§ 412.525(a)(4)(iv)(C) and the SSO policy at
§ 412.529(f)(4)(iii), the fiscal intermediary or
MAC may use a statewide average CCR,
which is established annually by CMS, if it
is unable to determine an accurate CCR for
a LTCH in one of the following
circumstances: (1) new LTCHs that have not
yet submitted their first Medicare cost report
(for this purpose, consistent with current
policy, a new LTCH is defined as an entity
that has not accepted assignment of an
existing hospital’s provider agreement in
accordance with § 489.18); (2) LTCHs whose
CCR is in excess of the LTCH CCR ceiling;
and (3) other LTCHs for whom data with
which to calculate a CCR are not available
(for example, missing or faulty data). (Other
sources of data that the fiscal intermediary or
MAC may consider in determining a LTCH’s
CCR include data from a different cost
reporting period for the LTCH, data from the
cost reporting period preceding the period in
which the hospital began to be paid as a
LTCH (that is, the period of at least 6 months
that it was paid as a short-term acute care
hospital), or data from other comparable
LTCHs, such as LTCHs in the same chain or
in the same region.)
In Table 8C of the Addendum to the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 44160 through 44161), in accordance with
the regulations at § 412.525(a)(4)(iv)(C) for
HCOs and § 412.529(f)(4)(iii) for SSOs, using
our established methodology for determining
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the LTCH statewide average CCRs, based on
using the most recent complete IPPS total
CCR data from the March 2009 update of the
PSF, we established the LTCH PPS statewide
average total CCRs for urban and rural
hospitals effective for discharges occurring
on or after October 1, 2009, through
September 30, 2010. (For further detail on
our current methodology for annually
determining the LTCH statewide average
CCRs, we refer readers to the FY 2007 IPPS
final rule (71 FR 48119 through 48121).)
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24087), using our established
methodology for determining the LTCH
statewide average CCRs, based on the most
recent complete IPPS total CCR data from the
December 2009 update of the PSF, we
proposed to establish LTCH PPS statewide
average total CCRs for urban and rural
hospitals that would be effective for
discharges occurring on or after October 1,
2010, through September 30, 2011, in Table
8C of the Addendum to that proposed rule.
In this final rule, consistent with our
historical practice of using the best available
data and using our established methodology
for determining the LTCH statewide average
CCRs, based on the most recent complete
IPPS total CCR data from the March 2010
update of the PSF, we are establishing LTCH
PPS statewide average total CCRs for urban
and rural hospitals that will be effective for
discharges occurring on or after October 1,
2010, through September 30, 2011, in Table
8C of the Addendum to this final rule.
As we noted in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 24088), all areas
in the District of Columbia, New Jersey,
Puerto Rico, and Rhode Island are classified
as urban. Therefore, there are no rural
statewide average total CCRs listed for those
jurisdictions in Table 8C of the Addendum
to this final rule. This policy is consistent
with the policy that we established when we
revised our methodology for determining the
applicable LTCH statewide average CCRs in
the FY 2007 IPPS final rule (71 FR 48119
through 48121) and is the same as the policy
applied under the IPPS. In addition, although
Massachusetts has areas that are designated
as rural, there are no short-term acute care
IPPS hospitals or LTCHs located in those
areas as of March 2010. Therefore, there is no
rural statewide average total CCR listed for
rural Massachusetts in Table 8C of the
Addendum to this final rule.
In addition, as we discussed in the FY
2011 IPPS/LTCH PPS proposed rule (75 FR
24088), consistent with our existing
methodology, in determining the urban and
rural statewide average total CCRs for
Maryland LTCHs paid under the LTCH PPS,
in this final rule, we use, as a proxy, the
national average total CCR for urban IPPS
hospitals and the national average total CCR
for rural IPPS hospitals, respectively. We use
this proxy because we believe that the CCR
data on the PSF for Maryland hospitals may
not be entirely accurate (as discussed in
greater detail in the FY 2007 IPPS final rule
(71 FR 48120)).
d. Reconciliation of LTCH HCO and SSO
Payments
We note that under the LTCH PPS HCO
policy at § 412.525(a)(4)(iv)(D) and the LTCH
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PPS SSO policy at § 412.529(f)(4)(iv), the
payments for HCO and SSO cases,
respectively, are subject to reconciliation.
Specifically, any reconciliation of outlier
payments is based on the CCR that is
calculated based on a ratio of CCRs computed
from the relevant cost report and charge data
determined at the time the cost report
coinciding with the discharge is settled. For
additional information, we refer readers to
the RY 2009 LTCH PPS final rule (73 FR
26820 through 26821).
3. Establishment of the LTCH PPS Fixed-Loss
Amount for FY 2011
When we implemented the LTCH PPS, as
discussed in the August 30, 2002 LTCH PPS
final rule (67 FR 56022 through 56026),
under the broad authority of section 123 of
the BBRA as amended by section 307(b) of
BIPA, we established a fixed-loss amount so
that total estimated outlier payments are
projected to equal 8 percent of total estimated
payments under the LTCH PPS. To determine
the fixed-loss amount, we estimate outlier
payments and total LTCH PPS payments for
each case using claims data from the
MedPAR files. Specifically, to determine the
outlier payment for each case, we estimate
the cost of the case by multiplying the
Medicare covered charges from the claim by
the applicable CCR. Under § 412.525(a)(3) (in
conjunction with § 412.503), if the estimated
cost of the case exceeds the outlier threshold
(the sum of the adjusted Federal prospective
payment for the MS–LTC–DRG and the fixedloss amount), we pay an outlier payment
equal to 80 percent of the difference between
the estimated cost of the case and the outlier
threshold (the sum of the adjusted Federal
prospective payment for the MS–LTC–DRG
and the fixed-loss amount).
In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 44028), we used our existing
methodology to calculate the fixed-loss
amount for RY 2010 in order to maintain
estimated HCO payments at the projected 8
percent of total estimated LTCH PPS
payments. 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 because
those data were the most recent complete
LTCH data available at that time. In that same
final rule, we established a fixed-loss amount
of $18,425 for RY 2010.
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24088), we proposed to continue
to use our existing methodology to calculate
the proposed fixed-loss amount for FY 2011
(based on updated data and the proposed
rates and policies presented in that proposed
rule) in order to maintain estimated HCO
payments at the projected 8 percent of total
estimated LTCH PPS payments. (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 our historical practice of using the best
data available, in determining the proposed
fixed-loss amount for FY 2011, we used the
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most recent available LTCH claims data and
CCR data at that time. Specifically, we used
LTCH claims data from the December 2009
update of the FY 2009 MedPAR files and
CCRs from the December 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 FY 2011 because
these data are the most recent complete
LTCH data currently available. Consistent
with the historical practice of using the best
available data, we also proposed that if more
recent LTCH claims data become available,
we would use them for determining the
fixed-loss amount for FY 2011 in the final
rule. Furthermore, we proposed to determine
the FY 2011 fixed-loss amount based on the
MS–LTC–DRG classifications and relative
weights from the version of the GROUPER
that will be in effect as of the beginning of
FY 2011, that is, proposed Version 28.0 of the
GROUPER.
As noted above in section V.A. of this
Addendum, although a number of the
provisions of the Affordable Care Act affected
the LTCH PPS, due to the timing of the
passage of the legislation, we were unable to
address those provisions in the May 4, 2010
FY 2011 IPPS/LTCH PPS proposed rule, and
therefore, the proposed policies and payment
rates in that proposed rule did not reflect the
new legislation. We addressed the provisions
of the Affordable Care Act that affected our
proposed policies and payment rates for FY
2011 under the LTCH PPS in the June 2, 2010
FY 2010 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30918). In that
supplemental proposed rule (75 FR 30980
through 30981), we proposed a revised
standard Federal rate for FY 2011 that was
developed consistent with the provisions of
newly added sections 1886(m)(3)(A)(ii) and
(m)(4)(B) of the Act. This revision to the
proposed standard Federal rate for FY 2011
also required us to revise the proposed HCO
fixed-loss amount for FY 2011. This was
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.
In the June 2, 2010 FY 2010 IPPS/LTCH
PPS supplemental proposed rule (75 FR
30981), under the broad authority of section
123(a)(1) of the BBRA and section 307(b)(1)
of BIPA, we proposed to establish a fixed-loss
amount of $19,254 for FY 2011. Thus, we
would pay an outlier case 80 percent of the
difference between the estimated cost of the
case and the outlier threshold (the sum of the
adjusted Federal LTCH payment for the MS–
LTC–DRG and the fixed-loss amount of
$19,254). We also discussed that the
proposed fixed-loss amount of $19,254 for FY
2011 is slightly higher than the revised RY
2010 fixed-loss amount of $18,615
(established in the June 2, 2010 FY 2010
IPPS/RY 2010 LTCH PPS notice (75 FR
31130)). Based on our payment simulations
using the most recent available data at that
time and the proposed 0.59 percent reduction
to the standard Federal rate for FY 2011, the
proposed increase in the fixed-loss amount
for FY 2011 would be necessary to maintain
the existing requirement that estimated
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outlier payments would equal 8 percent of
estimated total LTCH PPS payments. (For
further information on the existing 8 percent
HCO ‘‘target’’ requirement, as noted above, we
refer readers to the August 30, 2002 LTCH
PPS final rule (67 FR 56022 through 56024.)
Maintaining the fixed-loss amount at the
current level would result in HCO payments
that are greater than the current regulatory
requirement 8 percent requirement because a
higher fixed-loss amount would result in
fewer cases qualifying as outlier cases as well
as decreases 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 fixedloss amount) would be larger. For these
reasons, we believed that proposing to raise
the fixed-loss amount was 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).
Comment: One commenter expressed
concern that CMS erred in its calculation or
changed its methodology for determining the
proposed fixed-loss amount of $19,254 for FY
2011, and requested that CMS review its
calculation of the FY 2011 fixed-loss amount
for the final rule. The commenter stated that
its calculation of the fixed-loss amount for
FY 2011 was ‘‘significantly lower’’ than the
proposed fixed-loss amount of $19,254. The
commenter suggested that CMS may have
failed to account for cost inflation when
using the FY 2009 LTCH claims data or that
CMS may have incorrectly computed the
‘‘blend’’ for SSO cases (that is, the SSO
payment option at § 412.529(c)(2)(iv)) that are
also eligible for HCO payments.
Response: We reviewed our calculation of
the proposed FY 2011 fixed-loss amount of
$19,254 from the FY 2011 IPPS/LTCH PPS
proposed rule, and we have found no errors
or misapplication of our stated methodology.
Specifically, we have ensured that our
calculation accounts for cost inflation when
using the FY 2009 claims data to estimate
HCO and SSO payments for FY 2011 as we
noted in the FY 2011 IPPS/LTCH PPS
proposed rule. Consistent with our historical
practice, we stated in the FY 2011 IPPS/
LTCH PPS proposed rule that to model HCO
and SSO payments for FY 2011 we applied
an inflation factor of 1.049 (determined by
our actuaries) to the estimated costs of each
case determined from the charges reported on
the claims in the FY 2009 MedPAR files and
the best available CCRs from the December
2009 update of the PSF (75 FR 31113). We
also reviewed our calculations to ensure that
we were correctly determining SSO
payments, especially for those SSO cases that
are eligible for HCO payments, and found no
miscalculations. As noted below, generally it
is only in rare circumstances that a LTCH
case qualifies as both a SSO case and a HCO
case. In fact, SSO cases that are eligible for
HCO payments typically represent less than
1 percent of all LTCH cases and, therefore,
have little effect on the derivation of the
fixed-loss amount. Therefore, we are
adopting our proposed methodology as final
and consistent with our proposal, we applied
that methodology to the latest available data
to determine the FY 2011 fixed-loss amount
in this final rule.
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For FY 2011, in this final rule, as proposed,
we continue to use our existing methodology
to calculate the fixed-loss amount (based on
updated data and the rates and policies
presented in this final rule) in order to
maintain estimated HCO payments at the
projected 8 percent of total estimated LTCH
PPS payments. (For an explanation of our
rationale for establishing an HCO payment
‘‘target’’ of 8 percent of total estimated LTCH
PPS payments, we refer readers to the August
30, 2002 LTCH PPS final rule (67 FR 56022
through 56024).) Consistent with our
historical practice of using the best data
available, as we proposed, in determining the
fixed-loss amount for FY 2011, we use the
most recent available LTCH claims data and
CCR data. Specifically, for this final rule, we
used LTCH claims data from the March 2010
update of the FY 2009 MedPAR files and
CCRs from the March 2010 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 FY 2011 because
these data are the most recent complete
LTCH data currently available. Furthermore,
as we proposed, we determined the FY 2011
fixed-loss amount based on the MS–LTC–
DRG classifications and relative weights from
the version of the GROUPER that will be in
effect as of the beginning of FY 2011, that is,
Version 28.0 of the GROUPER (discussed in
section VII.B. of the preamble of this final
rule).
In this final rule, under the broad authority
of section 123(a)(1) of the BBRA and section
307(b)(1) of BIPA, we are establishing a fixedloss amount of $18,785 for FY 2011. Thus,
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
$18,785).
The fixed-loss amount for FY 2011 of
$18,785 is slightly higher than the RY 2010
fixed-loss amount of $18,425. As discussed
in the FY 2011 IPPS/LTCH PPS supplemental
proposed rule (75 FR 30981) and as reiterated
above, we believe that increasing the fixedloss 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). We also note that the FY 2011
fixed-loss amount of $18,785 is slightly less
than the proposed FY 2011 fixed-loss amount
of $19,254. We believe that the increase in
the LTCH PPS FY 2011 market basket
estimate from 1.9 percent in the FY 2011
IPPS/LTCH PPS supplemental proposed rule
(that is, the estimated full market basket
percentage increase of 2.4 percent minus 0.50
percentage point) to 2.0 percent for this final
rule (that is, the estimated full market basket
percentage increase of 2.5 percent minus 0.50
percentage point) contributed to a slightly
lower final HCO fixed-loss amount for FY
2011. Specifically, the additional 0.1
percentage point increase to the standard
federal rate increases payments to all cases,
which reduces the amount of HCO payments
for ‘‘unusually costly’’ cases, and therefore
requires that we establish a lower fixed-loss
amount for FY 2011 (as compared to the
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proposed FY 2011 fixed-loss amount) to
increase HCO payments in order to maintain
the established HCO payment ‘‘target’’ of 8
percent of total estimated LTCH PPS
payments.
4. Application of Outlier Policy to SSO Cases
As we discussed in the August 30, 2002
final rule (67 FR 56026), under some rare
circumstances, a LTCH discharge could
qualify as a SSO case (as defined in the
regulations at § 412.529 in conjunction with
§ 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, for a SSO case
in FY 2011, 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 fixed-loss amount
of $18,785 and the amount paid under the
SSO policy as specified in § 412.529).
D. Computing the Adjusted LTCH PPS
Federal Prospective Payments for FY 2011
In accordance with § 412.525, the standard
Federal rate is adjusted to 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 this final rule). The
standard Federal rate is also adjusted to
account for the higher costs of hospitals in
Alaska and Hawaii by multiplying the
nonlabor-related 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 this final rule). In this
final rule, we are establishing a standard
Federal rate for FY 2011 of $39,599.95, as
discussed in section VII.C.2. of the
Addendum of this final rule. We illustrate
the methodology to adjust the LTCH PPS
Federal rate for FY 2011 in the following
example:
Example:
During FY 2011, a Medicare patient is in
a LTCH located in Chicago, Illinois (CBSA
16974). The FY 2011 LTCH PPS wage index
value for CBSA 16974 is 1.0593 (Table 12A
of the Addendum of this final rule). The
Medicare patient is classified into MS–LTC–
DRG 28 (Spinal Procedures with MCC),
which has a relative weight for FY 2011 of
1.0928 (Table 11 of the Addendum of this
final rule).
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 ($39,599.05) by the
labor-related share (75.271 percent) and the
wage index value (1.0593). This wageadjusted amount is then added to the
nonlabor-related portion of the unadjusted
standard Federal rate (24.729 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 (1.0928) to calculate the total
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adjusted Federal LTCH PPS prospective
payment for FY 2011 ($45,206.43). The table
below illustrates the components of the
calculations in this example.
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 ($39,599.95 × 0.24729) .................
Adjusted Federal Rate Amount ...............................................................................
MS–LTC–DRG 28 Relative Weight .........................................................................
$39,599.95
× 0.75271
= $29,807.28
× 1.0593
= $31,574.85
+ $9,792.67
= $41,367.52
× 1.0928
Total Adjusted Federal Prospective Payment ..................................................
= $45,206.43
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VI. Tables
This section contains the tables referred to
throughout the preamble to this final rule
and in this Addendum. Tables 1A, 1B, 1C,
1D, 1E, 2, 3A, 3B, 4A, 4B, 4C, 4D–2, 4E, 4F,
4J, 5, 7A, 7B, 8A, 8B, 8C, 9A, 9C, 10, 11, 12A,
and 12B are presented below. The following
tables are available only through the Internet
on the CMS Web site at https://
www.cms.hhs.gov/AcuteInpatientPPS/:
Table 6G.—Additions to the CC Exclusions
List
Table 6H.—Deletions From the CC
Exclusions List
Table 6I.—Complete MCC List
Table 6I.1.—Additions to the MCC List
Table 6I.2.—Deletions to the MCC List
Table 6J.—Complete CC List
Table 6J.1.—Additions to the CC List
Table 6J.2.—Deletions to the CC List
Table 6K.—Complete List of CC Exclusions
The tables presented below are as follows:
Table 1A.—National Adjusted Operating
Standardized Amounts, Labor/Nonlabor
(68.8 Percent Labor Share/31.2 Percent
Nonlabor Share If Wage Index Is Greater
Than 1)
Table 1B.—National Adjusted Operating
Standardized Amounts, Labor/Nonlabor
(62 Percent Labor Share/38 Percent
Nonlabor Share If Wage Index Is Less Than
or Equal To 1)
Table 1C.—Adjusted Operating Standardized
Amounts for Puerto Rico, Labor/Nonlabor
Table 1D.—Capital Standard Federal
Payment Rate
Table 1E.—LTCH Standard Federal
Prospective Payment Rate
Table 2.—Acute Care Hospitals Case-Mix
Indexes for Discharges Occurring in
Federal Fiscal Year 2009; Hospital Wage
Indexes for Federal Fiscal Year 2011;
Hospital Average Hourly Wages for Federal
Fiscal Years 2009 (2005 Wage Data), 2010
(2006 Wage Data), and 2011 (2007 Wage
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Data); and 3-Year Average of Hospital
Average Hourly Wages
Table 3A.—FY 2011 and 3-Year Average
Hourly Wage for Acute Care Hospitals in
Urban Areas by CBSA
Table 3B.—FY 2011 and 3-Year Average
Hourly Wage for Acute Care Hospitals in
Rural Areas by CBSA
Table 4A.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Acute Care Hospitals in Urban Areas by
CBSA and by State—FY 2011
Table 4B.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Acute Care Hospitals in Rural Areas by
CBSA and by State—FY 2011
Table 4C.—Wage Index and Capital
Geographic Adjustment Factor (GAF) for
Acute Care Hospitals That Are Reclassified
by CBSA and by State—FY 2011
Table 4D–2.—States Designated as Frontier,
with Acute Care Hospitals Receiving at a
Minimum the Frontier State Floor Wage
Index; Urban Areas With Acute Care
Hospitals Receiving the Statewide Rural
Floor or Imputed Floor Wage Index—FY
2011
Table 4E.—Urban CBSAs and Constituent
Counties for Acute Care Hospitals—FY
2011
Table 4F.—Puerto Rico Wage Index and
Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals by CBSA—
FY 2011
Table 4J.—Out-Migration Adjustment for
Acute Care Hospitals—FY 2011
Table 5.—List of Medicare Severity
Diagnosis-Related Groups (MS–DRGs),
Relative Weighting Factors, and Geometric
and Arithmetic Mean Length of Stay
Table 6A.—New Diagnosis Codes
Table 6B.—New Procedure Codes
Table 6C.—Invalid Diagnosis Codes
Table 6D.—Invalid Procedure Codes
Table 6E.—Revised Diagnosis Code Titles
Table 6F.—Revised Procedure Code Titles
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Table 7A.—Medicare Prospective Payment
System Selected Percentile Lengths of Stay:
FY 2009 MedPAR Update—March 2010
GROUPER V27.0 MS–DRGs
Table 7B.—Medicare Prospective Payment
System Selected Percentile Lengths of Stay:
FY 2009 MedPAR Update—March 2010
GROUPER V28.0 MS–DRGs
Table 8A.—Statewide Average Operating
Cost-to-Charge Ratios (CCRs) for Acute
Care Hospitals—July 2010
Table 8B.—Statewide Average Capital Costto-Charge Ratios (CCRs) for Acute Care
Hospitals— July 2010
Table 8C.—Statewide Average Total Cost-toCharge Ratios (CCRs) for LTCHs— July
2010
Table 9A.—Hospital Reclassifications and
Redesignations—FY 2011
Table 9C.—Hospitals Redesignated as Rural
Under Section 1886(d)(8)(E) of the Act—FY
2011
Table 10.—Geometric Mean Plus the Lesser
of .75 of the National Adjusted Operating
Standardized Payment Amount (Increased
to Reflect the Difference Between Costs and
Charges) or .75 of One Standard Deviation
of Mean Charges by Medicare Severity
Diagnosis-Related Group (MS–DRG)—July
2010
Table 11.—MS–LTC–DRGs, Relative Weights,
Geometric Average Length of Stay, and
Short-Stay Outlier (SSO) Threshold for
Discharges Occurring From October 1,
2010 through September 30, 2011 Under
the LTCH PPS
Table 12A.—LTCH PPS Wage Index for
Urban Areas for Discharges Occurring from
October 1, 2010 Through September 30,
2011
Table 12B.—LTCH PPS Wage Index for Rural
Areas for Discharges Occurring From
October 1, 2010 Through September 20,
2011
BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C
Note: The following Appendices will not
appear in the Code of Federal Regulations.
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Appendix A: Regulatory Impact
Analysis
I. Overall Impact
We have examined the impacts of this final
rule as required by Executive Order 12866
(September 1993, Regulatory Planning and
Review), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354), section
1102(b) of the Social Security Act, the
Unfunded Mandates Reform Act of 1995
(Pub. L. 104–4), Executive Order 13132 on
Federalism, and the Congressional Review
Act (5 U.S.C. 804(2)).
Executive Order 12866 directs agencies to
assess all costs and benefits of available
regulatory alternatives and, if regulation is
necessary, to select regulatory approaches
that maximize net benefits (including
potential economic, environmental, public
health and safety effects, distributive
impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major
rules with economically significant effects
($100 million or more in any 1 year).
We have determined that this final rule is
a major rule as defined in 5 U.S.C. 804(2). We
estimate that the final changes for FY 2011
acute care hospital operating and capital
payments will redistribute amounts in excess
of $100 million among different types of
inpatient cases. The final applicable
percentage increase to the IPPS rates required
by the statute, in conjunction with other final
payment changes in this final rule, will result
in an estimated $440 million decrease in FY
2011 operating payments (or ¥0.4 percent
decrease) and an estimated $21 million
decrease in FY 2011 capital payments (or
¥0.5 percent change). The impact analysis of
the capital payments can be found in section
VIII. of this Appendix. In addition, as
described in section IX. of this Appendix,
LTCHs are expected to experience an
increase in payments by $22.3 million (or 0.5
percent).
Our operating impact estimate includes the
final ¥2.9 percent documentation and
coding adjustment applied to the hospitalspecific rates, the final ¥2.6 percent
documentation and coding adjustment
applied to the Puerto Rico-specific rates and
the final ¥2.9 percent adjustment for
documentation and coding changes to the
IPPS standardized amounts. In addition, our
operating impact estimate includes the final
2.35 percent market basket update to the
standardized amount (which includes the
final 2.6 percent update with the 0.25
percentage point reduction required under
the Affordable Care Act). The estimates of
IPPS operating payments to acute care
hospitals do not reflect any changes in
hospital admissions or real case-mix
intensity, which would also affect overall
payment changes.
The RFA requires agencies to analyze
options for regulatory relief of small
businesses. For purposes of the RFA, small
entities include small businesses, nonprofit
organizations, and small government
jurisdictions. Most hospitals and most other
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providers and suppliers are considered to be
small entities, either by being nonprofit
organizations or by meeting the Small
Business Administration definition of a small
business (having revenues of $34.5 million or
less in any 1 year). (For details on the latest
standards for health care providers, we refer
readers to the Table of Small Business Size
Standards for NAIC 622 found on the Small
Business Administration Office of Size
Standards Web site at: https://www.sba.gov/
contractingopportunities/officials/table/
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 the provisions of this final rule relating
to acute care hospitals would have a
significant impact on small entities as
explained in this Appendix. Because we lack
data on individual hospital receipts, we
cannot determine the number of small
proprietary LTCHs. Therefore, we are
assuming that all LTCHs are considered
small entities for the purpose of the analysis
in section IX. of this Appendix. Medicare
fiscal intermediaries and MACs are not
considered to be small entities. Because we
acknowledge that many of the affected
entities are small entities, the analysis
discussed throughout the preamble of this
final rule constitutes our final regulatory
flexibility analysis. Therefore, in the FY 2011
IPPS/LTCH PPS proposed rule and the
supplemental proposed rule (75 FR 24287
and 31093, respectively), we solicited public
comments on our estimates and analysis of
the impact of our proposals on those small
entities. We address any public comments
that we received on the impact of the changes
that we are finalizing in the applicable
sections of this Appendix.
The Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA),
Public Law 104–121, as amended by section
8302 of Public Law 110–28, requires an
agency to provide compliance guides for each
rule or group of related rules for which an
agency is required to prepare a final
regulatory flexibility analysis. The
compliance guides associated with this final
rule are available on the CMS IPPS Web page
at https://www.cms.hhs.gov/
AcuteInpatientPPS/01_overview.asp. We also
note that the Hospital Center Web page at
https://www.cms.hhs.gov/center/hospital.asp
was developed to assist hospitals in
understanding and adapting to changes in
Medicare regulations and in billing and
payment procedures. This Web page provides
hospitals with substantial downloadable
explanatory materials.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory impact
analysis for any proposed or final rule that
may have a significant impact on the
operations of a substantial number of small
rural hospitals. This analysis must conform
to the provisions of section 603 of the RFA.
With the exception of hospitals located in
certain New England counties, for purposes
of section 1102(b) of the Act, we now define
a small rural hospital as a hospital that is
located outside of an urban area and has
fewer than 100 beds. Section 601(g) of the
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Social Security Amendments of 1983 (Pub. L.
98–21) designated hospitals in certain New
England counties as belonging to the adjacent
urban area. Thus, for purposes of the IPPS
and the LTCH PPS, we continue to classify
these hospitals as urban hospitals. (We refer
readers to Table 1 and section VI. of this
Appendix for the quantitative effects of the
final policy changes under the IPPS for
operating costs.)
Section 202 of the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4) also
requires that agencies assess anticipated costs
and benefits before issuing any rule whose
mandates require spending in any 1 year of
$100 million in 1995 dollars, updated
annually for inflation. That threshold level is
currently approximately $133 million. This
final rule would not mandate any
requirements for State, local, or tribal
governments, nor would it affect private
sector costs.
Executive Order 13132 establishes certain
requirements that an agency must meet when
it promulgates a proposed rule (and
subsequent final rule) that imposes
substantial direct requirement costs on State
and local governments, preempts State law,
or otherwise has Federalism implications. As
stated above, this final rule would not have
a substantial effect on State and local
governments.
The following analysis, in conjunction
with the remainder of this document,
demonstrates that this final rule is consistent
with the regulatory philosophy and
principles identified in Executive Order
12866, the RFA, and section 1102(b) of the
Act. The final rule would 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.
II. Objectives of the IPPS
The primary objective of the IPPS is to
create incentives for hospitals to operate
efficiently and minimize unnecessary costs
while at the same time ensuring that
payments are sufficient to adequately
compensate hospitals for their legitimate
costs. In addition, we share national goals of
preserving the Medicare Hospital Insurance
Trust Fund.
We believe the changes in this final rule
would further each of these goals while
maintaining the financial viability of the
hospital industry and ensuring access to high
quality health care for Medicare
beneficiaries. We expect that these finalized
changes would ensure that the outcomes of
the prospective payment systems are
reasonable and equitable while avoiding or
minimizing unintended adverse
consequences.
III. Limitations of Our Analysis
The following quantitative analysis
presents the projected effects of our finalized
policy changes, as well as statutory changes
effective for FY 2011, on various hospital
groups. We estimate the effects of individual
policy changes by estimating payments per
case while holding all other payment policies
constant. We use the best data available, but,
generally, we do not attempt to make
adjustments for future changes in such
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case-mix.
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IV. Hospitals Included in and Excluded
From the IPPS
The prospective payment systems for
hospital inpatient operating and capitalrelated costs of acute care hospitals
encompass most general short-term, acute
care hospitals that participate in the
Medicare program. There were 33 Indian
Health Service hospitals in our database,
which we excluded from the analysis due to
the special characteristics of the prospective
payment methodology for these hospitals.
Among other short-term, acute care hospitals,
only the 46 such hospitals in Maryland
remain excluded from the IPPS pursuant to
the waiver under section 1814(b)(3) of the
Act.
As of June 2010, there are 3,472 IPPS acute
care hospitals to be included in our analysis.
This represents about 64 percent of all
Medicare-participating hospitals. The
majority of this impact analysis focuses on
this set of hospitals. There also are
approximately 1,317 CAHs. These small,
limited service hospitals are paid on the basis
of reasonable costs rather than under the
IPPS. (We refer readers to section VII. of this
Appendix for a further description of the
impact of CAH-related final policy changes.)
There are also 1,260 IPPS-excluded hospitals
and 2,150 IPPS-excluded hospital units.
These IPPS-excluded hospitals and units
include IPFs, IRFs, LTCHs, RNHCIs,
children’s hospitals, and cancer hospitals,
which are paid under separate payment
systems. Changes in the prospective payment
systems for IPFs and IRFs are made through
separate rulemaking. Payment impacts for
these IPPS-excluded hospitals and units are
not included in this final rule. The impact of
the final update and policy changes to the
LTCH PPS for FY 2011 are discussed in
section IX. of this Appendix.
V. Effects on Hospitals and Hospital Units
Excluded From the IPPS
As of June 2010, there were 3,415 hospitals
and hospital units excluded from the IPPS.
Of these, 78 children’s hospitals, 11 cancer
hospitals, and 17 RNHCIs are being paid on
a reasonable cost basis subject to the rate-ofincrease ceiling under § 413.40. The
remaining providers, 230 rehabilitation
hospitals and 953 rehabilitation units, and
433 LTCHs, are paid the Federal prospective
per discharge rate under the IRF PPS and the
LTCH PPS, respectively, and 507 psychiatric
hospitals and 1,197 psychiatric units are paid
the Federal per diem amount under the IPF
PPS. As stated above, IRFs and IPFs are not
affected by rate updates discussed in this
final rule. The impacts of the changes to
LTCHs are discussed in section IX. of this
Appendix.
In the past, certain hospitals and units
excluded from the IPPS have been paid based
on their reasonable costs subject to limits as
established by the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA). Cancer
and children’s hospitals continue to be paid
on a reasonable cost basis subject to TEFRA
limits for FY 2011. For these hospitals
(cancer and children’s hospitals), consistent
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with the authority provided in section
1886(b)(3)(B)(ii) of the Act, the update is the
percentage increase in the FY 2011 IPPS
operating market basket. In compliance with
section 404 of the MMA, in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR
43930), we replaced the FY 2002-based IPPS
operating and capital market baskets with the
revised and rebased FY 2006-based IPPS
operating and capital market baskets.
Therefore, consistent with current law, based
on IHS Global Insight, Inc.’s 2010 second
quarter forecast, with historical data through
the 2010 first quarter, the final FY 2011
update to the IPPS operating market basket
is 2.6 percent (that is, the current estimate of
the market basket rate-of-increase). However,
the Affordable Care Act requires a 0.25
percentage point reduction to the market
basket update resulting in a final 2.35 percent
applicable percentage increase for IPPS
hospitals. RNCHIs, children’s hospitals and
cancer hospitals are not subject to the
reduction in the applicable percentage
increase required under the Affordable Care
Act. In accordance with § 403.752(a) of the
regulations, RNHCIs are paid under § 413.40.
Therefore, for RNHCIs, the final update is the
same as for children’s and cancer hospitals,
which is the percentage increase in the FY
2011 IPPS operating market basket, estimated
to be 2.6 percent, without the reductions
required under the Affordable Care Act.
The impact of the final update in the rateof-increase limit on those excluded hospitals
depends on the cumulative cost increases
experienced by each excluded hospital since
its applicable base period. For excluded
hospitals that have maintained their cost
increases at a level below the rate-of-increase
limits since their base period, the major effect
is on the level of incentive payments these
excluded hospitals receive. Conversely, for
excluded hospitals with per-case cost
increases above the cumulative update in
their rate-of-increase limits, the major effect
is the amount of excess costs that will not be
reimbursed.
We note that, under § 413.40(d)(3), an
excluded hospital that continues to be paid
under the TEFRA system and whose costs
exceed 110 percent of its rate-of-increase
limit receives its rate-of-increase limit plus
50 percent of the difference between its
reasonable costs and 110 percent of the limit,
not to exceed 110 percent of its limit. In
addition, under the various provisions set
forth in § 413.40, cancer and children’s
hospitals can obtain payment adjustments for
justifiable increases in operating costs that
exceed the limit.
VI. Quantitative Effects of the Policy
Changes Under the IPPS for Operating Costs
A. Basis and Methodology of Estimates
In this final rule, we are announcing final
policy changes and payment rate updates for
the IPPS for operating costs of acute care
hospitals. Updates to the capital payments to
acute care hospitals are discussed in section
VIII. of this Appendix. Based on the overall
percentage change in payments per case
estimated using our payment simulation
model, we estimate that total FY 2011
operating payments would decrease by 0.4
percent compared to FY 2010, largely due to
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the documentation and coding adjustments
and the applicable percentage increase
applied to the IPPS rates. This amount
reflects the FY 2011 documentation and
coding adjustments described in Section X of
this final rule: ¥2.9 percent for the IPPS
national standardized amounts, ¥2.9 percent
for the IPPS hospital-specific rates, and ¥2.6
percent for the IPPS Puerto Rico-specific
standardized amount. The impacts do not
illustrate changes in hospital admissions or
real case-mix intensity, which will also affect
overall payment changes.
We have prepared separate impact analyses
of the finalized changes to each system. This
section deals with changes to the operating
inpatient prospective payment system for
acute care hospitals. Our payment simulation
model relies on the most recent available
data to enable us to estimate the impacts on
payments per case of certain changes in this
final rule. However, there are other finalized
changes for which we do not have data
available that would allow us to estimate the
payment impacts using this model. For those
finalized changes, we have attempted to
predict the payment impacts based upon our
experience and other more limited data.
The data used in developing the
quantitative analyses of changes in payments
per case presented below are taken from the
FY 2009 MedPAR file and the most current
Provider-Specific File that is used for
payment purposes. Although the analyses of
the final changes to the operating PPS do not
incorporate cost data, data from the most
recently available hospital cost reports were
used to categorize hospitals. Our analysis has
several qualifications. First, in this analysis,
we do not make adjustments for future
changes in such variables as admissions,
lengths of stay, or underlying growth in real
case-mix. Second, due to the interdependent
nature of the IPPS payment components, it is
very difficult to precisely quantify the impact
associated with each change. Third, we use
various data sources to categorize hospitals
in the tables. In some cases, particularly the
number of beds, there is a fair degree of
variation in the data from the different
sources. We have attempted to construct
these variables with the best available source
overall. However, for individual hospitals,
some miscategorizations are possible.
Using cases from the FY 2009 MedPAR
file, we simulated payments under the
operating IPPS given various combinations of
payment parameters. Any short-term, acute
care hospitals not paid under the IPPS
(Indian Health Service hospitals and
hospitals in Maryland) were excluded from
the simulations. The impact of payments
under the capital IPPS, or the impact of
payments for costs other than inpatient
operating costs, are not analyzed in this
section. Estimated payment impacts of the
capital IPPS for FY 2011 are discussed in
section VIII. of this Appendix.
We discuss the following changes below:
• The effects of the annual reclassification
of diagnoses and procedures, full
implementation of the MS–DRG system and
100 percent cost-based MS–DRG relative
weights.
• The effects of the changes in hospitals’
wage index values reflecting updated wage
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data from hospitals’ cost reporting periods
beginning during FY 2007, compared to the
FY 2006 wage data.
• The effects of the recalibration of the
MS–DRG relative weights as required by
section 1886(d)(4)(C) of the Act, including
the wage and recalibration budget neutrality
factors.
• The effects of geographic
reclassifications by the MGCRB that will be
effective in FY 2011.
• The effects of the frontier wage index
provision that requires that hospitals located
in States that qualify as frontier states cannot
have a wage index less than 1.0. This
provision is not budget neutral.
• The effects of the rural floor and imputed
floor with a national budget neutrality
applied to the wage index, as required by the
Affordable Care Act.
• The effects of section 505 of Public Law
108–173, which provides for an increase in
a hospital’s wage index if the hospital
qualifies by meeting a threshold percentage
of residents of the county where the hospital
is located who commute to work at hospitals
in counties with higher wage indexes.
• The total estimated change in payments
based on the FY 2011 policies relative to
payments based on FY 2010 policies that
include the applicable percentage increase of
2.35 percent (or 2.6 percent market basket
with a 0.25 percentage point reduction, as
required under the Affordable Care Act). The
FY 2010 operating payments also account for
provisions under the Affordable Care Act that
were effective for FY 2010.
To illustrate the impact of the FY 2011
changes, our analysis begins with a FY 2010
baseline simulation model using: The FY
2011 applicable percentage increase of 2.35
percent; the FY 2010 MS–DRG GROUPER
(Version 27.0); the most current CBSA
designations for hospitals based on OMB’s
MSA definitions; the FY 2010 wage index;
and no MGCRB reclassifications. Outlier
payments are set at 5.1 percent of total
operating MS–DRG and outlier payments.
Section 1886(b)(3)(B)(viii) of the Act, as
added by section 5001(a) of Public Law 109–
171, as amended by section 4102(b)(1)(A) of
the ARRA (Pub. L. 111–5) and by section
3401(a)(2) of the Affordable Care Act (Pub. L.
111–148), provides that, for FY 2007 through
FY 2014, the update factor will be reduced
by 2.0 percentage points for any hospital that
does not submit quality data in a form and
manner and at a time specified by the
Secretary. (Beginning in FY 2015, the
reduction is one-quarter of such applicable
percentage increase determined without
regard to section 1886(b)(3)(B)(ix), (xi), or
(xii) of the Act.) At the time that this impact
was prepared, 104 hospitals did not receive
the full market basket rate-of-increase for FY
2010 because they failed the quality data
submission process or did not choose to
participate. For purposes of the simulations
shown below, we modeled the payment
changes for FY 2011 using a reduced update
for these 104 hospitals. However, we do not
have enough information at this time to
determine which hospitals will not receive
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the full market basket rate-of-increase for FY
2011.
Each policy change, statutory or otherwise,
is then added incrementally to this baseline,
finally arriving at an FY 2011 model
incorporating all of the changes. This
simulation allows us to isolate the effects of
each change.
Our final comparison illustrates the
percent change in payments per case from FY
2010 to FY 2011. Three factors not discussed
separately have significant impacts here. The
first factor is the update to the standardized
amount. In accordance with section
1886(b)(3)(B)(i) of the Act, we are updating
the standardized amounts for FY 2011 using
an applicable percentage increase of 2.35
percent. This includes our forecasted
hospital market basket increase of 2.6 percent
with a 0.25 percentage point reduction as
required under the Affordable Care Act.
(Hospitals that fail to comply with the quality
data submission requirements to receive the
full update will receive an update reduced by
2.0 percentage points from 2.35 percent to
0.35 percent.) Under section 1886(b)(3)(B)(iv)
of the Act, the updates to the hospitalspecific amounts for SCHs and for MDHs are
also equal to the market basket percentage
increase, or 2.35 percent. In addition, we are
updating the Puerto Rico specific amount by
an applicable percentage increase of 2.35
percent.
A second significant factor that affects the
changes in hospitals’ payments per case from
FY 2010 to FY 2011 is the change in
hospitals’ geographic reclassification status
from one year to the next. That is, payments
may be reduced for hospitals reclassified in
FY 2010 that are no longer reclassified in FY
2011. Conversely, payments may increase for
hospitals not reclassified in FY 2010 that are
reclassified in FY 2011.
A third significant factor is that we
currently estimate that actual outlier
payments during FY 2010 will be 4.7 percent
of total MS–DRG payments. Our updated FY
2010 outlier estimate accounts for changes to
the FY 2010 IPPS payments required under
the Affordable Care Act. When the FY 2010
final rule was published, we projected FY
2010 outlier payments would be 5.1 percent
of total MS–DRG plus outlier payments; the
average standardized amounts were offset
correspondingly. The effects of the lower
than expected outlier payments during FY
2010 (as discussed in the Addendum to this
proposed rule) are reflected in the analyses
below comparing our current estimates of FY
2010 payments per case to estimated FY 2011
payments per case (with outlier payments
projected to equal 5.1 percent of total MS–
DRG payments).
B. Analysis of Table I
Table I displays the results of our analysis
of the final changes for FY 2011. 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 3,472 acute
care hospitals included in the analysis.
The next four rows of Table I contain
hospitals categorized according to their
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geographic location: All urban, which is
further divided into large urban and other
urban; and rural. There are 2,494 hospitals
located in urban areas included in our
analysis. Among these, there are 1,362
hospitals located in large urban areas
(populations over 1 million), and 1,132
hospitals in other urban areas (populations of
1 million or fewer). In addition, there are 978
hospitals in rural areas. The next two
groupings are by bed-size categories, shown
separately for urban and rural hospitals. The
final groupings by geographic location are by
census divisions, also shown separately for
urban and rural hospitals.
The second part of Table I shows hospital
groups based on hospitals’ FY 2011 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 1886(d)(8)(E) of the Act that have
implications for capital payments) are 2,551;
1,404; 1,147; and 921, 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 adjustment) or receive DSH payments, or
some combination of these two adjustments.
There are 2,429 nonteaching hospitals in our
analysis, 805 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 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 180 RRCs, 332 SCHs, 194 MDHs,
and 117 hospitals that are both SCHs and
RRCs, and 13 hospitals that are both an MDH
and an RRC.
The next series of groupings are based on
the type of ownership and the hospital’s
Medicare utilization expressed as a percent
of total patient days. These data were taken
from the FY 2008 or FY 2007 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 2011. The second grouping
shows the MGCRB rural reclassifications.
These groupings account for the change in
the MGCRB reclassification policy as
required under the Affordable Care Act.
The final category shows the impact of the
policy changes on the 19 cardiac hospitals in
our analysis.
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C. Effects of the Changes to the MS–DRG
Reclassifications and Relative Cost-Based
Weights (Column 1)
In Column 1 of Table I, we present the
effects of the final MS–DRG reclassifications,
as discussed in section II. of the preamble to
this final rule. Section 1886(d)(4)(C)(i) of the
Act requires us annually to make appropriate
classification changes in order to reflect
changes in treatment patterns, technology,
and any other factors that may change the
relative use of hospital resources.
As discussed in section II.E. of the
preamble of this final rule, the FY 2011 MS–
DRG relative weights will be 100 percent
cost-based and 100 percent MS–DRGs. For
FY 2011, the MS–DRGs are calculated using
the FY 2009 MedPAR data grouped to the
Version 28.0 (FY 2011) MS–DRGs. The
methods of calculating the relative weights
and the reclassification changes to the
GROUPER are described in more detail in
section II.H. of this final rule. The changes
to the relative weights and MS–DRGs shown
in Column 2 are prior to any offset for budget
neutrality. Overall, hospitals will experience
a 0.3 percent increase and a 0.4 percent
increase, respectively, in payments due to the
changes in the MS–DRGs and relative
weights prior to budget neutrality. Urban
hospitals and rural hospitals will experience
a 0.3 percent increase in payments under the
updates to the relative weights and MS–
DRGs.
D. Effects of the Application of Recalibration
Budget Neutrality (Column 2)
Column 2 shows the effects of the changes
to the MS–DRGs and relative weights with
the application of the recalibration budget
neutrality factor to the standardized amounts.
Consistent with section 1886(d)(4)(C)(iii) of
the Act, we are calculating a recalibration
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 ‘‘All Hospitals’’ line in Column 1
indicates that changes due to MS–DRGs and
relative weights will increase payments by
0.3 percent before application of the budget
neutrality factor. The recalibration budget
neutrality factor is 0.996731, which is
applied to the standardized amount. Thus,
the impact after accounting only for budget
neutrality for changes to the MS–DRG
relative weights and classification is
somewhat lower than the figures shown in
Column 1 (approximately 0.3 percent).
Consequentially, urban hospitals will not
experience a change in payments, while rural
hospitals will experience a 0.1 percent
increase in payments when recalibration
budget neutrality is applied.
E. Effects of Wage Index Changes (Column 3)
Section 1886(d)(3)(E) of the Act requires
that, beginning October 1, 1993, we annually
update the wage data used to calculate the
wage index. In accordance with this
requirement, the wage index for acute care
hospitals for FY 2011 is based on data
submitted for hospital cost reporting periods
beginning on or after October 1, 2006 and
before October 1, 2007. The estimated impact
of the updated wage data and labor share on
hospital payments is isolated in Column 3 by
holding the other payment parameters
constant in this simulation. That is, Column
3 shows the percentage change in payments
when going from a model using the FY 2010
wage index, based on FY 2006 wage data, the
current labor-related share and having a 100percent occupational mix adjustment
applied, to a model using the FY 2011 prereclassification wage index with the laborrelated share, also having a 100-percent
occupational mix adjustment applied, based
on FY 2007 wage data (while holding other
payment parameters such as use of the
Version 28.0 MS–DRG GROUPER constant).
The occupational mix adjustment is based on
the FY 2008/2009 occupational mix survey.
Column 3 shows the impacts of updating
the wage data using FY 2007 cost reports.
Overall, the new wage data will lead to a 0.0
percent change for all hospitals before being
combined with the wage budget neutrality
adjustment shown in Column 5. Among the
regions, the largest increase is in the rural
New England region, which experiences a 0.5
percent increase before applying an
adjustment for budget neutrality. The largest
decline from updating the wage data is seen
in the urban New England region (0.5 percent
decrease).
In looking at the wage data itself, the
national average hourly wage increased 4.3
percent compared to FY 2010. Therefore, the
only manner in which to maintain or exceed
the previous year’s wage index was to match
or exceed the national 4.3 percent increase in
average hourly wage. Of the 3,441 hospitals
with wage data for both FYs 2010 and 2011,
1,621, or 47.1 percent, experienced an
average hourly wage increase of 4.3 percent
or more.
The following chart compares the shifts in
proposed wage index values for hospitals for
FY 2011 relative to FY 2010. Among urban
hospitals, 38 will experience an increase of
more than 5 percent and less than 10 percent
and 8 will experience an increase of more
than 10 percent. Among rural hospitals, 2
will experience an increase of more than 5
percent and less than 10 percent, and none
will experience an increase of more than 10
percent. However, 939 rural hospitals will
experience increases or decreases of less than
5 percent, while 2,424 urban hospitals will
experience increases or decreases of less than
5 percent. Thirteen urban hospitals will
experience decreases in their wage index
values of more than 5 percent and less than
10 percent. Sixteen urban hospitals will
experience decreases in their wage index
values of greater than 10 percent. One rural
hospital will experience a decrease of more
than 10 percent. These figures reflect changes
in the wage index which is an adjustment to
either 68.8 percent or 62 percent of a
hospital’s standardized amount, depending
upon whether its wage index is greater than
1.0 or less than or equal to 1.0. Therefore,
these figures illustrate a somewhat larger
change in the wage index than will occur to
the hospital’s total payment.
The following chart shows the projected
impact for urban and rural hospitals.
Number of hospitals
Percentage change in area wage index values
Urban
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Increase more than 10 percent .......................................................................................................................................
Increase more than 5 percent and less than 10 percent ................................................................................................
Increase or decrease less than 5 percent .......................................................................................................................
Decrease more than 5 percent and less than 10 percent ..............................................................................................
Decrease more than 10 percent ......................................................................................................................................
F. Application of the Wage Budget Neutrality
Factor (Column 4)
Column 4 shows the impact of the new
wage data with the application of the wage
budget neutrality factor. In FY 2010, we
began calculating separate wage budget
neutrality and recalibration budget neutrality
factors, in accordance with section
1886(d)(3)(E) of the Act, which specifies that
budget neutrality to account for wage
changes or updates made under that
subparagraph must be made without regard
to the 62 percent labor-related share
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guaranteed under section 1886(d)(3)(E)(ii) of
the Act. Therefore, for FY 2011, we are
calculating the wage budget neutrality factor
to ensure that payments under updated wage
data and the labor-related share are budget
neutral without regard to the lower laborrelated share of 62 percent applied to
hospitals with a wage index less than or
equal to 1. In other words, the wage budget
neutrality is calculated under the assumption
that all hospitals receive the higher laborrelated share of the standardized amount.
Because the wage data changes did not
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Rural
8
38
2,424
13
16
0
2
939
0
1
change overall payments (displayed in
Column 3), the revised wage budget
neutrality factor is 1.000013, and the overall
payment change is 0.0 percent.
G. Combined Effects of the MS–DRG and
Wage Index Changes (Column 5)
Section 1886(d)(4)(C)(iii) of the Act
requires that changes to MS–DRG
reclassifications and the relative weights
cannot increase or decrease aggregate
payments. In addition, section 1886(d)(3)(E)
of the Act specifies that any updates or
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adjustments to the wage index are to be
budget neutral. We computed a wage budget
neutrality factor of 1.000013, and a
recalibration budget neutrality factor of
0.996731 (which is applied to the Puerto
Rico-specific standardized amount and the
hospital-specific rates). The product of the
two budget neutrality factors is the
cumulative wage and recalibration budget
neutrality factor. The cumulative wage and
recalibration budget neutrality adjustment is
0.996744, or approximately ¥0.3 percent,
which is applied to the national standardized
amounts. Because the wage budget neutrality
and the recalibration budget neutrality are
calculated under different methodologies
according to the statute, when the two budget
neutralities are combined and applied to the
standardized amount, the overall payment
impact is not necessarily budget neutral.
However, in this rule, we are estimating that
the changes in the MS–DRG relative weights
and updated wage data with wage and budget
neutrality applied will result in a 0.0 change
in payments.
We estimate that the combined impact of
the changes to the relative weights and MS–
DRGs and the updated wage data with budget
neutrality applied will result in no change in
payments for urban or rural hospitals. Urban
New England would experience a 0.7
decrease in payments due to reductions in
their case-mix and wages compared to the
national average, while the urban Pacific area
would experience a 0.6 percent increase in
payments because of above average increases
in wages and case-mix. Among the rural
hospital categories, rural South Atlantic
hospitals would experience the greatest
decline in payment (¥0.9 percent) primarily
due to the changes to MS–DRGs and the
relative cost weights, while the rural West
South Central area would experience a 0.8
percent increase in payments.
H. Effects of MGCRB Reclassifications
(Column 6)
Our impact analysis to this point has
assumed acute care hospitals are paid on the
basis of their actual geographic location (with
the exception of ongoing policies that
provide that certain hospitals receive
payments on other bases than where they are
geographically located). The changes in
Column 6 reflect the per case payment
impact of moving from this baseline to a
simulation incorporating the MGCRB
decisions for FY 2011 which affect hospitals’
wage index area assignments.
By spring of each year, the MGCRB makes
reclassification determinations that will be
effective for the next fiscal year, which
begins on October 1. The MGCRB may
approve a hospital’s reclassification request
for the purpose of using another area’s wage
index value. Hospitals may appeal denials of
MGCRB decisions to the CMS Administrator.
Further, hospitals have 45 days from
publication of the IPPS rule in the Federal
Register to decide whether to withdraw or
terminate an approved geographic
reclassification for the following year.
Provisions in the Affordable Care Act
required us to revert to FY 2008 average
hourly wage reclassification criteria for
reclassifications effective in FY 2011.
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Therefore, additional hospitals qualify for
MGCRB reclassification.
The overall effect of geographic
reclassification is required by section
1886(d)(8)(D) of the Act to be budget neutral.
Therefore, for the purposes of this impact
analysis, we are applying an adjustment of
0.991264 to ensure that the effects of the
section 1886(d)(10) reclassifications are
budget neutral (section II.A. of the
Addendum to this final rule). Geographic
reclassification generally benefits hospitals in
rural areas. We estimate that geographic
reclassification will increase payments to
rural hospitals by an average of 1.7 percent.
By region, all the rural hospital categories
will experience increases in payments due to
MGCRB reclassification where rural hospitals
in the Mountain region will experience a 0.4
percent increase in payments and rural
hospitals in the New England region will
experience a 2.5 percent increase in
payments.
Table 9A of the Addendum to this final
rule reflects the approved reclassifications for
FY 2011.
I. Effects of the Rural Floor and Imputed
Floor, Including Application of National
Budget Neutrality (Column 7)
As discussed in section III.B. of the
preamble of the FY 2009 IPPS final rule, the
FY 2010 IPPS/RY 2010 LTCH final rule and
this final rule, section 4410 of Public Law
105–33 established the rural floor by
requiring that the wage index for a hospital
in any urban area cannot be less than the
wage index received by rural hospitals in the
same State. In FY 2008, we changed how we
applied budget neutrality to the rural floor.
Rather than applying a budget neutrality
adjustment to the standardized amount, a
uniform budget neutrality adjustment is
applied to the wage index. In the FY 2009
final rule, we finalized the policy to apply
the rural floor budget neutrality at the State
level with a 3-year transition. In FY 2009,
hospitals received a blended wage index that
is 20 percent of a wage index with the State
level rural and imputed floor budget
neutrality adjustment and 80 percent of a
wage index with the national budget
neutrality adjustment. In FY 2010, hospitals
received a blended wage index that is 50
percent of a wage index with the State level
rural and imputed floor budget neutrality and
50 percent of a wage index with the national
budget neutrality adjustment. For FY 2011,
the Affordable Care Act requires that we
apply one rural floor budget neutrality factor
to the wage index, nationally. The FY 2011
rural floor budget neutrality factor applied to
the wage index is 0.996641.
Furthermore, the FY 2005 IPPS final rule
(69 FR 49109) established a temporary
imputed floor for all urban States from FY
2005 to FY 2007. The rural floor requires that
an urban wage index cannot be lower than
the wage index for any rural hospital in that
State. Therefore, an imputed floor was
established for States that do not have rural
areas or rural IPPS hospitals. In the FY 2008
IPPS final rule with comment period (72 FR
47321), we finalized our proposal to extend
the imputed floor for 1 additional year. In the
FY 2009 IPPS final rule (73 FR 48573), we
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extended the imputed floor for an additional
3 years through FY 2011. The Affordable
Care Act requires that, effective for FY 2011,
we apply rural floor and imputed floor
budget neutrality at the national level, as we
did in FY 2008.
Column 7 shows the projected impact of
the rural floor and the imputed floor with the
national rural and imputed floor budget
neutrality factor applied to the wage index.
The column compares the postreclassification FY 2011 wage index of
providers before the rural floor adjustment
and the post-reclassification FY 2011 wage
index of providers with the rural floor and
imputed floor adjustment. Only urban
hospitals can benefit from the rural floor
provision. Because the provision is budget
neutral, all other hospitals (that is, all rural
hospitals and those urban hospitals to which
the adjustment is not made) experience a
decrease in payments due to the budget
neutrality adjustment applied nationally to
their wage index.
We project that, in aggregate, rural
hospitals will experience a 0.1 percent
decrease in payments as a result of the
application of rural floor budget neutrality
because the rural hospitals do not benefit
from the rural floor, but have their wage
indexes downwardly adjusted to ensure that
the application of the rural floor is budget
neutral overall. We project hospitals located
in other urban areas (populations of 1 million
or fewer) will experience a 0.1 percent
increase in payments because those providers
benefit from the rural floor. Urban hospitals
in the New England region can expect 0.8
percent increase in payments because a large
percentage of hospitals in this region receive
the rural floor. Urban hospitals in the Middle
Atlantic can expect a 0.2 percent increase in
payments because New Jersey hospitals
benefit from the imputed floor. Rural
hospitals in most regions can expect a 0.1 to
0.2 percent decrease in payments because the
rural and imputed floors only benefit urban
hospitals.
J. Effects of the Application of the Frontier
Wage Index (Column 8)
Section 10324(a) of Affordable Care Act
requires that we establish a minimum postreclassified wage-index of 1.00 for all
hospitals located in ‘‘frontier States.’’
‘‘Frontier States’’ is defined in the statute as
a State in which at least 50 percent of its
counties have a population density lesser
than 6 persons per square mile. Based on
these criteria, five states (Montana, North
Dakota, Nevada, South Dakota, and
Wyoming) are considered frontier States and
51 hospitals located in those States will
receive a frontier wage index of 1.0. This
provision is not budget neutral and is
estimated to increase IPPS operating
payments by approximately $50 million.
Urban hospitals located in the West North
Central region and urban hospitals located in
the Mountain region will experience an
increase in payments by 0.5 percent and 0.3
percent, respectively because many of the
hospitals located in this region are frontier
hospitals. Similarly, rural hospitals located
in the Mountain region and rural hospitals in
the West North Central region will
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K. Effects of the Wage Index Adjustment for
Out-Migration (Column 9)
Section 1886(d)(13) of the Act, as added by
section 505 of Public Law 108–173, provides
for an increase in the wage index for
hospitals located in certain counties that
have a relatively high percentage of hospital
employees who reside in the county, but
work in a different area with a higher wage
index. Hospitals located in counties that
qualify for the payment adjustment are to
receive an increase in the wage index that is
equal to a weighted average of the difference
between the wage index of the resident
county, post-reclassification and the higher
wage index work area(s), weighted by the
overall percentage of workers who are
employed in an area with a higher wage
index. With the out-migration adjustment,
small rural providers with less than 100 beds
will experience a 0.4 percent increase in
payments in FY 2011 relative to no
adjustment at all. We included these
additional payments to providers in the
impact table shown above, and we estimate
the impact of these providers receiving the
out-migration increase to be approximately
$30 million.
L. Effects of All Changes Prior to
Documentation and Coding (or CMI)
Adjustment (Column 10)
Column 10 shows our estimate of the
changes in payments per discharge from FY
2010 and FY 2011, resulting from all changes
reflected in this final rule, other than the
documentation and coding adjustment.
Column 10 reflects the impact of all other FY
2011 changes relative to FY 2010, including
those shown in Columns 1 through 9. We
note that our baseline FY 2010 operating
estimates account for the provisions under
the Affordable Care Act that affected the FY
2010 operating payments. The average
increase in payments under the IPPS for all
hospitals is approximately 2.5 percent. This
includes the 2.35 percent applicable
percentage increase (including the ¥0.25
reduction to the market basket increase
required under the Affordable Care Act). The
application of ¥0.25 percentage point
reduction to the FY 2010 required by the
Affordable Care Act only affected payments
for discharges on or after April 1, 2010,
reducing payments by 0.1 percent in FY
2010. However, the 0.25 percentage point
reduction for FY 2011 required under the
Affordable Care Act was a cumulative
reduction on the FY 2010 reduction,
resulting in an additional 0.1 percent
decrease in payments in FY 2011. In
addition, it reflects the estimated 0.4
percentage point difference between the
projected outlier payments in FY 2010 (5.1
percent of total MS–DRG payments) and the
current estimate of the percentage of actual
outlier payments in FY 2010 (4.7 percent), as
described in the introduction to this
Appendix and the Addendum to this final
rule. It accounts for the non-budget neutral
wage index provisions, including the frontier
State wage index and the Section 505 out-
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commuting adjustment that increases
payments by 0.1 percent. Finally, it accounts
for ¥0.1 percent decrease in payments due
to the expiration of section 508
reclassifications that had been extended for
FY 2010 under the Affordable Care Act.
There might also be interactive effects
among the various factors comprising the
payment system that we are not able to
isolate. For these reasons, the values in
Column 10 may not equal the sum of the
percentage changes described above.
M. Effects of All FY 2011 Changes With CMI
Adjustment (Column 11)
Column 11 shows our estimate of the
changes in payments per discharge from FY
2010 and FY 2011, resulting from all changes
reflected in this final rule for FY 2011. The
FY 2010 baseline estimates account for the
provisions under the Affordable Care Act that
affected the FY 2010 operating payments.
Specifically, the FY 2010 baseline payment
estimates account for the additional ¥0.25
reduction in the applicable percentage
increase (hospitals are paid based on the
updated FY 2010 rate for discharges
occurring on or after April 1, 2010), and
accounts for the extension of section 508
reclassifications for FY 2010. As discussed in
section II.D. of the preamble of this final rule,
this column includes the FY 2011
documentation and coding adjustment of
¥2.9 percent on the national standardized
amount, ¥2.9 percent on the hospitalspecific rates, and ¥2.6 percent on the
Puerto Rico-specific standardized amount,
which overall accounts for a 2.9 percent
decrease in payments.
The average decrease in payments under
the IPPS for all hospitals is approximately
¥0.4 percent. As described in Column 10,
this average decrease includes the effects of
the 2.35 percent applicable increase
(including the 0.25 percentage point
reduction) to the market basket update
required under the Affordable Care Act), the
0.4 percentage point difference between the
projected outlier payments in FY 2011 (5.1
percent of total MS–DRG payments), and the
current estimate of the percentage of actual
outlier payments in FY 2010 (4.7 percent). In
addition, it includes a ¥0.1 percent decrease
in payments due to the expiration of section
508 reclassifications that had been extended
for FY 2010 under the Affordable Care Act.
Section 508 reclassification was not a budgetneutral provision. There might also be
interactive effects among the various factors
comprising the payment system that we are
not able to isolate. For these reasons, the
values in Column 11 may not equal the sum
of the percentage changes described above.
The overall change in payments per
discharge for hospitals paid under the IPPS
in FY 2011 is estimated to decrease by 0.4
percent. The payment decreases among the
hospital categories are largely attributed to
the documentation and coding adjustments.
Hospitals in urban areas would experience an
estimated 0.4 percent decrease in payments
per discharge in FY 2011 compared to FY
2010. Hospital payments per discharge in
rural areas are estimated to decrease by 0.4
percent in FY 2011 as compared to FY 2010.
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Among urban census divisions, the largest
estimated payment decreases will be 0.9
percent in the Middle Atlantic region
because many of the urban providers in this
region had benefited from section 508
reclassifications in FY 2010 that has expired
for FY 2011. Urban hospitals in the Pacific
will see the largest payment increases (0.4
percent) because urban providers in this
region will experience increases in their
wage index above the national average.
Among the rural regions, the providers in the
Middle Atlantic and South Atlantic region
will experience the largest decrease in
payments (1.2 percent) while rural hospitals
in the Mountain region will experience an
increase in payments by 0.3 percent because
the rural providers in this region benefit from
MGCRB reclassification and the frontier State
wage index provision, implemented under
the Affordable Care Act.
Among special categories of rural
hospitals, MDHs will receive an estimated
payment decrease 0.8 percent. MDHs are
paid the higher of the IPPS rate based on the
national standardized amount, that is, the
Federal rate, or, if the hospital-specific rate
exceeds the Federal rate, the Federal rate
plus 75 percent of the difference between the
Federal rate and the hospital-specific rate.
MDHs will experience a decrease in
payments because of the documentation and
coding adjustments applied to both the
hospital-specific rate and the Federal rate.
SCHs are also paid the higher of their
hospital-specific rate or the Federal rate.
Overall, SCHs will experience an estimated
decrease in payments by 0.6 percent due to
the documentation and coding adjustments
to the national standardized amount and the
hospital-specific rates.
Rural hospitals reclassified for FY 2011 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 0.7 percent.
Cardiac hospitals are expected to
experience a payment increase of 0.3 percent
in FY 2011 relative to FY 2010 due to
increases in payments attributable to changes
in the MS–DRGs and relative weights.
N. Impact Analysis of Table II
Table II presents the projected impact of
the changes for FY 2011 for urban and rural
hospitals and for the different categories of
hospitals shown in Table I. It compares the
estimated average payments per discharge for
FY 2010 with the payments per discharge for
FY 2011, as calculated under our models.
The estimated FY 2010 payments per
discharge incorporate the provisions in the
Affordable Care Act. Thus, this table
presents, in terms of the average dollar
amounts paid per discharge, the combined
effects of the changes presented in Table I.
The estimated percentage changes shown in
the last column of Table II equal the
estimated percentage changes in average
payments per discharge from Column 11 of
Table I.
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VII. Effects of Other Policy Changes
In addition to those policy changes
discussed above that we are able to model
using our IPPS payment simulation model,
we are making various other changes in this
final rule. Generally, we have limited or no
specific data available with which to estimate
the impacts of these changes. Our estimates
of the likely impacts associated with these
other changes are discussed below.
A. Effects of Proposed Policy on HACs,
Including Infections
In section II.F. of the preamble of this final
rule, we discuss our implementation of
section 1886(d)(4)(D) of the Act, which
requires the Secretary to identify conditions
that are: (1) High cost, high volume, or both;
(2) result in the assignment of a case to an
MS–DRG that has a higher payment when
present as a secondary diagnosis; and
(3) could reasonably have been prevented
through application of evidence-based
guidelines. For discharges occurring on or
after October 1, 2008, hospitals will not
receive additional payment for cases in
which one of the selected conditions was not
present on admission, unless, based on data
and clinical judgment, it cannot be
determined at the time of admission whether
a condition is present. That is, the case will
be paid as though the secondary diagnosis
were not present. However, the statute also
requires the Secretary to continue counting
the condition as a secondary diagnosis that
results in a higher IPPS payment when doing
the budget neutrality calculations for MS–
DRG reclassifications and recalibration.
Therefore, we will perform our budget
neutrality calculations as though the
payment provision did not apply, but
Medicare will make a lower payment to the
hospital for the specific case that includes
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the secondary diagnosis. Thus, the provision
results in cost savings to the Medicare
program.
We note that the provision will only apply
when one or more of the selected conditions
are the only secondary diagnosis or diagnoses
present on the claim that will lead to higher
payment. Medicare beneficiaries will
generally have multiple secondary diagnoses
during a hospital stay, such that beneficiaries
having one MCC or CC will frequently have
additional conditions that also will generate
higher payment. Only a small percentage of
the cases will have only one secondary
diagnosis that would lead to a higher
payment. Therefore, if at least one
nonselected secondary diagnosis that leads to
higher payment is on the claim, the case will
continue to be assigned to the higher paying
MS–DRG and there will be no Medicare
savings from that case. In addition, as
discussed in section II.F.3.e. of the preamble
of this final rule, it is possible to have two
severity levels where the HAC does not affect
the MS–DRG assignment or for an MS–DRG
not to have severity levels. In either of these
circumstances, the case will continue to be
assigned to the higher paying MS–DRG and
there will be no Medicare savings from that
case.
The HAC payment provision went into
effect on October 1, 2008. Our savings
estimates for the next 5 fiscal years are
shown below:
Savings
(in millions)
Year
FY
FY
FY
FY
FY
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2011
2012
2013
2014
2015
....................................
....................................
....................................
....................................
....................................
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$20
22
23
25
27
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B. Effects of Policy Relating to New Medical
Service and Technology Add-On Payments
In section II.I. of the preamble to this final
rule, we discuss the three applications for
add-on payments for new medical services
and technologies for FY 2011, as well as the
status of the new technologies that were
approved to receive new technology add-on
payments in FY 2010. As explained in that
section, add-on payments for new technology
under section 1886(d)(5)(K) of the Act are not
required to be budget neutral. However, we
are providing an estimate of additional
payments for new technology add-on
payments because such payments will have
an impact on total operating IPPS payments
in FY 2010.
We are continuing to make new technology
add-on payments in FY 2011 for the
CardiowestTM Temporary Total Artificial
Heart System (TAH-t) and the Spiration®
IBV® Valve System. Therefore, we are
providing an estimate of total payments for
these technologies in FY 2011. We note that
new technology add-on payments per case
are limited to the lesser of: (1) 50 percent of
the costs of the new technology; or (2) 50
percent of the amount by which the costs of
the case exceed the standard MS–DRG
payment for the case. Because it is difficult
to predict the actual new technology add-on
payment for each case, our estimate below is
based on the increase in add-on payments for
FY 2011 as if every claim that would qualify
for a new technology add-on payments
would receive the maximum add-on
payment. Therefore, we currently estimate
that payments for the CardiowestTM
Temporary Total Artificial Heart System
(TAH-t) will increase overall FY 2011
payments by $9.54 million. For FY 2010, the
applicant, Spiration, Inc., estimated that
approximately 2,286 Medicare beneficiaries
would be eligible for the Spiration® IBV®
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Valve System. Therefore, based on the
applicant’s estimate from FY 2010, we
currently estimate that payments for the
Spiration® IBV® Valve System will increase
overall FY 2011 payments by $7.80 million.
In addition to continuing to make new
technology add-on payments in FY 2011 for
the CardiowestTM Temporary Total Artificial
Heart System (TAH-t) and the Spiration®
IBV® Valve System, as discussed in section
II.I. of the preamble to this final rule, we are
approving the AutoLITTTM for new
technology add-on payments for FY 2011.
The applicant, Monteris Medical, estimates
that approximately 170 Medicare
beneficiaries would be eligible for the
AutoLITTTM. Therefore, based on the
applicant’s estimate and 50 percent of the
estimated operating cost per case ($5,300),
we currently estimate that payments for the
AutoLITTTM will increase overall FY 2011
payments by $900,000.
C. Effects of Requirements for Hospital
Reporting of Quality Data for Annual
Hospital Payment Update
In Appendix A, section VII.C. of the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 44224), we discussed the impact of the FY
2011 RHQDAPU program requirements. In
this final rule, we are retiring one of the FY
2011 quality measures. We believe that this
will not have a significant effect on our
previous analysis. We note that, in that final
rule, we estimated that 96 hospitals would
not receive the full payment update in FY
2010 and that 96 hospitals would not receive
the full payment update in FY 2011. As
noted above, at the time this analysis was
prepared, 104 hospitals did not receive the
full payment update in FY 2010.
In section IV.A. of this final rule, we
discuss our requirements for hospitals to
report quality data in order to receive the full
annual payment update for FY 2011, FY
2012, FY 2013, and FY 2014. We estimate
that approximately 95 hospitals may not
receive the full annual payment update in
any fiscal year. Most of these hospitals are
either small rural or small urban hospitals.
However, at this time, information is not
available to determine the number of
hospitals that will not meet the requirements
for the full payment update for FY 2011, FY
2012, FY 2013, and FY 2014.
For the FY 2012 payment determination,
we did not adopt our proposal to require
hospitals to submit all-patient volume data
for selected MS–DRGs that relate to
RHQDAPU program measures.
For the FY 2013 payment determination,
we did not adopt our proposal that hospitals
would choose one of four proposed registrybased topics for which there are currently a
number of nationwide registries each
individually collecting data from a
significant proportion of IPPS hospitals. We
believe that the AMI-statin at discharge
measure, which we adopted for FY 2013
payment determination, will create minimal
additional burden as hospitals can collect the
data elements from the same charts already
being pulled for existing RHQDAPU program
AMI measures.
For the FY 2014 payment determination,
the addition of four chart-abstracted
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measures and the one measure collected via
NHSN that require hospitals to submit data
on all inpatients is expected to create an
additional burden for hospitals. The
information needed for the 2 ED-Throughput
measures is captured as routine
documentation, and therefore is not expected
to impose much additional burden. The 2
Global Immunization measures will require
hospitals to collect information on all
inpatients regarding flu and pneumonia
vaccinations that they are currently only
collecting for patients admitted for
pneumonia. Therefore, the number of
patients for which these data need to be
collected will increase. However, this
additional burden will be offset to some
extent by our decision to retire two measures
(PN–2 and PN–7). The information needed
for the fifth measure, an SSI measure to be
collected via NHSN, is structured to keep
additional burden to a minimum, since
hospitals in 21 States are already using
NHSN and CDC supports more than 2000
hospitals that are already using NHSN.
We discussed the validation requirements
for the FY 2011 annual payment update in
the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43883 through 43884). In the FY
2011 IPPS/LTCH PPS proposed rule, we
noted that for the FY 2012 payment update,
hospitals must pass our validation
requirement of a minimum of 75 percent
reliability, based upon our chart-audit
validation process, for three quarters of data
from first quarter CY 2010 through third
quarter CY 2010 (75 FR 23991 through
23993). These data are due to the QIO
Clinical Warehouse by August 15, 2010 (first
quarter CY 2010 discharges), November 15,
2010 (second quarter CY 2010 discharges),
and February 15, 2011 (third quarter CY 2010
discharges). We have continued our efforts to
ensure that QIOs provide assistance to all
hospitals that wish to participate in the
RHQDAPU program. The requirement of 12
charts per hospital submitted for validation
will result in approximately 9,600 charts per
quarter being submitted to CMS.
We reimburse hospitals for the cost of
sending charts to the Clinical Data
Abstraction Center (CDAC) contractor at the
rate of 12 cents per page for copying and
approximately $4.00 per chart for postage.
Our experience shows that the average chart
received by the CDAC contractor is
approximately 150 pages. Thus as a result of
the validation requirements effective for the
FY 2012 annual payment update, CMS will
have expenditures of approximately $212,000
per quarter, which is a reduction from the
$597,600 per quarter to collect the charts for
the FY 2010 and FY 2011 annual payment
updates. Given that we reimburse for the data
collection effort, we believe that a
requirement for twelve charts per hospital
per quarter represents a minimal burden to
the participating hospital.
We are adopting as final our proposal to
modify our validation process for FY 2012.
We believe that our FY 2012 policy, which
will only validate data submitted by 800
hospitals for the FY 2012 RHQDAPU
payment determination (as compared with
our previous policy under which we
validated data submitted by all hospitals
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participating in the RHQDAPU program),
will not change the number of hospitals that
fail the validation requirement for FY 2012
from previous years. We have changed the
way we calculate the validation matches (that
is, all relevant data elements submitted by
the hospital must match the independently
re-abstracted data elements to count as a
match), which will make it more difficult for
hospitals to satisfy the validation
requirement. However, we also are adopting
as final our proposal to validate data for a
smaller number of hospitals each year. In
combination, we believe that these two
proposed revisions will counterbalance each
other and result in no additional impact to
the number of hospitals failing our validation
requirement for FY 2012. In addition, CMS
conducted analysis in FY 2010 of past
validation data which indicates that at least
95 percent of sampled hospitals are expected
to pass the current 75 percent validation
threshold starting in FY 2012.
If we determine that a hospital is not
entitled to receive the full FY 2012 payment
update because it failed to satisfy the
validation requirement, and the hospital asks
for a reconsideration of that decision, the
hospital must submit complete copies of the
medical records that it submitted to the
CDAC contractor for purposes of the
validation for which the hospital incurs the
cost. We estimate that no greater than 20
hospitals would fail this requirement for
FY 2012. We estimate that this requirement
would cost hospitals approximately 12 cents
per page for copying and approximately
$4.00 per chart for postage. We have found
based on experience that an average sized
medical chart is approximately 150 pages.
Hospitals would be required to return all 36
sampled medical records for the three
quarters of data from FY 2010. We estimate
that the total cost to the 40 impacted
hospitals would be approximately $17,600,
or $440 per hospital. We believe that this cost
is minimal, compared with the 2.0 percent
RHQDAPU component of the annual
payment update at risk. This requirement is
necessary so that CMS has all the information
it needs to fairly and timely make a decision
on the hospital’s reconsideration request. We
also anticipate that this requirement will
benefit hospitals seeking reconsiderations
because it will enable us to resolve potential
issues earlier in the appeals process,
obviating the need for a hearing before the
Provider Reimbursement Review Board
(PRRB). We believe that this benefit will
greatly outweigh the burden of copying and
mailing the requested records.
We note that beginning with FY 2014 and
future years, we are considering adding two
strata to the current RHQDAPU validation
sample of SCIP, AMI, HF, and PN cases. We
will consider selecting 2 additional samples
of 3 cases per selected hospital per quarter
to validate proposed surgical site infection,
blood stream infection, ED-Throughput and
global immunization measures, If proposed
and adopted as final through a later
rulemaking, CMS would randomly select a
total of 18 records per quarter per validated
hospital in six strata (SCIP, AMI, HF, PN,
CDC/NHSN measures and ED-Throughput/
Global Immunization). The requirement of an
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additional 6 charts per hospital submitted for
validation will result in approximately 4800
additional charts per quarter being submitted
to CMS. We reimburse hospitals for the cost
of sending charts to the Clinical Data
Abstraction Center (CDAC) contractor at the
rate of 12 cents per page for copying and
approximately $4.00 per chart for postage.
Our experience shows that the average chart
received by the CDAC contractor is
approximately 150 pages. Thus, as a result of
the validation requirements effective for the
FY 2014 annual payment update, CMS will
have expenditures of approximately $105,600
per quarter to collect the charts for the FY
2014 and future years annual payment
update. Given that we reimburse for the data
collection effort, we believe that a
requirement of the additional records in FY
2014 per hospital per quarter represents a
minimal burden to the participating hospital.
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D. Effects of Policy on Payment for Transfer
Cases From Medicare Participating Hospitals
to Nonparticipating Hospitals and CAHs
In section IV.B. of the preamble of this
final rule, we are expanding the acute care
transfer policy to transfers to
nonparticipating acute care hospitals and to
CAHs. This expansion of the acute care
transfer policy aims to further align the
policy with its original intent, that is, to pay
a hospital commensurate with the resources
it expends in treating a Medicare beneficiary
who is transferred. However, the impacts of
this change are not possible to measure,
although we believe that any change in
Medicare payments to hospitals associated
with this change will be negligible.
Specifically, because there are relatively few
nonparticipating acute care hospitals, we
expect that there would be few, if any,
transfers to nonparticipating hospitals in a
given period. In addition, based on the
capped inpatient bed size of CAHs (that is,
not more than 25 inpatient beds) and the
CAH distance requirements (that is, a CAH
must generally be located at least 35 miles
from another hospital), we believe that
transfers from an IPPS acute care hospital to
a CAH occur very infrequently. Therefore, we
estimate that this expansion of the acute care
transfer policy will not have a material
impact on Medicare payments to acute care
hospitals.
E. Effects of the Low-Volume Hospital
Payment Adjustment: Changes for FYs 2011
and 2012
As discussed in section IV.D. of the
preamble to this final rule, the low-volume
hospital payment adjustment changes for FYs
2011 and 2012 expand eligibility for the lowvolume hospital payment adjustment to
hospitals with less than 1,600 Medicare
discharges (instead of the prior requirement
of less than 800 total, Medicare and nonMedicare, discharges) and more than 15
miles from other IPPS hospitals (rather than
the prior requirement of more than 25 miles).
The payment adjustment is changed also
from an empirically determined additional
25-percent payment adjustment to qualifying
hospitals with less than 200 total discharges
(69 FR 49099 through 49102 and 70 FR 47432
through 47434), to a continuous, linear
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sliding scale adjustment ranging from an
additional 25 percent payment adjustment to
qualifying hospitals with 200 or fewer
Medicare discharges to no additional
payment to hospitals with 1,600 or more
Medicare discharges.
We estimate, based on FY 2009 claims data
(March 2010 update of the MedPAR file), an
additional 1,444 hospitals would meet the
Medicare discharges criterion to qualify as a
low-volume hospital. However, we are not
able to estimate the number of these 1,444
hospitals that would also meet the distance
criterion. The actual number of hospitals that
would also meet the distance criterion to
qualify as a low-volume hospital would be
less, very likely much less, than the
estimated 1,444 maximum number of
potential low-volume hospitals for FY 2011.
If all 1,444 hospitals that meet the Medicare
discharge requirement also meet the distance
requirement, an additional estimated $835
million would be required for FY 2011, based
on each hospital’s number of Medicare
discharges and the corresponding payment
adjustment amount. At this time, we are not
able to estimate the impact of the change for
FY 2012.
Our actuaries chose a 40-percent factor to
estimate the percentage of hospitals that
would meet the distance requirement, in
addition to the discharge requirement, to be
a low-volume hospital. For FY 2011, our
actuaries estimate that there will be an
additional cost of $380 million; for FY 2012,
$450 million; and an additional $50 million
being paid in FY 2013, for hospital stays at
the end of FY 2012 that are paid at the
beginning of FY 2013.
F. Effects of Change Relating to Payment
Adjustment for Disproportionate Share
Hospitals
In section IV.F. of the preamble of this final
rule, we discuss the change, effective for FY
2011 and subsequent years, to the data
matching process used to calculate the SSI
fraction for the Medicare DSH payment
adjustment. The SSI fraction is part of the
formula used to determine whether a
subsection (d) hospital qualifies for a DSH
payment adjustment and the amount of any
DSH payment.
The numerator of a hospital’s DSH SSI
fraction is the number of inpatient days for
the provider’s patients who were entitled to
both Medicare Part A and SSI benefits. The
denominator of the hospital’s SSI fraction is
the total number of inpatient days for the
provider’s patients who were entitled to Part
A benefits. In order to calculate the
numerator of a hospital’s DSH SSI fraction,
CMS matches certain Medicare data files
with SSI eligibility data files that are
furnished by SSA. In Baystate Medical Center
v. Leavitt (545 F. Supp. 2d 20, as amended,
587 F. Supp. 2d 37, 44 (D.D.C. 2008)), the
district court concluded that, in certain
respects, CMS’ current matching process did
not use the ‘‘best available data’’ to match
Medicare patient day information with SSI
eligibility data. In implementing the Baystate
decision, CMS recalculated the plaintiff’s SSI
fractions and DSH payments for its FYs 1993
through 1996 by using a revised data
matching process that comports with the
district court’s decision.
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We are adopting a similar revised data
matching process for calculating hospitals’
DSH SSI fractions for FY 2011 and
subsequent fiscal years. In addition, we will
use, in the revised matching process, a later
update of the MedPAR claims data file and
the SSI eligibility data file. Specifically, we
will use MedPAR claims files and SSI
eligibility data that are updated 15 months
after the end of the Federal fiscal year, rather
than continue with our current practice of
using data updated 6 months after the end of
the Federal fiscal year. We believe that our
revision to the timing of the data match
achieves an appropriate balance between
accounting for additional retroactive SSI
eligibility determinations and the lifting of
SSI payment suspensions and facilitating
administrative finality through the timely
final settlement of Medicare cost reports.
We are not able to provide a detailed
analysis of the impact of the revised data
matching process. That is, it is not possible
to determine whether Medicare DSH
adjustment payments to hospitals will
generally increase or decrease, because
hospitals’ SSI fractions will vary depending
on various factors, including the use of a
more updated MedPAR claims data file, use
of a more updated SSI eligibility data file,
and the other features of our revised data
matching process.
With respect to the use of a more updated
MedPAR claims data file, we expect that
using a later version of the MedPAR claims
file will increase the number of inpatient
claims for a given Federal fiscal year and,
therefore, will increase the number of
Medicare inpatient days included in the
denominator of the SSI fraction. Depending
on whether or not the additional claims in
the MedPAR file are for Medicare patients
who are also eligible for SSI during the
inpatient stay, the numerator of the SSI
fraction might increase or decrease.
As for the use of an updated SSI eligibility
file, we note that retroactive SSI eligibility
determinations include both the granting and
the denial of SSI benefits. Therefore,
assuming that some of the retroactive SSI
eligibility determinations are for Medicare
patients, the use of an updated SSI eligibility
file also could increase or decrease the
numerator of the SSI fraction. We expect that,
as a result of using an updated SSI eligibility
file, the SSI fraction for some hospitals will
increase while it will decrease for other
hospitals.
We also note that, in the Baystate decision,
the district court found that certain records
(for example, ‘‘stale records’’ and ‘‘forced pay
records’’) were not included in the SSI
eligibility data that SSA gave to CMS for use
in the data matching process. However, the
SSI eligibility data files began to include
certain of these records in the mid-1990’s,
and stale records and forced pay records
were included in the SSI eligibility data files
that CMS used in recalculating the specific
SSI fractions and DSH adjustment payments
at issue in the Baystate case. As certain of
these records are already included in the data
matching process and we are making no
change to this policy, we are unable to
determine if this issue has any cost or savings
for FY 2011 and subsequent years.
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Finally, our revised data matching process
includes the use of SSNs and a greater
number of Title II numbers and HICANs. As
a result, we might be able to identify some
individuals who are entitled to both Part A
and SSI benefits that our current data
matching process might not have identified.
Therefore, we would expect an increase in
the SSI fraction for certain providers, but we
are unable to determine the extent to which
DSH adjustment payments will increase.
We did not receive any specific public
comments on this impact section.
G. Effects of Change in Policy Relating to
MDHs
1. Medicare Dependency: Counting Medicare
Inpatients
In section IV.G.2. of the preamble of this
final rule, we discuss our revision of the
existing Medicare-dependency criterion for
MDHs at § 412.108(a)(1)(iii) of the regulations
which specify that ‘‘At least 60 percent of the
hospital’s inpatient days or discharges were
attributable to individuals receiving
Medicare Part A benefits during the
hospital’s cost reporting period * * * ’’, by
replacing the word ‘‘receiving’’ with the
phrase ‘‘entitled to.’’ As a result, we will
include in the count of Medicare inpatient
days or discharges, all days or discharges
attributable to individuals entitled to
Medicare Part A benefits, including
individuals who have exhausted their
Medicare Part A hospital inpatient coverage
benefit.
Based on our analysis of data for cost
reporting periods beginning in FYs 2007 and
2008, we estimate that this change to the
MDH definition of Medicare dependency
may allow 48 more IPPS hospitals to qualify
as an MDH. We estimate that this change will
result in increased expenditure of $3.6
million in FY 2011.
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2. Extension of the MDH Program
In section IV.G.3. of the preamble to this
final rule, we discuss section 3124 of the
Affordable Care Act, which extended the
MDH program for 1 additional year, from the
end of FY 2011 (that is, for discharges before
October 1, 2011) to the end of FY 2012 (that
is, for discharges before October 1, 2012). The
extension of the MDH program has no impact
for FY 2011. For FY 2012, the extension
allows the continuation of MDH status and
the payment methodology for an MDH to be
paid its hospital-specific rate, based on its FY
1982, 1987, or 2002 costs per discharge,
rather than the Federal rate, if this results in
a greater aggregate payment. Therefore, the
impact of the MDH program extension is 1
additional year of updated hospital-specific
rate payments for each MDH, if this results
in a greater aggregate payment than Federal
rate payments, rather than Federal rate
payments for IPPS hospitals without special
treatment as MDHs. Our actuaries estimate
that this 1-year extension of the MDH
program through FY 2012 will cost an
additional $110 million.
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H. Effects of Changes Relating to Payments
for IME and Direct GME
1. Identifying ‘‘Approved Medical Residency
Programs’’
In section IV.H.2. of the preamble of this
final rule, we discuss our clarification of
policy regarding whether an individual is
considered to be training in an approved
medical residency program such that the
individual’s time should be included in the
FTE count for IME and direct GME purposes,
or whether that individual should be treated
and bill as a physician. Specifically, our
clarification states that individuals should be
treated as and bill as physicians if they have
already successfully completed at least one
residency program (regardless of whether
they have passed the board examination for
that specialty program), and are engaged in
subsequent training that is not required for
additional board certification in another
subspecialty. We also are revising the
definition of ‘‘resident’’ at § 413.75(b) to mean
‘‘an intern, resident, or fellow who is formally
accepted, enrolled, and participating in an
approved medical residency program,
including programs in osteopathy, dentistry,
and podiatry, as required in order to become
certified by the appropriate specialty board.’’
With respect to the policy regarding the
treatment of trainees that have already
successfully completed at least one residency
program, there is no financial impact on the
Medicare program because this is a
clarification of existing policy and is not a
policy revision or addition of a new policy.
The policy change to the regulations might
have some limited financial impact to the
extent that a hospital previously included
trainees who were not formally enrolled in
an approved program in its FTE counts, and
as a result of the change to the regulations,
will no longer be able to include such
trainees in its FTE count for IME and direct
GME purposes. We believe it would be rare
for a hospital to have included in its FTE
count trainees who are not formally enrolled
in a residency program in the typical fashion.
Further, we believe that it would be rare for
such a hospital to have sufficient room under
its IME and direct GME FTE resident caps to
include any such ‘‘informally enrolled’’
residents in addition to the typically enrolled
residents. Thus, the financial impact of the
change in the regulatory definition of
‘‘resident’’ would be insignificant.
2. Submission of Electronic Affiliation
Agreements
In section IV.H.3. of the preamble of this
final rule, we discuss our finalized policy to
allow hospitals to submit Medicare GME
affiliation agreements to the CMS Central
Office by electronic submission. Over the last
several years, we have received numerous
inquiries regarding the possibility of
submitting the Medicare GME affiliation
agreement electronically. To date, CMS has
only accepted signed hard copies of Medicare
GME affiliation agreements that are received
through the mail. Facsimile (FAX) and other
electronic submissions of affiliation
agreements have not been an acceptable
means of transmission of affiliation
agreements to CMS Central Office in order for
a hospital to meet the requirements of
§§ 413.79(f) and 412.105(f)(1)(vi).
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The increasing frequency of these inquiries
and our concerns regarding environmental
and paperwork reduction have prompted us
to reconsider our procedure for hospitals to
submit Medicare GME affiliation agreements
to the CMS Central Office. Accordingly, we
are changing our policy to provide for
electronic submission of the affiliation
agreement that is required to be sent to the
CMS Central Office. This policy change will
not affect the authority of the fiscal
intermediary or MAC to continue to specify
its requirements for submission for hospitals
in its servicing area.
We are establishing an electronic
submission process that will consist of either
an e-mail mailbox or a Web site where
hospitals will be able to submit their
Medicare GME affiliation agreements to the
CMS Central Office. As part of this process,
a copy of the Medicare GME affiliation
agreement must be received through the
electronic system no later than 11:59 p.m. on
July 1 of each academic year. We are requring
that the electronic affiliation agreement must
be submitted either as a scanned copy, a
Portable Document Format (PDF) version of
that hard copy agreement, or in another
electronic format that cannot be subject to
manipulation. This requirement will ensure
that the agreements are signed and dated as
required in the regulations at § 413.75.
We believe that allowing an electronic
submission of the affiliation agreement to the
CMS Central Office will assist us in more
effectively tracking the groups of hospitals
that become an affiliation as well as the
numbers of FTE cap slots that are being
transferred within those groups. In addition,
we believe an electronic submission process
will minimize the paperwork burden for
hospitals.
I. Effects of Changes Relating to CRNA
Services Furnished in Rural Hospitals and
CAHs
In section IV.I. of the preamble of this final
rule, we discuss our amendment to the
regulations at § 412.113(c)(2)(i)(A) to state
that, effective for cost reporting periods
beginning on or after October 1, 2010,
hospitals and CAHs that have reclassified
under section 1886(d)(8)(E) of the Act and
§ 412.103 are eligible to be paid based on
reasonable cost for anesthesia and related
care furnished by qualified nonphysician
anesthetists. Under existing regulations, a
hospital or CAH is not eligible to be paid
based on reasonable cost for anesthesia and
related care furnished by qualified
nonphysician anesthetists if the hospital or
CAH has been granted rural status under
§ 412.103. However, because the Act, as
revised by section 608 of Public Law 100–
485, allows for reasonable cost payments for
CRNA services if the facility is a hospital
located in a rural area as defined for purposes
of section 1886(d) of the Act, we are revising
the regulations to permit urban hospitals that
have been reclassified as rural, in accordance
with section 1886(d)(8)(E) of the Act, to
qualify for these payments. We are revising
the regulations to state that, effective for cost
reporting periods beginning on or after
October 1, 2010, hospitals and CAHs that
have reclassified as rural pursuant to section
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1886(d)(8)(E) of the Act and § 412.103 of the
regulations are eligible to be paid based on
reasonable cost for anesthesia services and
related care provided by qualified
nonphysician anesthetists.
We believe it is difficult to quantify the
payment impact of this change because, in
order to qualify for reasonable cost-based
payment for anesthesia and related services
provided by qualified nonphysician
anesthetists, a rural hospital or CAH cannot
exceed an annual limit of 800 surgical
procedures requiring anesthesia. We cannot
establish the number of facilities that will
meet this threshold. In addition, although a
hospital or CAH may contract with more than
one qualified nonphysician anesthetist and
be paid based on reasonable cost for
anesthesia and related services performed by
these nonphysician anesthetists, the total
number of hours of service furnished by the
nonphysician anesthetists may not exceed
2,080 hours annually. We also cannot
determine the number of facilities that will
exceed this threshold. Therefore, while we
believe the impact will be relatively minor,
we are unable to quantify the impact of the
change.
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J. Effect of the Additional Payments to
Qualifying Hospitals in Low Medicare
Spending Counties
Under section 1109 of Public Law 111–152,
Congress allocated $400 million to be spent
for FYs 2011 and 2012 to qualifying hospitals
located in the bottom quartile of counties
with the lowest Medicare Part A and Part B
spending per enrollee. In section IV.J. of the
preamble to this final rule, we have
identified the list of eligible counties and the
qualifying hospitals located in those counties
that will receive the $400 million. We are
finalizing our proposal to spend $150 million
in FY 2011 and $250 million in FY 2012.
This money will be given to the qualifying
hospitals by the fiscal intermediaries or MAC
through a one-time annual payment. In
section IV.J. of the preamble to this final rule,
Table 1 lists the distribution of payments
among the list of qualifying hospitals. In
addition, Table 2 in section IV.J. of the
preamble to this final rule lists the
distribution of payment by State for FY 2011.
K. Effects of Implementation of Rural
Community Hospital Demonstration Program
In section IV.K of the preamble of this final
rule, we discuss our implementation of
section 410A of Public Law 108–173, which
required the Secretary to establish a
demonstration that would modify
reimbursement for inpatient services for up
to 15 small rural hospitals. Section
410A(c)(2) requires that ‘‘[i]n conducting the
demonstration program under this section,
the Secretary shall ensure that the aggregate
payments made by the Secretary do not
exceed the amount which the Secretary
would have paid if the demonstration
program under this section was not
implemented.’’ As discussed in section V.K.
of the preamble of this final rule, in the IPPS
final rule for each of the previous 6 fiscal
years, we have estimated the additional
payments as a result of the demonstration for
each of the participating hospitals. In order
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to achieve budget neutrality, we are adjusting
the national IPPS rates by an amount
sufficient to account for the added costs of
this demonstration. In other words, we are
applying budget neutrality across the
payment system as a whole rather than
merely across the participants of this
demonstration. We believe that the language
of the statutory budget neutrality requirement
permits the agency to implement the budget
neutrality provision in this manner. The
statutory language requires that ‘‘aggregate
payments made by the Secretary do not
exceed the amount which the Secretary
would have paid if the demonstration * * *
was not implemented’’ but does not identify
the range across which aggregate payments
must be held equal.
In addition, an extension of this
demonstration was mandated by the
Affordable Care Act. The demonstration is
extended for an additional 5 years and will
be expanded to up to 30 hospitals. We are
making an adjustment in this final rule of
$70,483,384 to the national IPPS rates. This
amount accounts for an estimate of the
demonstration cost for FY 2011 for the 10
hospitals that are currently participating in
the demonstration, and an estimate of the
cost of the continuation of the 7 hospitals
that have participated in the demonstration
since its inception and that are still
participating. This amount accounts for the
portions of their cost reporting periods in FY
2010 that were not covered in the estimated
cost of the demonstration in the FY 2010
IPPS final rule because we formulated these
estimates under the assumption that the
demonstration would end in FY 2010. The
adjustment for this final rule also includes an
estimate of the cost of participation in the
demonstration for 20 additional hospitals in
FY 2011. In addition, for this final rule, we
had proposed in the May 4, 2010 proposed
rule to account for any differences between
the cost of the demonstration program for
hospitals participating in the demonstration
during FY 2007, represented by their cost
reports beginning in FY 2007, and the
amount that was offset by the budget
neutrality adjustment for FY 2007. However,
this final rule does not contain this
adjustment because the specific numeric
value associated with this component of the
adjustment to the national IPPS rates cannot
be known because settled cost reports
beginning in FY 2007 of the hospitals
participating during FY 2007 in the
demonstration are not available yet. We
anticipate that those settled cost reports may
be available prior to the publication of the FY
2012 IPPS proposed rule, at which time we
would include a similar proposal.
L. Effects of Proposed Changes Relating to
CAHs
1. CAH Optional Method of Payment for
Outpatient Services
In section VI.B.2. of the preamble of this
final rule, we discuss our amendment to the
regulations to permit a CAH’s election to be
paid for outpatient services under the
optional method to stay in effect until it is
terminated. Under existing regulations, if a
CAH wishes to be paid under the optional
method for outpatient services on a
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continuous basis, it must submit an annual
election to the fiscal intermediary or MAC
servicing the CAH at least 30 days prior to
the cost reporting period for which the
election is made. Due to the significant
consequences that result if a CAH fails to
make a timely election, we are amending the
regulations at § 413.70(b)(3)(i) to state that,
effective for CAH cost reporting periods
beginning on or after October 1, 2010, if a
CAH has elected the optional method for its
most recent cost reporting period beginning
prior to October 1, 2010, or chooses to elect
the optional method for its upcoming cost
reporting period, that election will remain in
place until it is terminated. If a CAH chooses
to terminate its election, it must submit a
termination request to the fiscal intermediary
or MAC servicing the CAH at least 30 days
prior to the start of the next cost reporting
period. In order to provide CAHs that have
cost reporting periods beginning in October
or November 2010 time to choose to
terminate an existing election of the optional
method, we are specifying that these CAHs
will have until December 1, 2010, to
terminate their election. We anticipate that
there will be no additional Medicare
expenditure associated with this change
because we are not making any changes that
govern payment rules for CAHs. Rather, we
believe the regulatory changes will reduce
any perceived burden associated with the
election process and make it easier for CAHs
to maintain their election of the optional
method on a continuous basis.
2. Effects of the Payment for CAH Outpatient
Services and Ambulance Services
In section VII.B.3. of the preamble of this
final rule, we discuss our implementation of
section 3128 of Public Law 111–148, which
amends the regulations at
§ 413.70(b)(3)(ii)(A) to state that, effective for
cost reporting periods beginning on or after
January 1, 2004, payment for outpatient
facility services under the optional method
will be made at 101 percent of reasonable
costs. We also are amending the regulations
at § 413.70(b)(5)(i) to state that, effective for
cost reporting periods beginning on or after
January 1, 2004, payment for ambulance
services furnished by a CAH or an entity that
is owned and operated by a CAH is 101
percent of the reasonable costs of the CAH or
the entity in furnishing those services, but
only if the CAH or the entity is the only
provider or supplier of ambulance services
located within a 35-mile drive of the CAH or
the entity. We do not believe these
amendments will result in additional
payments to CAHs for prior periods because
we believe that, in fact, we have paid CAHs
for these services at 101 percent of reasonable
costs during these prior periods.
3. Consideration of Costs of Provider Taxes
as Allowable Costs for CAHs
In section VI.B.4. of the preamble of this
final rule, we discuss our clarification of our
policy regarding the extent to which certain
provider taxes may be considered allowable
costs under Medicare, as described in
sections 2212.1 and 2212.2 of the PRM–1.
This is a clarification of our longstanding
policy. Therefore, we have determined that
there is no financial impact of the change.
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M. Effects of Policy Relating to Effective Date
of Provider Agreements and Supplier
Approvals
In section VIII. of the preamble of this final
rule, we discuss our clarification of the
requirements supporting the existing process
for assignment of an effective date for a
provider agreement or supplier approval.
Approximately 54,500 Medicare providers
and suppliers are subject to survey and
certification requirements under this
proposal. However, this clarification will not
change the process for providers and
suppliers. Therefore, we believe that the
impact of our clarification is negligible.
N. Effects of Changes Relating to Hospital
Rehabilitation Services and Respiratory Care
Services Conditions of Participation
In section IX. of the preamble of this final
rule, we discuss our changes to the
conditions of participation for hospital
rehabilitation services and respiratory care
services to clarify the categories of
practitioners allowed to order rehabilitation
services and respiratory care services. We
believe that these changes will impose
minimal additional costs on hospitals. In
fact, hospitals may realize some minimal cost
savings due to the regulatory flexibility of
these changes, which may allow for greater
consistency with existing State laws and with
hospital policies and procedures. The cost of
implementing these changes will largely be
limited to the one-time cost related to the
revision of a hospital’s medical staff bylaws
and its policies and procedures as they relate
to the requirements for the categories of
practitioners allowed to order rehabilitation
and respiratory care services. There also may
be some minimal cost associated with
communicating these changes to affected
hospital staff. However, we believe that these
costs will be offset by the benefits derived
from the overall intent of these changes to
allow qualified, licensed practitioners, who
are authorized by the medical staff, to order
these services as long as they are responsible
for the care of the patient for whom they are
ordering the services and as long as such
privileges are in accordance with hospital
policies and applicable State laws and
regulations. Furthermore, the changes will
clarify existing hospital CoPs to make them
more consistent not only with each other, but
also with many State laws and with current
practice. Therefore, no burden is being
assessed as a result of the revisions of these
CoPs, or on the communication of these
revisions to staff that will be required by this
final rule, as these practices are usual and
customary business practices.
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VIII. Effects of Changes in the Capital IPPS
A. General Considerations
Provisions of the Affordable Care Act
necessitated revising the May 4, 2010 FY
2011 IPPS/LTCH PPS proposed rule. While
the IPPS payment rates for capital-related
costs were not directly affected by provisions
of the Affordable Care Act, changes to the
wage index as well as to the outlier payment
adjustment factor were required by the law.
Changes to the wage index affect the
geographic adjustment factor (GAF) under
the capital IPPS which is used in conjunction
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with a factor for changes in DRG
classifications and weights to determine a
budget neutrality adjustment factor in
calculating the capital IPPS rate. A revision
of the outlier payment adjustment factor was
required because both inpatient operating
and inpatient capital-related payments use a
single set of thresholds to identify outlier
cases. Changes resulting from the provisions
of the Affordable Care Act are discussed in
more detail in section II.A. of the preamble
of the FY 2011 IPPS//LTCH PPS
supplemental proposed rule published in the
Federal Register on June 2, 2010.
For the impact analysis presented below,
we used data from the March 2010 update of
the FY 2009 MedPAR file and the March
2010 update of the Provider-Specific File
(PSF) that is used for payment purposes.
Although the analyses of the changes to the
capital prospective payment system do not
incorporate cost data, we used the March
2010 update of the most recently available
hospital cost report data (FYs 2007 and 2008)
to categorize hospitals. Our analysis has
several qualifications. We use the best data
available and make assumptions about casemix and beneficiary enrollment as described
below. In addition, as discussed in section
V.E. of the preamble to this final rule, we
made a ¥2.9 percent documentation and
coding adjustment to the national capital rate
for FY 2011 in addition to the ¥0.6 percent
adjustment established for FY 2008, and the
¥0.9 percent adjustment for FY 2009. This
results in a cumulative adjustment factor of
0.9574 that we applied to the national capital
rate to account for improvements in
documentation and coding that do not reflect
real changes in case mix under the MS–DRGs
in FY 2011. We also adjusted the Puerto
Rico-specific capital rate in FY 2011 to
account for changes in documentation and
coding resulting from the adoption of the
MS–DRGs.
Due to the interdependent nature of the
IPPS, it is very difficult to precisely quantify
the impact associated with each change. In
addition, we draw upon various sources for
the data used to categorize hospitals in the
tables. In some cases (for instance, the
number of beds), there is a fair degree of
variation in the data from different sources.
We have attempted to construct these
variables with the best available sources
overall. However, it is possible that some
individual hospitals are placed in the wrong
category.
Using cases from the March 2010 update of
the FY 2009 MedPAR file, we simulated
payments under the capital IPPS for revised
FY 2010 and revised FY 2011 (both years
have been revised to account for provisions
in the Affordable Care Act that required
changes to the wage index and outlier
threshold, as discussed above in this section)
for a comparison of total payments per case.
Any short-term, acute care hospitals not paid
under the general IPPS (Indian Health
Service hospitals and hospitals in Maryland)
are excluded from the simulations.
The methodology for determining a capital
IPPS payment is set forth at § 412.312. The
basic methodology for calculating capital
IPPS payments in FY 2011 is as follows:
(Standard Federal Rate) × (DRG weight) ×
(GAF) × (COLA for hospitals located in
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Alaska and Hawaii) × (1 + DSH Adjustment
Factor + IME adjustment factor, if
applicable).
In addition to the other adjustments,
hospitals may also receive outlier payments
for those cases that qualify under the
threshold established for each fiscal year. We
modeled payments for each hospital by
multiplying the capital Federal rate by the
GAF and the hospital’s case-mix. We then
added estimated payments for indirect
medical education, disproportionate share,
and outliers, if applicable. For purposes of
this impact analysis, the model includes the
following assumptions:
• We estimate that the Medicare case-mix
index will increase by 1.0 percent in both
FYs 2010 and 2011.
• We estimate that the Medicare
discharges will be approximately 11.3
million in FY 2010 and 11.5 million in FY
2011.
• The capital Federal rate was updated
beginning in FY 1996 by an analytical
framework that considers changes in the
prices associated with capital-related costs
and adjustments to account for forecast error,
changes in the case-mix index, allowable
changes in intensity, and other factors. As
discussed in section III.A.1.a. of this final
rule, the update is 1.5 percent for FY 2011.
• In addition to the FY 2011 update factor,
the FY 2011 capital Federal rate was
calculated based on a GAF/DRG budget
neutrality factor of 0.9990, an outlier
adjustment factor of 0.9404, and a (special)
exceptions adjustment factor of 0.9996.
• For FY 2011, as discussed above and in
section V.E. of the preamble to this final rule,
we applied a 0.9574 adjustment to the FY
2011 national capital rate for changes in
documentation and coding that are expected
to increase case-mix under the MS–DRGs but
do not reflect real case-mix change.
B. Results
We used the actuarial model described
above to estimate the potential impact of our
changes for FY 2011 on total capital
payments per case, using a universe of 3,472
hospitals. As described above, the individual
hospital payment parameters are taken from
the best available data, including the March
2010 update of the FY 2009 MedPAR file, the
March 2010 update to the PSF, and the most
recent cost report data from the March 2010
update of HCRIS. In Table III, we present a
comparison of estimated total payments per
case for FY 2010, as revised per the
Affordable Care Act, compared to FY 2011
based on the FY 2011 payment policies.
Column 2 shows estimates of payments per
case under our model for FY 2010 (as
revised). Column 3 shows estimates of
payments per case under our model for FY
2011. Column 4 shows the total percentage
change in payments from revised FY 2010 to
FY 2011. The change represented in Column
4 includes the 1.5 percent update to the
capital Federal rate and other changes in the
adjustments to the capital Federal rate. The
comparisons are provided by: (1) Geographic
location; (2) region; and (3) payment
classification.
The simulation results show that, on
average, capital payments per case in FY
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2011 are expected to decrease as compared
to capital payments per case in FY 2010. The
capital rate for FY 2011 will increase 1.5
percent as compared to the FY 2010 capital
rate. The changes to the GAFs are expected
to result, on average, in a slight decrease in
capital payments, although, for rural regions,
it is more of a contributing factor to the
overall decrease in capital payments than to
urban areas, mostly due to the application of
the rural floor to the wage index. We also are
estimating an increase in outlier payments
from FY 2010 to FY 2011 due primarily to
an estimated decrease in capital IPPS
payments per discharge. Since capital
payments per discharge are projected to be
slightly lower in FY 2011 compared to FY
2010, more cases would qualify for outlier
payments. The net impact of these changes
is an estimated ¥0.5 percent change in
capital payments per discharge from FY 2010
to FY 2011 for all hospitals (as shown below
in Table III).
The geographic comparison shows that, on
average, all urban hospitals, as well as
hospitals in large urban areas, are expected
to experience a 0.5 percent decrease in
capital IPPS payments per case in FY 2011
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as compared to FY 2010. Capital IPPS
payments per case for rural hospitals are
expected to decrease 0.7 percent.
The change comparisons by regions show
some regions experiencing slight increases in
total capital payments, while most other
regions are estimated to experience slight
decreases in capital payments from FY 2010
to FY 2011. For the urban regions, changes
in capital payments range from a ¥1.0
percent in both the New England region and
Middle Atlantic region to an increase of 0.2
percent for the Pacific region. The rural
regions show estimates of a 1.7 percent
change in capital payments from FY 2010 to
FY 2011 in the Middle Atlantic region and
Pacific region to a 1.9 percent increase for the
Mountain region.
By type of ownership, proprietary and
government hospitals are estimated to
experience a 0.3 percent decrease in capital
payments, while voluntary hospitals are
estimated to experience a 0.6 percent
decrease in capital payments per case from
FY 2010 to FY 2011.
Section 1886(d)(10) of the Act established
the MGCRB. Hospitals may apply for
reclassification for purposes of the wage
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index for FY 2011. Reclassification for wage
index purposes also affects the GAFs because
that factor is constructed from the hospital
wage index.
To present the effects of the hospitals being
reclassified for FY 2011, we show the average
capital payments per case for reclassified
hospitals for FY 2010, as revised per the
Affordable Care Act. All reclassified and nonreclassified hospitals are expected to
experience a decrease in capital payments in
FY 2011 as compared to FY 2010. Urban
reclassified and rural reclassified hospitals
are expected to have a decrease in capital
payments of 0.6 percent and 0.5 percent,
respectively. For non-reclassified hospitals,
the estimated decrease in capital payments is
0.4 percent for urban non-reclassified
hospitals, and 0.9 percent for rural nonreclassified hospitals. Other reclassified
hospitals (that is, hospitals reclassified under
section 1886(d)(8)(B) of the Act) are expected
to experience a decrease of 1.2 percent in
capital payments from FY 2010 to FY 2011.
BILLING CODE 4120–01–P
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IX. Effects of Payment Rate Changes and
Policy Changes Under the LTCH PPS
A. Introduction and General Considerations
In section VII. of the preamble and section
VII. of the Addendum to this final rule, we
set forth the annual update to the payment
rates for the LTCH PPS for FY 2011. In the
preamble, we specify the statutory authority
for the provisions that are presented, identify
the policies and rationales for our decisions
as well as alternatives that were considered.
In this section IX. of Appendix A. to this
final rule, we discuss the impact of the final
changes to the payment rates, factors, and
other payment rate policies related to the
LTCH PPS that are presented in the preamble
of this final rule in terms of their estimated
fiscal impact on the Medicare budget and on
LTCHs.
A number of the provisions of the
Affordable Care Act affected the LTCH PPS.
The provisions of the Affordable Care Act
that affected LTCH payments for FY 2011 are
reflected in this impact analysis.
Currently, our database of 423 LTCHs
includes the data for 78 nonprofit (voluntary
ownership control) LTCHs and 306
proprietary LTCHs. Of the remaining 39
LTCHs, 13 LTCHs are government-owned
and operated and the ownership type of the
other 26 LTCHs is unknown. In the impact
analysis, we used the final rates, factors, and
policies presented in this final rule,
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including the 0.50 percentage point
reduction to the market basket update
required by sections 1886(m)(3) and (m)(4) of
the Act and the updated wage index values
and the labor-related share, and the best
available claims and CCR data to estimate the
change in payments for FY 2011. The
standard Federal rate for RY 2010 is
$39,794.95, which reflects the 0.25
percentage point reduction applied to the RY
2010 market basket update required under
sections 1886(m)(3) and (m)(4) of the Act (as
established in the FY 2010 IPPS/LTCH PPS
notice published in the Federal Register on
June 2, 2010). Discharges in RY 2010
occurring on or after April 1, 2010 are paid
under the revised RY 2010 standard Federal
rate consistent with section 3401(p) of the
Affordable Care Act. Discharges in RY 2010
occurring on or after October 1, 2009, and on
or before March 31, 2010, are paid under the
standard Federal rate of $39,896.65 (74 FR
44022). As discussed in section VII.A.2. of
the Addendum to this final rule, consistent
with our historical practice, we are finalizing
an update to the standard Federal rate for FY
2011 by ¥0.49 percent and establishing a
standard Federal rate of $39,599.95 for FY
2011. This includes a market basket update
of 2.5 percent with a 0.50 percentage point
reduction as required under sections
1886(m)(3) and (m)(4) of the Act, and the
documentation and coding adjustment of
¥2.5 percent to account for increases in casemix associated with the adoption of the MS–
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50669
LTC–DRGs. Based on the best available data
for the 423 LTCHs in our database, we
estimate that the update to the standard
Federal rate for FY 2011 (discussed in section
VII.A.2. of the Addendum to this final rule)
and the changes to the area wage adjustment
for FY 2011 (discussed in section VII.B. of
the Addendum to this final rule), in addition
to an estimated increase in HCO payments
and an estimated increase in SSO payments,
would result in an increase in estimated
payments from RY 2010 of approximately
$22.3 million (or about 0.5 percent). Based on
the 423 LTCHs in our database, we estimate
FY 2011 LTCH PPS payments to be
approximately $4.932 billion, an increase
from RY 2010 LTCH PPS payments of
approximately $4.909 billion. Because the
combined distributional effects and
estimated changes to the Medicare program
payments would be greater than $100
million, this final rule is considered a major
economic rule, as defined in this section. We
note the approximately $22.3 million
projected increase in estimated aggregate
LTCH PPS payments from RY 2010 to FY
2011 does not reflect changes in LTCH
admissions or case-mix intensity in estimated
LTCH PPS payments, which also would
affect overall payment changes.
The projected 0.5 percent increase in
estimated payments per discharge from RY
2010 to FY 2011 is attributable to several
factors, including the ¥0.49 percent decrease
to the standard Federal rate, changes in the
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wage index values (including the change to
the labor-related share) presented in section
VII.B. of the Addendum to this final rule and
projected increases in estimated HCO and
SSO payments. As Table IV shows, the
change attributable solely to the standard
Federal rate is projected to result in an
decrease of 0.4 percent in estimated
payments per discharge from RY 2010 to FY
2011, on average, for all LTCHs, while the
changes to the area wage adjustment are
projected to result in an increase in estimated
payments of 0.1 percent, on average, for all
LTCHs.
As discussed in section VII.B. of this final
rule, we are updating the wage index values
for FY 2011 based on the most recent
available data. In addition, we are finalizing
a slight decrease in the labor-related share
from 75.779 percent to 75.271 percent under
the LTCH PPS for FY 2011 based on the most
recent available data on the relative
importance of the labor-related share of
operating and capital costs of the RPL market
basket. The wage data and the labor-related
share are expected to increase LTCH PPS
payments by 0.1 percent.
Table IV below shows the impact of the
final payment rate and final policy changes
on LTCH PPS payments for FY 2011
presented in this final rule by comparing RY
2010 estimated payments to FY 2011
estimated payments. The projected increase
in payments per discharge from RY 2010 to
FY 2011 is 0.5 percent (shown in Column 8).
This projected increase in payments is
attributable to the impacts of the change to
the standard Federal rate (¥0.4 percent in
Column 6) and the change due to the area
wage adjustment (0.1 percent in Column 7),
as well as the effect of the estimated increase
in payments for HCO cases and SSO cases in
FY 2011 as compared to RY 2010 (0.6 percent
and 0.3 percent, respectively). That is,
estimated total HCO payments are projected
to increase from RY 2010 to FY 2011 in order
to ensure that estimated HCO payments will
be 8 percent of the total estimated LTCH PPS
payments in FY 2011. An analysis of the
most recent available LTCH PPS claims data
(that is, FY 2009 claims data from the March
2010 update of the MedPAR file) indicates
that the RY 2010 HCO threshold of $18,615
(as announced in the June 2, 2010 FY 2010
IPPS/LTCH PPS notice) may result in HCO
payments in RY 2010 that fall below the
estimated 8 percent. Specifically, we
currently estimate that HCO payments will
be approximately 7.4 percent of the estimated
total LTCH PPS payments in RY 2010. We
note that the RY 2010 outlier payment
estimate in this impact analysis takes into
account for the revised RY 2010 rate and
outlier threshold determined consistent with
sections 1886(m)(3) and (4) of the Act and
section 3401(p) of the Affordable Care Act
that are used to make payments for
discharges in RY 2010 that occur on or after
April 1, 2010. We estimate that the impact of
the increase in HCO payments would result
in approximately a 0.6 percent increase in
estimated payments from RY 2010 to FY
2011, on average, for all LTCHs. Furthermore,
in calculating the estimated increase in
payments from RY 2010 to FY 2011 for HCO
and SSO cases, we increased estimated costs
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by the applicable market basket percentage
increase as projected by our actuaries, which
increases payments by 0.3 percent relative to
last year. We note that estimated payments
for all SSO cases comprise approximately 14
percent of the estimated total LTCH PPS
payments, and estimated payments for HCO
cases comprise approximately 8 percent of
the estimated total LTCH PPS payments.
Payments for HCO cases are based on 80
percent of the estimated cost of the case
above the HCO threshold, while the majority
of the payments for SSO cases (over 65
percent) are based on the estimated cost of
the SSO case.
As we discuss in detail throughout this
final rule, based on the most recent available
data, we believe that the provisions of this
final rule relating to the LTCH PPS will result
in an increase in estimated aggregate LTCH
PPS payments and that the resulting LTCH
PPS payment amounts result in appropriate
Medicare payments.
B. Impact on Rural Hospitals
For purposes of section 1102(b) of the Act,
we define a small rural hospital as a hospital
that is located outside of an urban area and
has fewer than 100 beds. As shown in Table
IV, we are projecting a 0.9 percent increase
in estimated payments per discharge for FY
2011 as compared to RY 2010 for rural
LTCHs that will result from the changes
presented in this final rule, as well as the
effect of estimated changes to HCO and SSO
payments. This estimated impact is based on
the data for the 26 rural LTCHs in our
database (out of 423 LTCHs), for which
complete data were available. The RY 2010
average payment per case in Table IV
accounts for the changes required by sections
1886(m)(3) and (4) of the Act and section
3401(p) of the Affordable Care Act, which
affects payments for discharges occurring on
or after April 1, 2010, as described below in
section IX.C.3. of the Appendix to this final
rule.
The estimated increase in LTCH PPS
payments from RY 2010 to FY 2011 for rural
LTCHs is primarily due to the higher than
average impacts from the changes to the area
wage adjustment and the reduction in the
labor-related share from 75.779 to 75.271,
which results in an estimated 0.6 percent
increase in payments.
C. Anticipated Effects of LTCH PPS Payment
Rate Change and Policy Changes
1. Budgetary Impact
Section 123(a)(1) of the BBRA requires that
the PPS developed for LTCHs ‘‘maintain
budget neutrality.’’ We believe that the
statute’s mandate for budget neutrality
applies only to the first year of the
implementation of the LTCH PPS (that is, FY
2003). Therefore, in calculating the FY 2003
standard Federal rate under § 412.523(d)(2),
we set total estimated payments for FY 2003
under the LTCH PPS so that estimated
aggregate payments under the LTCH PPS
were estimated to equal the amount that
would have been paid if the LTCH PPS had
not been implemented.
As discussed in section IX.A. of this
Appendix, we project an increase in
aggregate LTCH PPS payments in FY 2011 of
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approximately $22.3 million (or 0.5 percent)
based on the 423 LTCHs in our database.
2. Impact of Moratorium and Other
Provisions
Section 114(c) and (d) of the Medicare,
Medicaid, and SCHIP Extension Act of 2007
(MMSEA), as amended by section 4302 of the
American Recovery and Reinvestment Act of
2009 (ARRA), provided for a 3-year delay in
certain payment policies relating to LTCHs
and LTCH satellite facilities. Sections 3106
and 10312 of the Affordable Care Act
together provide for a 2-year extension of the
3-year delay in implementation of certain
payment policies relating to certain LTCHs
and LTCH satellite facilities. Specifically,
these provisions affect payment adjustments
for ‘‘very’’ short stay outliers (SSOs), the onetime adjustment to the standard Federal rate,
the 25 percent payment threshold policy, and
the moratorium on the establishment of new
LTCHs and LTCH satellite facilities and the
moratorium on the increase in LTCH beds in
existing LTCHs or satellite facilities.
Sections 3106 and 10312 of the Affordable
Care Act together provide for a 2-year
extension of the 3-year delay in
implementation of the revision to the SSO
policy at § 412.529(c)(3)(i) that was finalized
in the RY 2008 final rule. We estimate that
the extension of the SSO provision will result
in a projected increase in estimated aggregate
LTCH PPS payments of approximately $20
million in FY 2011. Sections 3106 and 10312
of the Affordable Care Act together provide
for a 2-year extension to several
modifications to the regulations at § 412.534
and § 412.536 required by section 114(c) of
MMSEA, as amended by section 4302 of the
ARRA, which addressed the percentage
thresholds between referring hospitals and
LTCHs and satellites of LTCHs. We estimate
that the implementation of this extension of
the MMSEA provisions, as amended by the
ARRA, pertaining to § 412.534 and § 412.536
will result in a projected increase in
estimated aggregate LTCH PPS payments of
approximately $20 million for FY 2011.
Regarding the 2-year extension of the
moratorium on the development of new
LTCHs and LTCH satellites and on the
increase in beds in existing LTCHs and LTCH
satellites, as we noted in the May 22, 2008
interim final rule with comment period when
the original 3-year delay required by section
114(d) of the MMSEA, as amended by the
ARRA, was implemented, we are unable to
quantify the impact of the additional 2-year
moratorium on the establishment of LTCHs,
LTCH satellite facilities, and on the increase
of LTCH beds in existing LTCHs or satellite
facilities with limited exceptions. We are
unable to provide an estimate of the impact
of the 2-year extension of this provision
because we have no way of determining how
many LTCHs would have opened in the
absence of the moratorium, nor do we have
sufficient information at this time to
determine how many new LTCHs will meet
the criteria for an exception described in the
statute.
3. 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
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the basic MS–LTC–DRG payment (the
standard Federal rate multiplied by the
MS–LTC–DRG relative weight), we make
adjustments for differences in area wage
levels, the COLA for Alaska and Hawaii, and
SSOs. Furthermore, LTCHs may also receive
HCO payments for those cases that qualify
based on the threshold established each year.
To understand the impact of the changes
to the LTCH PPS payments presented in this
final rule on different categories of LTCHs for
FY 2011, it is necessary to estimate payments
per discharge for RY 2010 using the rates,
factors (including the FY 2010 GROUPER
(Version 27.0), and relative weights and the
policies established in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43945
through 43994 and 44021 through 44030) and
to include any changes to payments due to
the provisions under sections 1886(m)(3) and
(4) of the Act and section 3401(p) of the
Affordable Care Act, which affects payments
for discharges occurring on or after April 1,
2010 in RY 2010 (as announced in the June
2, 2010 FY 2010 IPPS/LTCH PPS notice). It
is also necessary to estimate the payments
per discharge that would be made under the
final LTCH PPS rates, factors, policies, and
GROUPER (Version 28.0) for FY 2011 (as
discussed in III. of the preamble and section
VII. of the Addendum to this final rule).
These estimates of RY 2010 and FY 2011
LTCH PPS payments are based on the best
available LTCH claims data and other factors,
such as the application of inflation factors to
estimate costs for SSO and HCO cases in each
year. We also evaluated the change in
estimated RY 2010 payments to estimated FY
2011 payments (on a per discharge basis) for
each category of LTCHs.
Hospital groups were based on
characteristics provided in the OSCAR data,
FY 2007 through FY 2008 cost report data in
HCRIS, and PSF data. Hospitals with
incomplete characteristics were grouped into
the ‘‘unknown’’ category. Hospital groups
include the following:
• Location: large urban/other urban/rural.
• Participation date.
• Ownership control.
• Census region.
• Bed size.
To estimate the impacts of the payment rates
and policy changes among the various
categories of existing providers, we used
LTCH cases from the FY 2009 MedPAR file
to estimate payments for RY 2010 and to
estimate payments for FY 2011 for 423
LTCHs. We believe that the discharges based
on the FY 2009 MedPAR data for the 423
LTCHs in our database, which includes 306
proprietary LTCHs, provide sufficient
representation in the MS–LTC–DRGs
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containing discharges for patients who
received LTCH care for the most commonly
treated LTCH patients’ diagnoses.
4. 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 2009 MedPAR files. For modeling
estimated LTCH PPS payments for RY 2010,
we calculated a blended RY 2010 payment to
account for changes in the rate in accordance
with sections 1886(m)(3) and (m)(4) of the
Act and section 3401(p) of the Affordable
Care Act. Specifically, we applied the RY
2010 standard Federal rate (that is,
$39,896.65, under which LTCH discharges
occurring on or after October 1, 2009, and
through March 31, 2010 are paid, and
$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
FY 2011, we applied the FY 2011 standard
Federal rate of $39,599.95, which will be
effective for LTCH discharges occurring on or
after October 1, 2010, and through September
30, 2011.
Furthermore, in modeling estimated LTCH
PPS payments for both RY 2010 and FY 2011
in this impact analysis, we applied the RY
2010 and the FY 2011 adjustments for area
wage differences and the COLA for Alaska
and Hawaii. Specifically, we adjusted for
area wage differences for estimated RY 2010
payments using the current LTCH PPS laborrelated share of 75.779 percent (74 FR
43968), the wage index values established in
the Tables 12A and 12B of the Addendum to
the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 44192 through 44213) and the RY
2010 COLA factors shown in the table in
section V. of the Addendum to that final rule
(74 FR 44026). Similarly, we adjusted for area
wage differences for estimated FY 2011
payments using the finalized LTCH PPS FY
2011 labor-related share of 75.271 percent,
the FY 2011 wage index values presented in
Tables 12A and 12B of the Addendum to this
final rule, and the FY 2011 COLA factors
shown in the table in section VII.B.5. of the
Addendum to the final rule.
As discussed above, our impact analysis
reflects an estimated change in payments for
SSO cases, as well as an estimated increase
in payments for HCO cases (as described in
section VII.C. of the Addendum to this final
rule). In modeling payments for SSO and
HCO cases in RY 2010, we applied an
inflation factor of 1.025 percent (determined
by OACT) to the estimated costs of each case
determined from the charges reported on the
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claims in the FY 2009 MedPAR files and the
best available CCRs from the March 2010
update of the PSF. In modeling payments for
SSO and HCO cases in FY 2011, we applied
an inflation factor of 1.050 (determined by
OACT) to the estimated costs of each case
determined from the charges reported on the
claims in the FY 2009 MedPAR files and the
best available CCRs from the March 2010
update of the PSF. Furthermore, in modeling
estimated LTCH PPS payments for both RY
2010 and FY 2011 in this impact analysis, we
applied the RY 2010 HCO fixed-loss amount
of $18,425 (74 FR 44029) for the first half of
RY 2010, the revised RY 2010 HCO fixed-loss
amount of $18,615 established in conjunction
with implementing the provisions of sections
1886(m)(3) and (m)(4) of the Act and section
3401(p) of the Affordable Care Act for the
second half of RY 2010, and the FY 2011
fixed loss amount of $18,785 (as discussed in
section VII.C. of the Addendum to this final
rule).
These impacts reflect the estimated
‘‘losses’’ or ‘‘gains’’ among the various
classifications of LTCHs from the RY 2010 to
FY 2011 based on the payment rates and
policy changes presented in this final rule.
Table IV illustrates the estimated aggregate
impact of the LTCH PPS among various
classifications of LTCHs.
• The first column, LTCH Classification,
identifies the type of LTCH.
• The second column lists the number of
LTCHs of each classification type.
• The third column identifies the number
of LTCH cases.
• The fourth column shows the estimated
payment per discharge for RY 2010 (as
described above).
• The fifth column shows the estimated
payment per discharge for FY 2011 (as
described above).
• The sixth column shows the percentage
change in estimated payments per discharge
from RY 2010 to FY 2011 for changes to the
standard Federal rate (as discussed in section
VII.A.2. of the Addendum to this final rule).
• The seventh column shows the
percentage change in estimated payments per
discharge from RY 2010 to FY 2011 for
changes to the area wage adjustment at
§ 412.525(c) (as discussed in section VII.B. of
the Addendum to the final rule).
• The eighth column shows the percentage
change in estimated payments per discharge
from RY 2010 (Column 4) to FY 2011
(Column 5) for all finalized and statutory
changes (and includes the effect of estimated
changes to HCO and SSO payments).
BILLING CODE 4120–01–P
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5. Results
Based on the most recent available data for
423 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 final rule. The
impact analysis in Table IV shows that
estimated payments per discharge are
expected to increase approximately 0.5
percent, on average, for all LTCHs from RY
2010 to FY 2011 as a result of the finalized
payment rate and policy changes presented
in this final rule, as well as estimated
increases in HCO and SSO payments. We
note that we applied a ¥0.49 percent update
to the standard Federal rate for FY 2011,
based on the latest market basket estimate
(2.5 percent), the ¥0.50 percentage point
reduction required under sections 1886(m)(3)
and (m)(4) of the Act, and the adjustment for
the effect of changes in documentation and
coding in FY 2008 and FY 2009 of ¥2.5
percent. We noted earlier in this section that
for most categories of LTCHs, as shown in
Table IV (Column 6), the impact of the
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decrease of approximately ¥0.5 percent to
the standard Federal rate is projected to
result in approximately a ¥0.4 percent
change in estimated payments per discharge
for all LTCHs from RY 2010 to FY 2011.
Because payments to cost-based SSO cases
and a portion of payments to SSO cases that
are paid based on the ‘‘blend’’ option of the
SSO payment formula at § 412.529(c)(2)(iv)
are not affected by the update to the standard
Federal rate, we estimate that the effect of the
0.49 percent reduction to the standard
Federal rate would result in a 0.4 percent
reduction on estimated aggregate LTCH PPS
payments to all LTCH PPS cases, including
SSO cases. Furthermore, as discussed
previously in this regulatory impact analysis,
the average increase in estimated payments
per discharge from the RY 2010 to FY 2011
for all LTCHs of approximately 0.5 percent
(as shown in Table IV) was determined by
comparing estimated FY 2011 LTCH PPS
payments (using the final rates, final policies
and statutory changes discussed in this final
rule) to estimated RY 2010 LTCH PPS
payments (as described above in section
IX.C.3. of this Appendix).
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a. Location
Based on the most recent available data,
the vast majority of LTCHs are located in
urban areas. Only approximately 6 percent of
the LTCHs are identified as being located in
a rural area, and approximately 4 percent of
all LTCH cases are treated in these rural
hospitals. The impact analysis presented in
Table IV shows that the average percent
increase in estimated payments per discharge
from RY 2010 to FY 2011 for all hospitals is
0.5 percent for all changes. For rural LTCHs,
the percent change for all changes is
estimated to be 0.9 percent, while for urban
LTCHs, we estimate the increase to be 0.4
percent. Large urban LTCHs are projected to
experience an increase of 0.5 percent in
payments per discharge from RY 2010 to FY
2011, while other urban LTCHs are projected
to experience an increase of 0.3 percent in
payments per discharge from RY 2010 to FY
2011, as shown in Table IV.
b. Participation Date
LTCHs are grouped by participation date
into four categories: (1) Before October 1983;
(2) between October 1983 and September
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1993; (3) between October 1993 and
September 2002; and (4) after October 2002.
Based on the most recent available data, the
majority (approximately 49 percent) of the
LTCH cases are in hospitals that began
participating in the Medicare program
between October 1993 and September 2002.
These hospitals are projected to experience
nearly the average increase (0.3 percent) in
estimated payments per discharge from RY
2010 to FY 2011, as shown in Table IV.
In the participation category where LTCHs
began participating in the Medicare program
before October 1983, LTCHs are projected to
experience a higher than average percent
increase (0.6 percent) in estimated payments
per discharge from RY 2010 to FY 2011, as
shown in Table IV. Approximately 4 percent
of LTCHs began participating in Medicare
before October 1983. The LTCHs in this
category are projected to experience a slightly
higher than average increase in estimated
payments because of increases in their wage
data, increase under the MS–LTC–DRG
GROUPER (Version 28) and relative weights,
and estimated increases in their SSO
payments relative to last year. Approximately
10 percent of LTCHs began participating in
Medicare between October 1983 and
September 1993. These LTCHs are also
projected to experience a slightly higher than
average increase (0.6 percent) in estimated
payments from RY 2010 to FY 2011. LTCHs
that began participating in Medicare after
October 2002 currently represent
approximately 39 percent of all LTCHs, and
are projected to experience an average
increase (0.5 percent) in estimated payments
from RY 2010 to FY 2011.
c. Ownership Control
Other than LTCHs whose ownership
control type is unknown, LTCHs are grouped
into three categories based on ownership
control type: Voluntary, proprietary, and
government. Based on the most recent
available data, approximately 18 percent of
LTCHs are identified as voluntary (Table IV).
We expect that, for these LTCHs in the
voluntary category, estimated FY 2011 LTCH
payments per discharge will increase higher
than the average (0.8 percent) in comparison
to estimated payments in RY 2010 primarily
because we project an increase in estimated
HCO payments and SSO payments to be
higher than the average for these LTCHs. The
majority (72 percent) of LTCHs are identified
as proprietary and these LTCHs are projected
to experience an average increase (0.4
percent) in estimated payments per discharge
from RY 2010 to FY 2011. Finally,
government-owned and operated LTCHs (3
percent) are expected to experience a higher
than the average increase (1.0 percent) in
estimated payments primarily due to a larger
than the average increase in estimated HCO
payments and increases under the MS–LTC–
DRG GROUPER (Version 28) and relative
weights.
d. Census Region
Estimated payments per discharge for FY
2011 are projected to increase for LTCHs
located in all regions in comparison to RY
2010. Of the 9 census regions, we project that
the increase in estimated payments per
discharge will have the largest positive
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impact on LTCHs in the Pacific region (0.7
percent, as shown in Table IV). The
estimated percent increase in payments per
discharge from RY 2010 to FY 2011 for the
Pacific is largely attributable to the projected
increase in estimated HCO and SSO
payments and changes in their wage
adjustment.
In contrast, LTCHs located in the Middle
Atlantic region are projected to experience
the smallest increase in estimated payments
per discharge from RY 2010 to FY 2011. The
average estimated increase in payments of 0.2
percent for LTCHs in the Middle Atlantic
region is primarily due to estimated
decreases in payments associated with the
wage index because 50 percent of LTCHs
located in this region will have a FY 2011
wage index value that is less than their RY
2010 wage index value.
e. Bed Size
LTCHs were grouped into six categories
based on bed size: 0–24 beds; 25–49 beds;
50–74 beds; 75–124 beds; 125–199 beds; and
greater than 200 beds. We project that
payments for small LTCHs (0–24 beds) would
experience a 1.0 percent increase in
payments due to increases in their wage
index while large LTCHs (200+ beds) would
experience a 0.2 percent increase in
payments. LTCHs with between 75 and 124
beds and between 125 and 199 beds are
expected to experience an above average
increase in payments per discharge from RY
2010 to FY 2011 (0.8 percent and 0.6 percent,
respectively) primarily due to a larger than
average estimated increase in payments from
the FY 2011 changes to the area wage
adjustment.
D. Effect on the Medicare Program
As noted previously, we project that the
provisions of this final rule would result in
an increase in estimated aggregate LTCH PPS
payments in FY 2011 of approximately $22.3
million (or about 0.5 percent) for the 423
LTCHs in our database.
E. Effect on Medicare Beneficiaries
Under the LTCH PPS, hospitals receive
payment based on the average resources
consumed by patients for each diagnosis. We
do not expect any changes in the quality of
care or access to services for Medicare
beneficiaries under the LTCH PPS, but we
expect that paying prospectively for LTCH
services would enhance the efficiency of the
Medicare program.
X. Effects of Policy Changes Regarding
Accreditation Requirements for Medicaid
Providers of Inpatient Psychiatric Services
for Individuals Under Age 21
In section X. of the preamble of this final
rule, we discuss the removal of the Medicaid
requirement for Joint Commission
accreditation of psychiatric hospitals and
hospitals with inpatient psychiatric
programs. Psychiatric hospitals will have the
choice of undergoing a State survey to
determine whether the hospital meets the
requirements to participate in Medicare as a
psychiatric hospital under 42 CFR 482.60, or
obtaining accreditation from a national
accrediting organization whose psychiatric
hospital accrediting program has been
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approved by CMS. Likewise, hospitals with
inpatient psychiatric programs will have the
choice of undergoing a State survey to
determine whether the hospital meets the
requirements for participation in Medicare as
a hospital as specified in 42 CFR part 482 or
obtaining accreditation from a national
accrediting organization whose hospital
accreditation program has been approved by
CMS.
Ensuring access to services is a priority for
CMS, and we believe that this revision to the
regulations will result in an increased
number of psychiatric hospitals and hospitals
with inpatient psychiatric programs being
able to provide services. In addition, the
revision to the accreditation requirement
aligns Medicaid standards with existing
standards in the Medicare program. We
believe that this flexibility in obtaining
accreditation will facilitate the provision of
medically necessary, Medicaid-reimbursable
psychiatric services to vulnerable children,
while maintaining the high quality of care
demanded by the Medicaid program.
We are not preparing an analysis for this
policy under the RFA because we have
determined that the policy will not have a
significant economic impact on a substantial
number of small entities.
We are not preparing an analysis for
section 1102(b) of the Act because this policy
will not have a significant impact on the
operations of a substantial number of small
rural hospitals.
Section 202 of the Unfunded Mandates
Reform Act of 1995 also requires that
agencies assess anticipated costs and benefits
before issuing any rule that may result in
expenditure in any one year of $100 million
in 1995 dollars, updated annually for
inflation. That threshold level is currently
approximately $135 million. This policy will
not result in an impact of $135 million or
more on State, local or tribal governments, in
the aggregate, or on the private sector.
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.
Because this policy does not impose any
costs on State or local governments, the
requirements of Executive Order 13132 are
not applicable.
XI. Alternatives Considered
This final rule contains a range of policies.
The preamble of this final rule provides
descriptions of the statutory provisions that
are addressed, identifies policies and
presents rationales for our decisions and,
where relevant, alternatives that were
considered.
XII. Overall Conclusion
A. Acute Care Hospitals
Table I of section VI. of this Appendix
demonstrates the estimated distributional
impact of the IPPS budget neutrality
requirements for the final MS–DRG and wage
index changes, and for the wage index
reclassifications under the MGCRB. Table I
also shows an overall decrease of 0.4 percent
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in operating payments. We estimate that
operating payments will decrease by
approximately $440 million in FY 2011. In
addition, we estimates the reporting of
hospital quality data program costs at $2.4
million, a savings of $20 million associated
with the HACs policies, an additional
spending of $18.2 million for new technology
add-on payments, an additional $150 million
to hospitals that qualify for an additional
payment as provided under section 1109 of
Public Law 111–152, and all other operating
payment policies described in section VII. of
this Appendix. These estimates, added to our
FY 2011 operating estimate of ¥$440
million, result in a decrease of $290 million
for FY 2011. We estimate that capital
payments will experience ¥0.5 percent
change in payments per case, as shown in
Table III of section VIII. of this Appendix. We
project that there will be a $21 million
decrease in capital payments in FY 2011
compared to FY 2010. The cumulative
operating and capital payments should result
in a net decrease of $311 million to IPPS
providers. The discussions presented in the
previous pages, in combination with the rest
of this final rule constitute a regulatory
impact analysis.
B. LTCHs
Overall, LTCHs are projected to experience
an increase in estimated payments per
discharge in FY 2011. In the impact analysis,
we are using the final rates, factors, and
policies presented in this final rule,
including final updated wage index values
and relative weights, and the best available
claims and CCR data to estimate the change
in payments under the LTCH PPS for FY
2011. Accordingly, based on the best
available data for the 423 LTCHs in our
database, we estimate that FY 2011 LTCH
PPS payments will increase approximately
$22 million (or about 0.5 percent).
XIII. Accounting Statements
A. Acute Care Hospitals
As required by OMB Circular A–4
(available at https://www.whitehouse.gov/
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 final rule 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 finalized
changes to the IPPS presented in this final
rule. All expenditures are classified as
transfers to Medicare providers.
TABLE V—ACCOUNTING STATEMENT:
CLASSIFICATION OF ESTIMATED EXPENDITURES
UNDER THE IPPS
FROM FY 2010 TO FY 2011—Continued
Category
Total ...................
Transfers
¥$311 million.
B. LTCHs
As discussed in section IX. of this
Appendix, the impact analysis for the
finalized changes under the LTCH PPS for
this final rule projects an increase in
estimated aggregate payments of
approximately $22 million (or about 0.5
percent) for the 423 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 final rule as they relate to changes to
the LTCH PPS. Table VI provides our best
estimate of the estimated increase in
Medicare payments under the LTCH PPS as
a result of the finalized provisions presented
in this final rule based on the data for the 423
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 2010 LTCH
PPS RATE YEAR TO THE FY 2011
LTCH PPS
Category
Transfers
Annualized Monetized
Transfers.
Positive transfer—Estimated increase in
expenditures: $22
million.
Federal Government
to LTCH PPS Medicare Providers.
From Whom to Whom
Total ...................
$22 million.
XIV. Executive Order 12866
In accordance with the provisions of
Executive Order 12866, the Executive Office
of Management and Budget reviewed this
final rule.
Appendix B: Recommendation of
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TABLE V—ACCOUNTING STATEMENT: Update Factors for Operating Cost
CLASSIFICATION OF ESTIMATED EX- Rates of Payment for Inpatient Hospital
PENDITURES
UNDER THE IPPS Services
FROM FY 2010 TO FY 2011
Category
Annualized Monetized
Transfers.
From Whom to Whom
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¥$311 million.
Federal Government
to IPPS Medicare
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I. Background
Section 1886(e)(4)(A) of the Act requires
that the Secretary, taking into consideration
the recommendations of the MedPAC,
recommend update factors for inpatient
hospital services for each fiscal year that take
into account the amounts necessary for the
efficient and effective delivery of medically
appropriate and necessary care of high
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50675
quality. Under section 1886(e)(5) of the Act,
we are required to publish update factors
recommended by the Secretary in the
proposed and final IPPS rules, respectively.
Accordingly, this Appendix provides the
recommendations for the update factors for
the IPPS national standardized amount, the
Puerto Rico-specific standardized amount,
the hospital-specific rates for SCHs and
MDHs, and the rate-of-increase limits for
certain hospitals excluded from the IPPS, as
well as LTCHs, IPFs, and IRFs. We also
discuss our response to MedPAC’s
recommended update factors for inpatient
hospital services.
II. Inpatient Hospital Update for FY 2011
Several provisions of the Affordable Care
Act (Pub. L. 111–148 and Pub. L. 111–152,
collectively) affected the hospital inpatient
update for both FYs 2010 and 2011.
However, due to the timing of the passage of
the legislation, we were unable to address
those provisions in the FY 2011 IPPS/LTCH
PPS proposed rule issued in the Federal
Register on May 4, 2010 (75 FR 30756). On
June 2, 2010, we issued a supplemental
proposed rule (75 FR 30918) to the FY 2011
IPPS/LTCH PPS proposed rule to address
these provisions. The discussion below
reflects both the provisions of the initial FY
2011 proposed rule and the supplemental
proposed rule relative to the FY 2011
hospital inpatient update and any public
comments that we received on both
documents. We note that, in the June 2, 2010
supplemental proposed rule, we did not
propose to address the provisions of section
3401 of the Affordable Care Act, which
provided for a productivity adjustment for
FY 2012 and subsequent fiscal years. Rather,
we indicated that the provisions of section
3401 that affect FY 2012 would be addressed
in future rulemaking.
A. FY 2011 Inpatient Hospital Update
Section 3401(a) of the Affordable Care Act
amended section 1886(b)(3)(B)(i) of the Act to
provide that the FY 2011 applicable
percentage increase for IPPS hospitals equals
the rate-of-increase in the hospital market
basket for IPPS hospitals in all areas is
reduced by 0.25 percentage point, subject to
the hospital submitting quality data under
rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of
the Act. For hospitals that do not provide
quality data, the update is equal to the
market basket percentage increase minus a
0.25 percentage point less an additional 2.0
percentage points. Section 3401(a)(4) of the
Affordable Care Act further states that this
amendment may result in the applicable
percentage increase being less than zero.
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24321 and 24322), we announced
that, due to the timing of the passage of the
Affordable Care Act, we were unable to
address those statutory provisions in that
proposed rule. In that proposed rule,
consistent with current law, based on IHS
Global Insight, Inc.’s first quarter 2010
forecast, with historical data through the
2009 fourth quarter, of the FY 2011 IPPS
market basket increase, we estimated that the
FY 2011 update to the operating standardized
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amount would be 2.4 percent (that is, the
then estimate of the market basket rate-ofincrease) for hospitals in all areas, provided
the hospital submits quality data in
accordance with our rules. For hospitals that
do not submit quality data, we estimated that
the update to the operating standardized
amount would be 0.4 percent (that is, the
then current estimate of the market basket
rate-of-increase minus 2.0 percentage points).
In the FY 2011 IPPS/LTCH PPS
supplemental proposed rule (75 FR 30921
through 30923), we stated that, consistent
with the amendments to section
1886(b)(3)(B)(i) of the Act made by section
3401 of the Affordable Care Act, for FY 2011,
we are required to reduce the hospital market
basket update by 0.25 percentage points.
Therefore, based on IHS Global Insight, Inc.’s
first quarter 2010 forecast of the FY 2011
market basket increase, the estimated update
to the FY 2011 operating standardized
amount was 2.15 percent (that is, the FY
2011 estimate of the market basket rate-ofincrease of 2.4 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 estimated update to
the operating standardized amount was 0.15
percent (that is, the adjusted FY 2011
estimate of the market basket rate-of-increase
of 2.15 percent minus 2.0 percentage points).
Since publication of the FY 2011 IPPS/
LTCH PPS supplemental proposed rule, our
estimate of the market basket for FY 2011 has
changed. Therefore, we are adopting in this
final rule, based on IHS Global Insight, Inc.’s
second quarter 2010 forecast of the FY 2011
market basket increase, with historical data
through the 2010 first quarter, an applicable
percentage increase for FY 2011 of 2.35
percent (that is, the current FY 2011 estimate
of the market basket rate-of-increase of 2.6
percent minus 0.25 percentage point) 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 update to the operating
standardized amount is 0.35 percent (that is,
the FY 2011 applicable percentage increase
of 2.35 percent minus 2.0 percentage points).
As discussed in section IV.N. of the preamble
to this final rule, we are adopting as final,
without modification, our proposed changes
to § 412.64(d) to reflect current law.
B. Update for SCHs and MDHs for FY 2011
Section 1886(b)(3)(B)(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 Act sets the
update factor for SCHs and MDHs equal to
the update factor for all 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 section 3401(a) of the
Affordable Care Act. Because the Act requires
us to apply to the hospital-specific rates the
update factor for all other IPPS hospitals, the
update to the hospital specific rates for FY
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2011 for SCHs and MDHs is also subject to
section 1886(b)(3)(B)(i) of the Act, as
amended by the Affordable Care Act.
Accordingly, the FY 2011 update to the
hospital-specific rates applicable to SCHs
and MDHs is 2.35 percent for hospitals that
submit quality data or 0.35 percent for
hospitals that fail to submit quality data. As
discussed in section IV.N. of the preamble to
this final rule, we are adopting as final our
proposed changes to the regulations at
§§ 412.73(c)(15), 412.75(d), 412.77(e),
412.78(e), and 412.79(d) to implement the
statutory reduction to the FY 2011 market
basket.
C. FY 2011 Puerto Rico Hospital Update
Section 1886(d)(9)(C)(i) of the Act is the
basis for determining the applicable
percentage increase applied 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(d)(4) of the Act. Section 1886(e)(4)(1) of
the Act in turn directs the Secretary to
recommend an appropriate change factor for
Puerto Rico hospitals taking into 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 under
the IPPS 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.
As discussed in the preamble to this final
rule, the amendments to section
1886(b)(3)(B)(i) of the Act by sections 3401(a)
and 10319(a) of the Affordable Care Act
affected 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 consideration of public
comments. Therefore, we do not believe we
have the authority to adjust the FY 2010
update factor for the Puerto Rico-specific
operating standardized amount for the
second half of FY 2010 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 is 2.1 percent (that is,
the FY 2010 estimate of the market basket
rate-of-increase) for the entire FY 2010.
In the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 24321), for FY 2011, consistent
with our past practice, we proposed to apply
the full rate-of-increase in the hospital
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market basket for IPPS hospitals to the Puerto
Rico-specific standardized amount. In the
June 2, 2010 supplemental proposed rule (75
FR 30923), consistent with our past practice
of applying the same update factor to the
Puerto Rico-specific standardized amount as
applied to the national standardized amount
(and to conform to the changes to calculation
of the national standardized amount made by
the Affordable Care Act), for FY 2011, we
proposed to revise the regulations at
§ 412.211(c) to set the update factor for the
Puerto Rico-specific operating standardized
amount equal to the update factor applied to
the national standardized amount for all IPPS
hospitals. We did not receive any public
comments on our proposal. Therefore, in the
preamble of this final rule, we adopted as
final, without modification, the proposed
changes to revise § 412.211(c). Consequently,
we are applying an update factor for the
Puerto Rico-specific standardized amount
equal to the FY 2011 IPPS applicable
percentage increase (the market basket rateof-increase of 2.6 percent minus 0.25
percentage point, or 2.35 percent), for FY
2011.
D. Update for Hospitals Excluded From the
IPPS
Section 1886(b)(3)(B)(ii) of the Act is used
for purposes of determining the percentage
increase in the rate-of-increase limits for
children’s and cancer hospitals. Section
1886(b)(3)(B)(ii) of the Act sets the
percentage increase in the rate-of-increase
limits equal to the market basket percentage
increase. In accordance with § 403.752(a) of
the regulations, RNHCIs are paid under
§ 413.40, which also uses section
1886(b)(3)(B)(ii) of the Act to update the
percentage increase in the rate-of-increase
limits. Section 1886(j)(3)(C) of the Act
addresses the increase factor for the Federal
prospective payment rate of IRFs. Section
123 of Public Law 106–113, as amended by
section 307(b) of Public Law 106–554,
provides the statutory authority for updating
payment rates under the LTCH PPS. In
addition, section 124 of Public Law 106–113
provides the statutory authority for updating
all aspects of the payment rates for IPFs.
Currently, children’s hospitals, cancer
hospitals, and RNHCIs are the remaining
three types of hospitals still reimbursed
under the reasonable cost methodology. As
we proposed, we are providing our current
estimate of the FY 2011 IPPS operating
market basket percentage increase (2.6
percent) to update the target limits for
children’s hospitals, cancer hospitals, and
RNHCIs.
For FY 2011, as discussed in section VII.
of the preamble to this final rule, we are
establishing an update to the LTCH PPS
standard Federal rate for FY 2011 based on
the full LTCH PPS market basket increase
estimate (2.5 percent), including the
requirement that we reduce the LTCH PPS
market basket increase by 0.50 percentage
point reduction in accordance with sections
3401(c), 10319(b) and 1105(b) of the
Affordable Care Act which amended section
1886(m) of the Act, of 2.0 percent and an
adjustment to account for the increase in
case-mix in prior periods (FYs 2008 and
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Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules and Regulations
described in more detail below. As
mentioned above, section 1886(e)(4)(A) of the
Act requires that the Secretary, taking into
consideration the recommendations of the
MedPAC, recommend update factors for
inpatient hospital services for each fiscal year
that take into account the amounts necessary
for the efficient and effective delivery of
medically appropriate and necessary care of
high quality. Consistent with the update
factor in the President’s budget (and prior to
other adjustments required under the
statute), we are recommending an update to
the standardized amount of 2.9 percent. We
are recommending that this same update
factor apply to SCHs and MDHs.
Section 1886(d)(9)(C)(i) of the Act is the
basis for determining the percentage increase
to the Puerto Rico-specific standardized
amount. As discussed above, we finalized
our proposal to revise § 412.211(c) to set the
update factor for the Puerto Rico-specific
operating standardized amount equal to the
update factor applied to the national
standardized amount for all IPPS hospitals.
Therefore, we are applying an update factor
for the Puerto Rico-specific standardized
amount equal to the FY 2011 IPPS applicable
percentage increase (the market basket rateof-increase of 2.6 percent minus 0.25
percentage points), or 2.35 percent, for FY
2011.
In addition to making a recommendation
for IPPS hospitals, in accordance with
section 1886(e)(4)(A) of the Act, we also are
recommending update factors for all other
types of hospitals. Consistent with the update
factor in the President’s budget, we are
recommending an update for children’s
hospitals, cancer hospitals, and RNHCIs of
2.9 percent.
For FY 2011, consistent with policy set
forth in section VII. of the preamble of this
final rule, we are recommending an update
of ¥0.49 percent to the LTCH PPS standard
Federal rate. In addition, consistent with the
update specified in the FY 2011 IRF PPS
notice (as described above), we are
recommending an update of 2.25 percent to
the IRF PPS Federal rate for FY 2011. Finally,
consistent with the update specified in the
FY 2011 IPF PPS notice (as described above),
we are recommending an update of 2.4
percent reduced by 0.25 percentage point to
the IPF PPS Federal rate for RY 2011 for the
Federal per diem payment amount.
III. Secretary’s Final Recommendations
MedPAC is recommending an inpatient
hospital update equal to the market basket
rate of increase for FY 2011. MedPAC’s
rationale for this update recommendation is
mstockstill on DSKH9S0YB1PROD with RULES2
2009) that resulted from changes in
documentation and coding practices of ¥2.5
percent. Accordingly, the update factor to the
standard Federal rate for FY 2011 is ¥0.49
percent (that is, we are applying a factor of
0.9951 in determining the LTCH PPS
standard Federal rate for FY 2011, calculated
as 1.020 × 1 divided by 1.025 = 0.9951 or
¥0.49 percent).
Effective for cost reporting periods
beginning on or after January 1, 2005, IPFs
are paid under the IPF PPS. IPF PPS
payments are based on a Federal per diem
rate that is derived from the sum of the
average routine operating, ancillary, and
capital costs for each patient day of
psychiatric care in an IPF, adjusted for
budget neutrality. Section 1886(s)(3)(A) of
the Act, which was added by section 3401(f)
of the Affordable Care Act, as further
amended by section 10319(e) and by section
1105 of such Act, requires the application of
an ‘‘Other Adjustment’’ that reduces any
update to the IPF PPS base rate by 0.25
percentage point for the rate year beginning
in 2010. Therefore, as announced in the IPF
RY 2011 notice (75 FR 23109), we reduced
the update to the IPF PPS base rate of 2.4
percent (based on the FY 2002-based RPL
market basket and IHS Global Insight, Inc.’s
first quarter 2010 forecast) by 0.25 percentage
point for RY 2011.
IRFs are paid under the IRF PPS for cost
reporting periods beginning on or after
January 1, 2002. For cost reporting periods
beginning on or after October 1, 2002 (FY
2003), and thereafter, the Federal prospective
payments to IRFs are based on 100 percent
of the adjusted Federal IRF prospective
payment amount, updated annually (69 FR
45721). Section 1886(j)(3)(D) of the Act,
which was added by Section 3401(d) of the
Affordable Care Act, as further amended by
section 10319 and by section 1105 of such
Act, requires the Secretary to reduce the
market basket factor by 0.25 percentage point
for FY 2011. Therefore, as announced in the
IRF FY 2011 notice (75 FR 42848 and 42849),
we reduced the update to the IRF PPS
Federal rate of 2.5 percent (based on the FY
2002-based RPL market basket and IHS
Global Insight, Inc.’s second quarter 2010
forecast) by 0.25 percentage point for FY
2011. Thus, the adjusted RPL market basket
increase factor is 2.25 percent for FY 2011.
IV. MedPAC Recommendation for Assessing
Payment Adequacy and Updating Payments
in Traditional Medicare
In its March 2010 Report to Congress,
MedPAC assessed the adequacy of current
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50677
payments and costs, and the relationship
between payments and an appropriate cost
base. MedPAC recommended an update to
the hospital inpatient rates equal to the
increase in the hospital market basket in FY
2011, concurrent with implementation of a
quality incentive program. MedPAC’s
reasoning is that under a quality program, an
individual hospital’s quality performance
should determine whether its net increase in
payments is above or below the market
basket increase. MedPAC noted the
importance of hospitals to control their costs
rather than accommodate the current rate of
cost growth.
MedPAC also noted that indicators of
payment adequacy are positive. MedPAC
expects Medicare margins to remain low in
2011. At the same time though, MedPAC’s
analysis finds that high-performing hospitals
have been able to maintain relatively low
costs while maintaining a relatively high
quality of care. In addition, roughly half of
these providers are generating a profit on
their Medicare business.
Response: Similar to our response last year,
we agree with MedPAC that hospitals should
control costs rather than have Medicare
accommodate the current rate of growth. As
MedPAC noted, the lack of financial pressure
at certain hospitals can lead to higher costs
and in turn bring down the overall Medicare
margin for the industry.
In addition to the quality data that
hospitals are required to submit to CMS, as
discussed in section II. of the preamble of
this final rule, CMS implemented the MS–
DRGs in FY 2008 to better account for
severity of illness under the IPPS and is
basing the DRG weights on costs rather than
charges. We continue to believe that these
refinements will better match Medicare
payment of the cost of care and provide
incentives for hospitals to be more efficient
in controlling costs.
We note that, because the operating and
capital prospective payment systems remain
separate, we are continuing to use separate
updates for operating and capital payments.
The update to the capital rate is discussed in
section III. of the Addendum to this final
rule.
We did not receive any public comments
on MedPAC’s recommendation.
[FR Doc. 2010–19092 Filed 7–30–10; 4:15 pm]
BILLING CODE 4120–01–P
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Agencies
[Federal Register Volume 75, Number 157 (Monday, August 16, 2010)]
[Rules and Regulations]
[Pages 50042-50677]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19092]
[[Page 50041]]
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Part II
Book 2 of 2 Books
Pages 50041-50681
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, 415, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System Changes and FY2011 Rates; Provider Agreements and
Supplier Approvals; and Hospital Conditions of Participation for
Rehabilitation and Respiratory Care Services; Medicaid Program:
Accreditation for Providers of Inpatient Psychiatric Services; Final
Rule
Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules
and Regulations
[[Page 50042]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 415, 424, 440, 441, 482, 485, and 489
[CMS-1498-Fand CMS-1498-IFC; CMS-1406-F]
RIN 0938-AP80; RIN 0938-AP33
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System Changes and FY2011 Rates; Provider Agreements and
Supplier Approvals; and Hospital Conditions of Participation for
Rehabilitation and Respiratory Care Services; Medicaid Program:
Accreditation for Providers of Inpatient Psychiatric Services
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rules and interim final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems and to implement certain provisions of
the Affordable Care Act and other legislation. In addition, we describe
the changes to the amounts and factors used to determine the rates for
Medicare acute care hospital inpatient services for operating costs and
capital-related costs. We also are setting forth the update to the
rate-of-increase limits for certain hospitals excluded from the IPPS
that are paid on a reasonable cost basis subject to these limits.
We are updating the payment policy and the annual payment rates for
the Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs) and setting forth
the changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS. In addition, we are finalizing the
provisions of the August 27, 2009 interim final rule that implemented
statutory provisions relating to payments to LTCHs and LTCH satellite
facilities and increases in beds in existing LTCHs and LTCH satellite
facilities under the LTCH PPS.
We are making changes affecting the: Medicare conditions of
participation for hospitals relating to the types of practitioners who
may provide rehabilitation services and respiratory care services; and
determination of the effective date of provider agreements and supplier
approvals under Medicare.
We are also setting forth provisions that offer psychiatric
hospitals and hospitals with inpatient psychiatric programs increased
flexibility in obtaining accreditation to participate in the Medicaid
program. Psychiatric hospitals and hospitals with inpatient psychiatric
programs will have the choice of undergoing a State survey or of
obtaining accreditation from a national accrediting organization whose
hospital accreditation program has been approved by CMS.
We are also issuing an interim final rule with comment period to
implement a provision of the Preservation of Access to Care for
Medicare Beneficiaries and Pension Relief Act of 2010 relating to
Medicare payments for outpatient services provided prior to a Medicare
beneficiary's inpatient admission.
DATES: Effective Date: These rules are effective on October 1, 2010,
except for amendments to Sec. 412.2(c)(5) introductory text,
(c)(5)(iii), and (c)(5)(iv); Sec. 412.405; Sec. 412.521(b)(1); Sec.
412.540; Sec. 412.604(f); Sec. 413.40(c)(2) introductory text,
(c)(2)(iii), and (c)(2)(iv), that are effective on June 25, 2010 and
apply to services furnished on or after June 25, 2010. In accordance
with sections 1871(e)(1)(A)(i) and (ii) of the Social Security Act, the
Secretary has determined that retroactive application of these
regulatory amendments is necessary to comply with the statute and that
failure to apply the changes retroactively would be contrary to public
interest:
Comment Period: To be assured consideration, comments on the
interim final rule with comment period (CMS-1498-IFC) that appears as
section IV.M., of the preamble of this document and includes amendments
to Sec. 412.2(c)(5) introductory text, (c)(5)(iii), and (c)(5)(iv);
Sec. 412.405; Sec. 412.521(b)(1); Sec. 412.540; Sec. 412.604(f);
Sec. 413.40(c)(2) introductory text, (c)(2)(iii), and (c)(2)(iv) must
be received at one of the addresses provided below, no later than 5
p.m. EST on September 28, 2010. Comments on other sections of this
document will not be considered.
ADDRESSES: When commenting on issues presented in the interim final
rule with comment period, please refer to file code CMS-1498-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation at https://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code CMS-1498-IFC to
submit comments on this interim final rule.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1498-IFC, P.O. Box 8011, Baltimore, MD
21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1406-IFC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786-4487, and Ing-
Jye Cheng, (410) 786-4548, Operating Prospective Payment, MS-DRGs,
Hospital Acquired Conditions (HAC),
[[Page 50043]]
Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Acute Care Transfers, Capital
Prospective Payment, Excluded Hospitals, Direct and Indirect Graduate
Medical Education Payments, Disproportionate Share Hospital (DSH), and
Critical Access Hospital (CAH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Reporting of Hospital Quality Data for
Annual Payment Update--Program Administration, Validation, and
Reconsideration Issues.
Shaheen Halim (410) 786-0641, Reporting of Hospital Quality Data
for Annual Payment Update--Measures Issues Except Hospital Consumer
Assessment of Healthcare Providers and Systems
Elizabeth Goldstein (410) 786-6665 Reporting of Hospital Quality
Data for Annual Payment Update--Hospital Consumer Assessment of
Healthcare Providers and Systems Measures Issues.
Marcia Newton, (410-786-5265) and CDR Scott Cooper (U.S. Public
Health Service), (410) 786-9465, Hospital Conditions of Participation
for Rehabilitation Services and Respiratory Therapy Care Issues.
Marilyn Dahl, (410) 786-8665, Provider Agreement and Supplier
Approval Issues.
Melissa Harris, (410) 786-3397 or Adrienne Delozier, (410) 786-
0278, Accreditation of Providers of Inpatient Psychiatric Services to
Individuals under Age 21 Issues.
SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all comments received before the close of the comment period on
the following Web site as soon as possible after they have been
received: https://www.regulations.gov. Follow the search instructions at
that Web site to view public comments.
Comments received timely will also be available for public
inspection, generally beginning approximately 3 weeks after publication
of a document, at the headquarters of the Centers for Medicare &
Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244,
Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule
an appointment to view public comments, phone 1-800-743-3951.
Electronic Access
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web, (the Superintendent of Documents' home Web page
address is https://www.gpoaccess.gov/), by using local WAIS client
software, or by telnet to swais.access.gpo.gov, then login as guest (no
password required). Dial-in users should use communications software
and modem to call (202) 512-1661; type swais, then login as guest (no
password required).
Acronyms
3M 3M Health Information System
AAHKS American Association of Hip and Knee Surgeons
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory surgical center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIC Beneficiary Identification Code
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified Registered Nurse Anesthetist
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EMR Electronic medical record
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FHA Federal Health Architecture
FIPS Federal information processing standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICANHealth Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
[[Page 50044]]
HwH Hospital-within-a-hospital
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MPN Medicare provider number
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NP Nurse practitioner
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PA Physician assistant
PIP Periodic interim payment
PLI Professional liability insurance
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPACA Patient Protection and Affordable Care Act, Public Law 111-148
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSN Social Security number
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
UHDDS Uniform hospital discharge data set
Table of Contents
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
B. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148) and the Health Care and Education Reconciliation
Act of 2010 (Pub. L. 111-152)
C. Provisions of the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192)
D. Issuance of Two Notices of Proposed Rulemaking for FY 2011
1. Issuance of May 4, 2010 IPPS/LTCH PPS Proposed Rule
a. Proposed Changes to MS-DRG Classifications and Recalibrations
of Relative Weights
b. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
c. Other Decisions and Proposed Changes to the IPPS for
Operating Costs and GME Costs
d. Proposed FY 2011 Policy Governing the IPPS for Capital-
Related Costs
e. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
f. Proposed Changes to the LTCH PPS
g. Proposed Changes Relating to Effective Date of Provider
Agreements and Supplier Approvals
h. Proposed Changes to Medicare Conditions of Participation
Affecting Hospital Rehabilitation Services and Respiratory Care
Services
i. Proposed Changes to the Accreditation Requirements for
Medicaid Providers of Inpatient Psychiatric Services for Individuals
under Age 21
j. Determining Proposed Prospective Payment Operating and
Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals
k. Determining Proposed Prospective Payments Rates for LTCHs
l. Impact Analysis
m. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
n. Discussion of Medicare Payment Advisory Commission
Recommendations
2. Issuance of June 2, 2010 IPPS/LTCH PPS Proposed Rule
E. Public Comments Received on the FY 2011 IPPS/LTCH Proposed
Rule and Supplemental Proposed Rule
F. Finalization of Interim Final Rule with Comment Period That
Implemented Certain Provisions of the ARRA Relating to Payments to
LTCHs and LTCH Satellite Facilities
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
1. General
2. Yearly Review for Making MS-DRG Changes
C. Adoption of the MS-DRGs in FY 2008
[[Page 50045]]
D. FY 2011 MS-DRG Documentation and Coding Adjustment, Including
the Applicability to the Hospital-Specific Rates and the Puerto
Rico-Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Prospective Adjustment to the Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public Law 110-90
3. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Public Law 110-90
4. Retrospective Evaluation of FY 2008 Claims Data
5. Retrospective Analysis of FY 2009 Claims Data
6. Prospective Adjustment for FY 2010 and Subsequent Years
Authorized by Section 7(b)(1)(A) of Public Law 110-90 and Section
1886(d)(3)(vi) of the Act
7. Recoupment or Repayment Adjustment for FY 2010 Authorized by
Section 7(b)(1)(B) of Public Law 110-90
8. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
9. Documentation and Coding Adjustment to the Hospital-Specific
Rates for FY 2011 and Subsequent Fiscal Years
10. Background on the Application of the Documentation and
Coding Adjustment to the Puerto Rico-Specific Standardized Amount
11. Documentation and Coding Adjustment to the Puerto Rico-
Specific Standardized Amount
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
a. Summary of FY 2009 Changes and Discussion for FY 2011
b. Summary of the RAND Corporation Study of Alternative Relative
Weight Methodologies
2. FY 2011 Changes and Timeline for Changes to the Medicare Cost
Report
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Background
a. Statutory Authority
b. HAC Selection
c. Collaborative Process
d. Application of HAC Payment Policy to MS-DRG Classifications
e. Public Input Regarding Selected and Potential Candidate HACs
f. POA Indicator Reporting
2. HAC Conditions for FY 2011
3. RTI Program Evaluation Summary
a. Background
b. RTI Analysis on POA Indicator Reporting Across Medicare
Discharges
c. RTI Analysis on POA Indicator Reporting of Current HACs
d. RTI Analysis of Frequency of Discharges and POA Indicator
Reporting for Current HACs
e. RTI Analysis of Circumstances When Application of HAC
Provisions Would Not Result in MS-DRG Reassignment for Current HACs
f. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
g. RTI Analysis of Estimated Net Savings for Current HACs
h. Previously Considered Candidate HACs--RTI Analysis of
Frequency of Discharges and POA Indicator Reporting
i. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
j. Current HACs and Previously Considered Candidate HACs
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (MDCs)
a. Postsurgical Hypoinsulinemia (MS-DRG 008 (Simultaneous
Pancreas/Kidney Transplant))
b. Bone Marrow Transplants
2. MDC 1 (Nervous System): Administration of Tissue Plasminogen
Activator (tPA) (rtPA)
3. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA) and X-Ray
Coronary Angiography in Coronary Artery Bypass Graft Surgery
a. New MS-DRGs for Intraoperative Fluorescence Vascular
Angiography (IFVA) with CABG
b. New MS-DRG for Intraoperative Angiography, by any Method,
with CABG
c. New Procedure Codes
d. MS-DRG Reassignment of Intraoperative Fluorescence Vascular
Angiography (IFVA)
4. MDC 6 (Diseases and Disorders of the Digestive System):
Gastrointestinal Stenting
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue): Pedicle-Based Dynamic Stabilization
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
a. Discharges/Transfers of Neonates to a Designated Cancer
Center or a Children's Hospital
b. Vaccination of Newborns
7. Medicare Code Editor (MCE) Changes
a. Unacceptable Principal Diagnosis Edit: Addition of Code for
Gastroparesis
b. Open Biopsy Check Edit
c. Noncovered Procedure Edit
8. Surgical Hierarchies
9. Complication or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2011
10. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 to MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
11. Changes to the ICD-9-CM Coding System, Including Discussion
of the Replacement of the ICD-9-CM System with the ICD-10-CM and
ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
12. Other Issues Not Addressed in the Proposed Rule
a. Rechargeable Dual Array Deep Brain Stimulation System
b. IntraOperative Electron RadioTherapy (IOERT)
c. Brachytherapy
d. Excisional Debridement
H. Recalibration of MS-DRG Weights
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2011 Status of Technologies Approved for FY 2010 Add-On
Payments
a. Spiration[supreg] IBV[supreg] Valve System
b. CardioWestTM Temporary Total Artificial Heart
System (CardioWestTM TAH-t)
4. FY 2011 Applications for New Technology Add-On Payments
a. Auto Laser Interstitial Thermal Therapy
(AutoLITTTM) System
b. LipiScanTM Coronary Imaging System
c. LipiScanTM Coronary Imaging System with
Intravascular Ultrasound (IVUS)
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Wage Index Reform
1. Wage Index Study Required under the MIEA-TRHCA
a. Legislative Requirement
b. Interim and Final Reports on Results of Acumen's Study
2. FY 2009 Policy Changes in Response to Requirements under
Section 106(b) of the MIEA-TRHCA
a. Reclassification Average Hourly Wage Comparison Criteria
b. Budget Neutrality Adjustment for the Rural and Imputed Floors
3. Floor for Area Wage Index for Hospitals in Frontier States
4. Plan for Reforming the Wage Index under Section 3137(b) of
Affordable Care Act
C. Core-Based Statistical Areas for the Hospital Wage Index
D. Occupational Mix Adjustment to the FY 2011 Wage Index
1. Development of Data for the FY 2011 Occupational Mix
Adjustment Based on the 2007-2008 Occupational Mix Survey
2. New 2010 Occupational Mix Survey for the FY 2013 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2011
E. Worksheet S-3 Wage Data for the FY 2011 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals under the IPPS
F. Verification of Worksheet S-3 Wage Data
G. Method for Computing the FY 2011 Unadjusted Wage Index
H. Analysis and Implementation of the Occupational Mix
Adjustment and the
[[Page 50046]]
FY 2011 Occupational Mix Adjusted Wage Index
I. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General
2. Effects of Reclassification/Redesignation
3. FY 2011 MGCRB Reclassifications
a. FY 2011 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2012
c. Appeals of MGCRB Denials of Withdrawals and Terminations
4. Redesignations of Hospitals under Section 1886(d)(8)(B) of
the Act
5. Reclassifications under Section 1886(d)(8)(B) of the Act
6. Reclassifications under Section 508 of Public Law 108-173
J. FY 2011 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
K. Process for Requests for Wage Index Data Corrections
L. Labor-Market Share for the FY 2011 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
GME Costs
A. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
a. Overview
b. Hospital Quality Data Reporting under Section 501(b) of
Public Law 108-173
c. Hospital Quality Data Reporting under Section 5001(a) of
Public Law 109-171
d. Hospital Quality Data Reporting under Section 3001(a)(2) and
3401(a)(2) of Public Law 111-148
e. Quality Measures
f. Maintenance of Technical Specifications for Quality Measures
g. Public Display of Quality Measures
2. Retirement of RHQDAPU Program Measures
a. Considerations in Retiring Quality Measures from the RHQDAPU
Program
b. Retirement of Quality Measures under the RHQDAPU Program for
the FY 2011 Payment Determination and Subsequent Years
3. Expansion Plan for Quality Measures for the FY 2012, FY 2013,
and FY 2014 Payment Determinations
a. Considerations in Expanding and Updating Quality Measures
under the RHQDAPU Program
b. RHQDAPU Program Quality Measures for the FY 2012 Payment
Determination
c. RHQDAPU Program Quality Measures for the FY 2013 Payment
Determination
d. RHQDAPU Program Quality Measures for the FY 2014 Payment
Determination
4. Possible New Quality Measures for Future Years
5. Form, Manner, and Timing of Quality Data Submission
a. RHQDAPU Program Requirements for FY 2012, FY 2013, and FY
2014
b. Additional RHQDAPU Program Procedural Requirements for FY
2012, FY 2013, and FY 2014 Payment Determinations
6. RHQDAPU Program Disaster Extensions and Waivers
7. Chart Validation Requirements for Chart-Abstracted Measures
a. Chart Validation Requirements and Methods for the FY 2012
Payment Determination
b. Supplements to the Chart Validation Process for the FY 2013
Payment Determination and Subsequent Years
8. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2012 Payment Determination and Subsequent Years
9. Public Display Requirements for the FY 2012 Payment
Determination and Subsequent Years
10. Reconsideration and Appeal Procedures for the FY 2011
Payment Determination
11. RHQDAPU Program Withdrawal Deadlines
12. Electronic Health Records
a. Background
b. EHR Testing of Quality Measures Submission
c. HITECH Act EHR Provisions
13. Qualification of Registries for RHQDAPU Data Submission
14. RHQDAPU and Hospital Value-Based Purchasing
B. Payment for Transfers of Cases from Medicare Participating
Acute Care Hospitals to Nonparticipating Hospitals and CAHs
1. Background
2. Policy Change
C. Rural Referral Centers (RRCs)
1. Case-Mix Index (CMI)
2. Discharges
D. Payment Adjustment for Low-Volume Hospitals
1. Background
2. Temporary Changes for FYs 2011 and 2012
E. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2011
3. IME-Related Changes in Other Sections of this Final Rule
F. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs): Supplemental Security Income (SSI) Fraction
1. Background
2. CMS' Current Data Matching Process for the SSI Fraction
3. Baystate Medical Center v. Leavitt Court Decision
4. CMS' Proposed Process for Matching Medicare and SSI
Eligibility Data
a. Inclusion of Stale Records and Forced Pay Records in the SSI
Eligibility Data Files
b. Use of SSNs in the Revised Match Process
c. Timing of the Match
5. CMS Ruling 1498-R
6. Clarification of Language on Inclusion of Medicare Advantage
Days in the SSI Fraction of the Medicare DSH Calculation
G. Medicare-Dependent, Small Rural Hospitals (MDHs): Change to
Criteria
1. Background
2. Medicare-Dependency: Counting Medicare Inpatients
3. Extension of the MDH Program
H. Payments for Direct Graduate Medical Education (GME) Costs
1. Background
2. Identifying ``Approved Medical Residency Programs''
a. Residents in Approved Medical Residency Programs
b. Determining Whether an Individual Is a Resident or a
Physician
c. Formal Enrollment and Participation in a Program
3. Electronic Submission of Affiliation Agreements
I. Certified Registered Nurse Anesthetist (CRNA) Services
Furnished in Rural Hospitals and CAHs
J. Additional Payments for Qualifying Hospitals with Lowest Per
Enrollee Medicare Spending
1. Background
2. Eligible Counties
a. Development of Risk Adjustment Model
b. Calculation of County Level Part A and Part B Spending
3. Application of the Age/Sex/Race Adjustment to Part A and Part
B County Spending
4. Qualifying Hospitals and Annual Payment Amounts
5. Payment Determination and Distribution
6. Hospital Weighting Factors
7. Results
8. Finalization of Eligible Counties, Qualifying Hospitals and
Qualifying Hospitals' Weighting Factors
K. Rural Community Hospital Demonstration Program
L. Technical Change to Regulations
M. Interim Final Rule with Comment Period: Bundling of Payments
for Services Provided to Outpatients Who Later Are Admitted As
Inpatients: 3-Day Payment Window
1. Introduction
2. Background for Policy
3. Requirements of Section 102 of Public Law 111-192
4. Application of the Provisions of Section 102 of Public Law
111-192
5. Waiver of Notice of Proposed Rulemaking
6. Collection of Information Requirements
7. Response to Public Comments
8. Regulatory Impact Analysis
N. Changes in the Inpatient Hospital Market Basket Update
1. FY 2010 Inpatient Hospital Update
2. FY 2011 Inpatient Hospital Update
3. FY 2010 and FY 2011 Puerto Rico Hospital Update
V. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Exception Payments
C. New Hospitals
D. Hospitals Located in Puerto Rico
E. Changes for FY 2011: MS-DRG Documentation and Coding
Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
2. Retrospective Evaluation of FY 2008 Claims Data
3. Retrospective Analysis of FY 2009 Claims Data
[[Page 50047]]
4. Prospective MS-DRG Documentation and Coding Adjustment to the
National Capital Federal Rate for FY 2011 and Subsequent Years
5. Documentation and Coding Adjustment to the Puerto Rico-
Specific Capital Rate
F. Other Changes for FY 2011
VI. Changes for Hospitals Excluded from the IPPS
A. Excluded Hospitals
B. Critical Access Hospitals (CAHs)
1. Background
2. CAH Optional Method Election for Payment of Outpatient
Services
3. Costs of Provider Taxes as Allowable Costs for CAHs
a. Background and Statutory Basis
b. Clarification of Payment Policy for Provider Taxes
C. Report of Adjustment (Exceptions) Payments
VII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2011
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2011
3. Development of the FY 2011 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2011
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the RY 2011 MS-LTC-DRG Relative Weights
C. Changes to the LTCH Payment Rates and Other Changes to the FY
2011 LTCH PPS
1. Overview of Development of the LTCH Payment Rates
2. Market Basket for LTCHs Reimbursed under the LTCH PPS
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Changes to Reflect the Market Basket Update for LTCHs for RY
2010
d. Market Basket under the LTCH PPS for FY 2011
e. Market Basket Update for LTCHs for FY 2011
f. Labor-Related Share under the LTCH PPS for FY 2011
3. Adjustment for Changes in LTCHs' Case-Mix Due to Changes in
Documentation and Coding Practices That Occurred in a Prior Period
a. Background
b. Evaluation of FY 2009 Claims Data
c. FY 2011 Documentation and Coding Adjustment
D. Change in Terminology from ``Rate Year'' to ``Fiscal Year''
and Other Changes
E. Finalization of Interim Final Rule with Comment Period
Implementing Section 4302 of the American Recovery and Reinvestment
Act of 2009 (Pub. L. 111-5) Relating to Payments to LTCHs and LTCH
Satellite Facilities
1. Background
2. Amendments Relating to Payment Adjustment to LTCHs and LTCH
Satellite Facilities Made by Section 4302 of the ARRA
3. Amendment to the Moratorium on the Increase in Number of Beds
in Existing LTCHs or LTCH Satellite Facilities Made by Section 4302
of the ARRA
F. Extension of Certain Payment Rules for LTCH Services and
Moratorium on the Establishment of Certain Hospitals and Facilities
and the Increase in Number of Beds in Existing LTCHs and LTCH
Satellite Facilities
VIII. Determination of Effective Date of Provider Agreements and
Supplier Approvals
A. Background
B. Departmental Appeals Board Decision
C. Revisions to Regulations
IX. Medicare Hospital Conditions of Participation Affecting
Rehabilitation Services and Respiratory Care Services
X. Changes to the Accreditation Requirements for Medicaid Providers
of Inpatient Psychiatric Services for Individuals under Age 21
A. Background
B. Revision of Policy and Regulations
XI. MedPAC Recommendations
XII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Legislative Requirement for Solicitation of Comments
2. Requirements in Regulation Text
a. ICRs Regarding Withdrawing an Application, Terminating an
Approved 3 Year Reclassification, or Canceling a Previous Withdrawal
or Termination (Revised Sec. 412.273)
b. ICRs Regarding Condition of Participation: Respiratory Care
Services (Sec. 482.57)
3. Additional Information Collection Requirements
a. Present on Admission (POA) Indicator Reporting
b. Add-On Payments for New Services and Technologies
c. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
d. Occupational Mix Adjustment to the FY 2011 Index (Hospital
Wage Index Occupational Mix Survey)
e. Hospital Applications for Geographic Reclassifications by the
MGCRB
f. Direct GME Payments: General Requirements
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective with Cost Reporting Periods
Beginning on or after October 1, 2010
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2011
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. MS-DRG Relative Weights
D. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2011
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2011
C. Capital Input Price Index
IV. Changes to Payment Rates for Certain Excluded Hospitals: Rate-
of-Increase Percentages
V. Changes to the Payment Rates for the LTCH PPS for FY 2011
A. LTCH PPS Standard Federal Rate for FY 2011
B. Adjustment for Area Wage Levels under the LTCH PPS for FY
2011
C. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
D. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2011
VI. Tables
Table 1A--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (68.8 Percent Labor Share/31.2 Percent Nonlabor Share
If Wage Index Is Greater Than 1)
Table 1B--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If
Wage Index Is Less Than or Equal to 1)
Table 1C--Adjusted Operating Standardized Amounts for Puerto
Rico, Labor/Nonlabor
Table 1D--Capital Standard Federal Payment Rate
Table 1E--LTCH Standard Federal Prospective Payment Rate
Table 2--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2009; Hospital Wage Indexes for
Federal Fiscal Year 2011; Hospital Average Hourly Wages for Federal
Fiscal Years 2009 (2005 Wage Data), 2010 (2006 Wage Data), and 2011
(2007 Wage Data); and 3-Year Average of Hospital Average Hourly
Wages
Table 3A--FY 2011 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA
Table 3B--FY 2011 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA
Table 4A.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for
[[Page 50048]]
Acute Care Hospitals in Urban Areas by CBSA and by State--FY 2011
Table 4B.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--
FY 2011
Table 4C.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2011
Table 4D-1 (This table is discontinued due to section 3141 of
the Affordable Care Act returning the rural floor budget neutrality
to a uniform national adjustment.)
Table 4D-2.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage
Index; Urban Areas with Acute Care Hospitals Receiving the Statewide
Rural Floor or Imputed Floor Wage Index--FY 2011
Table 4E.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2011
Table 4F.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2011
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2011
Table 5.--List of Medicare Severity Diagnosis-Related Groups
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic
Mean Length of Stay--FY 2011
Table 6A.--New Diagnosis Codes
Table 6B.--New Procedure Codes
Table 6C.--Invalid Diagnosis Codes
Table 6D.--Invalid Procedure Codes
Table 6E.--Revised Diagnosis Code Titles
Table 6F.--Revised Procedure Code Titles
Table 6G.--Additions to the CC Exclusions List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6H.--Deletions from the CC Exclusions List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6I.--Complete List of Complication and Comorbidity (CC)
Exclusions (Available only through the Internet on the CMS Web site
at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6J.--Major Complication and Comorbidity (MCC) List
(Available through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6K.--Complication and Comorbidity (CC) List (Available
through the Internet on the CMS Web site at: https://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 7A.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2009 MedPAR Update--March 2010
GROUPER V27.0 MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2009 MedPAR Update--March 2010
GROUPER V28.0 MS-DRGs
Table 8A.--Statewide Average Operating Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2010
Table 8B.--Statewide Average Capital Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2010
Table 8C.--Statewide Average Total Cost-to-Charge Ratios (CCRs)
for LTCHs--July 2010
Table 9A.--Hospital Reclassifications and Redesignations--FY
2011
Table 9C.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2011
Table 10.--Geometric Mean Plus the Lesser of .75 of the National
Adjusted Operating Standardized Payment Amount (Increased To Reflect
the Difference Between Costs and Charges) or .75 of One Standard
Deviation of Mean Charges by Medicare Severity Diagnosis-Related
Groups (MS-DRGs)--July 2010
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, Short-Stay Outlier Threshold, and IPPS Comparable
Threshold for Discharges Occurring from October 1, 2010 through
September 30, 2011 under the LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges
Occurring from October 1, 2010 through September 30, 2011
Table 12B.--LTCH PPS Wage Index for Rural Areas for Discharges
Occurring from October 1, 2010 through September 30, 2011
Appendix A--Regulatory Impact Analysis
I. Overall Impact
II. Objectives of the IPPS
III. Limitations of Our Analysis
IV. Hospitals Included in and Excluded from the IPPS
V. Effects on Hospitals and Hospital Units Excluded from the IPPS
VI. Quantitative Effects of the Policy Changes under the IPPS for
Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects of the Changes to the MS-DRG Reclassifications and
Relative Cost-Based Weights (Column 1)
D. Effects of the Application of Recalibration Budget Neutrality
(Column 2)
E. Effects of Wage Index Changes (Column 3)
F. Application of the Wage Budget Neutrality Factor (Column 4)
G. Combined Effects of MS-DRG and Wage Index Changes (Column 5)
H. Effects of MGCRB Reclassifications (Column 6)
I. Effects of the Rural Floor and Imputed Floor, Including
Application of Budget Neutrality at the State Level (Column 7)
J. Effects of the Wage Index Adjustment for Out-Migration
(Column 8)
K. Effects of All Changes Prior to Documentation and Coding (Or
CMI) Adjustment (Column 9)
L. Effects of All Changes With CMI Adjustment (Column 10)
M. Effects of Policy on Payment Adjustments for Low-Volume
Hospitals
N. Impact Analysis of Table II
VII. Effects of Other Policy Changes
A. Effects of Policy on HACs, Including Infections
B. Effects of Policy Changes Relating to New Medical Service and
Technology Add-On Payments
C. Effects of Requirements for Hospital Reporting of Quality
Data for Annual Hospital Payment Update
D. Effects of Policy on Payment for Transfer Cases from Medicare
Participating Hospitals to Nonparticipating Hospitals and CAHs
E. Effects of Change in Criteria for MDHs
F. Effects of Change Relating to Payment Adjustment for
Disproportionate Share Hospitals
G. Effects of Changes Relating to Payments for IME and Direct
GME
1. Background
2. Identifying ``Approved Medical Residency Programs''
3. Submission of Electronic Affiliation Agreements
4. Technical Correction to the Regulations Relating to the Cost
of Approved Nursing and Allied Health Education Activities
H. Effects of Changes Relating to CRNA Services Furnished in
Rural Hospitals and CAHs
I. Effects of Implementation of Rural Community Hospital
Demonstration Program
J. Effects of Changes Relating to CAHs
1. CAH Optional Method of Payment for Outpatient Services
2. Consideration of Costs of Provider Taxes as Allowable Costs
for CAHs
K. Effects of Policy Relating to Effective Date of Provider
Agreements and Supplier Approvals
L. Effects of Changes Relating to Hospital Rehabilitation
Services and Respiratory Care Services Conditions of Participation
VIII. Effects of Changes in the Capital IPPS
A. General Considerations
B. Results
IX. Effects of Payment Rate Changes and Policy Changes under the
LTCH PPS
A. Introduction and General Considerations
B. Impact on Rural Hospitals
C. Anticipated Effects of LTCH PPS Payment Rate Change and
Policy Changes
D. Effect on the Medicare Program
E. Effect on Medicare Beneficiaries
X. Effects of Policy Changes Relating to Accreditation Requirements
for Medicaid Providers of Inpatient Psychiatric Services to
Individuals under Age 21
XI. Alternatives Considered
XII. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
XIII. Accounting Statements
A. Acute Care Hospitals
B. LTCHs
XIV. Executive Order 12866
Appendix B--Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2011
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
[[Page 50049]]
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of low-income patients, it
receives a percentage add-on payment applied to the DRG-adjusted base
payment rate. This add-on payment, known as the disproportionate share
hospital (DSH) adjustment, provides for a percentage increase in
Medicare payments to hospitals that qualify under either of two
statutory formulas designed to identify hospitals that serve a
disproportionate share of low-income patients. For qualifying
hospitals, the amount of this adjustment may vary based on the outcome
of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate based on
their costs in a base year. For example, sole community hospitals
(SCHs) receive the higher of a hospital-specific rate based on their
costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY
2006) or the IPPS Federal rate based on the standardized amount.
Through and including FY 2006, a Medicare-dependent, small rural
hospital (MDH) received the higher of the Federal rate or the Federal
rate plus 50 percent of the amount by which the Federal rate is
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific
rate. As discussed below, for discharges occurring on or after October
1, 2007, but before October 1, 2012, an MDH will receive the higher of
the Federal rate or the Federal rate plus 75 percent of the amount by
which the Federal rate is exceeded by the highest of its FY 1982, FY
1987, or FY 2002 hospital-specific rate. SCHs are the sole source of
care in their areas, and MDHs are a major source of care for Medicare
beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii)
of the Act defines an SCH as a hospital that is located more than 35
road miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of hospital inpatient services reasonably available to Medicare
beneficiaries. In addition, certain rural hospitals previously
designated by the Secretary as essential access community hospitals are
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as
a hospital that is located in a rural area, has not more than 100 beds,
is not an SCH, and has a high percentage of Medicare discharges (not
less than 60 percent of its inpatient days or discharges in its cost
reporting year beginning in FY 1987 or in two of its three most
recently settled Medicare cost reporting years). Both of these
categories of hospitals are afforded this special payment protection in
order to maintain access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs per discharge.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
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3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) effective for cost
reporting periods beginning on or after October 1, 2002. The LTCH PPS
was established under the authority of sections 123(a) and (c) of
Public Law 106-113 and section 307(b)(1) of Public Law 106-554 (as
codified under section 1886(m)(1) of the Act). During the 5-year
(optional) transition period, a LTCH's payment under the PPS was based
on an increasing proportion of the LTCH Federal rate with a
corresponding decreasing proportion based on reasonable cost
principles. Effective for cost reporting periods beginning on or after
October 1, 2006, all LTCHs are paid 100 percent of the Federal rate.
The existing regulations governing payment under the LTCH PPS are
located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we
issue the annual updates to the LTCH PPS in the same documents that
update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.
B. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148) and the Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152)
On March 23, 2010, the Patient Protection and Affordable Care Act
(PPACA), Public Law 111-148 was enacted. Following the 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 and certain sections of the Social
Security Act, and, in certain instances, included certain
``freestanding'' provisions that affect implementation of the IPPS and
the LTCH PPS. (Pub. L. 111-148 and Pub. L. 111-152 are collectively
referred to as the ``Affordable Care Act.'') A number of the provisions
of the Affordable Care Act affected the updates to the IPPS and the
LTCH PPS and the providers and suppliers that were addressed in the FY
2011 IPPS/LTCH PPS proposed rule that appeared in the Federal Register
on May 4, 2010 (75 FR 23852). However, due to the timing of the passage
of the legislation, we were unable to address those provisions in the
May 4, 2010 proposed rule. Therefore, on June 2, 2010, we issued in the
Federal Register two additional documents:
1. A supplemental proposed rule (75 FR 30918) to the FY 2010 IPPS/
LTCH PPS proposed rule published on May 4, 2010, that proposed to
implement certain provisions of the Affordable Care Act. These proposed
provisions are outlined in section I.D.2. of this final rule, and are
being finalized in the appropriate subject-matter sections of this
final rule.
2. A notice (75 FR 31118) that contained the final wage indices,
hospital reclassifications, payment rates, impacts, and other related
tables, effective for the FY 2010 IPPS and the RY 2010 LTCH PPS, that
were required by or directly resulted from implementation of provisions
of the Affordable Care Act.
C. Provisions of the Preservation of Access To Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192)
On June 25, 2010, the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was
enacted. Section 102 of Public Law 111-192 amended section 1886(a)(4)
and (d)(7) of the Act affecting Medicare payments for preadmission
services furnished to outpatients who are later admitted as inpatients
during a specified payment window. We are implementing this legislative
provision as discussed under section IV.M. of the preamble of this
document through an interim final rule with comment period.
D. Issuance of Two Notices of Proposed Rulemaking for FY 2011
1. Issuance of May 4, 2010 IPPS/LTCH PPS Proposed Rule
On May 4, 2010, we issued in the Federal Register the FY 2011 IPPS/
LLTCH PPS proposed rule (75 FR 23852). In that proposed rule, we set
forth proposed changes to the Medicare IPPS for operating costs and for
capital-related costs of acute care hospitals in FY 2011. We also set
forth proposed changes relating to payments for IME costs and payments
to certain hospitals and units that continue to be excluded from the
IPPS and paid on a reasonable cost basis.
In addition, in that proposed rule, we set forth proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for FY 2011. We note that because the annual update of
payment rates for the LTCH PPS now takes place on the same schedule and
in the same publication as for the IPPS, for the sake of clarity, in
section VII.D. of the proposed rule, we proposed to use ``fiscal year
(FY)'' instead of ``rate year (RY)'' when referring to updates and
changes to the LTCH PPS to be effective O